Spilling More Milk: Canada’s Dairy Quota Allocation Practices Under Siege as the United States requests consultations under the CUSMA for its second challenge against Canada’s TRQ allocation measures

On 25 May 2022, the United States invoked the dispute settlement procedures of the Canada-United States-Mexico Agreement (CUSMA) by requesting consultations concerning Canada’s dairy product tariff-rate quota (TRQ) allocation practices. Earlier this month, New Zealand challenged similar allocation practices under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (see Daring to Challenge Dairy: New Zealand Challenges Canada’s Implementation of Dairy Quotas under the CPTPP).

Rather than the high Canadian tariffs otherwise applicable to dairy imports, the TRQs provide duty-free access for specified annual quantities of certain dairy products. Canada’s TRQs are set out in Appendix 2: Tariff Schedule of Canada (Tariff Rate Quotas) and the TRQ administration provisions are set out in Article 3.A.2 of the CUSMA.

This is the second Canada-US dispute over dairy TRQ allocation practices. A CUSMA dispute settlement panel found last December that “Canada’s practice of reserving TRQ pools exclusively for the use of processors is inconsistent with Canada’s commitment in Article 3.A.2.11(b) of the Treaty not to limit access to an allocation to processors.” Although Canada took measures to implement the panel’s ruling, the United States alleges that the revised TRQ allocation measures remain inconsistent with Canada’s CUSMA obligations. Specifically, it alleges that Canada denies access to TRQ allocations to all types of importers except for processors, further processors, and distributors. This means that other types of importers, including retailers and food service operators, are not eligible to apply for a TRQ allocation. The United States is also challenging Canada’s “12-month activity” requirement, which specifies that TRQ allocation recipients must remain active during all 12 months of the quota year, and it is challenging Canada’s failure to fully allocate the 2022 dairy TRQs.

The first CUMSA panel issued its report approximately 1 year after the United States requested consultations. If the same timeframe is followed in this dispute, a decision can be expected in May 2023.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes. If you have any questions about the foregoing subject, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Canada Announces Plans to Ratify the Trade Continuity Agreement with the United Kingdom

On March 19, 2021, Canada’s Minister of International Trade announced that Canada will ratify its Trade Continuity Agreement (TCA) with the United Kingdom. The announcement came after the Canadian Minister held a call with the United Kingdom’s Secretary of State for International Trade, Elizabeth Truss. It is anticipated that Canada and the UK will implement the agreement by April 1, 2021.

On December 9, 2020, Minister Mary Ng introduced Bill C-18: An Act to implement the Agreement on Trade Continuity between Canada and the United Kingdom of Great Britain and Northern Ireland. On March 17, 2021, the Bill received Royal Assent and became law. As Canada and the UK negotiate a more expansive free trade agreement, the TCA is intended to be operate as an interim measure, maintaining preferential market access for Canadian businesses in the UK market and vice versa, including the elimination of tariffs on 98% of trade in goods (see Preparing For Brexit – Canada And the United Kingdom Clinch a Transitional Trade Continuity Deal).

Until the TCA is ratified and implemented, the trade relationship between Canada and the UK is governed by an MOU that provides reciprocal tariff preferences on goods shipped between both countries (see Maintaining the Status Quo – The Canada-United Kingdom Trade Continuity Remission Order, 2021).

On March 12, 2021, the Government of Canada launched public consultations in order to chalk out priorities from the Canadian perspective to shape the future trade negotiations with the UK. The public consultations will remain open until April 27, 2021 (see Canada Launches Public Consultation on Trade Negotiations with the United Kingdom).

Tereposky & DeRose regularly provides advice on the interpretation, application, and implementation of international trade agreements. Should you have any questions regarding the CUKTCA, CETA, CPTPP 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 Launches Public Consultation on Trade Negotiations with the United Kingdom

On March 12, 2021, the Government of Canada announced that it is launching public consultations as it ramps up its efforts on new trade negotiations with the United Kingdom. Further to the United Kingdom’s withdrawal from the European Union, Canada and the United Kingdom committed to continue their trade relationship, as established under the Canada-EU Comprehensive Economic and Trade Agreement (CETA), pursuant to the Canada-United Kingdom Trade Continuity Agreement (TCA) (see “Preparing for Brexit – Canada and the United Kingdom Clinch a Transitional Trade Continuity Deal”). While steps are taken to implement the TCA, interim measures agreed under a Memorandum of Understanding (MOU) have ensured that goods traded between Canada and the UK continue to enjoy uninterrupted preferential tariff treatment. The interim measure implemented in Canada is the United Kingdom Trade Continuity Remission Order, 2021 (see “Maintaining the Status Quo – The Canada-United Kingdom Trade Continuity Remission Order, 2021”).

