ARCHIVED — Vol. 147, No. 21 — October 9, 2013

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Registration

SOR/2013-161 September 30, 2013

CUSTOMS TARIFF

General Preferential Tariff Withdrawal Order (2013 GPT Review)

P.C. 2013-967 September 27, 2013

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 34 (see footnote a) of the Customs Tariff (see footnote b), makes the annexed General Preferential Tariff Withdrawal Order (2013 GPT Review).

GENERAL PREFERENTIAL TARIFF WITHDRAWAL ORDER (2013 GPT REVIEW)

WITHDRAWAL OF ENTITLEMENT

1. Entitlement to the benefit of the General Preferential Tariff is withdrawn in respect of all goods that originate in the following countries:

Algeria, American Samoa, Antigua and Barbuda, Antilles, Netherlands, Argentina, Azerbaijan, Bahamas, Bahrain, Barbados, Bermuda, Bosnia and Herzegovina, Botswana, Brazil, Brunei, Cayman Islands, Chile, China, Colombia, Costa Rica, Croatia, Cuba, Dominica, Dominican Republic, Ecuador, Equatorial Guinea, French Polynesia, Gabon, Gibraltar, Grenada, Guam, Hong Kong, India, Indonesia, Iran, Israel, Jamaica, Jordan, Kazakhstan, Kuwait, Lebanon, Macao, Macedonia, Malaysia, Maldives, Mariana Islands, Mauritius, Mexico, Namibia, New Caledonia and Dependencies, Oman, Palau, Panama, Peru, Qatar, Russia, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Singapore, South Africa, South Korea, Suriname, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, United Arab Emirates, Uruguay, Venezuela, and Virgin Islands, U.S.A.

EXEMPTION

2. Section 1 does not apply to goods that were in transit to Canada before January 1, 2015.

AMENDMENTS TO THE CUSTOMS TARIFF SCHEDULE

3. The List of Countries and Applicable Tariff Treatments set out in the schedule to the Customs Tariff (see footnote 1) is amended by deleting the symbol “X” in the column “GPT” opposite “Algeria”, “American Samoa”, “Antigua and Barbuda”, “Antilles, Netherlands”, “Argentina”, “Azerbaijan”, “Bahamas”, “Bahrain”, “Barbados”, “Bermuda”, “Bosnia and Herzegovina”, “Botswana”, “Brazil”, “Brunei”, “Cayman Islands”, “Chile”, “China”, “Colombia”, “Costa Rica”, “Croatia”, “Cuba”, “Dominica”, “Dominican Republic”, “Ecuador”, “Equatorial Guinea”, “French Polynesia”, “Gabon”, “Gibraltar”, “Grenada”, “Guam”, “Hong Kong”, “India”, “Indonesia”, “Iran”, “Israel”, “Jamaica”, “Jordan”, “Kazakhstan”, “Kuwait”, “Lebanon”, “Macao”, “Macedonia”, “Malaysia”, “Maldives”, “Mariana Islands”, “Mauritius”, “Mexico”, “Namibia”, “New Caledonia and Dependencies”, “Oman”, “Palau”, “Panama”, “Peru”, “Qatar”, “Russia”, “Saint Kitts and Nevis”, “Saint Lucia”, “Saint Vincent and the Grenadines”, “Seychelles”, “Singapore”, “South Africa”, “South Korea”, “Suriname”, “Thailand”, “Trinidad and Tobago”, “Tunisia”, “Turkey”, “Turks and Caicos Islands”, “United Arab Emirates”, “Uruguay”, “Venezuela” and “Virgin Islands, U.S.A.” in the column “Country Name”.

