Tax & Trade Blog

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CERTIFYING ORIGIN - NOT JUST A "FORMALITY"

RULES OF ORIGIN NEED TO BE CONSIDERED WHEN PREPARING CERTIFICATIONS

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Canada has a significant network of free-trade agreements which direct sellers can make good use of covering numerous countries including the United States and Mexico ("CUSMA"/"USMCA"), the countries of the European Union ("CETA"), and twelve trans-pacific countries (plus the UK) (the "CPTPP").

However, before claiming treaty benefits, importers are required to have either a Certificate of Origin or an equivalent certification confirming the goods qualify as originating under the relevant free trade agreement.

Canada-India trade and trade relations have plunged, stopped in their collective tracks by a Canadian government allegation that India may have been involved in the assassination of a Canadian Sikh activist.

In the balance is whether a Canada-India Free Trade Agreement (“FTA”) will ever come to fruition, and Canada’s growing trade with this aspiring superpower.

Here are the high points on why and why not a FTA with India would be a good thing for Canada.

Canada has bilateral free trade agreements with a number of other nations (e.g., between the US and Mexico under the USMCA, between Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam under the CPTPP, and with most of the European Union under the CETA).

Canada’s next target for free trade appears to be India, and Global Affairs indicates that negotiations toward an Early Progress Trade Agreement have been progressing rapidly!

Imported goods are identified using Canada’s tariff classification system. Tariff classification is important for two reasons: (1) the duty rate depends on the tariff classification; and (2) tariff classification determines eligibility for preferential duty rates under Canada’s various preferential trade agreements (generally speaking, “Free Trade Agreements” or “FTAs” for short).

Importers can sometimes find themselves in the unfortunate position of facing an enormous increase in duties, or disqualification from preferential FTAs, due to a tariff classification dispute with the Canada Border Services Agency (“CBSA”). As seen in the decision in Canada v. Best Buy Canada Ltd., 2021 FCA 161, classification is not always obvious!