This project is funded by Market access the European Union opportunities for
EU business00 in Canada in the context of CETA
Exper t Report
May 2018
MARKET ACCESS SUPPORT FOR EU BUSINESS IN CANADA UNDER CETA
i
This project is funded by the European Union
Market Access Support for EU Business in Canada under CETA
(2016/EuropeAid/DH/SER/137-941)
Market access opportunities for EU business in Canada in the context of CETA Expert Report
May 2018
Prepared by: Borden Ladner Gervais LLP and Tereposky & DeRose LLP
This project is financed by the European Union and executed by DEVELOPMENT Solutions Europe Ltd. & Borden Ladner Gervais LLP. Any views expressed are those of the consultants and do not represent an official view of the European Union. 2016/EuropeAid/DH/SER/137-941 Market Access Study Report 12 March 2018
TABLE OF CONTENTS
Market Access Support for EU Business in Canada under CETA ...... i
Table of Contents ...... ii
List of Tables ...... 1
Abbreviations ...... 2
Report Layout ...... 2
I. Summary, Conclusions, and Recommendations ...... 3
A. Identifying and Taking Advantage of Opportunities throughout Canada ...... 4
Overview of the Canadian economy ...... 5
1. Trade in Goods ...... 8
2. Government Procurement ...... 12
3. Trade in Services...... 14
4. Temporary Entry and Stay of EU Individuals in Canada for Business Purposes ...... 16
5. Investment ...... 17
B. Identifying and Taking Advantage of Opportunities in each Province and Territory ...... 18
C. Conclusions and Recommendations ...... 22
1. Exporters of EU Goods to Canada ...... 24
2. EU Enterprises Participating in Canadian Government Procurement Opportunities ... 25
3. EU Investors...... 26
II. Trade in Goods ...... 27
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A. Overview of Analysis ...... 28
B. Opportunities relating to Significant Reductions in Customs Duties ...... 30
1. Overview of Opportunities ...... 30
2. Product Category Studies ...... 31
3. Reduced Customs Duty Opportunities by HS Section and Chapter ...... 56
C. Opportunities and Challenges relating to the Cheese TRQs ...... 58
D. Taking Advantage of the Preferential Tariff Treatment Opportunities ...... 61
1. Post-Entry Customs Enforcement ...... 61
2. Tariff Classification of Goods ...... 62
5. Non-Resident Importer of Record ...... 65
6. Goods and Services Tax (GST) – Canada’s Value-Added Tax (VAT) ...... 66
7. Access to the Cheese TRQs and the Origin Quotas ...... 67
8. Regulatory Requirements, High Duties, and Other Considerations ...... 68
III. Government Procurement ...... 68
1. Comparison of Market Access Opportunities under the CETA and the CFTA ...... 69
2. The Impact of Canada’s Other Free Trade Agreements on CETA Procurement ...... 71
A. The Challenge of Quantifying Canadian Government Procurement Opportunities ...... 72
1. Statistics Collected on the Canadian Agreement on Internal Trade (AIT) ...... 73
2. OECD Procurement Data Calculation Methodology ...... 74
3. Municipal Government Procurement represents Significant Spending ...... 77
B. The Current Challenge: Identifying Government Procurement Opportunities...... 78
C. Assessment of Government Procurement Opportunities ...... 82 iii
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IV. Trade in Services...... 95
A. Cross-Border Trade in Services ...... 95
B. Financial Services ...... 97
C. International Maritime Transport Services ...... 102
D. Telecommunications Services ...... 106
V. Temporary Entry and Stay of EU Individuals for Business Purposes ...... 118
A. Categories of Workers Covered under CETA Chapter 10 ...... 119
1. Short-Term Business Visitors – no work permit required; 90 days of entry and stay within any 6-month period ...... 120
2. Key Personnel ...... 122
3. Contractual Services Suppliers and Independent Professionals – LMIA-exempt work permit required; entry and stay permitted for up to 12 months ...... 124
4. Canadian Reservations Applicable to Contractual Services Suppliers and Independent Professionals ...... 129
VI. Investment ...... 131
Appendix 8 ...... 132
Appendix 9 ...... 155
Appendix 10 ...... 171
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LIST OF TABLES
Table 1 Gross domestic product, expenditure-based, by province and territory ...... 19
Table 2 Value of total imports into Canada from all countries, by province and territory ...... 20
Table 3 Value of total imports into Canada from the European Union, by province and territory ...... 21
Table 4 Preparations of meat, fish, or crustaceans, molluscs or other aquatic invertebrates (HS Chapter 16)...... 33
Table 5 Preparations of cereals, flour, starch or milk, and pastry cooks’ products ...... 33
Table 6 Miscellaneous edible preparations (Chapter 21) ...... 34
Table 7 Processed agricultural products for which the CETA lowers tariffs for EU imports to rates no less favourable than imports from the United States and Mexico ...... 35
Table 8 Processed agricultural products for which the CETA lowers tariffs for EU exporters to rates more favourable than those applied to imports from Mexico ...... 37
Table 9 Imports of apparel and clothing goods into Canada (2015-2016) ...... 39
Table 10 Imports of knitted sweaters, sweatshirts and waist-coats into Canada – HS Tariff Heading 61.10 (2016) ...... 40
Table 11 Detail of imports from the European Union ...... 41
Table 12 Preferential Tariff Opportunities for EU Producers of Apparel and Clothing Goods ... 42
Table 13 Clothing and Apparel products for which the CETA lowers tariffs for EU imports to rates no less favourable than imports from the United States and Mexico ...... 45
Table 14 Imports into Canada of passenger motor cars powered by spark-ignition internal combustion reciprocating engines with cylinder capacities 1,501-3,000 cc – HS Tariff Subheading 8703.23 (2016) ...... 50
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Table 15 Imports into Canada of motor vehicles powered by internal combustion engines with cylinder capacities 1,001-3,000 cc – HS Tariff Subheadings 8703.22, 23, 31, and 32 (2016) .... 52 Table 16 Progressive elimination of customs duties on Imports into Canada of EU motor vehicles under HS Tariff Subheadings 8703.22, 23, 31, and 32 (2016) ...... 52 Table 17 Imports into Canada of motor vehicles parts, components, and accessories – HS Tariff Subheading 8707.10 and certain subheadings under Heading 87.08 (2016) ...... 54
Table 18 Canada's CETA TRQ Committments ...... 58
Table 19 Canada's industrial cheese TRQ committments ...... 59
Table 20 Imports into Canada of cheese and curd – HS Tariff Heading 04.06 (2016) ...... 59
Table 21 General government procurement estimates based on OECD national accounts data .. 75 Table 22 Frequency of sub-central government procurement opportunities posted on major online portals (13 October 2017) ...... 79
Table 23 Government Procurement covered by the CETA ...... 85
Table 24 Procurement value thresholds under the CETA, by entity and type of procurement .... 86
Table 25 Goods for Canadian government procurement covered by the CETA ...... 90
Table 26 Canadian Sub-central level exceptions on procurement of goods ...... 91
Table 27 Canadian government procurement of services covered by the CETA ...... 93 Table 28 Purposes and activities for which short-term business visitors may temporarily enter and stay in Canada (Article 10.9 and Annex 10-D)...... 120 Table 29 Goods of Section IV – Prepared Foodstuffs; Beverages, Spirits, and Vinegar, Tobacco and Manufactured Tobacco Substitutes...... 132 Table 30 Goods of Section IV – Prepared Foodstuffs; Beverages, Spirits, and Vinegar, Tobacco and Manufactured Tobacco Substitutes...... 134
Table 31 Goods of Section VI – Products of the Chemical or Allied Industries ...... 134
Table 32 Goods of Section VII – Plastics and Articles Thereof; Rubber and Articles Thereof . 136
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Table 33 Goods of Section VIII – Raw Hides and Skins, Leather, Furskins and Articles Thereof; Saddlery and Harness; Travel Goods, Handbags and Similar Containers; Articles of Animal Gut ...... 137 Table 34 Goods of Section IX – Wood and Articles of Wood; Wood Charcoal; Cork and Articles of Cork; Manufactures of Straw, of Esparto or of Other Plaiting Materials; Basketware and Wickerwork...... 137
Table 35 Goods of Section XI – Textiles and Textile Articles ...... 138
Table 36 Goods of Section XII – Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, Seat-sticks, Whips, Riding-crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowers; Articles of Human Hair ...... 142
Table 37 Goods of Section XIII – Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar Materials; Ceramic Products; Glass and Glassware ...... 143
Table 38 Goods of Section XV – Base Metals and Articles of Base Metal ...... 144
Table 39 Goods of Section XVI – Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles ...... 146 Table 40 Goods of Section XVII – Vehicles, Aircraft, Vessels and Associated Transport Equipment ...... 147
Table 41 Goods of Section XVIII – Optical, Photographic, Cinematographic, Measuring, Checking, Precision, Medical or Surgical Instruments and Apparatus; Clocks and Watches; Musical Instruments; Parts and Accessories Thereof ...... 148
Table 42 Goods of Section XIX – Arms and Ammunition; Parts and Accessories Thereof ...... 149
Table 43 Goods of Section XX – Miscellaneous Manufactured Articles ...... 150
Table 44 List of Canadian government entities covered under the CETA ...... 155
Table 45 Notable areas of improved market access for EU SMEs under the CETA ...... 171
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ABBREVIATIONS
ACSS Automated Clearing LVTS Large Value Transfer System Settlement System MFN Most-favoured-nation AIT Agreement on Internal Trade MRAs Mutual Recognition CBSA Canada Border Services Agreements Agency NAFTA North American Free Trade CCMR Capital Markets Regulator Agreement CETA Comprehensive Economic NOC National Occupational and Trade Agreement Classification CFTA Canadian Free Trade NRI Non Resident Importer Agreement OECD Organisation for Economic CITT Canadian International Trade Cooperation and Tribunal Act Development EDI Electronic Data Interchange OEM Original Equipment EU European Union Manufacturer GATS General Agreement on Trade PPS Prominent Payment System and Services PSD2 Payment Services Directive GDP Gross Domestic Product SDR Special Drawing Rights GPA Agreement on Government SIMA Special Import Measures Act Procurement SMEs Small and Medium-sized GST Goods and Services Tax Enterprises HS Harmonized System SNA System of National Accounts IMTS International Maritime SOE Settlement Optimization Transport Services Engine IRCC Immigration, Refugees and SPA Single Point of Access Citizenship Canada TRQs Tariff Rate Quotas ITC Input Tax Credits US United States (of America) LMIA Labour Market Impact WTO World Trade Organisation Assessment
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REPORT LAYOUT
This report identifies features of the European Union-Canada Comprehensive Economic and Trade Agreement (CETA) that create new and enhanced Canadian market access opportunities for European Union (EU) businesses, including small and medium-sized enterprises (SMEs). These opportunities relate primarily to the export of EU goods and services to Canada, but they also have implications for investment opportunities in Canada. The full scope of these opportunities can only be understood when assessed together with the steps necessary to take advantage of them. Accordingly, this report also outlines the key considerations and actions that must be undertaken by EU businesses in order to take advantage of the new market access opportunities.
First, the report provides an overview of the concrete opportunities arising with respect to trade in goods further to Canada’s tariff elimination and quota commitments under the CETA. Second, the report outlines the opportunities now available in Canadian government procurement, particularly at the sub-federal levels of government, further to Canada’s guaranteed market access and non- discrimination commitments. In addition, the report considers how the CETA affects opportunities arising with respect to trade in services, including with respect to the provisions for the temporary entry and stay of EU individuals for business purposes (often referred to as the “labour mobility” provisions). In turn, these considerations inform an assessment of the implications for potential new investment opportunities in Canada.
The objective is to provide practical and useful information to assist EU enterprises — including SMEs in particular — in taking the first steps to identify and take advantage of potential new business opportunities in Canadian markets under the CETA. It falls to each enterprise to assess the relevance of potential opportunities to its own specific circumstances and business interests.
The backdrop to the new CETA opportunities is the well-established status quo under the World Trade Organization (WTO) agreements and the body of other treaties ratified by the European Union and Canada, which many CETA provisions expressly affirm, incorporate by reference, modernize, formalize, or otherwise reinforce without necessarily creating new rights, obligations, or prospects. Thus, while the CETA creates important new opportunities and provides some
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enhancements for existing opportunities (e.g., through the provisions for the temporary entry and stay of individuals for business purposes), it more generally affirms the existing EU-Canada market access characteristics, which otherwise remain relatively unchanged, as the guaranteed minimum baseline for trade and investment going forward. The CETA also establishes a formal bilateral framework for ongoing cooperation, dialogue, and negotiations that are intended to build upon this foundation to further liberalize trade and investment between the European Union and Canada in the future.
Finally, notwithstanding protectionist and anti-globalization trends elsewhere in the current global environment, the European Union, the Government of Canada, and Canada’s provincial and territorial governments all show strong commitments to the CETA and its success. This support ensures predictability in the flow of EU-Canada trade and investment under the CETA, providing certainty to EU traders, service suppliers, and investors, and further enhancing their market access opportunities.
I. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
The CETA creates direct opportunities that are immediately apparent in relation to trade in goods and services, including in the context of government procurement. It also enhances and facilitates opportunities for direct investment in Canada. Trade in goods and/or services must be considered together with investment when assessing opportunities under the CETA. This is because an opportunity to trade in goods is often associated with an opportunity to trade in services, and vice versa. Further, direct investment in a Canadian infrastructure may provide the best way for an EU enterprise to leverage the maximum benefits of the preferential market access provided under the CETA. An example is the supply of a good that requires installation and set-up services and/or maintenance and repair services. The establishment of supply chains for the good and its associated services can lead to investment in Canada based on those supply chains. In addition, the CETA provisions for the temporary entry and stay of individuals for business purposes can support the supply of such services, the establishment of such an investment, or both. Thus, the predictability and certainty created by the CETA creates an environment that fosters further investment, both
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within and beyond the existing EU-Canada trade flows and supply chains, and synergies in the supply of goods and services.
The market access opportunities that are generated or enhanced by the CETA are available to small, medium, and large EU enterprises. Large enterprises generally have sophisticated ‘in-house’ resources to identify and take advantage of these opportunities, while SMEs have relatively little time, personnel, or money available to fully understand how to access the opportunities. Accordingly, this report goes beyond identifying opportunities for SMEs and addresses key considerations necessary to take advantage of them. Moreover, as explained below, elements of the CETA that do not themselves create direct opportunities (e.g., the provisions for the temporary entry and stay of individuals for business purposes) may assist SMEs in taking advantage of the market access opportunities created or affirmed under other CETA provisions.
This report does not examine the macro-economic impact of the CETA. Such an analysis has been undertaken in other studies. Rather, this report focuses on identifying opportunities and corresponding challenges relating to trade in goods and services under the CETA, including in the context of government procurement, for the benefit of EU exporters and investors. As discussed below, there is a multitude of opportunities and they are very significant when viewed on an opportunity-by-opportunity basis. SMEs need to be aware of the specific opportunities that relate to their business interests, and the considerations or challenges associated with taking advantage of those opportunities.
A. Identifying and Taking Advantage of Opportunities throughout Canada
The opportunities created or enhanced by the CETA and identified in this report extend throughout Canada to all of the provinces and territories. As discussed below, a rough approximation of the relative overall magnitudes of opportunities in each the provinces and territories can be extrapolated from their respective proportions of Canada’s gross domestic product (GDP).
For some market access opportunities, Canada’s geography may be relevant to assessing competitiveness and profitability. For example, EU goods shipped across the Atlantic Ocean, unloaded at a port in eastern Canada, and then distributed by rail or road transport throughout - 4 -
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Canada (including to the westernmost provinces and territories) will incur a range of different transportation costs depending on their final destination. While EU goods may be highly competitive in the large markets of Ontario and Quebec, which are relatively close to the major ports on the St. Lawrence River where trans-Atlantic cargos are ordinarily delivered, the same goods may be less competitive in the western provinces of Alberta and British Columbia. The structure and circumstances of an EU exporter’s business model in Canada, if any, will determine whether and to what extent this factor is relevant. For other kinds of opportunities — e.g., cross- border trade in services and intangible property — Canada’s geography will not be a relevant factor.
Also, certain opportunities relating to cross-border trade in services, sub-central government procurement, and investment may differ among the provinces and territories to the extent that there are differences in the specific exclusions and reservations secured by each provincial and territorial government, respectively, in the negotiated outcomes of the CETA. Again, whether or to what extent these exclusions and reservations are relevant to the business interests of an EU enterprise must be assessed on a case-by-case basis, taking into account all of the relevant circumstances.
Overview of the Canadian economy
Since 2010, the Canadian economy has been recovering well from the financial crisis and its real GDP growth has averaged 2.6% annually until 2017. For 2018 and 2019, the projected annual GDP growth is 2.1% and 1.9%, respectively. 1 The slower GDP growth is expected due to the contraction in resources sector; on the other hand, the economic activity in other sectors is expected to strengthen.2 The Canadian economy, rich in natural resources and mineral wealth, is diversified with services and manufacturing sectors, which are significant contributors in the economy.3
1 OECD (2018), Real GDP forecast (indicator). doi: 10.1787/1f84150b-en (Accessed on 06 March 2018) 2 OECD Economic Surveys: Canada© OECD 2016 3 WTO Trade Policy Review 2015: Canada, Report by the Government - 5 -
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According to UN data, agriculture accounts for 1.8% of GDP, while services comprises of 69.6% and industry 28.6%.
Canada is the world’s leading nation in mining, extracting more than 60 types of minerals and metals. Specifically, the country is the largest producer of potash and ranks among the top-five producers of aluminium, nickel, cobalt and platinum metals. Moreover, the country accounts for over 4% of global production of crude oil and natural gas, which positions Canada as the fifth- largest producer in the world for both products. All-natural resource sectors contribute significantly to Canada’s national and provincial economies, supporting close to 1.8 million jobs in Canada.4
The national, provincial and territorial governments work closely together on shared priorities in the areas of energy efficiency, oil and gas development, reliable electricity and technological innovation in the primary sector of Canada’s economy.5 The Canadian Energy Strategy, finalized in 2015, presents the main areas of focus in the energy sector: sustainability and conservation, technology and innovation and delivering energy to people. Addressing climate change, social and environmental responsibility, the Strategy aims to promote energy efficiency in the economy’s transition to a lower carbon economy. 6 Additionally, the strategy for the extractive sector, developed in 2014, projects that mining and energy sectors will remain the engine of Canada’s economy.7
As one of the largest consumers of electricity in the world, Canada is committed to increase the use of renewable energy. The relevant policies are developed by the federal government, which focuses on tax incentive provisions, funding programs and creation of favourable regulatory environment. A number of initiatives are implemented to support innovation and R&D in renewable energy. Foreign investors in wind energy should seek the financial support from
4 Innovating for a Strong Canadian Energy and Mining Sector, Energy and Mines Ministers’ Conference, 2015 5 WTO Trade Policy Review2015: Canada, Report by the Secretariat 6 Canadian Energy Strategy, Canada’s Premiers 2015, Council of the Federation Secretariat 7 WTO Trade Policy Review: Canada, Report by the Government 2015 - 6 -
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organizations such as the Wind Energy Institute of Canada, the TechnoCentre éolien, the Wind Engineering, Energy and Environment Institute and CanmetENERGY. As for solar energy companies, the National Solar Test Facility, Solar Simulator-Environmental Chamber and ReMAP (Refined Manufacturing Acceleration Process Network) are the leading organizations which support businesses by developing solar energy solutions, testing new technologies and also support research in this sector.8
The government of Canada has recently increased funding for the ICT sector, one of the priority sectors in Canada. The funding is provided through federal granting councils as well as the Industrial Research Assistance Program, the Institute for Quantum Computing, the Microelectronics Innovation Centre, Canadian Network for the Advancement of Research, Industry and Education and the Canadian Digital Media Network. The programs developed by these institutions provide opportunities for foreign investors to start their innovative R&D operations in Canada. Additionally, Canada is one of the most profitable markets for communication firms with a highly educated ICT workforce, well-developed communications infrastructure and a competitive cost environment.9
The Canadian market is also an attractive destination for investors in the R&D intensive biotechnology and pharmaceuticals sector. With its well-established health-research networks and biopharmaceutical clusters in several provinces, Canada provides an advantageous business environment for pharmaceutical firms. As mentioned previously, the National Research and Assistance Program provides direct assistance to SMEs aiming to establish their innovative operations in Canada.10
8 Government of Canada “Invest in Canada “2017, available at www.international.gc.ca/investors- investisseurs/assets/pdfs/download/vp-renewable_energy.pdf 9Government of Canada “Invest in Canada “2017, available at www.international.gc.ca/investors- investisseurs/assets/pdfs/download/vp-data_and_communications.pdf 10 Government of Canada “Invest in Canada “2017 available at www.international.gc.ca/investors- investisseurs/assets/pdfs/download/vp-biopharmaceuticals.pdf - 7 -
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The strong demand for supplies and equipment in Canada‘s agricultural, mining, oil, gas, construction and other sectors fosters growth in the machinery and equipment industries. Over the years, Canada has developed a strong competitive advantage in the industry, being one of the top machinery producers in the world. Manufacturers of the agricultural, automotive and aerospace machinery and equipment benefit from a duty-free regime on all industrial manufacturing inputs. Additionally, the Canadian presence ensures tariff free market access to the large North American market as provided by the NAFTA. This also enables foreign investors to quickly achieve economies of scale by joining the integrated Canadian and US value chains in the machinery sector. 11
1. Trade in Goods
The opportunities for trade in goods are reflected in: (i) the preferential tariff treatment that reduces or eliminates the customs duties on imports into Canada of originating EU goods; (ii) the tariff rate quota (TRQ) for cheese imports into Canada; and (iii) the CETA rules of origin for certain goods. The third source of opportunities — the CETA rules of origin — is less obvious, but it can be an important factor for certain goods. In many cases, the CETA preferential tariff treatment reduces the applicable rates of customs duty to levels that are equivalent to those agreed in Canada’s other regional free trade agreements, such as the North American Free Trade Agreement (NAFTA). In circumstances where the preferential tariff
11 Government of Canada “Invest in Canada “2017 available at http://international.gc.ca/investors- investisseurs/assets/pdfs/download/vp-machinery_and_equipment.pdf
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treatment under the CETA matches that in other regional free trade agreements, the rules of origin under the CETA are more liberal (i.e., easier to meet). This confers a competitive advantage on EU exporters because their goods can compete in the Canadian market at lower production costs than like goods imported from other countries. Whether a competitive advantage exists, and what the magnitude of that advantage is, will depend on the particular circumstances of the goods at issue, the other sources of imported goods that compete with EU goods in the Canadian market, and the comparative rules of origin that apply to such goods. Such an analysis must be undertaken on a case-by-case basis. To illustrate the analytical approach through which EU exporters may assess whether the CETA rules of origin provide an additional competitive opportunity for their goods, an example is provided in the context of clothing and apparel products.
On 21 September 2017, the application of the CETA resulted in the elimination of the customs duties on almost all EU products to which customs duties had previously applied. In Canada’s Harmonized System (HS) tariff schedule,12 customs duty at a rate of zero percent is designated by the term “free”, denoting that a good may be imported on a duty-free basis. Under the CETA preferential tariff treatment, customs duties at rates of 10 to 25 percent ad valorem were reduced to zero percent for EU-origin goods classified under approximately 1,000 subheadings and tariff items in Canada’s HS tariff schedule13 (i.e., a reduction of 10 to 25 percentage points). For EU goods classified under approximately 2,000 other tariff subheadings or tariff items, customs duties
12Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade- commerce/tariff-tarif/menu-eng.html. 13 The international Harmonized Commodity Description and Coding System, typically referred to as the Harmonized System (HS), is used to classify products for trading purposes in a consistent manner. It organizes goods into Chapters (2 digits), headings (4 digits), and subheadings (6 digits). Each country may further organize the goods within a subheading into tariff items (8 digits) and tariff classifications (10 digits). Canada follows the HS in its customs tariff schedule, available online at http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. It should be noted that the eliminations of customs duties at the 6-digit subheading level will extend to all of the goods classified within that subheading, i.e., at the 8-digit tariff item and the 10-digit tariff classification levels, respectively. Thus, the elimination of customs duties at rates of 10-25 percent for 1,000 tariff subheadings or tariff items does not mean that this change has affected 1,000 different products. Rather, the number of different products affected in this range will be greater, as each tariff subheading and tariff item may encompass a number of different products. This is also true for the elimination of customs duties at rates of 5-9.5 percent for 2,000 other tariff subheadings or tariff items, and 1-4.5 percent for 600 other tariff subheadings and tariff items. - 9 -
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at rates of 5 to 9.5 percent were reduced to “free” (i.e., a reduction of 5 to 9.5 percentage points). For about 600 other tariff subheadings and items, customs duties at rates of 1 to 4.5 percent were reduced to “free” (i.e., a reduction of 1 to 4.5 percentage points).
In current competitive circumstances, a customs duty reduction of between 5 and 25 percentage points amounts to a substantial competitive advantage for imported goods. This preferential tariff treatment under the CETA therefore provides a competitive opportunity for EU-origin goods. For certain products, a reduction of between 1 and 4.5 percentage points could also be meaningful, depending on the market circumstances.
Appendix 1 to this report is a spreadsheet that presents a detailed analysis, on a line-by-line basis, of the CETA customs duty reductions in Canada’s HS tariff schedule. Section II.B of the report, below, provides a summary of this data, organized into HS Chapters, headings, and subheadings, for ease of reference. Since it is not practical to review the opportunities associated with every single tariff item for which customs duties have been eliminated, the report presents studies of three key categories of goods: (i) prepared and processed food products; (ii) apparel and clothing goods; and (iii) automobiles (passenger cars) and automotive components. These studies illustrate the opportunities available to EU exporters and serve as guidance for company-specific studies of the opportunities generated by the CETA preferential tariff treatment of EU-origin goods.
The report also describes the opportunities available to EU exporters of cheese products for direct consumption and industrial cheese products under the CETA TRQs (including the reallocation of 800 metric tonnes of Canada’s WTO TRQ to the European Union). The value of these opportunities is substantial. Accessing the opportunities is complicated, however, by the fact that access is determined by Canadian permit holders, who must have a history of cheese production in Canada or participation in the Canadian cheese market. EU exporters, therefore, must seek out supply arrangements with these permit holders in order to benefit from the TRQs.
EU exporters seeking to take advantage of the opportunities arising from the CETA customs duty reductions or TRQs must be aware of requirements and issues relating to post-entry customs enforcement, tariff classification, customs valuation, and the rules of origin. These are the
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administrative matters in which mistakes are most common. The correct application of the relevant rules of origin can constitute a particularly high-risk issue, and therefore great care must be taken to ensure compliance. There are ways for EU businesses to reduce the costs of exporting goods to Canada while maintaining control over the importation of the goods. This can be accomplished, for example, by acting not only as the exporter in the European Union, but also as the “non-resident importer of record” in Canada. However, care must be taken to ensure that such transactions are structured in a manner that permits a refund of the Goods and Services Tax (GST) (i.e., Canada’s value-added tax), which is levied a rate of 5 percent ad valorem when the goods are imported into Canada. If the GST payment is not recovered through a refund, the goods will be less competitive in Canada by that amount.
Canadian regulatory requirements relating to trade in goods are similar to those in the European Union. The importation of certain goods is prohibited (e.g., illegal goods, dangerous goods, counterfeit goods that infringe trademarks), restricted or controlled (e.g., firearms, munitions, certain chemicals), regulated (e.g., animals, plants, food, and pharmaceutical drugs), and subject to technical regulations (e.g., food labelling requirements, electrical standards, building codes, etc.). EU exporters should identify the relevant regulatory requirements in advance and determine what is required to satisfy them.
EU exporters must confirm that the prohibitively high rates of customs duties that continue to apply to about 130 tariff items relating to “over-access commitment” quantities of supply-managed products in Canada (i.e., dairy products, poultry and poultry products, and eggs) will not be applied to their goods. Further, certain undenatured ethyl alcohol is subject to significant excise duties upon importation, and the importation of used motor vehicles is restricted. In addition, imports of certain kinds of goods can be subject to high anti-dumping and countervailing duties under the
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Special Import Measures Act (SIMA).14 EU exporters should determine in advance whether or to what extent such duties or restrictions apply to their products.
2. Government Procurement
The CETA creates substantial government procurement opportunities in Canada for EU exporters and service suppliers. It is Canada’s first and only international free trade agreement that guarantees market access and non- discriminatory treatment to non- Canadian enterprises participating in public procurements at the sub-central levels of government (i.e., provincial/territorial governments, municipal governments, and government entities). Thus, EU enterprises have market access to sub-central government procurement opportunities to which no other non-Canadian suppliers in the world have access. Given that most procurement in Canada occurs at sub-central levels, this competitive advantage is meaningful and substantial.
Currently, comprehensive information that quantifies Canadian government procurement markets, segregated by the different levels of government, does not exist. Section III of this report summarizes the best available information. While there exists reasonably detailed data on purchasing by the federal, provincial, and territorial governments up until 2012, detailed estimates of procurement by municipal governments has not been undertaken. Further, there is significant variance in the estimates of Canadian government spending in Canada prepared by different sources using different methodologies. In part, this is the result of a lack of consistent measurements of Canadian government procurements over time. Although this deficiency will be
14 Special Import Measures Act, R.S.C. 1985, c. S-14, available online at http://laws.justice.gc.ca/eng/acts/S- 15/index.html. - 12 -
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remedied going forward by the CETA’s reporting requirements,15 it currently precludes an accurate assessment of the magnitude of procurement opportunities for EU exporters and service suppliers.
Government procurement throughout Canada is growing. Thus, historic data from 2011-2012 understates the magnitude of the actual opportunities available to EU firms. In 2011-2012, total procurement reported by the federal and provincial/territorial governments (excluding municipal procurement) was over CA $28.3 billion. During the same period, four Canadian provinces each spent in excess of CA $1 billion: Quebec (CA $4.9 billion, or 17.4% of total procurement), Alberta (CA $4.6 billion, or 16.3% of total procurement), Ontario (CA $3.4 billion, or 12.2% of total procurement), and British Columbia (CA $1.8 billion, or 6.3% of total procurement). Even though this data is from 2011-12, it provides an estimate based on the best information available regarding potential government spending in Canada.
The OECD estimates Canada’s total annual government procurement (federal, provincial and territorial, and municipal) at CA $252 billion (2012) and CA $267 billion (2016). The difference between these figures (which include municipalities) and the above figures (which do not) indicates that most government procurement in Canada is conducted at the municipal level.
In terms of taking advantage of the CETA market access to Canadian government procurements, the single greatest challenge currently facing EU enterprises is the identification of opportunities offered by sub-central government entities in a timely manner. Canada has a transitional period under the CETA of up to five years to develop and implement an electronic single point of access (SPA) that covers all central and sub-central government procurements throughout Canada. In the meantime, EU exporters and service suppliers will have to consult multiple procurement information sources to identify opportunities. Fortunately, an online resource relating to the Canadian Free Trade Agreement (CFTA) provides accessible links to all of the provincial and
15 CETA, Article 19.15 (Transparency of procurement information), available online at http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/text- texte/19.aspx?lang=eng). - 13 -
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territorial portals that publish government procurement opportunities, as well as most municipal government portals.
As discussed in Section III.C, below, it will be important for EU enterprises, especially those first entering the Canadian market, to understand the legal framework for government procurement in Canada. In particular, this includes the procedures and extremely short limitation periods involved when it is necessary to challenge a government procurement decision.
3. Trade in Services
Chapters 9 through 16 of the CETA cover matters relating to EU-Canada trade in services. Chapter 9 deals generally with cross-border trade in services, which includes the supply of services from within the European Union to consumers in Canada (but does not include the supply of services by EU suppliers located in Canada, which is facilitated under Chapter 10). Chapters 13, 14, and 15 deals specifically with trade (and investment) in financial services, international maritime transport services, and telecommunications services, respectively. The commitments set forth in these chapters must be read together with the reservations made by the federal Government of Canada and each of the provincial and territorial governments in Annexes I, II, and III of the CETA. Chapter 10, which provides for the temporary entry and stay of EU individuals in Canada for business purposes, facilitates and enhances the market access opportunities relating not only to trade in services, but also to investment, government procurement, and trade in goods. Chapter 11 establishes a framework for the prospective negotiation of mutual recognition agreements (MRAs) between the relevant authorities in the European Union and Canada with respect to the qualifications of workers in certain regulated professions. Chapter 12 disciplines domestic regulatory measures that impose requirements and
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procedures on licences and qualifications relevant to trade in services and other economic activities (e.g., investment). Chapter 16 (Electronic commerce) is relevant to the extent that trade in services involves transactions of an electronic character (e.g., delivery of services or related intangible items in an electronic format).