Key provisions in Article IV of the TCA (i) require Canada and the UK to commence negotiations on a more permanent regional trade agreement (RTA) within one year of the TCA’s entry into force, and (ii) establish the objective of concluding those negotiations within three years of the TCA’s entry into force.

In addition to concluding a bilateral trade agreement with Canada, the United Kingdom has taken steps to begin the process of negotiating its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a plurilateral RTA to which Canada is already a party. The United Kingdom submitted a notification of intent letter to begin the CPTPP accession process on February 1, 2021..

The purpose of the Government of Canada’s consultations is to provide the Canadian public and other interested stakeholders (e.g., industry associations, enterprises, and other organizations) with an opportunity to submit information, views, requests, and questions that will help to shape Canada’s priorities in the trade negotiations with the United Kingdom.

More information on the consultation process and how to make submissions is provided on the dedicated Global Affairs Canada website. Canadians anywhere in the world can participate in the public consultations process, which will remain open until April 27, 2021.

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

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Umair Azam
613.237.1208
uazam@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Canada Launches Public Consultations on a Potential Comprehensive Economic Partnership Agreement with Indonesia

On January 11, 2021, the Honourable Mary Ng, Canadian Minister of Small Business, Export Promotion and International Trade, announced the launch of public consultations on a possible comprehensive economic partnership agreement (CEPA) with Indonesia.

The press release announcing these consultations explains that “[e]xpanding Canada’s trade and investment opportunities in Southeast Asia’s fastest-growing economy will diversify Canada’s trade portfolio and support our economic recovery from the COVID-19 pandemic.”

Indonesia is one of the member states of the Association of Southeast Asian Nations (ASEAN). Previously, Canada and the ASEAN member states have engaged in exploratory discussions for a possible Canada-ASEAN free trade agreement. The conclusion of these discussions was announced on September 10, 2019, when the Government of Canada expressed its “aim to expand trade and investment with large, fast-growing markets, including ASEAN”, explaining that, taken together, the “ASEAN member states represent the fifth largest economy in the world, and Canada’s sixth largest trading partner”.

Indonesia is Southeast Asia’s largest economy, a G20 member, Canada’s largest export market in Southeast Asia, and the second-largest destination for Canadian direct investment in Southeast Asia. According to the Government of Canada, the value of bilateral merchandise trade between Canada and Indonesia was $3.7 billion in 2019, and the total value of Canadian direct investment in Indonesia totaled $3.84 billion at the end of that year. Notable Canadian exports to Indonesia include agricultural products, including cereals, fertilizers, and wood pulp.

In the notice of the consultations published in the Canada Gazette, Part I on January 9, 2021 (Vol. 155, No. 2), Global Affairs Canada invites “all interested parties” to submit their views by February 23, 2021. The consultations are broad in scope, and “examples of areas where the Government would appreciate receiving views from Canadians” include the following:

  • Goods of interest in terms of export opportunities, import needs (e.g., input materials for Canadian manufacturing), and import sensitivities;
  • Rules of origin for preferential tariff treatment;
  • Procedures vis-à-vis origin (e.g., determining, certifying, and verifying origin);
  • Non-tariff barriers (e.g., technical barriers to trade and sanitary/phytosanitary measures);
  • Cross-border and customs issues;
  • Investment barriers;
  • Trade facilitation issues;
  • Services of interest in terms trade with Indonesia;
  • Temporary entry of business people from Canada into Indonesia and vice versa;
  • Electronic commerce;
  • Government procurement markets in Indonesia, including at the central, sub-central and local levels, for Canadian suppliers;
  • Issues affecting business practices when interacting with state-owned enterprises;
  • Indonesia’s application and enforcement of intellectual property (IP) protection rules;
  • Matters relating to competition policies;
  • Trade remedies with respect to ASEAN member states and Canada;
  • Any unfair business practices that may need to be addressed;
  • Issues relevant to the development of small and medium-sized enterprises; and
  • Matters relevant to Canada’s progressive trade priorities (including, for example, the rights and interests of Indigenous peoples, transparency, rule of law, gender equality, human rights, and environmental protection). In this regard, Canada has also announced its intention to conduct impact assessments with respect to the potential Canada-Indonesia CEPA, including an “initial environmental assessment” and a “gender-based analysis plus”.

Tereposky & DeRose regularly provides advice on international trade agreements. Should you have any questions regarding the consultations outlined above 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

Leading the world – the African Continental Free Trade Area (AfCFTA) sets a new high-water mark for dispute settlement under regional trade agreements

On 1 January 2021, trading began under the African Continental Free Trade Area (AfCFTA), a regional trade agreement aimed at all 55 member states of the African Union. The agreement is publicized as encompassing the world’s largest free trade area since the formation of the World Trade Organization (WTO). Once fully implemented, the AfCFTA will establish a new high-water mark for dispute settlement under regional trade agreements.

