While there are some similarities between the Canada and European Union Comprehensive Economic Trade Agreement (CETA) specifications and the North American Free Trade Agreement (NAFTA), the differences are significant. These differences mean extra caution must be taken and an in-depth understanding of the CETA rules of origin will be required even for those with an understanding of NAFTA.
Rules of Origin
Some of the rules of origin within the CETA text are complex and exporters on both sides will have to ensure they have taken the correct steps in their qualifying process, or engage service providers to complete the qualification process on their behalf. It’s confusing to many when the governments state; “when the agreement comes into force, 98.4% of Canada’s tariff lines and 98% of the EU tariff lines are expected to become duty free”. All exported goods must go through a qualification process and be covered under a CETA origin certificate to qualify for duty-free or a reduced duty entry into Canada or the EU.
Certain sections within CETA have quotas, and when qualifying a product within quota it will be important to review all the information as some of the quota rules will provide additional benefits. It will be important for exporters, or a service provider qualifying the product on their behalf, to understand the additional benefits of applying these complex quota rules. While quotas are the responsibility of the importing country to issue and manage, most will be applied on a first-come first-served basis. However, adequate allowances within the quotas are expected. Also, once the agreement is in place, there will be committees monitoring and adjusting the quotas over the years. This means exporters and their service providers will have to take extra care to ensure all considerations have been taken into account when qualifying products when quotas are applicable.
Areas covered under a quota are:
- Agricultural Products
- Fish and Seafood
- Textiles and Apparel
Cheese and beef are two products that proved challenging for the negotiators, however an agreement was reached. Canada has agreed to increase the quota for EU cheese by 18,000 tons over a 6-year period. This increase is comprised of two parts: 16,000 tons of regular cheese and 1,700 tons of industrial-use cheese – an additional 800 tons of cheese will be added to the quota also, due to new member states in the EU, but that is outside the CETA. The EU has agreed to fairly substantial concessions in the beef and pork industry in exchange for the increased access to Canada’s cheese market.
Canada will eventually receive duty-free access for 45,840 tons of beef, which will be divided into a quota for frozen beef (15,000 tons) and fresh chilled beef (30,840 tons), to be phased in over a 6-year period. The EU will also eliminate the in-quota of 20% duty on 11,500 tons of “high-quality beef”; this will be over and above the other quota concessions.
The lawyers for Canada and the EU are expected to complete the scrub and translations in 2015, with the agreement ratification anticipated for early 2016. While it’s understood that the ratification will take some time, it’s not too early to review potential benefits.