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Canada-United States-Mexico Agreement – Canadian Statement on Implementation

Table of Contents

PART ONE – GENERAL

Introduction

On November 30, 2018, Canada, the United States and Mexico signed a protocol to replace the 1994 North American Free Trade Agreement (NAFTA) with the Canada-United States-Mexico Agreement (CUSMA or Agreement). Under the protocol, NAFTA would be formally replaced by CUSMA upon entry into force of the new Agreement. On December 10, 2019, the Parties agreed to modify certain elements of the Agreement to improve the final outcome in the areas of state-to-state dispute settlement, labour, environment, intellectual property and rules of origin. The Parties subsequently provided their formal notifications of the completion of domestic procedures in April 2020. Under the terms of the protocol, entry into force of CUSMA was set for July 1, 2020. The Canada-United States Free Trade Agreement (CUSFTA), which was suspended upon entry into force of NAFTA, remains suspended until such time as the suspension of CUSFTA is terminated.

CUSMA provides important outcomes in areas such as labour, environment, automotive trade, culture, energy, agriculture and agri-food, and dispute resolution. It also includes outcomes on gender, Indigenous peoples’ rights, and small and medium-sized enterprises (SMEs). In that regard, CUSMA is consistent with Canada’s inclusive approach to trade, which seeks to ensure that all segments of society, both in Canada and abroad, can take advantage of the economic opportunities flowing from trade and investment. Furthermore, the Agreement confirms the continued right of the Parties to regulate in the public interest, including for public health and security.

CUSMA builds on NAFTA’s foundations, which have generated unprecedented economic growth and raised standards of living for the people of all three Parties. The modernized Agreement preserves key elements of NAFTA, including duty free market access for the majority of trilateral trade, and incorporates new and updated provisions that seek to address current trade challenges and opportunities. The Agreement will benefit Canadians, create jobs, contribute to North America’s global competitiveness, and strengthen economic relations with the United States and Mexico, respectively Canada’s first and third largest merchandise partners in the world.

Purpose and Structure of the Statement on Implementation

This Statement on Implementation for CUSMA sets out Canada’s interpretation of the Parties’ rights and obligations under CUSMA. As a legal document dealing with complex matters, the text of the Agreement can be difficult to understand. The objective of this Statement is to explain the basic rights and obligations in the Agreement so that Canadians have a clearer understanding of the substance and benefits of CUSMA, as well as trade opportunities. It also clearly sets out how Canada interprets the Agreement and intends to pursue the rights and obligations contained therein.

For each chapter, the Statement provides Canada’s interpretation of each article and outlines how Canada has implemented the Agreement in domestic law. It also sets out additional actions the Government will undertake to exercise its rights and obligations under the Agreement.

PART TWO – PROVISIONS OF THE AGREEMENT

PREAMBLE

1. CUSMA Provisions

The Preamble is the introductory statement in the Agreement that articulates the broad objectives of the Parties, including elements related to social and economic goals in the context of economic integration and development. It reflects the Parties’ commitment to free and fair trade, their shared values and the political context in which the Parties negotiated the Agreement.

The Preamble affirms the commitment of the Parties to strengthen their longstanding friendship and close economic relationship, and to replace NAFTA with a 21st century, high standard agreement to support mutually beneficial trade and economic growth in the region. It notably highlights the Parties’ resolve to expand regional trade and production by further incentivizing the production and sourcing of goods in the region, and to enhance competitiveness of regional exports and the conditions of fair competition. It affirms the Parties’ commitment to ensure predictability for businesses, importers and exporters, to grow micro, small and medium-sized enterprises, and to facilitate trade in goods and services by eliminating unnecessary technical barriers to trade, enhance transparency and promote good regulatory practices.

The Preamble recognizes the importance of other values, including environmental protection and enforcement, sustainable development, labour rights, the elimination of bribery and corruption, engagement by Indigenous people in trade and investment, and equal access to and opportunity for women and men to benefit from the opportunities created by CUSMA.

The Preamble also recognizes the Parties’ right to regulate in the public interest to set legislative and regulatory priorities, and protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of living or non-living exhaustible natural resources, the integrity and stability of the financial system, and public morals.

Finally, the Preamble highlights the Parties’ commitment to an Agreement that will address future trade and investment challenges and opportunities, and contribute to advancing their respective priorities over time.