4. The Note for each of the following tariff item numbers in the column “Description of Goods” in the schedule to the Act is deleted:

8701.10.90

8706.00.20

8705.30.00

8704.90.00

8704.23.00

8702.90.10

8701.20.00

8706.00.90

8705.40.10

8705.10.10

8703.21.90

8702.90.20

8702.10.10

8707.10.00

8705.90.10

8703.31.00

8703.22.00

8703.10.90

8702.10.20

8707.90.90

8704.21.10

8703.32.00

8703.23.00

8703.21.10

 

8704.31.00

8704.21.90

8703.33.00

8703.24.00

 

8705.20.00

8704.32.00

8704.22.00

8703.90.00

 

REPEAL

5. The General Preferential Tariff Withdrawal (Certain Automotive Goods) Order (see footnote 2) is repealed.

COMING INTO FORCE

6. This Order comes into force on January 1, 2015.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the orders or the Regulations.)

Executive summary

Issue: Economic Action Plan 2013 announced changes to Canada’s General Preferential Tariff (GPT) regime.

Description: These orders and these Regulations

  • (i) withdraw entitlement to GPT benefits from 72 higher-income and trade-competitive countries (out of current 175 beneficiaries), effective January 1, 2015;
  • (ii) ensure that changes to GPT country eligibility do not reduce the benefits of the Least Developed Country Tariff and the Outward Processing Remission Order;
  • (iii) introduce a number of revenue-neutral technical amendments to make the GPT and Least Developed Country Tariff rules of origin regulations simpler and clearer for traders; and
    (iv) make a consequential amendment to Most-Favoured-Nation tariffs on imported raw cane sugar, effective January 1, 2015.

Cost-benefit statement: Based on current trade patterns, the net impact of these changes, on a static basis, is expected to result in $333 million in additional annual tariff revenues, beginning January 1, 2015.

“One-for-One” Rule and small business lens: The “One-for-One”’ Rule and small business lens do not apply to these orders and these Regulations as there is no change in administrative or compliance costs to business.

Background

In the early 1970s, the United Nations recommended that developed countries grant non-reciprocal tariff preferences to imports from developing countries under a Generalized System of Preferences in an effort to promote the industrialization of developing countries. Most major developed countries offer such regimes.

Canada’s regime, the General Preferential Tariff (GPT), was established in 1974 and offers tariff rates that are lower than Most-Favoured-Nation (MFN) tariff rates for imports from developing countries, with the aim of promoting economic growth and export diversification in developing countries.

Further to a commitment in Economic Action Plan 2012, the Government undertook a comprehensive review of the GPT and consulted with Canadians on proposed changes that were published in Part I of the Canada Gazette on December 22, 2012. Consultations concluded on February 15, 2013.

Issue

Informed by stakeholders’ views, Economic Action Plan 2013 announced that the Government would modernize Canada’s GPT regime by removing benefits from 72 higher-income and trade-competitive countries, effective January 1, 2015, renew the GPT for another 10-year period, and take action to ensure that the benefits of the Least Developed Country Tariff (LDCT) regime would not be reduced by changes to GPT country eligibility. The Government also announced that the list of beneficiary countries will continue to be reviewed biannually on the basis of the same objective economic criteria used in the review, as published in Part I of the Canada Gazette on December 22, 2012, i.e. entitlement to GPT benefits will be withdrawn from

  • (1) countries that are classified for two consecutive years as high income or upper-middle income economies according to the latest World Bank income classifications; or
  • (2) countries that have a 1% or greater share of world exports for two consecutive years, according to the latest World Trade Organization statistics.

Changes to the list of GPT-eligible countries will restrict Canadian sugar refiners’ access to duty-free imports of raw cane sugar as the large majority of raw cane sugar imports enter Canada duty-free under the GPT from countries for which GPT eligibility is being withdrawn, including the primary global supplier, Brazil. The elimination of MFN tariffs on imports of raw cane sugar used for refining is therefore necessary to maintain tariff-free input costs for Canadian sugar refiners.

The extension of the GPT and LDCT to December 31, 2024, was implemented through the Economic Action Plan 2013 Act, No. 1, which received Royal Assent on June 26, 2013. All other changes to the GPT require orders in council and regulatory amendments to implement Economic Action Plan 2013 commitments, and to maintain tariff-free input costs for Canadian sugar refiners.

Objectives

  • Implement the Government’s Economic Action Plan 2013 commitment to modernize Canada’s GPT regime; and
  • Maintain tariff-free input costs for Canadian sugar refiners.

Description

The General Preferential Tariff Withdrawal Order (2013 GPT Review) withdraws entitlement to GPT benefits, effective January 1, 2015, from the following 72 higher-income and tradecompetitive countries (out of current 175 beneficiaries), as identified in the December 22, 2012, Canada Gazette, Part I,notice:

  • Algeria
  • American Samoa
  • Antigua and Barbuda
  • Antilles, Netherlands
  • Argentina
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Barbados
  • Bermuda
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei
  • Cayman Islands
  • Chile
  • China
  • Colombia
  • Costa Rica
  • Croatia
  • Cuba
  • Dominica
  • Dominican Republic
  • Ecuador
  • Equatorial Guinea
  • French Polynesia
  • Gabon
  • Gibraltar
  • Grenada
  • Guam
  • Hong Kong
  • India
  • Indonesia
  • Iran
  • Israel
  • Jamaica
  • Jordan
  • Kazakhstan
  • Kuwait
  • Lebanon
  • Macao
  • Macedonia
  • Malaysia
  • Maldives
  • Mariana Islands
  • Mauritius
  • Mexico
  • Namibia
  • New Caledonia and Dependencies
  • Oman
  • Palau
  • Panama
  • Peru
  • Qatar
  • Russia
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Seychelles
  • Singapore
  • South Africa
  • South Korea
  • Suriname
  • Thailand
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turks and Caicos Islands
  • United Arab Emirates
  • Uruguay
  • Venezuela
  • Virgin Islands, U.S.A.

The Least Developed Country Tariff Withdrawal Order (2013 GPT Review) removes LDCT benefits, effective January 1, 2015, from Equatorial Guinea and the Maldives, which are respectively classified as high and upper-middle income countries by the World Bank and are thus among the 72 countries from which GPT benefits are also being withdrawn.

The General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations amend the current regulations so that products imported from least developed countries can continue to qualify for duty-free treatment under the LDCT, even when using inputs from the current 175 GPT beneficiaries (i.e. “grandfathering”). In addition, a number of revenue-neutral technical amendments have been made, i.e.

  • removing rules of origin applicable to goods that are duty-free on a MFN basis;
  • updating the schedule to reflect revisions to the Customs Tariff;
  • adding the word “territory” to the definitions of “beneficiary country” and “least developed country”; and
  • clarifying that the rule of origin for apparel applies only to the fabric that makes up the major portion of the imported garment.

Under the outward processing program, Canadian importers can benefit from reduced rates of duty when importing apparel produced in a GPT country when that apparel is made from Canadian textiles. The Order Amending the Outward Processing Remission Order (Textiles and Apparel) grandfathers the current 175 GPT beneficiaries so that importers can continue using the program, even when producing apparel in a country for which GPT eligibility is being withdrawn.

The Order Amending the Schedule to the Customs Tariff (Raw Cane Sugar) eliminates, as of January 1, 2015, MFN tariffs on imported raw cane sugar.

Regulatory and non-regulatory options considered

Implementation of these orders and these Regulations is necessary to fulfill Economic Action Plan 2013 commitments in respect of the modernization of Canada’s GPT regime.

Orders and regulations under the existing authorities delegated by Parliament pursuant to subsection 16(2), paragraph 34(1)(b), paragraph 38(1)(b), section 82, and section 115 of the Customs Tariff are the most appropriate and timely means of implementing these commitments.

Benefits and costs

Based on current trade patterns, the net impact of these changes, on a static basis, is expected to result in $333 million in additional annual tariff revenues, beginning January 1, 2015. This amount could change as trade patterns shift over time (e.g. as importers shift to alternate GPT-eligible or other duty-free sources of supply).

As these changes affect less than 2% of total imports into Canada, they are not expected to have any impact on Canadian gross domestic product or consumer prices. The overall impact on total imports is expected to be minimal although changes in sources of imports are expected over time.

“One-for-One” Rule

The “One-for-One”’ Rule does not apply to these orders and these Regulations as there is no change in administrative or compliance costs to business.

