Order Repealing Certain Orders Made Under the Customs Tariff (CUSMA): SOR/2020-154

Canada Gazette, Part II, Volume 154, Number 15

Registration
SOR/2020-154 June 30, 2020

CUSTOMS TARIFF

The Minister of Finance, pursuant to subsection 45(13) of the Customs Tariff ^{footnote a}, makes the annexed Order Repealing Certain Orders Made Under the Customs Tariff (CUSMA).

Ottawa, June 23, 2020

William Francis Morneau
Minister of Finance

Order Repealing Certain Orders Made Under the Customs Tariff (CUSMA)

Repeals

1 The following orders are repealed:

• (a) the Textile and Apparel Extension of Benefit Order^{footnote 1}; and
• (b) the Order Amending the Schedule to the Customs Tariff (Conditions for Special Provisions for the Purposes of the United States Tariff (UST))^{footnote 2}.

Coming into Force

2 This Order comes into force immediately before the coming into force of section 190 of the Canada–United States–Mexico Agreement Implementation Act, chapter 1 of the Statutes of Canada, 2020.

REGULATORY IMPACT ANALYSIS STATEMENT

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

Issues

On November 30, 2018, Canada, the United States and Mexico signed the Canada–United States–Mexico Agreement (CUSMA or the Agreement), with further provisions agreed among the three countries on December 10, 2019. On July 1, 2020, the CUSMA entered into force, replacing the North American Free Trade Agreement (NAFTA) to provide for free trade among the three countries.

Like all of Canada’s free trade agreements, the CUSMA includes rules of origin that specify how much production must occur in Canada or another CUSMA country for a good to be deemed eligible to a preferential tariff under the Agreement. Regulations pursuant to the Customs Tariff are necessary to implement in domestic law the CUSMA provisions to allow importers to benefit from preferential tariffs.

In addition, because the CUSMA supersedes the NAFTA, consequential amendments to regulations and orders are necessary to either replace current references to the NAFTA or repeal regulations and orders that pertain solely to the NAFTA.

Objective

• To fully implement Canada’s negotiated tariff elimination commitments under the CUSMA.
• To enable importers to be able to claim the preferential tariff treatment of the CUSMA.
• To make housekeeping amendments to existing regulations and orders to ensure the proper functioning of the CUSMA.

Description

In Canada, the CUSMA Rules of Origin Regulations implement the “Uniform Regulations Regarding the Interpretation, Application, and Administration of Chapter 4 (Rules of Origin) and Chapter 6 (Textiles and Apparel Goods),” a trilaterally negotiated document that includes all of the rules of origin negotiated in the CUSMA, as well as additional details to ensure that the rules of origin are uniformly interpreted and applied in Canada, the United States and Mexico. These regulations establish the conditions under which goods are considered as originating from a CUSMA country and therefore entitled to the relevant CUSMA tariff preferences upon their importation into Canada.

The CUSMA Rules of Origin for Casual Goods Regulations replace the NAFTA Rules of Origin for Casual Goods Regulations. These regulations establish that non- commercial goods acquired in another CUSMA country that are either marked as made in a CUSMA country or not marked to the contrary, are considered originating and therefore entitled to the relevant CUSMA tariff preferences upon their importation into Canada.

The CUSMA Tariff Preference Regulations link CUSMA originating goods to their entitlement to the preferential tariff treatment of the CUSMA. For goods where production took place in more than one country, the preferential tariff treatment is based on the last CUSMA country where production occurred. The regulations also establish entitlement to preferential tariff for originating goods that are not shipped directly from another CUSMA country to Canada, provided the goods remain under customs control while in transit. These regulations replace the NAFTA Tariff Preference Regulations.

The Regulations Amending Certain Regulations and Orders Made Under the Customs Tariff (CUSMA) amend several regulations and orders, made under the Customs Tariff, to replace references to the NAFTA with references to the CUSMA.

The Order Repealing Certain Regulations and Orders Made Under the Customs Tariff (CUSMA) and the Order Repealing Certain Orders Made Under the Customs Tariff (CUSMA) repeal a number of Customs Tariff orders and regulations that are obsolete once the CUSMA supersedes the NAFTA.

Regulatory development

Consultation

These regulatory measures are technical and consequential in nature as they implement negotiated outcomes of the CUSMA.

The Government undertook extensive public consultations on the modernization of the NAFTA beginning in February 2017, and held over 800 interactions with more than 1 100 Canadian stakeholders. The Government also received over 46 500 written submissions from Canadians. The House of Commons Standing Committee on International Trade conducted extensive consultations from February through December 2017. Overall, the views expressed by Canadian outlined the importance of “doing no harm” and preserving the important benefits of the NAFTA.

Given the non-controversial nature of these regulations and orders and the prior broad consultations held on the CUSMA, publication of these regulations and orders in the Canada Gazette, Part I, was not considered necessary.

Modern treaty obligations and Indigenous engagement and consultation

The regulations will result in benefits in the form of reduced duties accessible to anyone seeking to import eligible goods from a CUSMA country, including Indigenous peoples.

Instrument choice

These regulations fully implement Canada’s negotiated tariff elimination commitments under the CUSMA and are necessary for importers to be able to claim the preferential tariff treatment of the CUSMA. These regulations are the only instruments for achieving this objective.