With the exception of certain concrete market access opportunities created under Chapter 14 (International maritime transport services),16 the negotiated outcomes in these chapters and annexes generally maintain the status quo in Canada in terms of apparent market access opportunities. Importantly, however, these outcomes serve to establish a minimum baseline of guaranteed market access and non-discriminatory treatment for EU services imported into Canada. This will provide increased certainty to EU services suppliers going forward and, in turn, this certainty will support the export of EU services to consumers in Canada. In the long term, this foundation will facilitate the growth and development of new opportunities, either through unilateral liberalization or bilateral agreement under the CETA framework for ongoing discussions and negotiations.
Importantly, market access opportunities relating to trade in services will be facilitated and enhanced by the provisions in CETA Chapter 10, which provide for the temporary entry and stay of EU individuals in Canada for business purposes. The practical impact of Chapter 10, particularly for SMEs, is that it will help to make theoretical market access possibilities under the CETA into actual, practical business opportunities in Canadian markets.
16 Subject to complex conditions and limitations, these new market access opportunities permit EU suppliers of international maritime transport services to use non-Canadian-registered, non-duty-paid vessels to reposition their own empty cargo containers and ancillary equipment between Canadian ports, perform certain ‘feeder’ transportation services between the Ports of Halifax and Montreal, and supply certain dredging services. These opportunities are discussed in detail in Section IV.C, below. - 15 -
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4. Temporary Entry and Stay of EU Individuals in Canada for Business Purposes
The negotiated outcomes of CETA Chapter 10 provide increased work force mobility and flexibility to EU enterprises of all sizes – including independent professionals – that engage in business activities in Canada. In turn, these benefits support and enhance the cross-border trade and investment opportunities that existed for EU enterprises in Canada prior to the CETA, as well as new market access opportunities that have been created by other CETA outcomes. Individuals from the European Union who qualify under the CETA as “key personnel”, “contractual services suppliers”, “independent professionals”, and “short-term business visitors” are now accorded preferential treatment by the relevant Canadian authorities, including Immigration, Refugees and Citizenship Canada (IRCC) and the Canada Border Services Agency (CBSA). The practical effects include greater certainty for EU individuals travelling to Canada for business purposes, and the reduction (or elimination) of both the administrative delays and the costs relating to labour market impact assessment (LMIA) and work permit requirements.
For example, the temporary entry and stay commitments allow short-term business visitors and key personnel from EU enterprises, including SMEs, to meet and network with potential Canadian partners, investigate market opportunities in Canada, engage with business and legal consultants, enter into agreements, and follow up on established business arrangements to address issues, manage activities, and expand operations. In addition, certain kinds of contractual services suppliers and independent professionals from the European Union are permitted to work in Canada for extended periods of time (i.e., up to 12 months within any 24-month period). These outcomes will facilitate the supply of services in Canada by EU suppliers, and further enable EU enterprises to take advantage of government procurement opportunities and investment opportunities. These - 16 -
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commitments could therefore mean the difference between a theoretical market access possibility under the CETA, and an actual business opportunity in Canada.
In particular, the capacity for EU individuals to enter into Canada and stay for extended periods of time to undertake business activities, without being required to satisfy work permit or LMIA requirements, will be very useful for SMEs looking to expand their business operations into Canadian markets. SMEs often do not have the resources available to establish a physical presence in Canada and must offer their goods and services without investing in permanent infrastructure. Further, the elimination of certain administrative delays will allow EU enterprises to react more promptly to market access opportunities in Canada and provide a higher level of service.
5. Investment
Chapter 8 of the CETA sets out provisions that protect the investments of EU investors in Canada. While this chapter does not open up specific new investment opportunities in Canada, it establishes a minimum baseline of guaranteed market access, non- discriminatory treatment, and investment protection that provides greater stability and certainty to EU investors. Like the CETA chapters relating to trade in services, the provisions in this chapter must be read together with the reservations made by the federal Government of Canada and each of the provincial and territorial governments in Annexes I and II.
As discussed above, trade in goods and services must be considered together with investment when assessing opportunities under the CETA. Direct investment in a Canadian infrastructure may provide the best way for an EU enterprise to leverage the maximum benefits of the preferential market access accorded to its goods and services under the CETA. To the extent that the CETA
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creates concrete market access opportunities relating to trade in a particular good, which may lead in turn to associated services opportunities, this may create corresponding investment opportunities (depending on all of the relevant circumstances and considerations). In this regard, the establishment of a supply chain for a particular product and any associated services can lead to investment in Canada on the basis of that supply chain. Regardless of the existence of such a concrete market access opportunity, the overall certainty and stability provided by the CETA provide an environment that fosters investment, both within and beyond the existing EU-Canada trade flows and supply chains.
Finally, the NAFTA in its current form provides EU investments in Canada with access to the large markets in the United States and integrated North American industries. For example, in the context of trade in goods, an EU enterprise might invest in establishing a production facility in Canada that produces finished goods using materials or inputs imported on a duty-free basis from the European Union under the CETA preferential tariff. Provided that the applicable NAFTA rules of origin are satisfied, the finished products could be exported to the United States on a duty-free basis under the NAFTA preferential tariff. The assessment of whether, to what extent, and how synergies between the CETA and the NAFTA can provide opportunities for EU investors must be undertaken on a case-by-case basis, having regard to the specific circumstances of an investment.
B. Identifying and Taking Advantage of Opportunities in each Province and Territory
Most of the market access opportunities created by the CETA are available throughout Canada. As a consequence, it is neither possible nor appropriate to isolate market access opportunities based on each province and territory. However, the distribution, magnitude and frequency of the opportunities between provinces and territories can be estimated.
At a very high level, the Gross Domestic Product (GDP) of each province and territory relative to Canada’s total GDP provides an indicator of the distribution of the market access opportunities for EU-Canada trade in goods, trade in services, and investment under the CETA, as this will identify the intensity of overall commercial activity in the provincial/territorial market hubs. This
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information is summarized in Table 1, below, together with the population levels in each province and territory.
Table 1 Gross domestic product, expenditure-based, by province and territory
GDP in 20152 Province or Share expressed as Population in 20151 (in millions of Canadian Territory a percentage dollars at current prices)
Canada3 35,832,500 1,986,193 100.00% Ontario 13,789,600 763,276 38.43% Quebec 8,254,900 380,972 19.18% Alberta 4,177,500 326,433 16.44% British Columbia 4,694,700 249,981 12.59% Saskatchewan 1,131,200 79,415 4.00% Manitoba 1,295,400 65,862 3.32% Nova Scotia 941,500 40,225 2.03% New Brunswick 753,900 33,052 1.66% Newfoundland and 528,800 30,100 1.52% Labrador Prince Edward 146,800 6,186 0.31% Island Northwest Territories 44,200 4,828 0.24% Yukon 37,300 2,710 0.14% Nunavut 36,600 2,447 0.12% Outside Canada N/A 705 0.04% 1 Source: Statistics Canada, CANSIM, table 051-0001, available online at http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/demo02a-eng.htm. These values represent populations as of 1st July 2015. 2 Source: Statistics Canada, CANSIM, table 384-0038, available online at http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ15-eng.htm. 3 The source data provides the following note: “Canada totals in the provincial and territorial gross domestic product by income and by expenditure accounts (PTEA) do not correspond to the national gross domestic product by income and by expenditure accounts (IEA) estimates at certain times of the year. The IEA's annual revisions, released each spring, result in a discrepancy between the estimates. The PTEA are brought back in line when the IEA's annual revisions are incorporated.”
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The data in Table 1 indicates that most of the market access opportunities created, enhanced, or otherwise facilitated by the CETA will arise in the four provinces with the largest populations: Ontario, Quebec, Alberta, and British Columbia.
For market access opportunities arising in relation to trade in goods from the European Union into Canada, import statistics by province and territory are a helpful indicator of the market access opportunities. Table 2, below, summarizes the total value of goods imported into Canadian provinces and territories from all countries during the two calendar years preceding the entry into force of the CETA, 2015 and 2016.
Table 2 Value of total imports into Canada from all countries, by province and territory
Imports in 2015 Imports in 2016 Province or Territory Value in Percentage Value in Canadian Percentage Canadian share dollars share dollars
Ontario 325,392,603,899 60.67% 333,663,590,720 62.56% Quebec 78,571,527,045 14.65% 73,684,060,448 13.82% British Columbia 48,836,984,742 9.10% 48,788,096,942 9.15% Alberta 29,383,072,251 5.48% 25,036,435,280 4.69% Manitoba 20,873,198,347 3.89% 19,843,380,198 3.72% New Brunswick 10,584,093,490 1.97% 9,250,325,228 1.73% Saskatchewan 10,388,954,056 1.94% 8,990,033,837 1.69% Nova Scotia 8,291,101,504 1.55% 8,160,653,602 1.53% Newfoundland and Labrador 3,776,854,499 0.70% 5,811,158,470 1.09% Prince Edward Island 51,853,339 0.01% 66,284,911 0.01% Yukon Territory 74,641,258 0.01% 59,390,386 0.01% Nunavut 60,180,938 0.01% 3,761,597 0.001% Northwest Territories 11,383,377 0.002% N/A N/A Canada 536,296,448,745 100.0% 533,357,171,619 100.0%
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Source: Industry Canada (Statistics Canada), Trade Data Online, available online at www.ic.gc.ca/eic/site/tdo- dcd.nsf/eng/home, based on data compiled from Statistics Canada and the US Census Bureau
For comparison, Table 3 summarizes the total value of goods imported into the provinces and territories from the European Union during the same two years.
Table 3 Value of total imports into Canada from the European Union, by province and territory
Imports in 2015 Imports in 2016 Province or Territory Value in Percentage Value in Canadian Percentage Canadian share dollars share dollars
Ontario 29,239,196,653 5.45% 27,499,006,694 5.16% Quebec 18,922,088,370 3.53% 19,615,637,366 3.68% Nova Scotia 4,538,329,123 0.85% 5,359,537,751 1.01% British Columbia 3,379,587,293 0.63% 3,326,878,815 0.62% Alberta 2,780,000,052 0.52% 2,297,103,172 0.43% Manitoba 1,157,774,329 0.22% 1,184,072,389 0.22% Newfoundland and Labrador 323,420,855 0.06% 659,490,620 0.12% Saskatchewan 619,912,016 0.12% 531,137,554 0.10% New Brunswick 482,552,643 0.09% 444,189,637 0.08% Prince Edward Island 6,948,407 0.001% 7,907,514 0.001% Yukon Territory 3,993,771 0.001% 1,711,951 0.0003% Nunavut 20,510,645 0.004% 600,473 0.0001% Northwest Territories 82,620 0.00002% N/A N/A EU Sub-total 61,474,396,777 11.463% 60,927,273,936 11.42% All other countries 474,822,051,968 472,429,897,683 sub-total 88.537% 88.58% Total imports from all 536,296,448,745 100.0% 533,357,171,619 100.0% countries
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Source: Industry Canada (Statistics Canada), Trade Data Online, available online at www.ic.gc.ca/eic/site/tdo- dcd.nsf/eng/home, based on data compiled from Statistics Canada and the US Census Bureau
More detailed statistical data are available for EU-Canada trade in specific goods, specific provinces and territories, and specific exporting EU member states. While it is not practical to present these data in this report, they are publicly available and readily accessible using Industry Canada’s Trade Data Online service.17
Sub-federal government procurement opportunities are specific to each province, territory, and municipality. Estimates of the potential magnitudes of sub-federal procurement opportunities are discussed in Part III, below.
As noted above, the most apparent challenge for EU enterprises in terms of taking advantage of these opportunities will be identifying them in a timely manner. The timeframes for identifying a procurement opportunity and preparing a bid for submission can be relatively short, requiring vigilance and the capacity to respond quickly. Until an electronic single point of access is implemented in Canada, EU exporters and service suppliers will need to consult multiple procurement information sources to identify sub-federal opportunities. Sufficient resources will need to be dedicated to this task. The CFTA online government procurement hub provides an important ‘interim’ resource, as it consolidates links to all of the provincial and territorial portals that publish government procurement opportunities, as well as most municipal government portals. This should be the starting point for most EU entrants seeking to participate independently in government procurement opportunities in Canada.
C. Conclusions and Recommendations
The CETA has changed the competitive landscape in Canada, creating new opportunities and enhancing or otherwise facilitating existing opportunities for EU exporters of goods and services
17 Industry Canada (Statistics Canada), “Trade Data Online”, available online at www.ic.gc.ca/eic/site/tdo- dcd.nsf/eng/home. - 22 -
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into Canada, EU services suppliers in Canada, and EU investors in Canada. This report provides a detailed overview of these opportunities. However, given the fact-specific nature of the opportunities created, enhanced, or otherwise facilitated under the CETA, it is important for interested EU enterprises to undertake their own opportunity analysis, drawing guidance from this report, and taking into account the provisions of the CETA applicable to the specific circumstances of their business.
In order to take advantage of the market access opportunities arising under the CETA, it will be necessary for EU enterprises to ensure that they satisfy any applicable conditions and administrative requirements. The assessment of an opportunity should therefore include the identification and consideration of all actions necessary to fully take advantage of it. In the context of trade in goods, for example, taking advantage of a new market access opportunity arising from preferential tariff treatment requires an EU exporter to ensure that their goods satisfy the requirements set forth in the CETA Protocol on Rules of Origin and Origin Procedures, as implemented into the domestic laws of Canada. This involves determining whether a good produced in Canada or an EU Member State qualifies as “originating” (e.g., pursuant to the applicable tariff shift rules and/or regional value content requirements that constitute “sufficient production”), and ensuring that a declaration of origin is correctly made out and fully supported by the appropriate documentation. If a declaration of CETA origin cannot be substantiated during a customs audit, the CBSA may be require payment of the standard rates of duty on a retroactive basis. This liability can extend to all cross-border shipments going back for a period of up to four years, so it is essential for EU enterprises to ensure that their declarations of origin are accurate, and their record-keeping is precise.
The principal actions that could give rise to problems like this, if not addressed correctly, are discussed in this report. However, taking advantage of CETA market access opportunities, like all commercial activities, care must be taken to ensure that all business and regulatory issues are identified, considered, and addressed.
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1. Exporters of EU Goods to Canada
A potential exporter of EU goods to Canada should classify its products under the Canadian HS tariff schedule described above.18 This classification will determine the applicable rate of customs duty under the CETA preferential tariff. A significant change in the applicable rate of customs duty under the CETA preferential tariff may enhance the competitiveness and/or increase the profitability of the exporter’s products in the Canadian market. Under these circumstances, the exporter should assess whether or to what extent the CETA has resulted in a favourable change to the competitive landscape in Canada, such that new market access opportunities are available to supply Canadian purchasers or supply chains.
The analysis to identify such opportunities requires a comparison between the rate of customs duty applicable to the EU goods under the CETA preferential tariff (designated by the term “CEUT” in the Canadian HS tariff Schedule) with (i) the rate of customs duty previously applicable to the same goods under the most-favoured-nation (MFN) tariff, and (ii) the rates of customs duty applicable to like goods from the principal competing countries (e.g., the United States, China, etc.).19 Where there is competition with imports from other countries (e.g., the rate of customs duty under the CETA preferential tariff are equivalent to those under the NAFTA preferential tariff for a particular product), the respective rules of origin should be compared. For example, by comparing the applicable rules of origin under the NAFTA with the applicable rules of origin under the CETA, an EU exporter can determine whether there are any differences that create a production cost advantage for the EU goods.20
18 See Section I.A.1, above. See also Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. 19 Information on competing imports of like goods is accessible using Industry Canada’s “Trade Data Online” service, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home. Information on the rates of customs duties applicable to such imports is available from the current version of the Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. 20 The rules of origin for Canada’s various trade agreements are implemented into Canadian law as regulations under the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade-commerce/tariff- tarif/menu-eng.html. - 24 -
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In terms of identifying the principal competing countries whose exports currently supply the Canadian market, guidance can be taken from the examples provided in section II.B.2.(b), below, in the context of trade in clothing and apparel products.
The next step is to determine whether there are any barriers to exporting the goods to Canada. Once it is determined that there is an opportunity that is not negated by barriers, the final step is to undertake all actions necessary to comply with the applicable conditions and administrative requirements necessary to facilitate the exports. This includes confirming the product classification, confirming compliance with the applicable rules of origin, securing a declaration of origin in accordance with the template provided in Annex 2 of the CETA Protocol on the Rules of Origin and Origin Procedures, confirming that the necessary record-keeping and audit procedures are in place to substantiate the declaration of origin, and establishing the internal procedures to ensure prompt compliance with all applicable Canadian customs and taxation requirements.
2. EU Enterprises Participating in Canadian Government Procurement Opportunities
EU exporters and service suppliers wishing to bid on Canadian government procurement opportunities will first need to identify opportunities that are relevant to their business interests. Monitoring options include the MERX online portal (www.merx.com), which lists federal government procurement opportunities as well as some provincial government procurement opportunities (as well as private procurement opportunities). Until Canada’s electronic single point of access is implemented, the CFTA website provides accessible links to the provincial and territorial portals, as well as most municipal government portals, that publish government procurement opportunities (www.cfta-alec.ca/doing-business/). This will be an important resource for EU firms for at least the next three to five years.
It is essential for EU enterprises, especially those first entering the Canadian market, to understand the legal framework for Canadian procurement, including the complaint and dispute settlement procedures, some of which have extremely short limitation periods.
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3. EU Investors
It is not practicable to identify CETA market access opportunities for direct investment in Canada on a general basis. This is because (i) the CETA does not create specific new market access opportunities for direct investment in Canada, but rather supports, enhances, and facilitates the opportunities that have previously been available to EU investors; and (ii) the circumstances under which an investment opportunity arises are complex, involving not only the framework provided by an international trade and investment agreement like the CETA, but also the contemporaneous needs of a market or industry sector in Canada, and the capability of an investor to satisfy those needs on a timely and sustainable basis with competitive products and/or services. It involves a case-by-case assessment in which the specific circumstances of the investor constitute the most important factors.
That said, the CETA provides greater certainty for EU investors seeking to enter the Canadian market or expand their existing investments in the Canadian market, and greater flexibility with respect to labour mobility. Together with the market access opportunities created or enhanced with respect to trade in goods and services, the CETA may provide real advantages to EU investors in the Canadian market.
In this regard, EU enterprises that have identified concrete opportunities relating to trade in goods and/or services under the CETA should assess whether and to what extent investment in Canada would maximize the benefits or open up further market access opportunities. In addition, EU enterprises considering investment opportunities in Canada should take into account the CETA provisions relating to the temporary entry and stay of EU individuals in Canada for business purposes.
Finally, EU investors must ensure that they understand and act in accordance with all Canadian laws and administrative requirements that are relevant to their investments in Canada.
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II. TRADE IN GOODS
Trade in goods in the context of this report concerns the exportation of goods from the European Union to Canada. The opportunities for trade in goods are reflected in:
The preferential tariff treatment on imports into Canada — These competitive opportunities are measured by comparing the preferential rate of customs duty under the CETA Tariff (designated by the term “CEUT” in Canada’s HS tariff schedule) to the standard rate of customs duty under the Most-Favoured-Nation (MFN) Tariff applicable to EU-origin goods imported into Canada. The tariff rate quota (TRQ) for cheese imports into Canada — These competitive opportunities are measured by comparing the preferential rate of customs duty for the within-quota (or “within access commitment”) volumes imported under the CETA to the prohibitive rate of customs duty on over-quota (or “over access commitment”) volumes imported under the Most-Favoured-Nation (MFN) Tariff. The CETA rules of origin — These competitive opportunities are measured by the application of the requirements of the CETA Protocol on the rules of origin and origin procedures (the “Origin Protocol”) and, for limited quantities of certain products, the special, liberalized requirements of the origin quotas under Annex 5-A of the Origin Protocol.
The third source of opportunities — the CETA rules of origin — is less obvious than the first two, but it can be important for certain goods. In many cases, the CETA preferential tariff treatment reduces the applicable rates of customs duty to those found in Canada’s other regional free trade agreements, such as the North American Free Trade Agreement (NAFTA). However, in circumstances where the CETA preferential duties match those in Canada’s other agreements, rules of origin that are more liberal under the CETA (i.e., easier to satisfy) than those under the other agreements may confer a competitive advantage to EU exporters to the extent that they allow the goods to be produced at comparatively lower costs. Thus, the questions of whether the CETA confers a competitive advantage and, if so, the magnitude of that advantage depend upon the
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circumstances of: (i) the EU goods at issue; (ii) the like goods exported from third countries that compete with the EU goods for sale in the Canadian market; and (iii) the comparative rules of origin that apply to the EU goods and the third-country goods, respectively. Such an analysis must be undertaken on a case-by-case basis. We provide an example below in the context of clothing and apparel products to illustrate the analytical approach that EU exporters can undertake to assess whether the CETA rules of origin provide an additional competitive opportunity for their goods.
Taking advantage of the foregoing opportunities requires additional considerations. The key considerations are discussed at the end of this section.
A. Overview of Analysis
The following analysis identifies the market access opportunities created under the CETA in relation to trade in goods that originate in the European Union. Such opportunities arise as a result of the progressive elimination or reduction of customs duties on EU goods imported into Canada in accordance with the CETA preferential tariff and the opening of the TRQ for cheese. These obligations entered into force on 21 September 2017.
Implementation of the CETA has eliminated the customs duties on almost all EU products to which customs duties had previously applied. For some goods, the duties are being gradually phased out over a period of four years (becoming duty “free” on 1 January 2020), or six years (becoming duty free on 1 January 2022), or eight years (becoming duty free on 1 January 2024). Beginning on 21 September 2022, customs duties on imports of sugar will be phased out over a period of three years, such that these goods may be imported free of customs duties as of 1 January 2024.21 These changes do not automatically apply to goods that are shipped into Canada from the European
21 These phase-out periods, or “staging categories”, are set forth in paragraph 3 of CETA Annex 2-A, available online at http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta- aecg/text-texte/02-A.aspx?lang=eng. Canada’s HS tariff schedule currently provides the applicable rates of customs duty under the CETA preferential tariff (designated by the term “CEUT”), including the first phase of annual reductions under the staging categories. See the Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html (see “Customs Tariff - 2017”, “T2017-5”, effective date 21 September 2017). - 28 -
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Union. Rather, importers must proactively claim the CETA preferential tariff treatment by entering tariff treatment code number “31” in field 14 of the Canada Customs Coding Form (B3), and ensure that they have in their possession a valid origin declaration and, if required, any necessary import permits.22
The applicable rates of customs duties under the CETA preferential tariff are specified in Canada’s HS tariff schedule under the Customs Tariff (2017), where they are designated by the term “CEUT”.23 Outside of the products that are specifically exempt from the elimination of customs duties (e.g., Canada’s supply-managed products like dairy, poultry, and eggs),24 there are only two tariff items that are not subject to either the immediate elimination of customs duties or the first- stage reduction in a phase-out period. These two tariff items cover refined sugar, with and without added flavouring and colouring matter (i.e., tariff item nos. 1701.91.90 and 1701.99.90). The duties on these two items will be removed in three equal stages beginning on the fifth anniversary of the date of entry into force of the CETA (i.e., 21 September 2022) and will be duty-free on 1 January 2024.25
22 See CBSA, Customs Notice 17-30, “Implementation of the Canada–European Union Comprehensive Economic and Trade Agreement (CETA)” (14 September 2017), available online at www.cbsa- asfc.gc.ca/publications/cn-ad/cn17-30-eng.html 2), available online at www.cbsa-asfc.gc.ca/publications/dm- md/d17/d17-1-10-eng.html. 23 See T2017-5, Effective date: 2017-09-21 www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2017/menu- eng.html. 24 Once the CETA’s tariff elimination staging periods are complete, the only prohibitive or restrictive tariffs that will exist are those listed in staging category E in Canada’s tariff Schedule. These 130 tariff items relate to over- access commitment tariffs on Canada’s supply managed products (i.e., dairy, poultry and eggs). A list of these tariff items is provided in Appendix 1. 25 These two tariff items are subject to staging category “S”. Paragraph 3(e) of CETA Annex 2-A provides that “duties on originating goods provided for in the items in staging category S in a Party's Schedule shall be removed in three equal stages beginning on the fifth anniversary of the date of entry into force of this Agreement, and these goods shall be duty-free, effective January 1 of year 8”. - 29 -
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B. Opportunities relating to Significant Reductions in Customs Duties
1. Overview of Opportunities
Appendix 1 is a spreadsheet that compares the rates of customs duties under the MFN Tariff to the rates of customs duties under the CETA Tariff.26 It shows approximately 1,000 tariff subheadings and tariff items (at the 6 to 10-digit levels) in Canada’s HS tariff schedule27 for which customs duties at rates of 10 to 25 percent ad valorem were reduced to zero percent for EU-origin goods (i.e., a reduction of 10 to 25 percentage points). It also shows approximately 2,000 other tariff subheadings or tariff items for which customs duties at rates of 5 to 9.5 percent were reduced to zero percent (i.e., a reduction of 5 to 9.5 percentage points). For about 600 other tariff subheadings and tariff items, the spreadsheet shows that customs duties at rates of 1 to 4.5 percent were reduced to zero percent (i.e., a reduction of 1 to 4.5 percentage points).28
In current competitive circumstances, a customs duty reduction of between 5 and 25 percentage points amounts to a substantial competitive advantage and, therefore, a competitive opportunity for originating EU goods. For certain products, duty reductions of between 1 and 4.5 percentage points could also be meaningful, depending upon the relevant market circumstances.
26 This spreadsheet does not currently catalogue goods that are subject to progressive tariff elimination through a phase-out period under CETA Staging Categories B, C, D, or S. 27 The international Harmonized Commodity Description and Coding System, typically referred to as the Harmonized System (HS), is used to classify products for trading purposes in a consistent manner. It organizes goods into Chapters (2 digits), headings (4 digits), and subheadings (6 digits). Each country may further organize the goods within a subheading into tariff items (8 digits) and tariff classifications (10 digits). Canada follows the HS in its customs tariff schedule, available online at www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/menu-eng.html. The eliminations of customs duties at the 6-digit subheading level will extend to all of the goods classified within that subheading, i.e., at the 8-digit tariff item and the 10-digit tariff classification levels, respectively. Thus, the elimination of customs duties at rates of 10-25 percent for 1,000 tariff subheadings or tariff items does not mean that this change has affected 1,000 different products. Rather, the number of different products affected in this range will be greater, as each tariff subheading (6 digits) and tariff item (8 digits) may encompass a number of different products at the 10- digit level. This is also true for the elimination of customs duties at rates of 5-9.5 percent for 2,000 other tariff subheadings or tariff items, and 1-4.5 percent for 600 other tariff subheadings and tariff items. Thus, there is some overlap, and this is shown in Appendix 1. 28 In Canada’s HS tariff schedule, customs duty at a rate of zero percent is designated by the term “free”, denoting that a good may be imported on a duty-free basis. - 30 -
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Given the large number of market access opportunities created by the reduction or elimination of customs duties under the CETA, it is not practical to review every single tariff item identified in Appendix 1. Instead, three product category studies are provided below as examples of such opportunities. They include assessments addressing the CETA rules of origin and origin quotas (i.e., the product category study regarding clothing and apparel goods at section II.B.2.(b), below), and the complexities involved in assessing whether or to what extent a duty reduction creates an opportunity in the existing framework of Canadian customs laws (i.e., the product category study with respect to automotive parts at section II.B.2.(c).(ii), below). These examples provide guidance for the purposes of assessing other market access opportunities.
The product category studies are followed by an overview that summarizes the market access opportunities identified in detail in the spreadsheet attached at Appendix 1. The information in the overview is organized and presented by product categories (i.e., under the sections and chapters of the HS tariff schedule). This approach makes the information much more manageable for the purposes of assessing market access opportunities on a case-by-case basis. The objective is to provide a streamlined and easy-to-use reference tool that will permit interested EU producers and exporters, particularly SMEs, to make a preliminary determination of the CETA duty reductions and eliminations that apply to their products.
2. Product Category Studies
The following product category studies outline the market access opportunities created under the CETA for certain key categories of goods as a result of the progressive elimination or reduction of customs duties. In order to provide an indication of the potential economic value of these opportunities, each study includes statistical information regarding the value of the total import market in Canada and the value of EU imports prior to the CETA. These studies provide examples of the opportunity assessments that each producer, exporter, and importer of EU products should
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undertake, starting with a review of the tariff treatment applicable to their products under the Customs Tariff (2017).29
a) Prepared and processed food products
The CETA preferential tariff treatment creates significant opportunities for EU producers of prepared and processed food products classified in HS Chapters 16, 19, and 21.30 Tariff reductions on a large number of these products range from 1 to 14.5 percentage points, with many reductions in the range of 4 to 10 percentage points.
Imports of these products into Canada are substantial, indicating significant potential opportunities for EU products to the extent that the elimination or reduction of customs duties increases their competitiveness and/or profitability in Canada. The proportions of EU goods supplying these import markets has been relatively small prior to the CETA (e.g., 3 percent of total imports from all countries under Chapter 16; 9 percent of total imports under Chapter 19; and 6% of total imports under Chapter 21). However, this is likely to change following the elimination or reduction of customs duties under the CETA, as producers, exporters, and importers of EU products move to take advantage of the new competitive advantages and market access opportunities in Canada.
Tables 4, 5, and 6, below, summarize the statistical data relating to the value of Canada’s import markets in 2016 for goods classified under HS Chapters 16, 19, and 21. This information provides an indication of the potential value of the new market access opportunities for EU producers and exporters of these goods, as well as EU enterprises that import these goods into Canada.
29 See the Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at http://www.cbsa-asfc.gc.ca/trade- commerce/tariff-tarif/menu-eng.html (see “Customs Tariff - 2017”, “T2017-5”, effective date 21 September 2017). 30 HS Chapter 16 covers preparations of meat, fish, or crustaceans, molluscs or other aquatic invertebrates. HS Chapter 19 covers preparations of cereals, flour, starch or milk, and pastrycooks’ products. Chapter 21 covers other “miscellaneous” edible preparations. - 32 -
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Table 4 Preparations of meat, fish, or crustaceans, molluscs or other aquatic invertebrates (HS Chapter 16)
EU member state 2016 EU member state 2016 Italy 20,896,064 Netherlands 194,365 Germany 8,036,899 Romania 53,786 Spain 5,701,698 Belgium 41,114 United Kingdom 2,976,312 Finland 40,237 France 2,749,335 Greece 38,928 Portugal 2,525,764 Estonia 27,472 Poland 2,306,545 Ireland 768 Sweden 1,706,833 Austria 215 Denmark 1,251,549 Czech Republic 201 Latvia 776,194 Lithuania 44 Croatia 679,871 EU sub-total 50,841,841 Hungary 606,691 All other countries 1,782,366,992 Total imports from Slovenia 230,956 1,833,208,833 all countries Value in Canadian dollars Source: Industry Canada (Statistics Canada), “Trade Data Online”, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
Table 5 Preparations of cereals, flour, starch or milk, and pastry cooks’ products
EU member state 2016 EU member state 2016 Italy 100,377,473 Finland 998,388 United Kingdom 57,665,915 Malta 746,932 Germany 45,708,778 Czech Republic 453,351 Belgium 32,665,975 Lithuania 259,064 France 32,534,550 Romania 245,521 Ireland 13,575,992 Cyprus 203,039 Spain 9,565,688 Slovakia 185,675 Poland 7,211,409 Hungary 182,757 Netherlands 7,088,071 Latvia 127,551 Greece 4,869,531 Slovenia 83,442 Bulgaria 4,209,143 Estonia 20,024
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EU member state 2016 EU member state 2016 Denmark 4,164,357 Luxembourg 191 Austria 3,921,350 EU sub-total 336,149,033 Portugal 3,895,763 All other countries 3,469,829,681
Sweden 3,769,562 Total imports from 3,805,978,714 Croatia 1,419,541 all countries Value in Canadian dollars Source: Industry Canada (Statistics Canada), “Trade Data Online”, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
Table 6 Miscellaneous edible preparations (Chapter 21)
EU member state 2016 EU member state 2016 Germany 40,370,420 Portugal 1,237,829 Sweden 30,791,668 Lithuania 410,440 United Kingdom 30,335,067 Czech Republic 216,369 France 20,709,604 Slovenia 201,901 Italy 15,969,349 Romania 180,561 Belgium 12,947,043 Bulgaria 33,142 Poland 9,062,896 Finland 22,502 Estonia 8,866,699 Slovakia 15,283 Netherlands 8,830,126 Luxembourg 8,728 Denmark 6,694,560 Malta 8,654 Spain 6,333,907 Latvia 2,533 Hungary 3,218,172 Cyprus 289 Austria 2,303,367 EU sub-total 204,424,826 Greece 2,166,971 All other countries 3,280,029,918
Ireland 1,882,573 Total imports from 3,484,454,744 Croatia 1,604,173 all countries Value in Canadian dollars Source: Industry Canada (Statistics Canada), “Trade Data Online”, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
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The elimination of significant customs duties will make imports of EU products considerably more competitive and/or profitable in Canadian markets. As a consequence, the market share of EU imports into Canada can be expected to increase. Given the extremely high level of competition in food retail across Canada, the removal of even a small rate of duty on a food product (e.g., less than 5 percent) is a meaningful competitive opportunity.
