Order Amending the Schedule to the Customs Tariff (Extension of a CPTPP Tariff to Malaysia): SOR/2022-245
Canada Gazette, Part II, Volume 156, Number 25
SOR/2022-245 November 25, 2022
P.C. 2022-1244 November 25, 2022
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Order Amending the Schedule to the Customs Tariff (Extension of a CPTPP Tariff to Malaysia) under subsection 52.61(1)footnote a of the Customs Tariff footnote b.
Order Amending the Schedule to the Customs Tariff (Extension of a CPTPP Tariff to Malaysia)
1 The List of Countries and Applicable Tariff Treatments set out in the schedule to the Customs Tariff footnote b is amended by adding, in the column “Tariff Treatment / Other”, a reference to “CPTPT” opposite the reference in the column “Country Name” to “Malaysia”.
Coming into Force
2 This Order comes into force, or is deemed to have come into force, on November 29, 2022.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
Malaysia recently completed its domestic implementation and ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP or the Agreement), and the Agreement will enter into force for that country on November 29, 2022. This requires Canada to extend to Malaysia the tariff commitments set out in the Agreement as of that date.
On March 8, 2018, Canada and 10 other Asia-Pacific countries (Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or the Agreement).
The Agreement entered into force on December 30, 2018, for Canada, Australia, Japan, Mexico, New Zealand, and Singapore, the first six countries to have ratified the CPTPP. The Agreement subsequently entered into force for Vietnam on January 14, 2019, and for Peru on September 19, 2021. Malaysia officially notified its ratification of the Agreement on September 30, 2022, becoming the ninth country to do so.
The CPTPP, like all of Canada’s free trade agreements, requires a new tariff treatment to be created or extended to partner countries so that qualifying goods imported into Canada can benefit from the Agreement. This requires amending the List of Countries and Applicable Tariff Treatments in the Schedule to the Customs Tariff to denote the appropriate tariff treatment. This is normally done in the implementing bill for the free trade agreement.
The CPTPP also includes an entry into force provision that allows for staggered implementation once six signatories have ratified the Agreement. As it was not known when remaining signatories would ratify and become a party to the Agreement, extension of the CPTPP preferential tariff for these signatories is implemented by an Order in Council upon their ratification of the Agreement.
The objective of this Order is to fulfill the implementation of Canada’s tariff commitments to Malaysia under the CPTPP.
The Order Amending the Schedule to the Customs Tariff (Extension of a CPTPP Tariff to Malaysia) [the Order] amends the Customs Tariff to extend entitlement to CPTPP preferential tariff treatment to Malaysia.
The Order is technical and consequential, as it implements negotiated outcomes of the CPTPP. Therefore, there have been no public consultations conducted specifically on the Order. However, the Government consulted extensively on the CPTPP (and its predecessor, the Trans-Pacific Partnership, or TPP), which gave the opportunity to stakeholders to input into the negotiated outcome that is reflected in the Order. In September 2017, the Government launched public consultations on the possibility of implementing the then TPP with members other than the United States, which ultimately became the CPTPP. The parliamentary process was an additional opportunity for stakeholders and the general public to be informed of, and comment on, the CPTPP. The CPTPP is supported by a broad cross-section of Canadian business stakeholders from all regions and from many sectors.
Given the Order is not controversial and broad consultations have already occurred, publication of the draft Order in the Canada Gazette, Part I, was not considered necessary.
Modern treaty obligations and Indigenous engagement and consultation
As a result of the Order Amending the Schedule to the Customs Tariff (Extension of a CPTPP Tariff to Malaysia), benefits in the form of reduced duties will be accessible to anyone seeking to import goods from Malaysia if they meet the applicable requirements, including Indigenous peoples. The Order is not expected to have any differential impacts on Indigenous people or implications for modern treaties, as per Government of Canada’s obligations in relation to rights protected by section 35 of the Constitution Act, 1982, modern treaties, and international human rights obligations.
