The trade deal between Europe and Canada (CETA) explained

With the Comprehensive Economic and Trade Agreement (CETA) now in force, many smaller companies are surprised to learn they can now ship their goods for import to the EU duty free. Canadian companies can now send qualifying goods duty free with simple ways to request preferential duty free import to the EU.

CETA since 2017

As a group, the 27 European Union members represent Canada’s third largest merchandise trading partner after the United States and China. The EU is the 2nd most important destination for Canadian merchandise exports) and and third largest for merchandise imports

Two-way merchandise trade between Canada and the EU has improve substantially to over $100 billion per year. Since 2017, merchandise trade between the EU and Canada increased over 30%.

Thanks to CETA, it’s estimated that over $800 million is saved on a yearly basis.

The key benefit of CETA is the virtual elimination of tariffs between Canada and the European Union. The deal’s supporters expect it to create additional GDP growth through cuts in tariffs in key economic sectors that include agriculture, auto and pharmaceutical industry.

Download accompanying PDF

Retailers sending online orders to Europe duty free

Many Canadian online purchases to Europe can be imported duty free to Europe. If the transaction is under 150 euros most goods qualify for duty free import. If the goods qualify as Canadian origin under CETA rules, the goods benefit from preferential duty free import regardless of the value.

Duty Free but with VAT

It is important to point out that all goods imported to Europe are subject to value added tax (VAT). The VAT rate varies by country but averages around 20%. Canadian retailers and online marketplaces can benefit from Import One Stop Shop or IOSS for managing VAT payment across all EU members.

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Can Online Orders Shipped to Europe from Canada Benefit from CETA?

There are two ways to benefit from duty free import to Europe

• Most shipments valued under 150 euros can be imported duty free
• Shipments that qualify as Canadian origin can be imported duty free from Canada

Most Favoured Nation (MFN) tariff rates are generally applicable for good traded between the EU and Canada. Goods that meet The Comprehensive Economic and Trade Agreement (CETA) rules of origin can benefit from preferential duty free import. The MFN tariff rates of Canada and EU members apply to goods that do not meet the rules of origin (non-originating goods) under CETA.

READ MORE: CERTIFICATE OF ORIGIN AND WHEN IT IS NEEDED.

CETA provisions make is it easier to declare goods as Canadian origin via a certification of origin (versus a separate certificate of origin). It is important to keep in mind that simply shipping from Canada does not, in itself, qualify the goods for preferential duty free import.

Ship from ≠ country of origin: The country of origin in most trade agreements refers to where the goods were made, raised or grown. For example: If a Canadian seller sold goods that were made in China to a buyer in France, the country of origin for CETA purposes would be China.

For goods that are of Canadian origin, CETA offers a great benefit for shipments to Europe and the UK (the UK and Canada have a new agreement (UKTCA) that essentially replicates CETA.

Download accompanying PDF

Shipping Air versus Ocean from Canada to Europe

The best shipping option from Canada depends on several factors.  Ocean is generally not the best options due to the time frame. However, for larger orders and consolidation of bulky orders, LCL shipping could be the solution.  Useful information: Things to know about Ocean Shipping To and From Canada.

See sample form to declaration of origin (Fillable PDF to download). Note that while the regulations do not mandate a specific format, it is recommended to include both a separate declaration form as well as a certification statement on the invoice (and other shipping documents) to ensure preferential duty free consideration at time of import.

The required origin declaration may be provided on an invoice or any other commercial document which describes the originating product in sufficient detail to enable its identification. In order to claim the preferential tariff treatment, importers must have in their possession the origin declaration completed by the exporter as well as any necessary permits.

CETA Rules of Origin

In general, a product will be considered to originate from an EU country or Canada if it is wholly obtained or produced entirely in Europe or Canada, or if it has undergone sufficient production or processing to meet the agreement's rules of origin.

Read More: Country from where goods were shipped versus country of origin

The origin of agricultural goods and commodities grown, raised or extracted can be clearly understand. Manufactured goods can be more complex and must have undergone sufficient transformation in Canada or Europe to qualify as a domestic product of that country.

The CETA rules of origin are divided into two main types:

• General rules: These are the general rules that apply to all products. Under CETA, a product is considered originating if it is wholly obtained or produced entirely in Canada or EU, or if it meets the product-specific rules.
• Product-specific rules: These rules specify the minimum amount of domestic content or processing that a product must have in order to be considered "originating" under CETA. These rules vary depending on the specific product.

It is important to note that the CETA rules of origin are complex. It is best to confirm compliance with a trade specialist, review official CETA documents and discuss directly with regulators.  Always confirm compliance and get approval from the consignee/ importer prior to shipping.

EORI Number for EU Imports

When shipping from Canada to Europe, one option is to import the goods in bulk via an EORI number.