In this regard, it is noteworthy that the CETA reduces tariffs on a wide range of processed agricultural products (PAPs) to levels enjoyed by Canada’s NAFTA partners of the United States and Mexico. As highlighted in Table 7, the CETA will provide tariff rates on nearly all products in tariff headings 16, 17, 19, 20 and 21 that are no less favourable than those afforded to the United States and Mexico under NAFTA. While the CETA does not provide any tariff rates that are preferential to those granted to the United States through NAFTA, several tariff rates afforded to the EU under CETA will be lower than those enjoyed by Mexico. The tariff lines for which this is the case can be found in Table 8. Overall, then, the CETA provides notable opportunities for the EU to improve competitiveness within the Canadian market for PAPs vis-à-vis the United States and Mexico.
Table 7 Processed agricultural products for which the CETA lowers tariffs for EU imports to rates no less favourable than imports from the United States and Mexico
HS Code HS Code Product Product (4 digit) (4 digit) Sausages and similar products of meat, Vegetables, fruit, nuts and other 1601 meat offal or blood; food preparations 2001 edible parts of plants; prepared or based on these products preserved by vinegar or acetic acid Tomatoes; prepared or preserved Prepared or preserved meat, meat offal or 1602 2002 otherwise than by vinegar or acetic blod acid Extracts and juices of meat, fish or Mushrooms and truffles, prepared 1603 crustaceans, molluscs or other aquatic 2003 or preserved other than by vinegar invertebrates or acetic acid Vegetables preparations n.e.c.; prepared or preserved otherwise Prepared or preserved fish; caviar and 1604 2004 than by vinegar or acetic acid, caviar substitutes frozen, other than products of heading no. 2006
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HS Code HS Code Product Product (4 digit) (4 digit) Vegetables preparations n.e.c; prepared or preserved otherwise Crustaceans, molluscs and other aquatic 1605 2005 than by vinegar or acetic acid, not invertebrates, prepared or preserved frozen, other than products of heading no. 2006 Sugars, including lactose, maltose, Vegetables, fruit, nuts, fruit-peel glucose or fructose in solid form; sugar and other parts of plants, preserved 1702 syrups without added flavouring or 2006 by sugar (drained, glace or colouring matter; artificial honey, whether crystallised) or not mixed with natural honey; caramel Jams, fruit jellies, marmalades, fruit or nut puree and fruit or nut pastes, Molasses; resulting from the extraction or 1703 2007 being cooked preparations; refining of sugar whether or not containing added sugar or other sweetening matter Fruit, nuts and other edible parts of plants; prepared or preserved in Sugar confectionery (including white ways n.e.c., whether or not 1704 2008 chocolate), not containing cocoa containing added sugar or other sweetening matter or spirit, not elsewhere specified or included Malt extract; flour/groats/meal/starch/ malt Fruit juices (including grape must) extract products, no cocoa (or less than and vegetable juices, unfermented, 40% by weight) and food preparations of 1901 2009 not containing added spirit; whether goods of headings 04.01 to 04.04, no or not containing added sugar or cocoa (or less than 5% by weight), weights other sweetening matter calculated on a totally defatted basis, n.e.c Pasta; whether or not cooked or stuffed with meat or other substance, or otherwise Sauces and preparations therefor; prepared, egg spaghetti, macaroni, mixed condiments and mixed 1902 2103 noodles, lasagne, gnocchi, ravioli, seasonings, mustard flour and meal cannelloni; couscous, whether or not and prepared mustard prepared Soups and broths and Tapioca and substitutes therefor prepared preparations therefor; 1903 from starch; in the form of flakes, grains, 2104 homogenised composite food pearls, siftings or similar forms preparations Prepared foods obtained by swelling or roasting cereals or cereal products (e.g. corn flakes); cereals (other than maize Ice cream and other edible ice; 1904 2105 corn)) in grain form or in the form of flakes whether or not containing cocoa or other worked grains (not flour and meal), pre-cooked or otherwise prepared, n.e.c.
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HS Code HS Code Product Product (4 digit) (4 digit) Bread, pastry, cakes, biscuits, other bakers’ wares, whether or not containing Food preparations not elsewhere 1905 cocoa; communion wafers, empty cachets 2106 specified or included suitable for pharmaceutical use, sealing wafers, rice paper and similar products Source:
Table 8 Processed agricultural products for which the CETA lowers tariffs for EU exporters to rates more favourable than those applied to imports from Mexico
HS Code Product EU Rate Mexico Rate Sausages and similar products in cans or glass jars of 16010011 0 12.5 poultry in heading 01.05 Sausages of fowls of the species Gallus domesticus, 16010021 other than in cans or glass jars, other than spent fowl 0 0.95 ¢/kg (within access commitment) Homogenised preparations of fowls of the species 16021010 0 12.5 Gallus domesticus and turkeys, of heading 01.05 Homogenised preparations of turkeys, prepared meals 16023111 0 11 specially defined mixtures Homogenised preparations of turkeys, prepared meals 1602311110 0 12.5 in cans or glass jars Homogenised preparations of spent fowls, prepared 16023211 0 11 meals Homogenised preparations of spent fowls, prepared 1602311120 0 7.5 meals specially defined mixtures Homogenised preparations of spent fowls, in cans or 16023291 0 9.5 glass jars Homogenised preparations of ducks, geese or guinea 16023991 0 9.5 fowls, in cans or glass jars 17011290 Other raw beet sugar 0 $24,69/tonne Other cane sugar specified in subheading Note 2 of 17011390 0 $22.05/tonne Chapter 17 Other sugars containing reducing sugars after inversion 17029011 0 $11.99/tonne not exceeding 65 by weight of the total syrup Other sugars containing reducing sugars after inversion 17029013 exceeding 70 but not exceeding 71 by weight of the total 0 $13.26/tonne syrup
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HS Code Product EU Rate Mexico Rate Other sugars containing reducing sugars after inversion 17029014 exceeding 71 but not exceeding 72 by weight of the total 0 $13.47/tonne syrup Other sugars containing reducing sugars after inversion 17029015 exceeding 72 but not exceeding 73 by weight of the total 0 $13.69/tonne syrup Other sugars containing reducing sugars after inversion 17029016 exceeding 73 but not exceeding 74 by weight of the total 0 $13.90/tonne syrup Other sugars containing reducing sugars after inversion 17029017 exceeding 74 but not exceeding 75 by weight of the total 0 $14.11/tonne syrup Other sugars containing reducing sugars after inversion 17029018 0 $15.17/tonne exceeding 75 by weight of the total syrup 1901903 Ice cream mixes or ice milk mixes, 0 6.5 21050010 Flavoured ice and ice sherbets 0 9.5 Syrups derived from cane or beet sugar, containing, in 21069021 the dry state, 90 or more by weight of sugar and no 0 6 added flavouring matter Milk, cream or butter substitutes, containing 50 or more 21069031 0 5 by weight of dairy content, within access commitment 21069051 Egg preparations within access commitments 0 6.68¢/kg
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b) Apparel and Clothing Goods
(i) Preferential Duty Opportunities
The CETA preferential tariff treatment creates significant opportunities for EU producers of apparel and clothing products. Canada’s market for imports of apparel and clothing from all countries is approximately CA $12.5 billion per year.31 Despite high tariffs of 17 to 18 percent, imports from the European Union accounted for over 5 percent of the total value of imports into Canada in 2016 ($651 million or EU €444 million32). Table 9, below, illustrates the European Union’s share of the Canadian market for imported apparel and clothing in 2015 and 2016.
Table 9 Imports of apparel and clothing goods into Canada (2015-2016)
Source 2015 2016 Italy (incl. Vatican City State) 288,414,209 326,610,818 Portugal 45,787,512 66,666,216 Romania 58,542,659 61,662,913 France (incl. Monaco, French Antilles) 36,294,433 40,890,161 Bulgaria 25,599,811 32,790,017 United Kingdom 26,618,072 27,686,839 Germany 19,845,129 19,895,756 Spain 14,228,823 13,765,733 Poland 15,583,205 12,992,216 Hungary 9,914,251 10,826,553 Netherlands 7,840,617 5,738,422 Lithuania 5,766,395 5,401,119 Other EU member states 25,775,313 26,679,179 EU sub-total 580,210,429 651,605,942 All other countries 11,866,633,887 11,827,692,278
31 Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home. 32 This figure uses an annual average exchange rate in 2016 of EU € 0.6825 per CA $1.00. Source: Canadian Foreign Exchange Services, “Yearly Exchange Rates for Currencies”, available online at http://www.canadianforex.ca/forex-tools/historical-rate-tools/yearly-average-rates. - 39 -
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Total imports from all countries 12,446,844,316 12,479,298,220 Industry: NAICS 315 (clothing manufacturing) Value in Canadian dollars Source: Industry Canada (Statistics Canada), “Trade Data Online”, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
The CETA preferential tariff treatment eliminates the high rates of customs duties that previously limited the competitiveness and, thus, the market share of EU apparel products in Canada. For most apparel products that are manufactured in the European Union, this equates to a new competitive advantage of 17-18% in the Canadian market, allowing EU producers and exporters to compete at lower landed costs. Considering the total value of the Canadian market for imported apparel products, this change in the competitive landscape will open up market access opportunities for EU producers and exporters, allowing them to capture greater market shares.
As an example, CETA preferential tariff treatment allows all knitted sweaters, sweatshirts and waistcoats produced in the European Union to be imported under tariff heading 61.10 on a duty- free basis. This includes “jerseys, pullovers, cardigans, waistcoats and similar articles, knitted or crocheted” of wool, cashmere, cotton, man-made fibres, and other materials. Prior to the CETA, customs duties applied to these goods at a rate of 18 percent. In 2016, the total market in Canada for imports of these apparel products was an impressive CA $1.7 billion33 (i.e., 13.6 percent of all imported apparel products in that year). Imports from the European Union accounted for only CA $77.2 million, which was less than 5 per cent of the total imports from all countries. The duties applicable to these imports would have been approximately CA $12.9 million. Table 10, below, illustrates the Canadian market for these imports in 2016, while Table 11 provides a detailed analysis of EU imports based on production material.
Table 10 Imports of knitted sweaters, sweatshirts and waist-coats into Canada – HS Tariff Heading 61.10 (2016)
Source 2016 Italy (incl. Vatican City State) 44,858,496
33 Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home. - 40 -
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Portugal 13,031,126 Romania 4,182,902 United Kingdom 3,384,103 Bulgaria 3,222,081 France (incl. Monaco, French Antilles) 2,067,033 Germany 1,329,470 Ireland 1,324,528 Spain 537,431 Other EU member states 3,240,805 EU sub-total 77,177,975 All other countries 1,638,100,444 Total imports from all countries 1,715,278,419 Industry: NAICS 315 (clothing manufacturing) Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
Table 11 Detail of imports from the European Union
Source 2016 HS 61.10 Knitted sweaters, sweatshirts and
waist-coats HS 6110.11 - Wool 22,549,835 HS 6110.12 - Cashmere 8,271,947 HS 6110.19 - Other fine animal hair not elsewhere 1,585,352 specified HS 6110.20 - Cotton 23,532,165 HS 6110.30 - Man-made fibres 17,471,348 HS 6110.90 - Textile not elsewhere specified 3,767,328 EU sub-total 77,177,975 All other countries 1,638,100,444 Total imports from all Countries 1,715,278,419 Industry: NAICS 315 (clothing manufacturing) Value in Canadian dollars
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Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
These statistics indicate that there are major producers of knitted sweaters, sweatshirts and waist- coats in Italy, Portugal, Romania, the United Kingdom, and other EU member states, but their access opportunities in the Canadian market have been limited by the historic application of customs duties at a rate of 18 percent. With the elimination of these duties on 21 September 2017, the EU producers indicated above are now in a position to export their products to Canada on a duty-free basis, allowing them to compete for a greater share of the Canadian market for these goods.
Applying the analytical approach outlined above more broadly indicates that the preferential tariff treatment secured under the CETA creates immediate apparent opportunities for all EU producers of apparel and clothing products. Appendix n.08 at table 7 summarizes these opportunities for both knitted/crocheted goods and woven goods imported under Chapters 61 and 62 of Canada’s HS tariff schedule, respectively. The value of the total Canadian market for each category of imported goods is provided (in Canadian dollars) as an indication of the magnitude of the competitive opportunities available as a result of the elimination of customs duties under the CETA. The largest market access opportunities in Canada, by value, include business attire (i.e., suits, ensembles, jackets and blazers, dresses, skirts, and similar garments), t-shirts, and knitted sweaters, sweatshirts and waist-coats.
Table 12 Preferential Tariff Opportunities for EU Producers of Apparel and Clothing Goods
Preferential Total Imports EU Imports to HS Tariff Description Tariff to Canada Canada Treatment (2016) (2016) Chapter 61 Apparel and clothing products, knitted or crocheted 61.01 Men’s or boys’ overcoats, anoraks, ski-jackets, wind-jackets, and similar 18% Free 120,545,758 1,802,255 articles, knitted or crocheted 61.02 Women’s or girls’ overcoats, anoraks, ski-jackets, wind-jackets, 18% Free 142,356,174 5,273,361 and similar articles, knitted or crocheted
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Preferential Total Imports EU Imports to HS Tariff Description Tariff to Canada Canada Treatment (2016) (2016) 61.03 Men’s or boys’ suits, ensembles, jackets, blazers, trousers, breeches, 18% Free 207,528,869 6,093,049 shorts, knitted or crocheted 61.04 Women’s or girls’ suits, ensembles, jackets, blazers, dresses, skirts, 18% Free 899,090,113 33,990,938 trousers, breeches, shorts, knitted or crocheted 61.05 Men’s or boys’ shirts, knitted or 18% Free 197,686,919 5,156,363 crocheted 61.06 Women’s or girls’ blouses, shirts, and shirt-blouses, knitted and 18% Free 133,000,000 5,332,000 crocheted 61.07 Men’s and boys’ undergarments, night clothes, bathrobes, dressing 18% Free 189,814,735 921,411 gowns, and similar articles, knitted or crocheted 61.08 Women’s or girls’ undergarments, night clothes, bathrobes, dressing 18% Free 375,575,131 2,976,774 gowns, and similar articles, knitted or crocheted 61.09 T-shirts, singlets and other vests, 18% Free 902,874,000 33,711,000 knitted or crocheted 61.10 Jerseys, pullovers, cardigans, waistcoats, and similar articles, 18% Free 1,715,278,419 77,177,975 knitted or crocheted 61.12 Track suits, ski suits, and swimwear, 18% Free 119,721,086 2,991,578 knitted and crocheted 61.14 Other garments, knitted or 18% Free 192,196,187 5,050,829 crocheted 61.15 Tights, stockings, socks, and other 18% Free 363,929,658 20,046,331 hosiery, knitted or crocheted 61.16 Gloves, mittens, and mitts, knitted or 16-18% 150,582,746 1,534,156 crocheted Free 61.17 Clothing accessories, knitted or 12-18% 60,849,057 4,237,312 crocheted (e.g., scarves, belts) Free Chapter 62 Apparel and clothing products, woven (not knitted or crocheted)
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Preferential Total Imports EU Imports to HS Tariff Description Tariff to Canada Canada Treatment (2016) (2016) 62.01 Men’s or boys’ overcoats, anoraks, 17-18% ski-jackets, wind-jackets, and similar 368,900,086 30,131,304 Free articles 62.02 Women’s or girls’ overcoats, 16-18% anoraks, ski-jackets, wind-jackets, 488,661,158 45,512,912 Free and similar articles 62.03 Men’s or boys’ suits, ensembles, 17-18% jackets, blazers, trousers, breeches, 1,091,784,865 89,774,924 Free shorts 62.04 Women’s or girls’ suits, ensembles, 17-18% jackets, blazers, dresses, skirts, 1,440,504,959 100,237,809 Free trousers, breeches, shorts 62.05 Men’s or boys’ shirts 17-18% 450,064,365 26,759,315 Free 62.06 Women’s or girls’ blouses, shirts, 16-18% 385,418,758 25,007,157 and shirt-blouses Free 62.07 Men’s and boys’ singlets and other vests, undergarments, night clothes, 16-18% 31,241,134 418,415 bathrobes, dressing gowns, and Free similar articles 62.08 Women’s or girls’ singlets and other vests, undergarments, night clothes, 16-18% 52,625,910 1,061,495 bathrobes, dressing gowns, and Free similar articles 62.11 Track suits, ski suits, and swimwear 6-18% Free 340,091,644 14,984,759 62.12 Lingerie and similar articles, 18% Free 340,338,552 5,724,393 whether or not knitted or crocheted 62.14 Clothing accessories, knitted or 9-18% Free 91,126,085 26,883,526 crocheted (e.g., scarves) 62.15 Ties and cravats 16-18% 28,891,423 8,901,367 Free Chapter 42 Apparel and clothing products, of leather 42.03 Articles of apparel (e.g., coats, jackets, etc.), gloves, belts, and 8-15.5% 226,524,264 34,153,395 other clothing accessories Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
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Importantly, the reductions in tariffs on clothing and apparel under the CETA result in rates for EU exporters that are, in nearly all cases, no less favourable than those applied to Canada’s NAFTA partners of the United States and Mexico. As observed in Table 2.7., the elimination of tariffs on nearly all tariff lines within chapters 42, 61, 62 and 64 of the Harmonised System makes imports of these products originating from the EU that meet the specified rules of origin subject to the same tariff rates as similar products originating from the United States and Mexico. As such, the CETA not only provides significant improvements in market access to EU manufacturers of clothing and apparel, but also greatly enhances the industry’s competitiveness in the Canadian market vis-à-vis the United States and Mexico.
Table 13 Clothing and Apparel products for which the CETA lowers tariffs for EU imports to rates no less favourable than imports from the United States and Mexico
HS HS Code Product Code (4 Product digit)
Trunks; suit, camera, jewelry, cutlery Suits, ensembles, jackets, blazers, cases; travel, tool, similar bags; wholly trousers, bib and brace overalls, 4202 mainly covered by leather, composition 6203 breeches and shorts (other than leather, plastic sheeting, textile swimwear); men's or boys' (not materials, vulcanised fibre, paperboard knitted or crocheted) Suits, ensembles, jackets, dresses, skirts, divided skirts, trousers, bib and 420330 Belts and bandoliers 6204 brace overalls, breeches and shorts (other than swimwear); women's or girls' (not knitted or crocheted) Coats; men’s or boys’ overcoats, car- coats, capes, cloaks, anoraks, ski- Shirts; men's or boys' (not knitted or jackets, wind-cheaters, wind-jackets 6101 6205 crocheted) and similar articles; knitted or crocheted, other than those in heading no. 6103 Coats; women’s or girls’ overcoats, car- coats, capes, cloaks, anoraks, ski- Blouses, shirts and shirt-blouses; jackets; wind-cheaters, wind-jackets women's or girls' (not knitted or 6102 6206 and similar articles, knitted or crocheted) crocheted, other than those of heading no. 610
6103 Suits, ensembles, jackets, blazers, 6207 Singlets and other vests, underpants, trousers, bib and brace overalls, briefs, night-shirts, pyjamas,
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HS HS Code Product Code (4 Product digit) breeches, shorts (not swimwear); men's bathrobes, dressing gowns and or boys', knitted or crocheted similar articles; men's or boys' (not knitted or crocheted) Singlets and other vests, slips, Suits, ensembles, jackets, dresses, petticoats, briefs, panties, skirts, divided skirts, trousers, bib and nightdresses, pyjamas, negligees, 6104 brace overalls, breeches and shorts 6208 bathrobes, dressing gowns and (not swimwear), women's or girls', similar articles; women's or girls' (not knitted or crocheted knitted or crocheted)
6105 Shirts; men's or boys', knitted or 6209 Garments and clothing accessories; crocheted babies' (not knitted or crocheted) Garments made up of fabrics of Blouses, shirts and shirt-blouses; 6106 6210 heading no. 5602, 5603, 5903, 5906 women's or girls', knitted or crocheted or 5907 (not knitted or crocheted) Underpants, briefs, nightshirts, 6107 pyjamas, bathrobes, dressing gowns 6211 Track suits, swimwear and other and similar articles; men's or boys', garments (not knitted or crocheted) knitted or crocheted Slips, petticoats, briefs, panties, Brassieres, girdles, corsets, braces, nightdresses, pyjamas, negligees, suspenders, garters and similar 6108 bathrobes, dressing gowns and similar 6212 articles and parts thereof; whether or articles; women's or girls', knitted or not knitted or crocheted crocheted
6109 T-shirts, singlets and other vests; 6213 Handkerchiefs (not knitted or knitted or crocheted crocheted) Jerseys, pullovers, cardigans, Shawls, scarves, mufflers, mantillas, 6110 waistcoats and similar articles; knitted 6214 veils and the like (not knitted or or crocheted crocheted)
6111 Garments and clothing accessories, 6215 Ties, bow ties and cravats (not knitted babies'; knitted or crocheted or crocheted)
6112 Track suits, ski suits and swimwear; 6216 Gloves, mittens and mitts (not knitted knitted or crocheted or crocheted) Clothing accessories n.e.c.; parts of Garments made up of knitted or garments or accessories other than 6113 crocheted fabrics of heading no. 5903, 6217 those of heading no. 6212 (not knitted 5906 and 5907 or crocheted) Footwear; waterproof, with outer Garments; knitted or crocheted, n.e.c. in 6114 6401 soles and uppers of rubber or chapter 61 plastics, (uppers not fixed to the sole
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HS HS Code Product Code (4 Product digit) nor assembled by stitch, rivet, nail, screw, plug or similar) Hosiery; panty hose, tights, stockings, socks and other hosiery, including Footwear; with outer soles and graduated compression hosiery (for 6115 6402 uppers of rubber or plastics example, stockings for varicose veins) (excluding waterproof footwear) and footwear without applied soles, knitted or crocheted Footwear; with outer soles of rubber, Gloves, mittens and mitts; knitted or 6116 6403 plastics, leather or composition crocheted leather and uppers of leather Clothing accessories; made up, knitted Footwear; with outer soles of rubber, 6117 or crocheted, knitted or crocheted parts 6404 plastics, leather or composition of garments or of clothing accessories leather and uppers of textile materials Overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind- 6201 cheaters, wind-jackets and similar 6405 Footwear; other footwear n.e.c. in articles, men's or boys', other than chapter 64 those of heading no. 6203 (not knitted or crocheted) Coats; women's or girls' overcoats, carcoats, capes, cloaks, anoraks, ski- Footwear; parts of footwear; 6202 jackets, wind-cheaters, wind-jackets 6406 removable in-soles, heel cushions and similar articles, other than those of and similar articles; gaiters, le.g.ings heading no. 6204 (not knitted or and similar articles, and parts thereof crocheted)
(ii) Rule of Origin Opportunities
Additional opportunities are provided by the relatively liberal CETA rules of origin in comparison to the rules of origin under Canada’s other regional trade agreements. This is illustrated by the balance of competitive opportunities between the CETA and the NAFTA in respect of tariff subheading 6101.20, which covers the following products:
Articles of apparel and clothing accessories, knitted or crocheted – Men’s or boys’ overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.03 – of cotton.
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Under both the CETA and the NAFTA, the preferential rate of customs duty applicable to imports of these products is zero percent. This means that both US-origin goods and EU-origin goods can be imported into Canada on a duty-free basis, provided that the respective rules of origin are satisfied. However, the CETA has a more liberal and less costly rule of origin than the NAFTA.
Under Annex 5 of the CETA Origin Protocol, the applicable rule of origin provides that the products of subheading 6101.20 must undergo the following “sufficient production” within the European Union in order to be considered “originating” and, thus, eligible for the preferential tariff treatment: “Knitting or crocheting and making-up (including cutting)”. It is therefore sufficient for the products to be knitted/crocheted and made up in the European Union, even if all of the cotton yarn used for this production is imported from a third country.
In contrast, the applicable NAFTA rule of origin requires the same kinds of products to be cut, knit, and sewn, or otherwise assembled in a NAFTA country using only NAFTA-originating cotton yarn.34 Thus, the CETA rule of origin for apparel products under tariff subheading 6101.20 confers a competitive advantage on EU producers by allowing them to use non-originating yarn inputs (i.e., yarn from any country in the world).
34 The NAFTA rule of origin is complex due to its express exclusions. While the rule requires a change to subheading 6101.20 from “any other chapter”, the exclusions essentially narrow the only possibility to a change from headings 52.01 (cotton, not carded or combed) or 52.03 (cotton, carded or combed). The rule reads as follows, with elaboration added to the exclusions [in square brackets and bold font]: A change to subheadings 6101.20 through 6101.30 from any other chapter, except from headings 51.06 through 51.13 [wool and animal hair yarn], 52.04 through 52.12 [cotton thread, yarn and woven fabrics], 53.07 through 53.08 [certain yarn of jute, other vegetable textile fibres, paper] or 53.10 through 53.11 [certain yarn of jute, other vegetable textile fibres, paper), Chapter 54 [man-made filaments and textile materials] or headings 55.08 through 55.16 [sewing thread, yarn and woven fabrics of synthetic staple fibres] or 60.01 through 60.06 [knitted or crocheted fabrics], provided that: (a) the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the NAFTA countries, and (b) the visible lining fabric listed in Note 1 to Chapter 61 satisfies the tariff change requirements provided therein. In principle, a NAFTA-originating apparel product can be made from 100% non-originating cotton, but this is only possible if: (i) the cotton is spun into yarn in a NAFTA country; (ii) that yarn is used to knit the apparel products in a NAFTA country; and (iii) the production at each stage is accumulated in accordance with the accumulation provisions, such that the cumulative transformation is from heading 52.01 (cotton, not carded or combed) or heading 52.03 (cotton, carded or combed) to subheading 6101.20. See e.g., NAFTA Rules of Origin Regulations, SOR/94-14, ss. 14(1), 14(6) (Example 2). - 48 -
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(iii) Origin Quota Opportunities
In addition to the standard rules of origin under Annex 5, the CETA also provides highly liberalized alternative rules of origin for limited quantities of certain textile and apparel goods produced in the European Union and imported into Canada. These “origin quotas”, which are set forth under Annex 5-A, provide additional market access opportunities for EU enterprises trading in textile or apparel products.
For example, the standard rule of origin for goods classified under heading 61.10, including “jerseys, pullovers, cardigans, waistcoats and similar articles, knitted or crocheted”, requires the goods to undergo “knitting or crocheting and making-up (including cutting)” within the European Union in order to qualify as “originating” goods.35 In comparison, a more liberal rule applies under the origin quota. Specifically, the origin quota permits 537,000 units of such goods to qualify as “originating” and receive preferential tariff treatment if they undergo only the following production in the European Union: “Cutting of fabric and making up; or … Knitting to shape for products for which no sewing or other assembly is required”. Thus, a product imported under the origin quota does not need to be knitted or crocheted in the European Union; the knitted/crocheted fabric or components can be produced in any third country, provided that the product is ultimately made up (i.e., assembled and sewn together) within the European Union. This reduces the production costs of the goods eligible for duty-free treatment under the CETA and provides a corresponding competitive advantage in the Canadian market that goes beyond the elimination of the customs duties.
The origin quotas, including details regarding their coverage and the alternative rules of origin that apply to them, are set forth in the following tables under Annex 5-A of the CETA Origin Protocol:
Table C.3 – Annual Quota Allocation for Textiles Exported from the European Union to Canada; and
35 This is the same rule as that applicable to goods classified under tariff subheading 6101.20, as discussed above in section II.B.2.(b).(ii). - 49 -
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Table C.4 – Annual Quota Allocation for Apparel Exported from the European Union to Canada.
c) Automobiles (passenger cars) and automotive components
One of the most important markets in Canada is the automobile market. This market is primarily supplied by the integrated North American (NAFTA) motor vehicle industry, although imports from outside the NAFTA region also play an important role. The progressive elimination of customs duties under the CETA will generate competitive opportunities for EU producers that are already established in the Canadian market, but may also provide openings for new EU entrants.
(i) Finished Passenger Motor Cars
Notwithstanding the application of customs duties at a rate of 6.1%, the top EU products imported into Canada in 2016 (by total value) were passenger motor cars classified under tariff subheading 8703.23 (i.e., powered by spark-ignition internal combustion reciprocating engines with cylinder capacities between 1,501 and 3,000 cubic centimeters (cc)).36 The vast majority of passenger motor cars traded in Canada are classified under this HS tariff subheading.
The total value of the vehicles in this category that were imported into Canada from all countries in 2016 was approximately $18.2 billion, of which imports from the European Union accounted for $3.4 billion (18.7%). The majority of these EU imports were produced in Germany. Table 14, below, outlines this information in more detail, indicating that imports from Germany compete at comparable levels with imports from Japan and Mexico, while imports from Spain and Italy are well within the top ten countries exporting to Canada.
Table 14 Imports into Canada of passenger motor cars powered by spark-ignition internal combustion reciprocating engines with cylinder capacities 1,501-3,000 cc – HS Tariff Subheading 8703.23 (2016)
Source 2016 United States 7,337,789,675
36 Source: Industry Canada (Statistics Canada), “Trade Data Online”, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home (selecting “top 25 products (HS6 codes)” from the European Union). - 50 -
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Source 2016 Japan 2,842,015,504 Germany 2,695,884,948 Mexico 2,518,068,504 Korea, South 1,902,822,815 Slovakia 250,727,587 Hungary 135,797,044 Spain 117,972,715 Italy (incl. Vatican City State) 102,235,774 South Africa 92,324,864 United Kingdom 87,910,210 China 52,636,499 Other countries 42,977,068 EU sub-total 3,430,212,554 All other countries sub-total 14,748,950,653 Total imports from all countries 18,179,163,207 Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
Looking more broadly at the full range of passenger motor cars, including both spark-ignition internal combustion reciprocating engines (i.e., gasoline) and compression-ignition internal combustion piston engines (i.e., diesel), with cylinder capacities ranging from 1,001 through 3,000 cc, the total value of imports into Canada from all countries in 2016 was CA $19.9 billion, of which imports from the European Union accounted for CA $3.8 billion (19.1%). Table 15 outlines this information in more detail. This broader analysis indicates that that motor cars with smaller engines (i.e., with a cylinder capacity equal to or less than 1,500 cc) or powered by diesel engines account for relatively modest shares of the overall market for imported automobiles in Canada.
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Table 15 Imports into Canada of motor vehicles powered by internal combustion engines with cylinder capacities 1,001-3,000 cc – HS Tariff Subheadings 8703.22, 23, 31, and 32 (2016)
Source 2016 Internal combustion engine (1,001-3,000 cc) United States 7,805,595,713 Mexico 3,151,636,053 Japan 2,929,757,632 Germany 2,819,135,581 Korea, South 2,068,146,711 Slovakia 250,727,587 United Kingdom 226,295,210 Hungary 135,800,752 Spain 118,053,862 Italy (incl. Vatican City State) 106,614,771 Other countries 325,157,499 EU sub-total 3,801,336,667 All other countries sub-total 16,135,584,704 Total imports from all countries 19,936,921,371 Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
The negotiated outcomes of the CETA require the customs duties on motor vehicles from the European Union to be gradually phased out over a period of eight years in equal annual increments, such that these products will be entitled to duty-free treatment on 1 January 2024. Unless Canada elects unilaterally or agrees bilaterally to accelerate this staging process, the customs duties will be reduced and eliminated pursuant to the following timetable:
Table 16 Progressive elimination of customs duties on Imports into Canada of EU motor vehicles under HS Tariff Subheadings 8703.22, 23, 31, and 32 (2016)
Year Applicable rate of customs duty Prior to 21 Sept 2017 6.1% 2017 (21 Sept to 31 Dec) 5.3%
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Year Applicable rate of customs duty 2018 (1 Jan to 31 Dec) 4.6% 2019 (1 Jan to 31 Dec) 3.8% 2020 (1 Jan to 31 Dec) 3.1% 2021 (1 Jan to 31 Dec) 2.3% 2022 (1 Jan to 31 Dec) 1.5% 2023 (1 Jan to 31 Dec) 0.8% 2024 (1 Jan) and going forward Free
As Canada’s NAFTA partners similarly enjoy duty-free status on these tariff lines, the EU will, therefore, significantly enhance its competitiveness in Canada’s motor vehicles import market by 2024 vis-à-vis the United States and Mexico.
(ii) Automotive Parts, Components and Accessories
The immediate elimination of customs duties on imports into Canada of parts, components, and accessories under HS heading 87.08 for passenger motor cars of heading 87.03 may also provide market access opportunities for EU enterprises, particularly SMEs, that specialize in producing after-market goods for the automotive maintenance, repair, and customization industries. These goods include bumpers, safety seat belts, brake systems, gear boxes, axles, transmission systems, wheels, suspension systems, radiators, silencers (mufflers) and exhaust systems, clutches, steering wheels and columns, safety airbag systems, power train parts, and the parts and components of the foregoing items. Prior to 21 September 2017, these goods were subject to customs duties at a rate of 6%. Under the CETA, they may be imported into Canada on a duty-free basis, provided they satisfy the applicable rules of origin.
