Energy provisions summary
Provisions governing trade in energy goods, as well as other activities in the energy sector, will be found across the Canada-United States-Mexico Agreement (CUSMA) instead of in a dedicated chapter. This includes disciplines and provisions in the areas of national treatment and market access, rules of origin, customs and trade facilitation, cross-border trade in services and investment. Recognizing the importance of the energy sector in North America, the CUSMA also contains an enforceable bilateral Canada-U.S. side letter on energy regulatory measures and regulatory transparency. The commitments, contained in an annex to the letter, will provide for enhanced regulatory transparency and cooperation in the North American energy sector and include disciplines with respect to access to electric transmission facilities and pipeline networks. The CUSMA also resolves a technical issue related to diluents that had previously added upwards of $60 million a year in duties and other fees, which served as an unnecessary and burdensome cost to Canadian businesses.
The CUSMA does not include the provision known as the “energy proportionality clause.” Under the original NAFTA energy proportionality clause, if Canada were to apply an export restriction on energy goods, it would have had to give the United States the opportunity to maintain a proportionate volume of Canadian supply, based on recent export levels. While this provision was never invoked, elimination of the proportionality clause in the CUSMA reaffirms Canada’s sovereignty over its energy resources.
Technical summary of negotiated outcomes related to the energy sector
- Maintains obligations and provisions on trade in energy products and services, including in the areas of national treatment and market access, rules of origin, customs and trade facilitation, and cross-border trade in services and investment, and locks in Mexico’s services and investment-related commitments in the energy sector.
- No longer includes the provision known as the “energy proportionality clause.”
- Includes a rule of origin amendment to allow up to 40% of non-originating diluent in pipelines when moving crude oil, a longstanding Canadian industry request. Diluent is a petroleum-based liquid that is often added to crude oil to ensure that it flows properly through pipelines.
- This will resolve a technical issue that had previously added upwards of $60 million a year in duties and other fees, which served as an unnecessary and burdensome cost to Canadian businesses.
- Includes an enforceable side letter between Canada and the United States on energy regulatory measures and regulatory transparency. Included in an annex to the letter are:
- an article encouraging cooperation in the energy sector;
- provisions that require parties to establish or maintain an independent regulatory authority, and the establishment of transparency requirements for the authorization process in the energy sector;
- requirements for parties to provide a right of appeal or review for certain decisions concerning these authorizations;
- an obligation stating that measures governing access to or use of energy infrastructure must be neither unduly discriminatory nor unduly preferential; and
- the longstanding U.S. commitment from the Canada-U.S. FTA ensuring that the Bonneville Power Administration, the U.S. federal agency, afford BC Hydro treatment that is no less favourable than that afforded to utilities located outside of the Pacific Northwest.
- Includes sector-specific outcomes that build upon obligations related to technical barriers to trade and good regulatory practices. This includes a sectoral annex that recognizes the parties’ interest in harmonizing energy-efficiency performance standards and test procedures with a view to enhancing transparency and facilitating trade and future cooperation between the parties.
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