New free trade agreements have transitioned from focusing on large trade of commodities to facilitating small business and online e-commerce transactions. Canada's many trade agreements is making it easier than ever to ship goods duty free to Canada and duty from Canada to most the world's major economies.
Most Favoured Nation (MFN) tariff rates are generally applicable for goods traded between Canada and other countries. Goods that meet the rules of origin of a specific trade agreement can benefit from preferential duty free import.
Building an international logistics network is never more important. From e-commerce online retailers to businesses accessing suppliers and selling their completed products. The low value duty free thresholds to Europe, Australia, Mexico and Australia primarily benefit e-commerce direct sales direct to consumers.
Canada's many free trade agreements benefit businesses importing and exporting goods. With the exception of China and India (albeit large exceptions!), goods from all the worlds major economies can benefit from preferential duty free import. And claiming these benefits has been made easier by (in most cases) not requiring a separate certificate of origin.
Take advantage of duty free import to Canada's trading partners
The goal of our team is to help your team understand the processes and possibilities. Contact our team to learn more.
Canadian Free Trade with the World's Largest Economies
Canada has free trade agreements with the USA and Mexico (USMCA CUSMA T-MEC), 10 countries in the Asia Pacific region (CPTPP), and 27 European countries and several stand alone agreements including with South Korea.
Canada's newest free trade agreements make it easier for companies to get the benefit of duty free entry for smaller orders. We are surprised how many regular shippers are not aware that preferential duty free entry is available for the goods they sell internationally.
Advantages of Canada's Free Trade Agreements include:
- Increases competitiveness: With preferential duty rates - including duty free access.
- Provides access to new customers: Most Canadian's free trade agreements access to government procurement processes.
- Makes trade with the EU more predictable, transparent and accessible:The biggest savings of free trade agreements can be from clarification of rules that promote fair business practices and a level playing field.
- Improves access for service‑providing companies: Services company gain access to foreign markets as well.
Preferential Duty Free Import Even for small shipments
One of the key features of Canada's newest free trade agreements is how they facilitate international shipping for small businesses as well as small packages (i.e. E-Commerce).
- For imports to Canada valued under CA $3,300, the origin declaration process is simplified (see below).
- For exports, a separate certificate of origin is most often replaced by a simpler declaration of origin that can be included on shipping documents (most commonly on the customs invoice). Contact Jet's team for shipping online orders duty free direct to Europe, UK, Japan and other major economies.
Disclaimer: The information in Jet Worldwide online content, including this post, is for general information only.
CETA Rules of Origin between Canada and the European Union
In order to qualify for reduced tariffs under CETA, a product must be deemed "originating" from either Canada or Germany (or other EU country). This means that the product must have undergone sufficient production or transformation in Canada or the EU to qualify as a domestic product of that country.
Just being purchased and shipped between Canada and European Union countries does not grant country of origin status for preferential duty free import.
There are two main methods for determining origin under CETA: The change of tariff classification method and the regional value content method.
- The change of tariff classification method is based on the concept that a product must undergo a sufficient change in tariff classification as a result of production or transformation in Canada or the EU in order to qualify as an originating product.
- The regional value content method is based on the concept that a product must have a certain percentage of its value added in Canada or the EU in order to qualify as an originating product.
Read More: Useful information explaining import duty and how it is calculated
There are also specific rules of origin for certain sectors, such as textiles and apparel, automotive, and chemicals, which may have different requirements for determining origin. It is important to verify compliance with the consignee/ importer and regulatory authorities prior to shipping.
Read More: Country from where goods were shipped versus country of origin
When is a certificate of origin needed
The country of origin used by Canadian customs to determine if preferential duty free import can be applied. The country of origin is also a data point used to support regulatory actions such as quarantine, import quotas, to ensure that the goods being imported comply with relevant regulations.
Read more: Understanding a certificate of origin.
A certification of origin can be included for online orders of Canadian origin goods sent to Europe.
Understanding Rules of Origin of Canada's Free Trade Agreements
Country of origin rules in Canadian Free Trade Agreements (FTAs) are the primary determinate into whether the goods can benefit from duty free import (or other preferential treatment). While there can be exceptions, most qualifying goods benefit from the the elimination of import duty.
Some important aspects include:
- Traceability requirements: Documentation requirements to show that a product meets the origin criteria and is eligible for preferential treatment.
- Origin verification: Procedures for verifying the accuracy of origin declarations and ensuring compliance with the agreement.
- Origin quotas: Limits on the amount of goods that can be imported into a country under preferential treatment.
