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#Made in the Transpacific

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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.

The TPP deal has made a free trade zone of the Pacific rim

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 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!

Appendix

Below is a sample of the statement that must be signed
 
Your vendor can include this on the invoice
Annex 3–B: Minimum Data Requirements
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).

2. Certifier

Provide the certifier’s name, address (including country), telephone number and e-mail address.

3. Exporter

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.

4. Producer

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.

5. Importer

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.

What does the future hold for cannabis importing into Canada?

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The Canada Border Services Agency released a Customs Notice yesterday regarding the Excise Taxes that will apply to importations of cannabis products. Similar to alcohol, the rates vary by province and can be found on the Department of Finance’s website. These excise taxes are largely a formality at the moment (few parties can legally import cannabis), but they do suggest some dramatic changes to Canada’s import policy regarding cannabis products.

Please find our questions to importing Cannabis after Oct. 17 below:

Who can import Cannabis?

At this stage, only licensed producers with a valid Health Canada permit can import Cannabis products into Canada for commercial use, which has been the case since licensing started.

Under this regime, licensed growers must provide the details of their order to Health Canada, and then wait for the permit to be issued (which can be a long wait). Once issued, the permits must be used before they expire, and only at the port of entry described on the permit.

These permits are also only issued for seeds or other small amounts of cannabis. The importing of bulk quantities of cannabis is still not permitted.

For details on what exactly is required to import, please read here.

Can individuals import Cannabis?

Per D19-9-2, individuals may import cannabis for their own medical use, but only where and when regulations authorize it. Other exemptions can be granted on a case by case basis if a scientific or medical purpose exists and the exemption is granted in advance.

Even travelling across provincial borders could pose problems, as the CBSA has stated: “If you transport cannabis or products containing it across the border, regardless of quantity, and even to or from jurisdictions that have legalized cannabis, you could face prosecution”

What does the future hold for Cannabis importing?

commercial

It seems inevitable that Canada will approve and accelerate the processing of import requests for bulk orders of cannabis, and many licensed growers are already invested in offshore production. One factor preventing this is that other countries will only permit the exportation to Canada to take place if the cannabis is for medical purposes, which would add conditions to re-selling for recreation. Even if that hurdle is overcome, bulk imports will still be subject to Health Canada approval as well as other controls, such as an annual quota system or provincial permits.

For an example of what a quota system would like like, we can use dairy and textiles, which are controlled by Global Affairs: permits are issued using online software, and are available until a specific amount (i.e. 100,000 kgm) is met each year. After that, imports are still permitted, but at a much higher rate of duty, which helps shelter the domestic industry (jobs!) from too much competition.

An alternative would see the provinces take control, as is the case with alcohol. Currently, for a company to import alcohol, they must first order from the appropriate provincial agency (i.e. the LCBO or SAQ). The provincial agency then submits the order to the foreign supplier and controls the shipment and pricing. It is hard to see provinces not fighting for something like this, as it means additional revenue and control.

 

personal

For individuals and travellers, they will also likely be able to import small amounts in the future for recreational use, but will probably be obliged to pay hefty provincial markups as is currently the case with alcohol (this effectively makes importing large amounts impractical).

Read More:

The CBSA’s official memoranda regarding cannabis importing is available on their website.

 

 

The HS Classification of Cannabis Products

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With the imports of legal cannabis plants and products set to jump significantly, Statistics Canada has published their list of harmonized system tariff classifications to help importers. Please find a list of the most common items below along with their OGD regulations:

Note that only licensed growers may import Cannabis products. Please check with Health Canada for the admissibility of what you plan to import before ordering.

Description HS Code OGD Requirements**
Live Plants 0602.90.90.90 Health Canada Permit, Phytosanitary Certificate, CFIA
Cannabis Seeds for Sowing 1209.99.10.29 CFIA: Phytosanitary Certificate, Plant Protection Permit, Health Canada Permit, *Seed Analysis (for orders > 500 g)
Cannabis plants, herbs & seeds used in pharmacy 1211.90.90.50 Health Canada Permit, CFIA: No Permit Required Letter, Plant Protection Permit
Cannabis resin or oleoresin 1302.90.00.10 CFIA, Health Canada permit
Cannabis oil, extracts, and tinctures 1302.19.00.10 CFIA, Health Canada permit
Medicaments for retail sale, containing cannabis or cannabinoids 3004.90.00.21 CFIA, Health Canada

**Note that the OGD requirements can vary depending on the country of origin, end use and state (dried, chilled, fresh) of the items you are importing. For more information, please contact our office directly.

