Order Fixing January 1, 2025 as the Day on Which Section 229 of the Budget Implementation Act, 2023, No. 1 Comes into Force: SI/2023-64
Canada Gazette, Part II, Volume 157, Number 22
Registration
SI/2023-64 October 25, 2023
BUDGET IMPLEMENTATION ACT, 2023, NO. 1
Order Fixing January 1, 2025 as the Day on Which Section 229 of the Budget Implementation Act, 2023, No. 1 Comes into Force
P.C. 2023-1020 October 6, 2023
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, under section 234 of the Budget Implementation Act, 2023, No. 1, chapter 26 of the Statutes of Canada, 2023, fixes January 1, 2025 as the day on which section 229 of that Act comes into force.
EXPLANATORY NOTE
(This note is not part of the Order.)
Proposal
This Order serves, pursuant to section 234 of the Budget Implementation Act, 2023, No. 1 (BIA), to bring into force section 229 of the BIA at the time that the Direct Shipment (Most-Favoured-Nation Tariff, General Preferential Tariff, General Preferential Tariff Plus, Least Developed Country Tariff, Commonwealth Caribbean Countries Tariff, Australia Tariff and New Zealand Tariff) Regulations come into force. This will remove the direct shipment and transhipment requirements that are currently set out in sections 17 and 18 of the Customs Tariff and enable the Governor in Council to set the requirements in regulations. Without this Order, the direct shipment and transhipment provisions currently set out in sections 17 and 18 of the Customs Tariff will continue to apply, contrary to the Government’s intention announced in Budget 2023.
Objective
The objective of this Order is to bring into effect changes to the Customs Tariff, specifically removing the direct shipment and transhipment requirements from legislation and allowing for them to be set in regulation, where they can be updated to align with changing shipping practices in a more timely manner, per the feedback received during stakeholder consultations.
Background
Shipment requirements for Canada’s non-reciprocal preferential tariff programs for developing countries, as well as for the Most-Favoured-Nation Tariff, Australia Tariff and New Zealand Tariff, have traditionally been set out in sections 17 and 18 of the Customs Tariff. The direct shipment provisions specified that goods are shipped directly to Canada from another country when the goods are conveyed to Canada from that other country on a specific document, called a “through bill of lading.” During the public consultations on the renewal of the tariff preference programs held in fall 2022, stakeholders conveyed that this requirement is overly restrictive, as it only allows for one type of shipping document to be used as proof that the goods are shipped directly to Canada. As a result, Budget 2023 announced the Government’s intention to simplify administrative requirements for Canadian importers.
Accordingly, section 229 of the BIA (which received royal assent on June 22, 2023), once brought into force by this Order, will repeal sections 17 and 18 of the Customs Tariff and instead (a) establish that, for the purposes of the Customs Tariff, goods are shipped directly to Canada from another country when the goods are shipped to Canada from that other country in accordance with the regulations; and (b) set out the ability for the Governor in Council to, on the recommendation of the Minister, make regulations specifying the requirements respecting the shipping of goods.
Implications
This Order will allow direct shipment and transhipment provisions to be set in regulation. The new direct shipment regulations will allow for more types of documentation to serve as proof that goods are shipped directly to Canada, ensuring that the programs are easier to access. The new regulations will also remove the six-month time limit on the storage of goods in an intermediary country, so that shipments that need to remain in storage for longer periods can still benefit under the programs. Both of these changes align with Canada’s standard practice under its free trade agreements. There are no financial, environmental, social, or legal implications to this Order.
Consultation
In the fall of 2022, the Department of Finance held public consultations for 60 days on the potential renewal of the General Preferential Tariff and Least Developed Country Tariff programs, as well as several potential program updates, including the direct shipment and transhipment provisions. The public consultation paper is available here: Consultation on the Renewal of Canada’s Tariff Preference Programs for Developing Countries.
In total, the government received 12 submissions from stakeholders, reflecting all key implicated industries — including labour groups, retailers, the apparel sector, and food and agriculture sectors. Stakeholders were supportive of all program updates proposed by the government, including the proposed updates to the direct shipment provisions. Specifically, stakeholder feedback repeatedly highlighted the existing direct shipment provisions in the Customs Tariff as being overly restrictive, with requirements only satisfiable by providing a single type of shipping document that was common in the 1970s and 1980s, but much less common today. As a result, the programs have gradually become more difficult to access, because this depends on providing a single type of shipping document.
Stakeholder feedback was in favour of updating these requirements to allow for a broader range of documentation to prove that goods are shipped directly to Canada, which reflects the way companies currently do business and aligns with the requirements in Canada’s free trade agreements. This would maximize the programs’ usage by allowing for other supporting documents that contain adequate information to serve as proof of direct shipment. Stakeholders were also in favour of requirements being set in regulation, rather than legislation, in order to ensure they can be updated in a more timely manner in the future to reflect changing shipping practices, as necessary.
The direct shipment requirements for the Most-Favoured-Nation Tariff, Australia Tariff and New Zealand Tariff were not consulted on, as they are not expected to generate significant interest and would align with the requirements of other tariff treatments.
Contact
Mike Mosier
Director
Trade and Tariff Policy
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Email: tariff-tarif@fin.gc.ca