To date, most trade disputes have been resolved using the WTO dispute settlement mechanism, even when the matters concerned could have been resolved under a regional trade agreement. This is largely because the WTO was viewed as offering a better mechanism to address complex factual and legal issues. Disputes that reach the formal dispute settlement stage inevitably involve political sensitivities, particularly for the country whose measures are being challenged, but also for the challenging country.  Whatever the outcome, both disputing countries must “sell” that outcome to their constituents. To best achieve this, particularly if the outcome is negative, the constituents need to be convinced that the strongest possible case was put forward, that the decision-making body understood and considered that case, and that the decision that was issued is factually accurate and legally well-reasoned. Although it has been the subject of criticism by some WTO Members, the WTO mechanism has generally been successful at meeting these requirements. This is due to its well-developed procedures, the ability to appeal findings of dispute settlement panels, and dispute settlement support by an experienced and professional Secretariat. Until now, the ad hoc trade dispute settlement mechanisms under regional trade agreements have lacked these components.

The AfCFTA changes this by creating a dispute settlement mechanism that closely resembles the WTO mechanism, including panels, a process for appeals, a procedure governing the “suspension of concessions” (e.g., trade retaliation), and a supporting Secretariat.  Although it does not have the 165-country membership of the WTO, the AfCFTA membership of 55 countries should generate enough formal disputes to reasonably utilize the mechanism.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO and regional trade agreement dispute settlement proceedings.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

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

 

Preparing for BREXIT – Canada and the United Kingdom Clinch a Transitional Trade Continuity Deal

On 21 November 2020, the Governments of Canada and the United Kingdom (UK) announced the successful conclusion of talks for an interim post-Brexit trade agreement, the Canada-United Kingdom Trade Continuity Agreement (CUKTCA). The UK is one of Canada’s largest trading partners and the largest export market for Canadian goods in Europe. In 2019, under the Canada-EU Comprehensive Economic and Trade Agreement (CETA), Canada-UK trade totalled about $29 billion.

By agreement, the CETA has continued to apply to Canada-UK trade during the transitional period following the UK’s departure from the EU (see The United Kingdom’s Withdrawal Agreement with the European Union Enters into Force). Beginning 1 January 2021, however, the UK will no longer remain bound by EU treaties with third countries, and this includes the CETA. The newly concluded CUKTCA will therefore serve to ensure continuity of trade between Canada and the UK.

The CUKTCA operates as an interim agreement, setting the stage for further Canada-UK negotiations toward a permanent, comprehensive, and more ambitious free trade agreement that can be better tailored to the bilateral relationship and interests of both countries. In the meantime, the CUKTCA will provide continued access to the benefits of the CETA for Canadian and UK stakeholders. For example, it will maintain preferential access for Canadian businesses to the UK market and vice versa, including the elimination of tariffs on 98% of products traded between Canada and the UK. Further, it will preserve the progress made under the CETA toward mutual recognition of professional qualifications and progressive trade objectives. As the UK Government has explained in a news release published on 21 November, the CUKTCAwill ensure that Canada and the UK can continue to work towards recognising each other’s qualifications in areas including accountancy, architecture and law”, and “paves the way for negotiations to begin in 2021 on a new tailor-made UK-Canada trade deal, with the potential to go further in areas like digital trade, the environment and women’s economic empowerment”.

Minister Ng, the Canadian Minister of Small Business, Export Promotion and International Trade, said that officials were in the process of finalizing the legal text of the agreement, which will then be submitted to the Parliament of Canada for ratification. There will be a relatively short timeframe for Canada’s legislators to ensure that the CUKTCA is implemented before the beginning of 2021.

Tereposky & DeRose regularly provides advice on the interpretation, application, and implementation of international trade agreements. Should you have any questions regarding the CUKTCA, 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

 

Fifteen Countries Conclude the Regional Comprehensive Economic Partnership (RECP)

On Sunday 15 November, fifteen Indo-Pacific countries signed the text of the Regional Comprehensive Economic Partnership (RCEP), which is set to become the world’s single largest regional trade agreement to date.

The parties to the RCEP include the members of the Association of Southeast Asian Nations (ASEAN) — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam — as well as Australia, China, Japan, New Zealand and the Republic of Korea. In addition, a “Ministers’ Declaration on India’s Participation in the RCEP” provides for India’s accession to the agreement in the future, reflecting India’s participation in the RCEP negotiations while expressly “recognizing that India is not in a position to sign the RCEP Agreement in 2020”.