Custom Import For Online Orders Shipped from Canada
Jet helps Canadian companies build durable, efficient import processes that can then be incorporated into the product listing.
- Harmonized System Code (HS): It is not always necessary to include the HS Code but it is absolutely necessary that the codes are understood and implemented as needed. Visit our blog on HS codes: HS Codes for Cross Border Online Shipments.
- Valuing your Item(s): Although the correct declared value for import is most often the value of the sale or transaction, it is important to understand methods of valuation. Issues for valuation include whether or not to include transport costs, insurance, and/ or value added tax. Visit our blog on valuation: Declared Value, CIF and Valuation for international shipping.
- Restricted Items: It is necessary for online sellers to categorize shipments that may be restricted by virtue of the item itself or it may be permitted under certain circumstances.
- Country of Origin: Useful information on a certificate of origin and when it is needed
- Value Add Tax: Even goods that qualify for duty free import may be subjected to a value added tax. It is a requirement when shipping online orders to many countries - most notably the UK and European Union members - that this be prepaid. Jet helps companies understand and comply with these requirements.
Jet Worldwide Canada: 40 years and counting!
- Jet Worldwide is a trusted brand helping Canadians connect with international markets
We provides transparency and best in class international shipping solutions for parcels, pallets and online orders shipped from Canada.
Canada's FTA's help Canada to increase its exports, by providing better access to different markets around the world, making Canadian goods and services more competitive.
What to do if Canada has more than one Free Trade Agreement with a particular country
Canada has overlapping free trade agreements with some countries, most notably Mexico (CUSMA and CPTPP). Importers can freely choose which agreement they wish to use but can only choose and it must be done at time of import.
For shipments from Mexico, some experts prefer using CPTPP versus CUSMA due to more favourable origin rules.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly known as the Trans-Pacific Partnership (TPP), is a trade agreement between 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
The overlap of trade agreements mostly seem to occur with CPTPP countries and include;
- Chile: CCFTA and CPTPP
- Peru: CPFTA and CPTPP
- Mexico: CUSMA/T-MEC and CPTPP
Country of Origin Rules
Each trade agreement has rules of origin that are used to determine whether a product qualifies for duty-free or reduced-tariff treatment when traded with Canada. These rules specify the minimum percentage of the product that must originate from one or more of the CUSMA countries in order to qualify for the preferential treatment.
The rules of origin are divided into two main categories: general rules and sector-specific rules.
- General rules of origin apply to all products not covered by the sector-specific rules. The generally include wording such as "wholly obtained" , "produced entirely" , or "regional value content (RVC)."
- Sector Specific Rules: Category specific rules (CSROs) are more complex and can involve both product and process specific rules. Categories commonly subject to specific rules of origin include automotive, textiles, chemicals, pharmaceuticals, and metals.
Simply purchasing a good from a country that has a free trade agreement with Canadas does not necessarily qualify them (as “wholly obtained or produced entirely”) for preferential duty free import.
For many many specialized Canadian companies, the country of origin is clearly Canada. And goods purchased from overseas suppliers to Canada often meet the country of origin rules for preferential duty free import.
Canadian origin goods can gain a competitive advantage with duty free import to their customers in Europe, CPTPP countries, South Korea, USA and Mexico.
As mentioned above: Most Favoured Nation (MFN) tariff rates are generally applicable for goods traded between Canada and other countries.Goods that meet the rules of origin of a specific trade agreement can benefit from preferential duty free import. The MFN tariff rates apply to goods that do not meet the rules of origin (non-originating goods) even when there is a free trade agreement.
Country Shipped from ≠ Country of Origin
As it is often cause for confusion, it is important to clarify that from where an order is "shipping from" does not automatically qualify the goods for preferential duty free status.
Country of origin refers to where the goods were actually made (if manufactured), grown/ raised (if agricultural goods), or extracted (in the case of mined goods/ minerals). Country of origin preferential status is not granted solely on where the goods were shipped from.
For example: An item made in China but shipped from Canada to a European Union country will not qualify as Canada origin / preferential duty free entry under CETA free trade provisions.
Read More About Shipping to the UK and the Canada UK Trade Continuity Act
Importer and Exporter Declarations
We strongly recommend that companies confirm regulatory compliance with authorities before shipping.Ultimately, the shipper/ exporter/ importer are the parties responsible for origin declarations and they should not depend solely on "googling".