The elimination of the customs duties on automotive parts, components, and accessories will not create new market access opportunities to supply Canadian production plants with inputs for use in the assembly of finished vehicles. This is because such opportunities have long existed independent of the CETA. Under the special tariff classification code 9958.00.00, “parts, accessories and articles” may be imported from any country on a duty-free basis “for use in the
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manufacture of original equipment parts for passenger automobiles, trucks or buses, or for use as original equipment in the manufacture of such vehicles”.37 Importantly, this special treatment does not extend to after-market goods that are offered as lower-cost alternatives to Original Equipment Manufacturer (OEM) replacement parts by suppliers of maintenance and repair services.
Thus, the 6% advantage conferred under the CETA through the elimination of the customs duties on automotive parts, components and accessories may help EU firms to compete with, e.g., Chinese companies for contracts supplying aftermarket goods to automotive services suppliers, either directly or through Canadian importers/distributors.
It is not possible to disaggregate the import value statistics for the parts, components, and accessories that have entered Canada for use as “original equipment” in motor vehicle production and like goods that have been imported for use in the after-market maintenance, repair, and customization industry. Further, it is not possible to disaggregate the import value statistics for parts, components, and accessories of passenger motor cars from those of mass transit motor vehicles (e.g., coaches and buses), utility motor vehicles (e.g., fire engines and concrete mixers), and transport motor vehicles (lorries and trucks). That said, Table 17 summarizes the best information publicly available in relation to the magnitude of the Canadian market for such goods.
Table 17 Imports into Canada of motor vehicles parts, components, and accessories – HS Tariff Subheading 8707.10 and certain subheadings under Heading 87.08 (2016)
Source 2016
United States 19,210,476,698 Mexico 2,822,740,427 China 1,674,903,984 Japan 1,095,405,982 Korea, South 666,488,469 Germany 506,256,355
37 Customs Tariff, S.C. 1997, c. 36, Schedule, Chapter 99, available online at http://www.cbsa-asfc.gc.ca/trade- commerce/tariff-tarif/menu-eng.html (for Chapter 99, see http://www.cbsa-asfc.gc.ca/trade-commerce/tariff- tarif/2017/01-99/ch99-2017-5-eng.pdf). - 54 -
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Source 2016
Taiwan 219,845,380 Re-Imports (Canada) 208,299,652 India 187,281,059 Italy (incl. Vatican City State) 75,357,963 Spain 68,138,894 Slovakia 65,741,051 United Kingdom 48,376,999 Other countries 374,604,017 EU sub-total 946,851,564 All other countries sub-total 26,278,065,366 Total imports from all countries 27,223,916,930 Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
While the total market in Canada for imported automotive parts is significantly greater in value than the market for finished imported motor vehicles, much of this trade is dominated by NAFTA imports relating to the integrated North American automotive industry. Most of this value is incorporated into the production of motor vehicles in Canada for export to the United States and other countries. Manufacturing inputs from non-NAFTA countries are already entitled to duty-free treatment under the special tariff classification code 9958.00.00. Unfortunately, these data do not provide a clear indication of the magnitude of the specific market sector in Canada for after-market parts, components, and accessories. Nevertheless, with respect to EU’s competitive position vis- à-vis the United States and Mexico, it is noteworthy that the elimination of duties on European automotive parts under tariff heading 8708 will place EU imports on equal footing with respect to Canada’s NAFTA partners in terms of the applied tariffs to which these goods are subject.
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Considering, however, the value of the market in Canada for passenger automobiles,38 and the preference among many consumers for after-market parts and components as alternatives to OEM products for the purposes of maintenance and repair, it is likely that this market sector is not insignificant. The preferential tariff treatment under the CETA may therefore represent real opportunities, particularly for SMEs in the European Union that specialize in the supply of after- market products. These opportunities may be of particular interest to producers of automotive parts, components, and accessories in the EU countries listed in Table 17, above, as well as Austria, France, Poland, the Czech Republic, and other EU member states that have exported such goods to Canada prior to the CETA.39
3. Reduced Customs Duty Opportunities by HS Section and Chapter
The following presents the reduced duty opportunities by HS section along with data on total imports into Canada and imports from the EU into Canada.
The following tables set out an overview of the market access opportunities created by the elimination or reduction of customs duties for EU goods imported into Canada under the CETA. It summarizes the detailed information provided in the Appendix 1 spreadsheet, organizing it by product categories (i.e., under the sections and chapters of the HS tariff schedule) for ease of reference.
In order to provide an indication of the potential economic value of these market access opportunities, the following statistical data are provided for each product category: (i) the total value of the goods imported into Canada from all countries in 2016; and (ii) the value of the goods imported into Canada from the European Union in the same year. The former indicates the size of
38 According to statistics published by DesRothiers Automotive Consultants, year-to-date sales of light vehicles in Canada as of September 2017 totalled over 1.5 million units. See Gerry Malloy, Canadian Auto Dealer, “September sales set yet another record” (4 October 2017), available online at https://canadianautodealer.ca/2017/10/september- sales-set-yet-another-record/. 39 See e.g., Appendix 7, which indicates that, in 2016, exports of automotive parts and components to Canada from each of these EU countries were worth between CA $30.5 million and CA $15 million, respectively. - 56 -
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the Canadian market for imported goods, which suggests the magnitude of the opportunities available for EU goods under the new competitive conditions created by the CETA. The latter indicates whether and to what extent there were trade flows of the goods from the European Union into Canada in 2016, notwithstanding the rates of customs duties that applied before to the CETA. This indicates the existence of EU enterprises engaged in the production and export/import of the goods into Canada that stand to benefit immediately from the elimination or reduction in the applicable rate of customs duty.
a) Goods of Section II – Vegetable Products
The CETA preferential tariff treatment creates significant opportunities for EU producers of frozen fruits and nuts. Canada’s market for imports of frozen fruits and nuts from all countries is approximately CA $311.5 million per year.40 Despite the application of high rates of customs duties, i.e., at 6 to 12.5 percent, imports from the European Union accounted for over 3.3 percent of the total value of imports into Canada in 2016 ($10.3 million or EU €7.04 million41).
Although there were significant reductions in the rates of customs duty applicable to other items under Section II (Vegetable Products), the import markets for these goods in Canada is almost non-existent. Therefore, these reductions do not create significant new opportunities for EU businesses.
b) Goods of Section IV – Prepared Foods, Beverages, Spirits and Vinegar and Tobacco Products
The CETA preferential tariff treatment creates significant opportunities for EU producers of prepared/processed food products, beverages and spirits, and tobacco products. Canada’s import
40 Source: Industry Canada (Statistics Canada), Trade Data Online, available online at www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home. 41 This figure uses an annual average exchange rate in 2016 of EU € 0.6825 per CA $1.00. Source: Canadian Foreign Exchange Services, “Yearly Exchange Rates for Currencies”, available online at www.canadianforex.ca/forex-tools/historical-rate-tools/yearly-average-rates. - 57 -
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markets for these goods is approximately CA $24 billion per year (from all countries).42 In 2016, the European Union occupied almost 16% of this market, despite customs duty rates of up to 17%.
C. Opportunities and Challenges relating to the Cheese TRQs
Canada’s commitments under Annex 2-A of the CETA include TRQs for (i) cheese of all kinds for direct consumption (i.e., fine cheeses for retail sale), and (ii) “industrial cheese” for use exclusively by processed food producers (i.e., ingredients for secondary production). These TRQs allow specific annual quantities of originating cheese and industrial cheese products from the European Union to be imported into Canada on a duty-free basis. Canada’s commitments also require a reallocation to the European Union of 800 metric tonnes out of Canada’s 20,411.9 metric tonne WTO cheese TRQ, starting as of 21 September 2017.
Canada’s CETA cheese TRQ commitments will be phased in over a period of six increments within five years, as follows:
Table 18 Canada's CETA TRQ Committments
Year Aggregate Annual Quantity (metric tonnes, net weight) 1 2017 745 (pro-rated from 2,667)* 2 2018 5,333 3 2019 8,000 4 2020 10,667 5 2021 13,333 6 (and each 2022 and 16,000 subsequent onward year) * In accordance with paragraph 6 of CETA Annex 2-A, access in Year 1 (2017) is pro-rated to the period between 21 September and 31 December 2017. Source: Global Affairs Canada, Notice to Importers, “Dairy – CETA Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List)”, Serial No. 904 (1 October 2017), available online at www.international.gc.ca/controls-controles/prod/agri/dairy-laitiers/notices-avis/904.aspx?lang=eng).
42 Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home. - 58 -
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Canada’s industrial cheese TRQ commitments are also phased in over the same period of time, as follows:
Table 19 Canada's industrial cheese TRQ committments
Year Aggregate annual quantity (metric tonnes, net weight) 1 2017 79 (pro-rated from 283)* 2 2018 567 3 2019 850 4 2020 1,133 5 2021 1,417 6 (and each 2022 and onward 1,700 subsequent year) * In accordance with paragraph 6 of CETA Annex 2-A, access in Year 1 (2017) is pro-rated to the period between 21 September and 31 December 2017. Source: Global Affairs Canada, Notice to Importers, “Dairy – CETA Industrial Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List)”, Serial No. 905 (1 October 2017), available online at www.international.gc.ca/controls-controles/prod/agri/dairy-laitiers/notices- avis/905.aspx?lang=eng .
In 2016, a total of 25,155 metric tonnes of cheese was imported into Canada.43 The total value of these imports from all countries was approximately CA $320 million, of which imports from the European Union accounted for CA $182 million (more than double the value of imports from the United States). Table 20, below, details the value of imports from the United States and the EU member states, respectively.
Table 20 Imports into Canada of cheese and curd – HS Tariff Heading 04.06 (2016)
Source 2016
United States 86,858,335 Italy (incl. Vatican City State) 64,815,543
43 TRQ Imports Summary Control, Year 2016, available online at https://www.eics-scei.gc.ca/report- rapport/APRMT61C-C-16.htm. - 59 -
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Source 2016
France (incl. Monaco, French Antilles) 53,603,628 Denmark 17,003,093 United Kingdom 13,406,542 Netherlands 12,232,997 Greece 6,900,518 Germany 4,062,198 Spain 3,626,821 Ireland 2,894,808 Bulgaria 1,376,186 Portugal 992,040 Cyprus 501,847 Poland 201,590 Austria 152,154 Belgium 108,628 Sweden 36,587 Lithuania 41 Estonia 18 EU sub-total 181,915,239 All other countries sub-total 138,131,205 Total imports from all countries 320,046,444 Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
Based on the total import values summarized in Table 20, the average value of cheese imported into Canada in 2016 was CA $12,722.79 per metric tonne. Considering that the CETA TRQs open up 745 metric tonnes of increased market access for EU cheeses for direct consumption and 79 metric tonnes of increased market access for “industrial cheese”, the total value of these market access opportunities is approximately CA $10.5 million from 21 September to 31 December 2017,
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growing to approximately CA $225.2 million in 2022 (assuming that the prices of cheese remain stable at 2016 rates). The 800 metric tonne WTO cheese TRQ allocation adds a further $10.2 million per year.
Administrative and practical issues related to taking advantage of these market access opportunities are discussed in the next section.
D. Taking Advantage of the Preferential Tariff Treatment Opportunities
This section addresses the principal steps that importers of EU products must undertake in terms of customs administration in order to take advantage of the CETA market access opportunities identified above. This includes a discussion of the common mistakes made by exporters and importers that need to be avoided.44 It also describes related tax and other trade issues that need to be considered.
1. Post-Entry Customs Enforcement
Specific requirements and procedures must be followed to take advantage of the market access opportunities created under the CETA through the elimination or reduction of customs duties. It is important for importers of goods from the European Union to ensure that they fully comply with these requirements and procedures. Most of these matters must be addressed before to the exportation of the goods (e.g., tariff classification of the goods, application of the rules of origin to establish originating status, and valuation of the goods). Some matters, such as record-keeping requirements, must be observed for a period following exportation. Failure to comply with the applicable requirements and procedures will result in liability for unpaid duties and taxes, interest charges, and possible penalties.
For the most part, Canada enforces the customs requirements and procedures relevant to preferential duties on a post-entry basis. Records must be maintained for a period of six years
44 This section is written for the benefit of SMEs and new entrants to the Canadian market. Some of the content may be common knowledge for large and sophisticated EU enterprises and others that are experienced in exporting to Canadian markets. - 61 -
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following the importation of commercial goods.45 Although customs audits generally look back in time for a period of 12-24 months, they could in principle go back as far as six years. This means that the mere fact that goods have cleared customs in Canada does not mean that the importation meets all of the applicable requirements. Where errors have occurred (e.g., in any declaration of origin, tariff classification, valuation, etc.), a contingent liability can exist for up to six years.
For an EU enterprise, the cost of fully complying with the applicable requirements and procedures before exportation is substantially less than the costs of dealing with a finding of non-compliance in a future customs audit and being required to correct the problem (including the payment of any applicable duties) at that time. Moreover, failing a customs audit can result in additional scrutiny of the enterprise’s importations and, thus, higher compliance costs in the future. Accordingly, it is worthwhile for EU exporters to incur the costs of ensuring compliance prior to exportation of their goods to Canada.
The following are the key areas relevant to preferential duty access that give rise to compliance issues.
2. Tariff Classification of Goods
The starting point for the exportation of EU goods to Canada is to determine the tariff classification of those goods in accordance with the classification rules in Canada’s HS tariff schedule.46 The Harmonized System (HS) administered by the World Customs Organization (WCO) describes approximately 5,000 commodity groups, each identified by a six-digit tariff code, and provides specific rules to determine tariff
45 Imported Goods Records Regulations, SOR/86-1011, available online at www.laws.justice.gc.ca/eng/regulations/SOR-86-1011/FullText.html. 46 Schedule to the Customs Tariff, S.C. 1997, c. 36, available online at www.cbsa-asfc.gc.ca/trade- commerce/tariff-tarif/menu-eng.html. See also World Customs Organization, “What is the Harmonized System (HS)?”, available online at www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized- system.aspx. - 62 -
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f classification.47 Commodity groups are organized into chapters (2-digit code), headings with each chapter (4-digit code), and subheadings within each heading (6-digit code). Canada’s HS tariff schedule to the Customs Tariff, which sets out the applicable rates of customs duties, is based on the HS administered by the WCO and, up to the six-digit level, it corresponds with that system. However, Canada’s HS tariff schedule lists tariff items up to the 10-digit level. Specifically, it further organizes goods into tariff items (8-digit code) and tariff classification numbers (10-digit code). The 8-digit and 10-digit subcategories provide additional levels of detail within the 6-digit HS categories. Information on which goods are covered at these additional digits is found in the text of Canada’s HS tariff schedule.
Since tariff classification forms the basis for determining the applicable rules of origin and the applicable rate of customs duty, it is essential that the classification determination is accurate. Care should be taken when classifying goods. Unless the classification is obvious, it is worthwhile consulting with a customs classification expert. Most established and reputable customs brokers provide these services at a reasonable cost.
Customs tariff classification errors are common. They can be avoided by taking the necessary care when undertaking the classification exercise.
3. Customs Valuation
Customs valuation — i.e., determining the value against which the applicable rate of customs duty will be applied — is another common area of non-compliance. Detailed valuation rules and procedures are established in Canada’s federal legislation, regulations, and administrative guidelines.48 Care should be taken when determining the customs value of the goods, particularly if related parties are involved in the transaction triggering the export of the goods to Canada. It is worthwhile to consult with a customs valuation expert unless an EU exporter is familiar with the
47 Ibid. 48 These are summarized in the D-13 series of D Memorandum published by the Canada Border Services Agency www.cbsa-asfc.gc.ca/publications/dm-md/d13-eng.html. - 63 -
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nuances of customs valuation. Most established and reputable customs brokers provide these services at a reasonable cost.
4. Rules of Origin
Rules of origin are, by far, the riskiest element of customs compliance when qualifying for a preferential rate of customs duty under a trade agreement. It is common for exporters and importers, even large and sophisticated multinational companies, to fail origin verification audits. Non-compliance with the rules of origin is also generally the most expensive form of non- compliance because it results in the withdrawal of the preferential tariff and the application of the MFN Tariff on a retro-active basis. When a positive rate of customs duty applies under the MFN Tariff, payment of the duties can be required for all shipments into Canada going back up to four years. For goods with high rates of customs duties under the MFN Tariff (e.g., textiles and apparel), a finding of non-compliance with the CETA rules of origin would be disastrous for an SME. For this reason, extreme care must be taken to ensure compliance with the applicable rules and procedural requirements.
To benefit from CETA preferential duties, goods produced in the European Union must meet the origin requirements specified in the Origin Protocol. The Origin Protocol specifies the substantive requirements to determine whether a good originates in the European Union. There are general rules applicable to all products, product-specific rules, special rules for certain products (e.g., textiles and apparel) and procedural requirements. Product-specific rules are tied to the HS tariff classifications of (i) the finished goods that are being exported, and (ii) the materials and parts or components that go into the production of those goods as inputs. The rules are primarily based on transformation requirements (e.g., a shift in tariff classification between the inputs used in producing the product and the finished product itself). However, the rules also include value content requirements (e.g., EU and/or Canadian content must account for a minimum percentage of the ex-factory value or transaction value of the product, or non-CETA content must not exceed a maximum allowable percentage).
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Compliance with the applicable rules of origin is proven through a signed origin declaration. Erroneous origin declarations are common, and care must be taken before signing one.
Unless an origin declaration relates to a primary agricultural good, and the exporter can prove with certainty the good is grown in the European Union (e.g., the exporter received the agricultural product directly from an EU farm), the best practice is to avoid signing an origin declaration unless the signatory is the producer of the good and the necessary accounting and audit procedures are in place to ensure the origin declaration can be fully substantiated and verified. It is not enough for the good in question to meet the requirements of the applicable rule of origin. A complete audit trail must exist to prove compliance for every shipment that has been exported to Canada. There have been many instances where a manufactured good is wholly produced in a NAFTA facility, but the importer has failed a NAFTA origin audit because the facility did not have the requisite accounting and audit procedures in place to substantiate the declaration of origin for every product that had been imported into Canada during the period of review.
Resellers of EU products who wish to export and claim the preferential duty face considerable risk unless they have a signed origin declaration from the producer of the goods. It is a common mistake for an exporter to sign a certificate of origin based simply on personal knowledge that the goods in question were produced in the European Union, even if by a third party. In the North American context, preferential tariff treatment has been denied for acknowledged North American goods (e.g., motor vehicles) when the exporter/importer is unable to provide a certificate of origin signed by the producer of the good. This has resulted in situations where producers control the certificates of origin and, therefore, control access to the preferential duties. Resellers who are not working with such producers may not be able to obtain valid certificates of origin and, therefore, may be unable to claim the NAFTA preferential tariff treatment even on well-known products. A similar situation will likely arise with respect to CETA preferential tariff treatment.
5. Non-Resident Importer of Record
EU exporters can ship goods to customers in Canada who act as the importers of record. Alternatively, EU exporters can import goods into Canada without having a physical presence
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(e.g., a permanent establishment) in Canada by registering and acting as a non-resident importer (NRI) of record. NRIs are responsible for all import documentation and pay all duties and taxes related to the goods.
Becoming an NRI is an advantage because it allows EU exporters to avoid the costs of a commercial establishment in Canada while providing goods that have already cleared customs to Canadian customers. Most established and reputable customs brokers can assist EU exporters in setting up an NRI account with the Canada Border Services Agency, and can also assist in ensuring compliance with all requirements, including record-keeping requirements. Care should be taken in determining the tax implications of becoming an NRI, including payment of the Canadian goods and service tax (GST).
6. Goods and Services Tax (GST) – Canada’s Value-Added Tax (VAT)
All goods and services imported into Canada are subject to the 5 percent ad valorem federal goods and services tax (GST), unless they are specified as non-taxable importations. Normally, the intended payor of this tax is the final consumer in Canada. The tax is collected by the seller and remitted to the Government of Canada. To avoid multiple payments of the tax on goods transferred between commercial entities before being sold to the final consumer, the GST paid during intermediate transactions can be recovered through input tax credits (ITCs), provided that all requirements to claim the ITC are met.
In structuring their transactions, EU exporters must ensure that either they or their Canadian commercial customers can recover the GST paid or payable at the time of importation through ITCs. If the GST paid on imported goods cannot be recovered in some way, it becomes a transaction cost that reduces the profitability and/or competitiveness of the sale of the goods in the Canadian market. As an example, if the CETA preferential tariff eliminates 5 percentage points of customs duty, the inability to claim the ITC on the 5% GST will completely negate the advantage conferred by the CETA.
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It is a common practice in Canada for importers to claim ITCs for imported goods. Provided that all requirements are complied with, the trade of goods into Canada by an EU exporter/importer will not be adversely affected by the GST. Consultation with a tax consultant is recommended, given the fact-specific nature of the ITC requirements, including the exclusions, exceptions, and special conditions that might apply.
7. Access to the Cheese TRQs and the Origin Quotas
The three cheese TRQs (CETA-cheese, CETA-industrial cheese, and WTO-EU cheese re- allocation) are administered through an import licensing system by the Trade Controls Bureau of Global Affairs Canada.49 Applicants for import licenses for the two CETA TRQs must be Canadian residents. In the case of the cheese quota, applicants must “be active in the Canadian cheese sector regularly during the reference period and the allocation year” and, in the case of the industrial cheese quota, must “be regularly active in the further processing of cheese during the reference period and the allocation year”.50 The WTO-EU cheese allocation import licenses are available to traditional import allocation holders on the basis of their historical import quota as adjusted, if necessary, for any under-utilization.51 The application requirements and administrative procedures are set out in notices issued by the Trade Controls Bureau.52
The combination of import licensing requirements, residency requirements, and historic production and participation requirements prevents new entrant EU exporters from acquiring
49 Administration of the TRQs using import licensing is permitted under the CETA. See CETA Annex 2-A, paragraphs 16 and 17. 50 Notice to Importers – Dairy - CETA Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List), Serial No. 904, October 1, 2017 and in the Notice to Importers – Dairy - CETA Industrial Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List), Serial No. 905, October 1, 2017. See: www.international.gc.ca/controls-controles/prod/agri/dairy-laitiers/notices-avis/904.aspx?lang=eng and www.international.gc.ca/controls-controles/prod/agri/dairy-laitiers/notices-avis/905.aspx?lang=eng 51 Notice to Importers - Dairy - World Trade Organization (WTO) Cheese Tariff Rate Quota (TRQ) (Items 141 to 157 on the Import Control List), Serial No.: 906, October 1, 2017. See: www.international.gc.ca/controls- controles/prod/agri/dairy-laitiers/notices-avis/906.aspx?lang=eng 52 Ibid. - 67 -
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licenses to access the TRQs. This access is controlled by the permit holders. EU exporters, therefore, must seek out supply arrangements with the permit holders in order to benefit from the TRQs. A list of the cheese quota holders for 2017 is included as Appendix 2.
8. Regulatory Requirements, High Duties, and Other Considerations
Canadian regulatory requirements are similar to those in the European Union. The importation of certain goods is prohibited (e.g., illegal goods, trademark infringing goods, dangerous goods), restricted or controlled (e.g., firearms, munitions, certain chemicals), regulated (e.g., animals, plants, food and drugs), and subject to technical regulations (e.g., food labelling requirements, electrical safety standards, building codes, etc.). EU exporters should identify in advance such requirements and determine if they can be met or if they prevent exportation.
Prohibitively high duties remain on approximately 130 tariff items which relate to over-access commitment tariffs on Canada’s supply managed products (i.e., dairy, poultry, and eggs). These tariff items are included in Appendix 1. Certain undenatured ethyl alcohol is subject to significant excise duties upon importation. Imports of used motor vehicles are restricted. Finally, imports of specific goods can be subject to high anti-dumping and countervailing duties.53 EU exporters should determine in advance whether such duties or restrictions apply to their products.
III. GOVERNMENT PROCUREMENT
Chapter 19 of the CETA requires Canadian authorities to treat EU suppliers of goods and services in an open, transparent, and non-discriminatory manner when they participate in public procurement opportunities for contracts above the applicable value thresholds (“covered procurements”) that are not subject to express exclusions. Importantly, the CETA is Canada’s first international free trade agreement that guarantees market access and non-discriminatory treatment
53 For a list of these goods and details on the duties, see http://www.cbsa-asfc.gc.ca/sima-lmsi/mif-mev- eng.html. The currently listed goods relevant to the EU are: certain steel plate (Bulgaria, Czech Republic, Denmark, Italy, Romania), concrete reinforcing bar (Portugal and Spain), copper tube (Greece), fabricated industrial steel components (Spain), and refined sugar (EU). - 68 -
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in relation to supply contracts procured by sub-central governments (i.e., provincial/territorial and municipal governments and government entities).
For over two decades, Canada has implemented various trade agreements that require federal government procurement to be conducted in in an open, transparent, and non-discriminatory manner. The CETA, however, represents the first international trade agreement in which Canada has made market access and non-discrimination commitments covering procurement opportunities at the provincial, territorial, and municipal levels of government. As a result, Chapter 19 significantly expands the market access opportunities for EU firms to supply their goods and services to all levels of Canadian governments. In particular, it provides them with a competitive advantage over prospective suppliers from third countries in sub-central government procurement opportunities. While Canada has guaranteed market access and non-discriminatory treatment to EU enterprises in covered procurements at the provincial/territorial and municipal levels of government, it has not provided equivalent access to any other international actors.
1. Comparison of Market Access Opportunities under the CETA and the CFTA
Internally, the Canadian federal government and provincial/territorial governments entered into the Agreement on Internal Trade (“AIT”) in July 1994. Chapter 5 of the AIT was intended to ensure equal access to government procurements for all Canadian suppliers. The AIT did not, however, guarantee to interprovincial suppliers the extent of market access that was accorded to EU suppliers in the negotiated outcomes of the CETA. In particular, the AIT did not ensure access to municipal government procurement opportunities for Canadian suppliers from other provinces or territories.
On 1 July 2017, the AIT was replaced by the Canadian Free Trade Agreement (“CFTA”). The CFTA substantially increases the rights of Canadian suppliers to access Canadian government procurements at the federal, provincial/territorial, and municipal levels. While the monetary thresholds and procurement exceptions vary between the CFTA and the CETA, the access to government procurement ensured by these two agreements is significantly greater than the access provided by Canada’s other free trade agreements with third countries. Effectively, EU suppliers
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(because of the CETA) and Canadian suppliers (because of the CFTA) have market access to sub- central government procurement opportunities to which no other suppliers in the world have access.
Attached as Appendix 3 is a comparison of the monetary thresholds and covered government entities under the procurement chapters of the CETA and the CFTA, respectively. This comparison indicates that the monetary thresholds applicable under the CETA are higher than the monetary thresholds applicable under the CFTA. While this means that Canadian suppliers will have guaranteed market access to certain low-value procurements that are not covered under the CETA, this will not have a material impact on EU procurement opportunities for the following reasons.
First, the differences in the minimum contract value thresholds are not substantial enough to result in a large tranche of meaningful procurement opportunities that are reserved only for Canadian businesses. In this regard, we have not become aware of any governments in Canada attempting to structure a procurement with the intention of including it within the scope of CFTA but excluding it from the scope of the CETA. Moreover, the nature of certain government supply contracts would make it difficult (if not impossible) to bring the contractual value below the applicable CETA thresholds without giving rise to improper contract splitting.
Second, the minimum contract value thresholds set forth in the CETA are not so high that they would apply only to the largest procurement opportunities. Rather, the thresholds are set low enough that EU suppliers, including SMEs, will have guaranteed market access to many meaningful opportunities. In our experience as legal counsel in public procurement matters, non- Canadian suppliers are generally not inclined to invest the resources associated with participating in a Canadian procurement process unless the resulting contract is sufficiently lucrative. It would be rare for us to see a non-Canadian supplier take interest in a complex procurement below the minimum contract value thresholds agreed in the CETA.
In short, we do not view the CETA procurement thresholds as a barrier to market access opportunities. To the contrary, in our experience, the majority, if not the totality, of the publicly
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procured contracts that are of primary interest to EU companies will be valued above the applicable thresholds.
Prior to the implementation of the CETA, EU enterprises seeking to supply goods or services to a sub-central government in Canada would find it necessary, in most cases, to enter into a partnership, joint venture, or sub-contract with a Canadian enterprise. One of the benefits of the CETA market access and non-discrimination commitments under Chapter 19 is that EU businesses will no longer need to enter into such arrangements with Canadian entities in order to participate effectively in sub-central government procurements. Instead, EU suppliers will be in a position to participate independently in tendering processes and, when successful, contract directly with the provincial, territorial, or municipal government entity purchasing the supply of goods and/or services.
2. The Impact of Canada’s Other Free Trade Agreements on CETA Procurement
Canada’s other international free trade agreements that address procurement include the North American Free Trade Agreement (“NAFTA”), the WTO Agreement on Government Procurement (“GPA”), the Canada-Chile Free Trade Agreement, the Canada-Costa Rica Free Trade Agreement, the Canada-Peru Free Trade Agreement, the Canada-Colombia Free Trade Agreement, and the Canada-Panama Free Trade Agreement. While all of these agreements provide guaranteed market access to federal government procurement, none of them provide guaranteed market access to sub-central government procurement.
However, the fact that trade agreements such as the NAFTA, the AIT, and the GPA have been implemented and enforced in Canada for over two decades is an important factor in the market access opportunities accorded to EU suppliers under the CETA. The implementation and application of Canada’s obligations under its pre-CETA trade agreements have brought public tendering and purchasing processes, at the federal and provincial/territorial levels, under specific procurement disciplines that are similar to the Chapter 19 obligations imposed by the CETA. Through the implementation and application of basic procurement principles, such as transparency and non-discrimination, Canada’s other trade agreements have already done away with many of
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the discriminatory practices that were previously experienced in Canadian government procurement.
Moreover, while Canada’s other trade agreements did not open up access to municipal government procurement, many municipal governments have already implemented purchasing by-laws that are consistent with the AIT (and more recently the CFTA). To this end, the procurement practices of those municipalities will already be consistent with most, if not all, of the procurement obligations imposed by CETA.
The NAFTA prompted the need for the AIT. The NAFTA went into effect on 1 July 1994, and the AIT came into force just seven months later, on 1 July 2017. The proximity of the dates on which these two landmark agreements entered into force is more than mere coincidence. At the time, the negotiated outcomes of the NAFTA provided non-Canadian enterprises with a level of access to federal government procurements that was unprecedented. Without the AIT, Canadian suppliers would potentially have been at a competitive disadvantage to American and Mexican suppliers.
A similar timeline has been witnessed with the CFTA and the CETA. The CFTA entered into force on 1 July 2017, just less than four months before the CETA entered into force on 21 September 2017. In May 2015, the Ontario Government published a presentation on government procurement, which confirmed that one of the purposes of the re-negotiation of the AIT (now the CFTA) was to ensure that Canadian suppliers would have guaranteed access to government procurement that would be at least equal to that accorded to European suppliers under the CETA. Had the CFTA not replaced the AIT, then EU suppliers would have gained guaranteed market access to sub- central government procurements for which Canadian suppliers could have been excluded.
A. The Challenge of Quantifying Canadian Government Procurement Opportunities
Canadian governments at the federal, provincial/territorial and municipal levels are significant purchasers of goods and services. Collectively, these Canadian markets represent very significant opportunities for EU suppliers of goods and services. That said, a quantification of Canadian government procurement markets, segregated by the different levels of government, does not yet exist. - 72 -
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The best available information on public spending in Canada is summarized below. While there exists reasonably detailed data on purchasing by the federal, provincial, and territorial governments up until 2012, detailed estimates of procurement by municipal governments has not been undertaken. Further, there is significant variance in the estimates of Canadian government spending in Canada prepared by different sources using different methodologies. In part, this is the result of a lack of consistent measurements of Canadian government procurements over time.
In order to ensure better records and measurements going forward, both the CFTA and the CETA include reporting requirements. While these provisions do not currently assist EU stakeholders to understand the scope of market access opportunities in Canadian government procurement, the comprehensive data collected over time from consistent reporting will provide insight into public purchasing trends at all levels of government in Canada.
1. Statistics Collected on the Canadian Agreement on Internal Trade (AIT)
As discussed above, the predecessor to the CFTA was the AIT. Like the CFTA and the CETA, the AIT required covered entities to submit reports on government spending. The AIT summaries of government spending are available from 1995-1996 until 2011-2012. Attached as Appendix 4 is a summary of AIT procurement data based on reports from 1995-1996 through 2011-2012. Attached as appendix 5 is a summary of AIT reporting by party for the same period of time.
While these data indicate certain historic trends, they do not include municipal government spending. Further, the minimum value thresholds were lower in the AIT than those set forth in the CETA, and there are also differences between the exclusions and exceptions in the respective agreements. Nevertheless, the government spending trends at the federal and provincial/territorial levels, as shown by the AIT reporting data, provide an estimate of the market access opportunities available under Canada’s CETA obligations.
