A Happy New Year surprise

Canadian businesses got an unexpected treat over the Holidays: the CPTPP or Comprehensive and Progressive Agreement for Trans-Pacific Partnership, often abbreviated the TPP11, came into effect in Canada, Australia, Japan, Mexico, New Zealand and Singapore right after Christmas and just before the New Year, on December 30, 2018.

Why such an unusual date? It’s because the agreement was to be implemented 60 days after six of the 11 countries ratified it through their internal processes. Canada was the fifth country to ratify it, when Bill C-79 was passed on October 29, but the most important date is October 31, when Australia became the sixth country to ratify it, triggering an implementation process that few expected would happen so fast.

The Agreement with Vietnam will be in effect on January 15, 2019, as it ratified it two weeks after Australia. At time of writing, we’re expecting the ratification process from the remaining countries – Brunei, Chile, Malaysia and Peru soon.

Why is this good news?

It’s actually a very big deal, which opens interesting new markets for Canadian exporters and provides access to competitive suppliers for Canadian manufacturers, importers and distributors, just as the situation with our main trading partner, the U.S., continues to be full of uncertainties.

What are the main elements to know?

The CBSA issued its traditional Customs Notice 18-22 on December 5, notifying the trade of the implementation dates, the Rules of Origin (found in Annex 3-D of Chapter 3), the Proof of Origin documentary requirements, and the usual transhipment conditions applicable to Free Trade Agreements, i.e. goods can be transhipped, as long as they stay under Customs’ control at all times.

The CBSA has also informed brokers about the newly created Tariff Treatment Code # 33, to be shown in the all-important field # 14 of all B3 import declarations – this is the field that links to the preferential duty rate. Should goods be cleared under the Most Favoured Nation treatment code in effect prior to the agreement, therefore paying higher duties, either in error or due to missing origin certification, requests for refunds can be made within four years of the release date.

What are the next steps?

Canadian freight forwarders, Customs brokers and similar service providers should establish partnerships or strengthen their existing one in the countries involved and look at carrier offerings, in order to be well equipped to handle the expected increase in trade. Canadian exporters must familiarize themselves with the TPP’s Rules of Origin to ensure their products meet them and can therefore be more competitive in those markets. Canadian manufacturers, importers and distributors should hunt for new potential sources of supplies in those countries and do some benchmarking with their existing vendors.

Having these tools to diversify both our export markets and our supply chains are a great way to start the year. Thanks to the relatively new CETA Agreement with the European Union – in effect barely a year – and the brand-new Trans-Pacific Partnership: Canada, can now look East and West, not just South!