Vol. 148, No. 21 — October 8, 2014

Registration

SOR/2014-224 September 26, 2014

EXPORT AND IMPORT PERMITS ACT

Order Amending the Import Control List

P.C. 2014-986 September 25, 2014

Whereas the Governor General in Council deems it necessary to control the importation of certain textile and apparel goods to implement an intergovernmental arrangement or commitment;

Whereas it appears to the satisfaction of the Governor in Council that it is advisable to collect information with respect to the importation of textile and apparel goods in respect of which a specified quantity is eligible each year for the rate of duty provided for in the Schedules to Annex 3.4.1 of CHFTA in accordance with Annex 3.1 of CHFTA;

And whereas it appears to the satisfaction of the Governor in Council that, for the purposes of implementing CHFTA, it is advisable to collect information with respect to the importation into Canada of textile and apparel goods referred to in section 1 of Annex 3.1 of CHFTA;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to paragraph 5(1)(e), subsections 5.2(1) (see footnote a) and (2) (see footnote b) and section 6 (see footnote c) of the Export and Import Permits Act (see footnote d), makes the annexed Order Amending the Import Control List.

ORDER AMENDING THE IMPORT CONTROL LIST

AMENDMENT

1. The Import Control List (see footnote 1) is amended by adding the following after item 86.94:

86.95 (1) Apparel goods that

(2) In this item, “apparel goods” means goods provided for in Chapters 61 and 62 in the List of Tariff Provisions set out in the schedule to the Customs Tariff.

86.96 Fabric and made-up textile goods provided for in Chapters 51 to 55, 58, 60 and 63 in the List of Tariff Provisions set out in the schedule to the Customs Tariff that

86.97 Goods provided for in subheading 9404.90 in the List of Tariff Provisions set out in the schedule to the Customs Tariff that

COMING INTO FORCE

2. This Order comes into force on the day on which sections 17 to 19 of the Canada–Honduras Economic Growth and Prosperity Act, chapter 14 of the Statutes of Canada, 2014, come into force, but if it is registered after that day, it comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

As per subsection 8(1) of the Export and Import Permits Act (EIPA), import permits may only be issued for goods included on the Import Control List (ICL). Therefore, in order for Canada to implement and administer its international obligations and rights on tariff preference level (TPL) textiles and apparel goods under the Canada-Honduras Free Trade Agreement (CHFTA), and for these goods to receive preferential tariff treatment, the ICL must be amended to include the scope of the CHFTA TPL provisions on textiles and apparel prior to the entry into force of the Agreement.

Background

The CHFTA was signed on November 5, 2013. The Canada–Honduras Economic Growth and Prosperity Act (the Act) implementing the CHFTA in Canada, received Royal Assent on June 19, 2014. The Act is expected to enter into force on October 1, 2014. The benefits of the CHFTA will be broad. The Agreement includes tariff elimination and reduction obligations, comprehensive provisions with respect to investment and cross-border trade in services, government procurement, and financial services obligations.

A key objective of the CHFTA is to eliminate trade barriers between Canada and Honduras on most goods, including textiles and apparel. Upon entry into force of the Act, Canadian producers, manufacturers and importers will benefit from either the immediate elimination, or the phased-in reduction of tariffs, on originating and TPL-eligible textile and apparel goods (as set out in section XI of the CHFTA). Originating textile and apparel goods are goods that are wholly produced within the free trade area from material originating within the free trade area. TPL-eligible goods are goods that do not meet the requirements of the rules of origin but can still receive the same preferential tariff treatment as originating goods, up to a negotiated quantity, as long as they meet certain conditions (such as being cut, sewn, and assembled in a party from nonoriginating material). The negotiated quantities of TPL-eligible goods are measured in a unit used by the textile industry known as square meters equivalents (SME). The maximum quantity of textile goods under the CHFTA that is TPL-eligible is an annual quantity of one million SME. The maximum quantity of apparel goods that is TPL-eligible under the CHFTA is four million SME.

Before a TPL-eligible good may benefit from preferential tariff treatment under the CHFTA, the importing party must establish the import documentation requirements. Imports of TPL-eligible goods under Canada’s free trade agreements, including the CHFTA, must be accompanied by an import permit in order to obtain preferential tariff treatment. In order to issue an import permit for the subject goods, the goods must be added to the ICL. In addition, as the quantity of goods that can receive preferential tariff access under TPL cannot surpass the negotiated quantity levels, the utilization of TPL quota must be monitored to ensure that all TPL imports are counted against TPL quota. TPL transactions must also be properly documented in case there are any discrepancies between Canada’s TPL utilization numbers and that of our FTA partner. The issuance of permits also allows Canada to undertake the required monitoring and tracking of TPL utilization.