In 1995-96, total procurement reported by the federal and provincial/territorial governments totalled over CA $11.7 billion. This amount increased to over CA $28.3 billion by 2011-12. This represents an increase of 140% in less than 20 years.
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Another trend that this data reveals is a shift from spending by the federal government to spending by the provincial/territorial governments. In 1995-96, federal government spending represented 54.9% of total reported public procurement in Canada. However, by 2011-2012, federal government spending represented just 34.3% of total reported public procurement. This reinforces the importance of CETA’s guaranteed market access to provincial government procurements.
Moreover, the AIT data also shows that four provinces spent in excess of CA $1 billion in 2011- 12: Quebec (CA $4,907,142,769 or 17.4%), Alberta (CA $4,610,982,846 or 16.3%), Ontario (CA $3,446,064,868 or 12.2%), and British Columbia (CA $1,774,176,388 or 6.3%). Even though this data is from 2011-12, it provides an estimate of potential government spending throughout Canada.
2. OECD Procurement Data Calculation Methodology
While the AIT records provide some insight into the magnitude of the market opportunities relating to Canadian federal and provincial/territorial government procurement, these data do not provide any information regarding the magnitude of overall total government procurement, i.e., including municipal government spending. The best evidence available on total government spending is provided by the Organisation for Economic Co-operation and Development (OECD).
The OECD’s national accounts data are taken from its OECD Quarterly National Accounts.54 Each OECD country maintains data based on its own system of national accounts. OECD member nations currently populate their national accounts according to the System of National Accounts, 2008 (“2008 SNA”), “a statistical framework that provides a comprehensive, consistent, and flexible set of macroeconomic accounts for policy-making, analysis and research purposes”.55 The SNA 2008 was produced by the United Nations, the European Commission, the Organisation for
54 OECD, Quarterly National Accounts, available online at https://stats.oecd.org/Index.aspx?DataSetCode= QNA. 55 United Nations, System of National Accounts 2008 – 2008 SNA (New York, 2009), available online at https://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf. - 74 -
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Economic Co-operation and Development, the International Monetary Fund, and the World Bank Group.
General procurement spending is estimated using data from the 2008 SNA. OECD defines general procurement as follows:
intermediate consumption General procurement = + gross fixed capital formation + social transfers in kind via market producers
Intermediate consumption means “goods and services purchased by governments for their own use, such as accounting or information technology services”. Gross fixed capital formation entails the “acquisition of capital excluding sales of fixed assets, such as building new roads”. Social transfers in kind via market producers entail “purchases by general government of goods and services produced by market producers and supplied to households”.56
The general government procurement figures include the procurement values for central, sub- central, and local governments. The OECD does not, however, indicate on what basis it computes central government procurement and sub-central government procurement as subsets of general government procurement.
The most recent OECD data set for Canadian government procurement is summarized in Table 21, below.
Table 21 General government procurement estimates based on OECD national accounts data
2012 2013 2014 2015 2016 Indicator Unit
56 OECD.Stat, “Government at a Glance – 2015”, “Information – Concepts & Classifications”, available online at https://stats.oecd.org/Index.aspx?DataSetCode=GOV_2015#. See also OECDiLibrary, “Government at a Glance 2017, 9. Public Procurement, Size of Public Procurement, Methodology and Definitions”, available online at http://www.oecd-ilibrary.org/sites/gov_glance-2017-en/09/01/index.html?itemId=/content/chapter/gov_glance- 2017-59-en&mimeType=text/html. - 75 -
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2012 2013 2014 2015 2016 General government procurement as Percen share of total general 33.09% 32.53% 32.39% 32.71% tage government expenditures General government Percen procurement as a 13.84% 13.34% 12.80% 13.44% tage percentage of GDP Gross domestic product, expenditure- based $ $1,822,808.0 $1,897,531 $1,983,117 $1,986,193 $2,027,544. millions 0 .00 .00 .00 00
General government $ $253,130.6 $253,838.9 $266,944.3 procurement $ $252,276.63 millions 4 8 4 millions Central government procurement as a percentage of Percen general government 12.54% 12.29% 9.65% 10.84% tage procurement, excluding social security funds Sub-central government procurement as a percentage of Percen 87.46% 87.71% 90.35% 89.16% general government tage procurement, excluding social security funds Central government procurement as a percentage of general government $ $31,635.49 $31,109.76 $24,495.46 $28,936.77 procurement, millions excluding social security funds, current PPPs
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2012 2013 2014 2015 2016 Sub-central government procurement as a percentage of $ $222,020.8 $229,343.5 $238,007.5 general government $220,641.14 millions 8 1 7 procurement, excluding social security funds, current PPPs Central government procurement as a Percen percentage of 12.43% 12.19% 9.56% 10.70% tage general government procurement Sub-central government procurement as a Percen 86.65% 86.93% 89.45% 87.99% percentage of tage general government procurement Social security government procurement as a Percen 0.92% 0.88% 0.99% 1.31% percentage of tage general government procurement
The OECD estimates cover all government procurement. In light of the minimum value thresholds and the exclusions set forth in CETA Chapter 19 and Canada’s market access schedule in Annex 19-A, the total value of the market access opportunities available to EU suppliers will be less than the total value of Canadian government procurements in the OECD estimates. However, the OECD estimates provide an approximate indication of the magnitude of the market access opportunities created under the CETA.
3. Municipal Government Procurement represents Significant Spending
Collectively, municipal government spending throughout Canada is very significant. While no detailed studies exist on the total value of municipal government procurements, a high-level
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estimate can be derived from the OECD estimates and the data collected pursuant to the AIT reporting requirement.
For 2012, the OECD estimates that the total sub-central government spending in Canada was CA $220,641,140,000. According to the data reported pursuant to the AIT for 2011-12, the total provincial/territorial government procurement spending was CA $18,540,480,431. While the AIT data do not include the procurements excluded from CETA coverage, they provide the best available information on provincial/territorial government procurements. On this basis, total municipal government procurement spending in 2012 would have represented approximately CA $202 billion.
This estimate of the total value of all municipal public contracts throughout Canada indicates the approximate magnitude of real opportunities for EU suppliers under CETA Chapter 19. As discussed below, it also highlights the importance of developing an electronic, publicly accessible single point of access for the publication and organization of all Canadian government procurements.
B. The Current Challenge: Identifying Government Procurement Opportunities
In terms of taking advantage of the CETA market access to Canadian government procurements, the single greatest challenge currently facing EU enterprises is the identification of opportunities offered by sub-central government entities in a timely manner.
Currently, a Canada-wide electronic single point of access (“SPA”) that publishes a consolidated and searchable list of all intended government procurement notices does not exist. Without an SPA, many EU enterprises (especially SMEs) will have difficulty identifying all of the opportunities throughout Canada that are relevant to their business interests.
Calculating the total number of procurement opportunities within a province or territory can be challenging because, depending on the province or territory, there may be multiple sources where intended government procurements are posted. These sources include online portals as well as
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print sources, such as newspapers. Moreover, while some provincial/territorial on-line portals include municipal government procurement opportunities, others do not.
The frequency of new opportunities that are continuously being posted also poses a challenge. Numerous procurement opportunities are published on a weekly basis across Canada, often with short deadlines. Under the existing system, EU enterprises seeking to maintain up-to-date information on government procurement opportunities will need to continually review multiple portals. When a functional SPA is implemented, maintaining up-to-date information on opportunities throughout Canada will be significantly easier for both EU and Canadian stakeholders.
Table 22, below, provides an example of the government procurement opportunities published on the primary provincial/territorial portals as of the date of this report. It also provides an indication of the frequency at which such notices are published and turned over in sub-central jurisdictions. This data is aggregated from the major provincial and territorial government procurement portals and therefore does not capture all sub-central opportunities.
Table 22 Frequency of sub-central government procurement opportunities posted on major online portals (13 October 2017)
Total issued Posted in the Province Source opportunities last 7 days Alberta 894 139 Alberta Government Alberta Purchasing Connection, available online at http://www.purchasingconnection.ca/ British Columbia 553 208 BC Bid, e-Procurement in British Columbia, available online at http://www.bcbid.gov.bc.ca/
Manitoba1 689 listed across 133 posted in the MERX, Canadian public tenders, available Canada (89 listed last 7 days (45 online at http://www.merx.com/ by the Government posted by the of Manitoba) Government of Manitoba) New Brunswick 97 45 New Brunswick Opportunities Network (NBOB), available online at https://nbon- rpanb.gnb.ca/welcome?language=En
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Total issued Posted in the Province Source opportunities last 7 days
Newfoundland 20 8 Newfoundland and Labrador Government and Labrador Purchasing Agency, available online at http://www.gpa.gov.nl.ca/index.html Northwest 36 N/A Government of the Northwest Territories, Territories Contract Event Opportunities, available online at https://contracts.fin.gov.nt.ca/psp/fsprod1/S UPPLIER/ERP/c/GNT_SS.GNT_LOGIN.G BL Nova Scotia 146 51 Government of Nova Scotia, Procurement, Nova Scotia Tender Notices, available online at http://www.novascotia.ca/tenders/tenders/n s-tenders.aspx Nunavut 11 2 Government of Nunavut, Requests for Tenders/Proposals, available online at http://www.nunavuttenders.ca/ Ontario 88 “current N/A Ontario Tenders Portal, available online at opportunities”, and https://ontariotenders.bravosolution.com/es op/nac-host/public/web/login.html 1029 “global opportunities” Prince Edward 22 11 Prince Edward Island, Tenders, available Island online at https://www.princeedwardisland.ca/en/tend ers Quebec2 927 N/A Government of Quebec, SEAO (Le . Système Électronique d’appel d’Offres du Gouvernement du Québec), available online at https://www.seao.ca/ Saskatchewan 148 52 Government of Saskatchewan, SaskTenders, available online at https://sasktenders.ca/content/public/Searc h.aspx Yukon 14 3 Yukon Government, Department of Highways and Public Works, Procurement Support Centre, Tender Management System, available online at http://www.hpw.gov.yk.ca/csb/tender- management-system-tms.html; see also http://www.hpw.gov.yk.ca/csb/procurement .html
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Total issued Posted in the Province Source opportunities last 7 days 1 The Government of the Province of Manitoba posts all procurement opportunities on the MERX website. However, the MERX website is not a dedicated provincial portal. Rather, it hosts notices for procurement opportunities across Canada, including from the federal Government of Canada and other government entities. 2 The Government of the Province of Quebec lists its procurement opportunities in a format unlike any other province, which makes determining the total number of open contracts difficult. This should be addressed in the SPA, which is expected to index and present all procurement information from across Canada in a consistent manner.
Pursuant to CETA Article 19.6, Canada has a transitional period of up to five years to develop and implement an electronic SPA that covers all central and sub-central government procurements throughout Canada. The same requirement is contained in the CFTA. Specifically, Article 506(3) of the CFTA states as follows:
The Parties recognize that the Government of Canada will be developing an electronic Canada-wide single point of access (“SPA”) in accordance with international obligations.
Consequently, this particular challenge will be resolved within five years. However, the question remains how EU enterprises seeking to take advantage of new market access opportunities in provincial/territorial and municipal government procurements should address and manage this challenge in the meantime.
As indicated in Table 22, each of the provinces and territories publishes notices of intended government procurement opportunities on a variety of different websites. Moreover, while some provincial/territorial websites include municipal opportunities, others do not. For those that do not, the municipal governments either publish opportunities on their own municipal websites or use electronic tendering websites that provide notices of both public and private procurement opportunities. An example of such a website is “MERX”.
Currently, the website for the CFTA provides accessible links to all of the provincial and territorial portals that publish government procurement opportunities, as well as most municipal government portals. While the CFTA’s resource does not replace the need for an electronic SPA, it is currently
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the best single resource available to assist EU companies in identifying sub-central government procurement opportunities in Canada. This resource can be accessed online at https://www.cfta- alec.ca/doing-business/. Clicking on any of the provinces or territories in the map of Canada (or, alternatively, using the pull-down menu bar to select the province or territory of interest) leads to a page that consolidates links to all of the online portals and government procurement resources available, including for most municipal governments, with respect to that particular province or territory.
C. Assessment of Government Procurement Opportunities
It will be important for EU enterprises, especially those first entering the Canadian market, to understand the legal framework for Canadian procurement.
Under the common law of Canada, most procurements create two separate contracts, which are referred to as “Contract A” and “Contract B”. Contract A is formed when a bidder submits a proposal that is fully compliant with all of the terms and conditions of the government procurement solicitation. Contract B, on the other hand, is the resulting contract awarded to the successful proponent for the supply of goods and/or services.
The Supreme Court of Canada, the highest judicial authority in Canada, has imposed a “duty of fairness” on all public procurements in which Contract A is formed. That duty imposes an obligation on government purchasing authorities to treat all participants in the procurement process equally and fairly. This means that no single bidder can be granted an unfair advantage over other bidders. It has also been interpreted to mean that government purchasing authorities are not permitted, at law, to grant Contract B to a non-compliant bidder (i.e., a participant whose proposal does not satisfy the requirements of the solicitation).
Judicial decisions arising from procurement disputes, a large portion of which relates to the meaning of the “duty of fairness”, has created a number of general procurement propositions in Canada. Examples of the procurement issues that are commonly litigated
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include:
1. Whether the winning bidder submitted a technically compliant proposal;
2. Whether the standard of judicial review is “strict compliance” (i.e., the proposal is compliant with every requirement identified in the solicitation) or “substantial compliance” (the proposal is compliant with all material requirements). This issue regularly arises when a bidder’s proposal contains a minor error or irregularity, but the government purchasing authority nevertheless awards the contract to that proponent;
3. Whether the evaluators properly evaluated all of the proposals in accordance with the terms and conditions of the solicitation;
4. Whether the evaluators introduced undisclosed evaluation criteria into the evaluation process;
5. Whether the government purchasing authority permitted an improper “bid repair”, i.e., by allowing a bidder to supplement or ‘fix’ their non-compliant proposal through revised or additional submissions after the bid closing date;
6. Whether the winning proposal was submitted after the bid closing period. In Canada, proposals that are submitted after the time and date at which a bid period closes must, as a general proposition, be rejected;
7. Whether evaluators ignored vital information contained in the proposal; and
8. Whether the government purchasing authority undertook improper “bid shopping” by negotiating with two or more bidders after the submission of their respective proposals.
Disputes based on one or more of the issues identified above commonly arise in even the most sophisticated Canadian procurements. To this end, it is advisable that EU enterprises familiarize themselves with the general legal principles and rules applicable to government procurement opportunities in Canada before to investing significant resources in the Canadian market.
At the federal level, most procurements are subject to the jurisdiction of the Canadian International Trade Tribunal (“CITT”). The Canadian International Trade Tribunal Act,57 and the related
57 Canadian International Trade Tribunal Act, R.S.C. 1985, c. 47 (4th Supp.), available online at http://laws.justice.gc.ca/eng/acts/C-18.3/index.html. - 83 -
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Canadian International Trade Tribunal Procurement Inquiry Regulations,58 impose a limitation period of 10 working days on bidders to commence procurement challenges from the date on which they knew, or ought to have known, that the applicable provisions of a trade agreement were breached. Although the provinces and territories have not yet formalized their respective dispute settlement mechanisms for government procurement matters, we expect that most if not all such administrative tribunals will operate with similarly short limitation periods. To this end, it is essential that EU suppliers should act immediately when concerns of impropriety or unfairness arise in government procurement opportunities. Failure to do so may preclude the EU supplier from challenging the procurement.
How the CETA enhances market access for EU stakeholders in the Canadian public procurement market?
As noted, Chapter 19 of the CETA significantly expands market access opportunities for EU firms wishing to supply goods and services to the Canadian government. The following analysis highlights specific areas of access made available to EU firms through the CETA, while providing details on how to determine whether a procurement is covered under the Agreement.
58 Canadian International Trade Tribunal Procurement Inquiry Regulations, SOR/93-602, available online at http://laws.justice.gc.ca/eng/regulations/SOR-93-602/index.html. - 84 -
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Table 23 Government Procurement covered by the CETA
The value of the procurement is equal to or greater than the relevant threshold (Table 1) A government procurement is No specific covered by the The contracting exceptions are CETA – and applicable or authority of the invoked (e.g. hence accessible procurement is national security) to EU firms – if covered (Table 2) these criteria are met
The good or service being procured is covered (Table 3, Table 4 &Table 5)
First, in order to determine whether a procurement is open to EU firms, it is essential to confirm that the value of the requisition meets the relevant threshold value. Table 24 highlights the threshold for values of government procurement by type of entity and according to whether the procurement is a good, service, or related to construction. Where the procurement meets or exceeds these thresholds, it is open to EU firms provided it pertains to a covered good or service (Table 26, Table 27 and Table 28) is being tendered by a covered government entity (Table 25), and is not subject to any specific exceptions.
It should be noted that the Agreement expresses these values in Special Drawing Rights (SDR), which are converted to Canadian dollars and published in a Treasury Board Contracting Policy
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Notice.59 The current value of these thresholds in Canadian dollars is reproduced in the table, but it is advised that any interested EU firm consult the current conversion rate, which is required to be reviewed every two years, commencing on 1 January 2018.
Table 24 Procurement value thresholds under the CETA, by entity and type of procurement
Threshold Entity Type of procurement SDR Canadian $
Federal government (including Goods and services 130,000 CA $ 221,400 departments and some Commissions Construction services 5,000,000 CA $8,500,000 and Boards)60
Goods and services 355,000 CA $ 604,700
Federal Crown Corporation61 Construction services 5,000,000 CA $8,500,000
Goods and services63 200,000 CA $ 340,600 Sub-federal entities62 Construction services 5,000,000 CA $8,500,000
Goods and services 400,000 CA $ 681,200 Public utilities and transportation64 Construction services 5,000,000 CA $8,500,000
Source: Chapter 19 of the CETA and its accompanying Annexes
Second, it is essential to determine whether the contracting authority requisitioning the procurement is covered by the CETA and, therefore, bound by the above thresholds. Table 25
59 www.tbs-sct.gc.ca/pubs_pol/dcgpubs/ContPolNotices/2015/15-03-eng.asp 60 See Annex 19-1 of the CETA 61 See Annex 19-3 of the CETA 62 See Annex 19-2 of the CETA 63 For covered procuring entities listed in Annex 19-2, the thresholds are increased to SDR 355,000 (CA$ 604,700) when procuring consulting services regarding matters of a confidential nature, the disclosure of which could reasonably be expected to compromise government confidences, cause economic disruption or similarly be contrary to public interest 64 See Annex 19-3 of the CETA - 86 -
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highlights the entities at the relevant levels of jurisdiction that are covered by the CETA. As observed, the CETA provides for a wide range of procurement opportunities across entities at the federal and sub-provincial level for procurements that the valuation thresholds outlined in Table 24.
If a procurement meets the specified valuation threshold and is being offered by a covered government entity, the third step is to determine whether the specific good or service being procured is covered under the CETA. As the following tables highlight, the Agreement makes three broad distinctions according to (i) goods, (ii) services and (iii) construction services, with the goods and services covered potentially differing according to whether the procuring entity is at the federal or sub-provincial level.
With respect to goods, Table 26 identifies those procured by all levels of government which European firms can seek to provide, with Table 4 highlighting specific sub-central exceptions on procurement of goods. Importantly, goods pursuant to procurement from the following entities are not covered by the CETA65:
- Department of National Defence - Royal Canadian Mounted Police - Department of Fisheries and Oceans for the Canadian Coast Guard - Canadian Air Transport Security Authority - Provincial and municipal police forces - Any Procurement between subsidiaries or affiliates of the same entity, or between an entity and any of it its subsidiaries or affiliates, or between an entity and a general, limited or special partnership in which the entity has a majority of controlling interest
65 Across all goods and services, exceptions also pertain, inter alia, to: (i) procurement subject to the Northwest Territories Business Incentive Policy; (ii) procurement subject to the Nunavummi Nangminiqaqtunik Ikajuuti Policy (NNI Policy); (iii) procurement in relation to any measure maintained with respect to Aboriginal peoples, or to set asides for aboriginal businesses; existing aboriginal or treaty rights or nay of the Aboriginal peoples of Canada protected by Section 35 of the Constitution Act, 1982. Further, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia, Northwest Territories, Nunavut, Prince Edward Island or Yukon may derogate from the CETA provisions covering government procurement in order to promote regional economic development, provided doing so does not grant undue support to monopolistic activities. Any such derogation cannot be invoked more than 10 times per annum and cannot qualify for derogation if the procurement is funded by the federal government. - 87 -
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- Procurement of goods purchased for representational or promotional purposes outside the province, in respect of Alberta, British Columbia, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Quebec and Saskatchewan The list of services for which European firms are able to bid is highlighted in Table 28. It should be emphasised that the services covered are subject to Canada’s exclusions from and reservations included in Chapters 8 (investment), 9 (Cross-border trade in services) and 13 (financial services) of the CETA. Additional exceptions in the provision of services are listed in the accompany footnote.66
66 Services covered under Chapter 19 are subject to the following exceptions: All services related to goods purchased by: Department of National Defence; Royal Canadian Mounted Police; Department of Fisheries and Oceans for the Canadian Coast Guard; Canadian Air Transport Security Authority; and Provincial and municipal police forces not covered by Annex 19-4 Services procured in support of military forces located overseas Instruments of monetary policy, exchange rates, public debt, reserve management or other policies involving transactions in securities or other financial instruments, in particular transactions by the contracting authorities to raise money or capital Central bank services Shipbuilding and repair, including related architectural and engineering services for central and sub-central entities in British Columbia, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia, Prince Edward Island and Quebec Any Procurement between subsidiaries or affiliates of the same entity, or between an entity and any of it its subsidiaries or affiliates, or between an entity and a general, limited or special partnership in which the entity has a majority of controlling interest Procurement of services purchased for representational or promotional purposes outside the province, in respect of Alberta, British Columbia, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Quebec and Saskatchewan Procurement of services contracts, excluding construction services contracts, which grant to a supplier the right to provide and exploit a service to the public as complete or partial consideration for the delivery of a service under a procurement contract Procurement for the acquisition, development, production or co-production of programme material by broadcasters and contracts for broadcasting time. Procurement with respect to cultural industries Procurement in connection with activities in the fields of drinking water, energy, transport and the postal sector unless covered by Section B of Annex 19-3
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For the provision of construction services to government entities, the CETA covers all construction services identified in Division 51 of the CPC, with some limitations on services which grant temporary ownership or rights to control or operate the civil or building work resulting from the contract. Additionally, some stipulations are placed on dredging services and dredging services incidental to construction services, while procurements related to an international crossing between Canada and another country are not covered. For Quebec, procurements awarded by Hydro-Quebec reserve the right to adopt or maintain measures favouring local outsourcing in the case of construction services, while construction services for the Manitoba Hydro Electric Board are not covered.
These various federal and sub-federal exceptions notwithstanding, a review of the accompanying tables on the covered goods and services reveals that the CETA opens up a wide range of opportunities to European firms wishing to enter Canada’s government procurement market. While these opportunities are present at all levels of government, it is again worth emphasising that the CETA provides a degree of access to Canada’s sub-central procurement market that is not matched by any other foreign country. As a result, European firms should find that they are afforded a wide range of new opportunities, which should only improve as Canada consolidates electronic platforms publishing tender notifications.
procurement from non-profit organisations with respect to urban planning, as well as resulting plans and specifications preparation and works management, provided that the non-profit organisation respects, for its procurement, the procuring entity’s obligations Procurement by Hydro-Quebec of: Computer and related services Engineering design services for the construction of civil engineering works Other engineering services Procurement in relation to any measure adopted or maintained by Quebec with respect to cultural industries
For Manitoba, procurement of services by Manitoba Hydro Electric Board are not covered.
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Table 25 Goods for Canadian government procurement covered by the CETA
Type of good Exception
Railway equipment Motor vehicles, trailers and cycles Buses, military trucks and trailers, and tracked combat, assault and tactical vehicles and wheeled combat, assault and tactical vehicles Tractors Vehicular equipment components Tyres and tubes Engine accessories Mechanical power transmission equipment Woodworking machinery and equipment Metal working machinery Service and trade equipment Special industry machinery Agricultural machinery and equipment Construction, mining, excavating and highway maintenance equipment Materials handling equipment Rope, cable, chain and fittings Refrigeration and air conditioning equipment Firefighting, rescue and safety equipment Marine lifesaving and driving equipment; decontaminating and impregnating equipment Pumps and compressors Furnace, steam plant, drying equipment and nuclear reactors Plumbing, heating and sanitation equipment Water purification and sewage treatment equipment Pipe, tubing, hose and fittings Valves Maintenance and repair shop equipment Measuring tools Hardware and abrasives Prefabricated structures and scaffolding Lumber, millwork, plywood and veneer Construction and building materials Electric wire and power and distribution equipment Lighting fixtures and lamps Alarm and signal systems Security detection systems related to security screening Medical, dental and veterinary equipment and supplies Instruments and laboratory equipment Automatic pilot mechanisms and airborne gyro components; physical properties testing and inspection related to security - 90 -
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Type of good Exception
screening; hazard detecting instruments and apparatus Photographic equipment Chemicals and chemical products Training aids and devices General purpose automatic data processing equipment, software, Automatic data processing supplies and support equipment equipment (ADPE) configurations Furniture Household and commercial furnishings and appliances Food preparation and serving equipment Office machines, text processing system and visible record equipment Office supplies and devices Books, maps and other publications Drawings and specifications Musical instruments, phonographs and radios Recreational and athletic equipment Cleaning equipment and supplies Brushes, paints, sealers and adhesives Containers, packaging and packing supplies Toiletries Agricultural supplies Agricultural goods made in furtherance of agricultural support programmes or human feeding programmes Live animals Fuels, lubricants, oils and waxes Non-metallic fabricated materials Non-metallic crude materials Ores, minerals and their primary products miscellaneous
Source: Chapter 19 of the CETA and its accompanying Annexes
Table 26 Canadian Sub-central level exceptions on procurement of goods
Province Good Exception Ontario & Mass transit vehicles (street cars, Procuring entities may require contractors to procure Quebec buses, trolley busses, subway up to 25% of the contract value in Canada. cars, passenger rail cars or locomotive for subway or rail “Value” refers to eligible costs in the procurement of system) mass transit vehicles for components, sub- components and raw materials produced in Canada, including labour or other related services such as after- sale and the maintenance services, as determined in the tender. It also includes all costs related to final
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Province Good Exception assembly of the mass transit vehicle in Canada. It will be for the bidder to determine which part of the contract value will be fulfilled through the use of Canadian acquired value.
Quebec may require that final assembly take place in Canada. Prince Construction materials Does not cover procurement of construction materials Edward used for highway construction and maintenance. Island Quebec Goods related to procurement by Does not cover goods of the following HS codes: Hydro-Quebec 730820 – iron or steel; structures and parts thereof, towers and lattice masts 8406 – turbines; steam and other vapour turbines 8410 – turbines; hydraulic water wheels and regulators therefore 8426 – Derricks, cranes, including cable cranes, mobile lifting frames, straddle carriers and works trucks fitted with a crane 8504 – Electric transformers, static converters (e.g. rectifiers) and inductors 8535 – Electrical apparatus for switching, protecting electrical circuits, for making connections to or in electrical circuits; for a voltage exceeding 1000 volts 8536 – electrical apparatus for switching, protecting electrical circuits, for making connections to or in electrical circuits, for a voltage not exceeding 1000 volts; connectors for optical fibres, optical fibre bundles or cables 8537 – boards, panels, consoles, desks, cabinets, bases with apparatus of heading no. 8535, 8536 for electricity control and distribution (other than switching apparatus of heading no. 8517) 8544 – insulated wire, cable and other electric conductors, connector fitted or not; optical fibre cables of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors 870510 – crane lorries 870520 – mobile drilling derricks 870590 – break-down lorries, road-sweepers, spraying lorries, mobile workshops, mobile radiological units and other special purpose vehicles n.e.c. in no. 8705 8707 – Bodies; (including cabs) for the motor vehicles of heading no. 8701 and 8705 8708 – motor vehicles; parts and accessories, of heading no. 8701 to 8705 871639 – trailers and semi-trailers; (other than tanker type) - 92 -
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Province Good Exception 871640 – trailers and semi-trailers, n.e.c. in no. 8716.3 Manitoba Goods related to procurement by Textiles – fire retardant clothing and other work Manitoba Hydro Electric Board apparel; Prefabricated buildings; Bridges, bridge sections, towers and lattice masts, or iron or steel; Steam turbines and other vapour turbines; hydraulic turbines and water wheels; gas turbines other than turbo-jets and turbo-propellers; Electrical transformers, static converters and inductors; Electricity distribution or control apparatus; Parts of electricity distribution or control apparatus; Co-axial cable and other co-axial electrical conductors; Other electric conductors, for a voltage exceeding 1000V; Gates; Woodpoles and crossarms; or Generators.
Source: Chapter 19 of the CETA and its accompanying Annexes
Table 27 Canadian government procurement of services covered by the CETA
Entities Service Exception Central Legal services (advisory services of foreign and international law only) entities Accounting, auditing and book-keeping services covered All Repair services of personal and household goods Entities Commercial courier services (including multi-modal) covered Electronic data interchange (EDI) Electronic mail Enhanced/value-added facsimile services, including store and forward, store and retrieve Code and protocol conversion On-line information and database retrieval Voice mail Real estate services on a fee or contract basis Consultancy services related to the installation of computer hardware Software implementation services, including systems and software consulting services, systems and analysis, design, programming and maintenance services Data processing services, including processing, tabulation and facilities management services Online information and/or data processing (including transaction processing) Database services
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Entities Service Exception Maintenance and repair services of office machinery and equipment including computers Other computer services General management consulting services Marketing management consulting services Human resources management consulting services Production management consulting services Services related to management consulting Arbitration and conciliation services Architectural services Engineering services Integrated engineering services Integrated engineering services for transportation infrastructure turnkey projects Urban planning and landscape architectural services Technical testing and analysis services including quality control and Except with inspection reference to FSC 58 and transportation equipment Building-cleaning services Repair services incidental to metal products, machinery and equipment Sewage and refuse disposal, sanitation and similar services
Source: Chapter 19 of the CETA and its accompanying Annexes
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IV. TRADE IN SERVICES
A. Cross-Border Trade in Services
Chapter 9 of the CETA sets forth broad market access and non-discrimination obligations with respect to cross-border trade in services.67 However, these obligations are limited in scope by the exclusions incorporated into the provisions of Chapter 968 and the reservations established in Canada’s schedules to Annexes I and II.69 The reservations operate to preserve the rights of Canadian governments, at both the federal and provincial/territorial levels, to maintain or adopt certain trade-restrictive “non-conforming” measures that would otherwise be inconsistent with the CETA market access and non-discrimination provisions. The exclusions and reservations also serve to protect certain essential public services sectors from coverage under the CETA, such as social services, healthcare services, and services relating to public education and Canadian “cultural industries”, among others. This is consistent with the exclusions and reservations in Canada’s other free trade agreements.
From a practical point of view, the negotiated outcomes in the CETA relating to trade in services generally maintain the status quo in Canada, such that no new discrete opportunities for EU services suppliers are immediately apparent under Chapter 9. The same is generally true with respect to Canada’s obligations under CETA Chapters 13 and 15, as discussed below, which specifically address trade and investment in the financial services and telecommunications sectors, respectively.
In contrast, however, new market access opportunities are immediately apparent in the maritime transport services sector covered under Chapter 14. A set of complex provisions in one of Canada’s
67 CETA, Articles 9.3 (National treatment), 9.5 (Most-favoured-nation treatment), and 9.6 (Market access). 68 See e.g., CETA, Articles 9.2 (specifically, paras. 9.2.2, 9.2.3, and 9.2.4), 9.4, and 9.7. 69 CETA Annex I (Reservations for existing measures and liberalisation commitments) provides lists of existing non-conforming measures that the federal Government of Canada and the governments of the provinces and territories, respectively, have reserved their rights to maintain. CETA Annex II (Reservations for future measures) provides lists of industry sectors or activities for which the federal Government of Canada and the governments of the provinces and territories, respectively, have reserved their rights to adopt or maintain future non-conforming measures. - 95 -
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reservations has opened limited market access to certain “coasting trade” activities in Canada’s internal waters. These new opportunities are discussed in section B, below.
Although the provisions in CETA Chapter 9, read together with the reservations in Annexes I and II, do not substantially liberalize Canada’s services markets or otherwise introduce new market access opportunities in protected sectors historically closed to cross-border trade, they do secure a critically important outcome that will facilitate the growth and development of new opportunities in the long term: a minimum baseline of guaranteed market access and non-discriminatory treatment for EU services imported into Canada.
