Beginning at the end of the year (December 30), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be in effect in Canada and five other countries that ratified the CPTPP last October, thereby fulfilling the threshold required for the pact’s implementation.
In the case of Vietnam, which completed its domestic approval process last month, the deal will come into force on January 14, 2019. Other signatories yet to ratify the CPTPP are Brunei, Chile, Malaysia and Peru.
The deal is the result of the 11 nations remaining after U.S. President Donald Trump’s promised withdrawal from the Trans-Pacific Partnership in 2017 amended the pact to enable it to take effect without Washington’s participation. Under the previous administration, the deal had been a largely American-led initiative aiming to put pressure on China to liberalize its trade practices.
Even without U.S. involvement however, the CPTPP remains one of the largest free trade agreements in the world, comprising 11 countries with a combined population of nearly 500 million people and GDP of $13.5 trillion or roughly 13% of the world’s economy. The CPTPP not only provides enhanced market access to key Asian markets, but also invites increased participation from other countries wishing to join the trade pact.
What Does This Mean for Canadian Businesses?
With the exception of a few agricultural goods, the CPTPP will essentially eliminate the customs duties on all qualifying imports into Canada from a country for which the CPTPP is in force. By the same token, 99% of Canada’s current exports to the CPTPP markets will now enter tariff-free.
According to the Canadian government, the trade pact “is expected to provide a net advantage to Canada resulting from increased market access and greater regional economic integration with Asia-Pacific countries.” Ottawa says that once fully in force it expects the agreement to boost Canada's GDP by $4.2 billion, thanks to preferential access to the other 10 CPTPP countries.
In particular, the government notes that since the Trump administration withdrew the United States from the TPP last year, “Canada will enjoy better market access to other CPTPP countries than U.S. competitors, enabling Canadian exporters to capture larger market shares in these countries.”
CPTPP’s Relationship to Other Trade Agreements
Canada already has trade agreements or bilateral arrangements with some of the other 10 participating nations (Chile, Mexico, Peru, and Australia), so there is a certain amount of overlap with the new CPTPP.
Canadian businesses using one of the existing agreements should therefore consider whether it may be better to use the new CPTPP and determine if it would be worth transitioning to new origin rules, reporting requirements and documentation.
It should be kept in mind that the rules of origin and other requirements under the CPTPP will be different from those under the new NAFTA.
As of December 30, 2018, a new preferential tariff treatment the Comprehensive and Progressive Trans-Pacific Partnership Tariff (CPTPT) will be in effect for originating imports from Australia, Japan, Mexico, New Zealand and Singapore. Entitlement to the CPTPP tariff treatment is determined in accordance with the rules of origin set out in Annex 3-B of Chapter 3 of the CPTPP.
The newly assigned Tariff Treatment Code 33 must be indicated on the B3 Accounting Document to account for goods entitled to CPTPT. This preferential tariff treatment will be extended to originating imports from Vietnam as of January 14, 2019.
Proof of Origin
Eligibility to claim the preferential tariff treatment is determined in accordance with the rules of origin set out in Annex 3-B of Chapter 3 of the CPTPP. Importers must have the certification of origin in their possession to claim CPTPT.
Additional information concerning the CPTPP certification of origin is contained in Article 3.20 of Chapter 3. In reference in Article 3.20 and 3.21, if an importer completes the Certificate of origin they are required to provide documents or other information to support the certification. Failure to comply will lead to prohibition of issuing a certificate.
For additional details concerning transshipment, refunds and links to additional information regarding the CPTPP, see Customs Notice 18-22.
More Information About CPTPP
- Business Benefits of Canada’s Newest Trade Deal – Export Development Canada
- Global Affairs Canada CPTPP Website Portal
- Government of Canada – Frequently Asked Questions About CPTPP
- Global Affairs Canada – CPTPP Backgrounder
If you have any questions about how your business can possibly take advantage of the CPTPP, please do not hestitate to contact us.