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Canada-United Kingdom Trade: Duty Remission Allowed on Imported Goods for Interim Period

Canada-United Kingdom Trade: Duty Remission Allowed on Imported Goods for Interim Period
December 30, 2020

Canada has issued the United Kingdom Trade Continuity Remission Order to allow imports of goods to benefit from the Canada-United Kingdom Trade Continuity Agreement (Continuity Agreement), which has not yet entered into force. Importers of goods otherwise qualifying for preferential tariff treatment under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) will have duties remitted until such time as the Continuity Agreement receives royal assent in Canada.

As discussed in our December 2020 Blakes Bulletin: Canada-United Kingdom Trade: Seamless Transition Based on CETA Rules, Canada and the United Kingdom announced the Continuity Agreement on November 23, 2020. The Continuity Agreement was to ensure that the trading relationship established under the CETA continued to apply between Canada and the UK after December 31, 2020 while a new trade agreement is negotiated.

STOP-GAP MEMORANDUM OF AGREEMENT REACHED

Though the Continuity Agreement was signed by both countries on December 9, 2020, the parties have not been able to complete the respective parliamentary approvals necessary for ratification. In order to avoid a potential gap in coverage, on December 22, 2020, Canada and the UK announced that they had signed a memorandum of understanding (MOU) providing that the benefits of CETA would continue in effect until the Continuity Agreement can be ratified. The text of the MOU is available on the Government of the United Kingdom’s website. The MOU expires after three months if it is not renewed and the Continuity Agreement has not been ratified by that date.

TEMPORARY REMISSION ORDER BEGINNING JANUARY 1, 2021

As part of implementing the MOU, Canada’s Minister of Finance has issued the United Kingdom Trade Continuity Remission Order, 2021 #20-1135 (Remission Order). In turn, the Canada Border Services Agency (CBSA) has issued two customs notices regarding imports from the United Kingdom after January 1, 2021.

CBSA Customs Notice 20-38 provides that, following January 1, 2021, importers of goods from the United Kingdom, the Channel Islands, Gibraltar and the Isle of Man must account for their goods under the Most-Favoured-Nation (MFN) tariff treatment. Goods already in transit to Canada before January 1, 2021 are still eligible for CETA treatment.

CBSA Customs Notice 20-39 puts into force the MOU for goods shipped to Canada after January 1, 2021. Importers must still claim the MFN tariff treatment, but should also enter “OIC #20-1135” into the “Special Authority” field of Form B3-3 to obtain a remission of any duties paid in excess of those that would have been paid under CETA.

CONTINUITY AGREEMENT AND FIRST SIDE LETTER

The full text of the Continuity Agreement has now been made available on the Government of Canada’s website. The agreement states that the provisions of CETA are incorporated mutatis mutandis into the Continuity Agreement, subject to certain express clarifications, including modifications provided for in annexes A and B. The Continuity Agreement also provides that the parties shall strive to conclude negotiation of a new agreement within three years of the Continuity Agreement’s date of entry.

Further, on the same day the Continuity Agreement was signed, Canada and the UK entered into a side letter providing that cheese originating in the UK shall continue to be eligible to be imported into Canada under the reserve for the European Union within Canada’s World Trade Organization (WTO) cheese Tariff Rate Quota (TRQ) until December 31, 2023, after which time it will be eligible to be imported under the reserve for non-EU WTO members within Canada’s cheese TRQ. The side letter also states that the parties shall endeavour to reach a new arrangement on cheese no later than June 30, 2023.

NEW YEAR, NEW NEGOTIATIONS

The signing of the MOU will come as a relief to anyone reliant on CETA trading between the Canada and the UK, as it removes any question of continuity after December 31, 2020. It is likely that the Continuity Agreement will be ratified in early 2021, following which the parties will no doubt focus their efforts on forging a new agreement.

For further information, please contact:
 
Greg Kanargelidis                     416-863-4306
Jennifer Maxwell                       +44 (0) 20 7429 3558
Skye Sepp                                  416-863-3887
 
or any other member of our International Trade group or London office.