Tereposky & DeRose LLP’s CETA Expertise
As the key experts in the European Union’s CETA market access support project (2016/EuropeAid/DH/SER/137-941), the team at Tereposky & DeRose LLP has completed a thorough clause-by-clause legal analysis of CETA implementation. This includes comprehensive assessments of how the CETA provisions create new and enhanced business opportunities for both Canadian and EU enterprises. As part of this process, we have also assessed ongoing challenges and barriers that Canadian and EU businesses are facing under the CETA and considered strategies to address them. We are therefore uniquely qualified to efficiently advise on any matter or issue relating to the CETA.
Trade in Goods under the CETA
The CETA creates new market access and supply chain opportunities for Canadian and EU businesses in a number of ways. These are briefly summarized below.
Progressive elimination of customs duties
It is well known that the CETA eliminates most of the customs duties that previously applied to cross-border trade in Canadian and EU goods. While about 25 percent of product categories could be traded on a duty-free basis before the CETA entered into force, about 98 percent can now be traded duty-free between Canada and the European Union. Meanwhile, the rate of customs duties is being gradually reduced to zero on most of the remaining product categories.
Tariff Rate Quotas (TRQs)
Although duties will remain in place for certain agricultural products in order to protect the domestic industries that produce them, the CETA provides some market access through annual “tariff rate quotas” (TRQs). TRQs permit limited quantities of certain products to be traded duty-free — e.g., EU cheese products imported into Canada or Canadian beef products imported into the European Union — while prohibitively high rates of customs duties are imposed on any shipments outside the quota. Some TRQs are administered on a first-come, first-served basis, while other TRQs are allocated to importers/exporters through an application process. Although it can sometimes be challenging for businesses to secure TRQ allocations, it should be noted that the Government of Canada sets aside certain proportions of the EU cheese TRQs for (i) new entrants, and (ii) small and medium-sized enterprises (SMEs).
Rules of Origin that provide a competitive advantage over other trading partners
Importantly, preferential tariff treatment under the CETA is not provided to products merely because they are exported from a CETA country. To be eligible for duty-free treatment, exported goods must qualify as “originating” in Canada or an EU country according to the applicable rules of origin. The rules of origin under the CETA are generally more liberal — that is, easier to satisfy — than those under other regional free trade agreements like the NAFTA. This may confer a competitive advantage to EU products in the Canadian market or Canadian products in EU markets because they can compete at lower production costs than like goods imported from other countries. The questions of whether and to what extent a
product obtains a competitive advantage under the CETA must be assessed on a case-by-case basis, as the results will depend on the specific circumstances of the product and the applicable rules of origin.
In addition, the CETA “origin quotas” are innovative provisions that allow limited quantities of certain kinds of products to receive preferential tariff treatment if they satisfy “alternative” rules of origin that are much more liberal and relaxed — and therefore easier to satisfy — than the product-specific rules of origin discussed above. These “alternative” rules permit higher proportions of input materials from third countries to be used in production, allowing producers to leverage the most efficient sources of supply available in international markets.
The CETA provides origin quotas for processed foods, textiles and apparel products, motor vehicles, fish and seafood products, high-sugar containing products, sugar confectionary and chocolate preparations, and pet food products exported from Canada to the European Union, and origin quotas for textiles and apparel products exported from the European Union to Canada. These origin quotas are set forth in Annex 5-A of the CETA Origin Protocol, and are administered in Canada by the Trade Controls Bureau of Global Affairs Canada.
How does your business benefit from the CETA?
If you wish to discuss any issues or opportunities relating to trade in goods under the CETA, please contact: