With the number of times we’ve been asked that question lately, I’d be forgiven for thinking EDC had shifted its focus to puppy adoptions. Don’t worry – we’re still here to provide the answers our readers are digging for, which increasingly involve exporting to Europe or getting ready for the market. Perhaps you’ve had these questions, too.
CETA (the Canada-European Union Comprehensive Economic Trade Agreement) has been provisionally in force for about three months now, and this blog shares some of our most common questions, as well as where you can find the answers. And if you have any additional resources to suggest, or any other Europe-related questions, please email me. I’d love to hear them.
The EU has a Registered Exporter system (nicknamed the REX system), which enables trade between member countries. Now that CETA is in force, European customers are asking their Canadian suppliers for their REX number or customs authorization number to include in the CETA origin declaration, which enables duty-free entry into the EU for Canadian products. However, they’re barking up the wrong tree; the REX system is only for EU-based companies. When asked to provide a REX, Canadian companies should instead include their CRA business number in their origin declarations.
For more details, you can read about this in the CETA text itself: See Annex 2 – Protocol on Rules of Origin and Origin Procedures, which gives a template of the origin declaration text. Note section (2) of the text states that for EU exporters, the number to provide is their customs authorization or registration number (i.e. REX), whereas for Canadian exporters, “The exporter’s Business Number assigned by the Government of Canada must be included.”
For extra confirmation, check out this document by the EU (see page 2) and this guide by EY Canada (see page 3).
That was easy – question one, done! What’s next?
Most Canadian-origin products can now enter the EU duty-free, with exceptions in the agri-food, seafood, and automotive categories. You can use the handy Canada Tariff Finder to find out the tariff rate based on your Harmonized System (HS) Code. (Tip: The MFN rate you’ll see in the search results represents the rate that was applicable before CETA was put in place.)
As with other free trade agreements, duty-free treatment is dependent on meeting the rules of origin, i.e., Canadian content requirements, which will determine whether a Canadian product is eligible for the reduced tariffs. Therefore, your next step is to check Annex 5 – Product-Specific Rules of Origin of the CETA agreement. This specifies what level of transformation should be done in Canada based on the HS code of your product.
This part can be complicated, so be sure to contact your local Trade Commissioner or work with a customs broker for further assistance.
Question 2 is done – but I’m fetching the answers to more of your questions with dogged determination.
Value Added Tax (VAT) is the sales tax in Europe, similar to Canada’s GST/HST. In most cases, VAT is charged to both products and services sold in the EU. Domestic sales are subject to VAT, so imports from Canada also remain subject to it – sales tax is not something that is eliminated when free trade agreements are put in place.
For an overview of how VAT works in Europe, see the section on VAT in the Trade Commissioner Service’s Guide to Exporting to the EU. The VAT rate applied in each EU member state is posted on this page of the European Commission website (see the VAT rates documents). Rates range from 17 to 27 per cent, with reduced rates on certain products.
For the most part, the importer in the EU should be responsible for paying the VAT. One common exception is if you are selling electronic services to consumers directly: see the EU’s Tax rules for electronic services. Regardless of who is paying the tax, you need to keep VAT in mind because it factors into the final selling price.
To understand how VAT rules apply to your specific situation, be sure to seek assistance from an accountant and/or your local Trade Commissioner.
P.S. Don’t forget that Canadian GST/HST is not applied to exported goods (see this page on the CRA website).
Another question we frequently get—and one you should ask yourself early on—is what type of certifications or standards are required for your product to be sold in the EU market.
The Trade Commissioners’ guide that I mentioned earlier has a chapter on Product Safety and another on Packaging and Labelling, which provide a great overview of this topic.
Every product is different, but here are a few links to get you started: the CE Mark is required for machinery, medical devices, and a number of other product categories. Check out the EU General Product Safety Directive if you are selling directly to consumers. For agri-food products, refer to the CFIA’s page on Food Exports and see the chapter in the Trade Commissioners’ guide on EU Sanitary and Phytosanitary Requirements.
Looking for expert assistance? Companies such as CSA Group, UL, or Intertek offer services to help ensure that your products meet any regulations and standards of the country you want to export to. For food products, be sure to connect with your CFIA regional office for assistance.
If you’re ready for the EU market, we have plenty of ways to help. There are lots of articles on our site to help you get informed, plus many other market intelligence sources available. We can also help you get the financing you need to grow your business internationally, and help you manage the risks.
And if you have any other questions, don’t hesitate to reach me at exporthelp@edc.ca. We don’t have all the answers but can certainly direct you to the resources and services available to you as you explore your next export market.
Save time and ask us!
We understand that finding the answers you need to your trade-related questions can be time-consuming. At EDC, we provide targeted information and resources for free, and our Export Help team can research and package the information you need on markets, sector opportunities and trade regulations – within five business days. To get started, click here to provide us with some information about your company and your export plans so that we can gather the most relevant resources and contacts for you.
