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.