2. Canadian Legislation

No amendments to Canadian legislation arise from the Preamble.

The Agreement’s objectives are reflected in section 7 of the Canada-United States-Mexico Agreement Implementation Act (CUSMA Implementation Act) which will guide the interpretation of the Act.

3. Intended Government Action

The Government will implement the Agreement in a manner that is consistent with its underlying principles and objectives. It will continue to promote Canadian values and its inclusive trade agenda when implementing the Agreement.

CHAPTER 1: INITIAL PROVISIONS AND GENERAL DEFINITIONS

1. CUSMA Provisions

This Chapter establishes the free trade area and outlines how CUSMA will interact and co-exist with other international agreements. This Chapter also defines the terms used throughout the Agreement, although individual chapters may contain definitions that have specific application to the obligations of that chapter.

Section A: Initial Provisions

Article 1.1 declares the establishment of a free trade area in conformity with Article XXIV of the General Agreement on Tariffs and Trade, 1994 (GATT 1994), and Article V of the General Agreement on Trade in Services (GATS). These provisions allow World Trade Organization (WTO) Members to enter into deeper trading relationships (free trade areas or customs unions) without violating the normal rules against providing preferential treatment to goods or services of different WTO Members. In order to benefit from this flexibility, certain substantive and procedural requirements apply, including a requirement to notify applicable WTO Committees.

Article 1.2 sets out the relationship between the Agreement, the WTO Agreement, and other agreements that are binding on two or more Parties (such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) between Canada and Mexico). It clarifies that CUSMA does not affect the Parties’ rights and obligations to each other in those other agreements.

Article 1.3 clarifies that a Party’s obligations under CUSMA do not preclude a Party from taking a measure to comply with its obligations under one of the listed multilateral environmental agreements, provided that the primary purpose of the measure is not to impose a disguised restriction on trade. The Parties may agree to amend the list of covered agreements.

Article 1.4 provides that each Party must ensure that a person who has been delegated authority (regulatory, administrative or other governmental) abides by the obligations set out in the Agreement when exercising that authority. This Article essentially confirms customary international law on state responsibility, under which a State is responsible for violations of international law by people who have that delegated authority.

Section B: General Definitions

Article 1.5 sets out definitions that are used throughout the Agreement.

Section C: Country-Specific Definitions

Section C sets out the geographical scope of application of the Agreement by defining each Party’s territory.

2. Canadian Legislation

Section 3 of the CUSMA Implementation Act provides that the Act and any federal law that implements or fulfills the Agreement is to be interpreted in a manner consistent with the Agreement. This clause is consistent with Canada’s treaty obligations under the Vienna Convention on the Law of Treaties (VCLT) and is intended to remove any ambiguity that might exist in domestic law regarding the interpretation of implementing measures.

3. Intended Government Action

Following the passage of the CUSMA Implementation Act and related regulatory and administrative action, the Government will have taken the steps necessary to bring the Agreement into force in Canada.

CHAPTER 2: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

1. CUSMA Provisions

One of Canada’s principal goals in the modernization of NAFTA was to maintain and improve existing market access for exports of Canadian goods to the United States and Mexico. This Chapter achieves this goal and its provisions set out the fundamental disciplines for trade in goods, which aim to eliminate or reduce barriers to trade in goods. The disciplines in this chapter also provide for transparency and predictability in the North American goods market, and help create opportunities for Canadian exporters. Most notably, the Parties agreed to preserve and expand NAFTA outcomes on tariff commitments, to not apply restrictions or prohibitions on the import or export of goods, and to treat imported products no less favourably than similar domestic products.

Additional information on tariff commitments and the tariff schedule for each Party is included below under Annex 2-B.

Article 2.1 provides definitions for certain terms used in this Chapter, including that “duty-free” means free specifically of customs duty.

Article 2.2 sets out the scope of the Chapter as applicable to trade in goods of a Party.

Paragraph 1 of Article 2.3 requires a Party to provide non-discriminatory treatment to the goods of the other Party by incorporating Article III of the GATT 1994 (National Treatment on Internal Taxation and Regulation) into the Agreement. National treatment is the obligation for a Party to treat imported goods no less favourably than domestic goods. This means, for instance, that a good imported into a Party cannot be subject to measures establishing adverse conditions for imported goods, such as higher internal taxes, stricter product regulations or more restrictive conditions on sale and distribution, compared to those for like goods of that Party. The national treatment obligation is an essential component of any free trade agreement that eliminates trade barriers for goods because it prevents a Party from replacing border measures with domestic measures that favour domestic goods over imported goods in that Party’s market.

Paragraph 2 of Article 2.3 clarifies the manner in which the national treatment obligation applies to measures maintained or adopted by regional governments. For Canada, this obligation applies to provincial and territorial governments. More specifically, with respect to measures of a provincial or territorial government, national treatment means treatment that is no less favourable than the treatment the province or territory accords to like goods produced in any other province or territory.

Paragraph 3 of Article 2.3 indicates that paragraph 1 of Article 2.3 does not apply to certain measures as set out in Annex 2-A.

Article 2.4 establishes that, for originating goods, the Parties must apply rates of customs duties in accordance with their respective Schedules to Annex 2-B, in which the relevant tariff commitment for each tariff line is identified. This Article prevents the Parties, unless provided for elsewhere in the Agreement (e.g. pursuant to Article 32.1.4 (General Exceptions)), from increasing rates of customs duties (i.e. tariffs) or adopting new duties on originating goods as set out in the Schedule of Tariff Commitments in CUSMA. Originating goods are those goods that qualify as ‘originating’ under Chapter 4 (Rules of Origin). It allows Parties to consult on accelerating or broadening the scope of the elimination of customs duties that are set out in the Parties’ Schedules (Tariff Commitments). An agreement by two or more Parties to accelerate or broaden the scope of customs duties elimination will supersede the Parties’ existing tariff schedules.

Article 2.5 establishes rules on the use of duty drawback programs and duty deferral programs. A duty drawback is a refund, waiver or reduction of a customs duty that is paid upon the importation of a good, provided the good is later exported or used in the production of a good that is exported. Duty deferral programs allow for a deferral of the payment of a customs duty until goods are used for consumption, are exported, or are used in the production of a good that is exported. Duty drawbacks and deferrals on an imported good are effectively prohibited unless permitted in accordance with the conditions in Article 2.5.

Article 2.6 prohibits the Parties from adopting or maintaining a waiver of customs duty when the waiver is conditioned, either explicitly or implicitly, on a performance requirement. In this context, performance requirements include: requiring that a quantity or percentage of goods or services be exported; requiring that a good or service from the importing Party be substituted for an imported good; requiring that a person benefiting from a customs duty waiver purchase other goods or services from the Party that grants the waiver; requiring a person benefiting from a customs duty waiver produce goods or services in the territory of the Party granting the waiver with a level or percentage of domestic content; or a requirement related in any way to the volume or value of imports or to the volume or value of exports or to the amount of foreign exchange inflows. Performance requirements explicitly exclude requirements that a good – or an identical or similar substitute – be subsequently exported or used in the production of a good that is subsequently exported.

Article 2.7 requires Parties to provide, subject to certain permissible conditions, duty-free admission for certain goods temporarily imported from another Party. These goods include professional equipment (e.g. equipment related to broadcasting), goods intended for display or demonstration, commercial samples, advertising films and recordings and goods for sports purposes. For the duty-free temporary admission of professional equipment, the equipment must be necessary for carrying out the trade or profession of a person who qualifies for temporary entry according to the laws of the Party into which the goods are temporarily imported. The Parties may still impose conditions listed in Article 2.7.2 including requiring that the goods: be imported by a national of another Party who seeks temporary entry; be used solely by or under the personal supervision of a national of another Party in the exercise of the business activity, trade, profession or sport of that national of another Party; not be sold or leased; be accompanied by a security in an amount no greater than 110% of the charges that would otherwise be owed on entry of such a good; and be otherwise admissible into a Party under its law. The Parties are required to extend the time allowed for temporary admission, if requested by the person concerned, subject to the Party’s law. If conditions applied by the Party for temporary entry are not fulfilled, the importing Party can apply customs duties and any other charges normally owed on entry or importation of the good as well as any charges or penalties provided for under its laws.

The Parties are required to adopt and maintain certain procedures for the expeditious release of goods temporarily admitted. The Parties are required to permit a good temporarily admitted through a point of entry to be exported through a different point of entry. Parties are required to allow for duty-free temporary admission of shipping containers with a volume of at least one cubic metre, and pallets, regardless of their origin.

