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CPTPP to Take Effect by End of Year

     Export / Import

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has now been ratified by seven signatories (Canada, Australia, New Zealand, Japan, Mexico, Singapore and Vietnam), meeting the minimum threshold for the trade deal to take effect on December 30, 2018.  The deal will enter into force on December 30th for the initial six signatories and January 14, 2019 for Vietnam, with initial tariff reductions beginning December 31st.

The 11 CPTPP participating countries are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

There was an economic incentive to have six countries on board by December 31st, as some of the CPTPPs tariff cuts are immediate, but others, including the most sensitive agricultural and automotive products, will be phased out over timelines of a decade or more.

Benefits
The CPTPP is about opening new and growing markets, and better ways to increase and diversify trade.

With a single set of rules for all member markets, companies can accumulate inputs from within any member of the agreement for production alone, or in combination with companies in another member country, to produce goods for sale within the agreement.

This one set of rules is what made the original NAFTA so special.  But with more members, the CPTPP improves on what Canadian firms have had in North America by offering more sources of inputs and more markets into which to sell.  And, unlike the USMCA, the CPTPP will grow even larger as new countries join as early as next year.

China is reportedly suddenly showing interest in joining the CPTPP.  If true, this would give Canada a much-needed, and much better, alternative than negotiating one-on-one with China.  Instead, we could negotiate as part of a team with other members that seek more in trade and better agreements.

Quick Facts

  • The CPTPP represents a trading bloc of 11 countries with almost 500 million consumers and a combined economy worth of $13.5 trillion.
  • Canada’s merchandise trade with its CPTPP partners was over $95 billion in 2017.
  • Upon entry into force, 86% of CPTPP countries’ tariff lines will become duty-free.
  • The CPTPP was signed on March 8, 2018, in Santiago, Chile.  Canada, Australia, New Zealand, Mexico, Japan, Singapore and Vietnam have ratified the agreement through their respective processes.
  • The CPTPP will enter into force 60 days after six of the signatories complete their domestic procedures and deposit their notice of ratification to the CPTPP Depositary (New Zealand) – this was accomplished October 30, 2018.

Duty Elimination Schedule

As soon as the agreement comes into force, 90% of Canadian tariffs on goods will be duty free.  The Staging category for Canada is from implementation date to phase-in period to 12-year time frame duty reductions to duty free status.

Here is a list of category time lines:

  • Category EIF – Duty elimination upon date of entry into force;
  • Category B4 – Elimination in four annual stages to January 1 of year 4;
  • Category B6 – Elimination in six annual stages to January 1 of year 6;
  • Category B7 – Elimination in seven annual stages to January 1 of year 7;
  • Category B11 – Elimination in eleven annual stages to January 1 of year 11;
  • Category CA1 – Maintain at base rate during year 1 to year 8. Elimination in four annual stages starting in year 9. Duty-free January 1 of year 12;
  • Category CA2 – reduced to one-quarter of the base rate in year 1 and maintained at that rate through year 11 and shall be eliminated to duty free January 1 of year 12;
  • Category CA3 – reduced to a 5.5% duty rate on date of entry into force in year 1. Duty reduced to 5% in January 1 of year 2. Duty reduced to 2.5% duty rate January 1 of year 3. Duty rate 2% in year 4. Duty free in Year 5;
  • Category TRQ governed by the terms in Appendix A TRQs of Canada’s schedule to Annex 2-D.

Please refer to the Tariff Elimination Schedules for each country and the full text of the agreement.

Claiming the preferential treatment to CPTPP
The preferential treatment can be used if a certificate of origin is completed by the exporter, producer or importer.  In reference in Article 3.20 and 3.21, if an importer completes the certificate of origin, they are required to provide documents or other information to support the certification. Failure to comply will lead to prohibition of issuing a certificate.

Format of the certificate of origin
The certification of origin:

  • Need not follow a prescribed format;
  • Be in writing, including electronic format;
  • Specifies that the good is both originating and meets the requirements of this Chapter; and
  • Contains a set of minimum data requirements as set out in Annex 3-B (Minimum Data Requirements).

The certificate of origin can be issued for each shipment or as a blanket certificate, and cannot exceed 12 months or for such longer period specified by the laws and regulations of the importing country.

The CBSA has advised that they hope to have CPTPP Implementation Customs Notice published in the next few weeks.  The CPTPP Proposed Regulatory Amendments and Proposed New Regulations Customs Notice will follow soon after.  Both notices will be published prior to the December 30 implementation date.

For more information visit the FAQs issued by Global Affairs Canada or contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.

Quick Tip #31
Act Quickly to resolve non-compliance issues and avoid increasing fines

Most monetary penalties issued by the Canada Border Services Agency (CBSA) under the Administrative Monetary Penalty System (AMPS) escalate with repetition.

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