CBSA Elimination of GPT Kicks in January 1
In September, 2014, the Canadian Border Services Agency (CBSA) released a statement that, effective January 1, 2015, the Canadian government has eliminated the General Preferential Tariff (GPT) for 72 countries with which Canada has an import relationship.
The GPT was established in the 1970s to benefit developing countries, many of which have become "richer" over the years. Some of these Canadian trade partners include China, South Korea, Thailand, Brazil, Hong Kong, India and Turkey. GPT rate is lower than the Most Favoured Nation (MFN) rate, and has provided importers a cost advantage when sourcing product from certain countries.
With the exception of imports from countries with which Canada has a better trade agreement than the GPT (e.g. Mexico, which currently falls under GPT, but NAFTA supersedes), importers can expect an increase in duty on products imported from those 72 countries. For example, a leather handbag originating in China currently has a 7% duty rate under GPT - in 2015 this same handbag will have a 10% duty rate under MFN (same rate as, say, Italy or France). The duty increase varies from product to product, as well, as some imported products are currently discounted considerably under GPT.
The most critical step for Canadian importers to take is make sure you have a firm understanding of your supply chain and, if the countries from which you're importing are on the list, know what the impacts will be. Anticipate some increased costs on your imports, and be prepared to evaluate new sources in case those increases are pervasive.
We can help! If you need assistance in analyzing your supply chain and understanding how the GPT elimination will affect you, contact Welke.