Article 2.8 provides for the duty-free re-importation of goods, regardless of their origin, after the good has been temporarily exported to another Party for repair or alteration in that other Party. The obligation not to apply a customs duty does not apply to a good imported under a duty deferral program that is exported for repair or alteration and is not re-imported under a duty deferral program. “Repair or alteration” under Article 2.8 does not include an operation or process that destroys a good’s essential characteristics or creates a new or commercially different good, or transforms an unfinished good into a finished good.

Article 2.9 provides for duty-free entry of commercial samples of negligible value or printed advertising material imported from the territory of any Party of any origin. The Article allows Parties to impose a condition that commercial samples benefitting from this treatment: be imported solely for the solicitation of orders for goods, or services provided from the territory of another Party or non-Party; or that the printed advertising material be imported in packets that contain no more than one copy of the material and the materials or packets do not form part of a larger delivery.

Article 2.10 requires the Parties to provide customs duty-free treatment on a most-favoured-nation (MFN) basis for certain information and communication technology goods set out in Table 2.10.1, 2.10.2 and 2.10.3. The Parties are required to consider the products set out in Table 2.10.1 as originating goods, regardless of origin.

Article 2.11 provides a general prohibition on the imposition of import or export prohibitions or restrictions.

Paragraph 1 of Article 2.11 incorporates Article XI of the GATT 1994 (General Elimination of Quantitative Restrictions) in order to ensure that a Party does not adopt or maintain prohibitions or restrictions on the importation or exportation of any good from or to another Party, except where provided under Article XI or elsewhere in CUSMA.

Paragraph 2 of Article 2.11 clarifies particular types of measures that the Parties are prohibited from adopting or maintaining. These are: export and import price requirements (except under countervailing and anti-dumping duty measures), import licensing conditions for fulfilling a performance requirement; or voluntary export restraints inconsistent with Article VI of the GATT 1994.

Paragraphs 3 and 4 of Article 2.11 sets out the Parties’ rights and obligations if a Party adopts or maintains a prohibition or restriction on the importation from or exportation to a non-Party of a good.

Paragraph 5 of Article 2.11 prohibits a Party from requiring, as a condition for importation, that persons of another Party establish contractual or other relationships with distributors in its territory. This obligation ensures that Parties cannot establish or maintain policies that prohibit the importation of goods unless the supplier has a contractual relationship with a domestic distributor. For greater certainty, this obligation would not apply to provincial liquor control boards, as the provinces are the sole importers of alcoholic beverages.

Paragraph 7 of Article 2.11 sets out that provisions on import and export restrictions in paragraphs 1-6 of Article 2.11 do not apply to measures as set out in Annex 2-A (e.g. import and export measures concerning rough diamonds).

Article 2.12 specifies that the obligation not to apply prohibitions or restrictions on the importation or exportation of goods under Article 2.11.1 applies to remanufactured goods. Remanufactured goods are distinct from used goods in that they undergo significant processing beyond cleaning, repair and maintenance and are thus restored to a higher level of functionality than a repaired or used good.

Article 2.13 incorporates transparency requirements included in the WTO’s Agreement on Import Licensing Procedures (Import Licensing Agreement). In addition, the Article includes a number of provisions designed to enhance transparency on import licensing requirements by requesting Parties to adhere to additional notification, publication and consultation requirements.

Article 2.14 requires the Parties to comply with certain notification, publication and consultation requirements for export licensing procedures.

Article 2.15 prohibits a Party from adopting or maintaining duties, taxes or other charges on exported goods unless it similarly applies that duty, tax or other charge to goods destined for domestic consumption, similar to NAFTA.

Article 2.16 prohibits fees and other charges imposed in connection with the import of goods, unless the fee or charge is commensurate to the cost of the services rendered, similar to NAFTA. Parties are prohibited from requiring consular transactions, including a related fee or charge, in connection with the importation of goods from another Party. Parties are further prohibited from adopting or maintaining a customs user fee on an originating good. For the United States, this prohibition applies to the merchandise processing fee (MPF), and for Mexico it applies to the derecho de trámite aduanero.

Article 2.17 establishes and sets out the functions of the Committee on Trade in Goods which include, addressing, at the request of Parties, all issues pertaining to trade in goods, including monitoring the implementation and administration of this Chapter.