 

 

Labelling versus Marking

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One of the most popular questions we receive are those concerned with the labelling of imported goods in Canada.

These questions should be split into two parts: ‘marking’ needs to be done before importation and ‘labelling’ before the item is re-sold

Before Importing: Marking

Marking is merely the notation of the country of manufacture on the imported product. This is enough to satisfy Customs officials — the lack of a bilingual or detailed label does not concern them. To be clear, Customs only wants to confirm where your product is made or produced.

If your shipment is inspected, Customs will definitely check that the country of origin is marked on the goods. If they find no such marking, they will hold the shipment until you provide a letter guaranteeing that the marking will be applied. Customs will also issue you a penalty if this is the case (depending on whether it is a first offense, the penalty is $150).

*Most, but not all, imported goods require marking. You can check the appendix here.

**It is possible that Customs can inspect your import — and if they discover that an existing label is misleading or deficient — demand a similar correction from you before releasing the product. (We have yet to experience this phenomenon, but the Food and Drug Regulations does provide for this scenario).

Before you re-sell: Labelling

Once the goods are released into Canada for consumption, it is then up to the importer to determine that the goods meet any specific labelling requirements before being sold at retail. What the label must provide depends on what type of good you are re-selling:

Food: Use the CFIA’s online tool

Note:  “name and address” may be your company — the importer — rather than the manufacturer

Apparel and textile articles: fibre content, care instructions, country of origin, and responsible party (Canadian brands may use a CA#)

FAQ

Does my product need to have a bilingual, detailed label applied before it arrives in Canada?

No. The product or its packaging should be marked with its country of origin, but the additional elements required on a label may be added to a product post-release.

I am importing apparel, does it need to be labelled before arrival?

For clothes, marking is often on the label itself. So, unless the marking of the origin exists elsewhere on the apparel, then a label indicating country of manufacture must be added before importation.

How do I know if my product is ‘marked’?

Is the country of origin clearly indicated on the product or packing? If so, it is marked.

What should I do to ensure that my imported goods are clearly marked?

If you do not trust your vendor, we recommend requesting a photograph of the marking from them before shipping.

Border Bee estimates that less than 1% of all importations into Canada are penalized for lack of marking — but it is always a possibility.

 

Canada – EU Free Trade (Apparel Edition)

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Please find below more specific information on how imports of European-Union made apparel will be treated under CETA.

The vast majority of E.U. made apparel will need to pass through a quota system established for the deal. Why?

CETA, similar to NAFTA, contains special provisions for clothing. Due the globalized nature of apparel production, barely any finished clothes are made wholly within a single country (or even a single continent).

Typically, clothes that are “made” in the E.U. are cut and sewn from fabric made in Asia.

The fact that the fabric comes from outside the E.U. disqualifies these products.

Therefore, most E.U. made clothes will still be hit with an 17-18% duty because fabric from outside the E.U. is NOT ALLOWED. The production of fabric creates jobs, therefore Canada and the E.U. are all protectionist about it.**(see footnote)

So… CETA changes nothing for clothes?

Not quite! a quota system (similar to the TPL under NAFTA) will allow a specific amount of clothing each year that is only cut and sewn in Europe to be imported duty-free.
The key to the quota system is that it is typically only open for the first half of the year (it is also specific to the HS code).

Questions to ask yourself before ordering E.U. made clothes in the anticipation of paying only GST:

1. Does my vendor manufacture their clothes within the E.U.?

Yes
No


Additional questions? Still confused? Contact us!

**It should be noted that the actual rules of origin are more complex and consist of specific ‘tariff shifts’ for different subcategories of apparel (i.e. shirts and shoes — very different). The complexity means that a rule of thumb (known as ‘yarn-forward’) is most often used by importers when speaking of these requirements which we used to write this article. This means that your imports/exports may qualify or not be qualified even if they pass our little quiz.

Should you or your vendor have questions regarding their eligibility, they can check the transformation requirements in Annex 5 of the CETA .

Annex 5 contains the requirements for goods to be considered duty-free no matter what the status of the quota system is.
Annex 5-A contains the requirements for goods failing the requirements of Annex 5 but that can still be imported under quota.

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Ecommerce, Customs and You provides answers to your questions on importing goods, written by the Border Bee staff.

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