The North American Free Trade Agreement (NAFTA), the Canada-Chile Free Trade Agreement (CCFTA) and the Canada-Costa Rica Free Trade Agreement (CCRFTA) contain similar provisions for TPL-eligible textile and apparel goods which were added to the ICL prior to the entry into force of these agreements. TPL imports under the CHFTA will be subject to the identical import permit requirement already in place for TPL imports under the NAFTA, the CCFTA and the CCRFTA.

Objectives

As per subsection 5.2(2) of the EIPA, it is necessary to add CHFTA TPL-eligible textiles and apparel goods to the ICL by the date of entry into force of the CHFTA. As TPL-eligible imports under the CHFTA must be accompanied by an import permit, and such permits may only be issued for goods included on the ICL, Canada’s import commitments and obligations under the CHFTA for TPL textile and apparel goods cannot be administered or monitored unless the ICL includes these TPL-eligible textile and apparel goods. Importers will not be able to benefit from the liberalized trade provisions under the CHFTA related to TPL until these goods are added to the ICL.

Description

The Order will add the CHFTA TPL-eligible textile and apparel goods to the ICL. Under Canada’s free trade agreements, a TPL-eligible good must be accompanied by an import permit in order to benefit from preferential tariff treatment. Canada cannot issue import permits for goods that are not on the ICL. In order to issue an import permit for CHFTA TPL-eligible textile and apparel goods, the scope of goods covered by the CHFTA TPL provisions must first be added to the ICL prior to the entry into force of the CHFTA.

This is the same approach taken for all of Canada’s free trade agreements containing TPL-eligible provisions. The scope of goods covered by TPL provisions for TPL-eligible textile and apparel goods under the NAFTA, the CCFTA and the CCRFTA were added to the ICL by the date of entry into force of these agreements.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to this proposal, as there are no costs (or insignificant costs) on small business.

Consultation

The CHFTA was signed on November 5, 2013. The Act implementing the CHFTA in Canada received Royal Assent on June 19, 2014. The Act is expected to enter into force on October 1, 2014. Negotiations with Honduras were concluded in 2011 and represent concrete progress under the Government’s Americas Strategy.

During negotiations, officials undertook consultations with producers, industry associations, the provinces and other interested parties. With respect to the CHFTA textile and apparel TPLs, Canada’s negotiators consulted with the Canadian Textile Association, the Canadian Apparel Federation and Canadian investors like Gildan Activewear (a significant Canadian investor in the textile and apparel industry in Honduras and the largest private-sector employer in Honduras). These stakeholders supported and helped develop Canada’s position prior to undertaking commitments on CHFTA TPLs, recognizing that the CHFTA will provide Canadian companies with important access to a preferential tariff rate. There have been no specific consultations undertaken regarding the subsequent requirement to implement these previously consulted commitments.

Rationale

Before a TPL-eligible good may benefit from preferential tariff treatment under the TPL provisions of Canada’s free trade agreements, including the CHFTA, the importing party must meet the import documentation requirements. In order to obtain preferential tariff treatment at Canada’s border, imports falling under one of Canada’s free trade agreements must be accompanied by an import permit. In addition, a permit will not be issued once the negotiated quantity of that particular TPL-eligible good has been fully utilized. As per subsection 8(1) of the EIPA, import permits may only be issued for goods included on the ICL.

Canada cannot meet its CHFTA TPL obligations without establishing the import documentation requirements. Goods covered by the CHFTA TPL provisions that are not accompanied by an import permit will be subject to the Most-Favoured Nation (MFN) tariff rate of duty.

Implementation, enforcement and service standards

Imports covered by the CHFTA TPL provisions must be accompanied by an import permit in order to benefit from CHFTA TPL preferential tariff treatment. In order to issue an import permit for the subject goods, the goods must be added to the ICL. Goods covered by the CHFTA TPL provisions that are not accompanied by an import permit will be subject to the MFN tariff rate of duty.

As with Canada’s existing free trade agreements containing TPL provisions, information regarding how companies can apply for import permits will be made publicly available once the CHFTA has entered into force. This will be achieved through the posting of a Notice to Importers on the Department of Foreign Affairs, Trade and Development (DFATD) Web site. This information will also be included in a Canada Border Services Agency (CBSA) D-Memorandum, which will be made available on the CBSA Web site with a link to this document provided on the DFATD Web site. The issuance of import permits will be subject to DFATD service standards for the delivery of permits. DFATD’s current service standards require that

Contact

Joanne Hamilton
Deputy Director
Trade Controls Policy Division
Department of Foreign Affairs, Trade and Development
111 Sussex Drive
Ottawa, Ontario
Telephone: 343-203-4365
Email: joanne.hamilton@international.gc.ca