Canada has seen its free trade reach increase incrementally in the past three years: starting with Europe in 2017 and extending now to the pacific rim in 2018. This expanded reach comes with a lot of promise but also many pitfalls.
Please find below specific information on how the deal will impact Canadian importers.
1. How do we apply?
The duty-free tariff will be applied automatically by your broker where appropriate confirmation of origin has been provided by your vendors. This statement MUST be either reproduced on the invoice or on an additional document and signed by the seller. An example of the statement can be found at the end of this article, while our branded PDF version can be found here.
2. Does this free trade agreement cover all goods?
No, as is the case with most free trade deals, exceptions abound: garments and textiles in particular are subject to a harsh ‘yarn-forward’ requirement, making it unlikely that apparel produced in Vietnam would qualify as duty-free. Agricultural goods are faced with similar issues.
For all other products, specific rules of origin must be passed in order for the product to qualify. A general rule of thumb would mean that the majority of the products will qualify so long as enough work is done on them within the borders of a member nation. Please read the below examples for an explanation of this:
An example of a qualifying item
An sofa has its wooden frame manufactured in Japan and then is upholstered in Vietnam. Since both nations are qualifying, the end result will still quality.
Example of an item that would not qualify
A light fixture is made in China, and then has a small Vietnamese flag applied in Vietnam before being exported to Canada. In this case, the real origin of the product would be better described as China since the amount of work done in Vietnam did not appropriately consume or transform said light fixture. Had the light fixture been installed in a large machine, then likely the machine would be considered eligible for duty-free status.
3. What is yarn-forward?!
‘Yarn-forward’: This means that garments must be cut-and-sewn from fabric and yarn produced inside the transpacific territory in order to qualify. A lot of attention has surrounded Vietnam as a prominent exporter of garments, but given the restrictions of the yarn-forward rules it is unlikely such imports will qualify.
4. Who are the transpacific members?
The TPP membership includes: Vietnam, Singapore, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, and Australia.
5. Why is the TPP not more of a big deal?
The vast majority of products entering Canada are already duty-free regardless of origin, and one of the major categories that remain dutiable (garments) are more or less excluded from duty-free eligibility as a result of strict transformation rules (yarn-forward). The real winners of the deal will include importers of household articles and appliances that are manufactured in the transpacific territory.
6. How can I know if the benefits of TPP were claimed on my imported goods?
On the B3 document provided to you by your broker, check if the ‘tariff treatment’ box includes the digits 33. If so, the goods were imported as TPP-qualifying merchandise.
Do you have additional questions about how TPP affects your business? Contact us!
Below is a sample of the statement that must be signed Your vendor can include this on the invoice
A certification of origin that is the basis for a claim for preferential tariff treatment under this Agreement shall include the following elements:1. Importer, Exporter or Producer Certification of OriginIndicate whether the certifier is the exporter, producer or importer in accordance with Article 3.20 (Claims for Preferential Treatment).
Provide the certifier’s name, address (including country), telephone number and e-mail address.
Provide the exporter’s name, address (including country), e-mail address and telephone number if different from the certifier. This information is not required if the producer is completing the certification of origin and does not know the identity of the exporter. The address of the exporter shall be the place of export of the good in a TPP country.
Provide the producer’s name, address (including country), e-mail address and telephone number, if different from the certifier or exporter or, if there are multiple producers, state “Various” or provide a list of producers. A person that wishes for this information to remain confidential may state “Available upon request by the importing authorities”. The address of a producer shall be the place of production of the good in a TPP country.
Provide, if known, the importer’s name, address, e-mail address and telephone number. The address of the importer shall be in a TPP country.
6. Description and HS Tariff Classification of the Good
(a) Provide a description of the good and the HS tariff classification of the good to the 6-digit level. The description should be sufficient to relate it to the good covered by the certification; and
(b) If the certification of origin covers a single shipment of a good, indicate, if known, the invoice number related to the exportation.
7. Origin Criterion
Specify the rule of origin under which the good qualifies.
8. Blanket Period
Include the period if the certification covers multiple shipments of identical goods for a specified period of up to 12 months as set out in Article 3.20.4 (Claims for Preferential Treatment).
9. Authorised Signature and Date
The certification must be signed and dated by the certifier and accompanied by the following statement:
I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification.