Canada-EU Free Trade Agreement Now in Force
On September 21st, the Canada-EU Comprehensive Economic and Trade Agreement (CETA) entered into provisional application, meaning that the majority of its provisions are now in force in Canada. These provisions include, among other benefits:
- the immediate elimination of most customs duties on imported EU-origin goods to which tariff rates previously applied;
- guaranteed market access and non-discriminatory treatment for EU firms when they participate in public procurement opportunities at the federal, provincial/territorial, and municipal levels of government in Canada (for contracts above the applicable value thresholds), and equivalent rights for Canadian firms in the European Union;
- enhanced intellectual property (IP) rights, including new protections for certain geographical indications (GI) identifying goods originating in specific regions (e.g., “Feta cheese” from Greece);
- and liberalized rights of mobility and temporary stay for key business personnel and investors, independent professionals, and contractual service suppliers visiting Canada from the European Union and vice versa.
In practical terms, what does this mean for business owners and other stakeholders?
In some cases, it will mean new opportunities for trade and commerce. For example, a Canadian retail business can now import leather handbags or wallets from Italy on a duty-free basis. Yesterday, customs duties would have applied to these goods at rates of 10 per cent and 8 per cent, respectively. This represents an opportunity not only for Italian producers, but also for Canadian distributors and retailers. Tariff elimination is even more dramatic on men’s and women’s suits and leather footwear (a drop from 17-18 per cent yesterday to duty free today).
Similarly, EU construction firms will have preferential market access to high-value infrastructure projects procured by municipal governments throughout Canada; none of Canada’s other trading partners have guaranteed access to these opportunities. Until the Government of Canada completes its electronic single point of access for notices of all public procurements at every level of government throughout Canada, information on Canadian opportunities can be accessed through the “Doing Business” hub on the official website of the Canadian Free Trade Agreement (CFTA): https://www.cfta-alec.ca/doing-business/. Canadian firms will have equivalent access to government procurement opportunities throughout the European Union, which can be identified on the “tenders electronic daily” (TED) website: http://ted.europa.eu/TED/main/HomePage.do.
The other perspective, however, is that the market access and non-discrimination commitments in the CETA will mean increased competition for Canadian and EU businesses in their local markets, i.e., from the new overseas sources of high-quality or lower-cost goods and services. Thus, in some sectors, the negotiated outcomes of the CETA will mean a shake-up in the existing trade flows and supply chains, as market forces establish the most efficient relationships, structures, and prices. In navigating these changes in the competitive landscape, the businesses that will enjoy the greatest success are those that are most attentive and adaptable to the CETA’s effects.
Market access under the CETA is neither effortless nor without compliance considerations. To take advantage of the new preferential tariff treatment, for example, businesses must 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 and the European Union, respectively. 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, a business may be required to pay, on a retroactive basis, the standard rates of duty applicable to all shipments that it has imported into Canada. Considering that this liability can extend to all imports going back for a period of up to four years, it is essential for companies to ensure that their declarations of origin are accurate and their record-keeping is precise.
Tereposky & DeRose LLP has undertaken a provision-by-provision analysis of the CETA, closely monitored its implementation into Canadian law, and assessed the opportunities and limitations of the market access and other benefits that it provides to Canadian and EU stakeholders.
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