Includes information on average tariff rates and types that U.S. firms should be aware of when exporting to the market.
Last Published: 8/14/2017
Although Canada eliminated tariffs on all industrial and most agricultural products imported from the United States under the terms of NAFTA, tariffs and tariff-rate quotas (TRQs) remain in place on dairy and poultry tariff lines. Canada announced the elimination of MFN tariffs on baby clothing and athletic equipment (valued at C$76 million annually) in its 2013 federal budget. Canada proposed to permanently eliminate tariffs on mobile offshore drilling units in its 2014 federal budget.

Technical Barriers to Trade
Restrictions on U.S. Seeds Exports
Canada’s Seeds Act generally prohibits the sale or advertising for sale in Canada or import into Canada of seeds of a variety that is not registered in the prescribed manner. The purpose of variety registration is to provide government oversight to ensure that seeds meet health and safety requirements and that information related to the identity of the variety is available to regulators to prevent fraud. There are concerns that the variety registration system is slow and cumbersome.

Import Policies
Agricultural Supply Management
Canada uses supply-management systems to regulate its dairy, chicken, turkey, and egg industries. The regime involves production quotas, producer marketing boards to regulate price and supply, and tariff-rate quotas (TRQs) for imports. Canada’s supply-management regime severely limits the ability of U.S. producers to increase exports to Canada above TRQ levels. Under the current system, U.S. imports above quota levels are subject to high tariffs (e.g., 245 percent for cheese, 298 percent for butter).

The United States remains concerned about potential Canadian actions that would limit U.S. exports to the Canadian dairy market. For example, the United States monitors closely any tariff reclassifications of dairy products to for possible negative effects on U.S. market access.

Special Milk Classes
Canada provides milk components at discounted prices to domestic processors under the Special Milk Class Permit Program (SMCPP). These prices are “discounted” in the sense that they are lower than Canadian support prices and reflect U.S. or world prices. The SMCPP is designed to help Canadian processed products compete against imports and in foreign markets.

Geographical Indications
Canada and the European Union (EU) announced on August 5, 2014, that they had concluded the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). The agreement contains Canadian commitments regarding geographical indications (GIs) that raise serious concerns about whether implementation will reduce access for current and future U.S. agricultural and foodstuff producers that trade with Canada. The U.S. government engages with Canada on this issue to advance transparency and due process in Canada’s geographical indications system.

Restrictions on U.S. Grain Exports
Several grain sector policies limit the ability of U.S. wheat and barley exporters to receive a premium grade (a grade that indicates use for milling purposes as opposed to grain for feed use) in Canada, including the provisions of the Canada Grain Act and Seeds Act.

Under the Canada Grain Act, the inspection certificate for grain grown outside Canada, including U.S. grain, can only state the country of origin for that grain and not issue a grade. The Canada Grain Act directs the Canadian Grain Commission to “establish grades and grade names for any kind of western grain and eastern grain and establish the specifications for those grades” by regulation. The explicit division between “eastern grain” and “western grain” in the Canada Grain Act as “grain grown in the [Eastern or Western] Division,” defined geographically within Canada, further underscores that grading is only available to Canadian grains. Under the Canada Grain Act, only grain of varieties registered under Canada’s Seeds Act may receive a grade higher than the lowest grade allowable in each class.

U.S. wheat and barley can be sold without a grade directly to interested Canadian purchasers at prices based on contract specifications. Canadian grain elevators offer economic efficiencies by collecting and storing grain from many small-volume growers, giving them the ability to fulfill larger contracts and to demand higher prices.

The barriers to assigning U.S. grain a premium grade encourage both a price discounting of high-quality U.S. grain appropriate for milling use and de facto segregation at the Canadian elevator.

Personal Duty Exemption
Canada’s personal duty exemption for residents who bring back goods from short trips outside its borders is more restrictive than the U.S. personal duty exemption. Canadians who spend more than 24 hours outside Canada can bring back C$200 worth of goods duty-free, or C$800 for trips longer than 48 hours. Canada provides no duty exemption for returning residents who have been out of Canada for fewer than 24 hours. U.S. retailers have raised concerns about the effect of this policy on purchases by Canadians during short trips to the United States.

