Canada’s unsung trade agreement

by Christian Sivière

CUFTA, the Canada-Ukraine Free Trade Agreement, which came into effect on August 1, did not get all the attention it deserved, as it happened shortly after the Canada Free Trade Agreement between Canadian provinces and territories on July 1 and just before the long-anticipated Free Trade Agreement with the European Union on September 21.

With the exception of a few agricultural goods, the CUFTA essentially eliminates Customs duties on most products, either immediately or through a tariff phase-out period.

The duty elimination process, however, is asymmetrical, as Canada has opened its market immediately for 98 percent of tariff items, both industrial and agricultural goods, with only a few exceptions: 108 tariff positions in poultry, dairy products, eggs and egg products, cheese and sugar. And there is a seven-year phase-in period for automobiles. Ukraine on the other hand, has granted duty-free access to Canadian products immediately on 72 percent of tariff items, and provides transitional periods of one, three, five and seven years for 27 percent of tariff items.

The CUFTA also opened government procurement to companies from both countries, giving them non-discriminatory access to bid on public airport, railway, mail and public transportation projects. In this context, Ukraine has recently opened an online public procurement platform called ProZorro, with the objective of providing equal, fair and transparent treatment to all bidders.

The Canada Border Services Agency advised the trade of the implementation of the CUFTA for August 1, as well as providing links to the tariff provisions, proof of origin and shipping requirements.

A new preferential tariff treatment was introduced, namely the Ukraine Tariff (UAT) code #32, to enable the Customs clearance of inbound shipments in Canada. Entitlement to the Ukraine Tariff is determined in accordance with the rules of origin set out in Chapter 3 of the CUFTA. As with every Free Trade Agreement, a certain percentage of non-originating products is allowed, in some cases, providing sufficient transformation of a product takes place, evidenced by a shift in the H.S. code.

Product-specific rules of origin are found in Annex 3-A and organized numerically, similarly to NAFTA’s Annex 401. Canadian exporters must familiarize themselves with these rules to determine if their products comply and will obtain the lower Customs duties in Ukraine. Unlike NAFTA, which requires a separate Certificate of Origin on a specific form, the required proof of origin under CUFTA is an Origin Declaration incorporated in the seller’s commercial invoice. A model declaration can be found in Annex 3-B of the Agreement.

Goods may be shipped to Ukraine or to Canada with a trans-shipment, providing the remain under Customs control/in bond at all times (article 3.13). Refunds of excess duties paid after August 1 can be made within four years of the importation date.

What does the current trade between Canada and Ukraine look like? In 2016, Canada’s exports to Ukraine amounted to $255 million (up from $205 million in 2015 and $137 million in 2014), led by exports of mineral products, live animals and animal products, and vehicles, aircraft and associated equipment. On the other hand, Canada’s imports from Ukraine came to $107 million (up from $67 million in 2015 and $99 million in 2014)), led by imports of vegetable products, transport equipment and machinery. Canada’s bilateral trade has been increasing steadily and will likely continue to grow further thanks to the CUFTA.