Maintaining the Status Quo – The Canada-United Kingdom Trade Continuity Remission Order, 2021

On December 22, 2020, the Government of Canada announced measures taken to ensure stability for Canadians relying upon goods imported from the United Kingdom during the period of time between January 1, 2021 and the date when the Canada-United Kingdom Trade Continuity Agreement (TCA) eventually enters into force (see “Preparing for Brexit – Canada and the United Kingdom Clinch a Transitional Trade Continuity Deal”).

The transitional period following the withdrawal of the UK from the European Union will come to an end on December 31, 2020. This means, among other things, that from January 1, 2021, the European Union’s regional free trade agreements — such as the Canada-EU Comprehensive Economic and Trade Agreement (CETA) — will no longer cover the United Kingdom. The Canada-UK TCA, which was concluded as of November 21, 2020, is intended to generally continue the rights and obligations set forth in the CETA vis-à-vis Canada and the United Kingdom until a more permanent trade agreement between the two countries can be negotiated and implemented.

However, there was simply insufficient time between the conclusion of the TCA in late November and the Brexit deadline in early January for the Parliament of Canada to pass the legislation required to implement the new agreement into Canadian law (see Bill C-18, An Act to implement the Agreement on Trade Continuity between Canada and the United Kingdom of Great Britain and Northern Ireland). Legislation to implement international trade agreements often requires months to move through three readings in the House of Commons (the “Lower Chamber” of Parliament), followed by three readings in the Senate (the “Upper Chamber”). This process includes referral of the draft legislation to specialized committees and often involves consultations with stakeholders. Therefore, an interim measure was needed in the meantime, to ensure that UK goods entering Canada would not become subject to customs duties pursuant to the MFN tariff under the Schedule to Canada’s Customs Tariff, potentially disrupting supply chains established under the CETA.

The solution is set out in the Canada-United Kingdom Trade Continuity Remission Order, 2021 (see CBSA Customs Notice 20-39). When it enters into force on January 1, 2021, this Remission Order will operate to provide the tariff benefits of the TCA for UK goods entering Canada. This measure implements the Memorandum of Understanding (MOU) concluded between Canada and the UK (published December 23, 2020), which lays out each country’s commitment to continue to give effect to the preferential tariff treatment for trade in goods “for the period between the date on which CETA ceases to apply to the United Kingdom and the entry into force or provisional application of the TCA”.

In order to benefit from the remission of duties, importers of qualifying goods must cite the Remission Order on their B3 Canada Customs Coding Forms in the prescribed manner. When this is done, the difference between the MFN Tariff rate of customs duty and the rate of customs duty that would apply under the CETA is remitted. For Canadian importers, this replicates the tariff benefits that would have applied to eligible imports from the UK. In return, the UK has agreed to provide reciprocal tariff benefits for eligible Canadian exports to the UK. It should be noted that importers are responsible for ensuring that they maintain the records required to support a claim for remission under the Order.

Tereposky & DeRose regularly provides advice on the interpretation, application, and implementation of international trade agreements. Should you have any questions regarding the Canada-UK TCA, the CETA, or any other trade matter, we are at your disposal.

Umair Azam
613.237.1208
uazam@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

 

Canada Not Ready to Give Up Its Seat? CBSA Launches Investigations concerning Imports of Certain Upholstered Domestic Seating Products

On December 21, 2020, the Canada Border Services Agency (CBSA) initiated investigations concerning the alleged injurious dumping and subsidizing of certain upholstered domestic seating imported from China and Vietnam. The investigation has been commenced under the Special Import Measures Act (SIMA), which helps to protect Canadian industries from injury caused by the dumping and subsidizing of imported goods. The investigations were initiated further to a complaint filed by Palliser Furniture Ltd. (Winnipeg, Manitoba).

The subject goods are usually classified under the following tariff classification numbers: 9401.40.00.00; 9401.61.10.10; 9401.61.10.90; 9401.71.10.10; and 9401.71.10.90.