As it stands, the RCEP is estimated to cover a combined GDP of US $26.3 trillion and a total population of 2.3 billion people (see Government of Australia, “About The Regional Comprehensive Economic Partnership (RCEP)”). This coverage encompasses trade in goods and services, investment, government procurement, electronic commerce, intellectual property, and worker mobility. There are chapters addressing SPS measures, technical regulations, trade remedies, and competition, as well as chapters concerning small and medium-sized enterprises (SMEs), customs procedures and trade facilitation, and economic and technical cooperation. However, the RCEP is not as comprehensive in its coverage as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which also addresses a number of other subject matters.

There are five countries who are party to both the RECP and the CPTPP: Australia, Japan, New Zealand, Singapore, and Vietnam (Brunei and Malaysia are also signatories to both agreements, but have not yet ratified or implemented the CPTPP). It will be interesting to see how suppliers in these countries leverage the overlap between these agreements to enhance their market access advantages in each regional trade area.

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

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

 

It’s Official – No U.S. Tariffs on Imports of Canadian Aluminum

On October 27, 2020, President Trump signed a Proclamation that formally exempted Canadian non-alloyed unwrought aluminum exports from the punitive tariffs under Section 232 of the Trade Expansion Act. This exemption formalizes USTR’s September 15th announcement of the return of tariff-free treatment of Canadian aluminum retroactively in response to Canada’s threatened countermeasures (see U.S. Blinks First – No Tariffs on Imports of Canadian Aluminum).

The Proclamation reserves the authority to reimpose the tariff on imports of non-alloyed unwrought aluminum from Canada in the event that the volume of imports from Canada in the remaining months of 2020 exceeds the quantities that the United States expects will be exported from Canada to the United States during this period. USTR has stated that it is expected that Canada would export just 70,000 to 83,000 tonnes of raw aluminum a month through December – about half the monthly rate from January to July.  The United States and Canada expect to hold further consultations in December 2020 to discuss the state of aluminum trade between the two countries in light of trade patterns in the last 4 months of 2020 and expected market conditions in 2021.

Tereposky & DeRose regularly provides advice on Canadian trade matters. Should you have any questions regarding this matter, we are at your disposal.

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Umair Azam
613.237.1208
uazam@tradeisds.com

It’s Official – No U.S. Tariffs on Imports of Canadian Aluminum (28 October 2020)

 

 

The U.S. Reimposes 10% Tariffs on Imports of Non-Alloyed Unwrought Aluminum from Canada

On August 6th, President Trump signed a Proclamation imposing aluminum tariffs on imports of non-alloyed unwrought aluminum from Canada. The Proclamation bases the imposition of the tariff on the substantial increase in imports of non-alloyed unwrought aluminum from Canada between June 2019 and May 2020, after President Trumps decision in May 19, 2019 to exclude Canada from the tariff on aluminum imports imposed by Proclamation 9704 of March 8, 2018 (Adjusting Imports of Aluminum Into the United States). The new tariff will take effect as of August 16, 2020.

On August 6, 2020 Canada responded issuing a Statement that the measure was “unwarranted and unacceptable” and that Canada will respond by imposing “dollar-for-dollar countermeasures”. Details on Canada’s countermeasures are to be announced shortly.

The U.S. originally imposed tariffs on Canadian aluminum and steel in 2018 through Proclamation 9704 of March 8, 2018. Negotiations with Canada resulted in Proclamation 9893 of May 19, 2019 excluding Canada from the tariffs imposed by Proclamation 9704 but subject to conditions of monitoring and effectiveness.

The imposition of tariffs on imports of non-alloyed unwrought aluminum from Canada is based on U.S. findings that imports of non-alloyed unwrought aluminum from Canada:

– accounted for 59 percent of total aluminum imports from Canada during June 2019 through May 2020;

– non-alloyed unwrought aluminum increased 87 percent compared to the prior twelve-month period and exceeded the volume of any full calendar year in the previous decade;

– non-alloyed unwrought aluminum reached historic levels in June 2020;

– Canadian imports non-alloyed unwrought aluminum account for the 27 percent increase in total aluminum imports from Canada during June 2019 through May 2020.

For the history of this issue, please see: Agreement to Eliminate The U.S. Section 232 Tariffs on Canadian Steel and Aluminum and Canada’s Retaliatory Countermeasures on U.S. Steel, Aluminum And Other GoodsCanada Announces Final Countermeasures Against The United States; The Morning After: U.S. Allies Taking Retaliatory Measures Against Trump’s Tariffs; Nothing Good Happens After Midnight: Canada, Mexico and the EU Hit With Tariffs on Steel and Aluminum.

Tereposky & DeRose regularly provides advice on Canadian trade matters. Should you have any questions regarding this matter, we are at your disposal.

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

The U.S. Reimposes 10% Tariffs on Imports of Non-Alloyed Unwrought Aluminum from Canada (10 August 2020)