An important factor in this regard is the nature of the reservations as a “negative list”. This means that the CETA market access and non-discrimination obligations will cover the supply of all EU services, except to the extent that one or more reservations apply to limit or exclude such coverage. This results in a transparent list of almost all Canadian barriers to trade in services, allowing such barriers to be readily identified by EU services suppliers. If a barrier is encountered in the course of trade that lies outside this list (e.g., de facto discriminatory effects caused by the application of Canadian regulatory requirements in an arbitrary or unjustifiable manner), then that barrier can be addressed or challenged under the CETA as contrary to Canada’s market access and non- discrimination obligations.
The so-called “standstill” and “ratchet” mechanisms provided under Article 9.7 are also important factors in establishing the minimum baseline described above. They prevent the existing non- conforming measures listed in Canada’s Annex I reservations from being changed in any way that makes them more trade-restrictive, while also protecting any future amendments that make them less trade-restrictive from being undone or reversed. In this way, any future changes that make such measures less trade-restrictive, thereby opening up expanded market access opportunities for EU businesses, will permanently lift the minimum baseline protected under the CETA.
Thus, the provisions of Chapter 9 establish and preserve a minimum baseline of guaranteed market access and non-discriminatory treatment, including any further gains realized through unilateral liberalization or bilateral agreement, for the benefit of EU services suppliers. In doing so, Chapter
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9 provides certainty to EU enterprises, including SMEs, with respect to their access opportunities in Canadian markets (provided, of course, that the Annex II reservations permitting Canadian governments to adopt future non-conforming measures in specific services sectors are taken into account). This certainty will support not only the export of EU services to recipients in Canada, but it will also support EU investments in Canada.
Importantly, market access opportunities relating to trade in services will be facilitated and enhanced by the provisions in CETA Chapter 10, which provide for the temporary entry and stay of EU individuals in Canada for business purposes. The practical impact of Chapter 10, particularly for SMEs, is that it will help to make the theoretical market access possibilities guaranteed under Chapter 9 into actual, practical business opportunities in Canadian markets.
Since the CETA applies broadly to services and, with the exception of certain maritime transport services, it does not open new market access opportunities, it is not feasible to identify specific, concrete opportunities. However, the market for imported services in Canada is substantial. In 2016, Canada imported US $97.7 billion in services.70
Three services sectors are discussed below to illustrate the opportunities and challenges relating to the supply of services in the Canadian market under the CETA.
B. Financial Services
As discussed above, the CETA provides a new foundation for EU-Canada trade in services, which in turn provides certainty to EU enterprises seeking to export their services to recipients in Canada. Like Chapter 9, Chapter 13 (Financial Services) does not create new market access opportunities that are immediately apparent from the negotiated outcomes in the text of the CETA. Rather, the provisions of Chapter 13 establish a minimum baseline of guaranteed market access and non- discriminatory treatment for EU financial services suppliers and related EU investments in Canada, subject to Canada’s reservations in Annex III. This foundation serves as a stable launch point for
70 OECD Data, Trade In Services, Exports/Imports: https://data.oecd.org/trade/trade-in-services.htm. - 97 -
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the participation of EU financial services suppliers in the ongoing development and reform of the Canadian financial services sector.
While the developments discussed below do not arise from the negotiated outcomes in the text of the CETA, they illustrate the market opportunities available to EU financial services suppliers in Canadian markets further to the context and stability created by the provisions of CETA Chapter 13, read together with the reservations in Annex III.
In the Budget 2017,71 the Government of Canada announced the establishment of an “Invest in Canada Hub”, “a new federal body dedicated to attracting leading global firms to Canada”, to, among other things, bring “fresh capital and new technologies” to the Canadian economy.72 The budget also announced plans to create “Innovation Canada”, “a new platform led by Innovation, Science and Economic Development Canada that will coordinate and simplify the support” available to Canada’s innovators” and develop “economic growth strategies”, including one for digital technologies.73 These initiatives should be of interest to EU financial services suppliers, especially firms with fintech business strategies.
Reforms are being considered to the Canadian payments system. The Department of Finance Canada, in a consultation paper entitled “A New Retail Payments Oversight Framework”,74 has outlined various components of a new oversight functional framework for retail payments. The Department has acknowledged that its traditional practice of regulating the “players”, as opposed to the “playing field”, is no longer appropriate in a rapidly-changing retail payments space, with
71 Minister of Finance, Government of Canada, Budget 2017, available online at www.budget.gc.ca/2017/home-accueil-en.html. 72 Minister of Finance, Budget 2017 (March 22, 2017), p. 92 (“Establishing an Invest in Canada Hub. As announced in the 2016 Fall Economic Statement, the Government will take the necessary steps to create an Invest in Canada Hub—a new federal body dedicated to attracting leading global firms to Canada to support middle class prosperity by bringing good jobs, fresh capital and new technologies to our economy. More trade commissioners will also be placed in strategic markets abroad to support this investment attraction. The Government has committed $218 million over five years to these efforts”), available online at www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf. 73 Minister of Finance, Budget 2017 (March 22, 2017), pp. 76-79. 74 Department of Finance Canada, A New Retail Payments Oversight Framework, available online at www.fin.gc.ca/activty/consult/rpof-cspd-eng.asp. - 98 -
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“evolving business models, activities and products”.75 The proposed regulatory framework would “apply to any PSP [i.e., retail Payment Service Provider] when performing … payment functions in the context of an electronic fund transfer ordered by an end-user (a person or entity that is not a PSP or a financial intermediary)”.76 These reforms, which are expected to be completed in 2018, will substantially clarify the market access opportunities for all PSPs, including EU-based PSPs. Accordingly, it is expected that new opportunities to enter the Canadian market will emerge for EU-based PSPs.
In this respect, Payments Canada issued a consultation document on 21 December 2017 titled “Modernization Target State”,77 which provides greater detail on the scope of these reforms. Payments Canada is proposing replacement of the current Large Value Transfer System (LVTS) – which currently serves as Canada’s real-time electronic funds transfer system – with a new system, Lynx. Lynx will be structured so as to provide a modernized high-value clearing and settlement system which will be better aligned with the Bank of Canada’s risk-management standards for systematically important payment systems. It is further calling for replacement of the existing Automated Clearing Settlement System (ACSS), Canada’s core retail payment system, with the Settlement Optimization Engine (SOE) in order to more effectively meet the Prominent Payment System (PPS) Standards of same-day settlement, open risk-based access and credit risk management. Payments Canada notes that the new system will also enable faster and more convenient automated funds transfers. Payment Canada also proposes to introduce a new ‘always- on’ payments infrastructure that will support immediate payments and could provide non-regulated entities with direct access to payments clearing and settlement systems. This real-time infrastructure is expected to also facilitate the development of overlay services.
75 Ibid. 76 Ibid. 77 Payments Canada, Modernization Target State (December 2017), available online at www.payments.ca/sites/default/files/21-Dec-17/modernization_target_state_en_final.pdf. - 99 -
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Reforms are also being considered to legislation regulating Canadian financial institutions that may facilitate market access opportunities for EU financial services suppliers. In this regard, the Department of Finance has released a paper entitled “Potential Policy Measures to Support a Strong and Growing Economy: Positioning Canada's Financial Sector for the Future”.78 The paper “launches the second stage of the renewal of Canada’s federal financial institutions statutes”.79 The Department is “consulting on potential policy measures that could lead to consideration of legislation in Parliament prior to the statutory sunset date of March 29, 2019, or inform the Department's longer-term approaches to the financial sector”.80 The paper “seeks views on whether and how to implement potential policy measures, as well as on policy directions for future work” under the following four themes: supporting a competitive and innovative sector; improving the protection of bank consumers; modernizing the framework; and safeguarding a stable and resilient sector.81 In addition, the Department indicates that it “will undertake targeted stakeholder consultations on separate technical and consequential changes that could be made to the federal financial institutions statutes to ensure they remain up to date and sound”.82
Taken together, the Department of Finance’s consultations on the four themes of supporting a competitive and innovative sector, improving the protection of bank consumers, modernising the framework, and safeguarding a stable and resilient sector and the underlying objectives thereto stand to introduce notable reforms to Canada’s financial services sector. In support of a competitive and innovative sector, the Department of Finance, for example, aims to introduce measures that will, inter alia, clarify the Fintech rights of financial institutions, facilitate Fintech
78 Department of Finance Canada, Potential Policy Measures to Support a Strong and Growing Economy: Positioning Canada's Financial Sector for the Future (August 11, 2017), available online at https://www.fin.gc.ca/activty/consult/pssge-psefc-eng.asp and www.fin.gc.ca/activty/consult/pssge-psefc-eng.pdf (PDF version). 79 Department of Finance Canada, Potential Policy Measures to Support a Strong and Growing Economy: Positioning Canada's Financial Sector for the Future (August 11, 2017), p. 1 (Preface). 80 Ibid., p. 1. 81 Ibid., pp. 1, 5. 82 Ibid., p. 1. - 100 -
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collaboration, improve regulatory transparency and coordination and streamline the framework for bank entry and exit. Clarifying the Fintech rights of financial institutions, for example, will likely lead to some easing of the restrictions that require the Minister’s consent in order to engage in commercial, information and technology activities through the updating of statutory language that clarifies and modernises the type of information and technology activities that federally regulated financial institutions are permitted to undertake in-house. Similarly, revisions to statutory language may be introduced that provides greater collaboration in Fintechs between new entrants and incumbent financial institutions. In this regard, Finance Canada is seeking input on whether to facilitate such collaboration by providing additional flexibility to make non-controlling investments in Fintechs. Here, the Department of Finance is seeking to balance changes to the type of technology activities financial institutions are permitted to engage in by ensuring that they are sufficiently modernised and in line with emerging standard practices for the global industry, while retaining the commitment to prohibit financial institutions from engaging in commercial activities through the separation of core financial services from other commercial activities.
In addition, the Department indicates that it “also intends to examine the merits of open banking— a framework under which consumers have the right to share their own banking information with other financial service providers—and will seek the views of stakeholders”.83 The EU Payment Services Directive (PSD2) is a leader in the concept of open banking, and Canadian policy makers can learn from the experience of policy makers in the European Union on this topic. To the extent that EU-based institutions have already taken steps to adapt to PSD2, they may have some advantages relative to competitors, including Canadian institutions, in taking advantage of future opportunities arising in Canadian markets.
Finance Canada has also expressed a desire to consider changes in the regulatory framework and in improving the current interaction across federal, provincial and territorial authorities. To this end, additional scope for change in Canada’s regulatory system may be presented through Co-
83 Ibid., p. 7. - 101 -
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operative Capital Markets Regulator (CCMR) that is scheduled to come into effect in 2018. While notable legal hurdles remain that may postpone the date by which this new body assumes oversight powers, it is presumed that the CCMR will eventually bring together the regulators of British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan, Yukon as well as the federal government in order to form a single national securities regulator. The establishment of a national securities regulator could have notable effects on Canada’s securities sector by, among other things, making securities regulation far more efficient and effective while improving investor protections and lowering compliance costs for market participants.
C. International Maritime Transport Services
Chapter 14 of the CETA generally affirms Canada’s existing international obligations to the European Union with respect to the supply of international maritime transport services (IMTS). This includes well-established non-discrimination commitments to EU IMTS suppliers84 (i.e., national treatment and most-favoured-nation treatment) with respect to their access to and use of Canadian ports and port services, customs services, maritime auxiliary services, and berths for loading and unloading cargo, as well as commitments prohibiting cargo-sharing arrangements and ensuring that EU IMTS suppliers may contract directly with road and rail transport services suppliers for door-to-door or multimodal transport operations. There are no new market access opportunities under these provisions, which instead serve to secure the status quo as the guaranteed minimum baseline for EU IMTS suppliers going forward.
84 For the sake of simplicity, we use the term “EU IMTS suppliers” to describe both EU entities (i.e., corporations, trusts, partnerships, joint ventures, or other associations that are incorporated or formed in the territory of the European Union) and third-country entities under EU control that use non-Canadian-registered vessels to supply the services covered under CETA Chapter 14. - 102 -
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However, complex exceptions to one of Canada’s reservations in Annex II of the CETA85 have opened up unprecedented market access opportunities for EU IMTS suppliers in Canada’s protected market for “coasting trade” and “marine cabotage”86 services.
As is the case in many countries, Canada’s domestic market for cabotage services is protected. In particular, the Coasting Trade Act87 has historically prohibited vessels that are not registered in Canada (and Canadian-registered vessels that are not fully duty-paid in Canada) from engaging in coasting trade or cabotage activities without a licence. Thus, market access has been reserved, first and foremost, for Canadian-registered vessels for which all applicable duties have been fully paid (referred to simply as “Canadian vessels”). A licence is generally only issued to a non-Canadian- registered vessel or a non-duty-paid vessel if no Canadian vessel is suitable and available to provide a service or to perform an activity that is required in Canada. Such a licence is limited to the supply of a specific service or the performance of a specific activity at a certain place in Canada for a limited period of time.
Under the CETA, Canada has granted limited preferential market access to the European Union with respect to certain coasting trade activities in Canada. In the text of the CETA, these market access concessions are provided as exceptions to the reservations set forth under Canada’s Reservation II-C-14 (paragraph 4) in Annex II. Those provisions have been fully implemented into Canadian law as specific exceptions incorporated into the Coasting Trade Act to the general prohibition and licensing requirements described above.
85 CETA, Reservation II-C-14 (measures relating to the investment in or supply of marine cabotage services), para. 4. 86 The term “marine cabotage” is not defined under the CETA. In Canada, this term is customarily used and understood to mean domestic transportation of passengers and cargo between ports within the territory of Canada and related commercial services, such as the repositioning of empty cargo containers. The term “coasting trade” is used in the English version of Canada’s legislation, equivalent to the French term “cabotage”. In common usage, the term “cabotage” is generally used, rather than the term “coasting trade”. Ultimately, these terms are synonymous in Canada. 87 Coasting Trade Act, S.C. 1992, c. 31, available online at http://laws.justice.gc.ca/eng/acts/C-33.3/index.html. - 103 -
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Briefly summarized,88 these market access opportunities are as follows:
An EU IMTS supplier may use a non-Canadian-registered vessel to carry its own “owned or leased” empty containers, and any ancillary equipment that is permanently affixed to such containers, between any ports throughout Canada, provided this activity is performed “without consideration”.89 This will allow EU IMTS services suppliers to use the vessels that are engaged in IMTS to and from Canada to reposition their own empty containers between Canadian ports as needed, thereby saving on the costs of engaging Canadian domestic transport services to reposition such containers, e.g., by rail. EU IMTS suppliers who intend to engage in this activity with a non-Canadian vessel are required to submit a Vessel Advance Notification Form to Transport Canada at least three business days before to the entry of the vessel into Canada or the date on which the vessel undertakes the activity. An EU IMTS supplier may engage in the following “feeder” transport activities, subject to the applicable conditions and limitations: (i) “Continual” feeder services: continuous transport of international cargo (i.e., goods in the process of being imported into Canada or goods destined for export out of Canada to other countries) in either direction between the Ports of Halifax and Montreal using only vessels that are registered on the first (domestic) registers of EU Member States. EU IMTS suppliers who intend to engage in this activity with a non-Canadian vessel are required to submit a Vessel Advance Notification Form to Transport Canada at least twenty business days before to the entry of the vessel into Canada or the date on which the vessel undertakes the activity.
(ii) “Single trip” feeder services: transport of international containerised cargo (i.e., goods in containers in the process of being imported into Canada or goods in containers destined for export out of Canada to other countries) in either direction between the Ports of Halifax and Montreal using only vessels that are registered on either (i) the first (domestic) registers of EU Member States, or (ii) the second (international) registers of EU Member States identified in Schedule 2 of the Regulations Specifying Territories and Indicating International Registers.90 EU
88 The CETA market access exceptions for certain coasting trade or marine cabotage activities are discussed in detail in the CETA Implementation in Canada – Study (Version 1), R1A3, in the “Market Access Support for EU Business in Canada under CETA” Project (2016/EuropeAid/DH/SER/137-941). 89 It should be noted that if the EU IMTS supplier is an EU entity, it may use a vessel of any register for this purpose. If the EU IMTS supplier is a third-country entity under European control, it may only use a vessel that is registered under either (i) the first (domestic) register of an EU Member State, or (ii) the second (international) register of an EU Member State that is set out in Schedule 2 of the Regulations Specifying Territories and Indicating International Registers. 90 Once a vessel that is registered on the second registry of an EU Member State has completed a “single trip” feeder service, it is not permitted to supply any further unlicensed feeder services between the ports of Halifax and - 104 -
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IMTS suppliers who intend to engage in this activity with a non-Canadian vessel are required to submit a Vessel Advance Notification Form to Transport Canada at least ten business days before to the entry of the vessel into Canada or the date on which the vessel undertakes the activity.
An EU IMTS supplier may use a non-Canadian-registered vessel to perform dredging activities anywhere within the territory of Canada, provided that such activities are not undertaken pursuant to an agreement with the federal Government of Canada (or any of the federal government entities listed in Canada’s Annex 19-1 to Chapter 19 of the CETA). Such federally-procured dredging services are covered under Chapter 19, however, subject to specific conditions and requirements.91 EU IMTS suppliers who intend to engage in this activity with a non-Canadian vessel are required to submit a Vessel Advance Notification Form to Transport Canada at least twenty business days before to the entry of the vessel into Canada or the date on which the vessel undertakes the activity. These CETA outcomes constitute concrete market access opportunities for EU IMTS suppliers. In order to take advantage of these opportunities, EU IMTS suppliers must comply with the administrative procedures and requirements implemented by Transport Canada92 and administered in partnership with the CBSA, including the submission of the relevant Vessel Advance
Montreal “until it departs from the exclusive economic zone of Canada or from the inland waters, as defined in subsection 2(1) of the Customs Act, at a location where the inland waters are contiguous to the United States”. For practical purposes, this means that the vessel must either travel more than 200 nautical miles beyond Canada’s coastal baseline and return, or it must travel southwest to the Canada-US border in the St. Lawrence River, to the point just south of the eastern tip of the Island of Cornwall (a round-trip distance of over 100 miles from the Port of Montreal). 91 A vessel used in the supply of such dredging services must be made or manufactured in Canada or the European Union (or, alternatively, it must have been predominantly modified in Canada or the European Union and owned by a person located in Canada or the European Union for at least one year before to the submission of the bid). Further, the vessel must be registered in either Canada or an EU Member State. If it is registered in an EU Member State, then it must obtain a licence under the Coasting Trade Act, although Transport Canada is required to grant such a licence, subject only to the “applicable non-discretionary requirements”. Thus, Transport Canada will not undertake the usual process of determining whether any Canadian vessel or Canadian-registered vessel is suitable and available to supply the services before granting the licence to the EU-registered vessel. 92 See Transport Canada, “Coasting trade, foreign vessels and the Canada-European trade agreement”, available online at www.tc.gc.ca/eng/policy/coasting-trade-foreign-vessels-canada-european-trade-agreement.html#changes. - 105 -
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Notification Forms,93 as well as all Canadian laws applicable to enterprises and vessels engaged in the supply of coasting trade or marine cabotage services in Canada.94
D. Telecommunications Services
The negotiated outcomes in Chapter 15 of the CETA maintain the status quo in Canada, such that no new concrete opportunities are immediately apparent in the Canadian market for telecommunications services. Like Chapters 9 and 13, the provisions of Chapter 15 serve to establish a minimum baseline for trade and investment in the telecommunications sector, although the existing competitive landscape in Canada remains unchanged. In this regard, the provisions of Chapter 15 are “subject to a Party’s right to restrict the supply of a service in accordance with its reservations as set out in its Schedule to Annex I or II”.95 In particular, Reservation I-C-9 maintains the existing measures that limit the opportunities for EU telecommunications services suppliers in the Canadian market.
The existing telecommunications regime in Canada is already consistent with the provisions set forth in Chapter 15 (subject to the applicable reservations), such that no legislative amendments or regulatory changes were necessary to implement Canada’s obligations. This is largely because the provisions of Chapter 15 affirm and reinforce Canada’s commitments under NAFTA Chapter 13 (Telecommunications), the Telecommunications Annex in the WTO General Agreement on Trade in Services (“GATS”), and the “Reference Paper” of the GATS Negotiating Group on Basic Telecommunications, which are already well established in Canadian law. Thus, Chapter 15 of CETA affirms Canada’s existing international obligations to the European Union with respect to the supply of telecommunications services, including the commitments to provide EU enterprises
93 See Transport Canada, “Advance notification of coasting trade for foreign vessels”, available online at www.tc.gc.ca/eng/policy/advance-notification-coasting-trade-foreign-vessels.html. 94 See generally, Transport Canada, “Coasting trade in Canada”, available online at www.tc.gc.ca/eng/policy/acf-acfs-menu-2215.htm#ceta. 95 CETA, Article 15.2.1. - 106 -
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with access to and use of public telecommunications networks or services on reasonable and non- discriminatory terms and conditions.
However, the provisions of Chapter 15, read together with Reservation I-C-9 in particular, also maintain the existing restrictions on foreign investment in Canada’s telecommunications sector. Reservation I-C-9 provides that, except for the ownership or operation of international submarine cables and satellites, foreign investment in a Canadian carrier is restricted to a maximum cumulative total of 46.7% voting interest, based on 20% direct investment and 33.3% indirect investment. Canada adopted a similar reservation in the “Reference Paper” of the GATS Negotiating Group on Basic Telecommunications (see Supplement 3 to Canada’s Schedule of Specific Commitments, 1997).96
For these reasons, an EU telecommunications services supplier is still only eligible to operate in Canada if (under section 16 of the Telecommunications Act):
It is an entity incorporated, organized or continued under the laws of Canada or a province and is Canadian-Owned and controlled (i.e., foreign direct investment must not exceed the maximum percentage of voting shares described above); It owns or operates only a transmission facility in the sectors of international submarine cables, earth stations that provide telecommunications services by means of satellites, or satellites; and It has annual revenues from the provision of telecommunications services in Canada that represent less than 10% of the total annual revenues, as determined by the CRTC, from the provision of telecommunications services in Canada.97
96 See Supplement 3 to Canada’s Schedule of Specific Commitments, 1997, available online at www.international.gc.ca/trade-agreements-accords-commerciaux/wto-omc/gats-agcs/commit-engage.aspx?lang=eng and https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009- DP.aspx?language=E&CatalogueIdList=3671,34022,23146,20088,5079,22853,14218,24805&CurrentCatalogueIdIn dex=2&FullTextSearch=. 97 Telecommunications Act, S.C. 1993, c. 38, s. 16, available online at http://laws.justice.gc.ca/eng/acts/T- 3.4/FullText.html. - 107 -
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These restrictions were in force before the implementation of CETA, and they continue under the CETA pursuant to Reservation I-C-9. Thus, Chapter 15 does not create new market access opportunities for EU businesses seeking to invest in Canada’s telecommunications services market
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Case Study Market analysis of the decision not to enter the Canadian market by a major US telecommunications services supplier
In 2013, a number of American telecommunications corporations were considering entering Canada’s telecommunications market in the period of time leading up to the Government of Canada’s of Canada’s spectrum auction (i.e., a regulated process in which the federal government sells the rights to use designated bandwidths of the electromagnetic spectrum to industry stakeholders). In particular, several large and well-establish telecommunications companies, including Verizon Communications Inc. (Verizon), contemplated expanding their operations into Canada. However, Verizon ultimately decided against investing in the supply of services in the Canadian market.
While Verizon executives did not publicly reveal the reasons underpinning their final decision, there are indications that several key factors likely influenced their assessment.
First, reports indicate a perceived lack of certainty in the Canadian regulatory regime among new investors. In this regard, foreign investors and domestic entrants in 2013, namely Wind Mobile and Mobilicity, cited their dissatisfaction with Canada’s regulatory framework for telecommunications services. While the Government of Canada made public statements in support of increased competition in the Canadian market, critics observed that the government did not adequately enforce regulations capable of supporting new entrants. These companies complained that, as a result, they were unable to secure sufficient coverage or optimize their supply services, resulting in missed opportunities and suppressed growth.1 Verizon may have taken note of these complaints and the underlying factual circumstances.
Second, financial considerations likely factored into Verizon’s decision not to enter the Canadian market. In particular, Verizon had considered expansion into the Canadian market in two ways: first, it tabled offers to the two starts-ups mentioned above, Wind Mobile and Mobilicity, in bids collectively worth over CA $1 billion. Second, it considered launching a mobile virtual network operator program in Canada, leasing space from an existing carrier’s network in order to offer Canadians wireless services.1
While the first option would have enabled Verizon to enter the Canadian market (securing approximately 900,000 subscribers), it would involve the assumption of a significant amount of debt from one of the new entrants. Further, competition with the so-called “Big Three” incumbent telecommunications services suppliers (Telus, Rogers, and Bell), which collectively own 90% of the electromagnetic spectrum in Canada, posed a significant challenge. Leasing network access from one of the existing carriers would likely have been problematic, as it would have necessarily involved negotiating deals with Canadian incumbent suppliers unlikely to be favourable toward foreign competitors. The challenges faced by new entrants are exemplified by the experience of Wind Mobile. Although it was the top performer among the new entrants, it struggled to control only 2% of the market three years after its entry.1
Third, the “Big Three” Canadian incumbents conducted a coordinated campaign to pressure the Government of Canada in relation to the spectrum auction. While reports are inconclusive about the results of these lobbying efforts, reports indicate that the incumbents engaged with opposition members in an effort to dissuade the Government of Canada from seeking to attract a fourth major network operator.
Lastly, Verizon’s move may have been less a rejection of the Canadian market, and more a result of its focus on efforts to capture a share in a much larger market with its US $130 billion acquisition of Vodafone Group Plc on 2 September 2013. While the “Big Three” controlled 90% of Canada’s 26.9 million- 1 - wireless subscribers, this was a relatively small market in global terms. Thus, investment in Canada’s difficult telecommunications sector may have been less compelling than investment in the much larger opportunities located in Europe and Asia.
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V. TEMPORARY ENTRY AND STAY OF EU INDIVIDUALS FOR BUSINESS PURPOSES
Chapter 10 of the CETA provides increased work force mobility and flexibility to EU enterprises doing business (or seeking to do business) with Canada. In turn, these outcomes facilitate or enhance Canadian market access opportunities under other CETA provisions. For example, the temporary entry and stay commitments allow short-term business visitors or key personnel from EU enterprises, including SMEs, to meet and network with potential Canadian partners, investigate market opportunities in Canada, engage with business and legal consultants, enter into agreements, and follow up on established business arrangements to address issues, manage activities, and expand operations. This could be the difference between a theoretical market access possibility under the CETA, and an actual business opportunity in Canada, by enabling efforts to: e.g., establish a joint-venture or partnership that facilitates access to high-value government procurement opportunities in Canadian provinces and territories; marketing the supply of EU services to prospective clients in Canada; or securing new customers in Canada for EU-origin goods for which high rates of customs duties have been eliminated under Chapter 2.
The provisions of Chapter 10 are fully implemented in Canadian federal law. As work permits and immigration matters fall exclusively within the jurisdiction of the federal Government of Canada, the impact of Chapter 10 applies to opportunities arising throughout Canada, including in each of the ten provinces and three territories.
Chapter 10 benefits EU enterprises of all sizes, including independent professionals, by lowering barriers to trade in the form of entry and immigration requirements for certain kinds of EU workers. This section of the Market Access Study Report will outline the mechanics of how EU enterprises of all sizes can take advantage of the new rules implemented in Canada regarding the temporary entry and stay of EU workers pursuant to the CETA.
Before the CETA, all citizens of the European Union would generally require a work permit to work in Canada (with limited exceptions for certain types of workers and business visitors).98
98 Immigration and Refugee Protection Regulations, SOR/2002-227, 2. 8, s. 186 and 187; Immigration and Refugee Protection Act, S.C. 2001, c. 27, s. 30. - 118 -
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Work permits were only issued if and when certain criteria were met, including a positive Labour Market Impact Assessment (LMIA) by Employment and Social Development Canada (ESDC) indicating that no qualified Canadian individual is available to fill the position at issue.99 In order to obtain an LMIA, an EU enterprise seeking to employ an EU citizen to undertake work in Canada would be required to apply to ESDC. The LMIA procedure is often a lengthy process that includes market studies and advertising attempts in order to confirm that a Canadian individual cannot be employed to fill the position.
Under the CETA, certain kinds of EU workers can now enter Canada without a work permit, while others will require a work permit that is not conditioned on a positive LMIA requirement (i.e., “LMIA-exempt”). This is a considerable benefit for EU enterprises and EU workers in terms of developing and exploiting business opportunities in Canada. It should be noted, however, that the CETA does not provide labour mobility opportunities to all EU workers.
In order to assess whether, to what extent, and exactly how the preferential treatment accorded to EU business persons, investors, professionals, and other workers under Chapter 10 will enhance market access opportunities in Canada, it is important to understand the requirements, conditions, and limitations of Canada’s obligations to allow temporary entry and stay in Canada for business purposes.
A. Categories of Workers Covered under CETA Chapter 10
The provisions of CETA Chapter 10 do not provide labour mobility opportunities for all EU workers. Rather, the negotiated outcomes of the CETA provide preferential treatment to certain categories of EU workers, including: so-called “key personnel”, “contractual services suppliers”, “independent professionals”, and “short-term business visitors”. The category of a worker, as defined under the CETA, will determine whether or not a Canadian work permit will be required,
99 For more information on Labour Market Impact Assessments, see “Canadian Immigration Procedures for Business People” in Doing Business in Canada: An Introduction to the Legal Aspects of Investing and Establishing a Business in Canada, Borden Ladner Gervais LLP (2017), available online at http://blg.com/en/News-And- Publications/Documents/Doing_Business_in_Canada.pdf. - 119 -
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1. Short-Term Business Visitors – no work permit required; 90 days of entry and stay within any 6-month period
Short-term business visitors from the European Union can enter Canada without a work permit.100 The maximum length of stay for short-term business visitors is 90 days within any six-month period.101 Canada has committed under Article 10.9 of the CETA to allow temporary entry and stay of short-term business visitors for each of the purposes/activities listed in Annex 10-D. These permitted activities are summarized in Table 28, below:102
Table 28 Purposes and activities for which short-term business visitors may temporarily enter and stay in Canada (Article 10.9 and Annex 10-D)
Business Definition Activity
Meetings and Natural persons attending meetings or conferences or engaged in consultations consultations with business associates.
Research and Technical, scientific and statistical researchers conducting independent research or design research for an enterprise located in the territory of the other party.
Market Market researchers and analysts conducting research or analysis for an enterprise Research located in the territory of the other party.
Personnel of an enterprise who enter the territory of the other party to receive Training training in techniques and work practices who are employed by companies or Seminars organisations in that party, provided that the training received is confined to observation, familiarisation and classroom instruction only.
Trade fairs and Personnel attending a trade fair for the purpose of promoting their company or its exhibitions products or services.
Sales Representatives of a supplier of services or goods taking orders or negotiating the sale of services or goods or entering into agreements to sell services or goods for
100 CETA, Article 10.9.2. 101 CETA, Article 10.9.3. 102 CETA, Article 10.9.1. - 120 -
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Business Definition Activity that supplier, but not delivering goods or supplying services themselves. Short-term business visitors do not engage in making direct sales to the general public.
Buyers purchasing goods or services for an enterprise, or management and Purchasing supervisory personnel, engaging in a commercial transaction carried out in the territory of the other party.
Installers, repair and maintenance personnel, and supervisors, possessing specialised knowledge essential to a seller's contractual obligation, performing After-sales or services or training workers to perform services, pursuant to a warranty or other after-lease service contract incidental to the sale or lease of commercial or industrial equipment service or machinery, including computer software, purchased or leased from an enterprise located outside the territory of the Party into which temporary entry is sought, throughout the duration of the warranty or service contract.
Management and supervisory personnel and financial services personnel (including Commercial insurers, bankers and investment brokers) engaging in a commercial transaction for transactions an enterprise located in the territory of the other party.
Tour and travel agents, tour guides or tour operators attending or participating in Tourism conventions or accompanying a tour that has begun in the territory of the other personnel party.
Translation and Translators or interpreters performing services as employees of an enterprise interpretation located in the territory of the other party.
Short-term business visitors are prohibited from engaging in certain activities. Participating in one of the activities outlined below would prevent an individual from qualifying as a short-term business visitor: (a) engaging in selling a good or a service to the general public; (b) receiving remuneration from a source located within Canada; and (c) suppling a service in the framework of a contract concluded between an enterprise that has no commercial presence in Canada and a consumer in Canada (except as provided in Annex 10-D, summarized in Table 28, above).103
103 CETA, Article 10.9.1(a)-(c). - 121 -
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2. Key Personnel
Article 10.7 permits the temporary entry and stay of “Key Personnel”. Key personnel include business visitors for investment purposes, investors, and intra-corporate transferees. The definitions for of these types of workers are discussed in the sections below.