An Economic Operators Registration and Identification number (EORI number) is an E.U. identification number for businesses (economic operator) which import or export of goods into or out of Europe to and from Canada.An EORI number is part of the data set required for customs entries in all EU countries.

The EORI number exists out of two parts:

• the country code of the issuing Member State; followed by
• a code or number that is unique in the Member State

Duty Free but with VAT for online orders to Europe

With CETA and duty free low value thresholds, the challenge for e-commerce shipments / online orders to Europe and UK (see mention above) is the payment of value added tax, VAT.

READ MORE: IMPORT DUTY EXPLAINED AND HOW IT IS CALCULATED

The VAT to Europe averages around 20% and now must be prepaid. This is explained below and also in our blogs dedicated to the subject of prepayment of VAT for online orders to the UK and EU.

Access DPD Direct from Canada for European Delivery

Benefit from direct shipping to Europe and UK for e-commerce orders. Contact our team for details.

VAT Rules for Imports to the European Union from Canada

It is important to note that IOSS is not mandatory. For Canadian companies shipping direct to a European country such, such as France, it probably best to set up payment direct upon import and avoid having to register fo IOSS.

All e-commerce orders imported to the EU are subject to VAT.E-commerce shipments valued under EUR 150 can be imported via One-Stop Shop (IOSS) processes that allow sellers and online marketplaces to charge VAT at the point of sale and remit it directly to the authorities. Prepayment of Value Added Tax to European Union Countries

For details on IOSS and the otherEU’s VAT rules, visit: Publications Office of the European Union.

Under the CETA provisions, qualifying goods can be declared on the commercial invoice - greatly simplifying the ability for Canadian companies to offer lower costs to European markets.

Jet Worldwide provides low cost shipping to France, Germany, Spain from Canada as well as well as distribution within the EU.

Free Trade Between Canada and the UK: From CETA to UKTCA

Canada and the UK have an agreement to continue the preferential duty-free status enjoyed under the CETA via the UK-Canada Trade Continuity Agreement (TCA).

What is the impact beyond tariff reductions?

• Canadian and European shared recognition of professional accreditation for architects, accountants and engineers,
• Ease citizenship or residency requirements including simplified transfer for inter-company staff and other professionals between the EU and Canada.
• Ownership and investment restrictions
• Clarified regulations between Canada and the EU on intellectual property rights
• European and Canadian companies gain the right to bid on Canadian and European municipal contracts respectively (see section below on inter-provincial trade)
• Greater flexibility regarding 'rules of origin' regarding automobiles and auto parts

Contact our Euro-Canadian Team for information on shipping parcels and online orders direct to France, Germany, Italy and all European Union Countries.

Duty Free - But with VAT- Growth of Online Orders

As mentioned above, orders online orders shipped to Europe Union countries valued under €150 (around CA$220) can be imported duty free but VAT will be assessed. This includes items sold on eBay, Shopify, bigcommerce, and other e-commerce platforms. See section above on IOSS and VAT payment or.... Read our blog on payment of VAT for online orders shipped to Europe.

Expected benefit to GDP growth in Canada and EU

As noted above, in an era that tariffs have already trended down to low levels, estimates of the expected benefit to GDP range have been modest: The growth in Canada's GDP from full implementation of CETA range from as low as 0.3% to more than 0.5%.

The provincial governments of Canada are actively working together to ensure out of province Canadian businesses will have access to provincial public markets that are at least as favourable as those granted to European companies in CETA.

Companies are diverting their logistics from the UK to the European continent. Contact our team to get information on EU based import, warehousing and distribution.

Delivery between the EU and Canada via Jet Worldwide

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Best shipping options between Canada and Europe

1. Air freight: This is the fastest option with economy air options. Shipping e-commerce orders direct air freight allows for low cost zone jumping.
2. Ocean: Best for large commercial orders
3. Canada post small packet air and  surface options are generally personal shipments
4. FedEX , DHL, UPS air options are well known with information readily available via their websites. 

Proof of origin requirements under Canada's Free Trade Agreements

The value for duty amount for all of Canada's free trade agreements (including CETA) 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.

Duty Free eligibility under the CETA

Country origin rules are associated with factors used to determine if the product is eligible for preferential duty free treatment under the CETA.

As mentioned above, the CETA rules don’t require a formal certificate in order to obtain tariff benefits. A declaration on the invoice or any other commercial document accompanying the shipment is enough.

The CETA country of origin declaration has a specific wording, which is fairly straight forward (check with up to date regulations before shipping).

Canada and EU: Incredible Opportunity

The benefits of the Canadian European free trade pact are being realized as more Canadian companies can offer competitive products and services to European customers. Canadian companies can more easily take advantage of duty free clearance from an EU Country.

Shipping Canadian E-commerce Orders to the EU

Jet Worldwide has best in class international shipping solutions for Canada's leading e-commerce platforms and sellers. Scale your sales directly from your Canadian resources by shipping direct.

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