LexSage

Can Canadian Importers Claim
CETA Preferential Tariff Treatment
If Goods Are Transshipped?

June 21, 2017
Authored by Cyndee Todgham Cherniak

One question we have been asked is whether Canadian importers will be able to claim Canada-EU CETA duty-free tariff treatment if the EU-origin goods are imported into Canada from the United States or some other non-EU country after provisional implementation of the Canada-EU CETA.  It is common for Canadian importers to purchase from distributors in the United States (and other countries).  It is also very common for United States companies to arrange for contract manufacturers (OEMs) in the European Union to manufacture goods that will have the U.S. company logo and to maintain an inventory of those EU-origin goods in the United States.

The answer to the question “Will Canadian importers be able to claim Canada-EU CETA duty-free tariff treatment if the EU-origin goods are imported into Canada from the United States or some other non-EU country after provisional implementation of the Canada-EU CETA?” is maybe.

To which countries may Canadian exporters sell CETA goods?

Canadian importers may benefit from the Canada-EU CETA duty relief commitments made in respect of imports originating in the 28 European Union countries, which are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

What Are the Rules?

As a general rule, EU-origin goods must be shipped directly from an EU Member to receive Canada-EU CETA preferential tariff treatment. There are a number of fields on the B3 Canada Customs Coding Form that communicate information about the place of direct shipment and the country of origin.

An exception to the general rule is contained in Article 14 of the Protocol on rules of origin and origin procedures, which permits certain transshipment.  Article 14 provides that:

"1. A product that has undergone production that satisfies the requirements of Article 2 shall be considered originating only if, subsequent to that production, the product;

(a) does not undergo further production or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the product to the territory of a Party; and

(b) remains under customs control while outside the territories of the Parties.

2. The storage of products and shipments or the splitting of shipments may take place where carried out under the responsibility of the exporter or of a subsequent holder of the products and the products remain under customs control in the country or countries of transit."

What this means is that if EU-origin goods are maintained by a U.S. distributor in a bonded warehouse, they may be able to enter Canada duty-free under the Canada-EU CETA.

What Are the Documentary Requirements?

Canadian importers of EU-origin goods must have an origin declaration.  There isn’t a certificate of origin like in NAFTA.  However, there is a certification requirement.  Annex 2 of the Protocol on rules of origin and origin procedures sets out the language to be used in the certification of origin.

It will be very important to verify that the U.S. or other non-EU warehouse was a customs bonded warehouse and that the EU-origin goods were imported into that warehouse and maintained in that warehouse while outside the EU.  It will be important to obtain a certification from the vendor of the goods.  If this evidence is not available to provide to the Canada Border Services Agency, CETA tariff treatment may be denied.

Provisional Implementation Date

We do not yet know the provisional implementation date – it is expected to be July 1, 2017 – but there are signs provisional implementation may be delayed.  Preferential Canada-EU CETA tariff rates cannot be claimed until provisional implementation.

For more information about the Canada-EU CETA, please contact 416-307-4168 or cyndee@lexsage.com.