LexSage

Canada-Ukraine Free Trade
Agreement Implementation Date Is
August 1, 2017

June 29, 2017
Authored by Cyndee Todgham Cherniak

Canada has sent a diplomatic note to the Government of Ukraine (the Ukrainian Embassy in Canada) stating that the implementation date for the Canada-Ukraine FTA is August 1, 2017.  The Canada-Ukraine FTA was singed in Kyiv on July 11, 2016. On March 14, 2017, the Ukrainian Parliament voted to ratify the Canada-Ukraine Free Trade Agreement. Ukraine is ready to ratify the Canada-Ukraine FTA. On June 1, 2017, the Canada- Ukraine Free Trade Agreement Implementation Act (Bill C-31) received Royal Asset in Canada’s Hose of Commons.

The Canada-Ukraine FTA is a trade in goods agreement (that is, it does not cover services and investment). Canada has agreed to reduce most customs duty rates to “free” or 0% immediately upon implementation on goods that meet the rules of origin.  Pursuant to Chapter 2 of the Canada-Ukraine FTA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-B.  In Article 1 of Annex 2-B, Canada agrees to eliminate customs duties on all goods in Chapters 1-97 of the Harmonized System that provides for Most-Favoured-Nation rate of duty, with the exception of any goods Canada has listed in Annex 2-B (which is a short list).  We have prepared a chart that sets out H.S. Chapters and which Chapters become duty-free immediately upon implementation.

Some of the Ukraine-origin goods that Canadian importers may look forward to importing on a duty free basis are:

• Ukrainian beer;
• Ukrainian vodka;
• Ukrainian chocolate;
• Pysanka/pysanky;
• Table cloths;
• Ceramics;
• Clothes;
• Toys;
• Copper; and
• Walking sticks.

Some of the Canadian-origin goods that Canadian exporters may look forward to exporting are:

• grain,
• canola;
• beef,
• pork;
• fish;
• wines/ice wines;
• maple syrup;
• softwood lumber;
• animal feed;
• medications;
• cosmetics and skin care;
• cars;
• mining equipment;
• semi-trailers;
• air compressors;
• tires;
• asphalt;
• plastics; and
• etc.

The rules of origin in the Canada-Ukraine FTA are important in determining whether a good is Ukraine-origin or Canadian origin.  Just because a good is shipped from Ukraine does not mean that it is originating for the purposes of the Canada-Ukraine FTA.  It is necessary to carefully review Chapter 3 of the Canada-Ukraine FTA regarding rules of origin and origin procedures.

As a general rule, goods must be shipped from Ukraine directly to Canada for preferential tariff treatment to be available.  There is an exception to the general rule contained in Article 3.13 of the Canada-Ukraine FTA, which provides:

“(1) A product is not considered originating by reason of having undergone production that satisfies the requirements of Article 3.2 if, subsequent to that production, the product:

(a) undergoes 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, to transport the product to the territory of a Party; or

(b) does not remain under customs control while outside the territories of the Parties.

(2) The storage of a product or shipment or the splitting of shipments may take place if 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 Ukrainian goods that are shipped from Ukraine to a third country (e.g., the US) and immediately enter a customs bonded warehouse upon importation into the third country (e.g., the US) and do not leave the customs bonded warehouse prior to export to Canada, then those goods could receive preferential tariff treatment in Canada under the Canada-Ukraine FTA. The importer must obtain evidence satisfactory to the Canada Border Services Agency that the goods were in a customs bonded warehouse in the third country and were not further processed.

The Canada-Ukraine FTA does not require a certificate of origin per se.  Article 3.15 of the Canada-Ukraine FTA requires that proof of origin be provided on an invoice or other commercial document.  The origin declaration must provided on an invoice or any other commercial document and must describe the originating product in sufficient detail to enable its identification.  Annex 3-B provides suggested/acceptable words to use in the origin declaration:

(Period: from___________ to __________)

The exporter of the products covered by this document declares that, except where otherwise clearly indicated, these products are of Ukraine preferential origin.

_________________________________________________

(Place and date)

_________________________________________________

(Signature of official of exporter)

A certification of origin may cover a 12 month period, such as a calendar year.  It cannot exceed 12 months of coverage.  Therefore, it will be prudent to establish a procedure to obtain a new certification of origin every year.

The Canada-Ukraine FTA does not cover services, financial services, investment or energy. For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.