CPTPP Rules of Origin Regulations: SOR/2018-221

Canada Gazette, Part II, Volume 152, Number 23

Registration

SOR/2018-221 October 30, 2018

CUSTOMS TARIFF

P.C. 2018-1323 October 29, 2018

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 16(2)^{footnote a} of the Customs Tariff ^{footnote b}, makes the annexed CPTPP Rules of Origin Regulations.

CPTPP Rules of Origin Regulations

Rules of Origin

1 (1) The following provisions of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership have the force of law in Canada:

• (a) Articles 3.1 to 3.18;
• (b) Annex 3-C;
• (c) Annex 3-D, including Appendix 1;
• (d) paragraphs 1 to 9 of Article 4.2; and
• (e) Annex 4-A, including Appendix 1.

(2) Despite paragraph (1)(c), between Canada and Australia and between Canada and Malaysia, for the purposes of determining whether a good of heading 87.03 qualifies as originating, the applicable product-specific rule of origin is

• (a) a change to a good of subheading 87.03 from any other heading; or
• (b) no change in the tariff classification required for a good of heading 87.03, provided there is a regional value content of not less than
  • (i) 40%, under the net cost method, or
  • (ii) 50%, under the build-down method.

Coming into Force

2 These Regulations come into force on the day on which section 43 of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation Act, chapter 23 of the Statutes of Canada 2018 comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issues

In order to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or the Agreement), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Implementation Act (the Act) was introduced in the House of Commons on June 14, 2018, and received royal assent on October 25, 2018. In addition to the implementing Act, a number of associated regulations are necessary to fully implement Canada’s tariff commitments under the CPTPP.

Background

Canada and 10 other Asia-Pacific countries (Australia, Brunei Darussalam, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam) signed the CPTPP on March 08, 2018.

The CPTPP will establish a trading bloc that represents 495 million people and 13.5% of global gross domestic products (GDP), and help facilitate long-term growth for the Canadian economy. Exports to these countries are significant for the Canadian economy, totalling $32 billion in 2016. Key Canadian goods exported to CPTPP signatories include oil seeds, machinery and equipment, wheat, pork and coal. Canada’s merchandise imports from CPTPP signatories totalled more than $68 billion in 2017. Major imports included vehicles and their parts, machinery and equipment, and electronics and electrical goods.

When Canada’s tariff commitments under the CPTPP are fully implemented, it is estimated that annual duties foregone by the Government would be approximately $652 million based on recent trade patterns with current CPTPP signatories. These duties represent a benefit, in the form of lower customs duties to be paid by Canadian importers of products originating from CPTPP members. The removal of CPTPP tariffs on Canadian exports will similarly make Canadian goods more competitive in CPTPP markets, potentially leading to increased exports across a range of sectors.

Objectives

The objective of these regulations is to fully implement Canada’s tariff commitments under the CPTPP so that Canada and the CPTPP signatories can proceed with the implementation of the Agreement.

Description

The following three regulations link the preferential tariff treatment provided for under the CPTPP, and implemented in the Customs Tariff by the implementing Act, with the rules of origin necessary to determine whether the goods qualify for preferential tariff treatment.

• The CPTPP Rules of Origin Regulations are designed to implement, in Canada, the rules of origin negotiated by Canada and the CPTPP signatories that will be used to determine when goods have undergone sufficient production to qualify for preferential tariff treatment.
• The CPTPP Rules of Origin for Casual Goods Regulations establish the conditions under which goods acquired in CPTPP member countries by travellers are considered originating and therefore entitled to preferential tariff treatment in Canada. Where travellers acquire goods in CPTPP member countries that are either marked as made in CPTPP member countries, or not marked to the contrary, the traveller can claim the CPTPP tariff preference on the importation of the goods into Canada.
• The CPTPP Tariff Preference Regulations allow eligible goods that are not shipped directly between CPTPP members and Canada to retain the eligibility for preferential tariff rates provided the goods remain under customs control in third-party countries.

“One-for-One” Rule

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

Small business lens

The small business lens does not apply to these regulations, as there are no costs imposed on business.

Consultation 

These regulations are technical and consequential as they implement provisions of the CPTPP. Therefore, there have been no public consultations conducted precisely on these regulations. However, the Government has extensively consulted on the Trans-Pacific Partnership (TPP) and the CPTPP, which gave the opportunity to stakeholders to input into the negotiated outcome that is reflected in these regulations. In December 2011, the Government of Canada launched public consultations with provinces and territories, businesses, industry associations and the general public to determine whether Canadians would be supportive of launching free trade negotiations with the TPP countries. Stakeholders were regularly consulted throughout the negotiations of the TPP. In September 2017, the Government subsequently launched public consultations on the possibility of implementing the TPP with members other than the United States, which ultimately became the CPTPP. A bill to implement the CPTPP was introduced in Parliament on June 14, 2018. The parliamentary process was an additional opportunity for stakeholders and the general public to be informed of, and comment on, the CPTPP. The CPTPP is supported by a broad cross-section of Canadian business stakeholders from all regions and from many sectors.

Rationale

These regulations are necessary to fulfill Canada’s tariff commitments under the CPTPP so that Canada and CPTPP members can proceed with the implementation of the Agreement. These regulations are entirely nondiscretionary in nature as they reflect the negotiated outcome of the CPTPP. They are also similar to changes made to implement tariff-related provisions in Canada’s other free trade agreements (e.g. the Canada-European Union Comprehensive Economic and Trade Agreement and the Canada-Korea Free Trade Agreement).

Implementation, enforcement and service standards

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

Contact

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