FEDERAL REG

SOR/2016-197: Schedule to the Customs Tariff (Information Technology Agreement Expansion, 2016) — Order Amending Customs Tariff

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
June 23, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: At the Ministerial Conference of the World Trade Organization (WTO) held in December 2015, trade ministers of 52 member economies — including Canada — agreed to eliminate tariffs on 201 products in the information and communication technology (ICT) and related sectors. The December 2015 agree... (Click for more)


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Published on June 23, 2016

Bill Summary

SOR/2016-197: Schedule to the Customs Tariff (Information Technology Agreement Expansion, 2016) — Order Amending Customs Tariff

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: At the Ministerial Conference of the World Trade Organization (WTO) held in December 2015, trade ministers of 52 member economies — including Canada — agreed to eliminate tariffs on 201 products in the information and communication technology (ICT) and related sectors. The December 2015 agreement is an expansion of the product coverage of the 1996 Information Technology Agreement to which Canada is also a party. The 2015 agreement liberalizes new product innovations over the past two decades (e.g. certain parts of smartphones such as touchscreens) and a broader range of ICT and related goods. Canada was a participant throughout these negotiations and was a party to the declaration that announced the successful conclusion of the negotiations at the December 2015 WTO Ministerial Conference. Description: This Order eliminates customs duties on 52 tariff items in the ICT and related sectors (e.g. multi-component integrated circuits, magnetic, optical and semiconductor media, communications satellites, and certain measuring instruments), consistent with the recently concluded negotiations. Cost-benefit statement: Based on recent trade patterns, the estimated annual duties foregone by the Government would be approximately $52.5 million once the tariff cuts are fully implemented in mid-2019. These duties foregone represent corresponding savings for Canadian importers of these goods, and could potentially enable lower prices on these goods. “One-for-One” Rule and small business lens: The “One-for-One” Rule does not apply to this Order, as there is no change in administrative costs to business. The small business lens does not apply to this Order, as there are no costs imposed on small business. Background This initiative expands the coverage of the 1996 Information Technology Agreement (ITA), in which a sub-set of WTO members agreed to eliminate their tariffs on key ICT products including computers, semiconductors, telecommunication equipment, data storage media and software. Originally an agreement among 29 members, the number of WTO signatories to the ITA has grown to 82 over the past 20 years, representing about 97% of world trade in products covered under the agreement. The expansion of the ITA is an initiative undertaken by 52 of the 82 ITA signatories and is intended to ensure product coverage accounts for the rapidly evolving technologies in the ICT sector as well as cover some products in related sectors (e.g. medical devices). The WTO Secretariat estimates that the additional products included in the expanded ITA account for approximately $1.3 trillion in annual trade globally. Based on recent trade patterns, Canada’s annual global exports of the products covered by the expanded ITA amount to approximately $21 billion. Issues In order to meet the commitment made during the December 2015 Ministerial Conference, Canada needs to modify the tariff rates on certain products by amending the Schedule to the Customs Tariff. The December 2015 ITA agreement expands coverage to liberalize new product innovations over the past two decades (e.g. certain parts of smartphones such as touchscreens) and a broader range of ICT and related goods (e.g. multi-component integrated circuits, machinery used to produce semiconductors, navigation equipment including radar, flight simulators, video-game consoles, and complex medical equipment such as MRI machines). All participants to the expanded ITA are required to eliminate their customs duties on the covered goods. Objectives The objective is to amend the Schedule to the Customs Tariff to ensure that Canadian tariff rates on certain products are modified to be consistent with Canada’s international obligations as a party to the expanded ITA. Description This Order eliminates customs duties on 52 tariff items in the information and communication technology (ICT) and related sectors (e.g. multi-component integrated circuits, magnetic, optical and semiconductor media, communications satellites, and certain measuring instruments), consistent with the recently concluded negotiations to expand the ITA. For three tariff items that are dutiable under the Most-Favored-Nation (MFN) tariff treatment, Canada will eliminate tariffs effective as of July 1, 2016. For 49 other tariff items that are dutiable under the MFN tariff treatment, Canada agreed to gradually eliminate those tariffs in a maximum of four cuts (e.g. commencing with a first cut on July 1, 2016, and annual cuts on July 1 of each of the subsequent three years in order for the tariff items to be duty-free by no later than July 1, 2019). The expanded ITA covers 336 Canadian tariff items, requiring them to be duty-free. The Order eliminates custom duties on 52 of these tariff items as described above, and the remaining 284 Canadian tariff items covered by the expanded ITA are already duty-free under the MFN tariff treatment. Benefits and costs Canadian importers of the products covered by this Order will benefit from the elimination, immediate or gradual, of customs duties. Based on recent trade patterns, these benefits are estimated at $52.5 million annually once the tariff cuts are completely implemented in mid-2019. Users of these goods, businesses and consumers, may also benefit as the elimination of tariffs could potentially lead to lower prices. By implementing its commitments in domestic law, Canada will be a full participant in the expanded ITA, which will enable Canadian exporting firms to gain better access, in the form of reduced tariffs, to key foreign markets, notably China. “One-for-One” Rule The “One-for-One” Rule does not apply to this Order, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to this Order, as there are no costs imposed on small business. Consultation Key stakeholders were engaged by the Government, led by Global Affairs Canada, throughout the negotiation of the expanded ITA agreement, including the Electro-Federation Canada, the Information Technology Association of Canada and certain ICT companies. All stakeholders are supportive of the expansion of the ITA, and no concerns were raised by stakeholders with respect to the elimination of Canadian tariffs during the course of negotiations. Rationale These tariff reductions are international obligations for Canada under the expansion of the WTO ITA that was announced at the December 2015 WTO Ministerial Conference. This Order implements these tariff cuts in the Customs Tariff. Implementation, enforcement and service standards The Canada Border Services Agency (CBSA) is responsible for the administration of, and compliance with, customs and tariff legislation and regulations. In the course of its administration of these tariff amendments, the CBSA will inform the importing community. Contact Brad Norwood International Trade Policy Division Department of Finance Canada Ottawa, Canada K1A 0G5 Telephone: 613-369-4039 Footnote a S.C. 2014, c. 28, s. 45 Footnote b S.C. 1997, c. 36 Footnote 1 S.C. 1997, c. 36

This Bill does not amend any statutes.

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