Rules of Origin for Preferential Tariffs

Summary#

The Canada Gazette published the final General Preferential Tariff, General Preferential Tariff Plus and Least Developed Country Tariff Rules of Origin Regulations (SOR/2023-210) on October 25, 2023. The rules explain when imported goods qualify for those tariff preferences and take effect on January 1, 2025; they also repeal the previous rules (SOR/2013-165).

What it does#

• Sets how a good is considered to “originate” in a country for the purposes of the General Preferential Tariff, General Preferential Tariff Plus and Least Developed Country Tariff programs.
• For most goods from a beneficiary or beneficiary-plus country, non-originating inputs can be at most 40% of the ex-factory price (i.e., up to 40% of the value can come from outside that country).
• For goods from a least developed country, non-originating inputs can be at most 80% of the ex-factory price (i.e., up to 80% of the value can come from outside that country).
• Special, simpler rules for many apparel and textile items (listed by tariff headings) say they originate if they are cut/knit to shape and assembled in the beneficiary country, or assembled from fabric made in beneficiary countries or Canada.
• Some materials and packing are “deemed” to originate in the beneficiary country (for example, inputs from other beneficiary countries or from Canada, and certain transport packing).
• A good keeps its originating status if it is moved outside the beneficiary country only while under customs control and if it does not undergo further production (other than minimal handling like unloading, storing, or reloading).
• Goods must be shipped directly to Canada from the beneficiary country (transhipment is allowed under the direct shipment rule).
• Repeals the older rules: SOR/2013-165.

Who's affected#

• Importers in Canada who want to claim lower tariff rates under the General Preferential Tariff, General Preferential Tariff Plus or Least Developed Country Tariff programs.
• Manufacturers and exporters in countries that are beneficiaries of those tariff programs (the regulations apply to goods coming from those countries).
• Businesses that trade or source textiles and apparel, because the rules include special provisions for many clothing and textile tariff headings.
• Customs brokers, freight forwarders and logistics providers, because of the direct-shipment and customs-control requirements.
• The source text does not list which countries are “beneficiary”, “beneficiary-plus” or “least developed” here. It applies to whatever countries are designated under those tariff programs.

Why it matters#

• Whether an imported product pays lower preferential tariffs in Canada now depends on clear value-content tests (40% and 80%) and where key manufacturing steps happen. That affects sourcing, pricing and competitiveness.
• Textile and clothing producers may need to change where cutting, sewing or fabric production happens to keep tariff preferences.
• The direct-shipment and customs-control rules can change shipping routes and paperwork for goods moving through third countries.
• The rules come into force on January 1, 2025, so businesses have time to check if their supply chains meet the new origin tests.