Appendix 1 to the notice of initiation of investigations provides the product definition and additional information on the subject goods. The product definition provides that the subject goods are any upholstered seating used for domestic purposes that originate in or are exported from China and Vietnam. This definition extends to include both stationary and “motion” seating. The phrase “for domestic purposes” is defined under Chapter 94 of the Schedule to the Canadian Customs Tariff and has been interpreted and applied in Tribunal jurisprudence (see e.g., Stylus Sofas, Appeal No. AP-2013-021).  It covers seating products that are intended and designed for use in residential settings. The product definition includes an explicit exclusion for seating products that are “clearly designed and marketed for non‑domestic (i.e. commercial) use, such as in offices, business reception areas, restaurants, studios and other non‑residential applications.”

Additional guidance addresses the different descriptive marketing terms that may be used by manufacturers and retailers to describe the subject goods, noting that these “descriptive words generally do not indicate any material differences in the nature of the goods or detract from the goods being subject goods.”

Further information regarding the investigations will be available in a Statement of Reasons that will be posted within 15 days on the CBSA’s website.

Tereposky & DeRose regularly provides advice on Canadian trade remedy and trade defence matters, including anti-dumping and countervailing investigations. Should you have any questions regarding this matter, we are at your disposal.

Umair Azam
613.237.1208
uazam@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Who’s Milking the New NAFTA? USTR Challenges Canada’s Dairy Quotas Under the CUSMA/USMCA

In a statement issued on 9 December 2020, the U.S. Trade Representative (USTR) announced that the United States has made a formal request for consultations to address Canada’s import limits on a variety of dairy products. This request for dispute settlement consultations is the first enforcement action taken under the Canada-United States-Mexico Agreement (CUSMA), which entered into force on July 1, 2020. (See “Farewell to the NAFTA and Welcome to the USMCA/CUSMA/T-MEC”).

In its statement, the USTR formally alleges that Canada is unfairly undermining the American dairy farmers’ ability to sell their products to Canadian consumers, and presents a four-pronged argument against Canada’s tariff-rate quota (TRQ) allocation measures. This accusation echoes the concerns of the U.S. Dairy Export Council, which complained in June 2020 about Canada’s TRQs. The USTR’s “request for consultations” could be the first step in what might become the first full-blown trade dispute under the CUSMA between Canada and the United States.

Under Chapter 31 of the CUSMA, the establishment of a dispute settlement panel may be requested if the matter is not resolved by consultations. The dispute resolution mechanism under Chapter 31 may be invoked when a party believes that another party has “nullified or impaired” a benefit that the first party “could reasonably have expected to accrue to it” under the CUSMA.

According to the USTR’s statement, the CUSMA allows Canada to maintain the right to apply certain TRQs on dairy products, including for the following kinds of goods: milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and “other” dairy. The USTR claims that Canada’s dairy TRQ allocation measures appear to be inconsistent with the following provisions of the CUSMA:

  1. Article 3.A.2.11(b) because Canada is setting aside and reserving a portion of the quota to processors.
  2. Articles 3.A.2.4(b) and 3.A.2.11(e) because Canada is not providing “fair” and “equitable” procedures and methods for administering its TRQs.
  3. Article 3.A.2.11(c) because, as a consequence of reserving large shares of the quota for processors and so-called “further processors”, Canada fails to ensure that, “to the maximum extent possible”, the allocation is made “in the quantities that the TRQ applicant requests”.
  4. Article 3.A.2.6(a) because the allocation measures “introduce a new or additional condition, limit, or eligibility requirement on the utilization of a TRQ” that goes “beyond those set out in [Canada’s] Schedule to Annex 2- B.”

The USTR’s challenge could set the stage for bilateral discussions and the development of measures aimed at re-shaping the trade landscape with respect to supply-managed diary products.

Tereposky & DeRose regularly provides advice on the interpretation, application, and implementation of international trade agreements. Should you have any questions regarding the CUSMA, or any other trade matter, we are at your disposal.

Umair Azam
613.237.1208
uazam@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com