Copyright 2008, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade, August 2008
On July 19, 2008, the Canadian government announced that it would be accepting public feedback regarding proposed price and volume triggers to the application of above-quota duties under the special agricultural safeguard applicable to supply-managed products. To have their comments considered, interested parties must provide those comments before September 1, 2008.
Tariff-Rate Quotas
Canada has tariff-rate quotas for all supply-managed products, as well as several additional products. This was done pursuant to the World Trade Organization (WTO) Agreement on Agriculture (the Agreement), which requires the conversion of all non-tariff border measures into tariff-rate quotas. Imports that fall within a specified quota volume are subjected to a lower tariff rate, whereas those that exceed the specified volume are subjected to a higher rate, known as an "over-quota tariff". Should a WTO member country wish to impose duty in addition to the over-quota tariff, they may use the special agricultural safeguard, provided they meet the requirements for its use, set out in the Agreement.
WTO Special Agricultural Safeguard
Canada is imposing the special agricultural safeguard under Article 5 of the Agreement. This permits a WTO member country to assess temporary additional duty on over-quota imports if those imports exceed specified trigger volumes or fall below specified trigger prices.
In Canada, this aspect of the Agreement is implemented by s. 68 of the Customs Tariff and the Safeguard Surtax Regulations 1995-1, 1995-2, and 1995-3. According to s. 68, the Minister of Finance may order the imposition of a surtax based on the findings and recommendations of the Minister of Agriculture and Agri-Food.
Volume Trigger
The safeguard measure can be applied where the volume of imports of the specific good exceeds 125% of the average imports of the most recent three years for which data is available. If this threshold is surpassed, then a surtax of up to one-third of the applied over-quota tariff can be imposed.
Price Trigger
The additional duty can be applied to imports where the price of a particular shipment falls below 90% of the 1986-1988 average. (However, the government has indicated that any recommendations to the Minister of Finance for a surtax will show that the goods are being imported at least 10% below their trigger price.) There is no set amount for this surtax; instead, it will vary with the amount by which the shipment is below the average in question.
Whether the shipment trips the volume or price trigger, the surtax can be applied only to those imports that exceed the quota, not those that fall within. However, the additional duty assessed to a particular shipment can be imposed only with respect to one of the two types of triggers.
The government announced on February 7, 2008 their intention to "operationalize" the special agricultural safeguard regarding supply-managed products. The government had reserved its right to impose additional duties as permitted in the Agreement and now intends to exercise that right and impose the duties. The July 19 notice, which invites feedback, includes the levels of the price and volume triggers as calculated by Agriculture and Agri-Food Canada. This list is lengthy, and can be found at: http://www.agr.gc.ca/itpd-dpci/technical/ssg_e.htm, Annex A.
The full list of values will form the basis of the report provided by the Minister of Agriculture and Agri-Food to the Minister of Finance, subject to any changes made following the consultation period as a result of feedback received. It is these trigger values that the government has invited comments on before September 1, 2008. After this, the government will determine the final trigger values and will begin to monitor imports of the prescribed goods and assess the surtax on the above tariff shipments.
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