What Exporters in Canada Need to Know About the Canadian-EU Trade Agreement

Helping Canadian Exporters Prep for CETA 

In September, the new Canadian-EU trade agreement will go into effect. Is your company ready?

In an era where future globalization and international trade is up in the air, at least one free trade agreement will soon come to fruition. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which will go into effect on September 21 (pending final approval), covers virtually all sectors and aspects of Canada-European Union (EU) trade.

Created to eliminate or reduce barriers to free trade between Canada and the EU, CETA removes customs duties, helps EU firms be more competitive in Canada, and makes it easier for the former to bid on Canadian public contracts, according to the European Commission. The new agreement involves 28 countries, including Canada and 27 different EU countries. The UK is currently part of the agreement, but won’t be once the final Brexit takes place.

The agreement has been under discussion for nearly 10 years, ever since Canadian and EU leaders agreed to conduct a joint study examining the costs and benefits of pursuing a closer economic partnership back in June 2007 at the EU-Canada Summit. For example, prior to CETA’s entry into force, only 25 percent of EU tariff lines on Canadian goods were duty-free, according to the Government of Canada. Upon CETA’s entry into force, the EU will remove tariffs on 98 percent of its tariff lines. Once CETA is fully implemented, the EU will have eliminated tariffs on 99 percent of its tariff lines.

“With CETA, the EU and Canada pledge to ensure that economic growth, social issues, and environmental protection go hand in hand,” the European Commission states on its website. The European Parliament voted in favor of CETA in February, and in the Canadian bill to implement CETA was granted royal assent.

What Makes CETA Different?

Unlike the North American Free Trade Agreement (NAFTA), CETA covers “sub-national procurement,” the public contracts of Canadian provinces and cities, so European companies can bid on hydro or subway deals, and Canadians can do the same in Europe – though the final deal will include many caveats and exceptions. “The EU deal covers extensions of drug patents in Canada and bigger trade quotas for agricultural products,” the Globe and Mail reports in Against all odds, CETA, Canada’s trade deal with Europe, moves forward. Now what?

Jennifer Deans, Schenker of Canada Limited’s Customs & Trade Compliance, Consulting Manager, says the agreement is important for shippers because it removes tariffs on approximately 98% of all goods moving between Canada and the EU (with some exceptions). Automobiles, for example, which currently have a 6.1% tariff, will be phased in via an 8-year tariff reduction process.

According to The Globe and Mail, CETA could bring major changes ahead for Canada’s auto sector, which is deeply integrated with the United States. “Vehicles that are at least 50% Canadian-made will enjoy open access into the EU market. Meanwhile, Canada will be allowed to export to the EU up to 100,000 vehicles a year that are at least 20% Canadian-made.”

When assessing how CETA will impact other industry sectors, Government Canada says it will open new agriculture and agri-food market opportunities for Canadian exporters in the EU. “With almost 94 percent of EU agriculture tariffs duty free upon entry into force, Canadian exporters will have an advantage over competitors in countries that do not have a free trade agreement with the EU,” it notes on its website.

Is Your Company Ready?

To prepare for the September 21 CETA start date, Deans says shippers should be talking to their EU vendors to make sure the proper audit trails are in place, mainly to ensure that the products that they are exporting qualify for and meet the rules of origin associated with the new agreement.

“Those declarations can be on the customs document itself, or filed on a separate piece of paper (for a period not to exceed 12 months),” says Deans. “At this point, there is no ‘formal’ certificate, so shippers can just list the qualified goods’ product numbers or file a declaration for each invoice.”

Shippers will also need to go through a certification process, and should expect a greater level of difficulty when exporting under the new agreement. That’s because Canadian manufacturers rely heavily on U.S. components that now must be excluded from the certification process when shipping to the EU.

“It will be more difficult for Canadian companies to get the goods to qualify than it will be for the European countries that are exporting to Canada,” says Emily Tsui ‎Director, Client Services and Solutions at Schenker of Canada Limited. To help shippers navigate the new rules, the logistics provider is offering a number of free webinars in September. It is also positioned to handle certification on its customers’ behalves. “If shippers provide us with the information and materials,” says Tsui, “we can quickly go through them and determine whether their goods qualify for CETA or not.”