Exceptions to National Treatment and Import and Export Restrictions

Annex 2-A contains exceptions to the application of Article 2.3 on national treatment and Article 2.11 on import and export restrictions. As in its other free trade agreements, Canada maintains an exception with respect to measures pertaining to:

Tariff Commitments and Tariff Schedules

Annex 2-B contains provisions regarding customs duty commitments for originating goods. As outlined in each Party’s Schedule to this Annex (Tariff Commitments), and in accordance with Article 2.4, the rates of customs duty on originating goods is designated with either a ’0’ or an asterisk (*). Goods designated with ’0’, are duty-free on the day that CUSMA enters into force. For goods marked with an asterisk, the tariff treatment is outlined in Appendix 1 to that Party’s Schedule.

CUSMA maintains and expands the duty-free market access outcomes that were included in NAFTA. CUSMA also provides Canada and the United States with new access to each other’s markets in the form of agricultural tariff rate quotas (TRQs). Tariff rate quotas are mechanisms that allow a specified volume of goods to enter at a preferential tariff, while requiring imports in excess of that volume to be subject to the MFN tariff rate.

Information on TRQ administration for Canada and the United States is set out in their respective General Notes to their Tariff Schedules as included in Appendix 2 to Annex 2-B.

Detailed information on TRQ outcomes for Canada and the United States is set out in Section B of their respective Tariff Schedules. Section C as included in Canada’s Appendix 2 to Annex 2-B establishes market access commitments in relation to Canada’s WTO tariff schedule for imports of turkey, turkey products, broiler hatching eggs, and chicks.

Canada’s TRQ Commitments

Canadian TRQs applicable to originating goods from the United States are established for certain dairy, poultry and eggs and egg products.

Paragraph 19 of Canada’s Appendix 2 to Annex 2-B establishes a country-specific TRQ for chicken. Upon entry into force of CUSMA, CUSFTA Article 706(a) is superseded and Canada’s global TRQ access quantity will be defined solely in accordance with its WTO commitments.

Paragraph 20 of Canada’s Appendix 2 to Annex 2-B establishes a country-specific TRQ for eggs and egg products. Once CUSMA enters into force, CUSFTA Article 706(c) will be superseded, and Canada’s global TRQ access quantity for eggs and egg products will be defined solely in accordance with its WTO commitments.

Paragraph 22(a) of Canada’s Appendix 2 to Annex 2-B reproduces Canada’s CUSFTA Article 706(b) commitment on global market access for turkey and turkey products with a small modification to how the 3.5% of production is calculated, and a transition period of 10 years.

Paragraph 22(b) of Canada’s Appendix 2 to Annex 2-B replicates Canada’s global market access commitment as agreed under the 1990 Exchange of Letters constituting an Agreement between the Government of Canada and the Government of the United States Of America concerning Imports of Broiler Hatching Eggs and Chicks. Canada and the United States agreed to terminate the 1990 Agreement through an exchange of letters that take effect upon entry into force of CUSMA.

TRQ Commitments of the United States

The United States’ TRQs applicable to originating goods from Canada are established for refined sugar and sugar-containing products and certain dairy products including cheese, cream, milk beverages and butter.

2. Canadian Legislation

To implement Canada’s obligations under this Chapter, the CUSMA Implementation Act amends the Customs Act and the Customs Tariff, as set out in sections 114 through 136, sections 183 through 205, and schedules 2 through 5 of the CUSMA Implementation Act.

The Customs Tariff is a fiscal statute that establishes the rules for determining the tariff treatment and rate of customs duties accorded to imported goods. It also provides for matters such as the prohibition of the importation of specific goods as well as the imposition of additional duties as a result of safeguard actions. The tariffs or rates of customs duty that apply to all goods upon their importation into Canada are set out in the Schedule to the Customs Tariff. The rules of origin made under the tariff regulations provide the basis for determining whether goods qualify for a particular tariff treatment. The Customs Tariff also provides for various measures for relief of customs duties.

To implement the elimination of customs duties under CUSMA, section 190 of the CUSMA Implementation Act modernizes the existing United States Tariff and Mexico Tariff preferential tariff treatments of NAFTA. NAFTA already eliminated tariffs on almost all goods from the United States and Mexico, with these preferential tariffs dating back to 1989 and 1994, respectively. Accordingly, the implementation of the CUSMA preferential tariffs streamlines some provisions in domestic law that are now redundant (e.g. staging categories for tariff phase-outs that are long completed).