As hard as we strive to be as informative as possible to assist shippers - including our industry leading blog - we always refer shippers to the actual regulations and regulators. The good news is that the Canadian and other government agencies generally happy to promote exports and assist both exporters and importers.
Shipping Terms to Consider When Shipping Duty Free
The default option for shipping internationally from Canada is delivery duty unpaid. Common carriers use the term EXW which essentially assigns all import related costs (duty, taxes, and other fees) to the receiver/ importer. Although goods may qualify for duty free entry, the CIF value are still subject to value added tax and other import fees.
Shippers from Canada can choose to pay the import fees on behalf of the receiver via a Delivery Duty Paid (DDP) options that many carriers offer.
Incoterms and shipping terms for packages and online orders.
The disadvantage of paying import fees on behalf of the receiver is that the bulk of the import fees are often from a value added tax that the importing business may otherwise be able to claim back.
Major Trade Deals
All of Canada's major trade deals, NAFTA (USMCA/ CUSMA/ T-MEC), CPTPP and CETA, include provisions to assist small companies to take advantage of free trade provisions. Most notable of the benefits is the easier process for country of origin declarations.
Canada's recent trade agreements allow for easier origin certifications that can be incorporated directly into the shipping documents. Separate certificate of origins are generally no longer required.
Jet Worldwide works with Canadian artisans who sell their locally sourced and made products internationally. In most cases, these shippers can sell and ship their goods for duty free entry to major international markets.
CUSMA/USMCA Shipping between USA, Canada and Mexico
The grand daddy of all major trade agreements the new NAFTA keeps the same basic provisions but with added benefits for parcel shippers to Canada from the USA and Mexico:
- Duty free and tax free entry for most parcels shipped parcel carrier / courier from the US and Mexico under CA$40
- Duty free entry for most parcels shipped from the US and Mexico shipped via parcel carrier/ courier under CA$150
- Simplified "Certification of Origin" for shipments to Canada valued under CA$3,300
For low value shipments (under CAD $3,300) to Canada, a certifying statement added to the commercial invoice or any shipping document for US or Mexican origin goods can benefit from preferential duty free import. Here is a sample statement:
“I hereby certify that the goods covered by this shipment qualifies as an originating good for the purposes of preferential tariff treatment under USMCA/T-MEC/CUSMA.”
This statement can be included on the commercial invoice or other shipping document.
Different duty assessment for goods shipped via USPS or Correos Mexican Post versus Courier (see above regarding new USMCA/CUSMA duty free thresholds).
For a shipments shipped via USPS for import via Canada Post, duty is assessed differently than for parcels shipped via parcel carriers/ courier:
- CA $20 (around US$14.75) and under: duty and tax free
- Above CA $20 duties and taxes apply
Useful Information: Common Canadian Import Fees you must consider.
Canadian Trade Deals includes EFTA
A lesser known but important trade deal for Canada is with the European Free Trade Association or EFTA. The EFTA is an intergovernmental trading bloc that includes Iceland, Liechtenstein, Norway, and Switzerland. The EFTA-Canada free trade agreement facilitates trade and allows for preferential duty free clearance for qualifying goods shipped between Canada and EFTA countries.
Proof of origin and Canada's free trade agreements
The value for duty amount for all of Canada's free trade agreements (including CPTPP, CETA, USMCA CUSMA, CKFTA etc) for which the proof of origin / certificate of origin is waived was changed to $3,300 CAD in July 2020. This change was made to harmonize the regulations with the new NAFTA/CUSMA.
For imports not exceeding $3,300 to Canada, the requirement for proof of origin is waived. The requirement on the importer to maintain records (for example, commercial invoice and B3) applies even if the CBSA does not require a certification of origin or if a requirement for a certification of origin has been waived.
Cross Border: More of a small bump than a big barrier
Generally, the world is moving towards updating processes to accommodate individual online orders. Jet Worldwide helps companies understand and take advantage of the opportunities for reaching new international markets AND finding new international suppliers.
CETA European Canadian Free Trade Agreement
New NAFTA Free Trade USMCA/ CUSMA/ TMEC
There are a few options for shipping international freight to and from Canada.
Some options include:
- Air freight: This is the fastest option
- Sea freight: This is a slower option best for large commercial orders and containers
- Couriers including FedEx, UPS and DHL
- Trucking and rail across North America
- Postal options are best for individuals sending personal items
When choosing a shipping method, you will need to consider factors such as the size and weight of your freight, the time frame in which you need it to arrive, and your budget. It may be helpful to compare quotes from different carriers to find the best option for your needs.