The CETA prohibits Canada from establishing limitations, such as economic needs tests or numerical restrictions, on the number of total key personnel that will be permitted temporary entry. The CETA also prohibits Canada from requiring work permits for business visitors for investment purposes.104 Canada is able to continue to require work permits for investors and intra-corporate transferees so long as they are LMIA-exempt (i.e., not subject to any numerical restrictions or economic needs tests, such as the assessment of whether or not a qualified Canadian worker is available to undertake the required services or activities).
a) Business Visitors for Investment Purposes – no work permit required; 90 days of entry and stay permitted within any 6-month period
The CETA defines “business visitors for investment purposes” as natural persons working in a managerial or specialist position who are responsible for setting up an enterprise, but who do not engage in direct transactions with the general public and do not receive remuneration from a source located within Canada.105 Business visitors for investment purposes are entitled to enter Canada and stay for up to 90 days within any 6-month period without a work permit.
b) Investors – LMIA-exempt work permit required; entry and stay permitted for a period of up to one year
“Investors” are defined in the CETA as “natural persons who establish, develop, or administer the operation of an investment in a capacity that is supervisory or executive and to which those persons or the enterprise employing those persons has committed, or is in the process of committing, a substantial amount of capital”.106 Currently, EU investors are required to obtain an LMIA-exempt
104 CETA, Article 10.7.2 and 3. 105 CETA, Article 10.1, Definitions. 106 CETA, Article 10.1. - 122 -
2016/EuropeAid/DH/SER/137-941 Market Access Study Report 12 March 2018 work permit in order to work in Canada. Once the work permit is obtained, entry will be permitted for one year, with possible extensions at the discretion of the federal department of Immigration, Refugees, and Citizenship Canada (IRCC). For the purposes of requesting an extension to a valid work permit, IRCC provides an administrative process involving an online application.107
c) Intra-Corporate Transferees – LMIA-exempt work permit required; entry and stay permitted for up to three years or the duration of the contract, whichever is less
The CETA also provides preferential treatment to certain intra-corporate transferees. However, not all intra-corporate transferees will meet the definition set forth in the negotiated outcomes of the CETA text. This definition is limited to natural persons who (a) have been employed by an EU enterprise or have been partners in an EU enterprise for at least one year, (b) are temporarily transferred to an enterprise in Canada (i.e., a subsidiary, branch, or head company of the EU enterprise), and (c) meet the definition for “senior personnel”, “specialist”, or “graduate trainee”.
To qualify as “senior personnel” under the CETA, an individual must be working in a senior position within an EU enterprise. His or her role must be primarily to direct the management of the enterprise, or either the enterprise itself or a department or sub-division of the enterprise. An individual with a lower level of authority may also meet the definition of “senior personnel” if he or she has the ability to exercise a wide latitude in decision making, which may include having the authority to personally recruit and dismiss personnel, or the authority to take other actions related to “human resources” activities (such as authorizing the promotion or leave of personnel). Further, he or she must (a) receive only general supervision or direction principally from higher level executives, the board of directors, or stockholders of the business, or (b) supervise and control the work of other supervisory, professional or managerial employees, and exercise discretionary authority over day-to-day operations.108
107 See IRCC, “Can I apply to extend a work permit from inside Canada?”, available online at www.cic.gc.ca/english/helpcentre/answer.asp?qnum=185&top=17; IRCC, “Application to Change Conditions or Extend Your Stay in Canada as a Worker (from inside Canada)”, available online at www.cic.gc.ca/english/information/applications/extend-worker.asp. 108 CETA, Article 10.1. - 123 -
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The CETA defines “specialists” as natural persons working within an enterprise who possess (a) uncommon knowledge of the enterprise’s products or services, and its application in international markets, or (b) an advanced level of expertise or knowledge of the enterprise’s processes and procedures, such as its production, research equipment, techniques, or management. When assessing the expertise or knowledge of a specialist, IRCC is required to consider unusual abilities that are different from those generally found in a particular industry and that cannot be easily transferred to another natural person in the short-term. Such abilities must be obtained through specific academic qualifications or extensive experience with the enterprise.109
Intra-corporate transferees who are “senior personnel” and “specialists” need to apply for an LMIA-exempt work permit. Once approved, they will be entitled to enter Canada and stay for up to three years or the length of their contract, whichever is less, with a possible extension of up to 18 months at the discretion of IRCC.
An EU enterprise also benefits from the intra-corporate transferee provisions of the CETA if the employee being transferred falls within the definition of “graduate trainee”. Graduate trainees are natural persons who possess a university degree and are temporarily transferred to Canada for career development purposes or to obtain training in business techniques and methods. Graduate trainees will be required to apply for a LMIA-exempt work permit. Graduate trainees are entitled to enter Canada and stay for up to three years or the duration of their contract, whichever is less.110
3. Contractual Services Suppliers and Independent Professionals – LMIA-exempt work permit required; entry and stay permitted for up to 12 months
Annex 10-E of the CETA requires Canada and the EU to permit the supply of services in their territory by contractual services suppliers and independent professionals for the sectors listed in Annex 10-E, subject to the specified limitations.111 For Canada, the sectoral commitments apply
109 CETA, Article 10.1. 110 CETA, Article 10.1. 111 CETA, Annex 10-E. - 124 -
2016/EuropeAid/DH/SER/137-941 Market Access Study Report 12 March 2018 to occupations listed under level “0” and “A” of Canada’s National Occupational Classification (“NOC”) system.112 The complete list of reservations can be found in Annex 10-E.
Unless Canada has established a reservation in Annex 10-E with respect to a particular industry, Canadian authorities cannot condition the temporary entry and stay of contractual services suppliers or independent professionals entering Canada to provide services in that industry on numerical restrictions or economic needs tests.113 Canada has also committed to allow independent professionals to enter and stay in Canada for a cumulative period of not more than 12 months in any 24 month period, or for the duration of the contract, whichever is less.114 A work permit will still be required for contractual services suppliers and independent professionals.
a) Contractual Services Suppliers
Contractual services suppliers are defined as natural persons employed by an EU enterprise that has no establishment (i.e., work place or premises) in Canada. 115 The work being supplied by the EU enterprise must fall within one of the industries outlined in section 9 of Annex 10-E., and the enterprise must have a bona fide contract (other than through an agency) to supply a service to a recipient in Canada.116
112 Government of Canada, Canadian National Occupation Classification List, Available online: http://www.cic.gc.ca/english/immigrate/skilled/noc.asp. 113 CETA, Article 10.8.3. 114 CETA, Article 10.8.4. 115 CETA, Article 10.1, Definitions. 116 CETA, Annex 10E, section 9 specifies the following industries: Legal advisory services in respect of public international law and foreign law; Accounting and bookkeeping services; Taxation advisory services; Architectural services and urban planning and landscape architectural services; Engineering services and integrated engineering services; Medical and dental services; Veterinary services; Midwives services; Services provided by nurses, physiotherapists and paramedical personnel; Computer and related services; Research and development services; Advertising services; Market research and opinion polling; Management consulting services; Services related to management consulting; Technical testing and analysis services; Related scientific and technical consulting services; Mining; Maintenance and repair of vessels; Maintenance and repair of rail transport equipment; Maintenance and repair of motor vehicles, motorcycles, snowmobiles and road transport equipment; Maintenance and repair of aircrafts and parts thereof; Maintenance and repair of metal products, of (non-office) machinery, of (non-transport and non- office) equipment and of personal and household goods; Translation and interpretation services; Telecommunication services; Postal and courier services; Construction and related engineering services; site investigation work; Higher education services; Services relating to agriculture, hunting and forestry; Environmental services; Insurance and - 125 -
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Under Article 10.8.1 of the CETA, an individual seeking entry as a contractual services supplier must meet each of the conditions outlined in the checklist below117:
insurance related services advisory and consulting services; Other financial services advisory and consulting services; Transport advisory and consulting services; Travel agencies and tour operators' services; Tourist guides services; Manufacturing advisory and consulting services. 117 CETA, Article 10.8.1. - 126 -
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✓
✓
✓
✓
✓
✓
✓
b) Independent Professionals
An “independent professional” is a natural person who is established as self-employed in the European Union, but engaged to temporarily supply a service in Canada pursuant to a service
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✓
✓
✓
✓
✓
✓
contract that is no longer than 12 months in duration. The work being supplied by the independent professional must be listed in one of the industries outlined in section 10 of Annex 10-E.118
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Under Article 10.8.2 of the CETA, an individual seeking entry as an independent professional must meet each of the conditions outlined in the checklist below:
4. Canadian Reservations Applicable to Contractual Services Suppliers and Independent Professionals
Canada did not make any commitments regarding the following sectors for contractual services suppliers or independent professionals, meaning that all EU workers entering Canada in these sectors will require a positive LMIA and a work permit in order to enter Canada or stay for the purpose of working in their professional fields: medical and dental services, veterinary services, midwifery services, services provided by nurses, physiotherapy and paramedical services, and higher education services.119
IRCC has published administrative guidance online regarding the implementation of the Government of Canada’s commitments relating to contractual service suppliers and independent professionals, as listed in CETA Annex 10-E, through the NOC 2011.120 A simplified version of the information illustrating Canada’s reservations with respect to the temporary entry and stay of contractual services suppliers and independent professionals is found at Appendix 6.
B. Opportunities for EU Enterprises
As outlined above, the negotiated outcomes of CETA Chapter 10 provide increased work force mobility and flexibility to EU enterprises of all sizes – including independent professionals – that engage in business activities in Canada. In turn, these benefits support and enhance the cross-
118 CETA, Annex 10-E, section 10 specifies the following industries: Legal advisory services in respect of public international law and foreign law; Architectural services and urban planning and landscape architectural services; Engineering services and integrated engineering services; Computer and related services; Research and development services; Market research and opinion polling; Management consulting services; Services related to management consulting; Mining; Translation and interpretation services; Telecommunication services; Postal and courier services; Higher education services; Insurance related services advisory and consulting services; Other financial services advisory and consulting services; Transport advisory and consulting services; Manufacturing advisory and consulting services. 119 CETA, Annex 10-E. 120 IRCC, “National Occupational Classification Equivalents of Canada’s Commitments in the Canada- European Union Free-Trade Agreement”, available online at http://www.cic.gc.ca/english/resources/tools/temp/ work/international/canada-eu/a10-e.asp. - 129 -
2016/EuropeAid/DH/SER/137-941 Market Access Study Report 12 March 2018 border trade and investment opportunities that existed for EU enterprises in Canada prior to the CETA as well as the new market access opportunities that have been created by other CETA outcomes. Individuals from the European Union who qualify under the CETA as “key personnel”, “contractual services suppliers”, “independent professionals”, and “short-term business visitors” are now accorded preferential treatment by the relevant Canadian authorities, including IRCC and CBSA. The practical effects include reduced costs and delays relating to LMIA and work permit applications, and greater certainty for EU individuals travelling to Canada for business purposes (e.g., developing an investment, establishing business relationships, or engaging in the supply of a specific professional or contractual service).
Although Chapter 10, in isolation, does not necessarily create concrete market access opportunities that were previously closed to EU enterprises, its implementation in Canada does facilitate and enhance the opportunities for enterprises of all sizes under the CETA, including those under Chapter 2 (National Treatment and Market Access for Goods), Chapter 8 (Investment), Chapter 9 (Cross Border Trade in Services), Chapter 13 (Financial Services), and Chapter 19 (Government Procurement).
In particular, the capacity for EU individuals to enter into Canada and stay for extended periods of time to undertake business activities, without being required to satisfy work permit or LMIA requirements, will be very useful for SMEs looking to expand their business operations into Canadian markets. SMEs often do not have the resources available to establish a physical presence in Canada and must offer their goods and services without investing in permanent infrastructure. Under these circumstances, SMEs may wish to take advantage of the short-term business visitor rules outlined above.
While in Canada, short-term business visitors for the European Union are able to attend meetings with potential business partners, conduct market research, and attend trade fairs or exhibitions to market their products and services. These are inexpensive ways to make important business connections, develop relationships, and establish customers, clients, and supply chains.
SMEs will also benefit from the limited sales and purchasing activities that are permitted for short- term business visitors as well as the entry permitted after a sale is completed to provide ongoing
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support. Sales representatives (for goods or services) are able to take orders or negotiate sales agreements while in Canada as a short-term business visitor. Short-term business visitors are also permitted to engage in certain services after a sale has been completed. For example, EU workers are permitted to enter Canada as short-term business visitors to undertake installation and repair services pursuant to a warranty or services contract related to the sale or lease of commercial or industrial equipment, machinery, or computer software.
It is important to remember that if an EU worker has been granted temporary entry and stay in Canada as a short-term business visitor under the CETA, he or she is prohibited from delivering goods or supplying services to consumers in Canada. Also, they are not permitted to engage in making direct sales to the general public and they are prohibited from receiving remuneration from a source located within Canada. However, once a foothold has been established in Canada and services contracts have been signed, the individual may be able to gain entry to Canada as an investor, key personnel, or a contractual service supplier under an LMIA-exempt work permit.
VI. INVESTMENT
CETA Chapter 8 sets out provisions that protect investments of EU investors in Canada. The Chapter does not, however, open up new investment opportunities in Canada that could be highlighted in this report.
As discussed above, the CETA creates direct opportunities in respect of trade in goods and services, including government procurement, that are immediately apparent. It also generates and facilitates opportunities for direct investment in Canada. Trade in goods and services and investment must be considered together when assessing opportunities because an opportunity to trade goods is often associated with opportunities to trade in services and make investments to leverage the maximum benefit from preferential market access. An example is the supply of a good that requires installation and set-up services and/or maintenance and repair services. The establishment of supply chains for the good and its associated services can lead to investment in Canada based on those supply chains. The certainty and predictability created by the CETA creates an environmental that fosters further investment both inside and outside of existing EU-Canada
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APPENDIX 8
Table 29 Goods of Section IV – Prepared Foodstuffs; Beverages, Spirits, and Vinegar, Tobacco and Manufactured Tobacco Substitutes.
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 16 Preparation of meat, fish or crustaceans, molluscs or other aquatic invertebrate 1602.49.10 Mixtures, in cans or glass jars, of other 12.5% prepared or preserved meat, meat offal or 327,466,006* 2,316,663* Free blood 1602.50.10 Prepared meals of bovine animals 11% 238,975,570* 381,384* Free 1602.90 Other prepared meals or mixtures, in 11-12.5% cans or glass jars, of other prepared or 2,475,839* 154,768* Free preserved meat, meat offal or blood 16.04 Prepared or preserved fish; caviar and 4.5-11% 315,937,637* 24,889,137* caviar substitutes prepared from fish eggs Free Chapter 17 Sugars and sugar confectionery 1702.90.90 Other sugars, containing in the dry state 11% 38,199,330* 3,851,523* 50% by weight of fructose Free 17.03 Molasses resulting from the extraction of 12.5% 44,595,790* 3,439,463* refining sugar Free 17.04 Sugar confectionery (including white 9.5-10% 531,342,825* 87,160,678* chocolate), not containing cocoa Free Chapter 19 Preparations of cereals, flour, starch or milk; pastrycooks' products 1902.20 Stuffed pasta, whether or not cooked or 11% 96,418,632 6,435,120 otherwise prepared Free Chapter 20 Preparations of vegetables, fruit, nuts or other parts of plants 20.02 Tomatoes prepared or preserved 11.5% 124,578,165 28,759,358 otherwise than by vinegar or acetic acid Free 20.03 Mushrooms and truffles, prepared or 17% preserved otherwise than by vinegar or 22,219,040* 1,225,108* Free acetic acid 20.04 Other vegetables prepared or preserved 6-17% otherwise than by vinegar or acetic acid, 158,964,409* 3,880,981* Free frozen
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 20.05 Other vegetables prepared or preserved 6-14.5% otherwise than by vinegar or acetic acid, 439,705,430* 86,087,008* Free not frozen, 20.06 Vegetables, fruit, nuts, fruit-peel and other 6-9.5% parts of plants, preserved by sugar 8,882,626* 529,516* Free (drained, glacé or crystallised) 20.07 Jams, fruit jellies, marmalades, fruit or nut 8.5-12.5% purée and fruit or nut pastes, obtained by 129,984,354* 20,647,785* Free cooking 20.08 Fruit, nuts and other edible parts of 4-12.5% 712,497,288* 19,861,517* plants, otherwise prepared or preserved Free 20.09 Fruit juices (including grape must) and 4-12.5% vegetable juices, unfermented and not 352,499,429* 21,875,008* Free containing added spirit Chapter 21 Miscellaneous edible preparations 21.03 Sauces and preparations therefor; mixed condiments and mixed seasonings; 3-12.5% 1,002,509,035* 47,003,213* mustard flour and meal and prepared Free mustard 21.04 Soups and broths and preparations 6-11% therefor; homogenized composite food 264,709,704 4,534,295 Free preparations 21.05 Ice cream and other edible ice, whether 6.5-9.5% 18,299,796* 1,712,569 or not containing cocoa Free 21.06 Food preparations not elsewhere 5-11% 1,855,685,988* 109,070,076* specified or included Free Chapter 22 Beverages, spirits and vinegar 2201.90 Other waters not containing added sugar 6.5% or other sweetening matter nor flavoured; 17,284,863 399,935 Free ice and snow 22.02 Waters, including mineral waters and aerated waters, containing added sugar 7.5-11% 390,184,149* 50,895,639* or other sweetening matter or flavoured, Free and other non-alcoholic beverages 2209.00 Vinegar and substitutes for vinegar 9.5% 54,817,113 25,714,331 obtained from acetic acid Free Chapter 23 Residues and waste from the food industries; prepared animal fodder 2309.90.20/99 Other preparations of a kind used in 8-10.5% 54,817,113* 25,714,331* animal feeding Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 24 Tobacco and manufactured tobacco substitutes 24.01 Unmanufactured tobacco; tobacco refuse 2.5-8% 73,105,290* 4,232,639* Free 24.02 Cigars, cheroots, cigarillos and cigarettes, 6.5-12.5% 61,221,085* 29,250,339* of tobacco or of tobacco substitutes Free 24.03 Other manufactured tobacco and manufactured tobacco substitutes; 4-13% 20,038,138* 812,222* "homogenized" or "reconstituted" Free tobacco; tobacco extracts and essences
Table 30 Goods of Section IV – Prepared Foodstuffs; Beverages, Spirits, and Vinegar, Tobacco and Manufactured Tobacco Substitutes.
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes 2703.00 Peat (including peat litter), whether or not 6.5% 18,958,597 1,282,178 agglomerated Free Lubricating oils put up in packings for 2710.12.20 5% Free 9,938,419,788 2,719,720,280 retail sale 2710.19.91 Lubricating oils put up in packings for retail sale, including for automobile, diesel 5% Free 4,665,294,713 340,582,367 or marine engines and automotive gear oils Lubricating oils put up in packings for 2710.20.10 5% Free 12,613,775 10,332,252 retail sale 2711.12.10 Propane in containers ready for use 12.5% 83,363,947* 860* Free 2711.19.10 Other petroleum gases and other 12.5% gaseous hydrocarbons in containers 23,079,247* 58,492* Free ready for use 2712.10 Petroleum jelly 7% Free 16,835,731 214,497 Table 31 Goods of Section VI – Products of the Chemical or Allied Industries
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 28 Inorganic chemicals; organic or inorganic compounds of precious metals, of rare- earth metals, of radioactive elements or of isotopes
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 2852.90.10 Mercury albuminate; 6.5% 73,833,955* 4,907,354* Nucleoproteids of mercury Free Chapter 32 Tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter; paints and varnishes; putty and other mastics; inks 32.08 Paints and varnishes based on synthetic polymers or chemically modified natural 6.5% 719,158,926* 33,322,542* polymers, dispersed or dissolved in a Free non-aqueous medium; solutions 32.09 Paints and varnishes (including enamels and lacquers) based on synthetic 6.5% polymers or chemically modified natural 632,828,295 22,906,692 Free polymers, dispersed or dissolved in an aqueous medium 3210.00.00 Other paints and varnishes (including enamels, lacquers and distempers); 6.5% 31,434,999 3,914,968 prepared water pigments of a kind used Free for finishing leather 3211.00.00 Prepared driers 6.5% 2,823,760 318,704 Free 32.13 Artists', students' or signboard painters' colours, modifying tints, amusement 6.5% colours and the like, in tablets, tubes, jars, 37,546,908 7,840,471 Free bottles, pans or in similar forms or packings 32.14 Glaziers' putty, grafting putty, resin cements, caulking compounds and other 6.5% mastics; painters' fillings; non-refractory 408,387,722 32,539,992 Free surfacing preparations for façades, indoor walls, floors, ceilings or the like Chapter 33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations 3303.00 Perfumes and toilet waters 6.5% 293,514,129 166,479,818 Free 33.04 Beauty or make-up preparations and preparations for the care of the skin (other 6.5% 1,906,830,467* 539,917,837* than medicaments); manicure or pedicure Free preparations 33.05 Preparations for use on the hair 6.5% 688,099,145 77,775,566 Free 33.06 Preparations for oral or dental hygiene, 6.5-8% 328,859,719 17,785,729 including denture fixative pastes and Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) powders; dental floss, in individual retail packages 33.07 Pre-shave, shaving or after-shave preparations, personal deodorants, bath preparations, depilatories and other 6.5% 485,907,208 34,242,903 perfumery, cosmetic or toilet Free preparations, not elsewhere specified or included; prepared room deodorizers Chapter 38 Miscellaneous chemical products 3819.00 Hydraulic brake fluids and other prepared liquids for hydraulic transmission, not 6.5% containing or containing less than 70% by 49,874,135 7,748,677 Free weight of petroleum oils or oils obtained from bituminous minerals 3820.00 Anti-freezing preparations and prepared 6.5% 89,167,352 1,535,671 de-icing fluids Free
38.25 Residual products of the chemical or allied 6.5-15.5% industries; municipal waste; sewage 11,730,877* 9956* Free sludge; other waste Table 32 Goods of Section VII – Plastics and Articles Thereof; Rubber and Articles Thereof
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 39 Plastics and articles thereof 39.18 Floor coverings of plastics in rolls or in the 6.5% form of tiles; wall or ceiling coverings of 477,893,637 51,056,024 Free plastics 39.22 Baths, shower-baths, sinks, wash-basins, bidets, lavatory pans, seats and covers, 6.5% 121,283,831 4,425,438 flushing cisterns and similar sanitary Free ware, of plastics 39.24 Tableware, kitchenware, other household 6.5% articles and hygienic or toilet articles, of 905,555,307 37,492,557 Free plastics 39.25 Builders' ware of plastics, not elsewhere 6.5% 507,771,600 26,918,609 specified or included Free Chapter 40 Rubber and articles thereof 4011.10 New pneumatic tires, of rubber used on 7% Free 1,962,766,996 247,675,439 motor cars
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 4011.20 New pneumatic tires, of rubber used on 7% Free 1,128,405,451 132,410,487 buses or lorries 4015.11 15.5% Surgical gloves, mittens and mitts 28,734,231 136,668 Free 4015.90 Other gloves, mittens and mitts 10-14% 4,799,881* 436,333* Free 40.16 Other articles of vulcanized rubber other 6.5-9.5% 1,253,305,308* 115,166,802* than hard rubber Free Chapter 42 Apparel and clothing products, of leather 42.03 Articles of apparel (e.g., coats, jackets, etc.), 8-15.5% 226,524,264 34,153,395 gloves, belts, and other clothing accessories Value in Canadian Dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at https://www.ic.gc.ca/eic/site/tdo- dcd.nsf/eng/home
Table 33 Goods of Section VIII – Raw Hides and Skins, Leather, Furskins and Articles Thereof; Saddlery and Harness; Travel Goods, Handbags and Similar Containers; Articles of Animal Gut
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 43 Furskins and artificial fur; manufactures thereof 43.03 Articles of apparel, clothing accessories 8-15.5% 49,651,984 7,431,465 and other articles of furskin Free
Table 34 Goods of Section IX – Wood and Articles of Wood; Wood Charcoal; Cork and Articles of Cork; Manufactures of Straw, of Esparto or of Other Plaiting Materials; Basketware and Wickerwork
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 44 Wood and articles of wood; wood charcoal 44.19 Tableware and kitchenware, of wood 6% Free 48,127,406 3,035,074 44.20 Wood marquetry and inlaid wood; caskets and cases for jewellery or cutlery, and 6-7% similar articles, of wood; statuettes and 66,075,356 2,734,485 Free other ornaments, of wood; wooden articles of furniture 44.21 Other articles of wood 6-9.5% 206,318,304* 10,629,538* Free
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Chapter 46 Manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork Basketwork, wickerwork and other articles, made directly to shape from 6.5-11% 4602.11 5,280,872 29,640 plaiting materials or made up from goods Free of heading 46.01 made of bamboo 4602.12 Basketwork, wickerwork and other articles, made directly to shape from 4-11% 3,607,637* 47,211* plaiting materials or made up from goods Free of heading 46.01 made of rattan 4602.19 Other basketwork, wickerwork and other articles, made directly to shape from 4-11% 16,474,036* 48,416* plaiting materials or made up from goods Free of heading 46.01 4602.90 Baskets, trunks, travelling-bags and 8-11% cases, shopping-bags, handbags and 12,220,795 54,118 Free hatboxes
Table 35 Goods of Section XI – Textiles and Textile Articles
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 52 Cotton 5204.20 Cotton sewing thread put up for retail sale 8% Free 165,497 1,075,166 Chapter 54 Man-made filaments; strip and the like of man-made textile materials 5406.00.10 Synthetic filament yarn 8% Free 3,301,862* 79,080* Chapter 55 Man-made staple fibres
5511.10/20 Yarn (other than sewing thread) of man- 8% Free 34,757,660 826,720 made staple fibres, put up for retail sale.
