Changes to the General Preferential Tariff and What it Means for Importers
As of January 2015 the federal government plans to remove 72 countries from the “General Preferential Tariff” (GPT) list. The GPT was first implemented in 1974 and offers lower-than-normal tariff rates for imports from developing countries into Canada.
Under the GPT, Canada currently offers duty-free or preferential market access to imports of most products from a list of designated countries. As a part of Canada’s Economic Action Plan 2012, the federal government announced that it would review and modernize the GPT due to major shifts in the income levels and trade competitiveness of certain developing countries.
As an outcome of this review, the federal government has announced that it will reduce the number of countries eligible for the GPT as of January 2015, including Brazil, China, India, Russia and nearly 70 others. With this change, these countries will instead fall under the “Most-Favoured-Nation” (MFN) status, and will be subject to a higher duty rate.
What Does This Mean for Importers?
Beginning January 2015, importers will have to pay higher duty rates when importing from countries that no longer qualify for the GPT. Some tariff increases will range from 3% to 6%, while on the higher end tariff increases for certain clothing items will range from 16% to 18%.
As an example, China currently qualifies for the GPT and an importer of Chinese handbags pays a 7% duty rate today, whereas an importer of handbags from Italy pays a 10% duty rate. In 2015, China will no longer qualify under the GPT, and importers of handbags from China will pay the same duty rate as importers of Italian handbags.
In another example, importers of fluorescent lighting fittings from countries that qualify under the GPT currently pay a 5% duty rate. After the GPT changes take effect, the duty rate will increase to 7% if those same fittings are imported from countries that no longer qualify.
What Countries No Longer Qualify?
For a full list of countries that will or will no longer qualify for the GPT as of January 2015, please see the official notice from the federal government. Please note that this notice states that the changes will take effect July 1, 2014, but that date has since been revised and the GPT changes are now slated for implementation on January 1, 2015.
After 2015 the federal government also plans to review the list of GPT countries annually, which may cause some challenges for businesses who sign multi-year contracts with suppliers abroad.
Source: Small Business BC Blog 2013