Canada: The Origin Verification Process In The Canada-EU CETA Is Different From NAFTA And Other Free Trade Agreements

Last Updated: September 18 2017
Article by Cyndee Todgham Cherniak

Canadian businesses are used to the North American Free Trade Agreement ("NAFTA") customs procedures for verifying certificates of origin that effectively state that exported goods are "made in Canada". The NAFTA origin verification procedures have been adopted in most other Canadian free trade agreements.

Under NAFTA, United States Customs and Border Protection ("US CBP") officers can ask for permission to come to Canada to attend at the Canadian premises of a Canadian supplier of NAFTA goods to verify statements of origin in a certificate of origin.  Similarly, Canada Border Services Agency ("CBSA") officers can ask U.S. exporters of NAFTA goods if they can attend at a U.S. supplier's premises on U.S. soil to review documents and computer records (and other records) to verify statements of origin in a certificate of origin.

The Canada-European Union Comprehensive Economic and Trade Agreement ("Canada-EU CETA") establishes a very different origin verification process. The Canada-EU CETA Protocol on rules of origin and origin procedures establishes an origin verification process whereby the European Union verifies EU company certifications of origin / Origin Declarations made by EU exporters and producers and the CBSA verifies Canadian suppliers' certifications of origin / Origin Declarations made by Canadian exporters and producers. The CBSA will not travel to the EU to verify EU certifications of origin / Origin Declarations. The Canada-EU CETA will be provisionally implemented on September 21, 2017.

The new origin verification procedures are found in Article 29 of the Canada-EU CETA Protocol on rules of origin and origin procedures.  In Article 29, Canada and EU Members have agreed assist each other, through their customs authorities, in verifying whether products are originating and ensuring the accuracy of claims for preferential tariff treatment.

Canada is required to establish procedures to verify Canadian exporters' statements of origin. The CBSA indicated on September 14, 2017 in Customs Notice 17-29 "Proposed Regulatory Amendments and Proposed New Regulations Related to the Implementation of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA)" that regulations setting out the new procedures will be passed soon.  So, we do not yet know the exact Canada-EU CETA origin verification procedures yet.  In Customs Notice 17-29, we have been informed that with respect to exported goods from Canada:

"The new CETA Verification of Origin of Exported Goods Regulations are being proposed in order to implement Articles 26 and 29 of the Protocol on Rules of Origin and Origin Procedures of the CETA. The regulations set out methods, other than a verification visit, that may be used in order to verify the originating status of goods exported from Canada to an EU country or other CETA beneficiary. These methods are the review of a verification questionnaire completed by the exporter or producer of goods, the review of the written response of the exporter or producer to a verification letter, or the review of other information received by the exporter or producer or by the producer or supplier of a material used in the production of the goods. These regulations will also set out what premises or places may be entered for the purpose of a verification visit, indicate that a verification visit may only be conducted if a written notice of intention to conduct the visit has been sent, and specify the way certain documents are to be provided."

With respect to goods imported into Canada that originated in the European Union and its included territories, we are informed that:

"The new CETA Verification of Origin of Imported Goods Regulations are proposed by CBSA to implement Articles 26 and 29 of the Protocol on Rules of Origin and Origin Procedures of the CETA. The Regulations describe the method for sending verification requests and provide for the review of the reports received in answer to these requests as well as for the review of any relevant supporting documents received."

Based on the text of the Canada-EU CETA Protocol on rules of origin and origin procedures, Canadian businesses know that the new regulations will contain the following requirements/procedures:

1. Record-keeping requirement (Exporters): Exporters who have completed an origin declaration must keep a copy of the origin declaration, as well as the supporting documents for three years after the completion of the origin declaration or for a longer period of time as the Party of export may specify.

2. Record-keeping requirement (Producers): If an exporter has based an origin declaration on a written statement from the producer, the producer shall be required to maintain records for three years after the completion of the origin declaration or for a longer period of time as the Party of export may specify.

3. Record-keeping requirement (Importers): Importers who have claimed and been granted preferential tariff treatment shall keep documentation relating to the importation of the product, including a copy of the origin declaration, for three years after the date on which preferential treatment was granted, or for a longer period of time as that Party may specify.

4. Form of Records: Canada and the EU must permit, in accordance with that Party's laws, importers, exporters, and producers in its territory to maintain documentation or records in any medium, provided that the documentation or records can be retrieved and printed.