Chapter 56 Wadding, felt and nonwovens; special yarns; twine, cordage, ropes and cables and articles thereof 5601.22.50 Articles of wadding, of man-made fibres 16% 13,981,579* 1,095,193* Free 5607.29.20/90 Other twine, cordage, ropes and cables, 10% whether or not plaited or braided, made of 1,710,734* 77,017* Free sisal or other textile fibres of the genus 5607.49.20/90 Other twine, cordage, ropes and cables, 10% whether or not plaited or braided, made of 25,483,433* 3,964,741* Free polyethylene or polypropylene
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016)
5607.50.20/90 Twine, cordage, ropes and cables, 10% whether or not plaited or braided, made of 25,842,853* 3,570,941* Free other synthetic fibres
5607.90.20/90 Other twine, cordage, ropes and cables, 10% 10,367,312* 1,862,299* whether or not plaited or braided Free 5608.11.90 Other made up fishing nets of man-made 14% 13,251,571* 1,230,227* textile materials Free 5608.19.90 Other knotted netting of twine, cordage or 14% rope; made up nets, of man-made textile 15,369,836* 2,992,947* Free materials 5608.90.90 Other knotted netting of twine, cordage or 13% rope; made up nets, of man-made textile 5,525,851 1,434,508 Free materials 5609.00 Articles of yarn, strip or the like, twine, 14% 17,410,751 465,175 cordage, rope or cables Free Chapter 57 Carpets and other textile floor coverings 57.01 Carpets and other textile floor coverings, 6.5-13% 37,013,830 113,586 knotted, whether or not made up Free 57.02 Carpets and other textile floor coverings, woven, not tufted or flocked, including 6.5-14% 122,761,323* 18,129,054* "Kelem", "Schumacks", "Karamanie" and Free similar hand-woven rugs 57.03 Carpets and other textile floor coverings, 10-12.5% 760,865,508 14,370,406 tufted, whether or not made up Free 57.04 Carpets and other textile floor coverings, 112.5% of felt, not tufted or flocked, whether or 24,042,583 3,372,900 Free not made up 5705.00 Other carpets and other textile floor 12% 27,150,332 2,170,890 coverings, whether or not made up Free Chapter 59 Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use 5901.90.10 Prepared painting canvas 7% Free 16,628,562* 193,368* 59.04 Linoleum; floor coverings consisting of a 7-18% coating or covering applied on a textile 16,433,791 12,951,725 Free backing 5905.00 Textile wall coverings 5-18% 4,913,082 1,621,798 Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 5907.00.29 Other painted canvas being theatrical 14% 17,519,033* 1,597,215* scenery, studio back-cloths or the like Free 5908.00.90 Other textile wicks, woven, plaited or knitted, for lamps, stoves, lighters, 14% candles or the like; incandescent gas 1,806,788* 142,980* Free mantles and tubular knitted gas mantle fabric therefor 5909.00.10 Fire hose 12% 9,570,034* 316,560* Free Chapter 61 Apparel and clothing products, knitted or crocheted 61.01 Men’s or boys’ overcoats, anoraks, ski- 18% jackets, wind-jackets, and similar articles, 120,545,758 1,802,255 Free knitted or crocheted 61.02 Women’s or girls’ overcoats, anoraks, 18% ski-jackets, wind-jackets, and similar 142,356,174 5,273,361 Free articles, knitted or crocheted 61.03 Men’s or boys’ suits, ensembles, jackets, 18% blazers, trousers, breeches, shorts, 207,528,869 6,093,049 Free knitted or crocheted 61.04 Women’s or girls’ suits, ensembles, 18% jackets, blazers, dresses, skirts, trousers, 899,090,113 33,990,938 Free breeches, shorts, knitted or crocheted 61.05 Men’s or boys’ shirts, knitted or crocheted 18% 197,686,919 5,156,363 Free 61.06 Women’s or girls’ blouses, shirts, and 18% 133,000,000 5,332,000 shirt-blouses, knitted and crocheted Free 61.07 Men’s and boys’ undergarments, night 18% clothes, bathrobes, dressing gowns, and 189,814,735 921,411 Free similar articles, knitted or crocheted 61.08 Women’s or girls’ undergarments, night 18% clothes, bathrobes, dressing gowns, and 375,575,131 2,976,774 Free similar articles, knitted or crocheted 61.09 T-shirts, singlets and other vests, knitted 18% 902,874,000 33,711,000 or crocheted Free 61.10 Jerseys, pullovers, cardigans, waistcoats, 18% 1,715,278,419 77,177,975 and similar articles, knitted or crocheted Free 61.12 Track suits, ski suits, and swimwear, 18% 119,721,086 2,991,578 knitted and crocheted Free 61.14 Other garments, knitted or crocheted 18% 192,196,187 5,050,829 Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 61.15 Tights, stockings, socks, and other 18% 363,929,658 20,046,331 hosiery, knitted or crocheted Free 61.16 Gloves, mittens, and mitts, knitted or 16-18% 150,582,746 1,534,156 crocheted Free 61.17 Clothing accessories, knitted or 12-18% 60,849,057 4,237,312 crocheted (e.g., scarves, belts) Free Chapter 62 Apparel and clothing products, woven (not knitted or crocheted) 62.01 Men’s or boys’ overcoats, anoraks, ski- 17-18% 368,900,086 30,131,304 jackets, wind-jackets, and similar articles Free 62.02 Women’s or girls’ overcoats, anoraks, 16-18% ski-jackets, wind-jackets, and similar 488,661,158 45,512,912 Free articles 62.03 Men’s or boys’ suits, ensembles, jackets, 17-18% 1,091,784,865 89,774,924 blazers, trousers, breeches, shorts Free 62.04 Women’s or girls’ suits, ensembles, 17-18% jackets, blazers, dresses, skirts, trousers, 1,440,504,959 100,237,809 Free breeches, shorts 62.05 Men’s or boys’ shirts 17-18% 450,064,365 26,759,315 Free 62.06 Women’s or girls’ blouses, shirts, and 16-18% 385,418,758 25,007,157 shirt-blouses Free 62.07 Men’s and boys’ singlets and other vests, 16-18% undergarments, night clothes, bathrobes, 31,241,134 418,415 Free dressing gowns, and similar articles 62.08 Women’s or girls’ singlets and other vests, undergarments, night clothes, 16-18% 52,625,910 1,061,495 bathrobes, dressing gowns, and similar Free articles 62.11 Track suits, ski suits, and swimwear 6-18% 340,091,644 14,984,759 Free 62.12 Lingerie and similar articles, whether or 18% 340,338,552 5,724,393 not knitted or crocheted Free 62.14 Clothing accessories, knitted or 9-18% 91,126,085 26,883,526 crocheted (e.g., scarves) Free 62.15 Ties and cravats 16-18% 28,891,423 8,901,367 Free Chapter 63 Other made up textile articles; sets; worn clothing and worn textile articles; rags
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 63.01 Blankets and travelling rugs 17-18% 109,405,277 4,117,716 Free 63.02 Bed linen, table linen, toilet linen and 7.5-18% 634,104,582 24,660,015 kitchen linen Free 63.03 Curtains (including drapes) and interior 17-18% 195,690,074 3,239,005 blinds; curtain or bed valances Free 63.04 Other furnishing articles, excluding those 15.5-18% 63,082,638 3,063,286 of heading 94.04 Free 63.05 Sacks and bags, of a kind used for the 5-18% 119,358,534 1,437,447 packing of goods Free 63.06 Tarpaulins, awnings and sunblinds; tents; 17-18% sails for boats, sailboards or landcraft; 102,411,506 2,232,327 Free camping goods 63.07 Other made up articles, including dress 7.5-18 417,286,983* 14,783,723* pattern Free 63.08 Sets consisting of woven fabric and yarn for making up into rugs, tapestries, 18% embroidered table cloths or serviettes, or 1,205,961 39,320 Free similar textile articles, put up in packings for retail sale 6309.00.90 Other worn clothing and other worn 18% 55,522,322* *223,618 articles Free
Table 36 Goods of Section XII – Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, Seat-sticks, Whips, Riding-crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowers; Articles of Human Hair
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 64 Footwear, gaiters and the like; parts of such articles 64.01 Waterproof footwear with outer soles and uppers of rubber or of plastics, the uppers 20% of which are neither fixed to the sole nor 45,733,179* 8,312,942* Free assembled by stitching, riveting, nailing, screwing, plugging or similar processes 64.02 Other footwear with outer soles and 16-18% 573,515,743* 13,439,320* uppers of rubber or plastics Free 64.03 Footwear with outer soles of rubber, 11-18% plastics, leather or composition leather 1,473,430,036* 324,989,652* Free and uppers of leather
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 64.04 Footwear with outer soles of rubber, 7.5-18% plastics, leather or composition leather 784,132,642* 49,512,061* Free and uppers of textile materials
64.05 Other footwear, including with uppers of 18% leather or composition leather, of textile 131,589,498* 6,662,856* Free materials
6406.90 Other parts of footwear; removable in- soles, heel cushions and similar articles; 5-10% 47,305,164* 4,340,711* gaiters, leggings and similar articles, and Free parts thereof Chapter 65 Headgear and parts thereof 6504.00.90 Other hats and other headgear, plaited or 12.5% made by assembling strips of any 10,923,606* 424,984* Free material 6505.00 Hats and other headgear, knitted or crocheted, or made up from lace, felt or 12.5-15.5% 226,180,045* 6,681,191* other textile fabric, in the piece (but not in Free strips); hair-nets of any material 65.06 Other headgear, whether or not lined or 5-12.5% 157,629,380* 8,292,067* trimmed Free Chapter 66 Umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof 66.01 Umbrellas and sun umbrellas (including 7-7.5% walking-stick umbrellas, garden umbrellas 83,337,178 967,622 Free and similar umbrellas) 6602.00.90 Other walking-sticks, seat-sticks, whips, 7% Free 5,158,633* 346,294* riding-crops and the like Chapter 67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles of human hair 67.04 Wigs, false beards, eyebrows and eyelashes, switches and the like, of 15.5% 56,975,065 1,490,254 human or animal hair or of textile Free materials; articles of human hair
Table 37 Goods of Section XIII – Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar Materials; Ceramic Products; Glass and Glassware
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 68 Articles of stone, plaster, cement, asbestos, mica or similar materials
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68.02 Worked monumental or building stone (except slate) and articles thereof; mosaic cubes and the like, of natural stone 3.5-8% 341,073,520* 71,920,796* (including slate); artificially coloured Free granules, chippings and powder, of natural stone (including slate) 6803.00.90 Worked slate and articles of slate or of 6.5% 8,146,351* 206,542 agglomerated slate Free 6807.10 Articles of asphalt or of similar material 6.5% (for example, petroleum bitumen or coal 80,770,594 6,593,281 Free tar pitch) in rolls 68.09 Articles of plaster or of compositions 6-6.5% 187,155,890* 824,431* based on plaster Free Chapter 69 Ceramic products 69.07 Ceramic flags and paving, hearth or wall tiles; ceramic mosaic cubes and the like; 8% Free 93,747,737 65,779,099 finishing ceramics Table 38 Goods of Section XV – Base Metals and Articles of Base Metal
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 73 Articles of iron or steel 7319.90 Other sewing needles, knitting needles, bodkins, crochet hooks, embroidery stilettos and similar articles, for use in the 7% Free 3,486,789 674,810 hand, of iron or steel; safety pins and other pins of iron or steel 73.21 Stoves, ranges, grates, cookers, barbecues, braziers, gas-rings, plate 7-8% warmers and similar non-electric 530,509,235* 18,852,197* Free domestic appliances, and parts thereof, of iron or steel 73.22 Radiators for central heating, not electrically heated, and parts thereof, of iron or steel; air heaters and hot air 7-7.5% 406,790,807* 28,140,734* distributors, not electrically heated, Free incorporating a motor-driven fan or blower, and parts thereof, of iron or steel
73.23 Table, kitchen or other household articles and parts thereof, of iron or steel; iron or 6.5% steel wool; pot scourers and scouring or 382,318,779 20,862,307 Free polishing pads, gloves and the like, of iron or steel
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 73.24 Sanitary ware and parts thereof, of iron or 6.5-7% 119,498,627* 8,357,883* steel Free Chapter 74 Copper and articles thereof 7419.99.20 Caskets or coffins 9.5% 57,355,349 6,256,816 Free Chapter 76 Aluminum and articles thereof
76.10 Aluminum structures and parts of structures; aluminum plates, rods, 6.5% 405,611,712* 39,401,618* profiles, tubes and the like, prepared for Free use in structures
76.12 Aluminum casks, drums, cans, boxes and 6.5% similar containers for any material of a 313,372,166* 12,646,305* Free capacity not exceeding 300 litres
76.15 Table, kitchen or other household articles and parts thereof, of aluminum; pot 6.5% scourers and scouring or polishing pads, 215,724,702 11,798,117 Free gloves and the like, of aluminum; sanitary ware and parts thereof, of aluminum
Chapter 82 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of base metal 8201.60.90 Hedge shears and similar two-handed 11% 6,488,817* 337,711 shears Free 8203.30 Metal cutting shears and similar tools 6.5-11% 10,253,459 1,065,984 Free 82.11 Knives with cutting blades, serrated or not 3.5-11% (including pruning knives), and blades 56,770,582* 6,967,389* Free therefor 8213.00 Scissors, tailors' shears and similar 3.5-11% 19,041,457 1,562,487 shears, and blades therefor Free 82.15 Spoons, forks, ladles, skimmers, cake- 6.5-11% servers, fish-knives, butterknives, sugar 69,504,203* 1,674,511* Free tongs and similar kitchen or tableware Chapter 83 Miscellaneous articles of base metal 83.01 Padlocks and locks (key, combination or electrically operated), of base metal; clasps and frames with clasps, 6.5% 236,753,765* 14,730,025* incorporating locks, of base metal; keys Free for any of the foregoing articles, of base metal
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 83.06 Bells, gongs and the like, non-electric, of base metal; statuettes and other 5-6.5% ornaments, of base metal; photograph, 82,047,847* 2,645,736* Free picture or similar frames, of base metal; mirrors of base metal
Table 39 Goods of Section XVI – Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 84.18 Refrigerators, freezers and other 6-8% refrigerating or freezing equipment, 1,715,886,858* 58,572,198* Free electric or other; heat pumps 84.51 Machinery for washing, cleaning, wringing, drying, ironing, pressing (including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile yarns, fabrics or 6-8% made up textile articles and machines for 47,678,377* 11,330,148* Free applying the paste to the base fabric or other support used in the manufacture of floor coverings such as linoleum; machines for reeling, unreeling, folding, cutting or pinking textile fabrics Chapter 85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles 85.06 Primary cells and primary batteries 7% Free 256,528,023* 16,072,999* 85.07 Electric accumulators, including 7% Free 674,570,277* 41,073,531* separators therefor 85.08 Vacuum cleaners 7.5-8% 366,605,031* 22,585,979* Free 85.16 Electric instantaneous or storage water heaters and immersion heaters; electric space heating apparatus and soil heating 6-9% apparatus; electrothermic hair-dressing 1,377,565,865* 99,669,656* apparatus (for example, hair dryers, hair Free curlers, curling tong heaters) and hand dryers; electric smoothing irons; other electro-thermic appliances of a kind used
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) for domestic purposes; electric heating resistors 85.28 Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not 5-6% 1,670,429,242* 12,614,685* incorporating radio-broadcast receivers or Free sound or video recording or reproducing apparatus 85.39 Electric filament or discharge lamps, including sealed beam lamp units and 6-8% 280,420,359* 48,802,237* ultra-violet or infra-red lamps; arc-lamps, Free light-emitting diode (LED) lamps Table 40 Goods of Section XVII – Vehicles, Aircraft, Vessels and Associated Transport Equipment
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 86 Railway or tramway locomotives, rolling-stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro- mechanical) traffic signalling equipment of all kinds 86.03 Self-propelled railway or tramway 8% Free 153,624,431 299,046 coaches, vans and trucks (cars) 8604.00 Railway or tramway maintenance or service vehicles (for example, workshops, cranes, ballast tampers, trackliners, 6% Free 75,168,982* 2,180,762* testing coaches and track inspection vehicles) 86.06 Railway or tramway goods vans and 11% 671,954,614 469,927 wagons (freight cars), not self-propelled Free 86.07 Parts of railway or tramway locomotives 2.5-10% 535,352,298* 54,436,436* or rolling-stock Free Chapter 87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof 87.03 ** Motor cars and other motor vehicles principally designed for the transport of 6.1% 920,546,802* 74,421,958* persons, including station wagons and Free racing cars **Tariff items nos. 8703.21.90 and 8703.90.00 are part of staging category C (“W2”). The duties on these goods will be removed in six equal stages beginning on September 21st, 2017 and will become duty-free effective on 1 January 2022.
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**Tariff items nos.8703.22.00, 8703.23.00, 8703.24.00, 8703.31.00, 8703.32.00 and 8703.33.00 are part of staging category D (“W3). The duties on these goods will be removed in eight equal stages beginning on September 21st, 2017 and will become duty-free effective on 1 January 2024. 87.08 Parts and accessories of the motor 6-8.5% 27,223,916,930* 945,851,564* vehicles Free 8712.00 Bicycles and other cycles (including 13% 296,388,005 5,636,195 delivery tricycles), not motorized Free Chapter 89 Ships, boats and floating structures 89.03 Yachts and other vessels for pleasure or 9.5% 691,109,997* 31,134,665* sports; rowing boats and canoes Free 8907.90 Other floating structures (for example, 6.5-15.5% tanks, coffer-dams, landing-stages, buoys 21,890,794* 1,072,871* Free and beacons) Table 41 Goods of Section XVIII – Optical, Photographic, Cinematographic, Measuring, Checking, Precision, Medical or Surgical Instruments and Apparatus; Clocks and Watches; Musical Instruments; Parts and Accessories Thereof
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof 90.04 Spectacles, goggles and the like, 5% Free 488,734,338* 105,104,722* corrective, protective or other 9005.90 Parts and accessories (including mountings) of Binoculars, monoculars, other optical telescopes, and mountings 6% Free 6,782,322 474,689 therefor; other astronomical instruments and mountings therefor, but not including instruments for radio-astronomy 90.06 Photographic (other than 3.5-6.5% cinematographic) cameras; photographic 48,132,317* 13,407,359* Free flashlight apparatus and flashbulbs 90.08 Image projectors, other than cinematographic; photographic (other 5.5-7% 12,349,661 806.790 than cinematographic) enlargers and Free reducers 9017.10.20 Drafting tables 8.5% 774,488* 137,780* Free Chapter 91 Clocks and watches and parts thereof 91.01 Wrist-watches, pocket-watches and other watches, including stopwatches, with 5% Free 140,233,298* 3,530,040* case of precious metal or of metal clad with precious metal.
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 91.02 Wrist-watches, pocket-watches and other 5% Free 415,156,694* 3,300,793* watches, including stopwatches 91.03 Clocks with watch movements 11-14% 1,289,938 46,850 Free 91.05 Other clocks 5-14% 39,260,963* 1,062,822* Free 9106.90.10 Parking meters 14% 6,942,744* 951,064* Free Chapter 92 Musical instruments; parts and accessories of such articles 92.01 Pianos, including automatic pianos; harpsichords and other keyboard stringed 7% Free 24,071,609* 4,298,433* instruments 9202.90 Other string musical instruments, not played with a bow, such as harps and 6% Free 37,827,934 1,251,856 guitars 9205.90 Wind musical instruments other than 6-7% fairground organs and mechanical street 15,849,100 1,784,201 Free organs 92.07 Musical instruments, the sound of which is produced, or must be amplified, 6% Free 84,088,883* 2,333,846* electrically (for example, organs, guitars, accordions) 92.08 Musical boxes, fairground organs, mechanical street organs, mechanical singing birds, musical saws and other musical instruments not falling within any 6% Free 7,270,840 326,782 other heading of this Chapter; decoy calls of all kinds; whistles, call horns and other mouth-blown sound signalling instruments 9209.99 Other parts (for example, mechanisms for musical boxes) and accessories (for example, cards, discs and rolls for 5-5.5% 16,875,297 2,459,722 mechanical instruments) of musical Free instruments; metronomes, tuning forks and pitch pipes of all kinds.
Table 42 Goods of Section XIX – Arms and Ammunition; Parts and Accessories Thereof
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 93 Arms and ammunition; parts and accessories thereof
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) 93.01 Military weapons 7% Free 12,808,828* 5,877,431* 9303.30 3.5-7% Sporting, hunting or target-shooting rifles 70,161,724 12,966,623 Free 9304.00 Other arms (for example, spring, air or 3.5-7% 24,514,977 1,471,822 gas guns and pistols, truncheons) Free 93.05 Parts and accessories of articles of 2-7.5% 80,454,670* 12,825,387* headings 93.01 to 93.04 Free 93.06 Bombs, grenades, torpedoes, mines, missiles and similar munitions of war and 3.5-7% parts thereof; cartridges and other 231,036,576* 21,756,639* Free ammunition and projectiles and parts thereof, including shot and cartridge wads 9307.00 Swords, cutlasses, bayonets, lances and similar arms and parts thereof and 7% Free 2,612,236 248,230 scabbards and sheaths therefor
Table 43 Goods of Section XX – Miscellaneous Manufactured Articles
Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) Chapter 94 Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings; illuminated signs, illuminated name-plates and the like; prefabricated buildings 94.01 Seats (other than those of heading 6-9.5% 2,110,411,871* 138,119,952* 94.02), and parts thereof Free 94.03 Other furniture and parts thereof 8-9.5% 2,436,842,713* 328,355,221* Free 94.04 Mattress supports; articles of bedding and similar furnishing fitted with springs or 8-15.5% 658,173,870 18,221,627 stuffed or internally fitted with any Free material or of cellular rubber or plastics 94.05 Lamps and lighting; illuminated signs, illuminated name-plates and the like, 5-7% 1,893,785,939* 103,321,245* having a permanently fixed light source, Free and parts thereof 94.06 Prefabricated buildings 4.5-15.5% 413,248,115* 9,956,424* Free Chapter 95 Toys, games and sports requisites; parts and accessories thereof 95.07 Fishing rods, fish-hooks and other line 6.5-7% 57,723,853* 3,731,296* fishing tackle; fish landing nets, butterfly Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) nets and similar nets; decoy "birds" and similar hunting or shooting requisites Chapter 96 Miscellaneous manufactured articles 96.03 Brooms, brushes, hand-operated mechanical floor sweepers, not motorized, mops and feather dusters; 6.5-15.5% 383,230,919* 40,295,936* prepared knots and tufts for broom or Free brush making; paint pads and rollers; squeegees 96.04 Hand sieves and hand riddles. 6.5% 844,386 46,484 Free 96.05 Travel sets for personal toilet, sewing or 6.5% 10,201,468 97,611 shoe or clothes cleaning. Free 96.07 Slide fasteners and parts thereof 10-11.5% 15,666,097* 1,987,092* Free 96.08 Pens and stylos; pen-holders, pencil- 5-7% holders and similar holders; parts of the 186,752,173* 23,288,180* Free foregoing articles 96.09 Pencils, crayons, pencil leads, pastels, 6-7% drawing charcoals, writing or drawing 70,031,377* 8,381,365* Free chalks and tailors' chalks 96.11 Date, sealing or numbering stamps, and the like, including devices for printing or embossing labels, designed for operating 6.5% 11,698,321 2,725,910 in the hand; hand-operated composing Free sticks, and hand printing sets incorporating such composing stick 96.12 Typewriter or similar ribbons, inked or 8.5-15.5% otherwise prepared for giving 34,398,805* 2,510,625* Free impressions; ink-pads 96.13 Cigarette lighters and other lighters, and 6.5-9.5% 50,531,977* 18,078,600* parts thereof other than flints and wicks Free 96.14 Smoking pipes (including pipe bowls) and 6.5-7% cigar or cigarette holders, and parts 12,142,366* 462,846* Free thereof 96.15 Combs, hair-slides and the like; hairpins, 5.5-7% curling pins, curling grips, hair-curlers and 37,968,472 841,269 Free the like and parts thereof 96.16 Scent sprays and similar toilet sprays, 8.5-12% 66,840,047 2,603,422 and mounts and heads therefor; powder- Free
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Preferential Total imports EU imports HS Tariff Description tariff to Canada to Canada treatment (2016) (2016) puffs and pads for the application of cosmetics or toilet preparations 96.17 Vacuum flasks and other vacuum 7.5% vessels, complete with cases; parts 66,655,821 183,793 Free thereof other than glass inners 96.18 Tailors' dummies and other lay figures; 7.5-9% automata and other animated displays 20,962,586 2,969,700 Free used for shop window dressing 96.19 Sanitary towels (pads) and tampons, 7-18% napkins and napkin liners for babies and 730,480,597* 15,325,739* Free similar articles, of any material * For detailed information regarding the imports of the goods at issue, please refer to Appendix 1. Value in Canadian dollars Source: Industry Canada (Statistics Canada), Trade Data Online, available online at www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home
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APPENDIX 9
Table 44 List of Canadian government entities covered under the CETA
Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Atlantic Canada Federal All Federal Crown corporations Opportunities Agency
Exceptions: Canada Border Services Agency Procurement in respect of the intervention of activities of the
Canada Deposit Insurance Canada Emission Corporation or its subsidiaries, or Reduction Incentives procurements by any subsidiary Agency created in respect of such
intervention activities
Canada Employment Procurement by the Canada Lands Insurance Commission Company Limited or its subsidiaries for the development of real property
for commercial sale or resale
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Canada Industrial Relations Alberta All: Legislative Assembly Alberta All: Board Provincial Crown corporations
1. Departments, ministries, agencies, boards, Legislative Assembly Canada Revenue Agency councils, committees, commissions and similar Office Provincial Government-owned agencies commercial enterprises Canada School of Public Office of the Auditor Service 2. Regional, local, district or other forms of General Other entities owned by the municipal government Government of Alberta through Canadian Centre for ownership interest Office of the Chief Occupational Health and 3. School boards and publicly-funded academic, Electoral Officer Safety health and social service entities Corporations or entities owned or
controlled by a regional, local, Office of the Ethics Canadian Environmental district or other form of municipal Commissioner Assessment Agency government covered under Annex 19-2
Office of the Canadian Food Inspection Information and Agency Privacy Commissioner
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Canadian Forces Office of the Grievance Board Ombudsman
Canadian Grain Commission
Canadian Human Rights Commission
Canadian Human Rights Tribunal
Canadian Institutes of British All: Legislative Assembly British Columbia All: Health Research Columbia and its independent
offices 1. Ministries, agencies, boards, councils, Provincial Crown corporations, Canadian committees, commissions and similar agencies of
Intergovernmental government Conference Secretariat Provincial Government-owned
commercial enterprises
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Canadian International 2. Regional, local, district or other forms of Other entities owned by the Trade Tribunal municipal government Government of British Columbia through ownership interest
Canadian Northern 3. School boards and publicly-funded academic, Economic Development health and social service entities Corporations or entities owned or Agency controlled by one or more municipal governments
Canadian Nuclear Safety Manitoba All: Manitoba All: Commission
1. Departments, boards, commissions, Provincial Crown corporations, Canadian Polar committees and similar agencies of government
Commission
Except:
2. Municipalities, municipal organisations
Canadian Radio-television and Telecommunications Manitoba Public Insurance Commission 3. School boards and publicly-funded academic, Corporation health and social service entities Venture Manitoba Tours Limited
Canadian Space Agency New The following departments, secretariats and New Brunswick The following Provincial Crown Brunswick agencies: corporations:
Aboriginal Affairs Secretariat Kinds Landing Corporation
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Canadian Transportation Agriculture, Aquaculture and Fisheries New Brunswick Credit Union Accident Investigation and Deposit Insurance Corporation Ambulance New Brunswick Inc. Safety Board New Brunswick Highway Aquarium and Marine Center of New Brunswick Corporation Office of the Attorney General Canadian Transportation New Brunswick Housing Agency Child and Youth Advocate Corporation
Education and Early Childhood Development New Brunswick Liquor Corporation
Copyright Board Efficiency New Brunswick New Brunswick Municipal Finance Corporation Elections New Brunswick New Brunswick Research and Correctional Service of Energy and Mines Productivity Council Canada Environment and Local Government
Executive Council Office Opportunities New Brunswick Courts Administration Facilicorp NB Ltd. Service Financial and Consumer Services Farm Products Commission Commission
Finance Regional Development Corporation Department of Agriculture Forest Protection Limited and Agri-Food Service New Brunswick Health
Horizon Health Network (Regional Health Authority)
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Department of Canadian Justice Heritage Labour and Employment Board
Natural Resources Department of Citizenship New Brunswick Arts Board and Immigration New Brunswick Emergency Measures
Organization Department of Employment New Brunswick Energy & Utilities Board and Social Development New Brunswick Forest Products Commission
New Brunswick Health Council Department of Finance New Brunswick Human Rights Commission
New Brunswick Insurance Board Department of Fisheries and Oceans New Brunswick Internal Services Agency
New Brunswick Lotteries Commission
Department of Foreign New Brunswick Museum Affairs, Trade and New Brunswick Police Commission Development New Brunswick Public Libraries
Office of Human Resources Department of Health Office of the Auditor General
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Office of the Commissioner of Official Languages
Department of Indian Affairs Office of the Comptroller and Northern Development Office of the Consumer Advocate for Insurance
Office of the Leader of the Opposition Department of Industry Office of the Lieutenant-Governor
Office of the Premier Department of Justice Office of the Public Trustee
Ombudsman Department of National Population Growth Secretariat Defence Post-Secondary Education, Training and Labour
Premier's Council on the Status of Disabled Department of Natural Persons Resources Public Safety Vitalité (Regional Health Authority)
Senior and Healthy Aging Secretariat Department of Public Safety and Emergency Social Development Preparedness Government Services
Tourism, Heritage and Culture
Transportation
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Department of Public Works Village Historique Acadien and Government Services Workplace Health, Safety and Compensation Commission
Department of the All District Education Councils Environment The following universities: Department of Transport Mount Allison University St. Thomas' University Université de Moncton Department of Veterans The University of New Brunswick Affairs The following community colleges:
Collège communautaire du Nouveau-Brunswick Department of Western (CCNB) Economic Diversification New Brunswick Community College (NBCC)
The following Regional Solid Waste Director of Soldier Commissions: Settlement Commission de gestion déchets de Kent
Commission de gestion des déchets solides de Director, The Veterans' la Péninsule acadienne Land Act Commission des Déchets Solides / Nepisiguit- Chaleur Solid Waste Commission
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Economic Development Fredericton Region Solid Waste Commission Agency of Canada for the Fundy Region Solid Waste Commission Regions of Quebec Kings County Region Solid Waste Commission
La Commission de gestion enviro ressources du Federal Economic Nord-Ouest Development Agency for Southern Ontario Northumberland Solid Waste Commission
Restigouche Solid Waste Corporation
Financial Consumer Southwest Solid Waste Commission Agency of Canada Valley Solid Waste Commission
Westmorland-Albert Solid Waste Corporation
Immigration and Refugee The following Wastewater Commissions: Board Fredericton Area Pollution Control Commission
Greater Moncton Sewerage Commission Indian Residential Schools The following Municipalities and Municipal Truth and Reconciliation Organisations (excluding municipal energy Commission entities):
City of Bathurst
City of Campbellton
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Library and Archives of City of Dieppe Canada City of Edmundston Military Police Complaints City of Fredericton Commission City of Miramichi
City of Moncton National Battlefields Commission City of Saint John
National Energy Board Newfound- All: Legislative Assembly Newfound-land and All: land and Labrador 1. Departments, boards, commissions Provincial Crown Corporations Labrador National Farm Products 2. Municipalities, municipal organisations Except: Council 3. School boards and publicly-funded academic, Nalcor Energy and its existing and health and social service entities future subsidiaries and affiliates
National Film Board (except Newfoundland and Labrador Hydro) Parole Board of Canada Research & Development
Corporation of Newfoundland and National Research Council Labrador and all subsidiaries of Canada thereof
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions
Northwest All: Legislative Assembly Northwest All: Natural Sciences and Territories Territories 1. Ministries, agencies territorial Crown corporations Engineering Research Council 2. Municipalities
3. School boards and publicly-funded academic, health and social service entities Northern Pipeline Agency
Nova All public-sector entities as defined in the Public any listed Nova Scotia Any: Scotia Procurement Act, except those listed in following intergovernmental or Office of Infrastructure of Entity designated as a government column privatised Canada business enterprise pursuant to the governmental unit if Finance Act, S.N.S. 2010, c. 2 and the Province does not the Public Procurement Act, except own or control a Office of the Auditor any listed intergovernmental or majority of it; General privatised governmental unit under the Provincial Finance Act if the
Province does not own or control a any entity listed or Office of the Chief Electoral majority of it. described in Section A Officer of Annex 19-3, whether as an Office of the Commissioner inclusion or exclusion; for Federal Judicial Affairs
Emergency Health Services (a division of
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Office of the Commissioner the Department of of Lobbying Health) in respect of ground ambulance-
related procurement, Office of the Commissioner for Emergency Health of Official Languages Care purposes;
Office of the Sydney Tar Ponds Communications Security Agency; Establishment
Commissioner Nova Scotia Lands
Inc.; and Office of the Co-ordinator,
Status of Women Harbourside
Commercial Park. Office of the Correctional
Investigator of Canada
Nunavut All: Legislative Assembly Nunavut All:
Office of the Director of 1. Ministries, agencies Territorial Crown corporations Public Prosecutions 2. Municipalities, municipal organisations
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions 3. School boards and publicly-funded academic, health and social service entities Office of the Governor General's Secretary Ontario All: Legislative Assembly Ontario All:
1. Provincial ministries and classified agencies, Provincial and municipal Office of the Public Sector excluding those in the following column government-owned entities of a Provincial energy Integrity Commissioner commercial or industrial nature 2. School boards and publicly-funded academic, agencies health and social service entities Except:
Office of the Superintendent 3. Municipalities, excluding those in the following Energy entities other than Hydro Provincial Agencies of of Financial Institutions column One and Ontario Power Generation a commercial or industrial nature, Procurement for the production, transmission and distribution of Office of the Information renewable energy, other than Commissioner of Canada Ontario Infrastructure hydro-electricity. and Lands Note: Corporation Office of the Privacy Ontario Power Generation reserves Commissioner of Canada the right to accord a preference to Municipal energy tenders that provide benefits to the entities Parks Canada Agency province, such as favouring local sub-contracting, in the context of
procurements relating to the
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Patented Medicine Prices construction or maintenance of Review Board nuclear facilities or related services.
Prince All: Prince Edward All: Privy Council Office Edward Island 1. Departments, agencies Provincial Crown corporations Island
2. Municipalities Except: Public Health Agency of 3. School boards and publicly-funded academic, Innovation PEI Canada health and social service entities
Quebec All: Quebec Government enterprises and legal Public Service Commission persons or other entities that are 1. Departments, governmental agencies owned or controlled by one or 2. Para-public organisations several of these enterprises which Public Service Labour are not in competition with the Relations and Employment private sector Board
Saskatch- All: Saskatch-ewan All: ewan Registrar of the Supreme 1. Ministries, agencies, Treasury Board Crown Provincial Crown corporations Court of Canada corporations, boards, commissions Corporations owned or controlled by 2. Municipalities one or more municipal governments
Registry of the Competition 3. School boards and publicly-funded academic, Saskatchewan Liquor and Gaming Tribunal health and social service entities Authority
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions
Yukon The following Departments: Yukon All: Registry of the Public Department of Community Services Government Corporations Servants Disclosure Protection Tribunal Department of Economic Development Except:
Department of Education Yukon Development Corporation
Registry of the Specific Department of Energy, Mine and Resources Claims Tribunal Department of Environment
Department of Finance
Royal Canadian Mounted Department of Health and Social Services Police Department of Highways and Public Works
Department of Justice Royal Canadian Mounted Department of Tourism and Culture Police External Review Committee Executive Council Office
Public Service Commission
Royal Canadian Mounted Women's Directorate Police Public Complaints French Language Services Directorate Commission The following Agencies:
Yukon Worker's Compensation Health & Safety Board
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Federal entities Sub-provincial entities Other Entities
Province Entities covered Entities not covered Jurisdiction Entities covered and exceptions Security Intelligence Review Committee
Shared Services Canada
Social Sciences and Humanities Research Council
Statistics Canada
Transportation Appeal Tribunal of Canada
Treasury Board of Canada Secretariat
Veterans Review and Appeal Board
Source: Chapter 19 of the CETA and its accompanying Annexes
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APPENDIX 10
Table 45 Notable areas of improved market access for EU SMEs under the CETA
Sector/industry Benefits Cheese Despite prohibitive tariff rate quotas (TRQ), cheese exports from the EU into Canada were healthy prior to completion of the CETA as Canadian consumers have historically exhibited high demand for European brands. The CETA notably improves market access by raising allowances of cheese imports from the EU within the TRQ (16,000 metric tonnes for cheese for direct consumption and 1700 metric tonnes for ‘industrial cheese’ from 2022 onwards) while also lowering the applied tariffs therein.
Specifically, the CETA allows for duty free entry of EU cheeses within separate TRQs for (i) cheese for direct consumption and (ii) ‘industrial cheese’ for processed food producers. The CETA also requires a further reallocation of 800 metric tonnes of cheeses from the EU to Canada’s existing WTO TRQ for cheese. Given the nature of cheese production within the EU and the types of products likely to see increases in exports, it is expected that this improved market access will overwhelmingly accrue to small- and medium-sized producers.
Benefits can also be expected to arise from the CETA’s expanded protection of Geographical Indications, which have been afforded to a number of European brands.
Processed meat The CETA significantly lowers tariffs on a number of products relevant to European producers of processed meat. Several types of sausages and similar products see their rates drop from 12.5 percent to 0. Homogenised preparations of fowls similarly decrease from 12.5 percent to 0. Processed pork products, including hams and cuts thereof in cans or glass jars and shoulders and cuts thereof in cans or glass jars see tariffs decline from 9.5 percent to 0. Prepared meals of bovine have rates decrease from 11 percent to 0.
Additional opportunities are likely to be presented by improved protection of Geographical Indications through the CETA, which has afforded such protection to a number of European meat products.
Preparations of For products falling within Chapter 19 of the Harmonised System, tariffs for EU cereals, flour, imports into Canada will be notably reduced under the CETA for a number of starch or milk or processed food and agricultural products. These reductions will present pastry cooks’ significant opportunities for small- and medium-sized producers across the products European Union.
Alcoholic While existing tariffs were already at zero for most wine and spirits entering from beverages the EU, the CETA is likely to improve market access for EU producers through its ability to ameliorate non-tariff barriers present in Canada that restricted market access. European small and medium-sized producers of wines, in particular, stand to benefit from this improved access through increased access to distribution channels, benefitting overall exports. Clothing, apparel Despite high tariffs of 17-18 percent on imports from the EU prior to the CETA, and footwear European imports were able to account for over 5 percent of Canada’s CA $12.5 billion import market for clothing and apparel. Reductions in tariffs from 12 to 18 percent to 0 for products listed in Chapters 61 and 62 of the Harmonised System should create a number of opportunities for small- and medium-sized manufacturers of clothing and apparel products within the EU that meet the - 171 -
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expressed rules of origin. Similar opportunities are afforded to EU manufacturers of footwear who will see tariffs decline from 5-20 percent to 0 as well as to EU manufacturers of luggage and handbags who will see tariffs decline from 7-10 percent to 0.
Automotive parts The immediate elimination of customs duties on imports of European automotive and accessories parts, components and accessories under HS heading 87.08 for passenger motor vehicles of heading 87.03 may provide market access opportunities for SMEs that specialise in producing after-market goods for the automotive maintenance, repair and customisation industries. In particular, producers of such products as bumpers, safety seat belts, brake systems, gear boxes, axles, transmission systems, wheels, suspension systems, radiators, silencers (mufflers) and exhaust systems, clutches, steering wheels and columns, safety airbag systems, power train parts, and the parts and components of the foregoing items stand to benefit from improved market access opportunities.
Architectural and Small and medium sized enterprises providing architectural and engineering engineering services as well as environmental services will likely benefit from significantly services improved access to Canada’s government procurement market. Notably Environmental improved labour mobility for such professionals will also simplify the ability of services European providers specialising in these services to access the wider Canadian market for such services and seek out new business opportunities.
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