On 21 September 2017, the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada entered into force provisionally.
CETA is designed to improve trade between the EU and Canada. Key features include those listed below. The agreement:
- Substantially eliminates customs duties on EU exports, in particular industrial and agricultural products (for example, tariffs on chocolate and confectionary are now 0% instead of 10%, whilst vehicles and parts are also set at 0% compared to up to 9.5% previously);
- Allows EU businesses to bid for public procurement contracts in Canada;
- Provides a Regulatory Co-operation forum to facilitate information exchange;
- Introduces an Investment Court System based on EU’s TTIP negotiations (this is controversial and is excluded from provisional application); and
- Liberalises access to services.
Now that CETA has been applied provisionally, it needs to be ratified by Member States’ national parliaments, and in some cases regional ones too, in order for it to come fully into force.
Practical considerations for companies:
Aside from the clear costs-savings arising from the abolition of tariffs on products covered, there are many other potential benefits including on the regulatory side. For example, under CETA, the EU and Canada have agreed to recognise the validity of each other’s conformity assessment certificates in relation to a variety of products, meaning that exporters need only test their products once. The inefficiency of double-testing will fall away, saving time and costs for traders on both sides of the channel.
In order to benefit from preferential tariffs under CETA, exporters must be registered in the Registered Exporter System (except for shipments with a value below EUR6,000 for which registration is not a requirement). Exporters are also advised to ensure that they are acquainted with applicable EU rules of origin so as to make full use of preferential tariff rates for EU and Canadian goods. If unsure, confirmation can be obtained from the customs authorities who can issue a Binding Origin Information (or BOI). This is valid for three years and exporters should keep a record of any BOIs they receive. Likewise, if uncertain about how a product is classified under the Harmonised System, a Binding Tariff Information (BTI) can be applied for.
Many of these considerations are relevant for importers, too, who will now be able to import parts and components for their products free of customs duties. This also signals an opportunity for importers to diversify their suppliers and ultimately improve their businesses. It will naturally be important going forward to closely monitor market trends and developments.
Please contact Robert MacLean with any questions on the above post or about the agreement.