CUFTA Rules of Origin Regulations: SOR/2024-68

Canada Gazette, Part II, Volume 158, Number 10

Registration
SOR/2024-68 April 19, 2024

CUSTOMS TARIFF

P.C. 2024-385 April 19, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed CUFTA Rules of Origin Regulations under subsection 16(2)footnote a of the Customs Tariff footnote b.

CUFTA Rules of Origin Regulations

Rules of Origin

Force of law

1 The following provisions of the Canada–Ukraine Free Trade Agreement have the force of law in Canada:

Repeal

2 The CUFTA Rules of Origin Regulations footnote 1 are repealed.

Coming into Force

S.C. 2024, c. 3

3 These Regulations come into force on the day on which section 9 of the Canada–Ukraine Free Trade Agreement Implementation Act, 2023 comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issues

The Canada–Ukraine Free Trade Agreement (CUFTA) came into force on August 1, 2017. The CUFTA included a review clause that committed the Parties to review the agreement within two years of its entry into force, with a view to expanding it. Canada and Ukraine negotiated a modernized CUFTA, which includes several new chapters as well as updated chapters, including on rules of origin and origin procedures and government procurement. The modernized CUFTA was signed by Canada and Ukraine on September 22, 2023, and tabled in Parliament on October 17, 2023. The domestic implementation of these changes requires amendments to the CUFTA Rules of Origin Regulations and the Canadian International Trade Tribunal Procurement Inquiry Regulations.

Background

In free trade agreements (FTAs), including the CUFTA, rules of origin provisions are used to determine whether a good has undergone enough production in the free trade area to be eligible for preferential treatment. The original CUFTA includes a provision relating to cumulation with non-Parties. This provision would allow materials of any non-Party with which both Canada and Ukraine have FTAs to be taken into consideration by the exporter when determining whether a product produced in Ukraine or Canada qualifies as originating under the CUFTA. This provision was not activated in the original agreement, given that several parameters, such as the list of countries with which Canada and Ukraine both have FTAs, had to be agreed upon first. These parameters have been included in the modernized CUFTA. In Canada, rules of origin related to free trade agreements are implemented through regulations made pursuant to the Customs Tariff.

The modernized CUFTA also updated the government procurement provisions to replace detailed provisions mirroring the World Trade Organization (WTO) Agreement on Government Procurement (GPA) with general provisions that incorporate by reference GPA commitments directly into the CUFTA, since Ukraine was not yet a party to the GPA at the time of the original negotiations with Canada (2010 to 2015). The GPA is a plurilateral agreement under the auspices of the WTO, which regulates the procurement of goods and services by the public authorities of the parties based on the principles of openness, transparency and non-discrimination. Ukraine became party to the GPA on May 17, 2016.

In order to implement the modernized CUFTA outcomes concerning government procurement, amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations are required. The Canadian International Trade Tribunal (CITT) is responsible for inquiring into complaints from potential suppliers of goods or services relating to federal government procurement covered by various trade agreements. These procurement inquiries are governed by the Canadian International Trade Tribunal Procurement Inquiry Regulations made pursuant to the Canadian International Trade Tribunal Act.

Objective

Description

The amendments to the CUFTA Rules of Origin Regulations repeal and replace the current CUFTA Rules of Origin Regulations to implement the updated rules of origin provisions agreed to by Canada and Ukraine. Specifically, the updated regulations would allow materials of any non-Party with which both Canada and Ukraine have FTAs to be taken into consideration by the exporter when determining whether a product produced in Ukraine or Canada qualifies as originating under the CUFTA.

The Regulations Amending the Canadian International Trade Tribunal Procurement Inquiry Regulations make requisite amendments to the current Canadian International Trade Tribunal Procurement Inquiry Regulations to implement the procurement obligations set out in the modernized CUFTA. Specifically, the amendments replace a reference to the old treaty with the new one and update chapter numbers. The amendments also remove from the Regulations a reference to the old CUFTA chapter on government procurement that is no longer needed since the modernized CUFTA chapter on government procurement incorporates the GPA commitments by reference.

Regulatory development

Consultation

Consistent with other trade agreement negotiations, the Government maintained an open dialogue with public and private sector stakeholders throughout the CUFTA modernization process, including through a public consultation process held from February 15 to March 16, 2020, and published on the website of Global Affairs Canada (GAC) as well as a public notice in the Canada Gazette, Part I. A report of those consultations is posted on GAC’s website. All stakeholders were supportive of CUFTA modernization. The regulatory changes were not prepublished in the Canada Gazette, Part I, given the consultations held to inform the negotiations in 2020 and the approval of the modernized CUFTA treaty amendments by Parliament in fall 2023.

Modern treaty obligations and Indigenous engagement and consultation

An assessment of modern treaty implications did not identify any adverse impacts on potential or established Aboriginal or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982.

Instrument choice

The CUFTA Rules of Origin Regulations and the Regulations Amending the Canadian International Trade Tribunal Procurement Inquiry Regulations fully implement Canada’s rules of origin and government procurement commitments under the modernized CUFTA. Regulations are the only instruments for achieving Canada’s international commitments in respect of these matters.

Regulatory analysis

Benefits and costs

The amendments to update the rules of origin have no direct cost impact on importers. The vast majority of goods already qualify under the rules of origin in the original CUFTA and will continue to qualify under the modernized CUFTA. There are no costs associated with these amendments on importers or the Government.

Small business lens

Analysis under the small business lens concluded that the regulations will not impact Canadian small businesses. The regulatory amendments update the CUFTA Rules of Origin Regulations to reflect the modernized CUFTA. The amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations implement the modernized CUFTA agreement. These amendments have negligible impacts. There is no change (increase or decrease) in the amount of administrative or compliance burden imposed on businesses as a result of this initiative.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in the administrative burden on business, and no regulatory titles are repealed or introduced. The amendments to the CUFTA Rules of Origin Regulations do not change the requirements already in place for importers who wish to claim CUFTA tariff preferential treatment when importing eligible goods from Ukraine, including the required customs forms. The amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations are perfunctory in nature and do not incrementally change procedures for the importation of products from Ukraine.

Regulatory cooperation and alignment

These regulations are not related to a work plan or commitment under a regulatory cooperation forum. They are necessary for Canada to fulfill its commitments under the CUFTA, which is an international agreement.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this initiative.

Implementation, compliance and enforcement, and service standards

The regulations come into effect on the date the modernized CUFTA comes into force. The Canada Border Services Agency (CBSA) will monitor compliance with the terms of the CUFTA Rules of Origin Regulations in the normal course of its administration of customs and tariff-related legislation and regulations. As it was the case for previous updates to the rules of origin in other free trade agreements, the CBSA will inform importers through a Customs Notice of all relevant issues pertaining to the CUFTA Rules of Origin Regulations. The amended Canadian International Trade Tribunal Procurement Inquiry Regulations will continue to be applied by the CITT as part of its responsibilities to consider and make findings with respect to complaints concerning federal procurements that are subject to Canada’s trade agreement obligations.

Contact

Karen LaHay
Senior Economist
International Trade Policy Division
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: tariff-tarif@fin.gc.ca