Most-Favoured-Nation Tariff Withdrawal Order (2022-1): SOR/2022-35
Canada Gazette, Part II, Volume 156, Number 6
SOR/2022-35 March 2, 2022
P.C. 2022-182 March 2, 2022
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to paragraph 31(1)(b) footnote a of the Customs Tariff footnote b, makes the annexed Most-Favoured-Nation Tariff Withdrawal Order (2022-1).
Most-Favoured-Nation Tariff Withdrawal Order (2022-1)
1 The following definitions apply in this Order.
- goods that originate in Belarus
- means goods that are eligible to be marked as goods of Belarus in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations. (marchandises originaires du Bélarus)
- goods that originate in Russia
- means goods that are eligible to be marked as goods of Russia in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations. (marchandises originaires de la Russie)
Withdrawal of Benefit
2 Entitlement to the benefit of the Most-Favoured-Nation Tariff is withdrawn in respect of goods that originate in Belarus and goods that originate in Russia.
3 Section 2 does not apply to goods that were in transit to Canada on or before the day on which this Order comes into force.
Amendment to the Schedule to the Customs Tariff
4 The List of Countries and Applicable Tariff Treatments set out in the schedule to the Customs Tariff footnote b is amended by deleting the symbol “X” in the column under the heading “MFN” opposite “Belarus” and “Russia” in the column under the heading “Country Name”.
Coming into Force
5 This Order comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
The Russian Federation, with support from Belarus, continues to violate the sovereignty and territorial integrity of Ukraine.
On February 24, 2022, Russian military forces invaded the sovereign country of Ukraine, including through the territory of Belarus with the permission of that country’s government.
Since the beginning of the current crisis, Canada and the international community have been calling on Russia to de-escalate, pursue diplomatic channels, and demonstrate transparency in military activities. Diplomatic negotiations have been taking place along several tracks, including via (1) United States–Russia bilateral talks (e.g. the Strategic Stability Dialogue); (2) the North Atlantic Treaty Organization (NATO); (3) the Organization for Security and Cooperation in Europe (OSCE); and (4) the Normandy Four format (Ukraine, Russia, Germany, France) for the implementation of the Minsk agreements.
The G7 Foreign Affairs ministers released a statement on February 21, 2022, condemning Russian recognition of the so-called Luhansk (LNR) and Donetsk (DNR) People’s Republics and stated that they were preparing to step up restrictive measures responding to Russia’s actions, while reaffirming their unwavering commitment to Ukraine’s sovereignty and territorial integrity. The G7 Foreign Affairs ministers also reconfirmed their support for the full implementation of the Minsk agreements in order to end the conflict in eastern Ukraine. This follows a similar statement made in December 2021, and one by NATO Foreign Affairs ministers in January 2022.
The Government of Canada is responding, in close coordination with our Allies and partners, with a broad range of measures to this violation of sovereignty and of international law, including measures related to the Special Economic Measures Act, which prohibit trade of certain goods from Russia and Belarus. The Government of Canada is expanding the range of trade measures by withdrawing eligibility for Most-Favoured-Nation (MFN) tariff treatment under section 31 of the Customs Tariff for goods of Russian or Belarusian origin as part of the Government’s response to the invasion of Ukraine.
- Impose costs on Russia and Belarus for their unprovoked and unjustifiable invasion of Ukraine;
- Stress that Canada does not recognize the independence and sovereignty of the so-called LNR and DNR nor Russia’s illegal annexation of Crimea, as these regions are integral parts of Ukraine; and
- Encourage further actions with our international partners in responding to Russia’s actions in Ukraine.
The Order withdraws eligibility for the Most-Favoured-Nation (MFN) Tariff from goods imported from Russia or from Belarus pursuant to paragraph 31(1)(b) of the Customs Tariff. Removal of MFN entitlement under this paragraph would result in making virtually all goods originating from Russia or Belarus be subject to the General Tariff at a rate of 35%, unless the current MFN Tariff is already higher than 35% (such as for over-access, supply-managed agricultural products). Currently, the only other country subject to the General Tariff is North Korea.
The MFN Tariff would continue to apply to goods in transit to Canada up to the day on which this Order comes into force.
An Order made under paragraph 31(1)(b) of the Customs Tariff will cease to have effect 180 days after it comes into force (or 15 days after Parliament resumes sitting, if Parliament is not sitting on the 180th day), unless it is approved by a resolution adopted by both Houses of Parliament.
Consultations were not undertaken with the public owing to the exceptional and urgent nature of responding to the invasion of Ukraine and sanctioning the countries responsible. However, it is the Government’s intention to undertake consultations, including to seek parliamentary approval in the event that the measure would need to be effective for a period that is longer than 180 days.
For these same reasons, this Order was granted an exemption from the requirement to prepublish in the Canada Gazette, Part I.
Modern treaty obligations and Indigenous engagement and consultation
The proposal is not expected to impact potential or established Aboriginal or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982.
Making an Order in Council under paragraph 31(1)(b) of the Customs Tariff is the most appropriate mechanism, as it was created to provide the ability to quickly remove eligibility for the MFN Tariff.
Benefits and costs
Withdrawing eligibility for the MFN Tariff would result in a higher import tariff of 35% for goods imported from Russia or Belarus. The average MFN Tariff rate is 2.7% based on actual trade. This will significantly increase the cost of importing goods from Russia and Belarus, which will cause, over time, imports to substantially reduce or cease. It will complement other import restrictions under the Special Economic Measures Act, by increasing tariffs on the full range of goods imported from Russia and Belarus.
Based on 2021 trade data, this measure would affect $2.1 billion in annual imports of Russian goods, and $33 million in annual imports of Belarusian goods. It is anticipated that as a result of the higher General Tariff of 35% applying to these goods, importers would be moving to other sources, including potentially from domestic sources. While it is anticipated that the majority of Russian and Belarusian goods imports would be displaced by other substitutable sources, there could be some impact on Canadians resulting from the lack of availability of a specific brand, for example.
Small business lens
The Order does not make changes to the importing and exporting of goods, including the required customs forms; rather, it changes the rate of customs duty applicable to goods of Russia or of Belarus. Accordingly, there is no incremental change to the level of administrative burden or compliance costs currently imposed on businesses, including small businesses, as a result of implementing this Order.
The Order does not make changes to processes for the importing and exporting of goods, including the required customs forms. Therefore, no increase or decrease in the level of administrative burden imposed on businesses is anticipated. Accordingly, the one-for-one rule does not apply.
Regulatory cooperation and alignment
There is no regulatory cooperation component to this Order.
Strategic environmental assessment
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for this Order.
Implementation, compliance and enforcement, and service standards
This Order would come into force upon registration. The Canada Border Services Agency (CBSA) will monitor compliance with the terms and conditions of the Order in the normal course of its administration of customs- and tariff-related legislation and regulations. The CBSA will update its systems to account for this Order and will inform importers through public materials.
Trade and Tariff Policy
International Trade Policy Division
Department of Finance Canada