For most purposes, including the Rules of Origin and the tariff schedules referred to below, Canada’s free trade agreement with the European Union (EU) came into force on September 21, 2017. The agreement is formally known as the Comprehensive Economic and Trade Agreement (CETA).
CETA is a powerful agreement. 98% of the tariff items of Canada and the EU became duty free in 2017. Another 1% are subject to staged tariff reductions that fully expire at the end of 2023. Only 1% of tariff items will remain dutiable.
The European Union is a customs union of the following 27 member countries. Goods pass between them free of duty and customs controls. They trade with outsiders as if they were a single country, having a common HS tariff schedule and common customs laws administered by the European Commission.
- Czech Rep
Tariff Elimination and Reduction
Most tariff items became duty free for both parties effective September 21, 2017. However, for certain goods the duties were reduced in stages under the Tariff Schedules in Annex 2-A to the Agreement from base rates equal to each party’s MFN rates for 2009. There are 7 staging categories:
- A: Tariff eliminated effective September 21, 2017.
- B: Tariff eliminated effective January 1, 2020, following staged reductions.
- C: Tariff to eliminated effective January 1, 2022, following staged reductions. The tariff rate for calendar 2021 is 16.67% of the base rate.
- D: Tariff to eliminated effective January 1, 2024, following staged reductions. The tariff rates for calendar 2021, 2022 and 2023 are, respectively, 37.5%, 25% and 12.5% of the base rate.
- E: Tariff remains at the base rate indefinitely.
- S: Tariff to eliminated effective January 1, 2024. Tariff remains at the base rate until September 16, 2022. Tariff is 66.67% of the base rate from September 17 to December 31, 2022. Tariff is 33.3% of the base rate for calendar 2023.
- AVO+EP: The ad valorem portion of the tariff was eliminated effective September 21, 2017. The specific duty remains at the base rate indefinitely.
Tariff Rate Quotas
Certain of the seafood and agricultural goods listed in the Tariff Schedules are subject to tariff rate quotas set out in Annex 2-A. For goods in staging category E, importations up to a specific quantity are duty free or subject to a lower duty than the base rate. Importations over that specific quantity are subject to the base rate indefinitely. For goods in staging category C or D, importations up to a specific quantity were duty free effective September 21, 2017. Importations over that specific quantity are subject to the staged reduction of duties as long as the staging remains in effect.
Rules of Origin
The basic criterion for origination under CETA is that a good be produced within Canada or the EU, or both together. The term “production” is broadly defined to mean any kind of working or processing, including such operations as growing, mining, raising, harvesting, fishing, trapping, hunting, manufacturing, assembling, or disassembling a product.
Production within Canada and/or the EU does not by itself mean that a product will be considered to originate. The product must also fall into one of the following three criteria which are designed to ensure that the value added from such production is significant:
- the product has been wholly obtained within the meaning of Article 4:
- the product has been produced exclusively from originating materials: or
- has undergone sufficient production within the meaning of the Product-Specific Rules of Origin (PSROs) in Annex 5.