Regulatory analysis

Benefits and costs

The regulations are non-discretionary enabling regulations with no direct cost impact. The orders consequentially repealing certain regulations and orders is also non-discretionary. The regulations and orders do not make changes to procedures for the importing and exporting of goods. Rather, they establish eligibility for the preferential tariffs of the CUSMA and link the preferential tariff treatment of the CUSMA with rules of origin requirements under that Agreement to enable importers to claim the CUSMA preferential tariffs. Without the implementation of these regulations, importers of originating goods from the United States or Mexico would not be able to claim the relevant CUSMA preferential tariff treatment, and would have to use Most Favoured Nation tariff treatment, even after the CUSMA entered into force. This would result in significant trading costs for Canadian importers through increased tariffs, undermine the intent of An Act to implement the Agreement between Canada, the United States of America and the United Mexican States, and run counter to Canada’s binding commitments under the CUSMA.

It is estimated that implementation of Canada’s tariff elimination commitments under the CUSMA will result $7 million in annual foregone tariff revenues. These duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of products originating in a CUSMA country.

The consequential amendments are similarly necessary to maintain the coherence of the regulatory framework as the NAFTA is superseded by the CUSMA by updating provisions that currently reference the NAFTA. Similarly, the consequential repeals are necessary to repeal NAFTA regulations and orders that have become obsolete with the implementation of the CUSMA.

Small business lens

These regulations and orders do not change procedures for the importing and exporting of goods. Rather, they link the preferential tariff treatment provided for under the CUSMA with the rules of origin requirements under the CUSMA to be able to claim the preferential tariffs. Therefore, all businesses, including small businesses, will be able to claim the preferential tariff treatment on goods originating in a CUSMA country and will see benefits in the form of lower duties paid on their imports.

One-for-one rule

While requirements may change pursuant to other provisions in the Agreement, these regulations and orders do not change procedures for the importing and exporting of goods. Rather, they link the preferential tariff treatments provided for under the CUSMA with rules of origin requirements under the CUSMA to be able to claim the preferential tariff, as well as making consequential amendments and consequential repeals. Accordingly, there is no incremental change to the level of administrative burden currently imposed on businesses as a result of implementing these regulations and orders.

The Regulations Repealing Certain Regulations and Orders under the Customs Tariff (CUSMA) and the Order Repealing Certain Orders made Under the Customs Tariff (CUSMA) repeal regulations and orders that have become obsolete with the implementation of CUSMA. The one-for-one rule applies since the following regulatory titles are removed:

• the Motor Vehicles Tariff Order, 1988;
• the Automotive Parts Tariff Removal Order, 1988;
• the Customs Duties Accelerated Reduction Order, No. 1;
• the Customs Duties Accelerated Reduction Order, No. 2;
• the Customs Duties Accelerated Reduction Order, No. 3;
• the Customs Duties Accelerated Reduction Order, No. 4;
• the Customs Duties Accelerated Reduction Order, No. 5;
• the Customs Duties Accelerated Reduction Order, No. 6;
• the Customs Duties Accelerated Reduction Order, No. 7, as amended by the Customs Duties Accelerated Reduction Order, No. 7, amendment;
• the Mexico Fruit and Vegetable Aggregate Quantity Limit Order;
• the NAFTA Rules of Origin for Casual Goods Regulations;
• the Automotive Goods Rules of Origin Regulations;
• the Customs Duties Accelerated Reduction Order, No. 8;
• the Surtax on Boneless Beef Order No. 2, 1994;
• the NAFTA Tariff Preference Regulations;
• the Customs Duties Accelerated Reduction Order, No. 9;
• the United States Barley and Barley Products Remission Order;
• the Customs Duties Accelerated Reduction Order, No. 10;
• the Customs Duties Accelerated Reduction Order, No. 11;
• the Customs Duties Accelerated Reduction Order, No. 12;
• the Textile and Apparel Extension of Benefit Order; and
• the Order Amending the Schedule to the Customs Tariff (Conditions for Special Provisions for the Purposes of the United States Tariff (UST)).

Regulatory cooperation and alignment

These regulations and orders are not related to a work plan or commitment under a regulatory cooperation forum. They are necessary for Canada to fulfill its commitments under the CUSMA, which is an international agreement.

Strategic environmental assessment

Global Affairs Canada (GAC) conducted an environmental assessment of the Agreement in accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. The Initial Environmental Assessment encompassed both qualitative and quantitative analyses. Based on a qualitative assessment of Canada’s negotiating objectives and expected outcomes, it was anticipated that a renegotiated NAFTA would have minor negative environmental impacts beyond the original NAFTA, although there was some prospect for positive environmental impacts as a result of enhanced and enforceable provisions related to environmental protection and governance. A Final Environmental Assessment led by GAC will be made publicly available in the coming weeks.

These regulations and orders are consequential to the implementation of the CUSMA. Therefore, a separate environmental assessment was not conducted on these regulations and orders.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this package of regulations and orders.

Implementation, compliance and enforcement, and service standards

The Canada Border Services Agency (CBSA) will monitor compliance with the terms of these regulations in the normal course of its administration of customs- and tariff-related legislation and regulations. As was the case for previous free trade agreements, the CBSA will update its systems to account for the implementation in Canada of the CUSMA and will inform importers of all relevant CUSMA-related issues pertaining to these regulations.

After the CUSMA enters into force, Canada will continue discussions with the United States and Mexico to further improve and clarify the Uniform Regulations for Rules of Origin. Consultations will be held to inform those discussions. These post-implementation efforts may result in amendments to the CUSMA Rules of Origin Regulations.

Contact

Karen LaHay
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone: 613‑369‑4043