The section also provides that goods are entitled to these preferential tariff treatments only when the rules of origin are met and proof of origin is provided.

The appropriate tariff treatment applicable to goods from Mexico and the United States is based upon the country where the last substantial production process (i.e. excluding operations such as labelling or repackaging) occurred, as set out in CUSMA.

Section 204, and schedules 2 through 5, of the CUSMA Implementation Act establish in domestic law the CUSMA preferential rates of customs duty for each good in the Canadian tariff classification. Given that the existing preferential tariffs were established in 1989 under CUSFTA and in 1994 under NAFTA and there have been numerous technical changes in the classification of goods since that time, in order to clean up the Schedule to the Customs Tariff, the existing preferential tariffs under NAFTA are repealed, and the CUSMA preferential rates under the Mexico Tariff and United States Tariff are re-established.

Subsection 204(1) repeals the existing preferential tariffs under NAFTA.

Subsection 204(2) re-establishes the United States Tariff for each tariff item in the Canadian tariff classification system. Paragraph (c) establishes that the United States Tariff shall be 0% (or “Free”) as of the date of entry into force for all items in the Canadian tariff classification system, other than those tariff items specified in Schedule 2 to 4 of the CUSMA Implementation Act. Paragraph (d) sets out those tariff items that are excluded from a preferential tariff under CUSMA (over-access supply-managed goods; tariff items unique to other FTAs, such as a country-specific TRQ for sugar for Peru and Honduras; and prohibited importations) and establishes this in domestic law by setting the United States Tariff as “N/A”. Schedule 4 sets out those tariff items that are subject to a United States Tariff that is gradually reduced to 0% (as opposed to being immediately set at 0% upon entry into force) and fixes in domestic law the phase-out schedule – this applies to whey, margarine and other butter substitutes.

Subsection 204(3) re-establishes the Mexico Tariff for each tariff item in the Canadian tariff classification system. Paragraph (c) establishes in domestic law that the Mexico Tariff shall be 0% (or “Free”) as of the date of entry into force for all items in the Canadian tariff classification system, other than those tariff items specified in Schedule 5 to the Act. Paragraph (d) sets out those tariff items that are excluded from a preferential tariff under the Mexico Tariff (over-access supply-managed goods; tariff items unique to other FTAs, such as a country-specific TRQ for sugar for Peru and Honduras; and prohibited importations) and establishes this in domestic law by setting the Mexico Tariff as “N/A”. There are no goods for which the Mexico Tariff is subject to a gradual reduction to free.

The CUSMA Implementation Act also amends the Customs Tariff to:

Finally, the CUSMA Implementation Act amends the Customs Tariff to make numerous consequential changes to existing provisions that are carried forward in CUSMA, but which require references to NAFTA to be updated.

3. Intended Government Action

In addition to the statutory provisions outlined in the previous section, several regulations and orders are being made under the authority of the Customs Tariff to implement the provisions of this Chapter. Principally, the CUSMA Tariff Preference Regulations will link eligibility for the preferential tariffs under CUSMA with the rules of origin of the Agreement, which are established in regulations.

There are also a number of regulations and orders under the Customs Tariff that are being repealed as they are not relevant under CUSMA. This is partly because of NAFTA provisions that are not included in the CUSMA, but largely because the re-establishment of the United States Tariff and Mexico Tariff means that they are redundant. Further regulations and orders under the Customs Tariff require consequential amendments, such as replacing references to NAFTA with references to CUSMA.

The Government will monitor closely the implementation of this Chapter by the Parties, especially on issues related to trade in goods, including agricultural goods, encountered by Canadian exporters. The Government will ensure that issues are monitored, raised and addressed in a timely manner through the appropriate mechanisms available, such as through the Committee on Trade in Goods, as set out in this Chapter.

Appendix 2, Section B, Paragraph 22(b) - Broiler Hatching Eggs and Chicks

Upon the entry into force of CUSMA, the 1990 Exchange of Letters constituting an Agreement between the Government of Canada and the Government of the United States Of America concerning Imports of Broiler Hatching Eggs and Chicks will be terminated.

CHAPTER 3: AGRICULTURE

1. CUSMA Provisions

This Chapter establishes obligations and commitments on agricultural trade between the Parties. In addition, market access and tariff commitments for agricultural goods are contained in Chapter 2 (National Treatment and Market Access for Goods). Chapter 2 also includes each Party’s Appendix with their respective tariff schedule and tariff rate quotas (TRQs).