U.S. companies shipping to Canada should be aware that Canada has a de minimis value of C$20. De minimis refers to the minimum value of the goods below which no duties and taxes are being collected by customs.

Wine, Beer, and Spirits
Canadians face high provincial taxes on personal imports of U.S. wines and spirits upon return to Canada from the United States.

Most Canadian provinces restrict the sale of wine, beer, and spirits through province-run liquor control boards, which are the sole authorized sellers of wine, beer, and spirits in those provinces. Market access barriers in those provinces hamper exports of U.S. wine, beer, and spirits to Canada. These barriers include cost-of-service mark-ups, restrictions on listings (products the liquor board will sell), reference prices (maximum prices the liquor board is willing to pay or prices below which imported products may not be sold), labeling requirements, discounting policies (requirements that suppliers offer rebates or reduce their prices to meet sales targets), and distribution policies.

British Columbia
British Columbia (BC) has implemented a measure that allows only BC wines to be sold on grocery store shelves. Imported wine in grocery stores can only be sold in a “store within a store” that has controlled access with separate cash registers.

Ontario’s new policy that came into effect in 2016 on wine sales in grocery stores, under which a certain number of licenses would be restricted to selling only Ontario Vintners Quality Alliance (VQA) wines, raises concerns that the measure may discriminate against imported wines.

Services Barriers
Canada no longer maintains foreign ownership restrictions for carriers that have less than a 10 percent share of the total Canadian telecommunications market, following an amendment to the Telecommunications Act in June 2012. Foreign owned carriers are permitted to continue operating if their market share grows beyond 10 percent, provided the increase does not result from acquisition of, or merger with, another Canadian carrier. Canada capped the amount of spectrum that all large incumbent companies could purchase in the January 2014 700 MHz spectrum auction to facilitate greater competition in the sector. No foreign entities participated in the auction, which resulted in Canada's three large incumbent wireless providers winning 85 percent of the available blocks. Canada has blocked deals it believes would lead to excessive spectrum concentration among market leaders, and set aside 60 percent of spectrum auctioned in March 2015 for new wireless entrants. These developments have fostered increased competition in Canada’s wireless telecommunications sector. The federal government included a provision to cap wholesale domestic wireless roaming rates in its 2014 budget implementation act. The measure is intended to foster increased competition in Canada’s telecommunications sector by preventing large wireless carriers from charging smaller providers higher roaming rates than they would charge their own customers.

Foreign ownership of transmission facilities is limited to 20 percent direct ownership and 33 percent through a holding company, for an effective limit of 46.7 percent total foreign ownership of certain suppliers of facilities-based telecommunications services (i.e., those that have more than 10 percent market share), except submarine cable operations. Canada has one of the most restrictive regimes among developed countries. Canada also requires that at least 80 percent of the members of the board of directors of facilities-based telecommunications service suppliers be Canadian citizens. Because of restrictions on foreign ownership, the role of U.S. firms in the Canadian market as wholly U.S.-owned operators has been limited to that of resellers, dependent on Canadian facilities-based operators for critical services and component parts.

Canadian Content in Broadcasting
The Canadian Radio-Television and Telecommunications Commission (CRTC) imposes quotas that determine both the minimum Canadian programming expenditure (CPE) and the minimum amount of Canadian programming that licensed Canadian broadcasters must carry (Exhibition Quota). Large English language private broadcaster groups have a CPE obligation equal to 30 percent of the group’s gross revenues from their conventional signals, specialty, and pay services.
In March 2015, the CRTC announced that it will eliminate the 55 percent daytime Canadian-content quota. The CRTC is maintaining the Exhibition Quota for prime time at 50 percent from 6 p.m. to 11 p.m. Specialty services and pay television services that are not part of a large English language private broadcasting group are now subject to a 35 percent requirement throughout the day, with no prime-time quota.

