Canada to Rescind Trade Preferences from January 1, 2015

Industry news

Canada to Rescind Trade Preferences from January 1, 2015

The Canadian government recently announced the results of its comprehensive review of the General Preferential Tariff and the Least Developed Country Tariff, which provide preferential duty treatment to a range of goods from developing and least-developed countries. The Canadian government has decided to graduate from the GPT program 72 higher-income and trade-competitive countries effective from January 1, 2015.

Affected suppliers include, among others, India, China, Hong Kong, Argentina, Brazil, Indonesia, Macao, Malaysia, Russia, South Africa, South Korea, Thailand and Turkey. Imports from these suppliers in transit to Canada prior to January 1, 2015 will still benefit from preferential duty treatment under GPT while imports in transit on or after that date will face regular most-favored-nation duties.

Canada will review the list of GPT beneficiary countries every two years on the basis of the same objective economic criteria used in the current review. GPT treatment will be withdrawn from (1) countries that are classified for two consecutive years as high income or upper-middle income economies according to the latest World Bank income classifications, and (2) countries that have a one percent or greater share of world exports for two consecutive years according to the latest WTO statistics.

The Canadian government also decided to renew the revamped GPT program for ten years and take action to ensure that the benefits of the LDCT regime would not be reduced by changes to GPT country eligibility. This will allow, for example, apparel assembled in an LDC like Bangladesh, Cambodia, Laos or Haiti from fabric cut in that country or Canada, or from parts knitted to shape, to incorporate fabric and yarn made in a graduated GPT country as long as the value of any non-LDC materials, including packing, that are used in the manufacture of such apparel does not exceed 75% of the ex-factory price of the goods as packed for shipment to Canada. In addition, duty-free treatment will be preserved for textile made-ups that are cut, or knitted to shape, and sewn or otherwise assembled in an LDC from fabric produced in an LDC or Canada from yarns made in a graduated GPT country.

The Canadian government believes based on current trade patterns that the removal of the 72 beneficiary countries from the GPT program will result in additional annual tariff revenues of CAN$ 333 million. This amount could change over time as importers shift to alternate GPT-eligible or other duty-free sources of supply. Canadian authorities further note that these changes are not expected to have any impact on Canadian gross domestic product or consumer prices because they affect less than two percent of total imports into Canada.