On August 1, 2017, the Canada-Ukraine Free Trade Agreement ("CUFTA") enters into effect. The CUFTA is a trade in goods agreement (that is, it does not cover services and investment). Canada has agreed to reduce most customs duty rates to "free" or 0% immediately upon implementation on goods that meet the rules of origin. Pursuant to Chapter 2 of the Canada-Ukraine FTA, each party shall reduce or eliminate customs duties on goods originating in either party in accordance with the tariff elimination schedules in Annex 2-B. In Article 1 of Annex 2-B, Canada agrees to eliminate customs duties on all goods in Chapters 1-97 of the Harmonized System that provides for Most-Favoured-Nation rate of duty, with the exception of any goods Canada has listed in Annex 2-B (which is a short list). We have prepared a chart that sets out H.S. Chapters and which Chapters become duty-free immediately upon implementation.
Some of the Ukraine-origin goods that Canadian importers may look forward to importing on a duty free basis are:
- Ukrainian beer;
- Ukrainian vodka;
- Ukrainian chocolate;
- Pysanka/pysanky;
- Table cloths;
- Ceramics;
- Clothes;
- Toys;
- Copper; and
- Walking sticks.
Some of the Canadian-origin goods that Canadian exporters may look forward to exporting are:
- grain,
- canola;
- beef,
- pork;
- fish;
- wines/ice wines;
- maple syrup;
- softwood lumber;
- animal feed;
- medications;
- cosmetics and skin care;
- cars;
- mining equipment;
- semi-trailers;
- air compressors;
- tires;
- asphalt;
- plastics; and
- etc.
The rules of origin in CUFTA are important in determining whether a good is Ukraine-origin or Canadian origin. Just because a good is shipped from Ukraine does not mean that it is originating for the purposes of the CUFTA. It is necessary to carefully review Chapter 3 of the CUFTA regarding rules of origin and origin procedures.
Another area where there may be significant business between Ukraine and Canada is in the area of e-commerce. Chapter 8 of CUFTA addresses e-commerce. Canada and Ukraine have both agreed to not apply a customs duty, fee or charge on a product delivered electronically (which is defined to mean "delivered through telecommunications, alone or in conjunction with other information and communication technologies").
What questions should Canadian importers be asking prior to exporting to Ukraine?
Canadian importers should get ready to take advantage of the CUFTA benefits. It is time to start asking questions, such as:
- What goods do I currently import from Ukraine?
- What new goods would I like to import from Ukraine?
- Do those goods that I currently import or would like to import from Ukraine meet the rules of origin in the CUFTA?
- What is the H.S. classification of the good to be imported from Ukraine? (You need the answer to this question in order to review Canada's commitments for duty elimination/duty reduction)?
- Are the goods that I import/wish to import within Canada's Schedule of duty elimination/duty reductions commitments in CUFTA? (If the answer is yes, then the goods may not be duty free immediately, if the answer is no, you still must ask questions about origin before knowing if the goods are duty-free immediately upon implementation)
- What is the rule of origin in CUFTA applicable to that good based on that H.S. classification number?
- Do the goods originate in Ukraine according to the CUFTA rules of origin? (you may need more information or assistance from customs counsel to answer this question)
- What is the applicable duty rate of the goods?
- Who within my organization must update computerized records and databases so that customs documentation will be correct after provisional implementation?
- What changes need to be made within our computerized record keeping programs and databases?
- Has there been a meeting with the customs broker and freight forwarded to make sure that they have updated computerized records and databases?
- Do I have the necessary Certifications of Origin from suppliers of Ukrainian-origin goods?
- What is the value for duty for customs purposes of the goods to be imported? (This would be a good time to revisit the issue and consider whether kits comprise Ukrainian-origin goods and non-Ukraine origin goods)?
- What documentation do I need before I can import this good?
- Do I require other governmental certification approvals for the goods I import/plan to import from Ukraine?
- Are there any sanitary or phyto-sanitary requirements?
- Are there any Canadian labelling or marking requirements for the goods?
- What record keeping requirement do I have to implement under Canadian law to maintain CUFTA benefits that I claim?
- Do I require quota to import the goods?
- Are the goods subject to antidumping or countervailing duties (applies to some steel products)?