5. Denial of Preferential Tariff Treatment by Country of Importation: Canada and the EU may deny preferential tariff treatment to a product that is the subject of an origin verification when the importer, exporter, or producer of the product that is required to maintain records or documentation under this Article (a) fails to maintain records or documentation relevant to determining the origin of the product in accordance with the requirements of this Protocol; or (b) denies access to those records or documentation.

6. Don't Deny Preferential Tariff Treatment for Slight Discrepancies – Be Fair: The discovery of slight discrepancies between the statements made in the origin declaration and those made in the documents submitted to the customs authorities for the purpose of carrying out the formalities for importing the products shall not, because of that fact, render the origin declaration null and void if it is established that this document corresponds to the products submitted.

7. Don't Deny Preferential Tariff Treatment for Typos – Be Fair: Obvious formal errors such as typing errors on an origin declaration shall not cause this document to be rejected if these errors do not create doubts concerning the correctness of the statements made in the document.

8. Cooperation: Canada and the EU shall cooperate in the uniform administration and interpretation of the Canada-EU Protocol on rules of origin and origin procedures and, through their customs authorities, assist each other in verifying the originating status of the products on which an origin declaration is based.

9. Verification Procedures: Canada and the EU have agreed that the customs authority of the Party of import may verify whether a product is originating by requesting, in writing, that the customs authority of the Party of export conduct a verification concerning whether a product is originating. When requesting a verification, the customs authority of the Party of import shall provide the customs authority of the Party of export with (a) the identity of the customs authority issuing the request; (b) the name of the exporter or producer to be verified; (c) the subject and scope of the verification; and (d) a copy of the origin declaration and, where applicable, any other relevant documentation.

10. Information Sharing: When appropriate, the customs authority of the Party of import may request, pursuant to paragraph 3, specific documentation and information from the customs authority of the Party of export.

11. Verification Procedures: The customs authority of the Party of export shall proceed to the origin verification. For this purpose, the customs authority may, in accordance with its laws, request documentation, call for any evidence, or visit the premises of an exporter or a producer to review the records referred to in Article 25 and observe the facilities used in the production of the product.

12. Producer Verifications: If an exporter has based an origin declaration on a written statement from the producer or supplier, the exporter may arrange for the producer or supplier to provide documentation or information directly to the customs authority of the Party of export upon that Party's request.

13. Length of Time of Verification: Verifications must be completed within 12 months, unless it is extended.

14. Written Report/Results: The customs authority of the exporting country (e.g., the CBSA) must provide to the customs authority of the importing country (e.g., Spain) the following information in a written report in order for it to determine whether the product is originating or not, and that contains:

1. the results of the verification;

2. the description of the product subject to verification and the tariff classification relevant to the application of the rule of origin;

3. a description and explanation of the production sufficient to support the rationale concerning the originating status of the product;

4. information on the manner in which the verification was conducted; and

5. where appropriate, supporting documentation.

15. Exporter Copy of Report: The customs authority that conducts the origin verification must provide the results of the verification to the exporter (that is, whether the goods are originating).

16. Denial of Preferential Treatment If Unfavorable Report: Based on the information in the report (that is, a finding that goods are not originating under the Canada-EU CETA), the customs authority may deny preferential tariff treatment.

17. Denial of Preferential Treatment: If the result of an origin verification has not been completed, the customs authority of the importing Party may deny preferential tariff treatment to a product if it has reasonable doubt or when it is unable to determine whether the product is originating.

18. Preferential Tariff Treatment Pending Results: Pending the results of an origin verification the customs authority of the Party of import, subject to any precautionary measures it deems necessary, shall offer to release the product to the importer.

19. Consultations: Where there are differences in the interpretation of the rules of origin by a customs authority conducting an origin verification, Canada and the EU member shall engage in consultations to resolve the differences.

20. Advance Rulings: Canada and the EU Members have the authority to issue advance rulings to their own exporters.

This origin verification process appears more fair. There is an incentive to be fair because the CBSA reviews the origin declarations provided to Canadian companies.  If the CBSA denies preferential Canada-EU CETA preferential tariff treatment (that is, tariff code CEUT), then the export orders may be reduced or cancelled.  Further, Canadian companies will be arguing Canadian law when there is a dispute and seeking redress in Canadian courts.  This may be more procedurally fair and cost-efficient than the NAFTA model where origin disputes are based on U.S. law, US CBP processes and procedures and resolves in U.S. courts.

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.

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