The only viable mechanism to extend preferential tariffs is through an order made under the Customs Tariff. The fact that the CPTPP provides for staggered implementation commencing once the first six signatories have ratified the Agreement meant that there was not certainty on which countries would be party to the Agreement, nor when. Accordingly, it was not possible to extend the tariff treatment in the implementing bill and an order to extend preferential tariffs is required.
Benefits and costs
By extending entitlement to CPTPP preferential tariff treatment to Malaysia, the Order allows Canadian importers of goods originating from those countries to claim the preferential tariffs as established in the CPTPP.
While not a direct impact of the Order (as Canada has already committed to implementing the Agreement), when Canada’s tariff commitments under the CPTPP are fully implemented, it is estimated that annual duties foregone by the Government would be approximately $652 million based on recent trade patterns with current CPTPP signatories. These duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of products originating from CPTPP members.
A study by Global Affairs Canada’s Office of the Chief Economist projects long-term economic gains for Canada totalling $4.2 billion by 2040 once the Agreement enters into force for all 11 signatories, driven by increases in exports and investment through preferential access. Upon full implementation by all 11 signatories, 99% of tariff lines of CPTPP parties will be duty-free, covering 98.1% of Canada’s average annual exports to CPTPP markets ($32 billion). By removing trade barriers and providing transparent, predictable, rules-based market access, the CPTPP benefits a wide range of industries and sectors across Canada, including agriculture and agri-food, fish and seafood, forestry, services, and various industrial products.
Small business lens
The Order does not make changes to the importing and exporting of goods, including the required customs forms; rather, it extends Canada’s tariff commitments to Malaysia under the CPTPP. Accordingly, there is no incremental change to the level of administrative burden or compliance costs currently imposed on businesses, including small businesses, as a result of implementing this Order. The Order will decrease costs for all businesses, including small businesses, purchasing originating goods from Malaysia.
The Order does not make changes to the importing and exporting of goods, including the required customs forms. Therefore, no increase or decrease in the level of administrative burden imposed on businesses is anticipated. Accordingly, the one-for-one rule does not apply.
Regulatory cooperation and alignment
Given that this Order extends entitlement to CPTPP preferential tariff treatment to Malaysia as per Canada’s negotiated commitments in that Agreement, there is no regulatory cooperation component to this Order.
Strategic environmental assessment
Global Affairs Canada conducted an environmental assessment of the Agreement in accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. The Initial Environmental Assessment encompassed both qualitative and quantitative analyses. The overall findings of the Initial Environmental Assessment were that Canadian environmental impacts as a result of the TPP Agreement (now CPTPP) would likely be minor in nature.
The Order is consequential to the implementation of the CPTPP. Therefore, a separate environmental assessment was not conducted on the Order.
Gender-based analysis plus
The Order is consequential to the implementation of the CPTPP and, in itself, has no gender-based analysis plus (GBA+) impacts. Global Affairs Canada has conducted a GBA+ analysis of the Agreement.
The Order is necessary to fulfill Canada’s tariff commitments under the CPTPP. It is non-discretionary in nature as it reflects the negotiated outcome of the CPTPP (i.e. the tariff schedule is set out in the CPTPP).
The Order extends preferential tariffs necessary for Canadian importers of goods originating from countries specified in the Order to claim the CPTPP preferential tariff. Without the implementation of the Order, importers of originating goods of Malaysia would not be able to claim the CPTPP preferential tariff rates, and would have to use the Most Favoured Nation tariff treatment, even after the CPTPP has entered for Malaysia. This would place Canada in violation of its commitments under the CPTPP.
Implementation, compliance and enforcement, and service standards
The Order will take effect, or be deemed to have taken effect, on November 29, 2022. The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of the Order in the normal course of its administration of customs- and tariff-related legislation and regulations. The CBSA will update its systems to account for this Order and will inform importers through public materials.
International Trade Policy Division
Department of Finance