Small business lens

The small business lens does not apply to these orders and these Regulations as there is no change in administrative or compliance costs to small business.

Consultation

Further to a commitment in Economic Action Plan 2012, the Government undertook a comprehensive review of the GPT and consulted with Canadians on proposed changes that were published in Part I of the Canada Gazette on December 22, 2012. Consultations concluded on February 15, 2013.

A total of 105 submissions were received during consultation from a wide range of stakeholders, including

  • (1) 68 Canadian retailers/distributors and manufacturers;
  • (2) 18 Canadian industry associations, customs brokers, and development non-governmental organizations;
  • (3) 8 foreign governments; and
  • (4) 11 foreign industry associations.

Stakeholders generally acknowledged the need to update the list of GPT-eligible countries given that it had not been reviewed in a comprehensive manner for many years.

A number of stakeholders expressed the need for additional time to allow for adjustments to their supply chains. As a result, Economic Action Plan 2013 announced that these changes would be effective January 1, 2015, instead of July 1, 2014, the date initially proposed in consultations, providing a 24-month transition period from the date of public consultations.

Approximately half of the submissions received during consultations expressed concern that changes to GPT country eligibility would reduce the benefits of Canada’s LDCT and outward processing regimes. Grandfathering the pre-January 1, 2015, list of GPT beneficiaries for these regimes responds to these concerns.

These changes also respond to a request from Canadian sugar refiners to ensure that input tariffs on raw cane sugar remain duty-free.

Rationale

Implementation of these orders and these Regulations is necessary to fulfill Economic Action Plan 2013 commitments to modernize Canada’s GPT regime and to respond to comments and views raised by stakeholders during consultations.

These changes ensure that the GPT is appropriately aligned with the global economic landscape and target the benefits to countries most in need of this type of assistance.

These changes also better align the GPT with similar programs of other major tariff-preference granting countries, such as the European Union (EU). As an example, the EU recently introduced significant changes to its own program to better focus on countries in need, reducing the number of countries receiving benefits from 176 to 89.

Modifications to the rules of origin regulations under Canada’s LDCT regime ensure that benefits for the world’s least developed countries are not affected by changes to GPT country eligibility, as LDC exports will continue to be eligible for duty-free treatment upon importation to Canada, even when incorporating inputs from countries that will no longer be eligible for the GPT.

In addition, modifications to the outward processing order mean that the program will not be affected by changes to GPT country eligibility, as imports of apparel from the countries currently eligible for the GPT will continue to qualify for reduced rates of duty when that apparel incorporates Canadian textiles. Both changes directly respond to stakeholders’ views on these issues and are necessary to ensure that the changes made to the GPT do not have a negative effect on these tariff regimes.

Technical amendments to the rules of origin regulations have been made to make the current regulations simpler and clearer for traders and administrators.

Eliminating MFN tariffs on imported raw cane sugar used in refining is necessary to maintain tariff-free input costs for Canadian sugar refiners and is consistent with the Government’s commitment to eliminate tariffs on manufacturing inputs.

Finally, the establishment of a framework for future biannual reviews of GPT country eligibility ensures that the GPT remains closely aligned with the global economic landscape going forward. GPT country eligibility will be reviewed biannually according to the same objective economic criteria used in this review, i.e. entitlement to GPT benefits will be withdrawn from

  • (1) countries that are classified for two consecutive years as high income or upper-middle income economies according to the latest World Bank income classifications; or
  • (2) countries that have a 1% or greater share of world exports for two consecutive years, according to the latest World Trade Organization statistics.

The first biannual review of GPT country eligibility will begin in fall 2015.

Implementation, enforcement and service standards

The Canada Border Services Agency (CBSA) is responsible for the administration of and compliance with customs and tariff legislation and regulations. The CBSA will update its systems to account for the implementation of these changes and will inform the importing community of all relevant issues pertaining to these orders and these Regulations.

Contact

Patrick Halley
International Trade Policy Division
Department of Finance Canada
Ottawa, Ontario
K1A 0G5
Telephone: 613-992-2518