Determination of Country of Origin for the Purposes of Marking Goods Regulations

The Department of Finance is considering the possible replacement of Canada’s two sets of country of origin marking regulations with one generic set of marking regulations to apply to all imported goods that are subject to marking.

A draft version of Schedule III Tariff Shift Rules incorporating the proposed changes can be downloaded here.

It is understood that this issue will be discussed at the next meeting of the CBSA’s Border Commercial Consultative Committee (BCCC). .

Background

Section 19 of the Customs Tariff authorizes the Governor in Council to require imported goods to be marked with their country of origin and to establish the terms and conditions governing this requirement.

Since the implementation of the North American Free Trade Agreement (NAFTA) in 1994, Canada has had two sets of country of origin marking regulations, one set for goods imported from non-NAFTA countries and one set for goods imported from NAFTA countries.  Each set of regulations contains three main elements: a list of goods required to be marked with their country of origin on importation into Canada; a list of exemptions from marking; and a test to be used to determine the country of origin of any particular good.

Both the NAFTA and non-NAFTA marking regulations contain the same list of goods required to be marked.  However, the NAFTA regulations have a longer list of exemptions from marking that were negotiated as part of NAFTA.  The NAFTA regulations also use “tariff-shift” rules of origin to determine the country of origin of goods, while the non-NAFTA regulations determine origin based on the country in which the good was last substantially manufactured.

Over the years since the implementation of NAFTA, it has become apparent that the NAFTA marking regulations have a number of advantages over the non-NAFTA regulations.  In particular, the marking exemptions in the NAFTA regulations are broader and more effective in ensuring that such things as manufacturing inputs are not subject to country of origin marking.  As the same time, the tariff-shift based rules for determining country of origin under the NAFTA regulations are easier for the Canada Border Services Agency to administer and provide more certainty for traders than the “substantial manufacturing” test for determining origin in the non-NAFTA regulations.

Accordingly, in order to facilitate import procedures for traders, the Department of Finance is contemplating replacing these two sets of regulations with one set of regulations to apply to all imported goods.  These regulations would consolidate the NAFTA and non-NAFTA marking regulations into one set applicable to all imported goods subject to marking, regardless of the country from which the goods are imported.  The new regulations would use the same list of goods required to be marked as those in the current regulations, but use the marking exemptions used in the NAFTA regulations.  The tariff-shift rules of origin in the new regulations would be based on those in the NAFTA regulations, but would be updated to align with the 2007 version of the Harmonized System, upon which most countries’ tariff schedules are based, and significantly liberalized to take into account the changes in the market conditions.