The Government of Canada announced that it will be implementing duty remission measures for imported goods as a result of the United Kingdom’s decision to leave the European Union — set to end on July 1, 2021.
Up until December 31, 2020, Canada allowed duty-free entry of certain goods from the United Kingdom, in order to provide Canadian importers with additional time to adjust to the United Kingdom’s new reality.
The duty suspension applied to the following categories of goods:
- Alcoholic beverages
- Various foods
- A wide range of manufactured goods
- A full range of textile and clothing
- Automobiles and light trucks
- A full range of household furniture, appliances, furnishings
This presented a great opportunity for importers to take advantage of duty remission on imported goods from the United Kingdom. But what will 2021 look like for Canada-UK trade? What agreements must Canadian and UK importers be privy to?
Memorandum of Understanding (MOU)
On December 22, 2020, Canada and the UK announced that they had signed a memorandum of understanding (MOU) providing that the benefits of CETA would continue in effect until the Continuity Agreement can be ratified. The MOU expires after three months if it is not renewed and the Continuity Agreement has not been ratified by that date.
As part of implementing the MOU, Canada’s Minister of Finance has issued the United Kingdom Trade Continuity Remission Order, 2021. In turn, the Canada Border Services Agency (CBSA) has issued two customs notices regarding imports from the United Kingdom after January 1, 2021. (See them here: Customs Notice 20-38 and Customs Notice 20-39)
Customs Notice 20-38: states that importers of goods from the United Kingdom, the Channel Islands, Gibraltar and the Isle of Man must account for their goods under the Most-Favoured-Nation (MFN) tariff treatment.
Customs Notice 20-39: provides guidance to Canadian importers of goods that were shipped to Canada after January 1, 2021, but before January 1, 2023. The notice states that goods shipped to Canada after January 1, 2021, but before January 1, 2023, are subject to the terms of CETA.
The Continuity Agreement: The agreement states that the provisions of CETA are incorporated mutatis mutandis into the Continuity Agreement with the wording:
“The Continuity Agreement provides that the parties shall strive to conclude negotiation of a new agreement within three years of the Continuity Agreement’s date of entry.”
Side Letter: provisions of the World Trade Organization (WTO) Agreement on Measures Concerning the International Trade in Cheese. This letter stipulates that a WTO member may impose a “tariff rate quota” on cheese originating in another WTO member. A “tariff rate quota” is a type of measure that limits the quantity of a good that is allowed to be imported into the importing country, but does not limit the price of the good.
Looking Ahead Into 2021 and Beyond…
The MOU will come as a relief to the trade community that uses CETA for their import business operations, as it removes any question of continuity for the time being. We suspect that the Continuity Agreement will be ratified in early 2021, following an updated agreement between Canada and the UK.
As the trade community adapts to Brexit, there are many uncertainties and unknowns. But working with an experienced customs broker can help Canadian importers navigate these strange times. To begin a conversation with a broker and see what a partnership may look like, you can click here.