For cable television and direct-to-home broadcast services, more than 50 percent of the channels subscribers receive must be Canadian programming services. Non-Canadian channels must be pre-approved (“listed”) by the CRTC. Upon an appeal from a Canadian licensee, the CRTC may determine that a non-Canadian channel competes with a Canadian pay or specialty service, in which case the CRTC may either remove the non-Canadian channel from the list (thereby revoking approval to supply service) or shift the channel into a less competitive location on the channel dial. The CRTC also requires that 35 percent of popular musical selections broadcast on the radio qualify as “Canadian” under a Canadian government-determined point system.

In September 2015, the CRTC released a new Wholesale Code that governs certain commercial arrangements between broadcasting distribution undertakings, programming undertakings, and exempt digital media undertakings. A proposal in the new Wholesale Code to apply a code of conduct for vertically integrated suppliers in Canada (i.e., suppliers that own infrastructure and programming) to foreign programming suppliers (who cannot be vertically integrated, as foreign suppliers are prohibited from owning video distribution infrastructure in Canada) has raised significant stakeholder concerns. Stakeholders have also expressed concern related to provisions in the Wholesale Code that affect U.S. broadcast signals and services within Canada. The Wholesale Code came into force January 22, 2016.

U.S. suppliers of programming have raised concerns about a CRTC policy not to permit simultaneous substitution of advertising for the Super Bowl beginning in 2017. Simultaneous substitution is a process by which broadcasters can insert local advertising into a program, overriding the original U.S. ad and thus providing the Canadian broadcaster an independent source of revenue. U.S. suppliers of programming believe that the price Canadian networks pay for Super Bowl rights is determined by the value of ads they can sell in Canada and that the CRTC’s decision reduces the value of their programming. The United States is seeking clarity from the Canadian government on the CRTC’s position in this matter.

Investment Barriers
The Investment Canada Act (ICA) has regulated foreign investment in Canada since 1985. Foreign investors must notify the government of Canada prior to the direct or indirect acquisition of an existing Canadian business above a threshold value. Canada amended the ICA in 2009 to raise the threshold for Canada’s “net benefit” review of foreign investment. The threshold currently stands at C$600 million and had been scheduled to increase to C$1 billion in 2019. The government announced November 1, 2016 that the threshold for review will be raised to C$1 billion in 2017, two years sooner than originally planned. Foreign state-owned enterprises (SOEs) remain subject to a lower threshold of $369 million. Innovation, Science and Economic Development Canada (ISED) is the government’s reviewing authority for most investments, except those related to cultural industries, which come under the jurisdiction of Heritage Canada. Foreign acquisition proposals under government review must demonstrate a “net benefit” to Canada. The Industry Minister may disclose publicly that an investment proposal does not satisfy the net benefit test and publicly explain the reasons for denying the investment, so long as the explanation will not do harm to the Canadian business or the foreign investor.

Under the ICA, the Industry Minister can make investment approval contingent upon meeting certain conditions such as minimum levels of employment and RandD. Since the global economic slowdown in 2009, some foreign investors in Canada have had difficulty meeting these conditions.

Canada administers supplemental guidelines for investment by foreign SOEs, including a stipulation that future SOE bids to acquire control of a Canadian oil-sands business will be approved on an “exceptional basis only.”
For more information, refer to the U.S. Trade Representative’s (USTR) 2017 National Trade Estimate Report on Foreign Trade Barriers.

Cross-Border Data Flows
The Canadian federal government is consolidating information technology services across 63 Canadian federal government e-mail systems under a single platform. The tender for this project invoked national security as a basis for prohibiting the contracted company from allowing data to go outside Canada. This requirement precludes U.S.-based “cloud” computing suppliers from participating in the procurement process, unless they replicate data storage and processing facilities in Canada. The public sector represents approximately one-third of the Canadian economy, and is a major consumer of U.S. services, particularly in the Information Communication Technology (ICT) sector, and thus the requirement could significantly hinder U.S. exports of a wide array of products and services.

Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using U.S. services when personal information could be accessed from or stored in the United States.

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Canada Tariff Rate Quotas Import Duties