- Are any of the persons with whom I want to do business subject to economic sanctions pursuant to the Special Economic Measures (Ukraine) Regulations?
- Are there other restrictions on doing business with Ukraine (including Crimea) pursuant to the Special Economic Measures (Ukraine) Regulations?
There are many other important questions to ask – hopefully this gets you started asking questions.
What questions should Canadian importers be asking prior to exporting to Ukraine?
Canadian exporters should get ready to take advantage of the CUFTA benefits. It is time to start asking questions, such as:
- Are any of the persons with whom I want to do business subject to economic sanctions pursuant to the Special Economic Measures (Ukraine) Regulations?
- Are there other restrictions on doing business with Ukraine (including Crimea) pursuant to the Special Economic Measures (Ukraine) Regulations?
- Are the goods that I wish to sell to Ukraine likely to be re-exported to Russia?
- Can I get an end-use certificate setting out who is buying the goods, where the goods will be used and for what purpose the goods will be used?
- What goods do I currently export to Ukraine?
- What new goods would I like to export to Ukraine?
- Do those goods that I currently export to or would like to export to Ukraine meet the rules of origin in the CUFTA?
- Do the goods have U.S-origin components? Do I need an export permit to export the goods to Ukraine?
- What is the H.S. classification of the good to be exported to Ukraine?
- Are the goods that I export/wish to export within Ukraine's Schedule of duty elimination/duty reductions commitments in CUFTA?
- What is the rule of origin in CUFTA applicable to that good based on that H.S. classification number?
- Do the goods originate in Canada according to the CUFTA rules of origin? (you may need more information or assistance from customs counsel to answer this question)
- What is the applicable duty rate of the goods?
- Who within my organization must update computerized records and databases so that customs documentation will be correct after provisional implementation?
- Do I need to provide an export declaration to the Canada Border Services Agency when I sell to Ukraine?
- What changes need to be made within our computerized record keeping programs and databases?
- Has there been a meeting with the customs broker and freight forwarded to make sure that they have updated computerized records and databases?
- Can I make the necessary Certifications of Origin or get certifications of origin if I am a resupplier?
- What is the value for duty for customs purposes of the goods to be exported?
- What documentation do I need before I can export this good?
- What record keeping requirement do I have to implement under Canadian law to maintain CUFTA benefits that I claim?
- Are the goods subject to a quota restriction in Ukraine?
There are many other important questions to ask – hopefully this gets you started asking questions.
What questions should Ukrainian exporters be asking prior to exporting to Canada?
Ukrainian exporters should get ready to take advantage of the CUFTA benefits. It is time to start asking questions, such as:
- Are the goods that I want to export to Canada originating in Ukraine according to CUFTA rules of origin?
- Can I provide a certification of origin with respect to the goods?
- What is the tariff classification number under Canada's Customs Tariff for the goods I will ship to Canada?
- Do I have to register for Canadian GST/HST purposes?
- Do I have to register to collect any provincial sales taxes (will I sell into British Columbia, Manitoba or Saskatchewan)?
- What Incoterm should I use with respect to shipments to Canada (if I do not want to get into the Canadian tax system)?
- Do my goods meet Canada's regulatory standards or do my goods meet mutual recognition requirements in the CUFTA?
- Do I need testing certificates or are the standards certified by the manufacturer?
- Do my goods meet Canada's labeling requirements?
- What paperwork is required for the importer to easily import the goods into Canada?
- Does Canada impose any import restrictions with respect to the goods?
- What do I need to do to ensure that the Canada Border Services Agency will release the goods in a timely manner?
- What is the Partners in Protection Program? Are there steps I can take to become an approved exporter in a FAST program so my goods will be considered to be low risk?
- What volume of goods do I expect to export to Canada – should I operate in Canada via a branch office or a Canadian subsidiary?
- Are there Canadian income tax consequences to my normal way of selling into markets?
- Should I register my trademarks in Canada?
- How can I protect my intellectual property in Canada?
- Do Canada's consumer protection laws apply to my goods?
- What reporting requirements are there for goods in Canada with respect to recalls in Canada and outside Canada?
- Will sales representatives who wish to travel to Canada need to obtain a visa?
There are many other important questions to ask – hopefully this gets you started asking questions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
