UK-Canada FTA: How to import at zero duty? PART 3
To save on customs duty, businesses need to meet the rules of origin contained in the agreement. Understand what needs to happen and download the official text.
This three-part series includes:
Part 2: UK-Canada FTA: Summary of the Agreement + Download legal text (S,P)
Part 3: How to meet the Rules of Origin to cut customs duty to zero (S) + Download the product-specific rules of origin directly (P)
As discussed in previous parts, the UK-Canada trade agreement includes provisions on:
trade in goods - including provisions on preferential tariffs, tariff rate quotas, rules of origin and sanitary and phytosanitary measures
trade in services and investment
intellectual property, including geographical indications
government procurement
Tariff rates on goods
Canadian and UK exporters will have clear and favourable rules that take into consideration the UK's and Canada’s supply chains to determine which goods are considered originating in the UK or in Canada and therefore eligible for preferential tariff treatment.
The TCA largely replicates the CETA rules of origin. The agreement allows for cumulation with the EU on a transitional basis for 3 years.
This means that materials sourced from the EU that are used in the production of goods in Canada or the U.K. can continue to count toward the originating status of those goods for purposes of Canada-U.K. trade.
TCA Origin Quotas reflect volumes negotiated on a bilateral basis, also subject to the 3-year transitional timeframe.
Similar to the CETA, TCA’s Origin Procedures establish common approaches for importers, exporters, and customs authorities with regard to areas such as certification of origin, record keeping, and origin verification.
Accordingly, the chapter clarifies the processes necessary for importers and exporters to take full advantage of the Agreement, while at the same time providing customs authorities with an applicable methodology to ensure that only qualifying goods enjoy the benefits of TCA.
Protocol on Mutual Acceptance of the Results of Conformity Assessment
Not all jurisdictions are alike in terms of the manner in which they apply conformity assessment procedures.
This can impose additional costs and delays for producers who wish to export. The TCA Protocol on Conformity Assessment replicates CETA provisions to address these issues by creating a framework for businesses to bring certain products to the UK / Canadian market without needing to have their products tested twice. The Protocol achieves this by establishing a mechanism through which Canadian or UK conformity assessment bodies in certain product categories can test products to certify their conformity with Canadian/UK technical regulations, and have that certification recognized and accepted in the UK/Canada respectivly.
Protocol on Mutual Recognition of the Compliance and Enforcement Programme regarding Good Manufacturing Practices for Pharmaceutical Products
As with CETA, the Protocol’s central objective is to reduce the number of duplicative visits and certification requirements faced by pharmaceutical manufacturers that sell their products in both Canada and the UK. As a result of the mutual recognition achieved under the Protocol, regulators in the UK will be able to rely on the certifications granted by Canadian regulators for certain products, and vice versa.
Tariff rate quotas
Tariff rate quotas in the agreement have been tailored specifically to the UK and Canada. There is no outward tariff rate quota for cheese in the UK-Canada trade agreement. However, UK cheese exports to Canada continue to be eligible under the EU reserve of Canada’s WTO cheese quota until 31 December 2023.
Rules of origin: Claiming preferential rates for your exports from the UK or Canada
The requirements for claiming preference remain largely unchanged.
A claim should be based on an origin declaration from the exporter that the product is originating. Some tips
When exporting to Canada or the UK include your EORI / Trader registration number in any origin declaration you issue to your customer, regardless of the value.
The origin declaration is to be provided on an invoice, or any other commercial document (excluding a bill of lading), describing the originating product in sufficient detail to enable its identification.
Using EU materials and processing in your exports to Canada
You can use EU materials or processes in your exports from the UK to Canada.
About the Rules of Origin in the UK-Canada FTA
A product is originating if it has been wholly obtained within the meaning of the UK-Canada FTA, if it has been produced from only originating materials or has undergone sufficient production on non-originating materials within the meaning of the UK-Canada FTA.
As long as the production is more than “insufficient” (according to Article 7), a product has undergone sufficient production (according to Article 5) when the conditions in Annex 5 are fulfilled.
Working or processing you do in the UK goes beyond the minimal operations listed in the trade agreement, and the other relevant conditions are met. For example, you cannot simply package or label a product from the EU and export it to Canada as a good originating in the UK.
See the list of operations that are insufficient in the incorporated Article 7 of the Rules of Origin Protocol. Read more also here
Here are some of the highlights, businesses need to think about:
Product Specific Rules (PSR) or list rules
The list rules specify what type of working or processing is required to be carried out on non-originating materials in order for the product to obtain originating status. The more commonly used and known list rules are a change in tariff classification e.g. change of tariff heading (CTH), change of tariff sub-heading (CTSH) etc., value-added of non-originating materials or specific processing that must be undertaken.
Note: In the UK-Canada FTA, the name and description of the list rules are different to those in other UK free trade agreements.
Tolerances
The provisions of tolerance rules allow the departure from sufficient production conditions set out in the list rules. It means that tolerance rules provide a certain
level of relaxation by allowing a certain percentage (a small amount) of non-originating materials to be incorporated in the production process without affecting the origin of the final product. The Agreement has both a general tolerance rule and specific tolerance rules for textiles and clothing.
See also: https://www.customsmanager.org/post/rules-of-origin-tolerances-explained
Cumulation
Bilateral cumulation is a system, where products/materials originating in the UK can be considered as materials originating in Canada if they are further processed in UK or incorporated into the product obtained there. Likewise, products/ materials originating in Canada may be considered as materials originating in the UK if they are further processed or incorporated into the product obtained there.
Access Rules of Origin Hub
Learn much more about the Rules of Origin in our exclusive Explainer Hub:
https://www.customsmanager.org/rules-of-origin
Download Product Specific Rules of Origin under UK-Canada FTA
Businesses need to analyse these against their products to ensure they can benefit from the rules of origin under the agreement (P).
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