Section A: General Provisions

Article 3.1 sets out definitions of general application that are used throughout this Chapter.

Paragraph 1 of Article 3.2 defines the scope of this Chapter as applicable to trade in agricultural goods.

Paragraph 2 of Article 3.2 ensures the provisions of this Chapter prevail in the event of any inconsistency with another provision in the Agreement.

Article 3.3 commits the Parties to work together through the WTO to promote increases in transparency and further develop multilateral disciplines on market access, domestic support, and export competition.

Paragraph 1 of Article 3.4 prohibits Parties from maintaining an export subsidy on any agricultural good destined for the territory of another Party.

Paragraph 2 of Article 3.4 sets out that if a Party considers that export financing support granted by another Party results or may result in a distorting effect on trade between the Parties, or considers that an export subsidy is being granted by another Party, with respect to agriculture goods, the Party can request a discussion on the matter with the other Party. The responding Party shall agree to discuss the matter with the requesting Party.

Paragraph 1 of Article 3.5 defines the term “foodstuff” to include fish and fish products intended for human consumption for the purpose of this Article.

Paragraph 2 of Article 3.5 acknowledges Article XI:2(a) of the GATT 1994 (General Elimination of Quantitative Restrictions) in order to recognize that a Party may temporarily apply an export prohibition or restriction that is otherwise prohibited under Article XI:1 of the GATT 1994 on a foodstuff to prevent or relieve a critical shortage subject to the conditions outlined in Article 12.1 of the WTO Agreement on Agriculture.

Paragraph 3 of Article 3.5 sets out conditions in addition to Article 12.1 of the WTO Agreement on Agriculture under which a Party is allowed to apply or maintain an export prohibition or restriction on the exportation or sale for export of a foodstuff, related to notification to the other Parties.

Paragraph 4 of Article 3.5 sets out what must be included in a notification made by the Party adopting an export prohibition and restriction in accordance to paragraph 3 of the Article.

Paragraph 5 of Article 3.5 specifies that a Party is not required to notify an export prohibition or restriction if the measure prohibits the exportation or sale for export of a foodstuff only if the Party has been a net importer of that foodstuff during each of the three calendar years preceding the imposition of the measure, excluding the year the measure was imposed.

Paragraph 6 of Article 3.5 sets out that if a Party adopts or maintains an export prohibition or restriction on a foodstuff for which it is a net importer and that Party does not provide notification to the other Parties, that Party is obligated to provide to the other Parties trade data demonstrating that it was a net importer of the foodstuff during the three calendar years preceding the measure, excluding the year the measure was imposed.

Paragraph 7 of Article 3.5 sets out the requirements for consultation and information sharing by a Party that is notifying the other Parties of their export prohibition or restriction measure under paragraph 3 of this Article.

Paragraph 8 of Article 3.5 sets out that if an export prohibition or restriction is not considered by a Party to be satisfactorily resolved, that Party can bring the measure to the attention of the third Party.

Paragraph 9 of Article 3.5 sets out the timeframe within which a Party adopting an export prohibition or restriction must terminate the measure and sets out the requirements on any continuation of the measure beyond the initial period.

Paragraph 10 of Article 3.5 prohibits a Party from applying an export prohibition or restriction to a foodstuff purchased for a non-commercial, humanitarian purpose.

Paragraph 1 of Article 3.6 requires a Party providing domestic support to its agriculture producers to try to minimize or eliminate any distorting effects of that measure on trade or production.

Paragraph 2 of Article 3.6 commits Parties to work together and share information to minimize any negative trade impact of a domestic support measure.

Article 3.7 establishes a Committee on Agricultural Trade and sets out its functions, the establishment of its terms of reference and the frequency of its meetings.

Article 3.8 sets out the activities of the three separate bilateral Consultative Committees on Agriculture such as the Canada-United States Consultative Committee on Agriculture and Mexico-Canada Agriculture Consultative Committee. The Article allows the bilateral Committees to share information with CUSMA’s Committee on Agriculture, Committee on Sanitary and Phytosanitary Measures, and Committee on Technical Barriers to Trade regarding their activities.

Article 3.9 prohibits the Parties from applying duties pursuant to a special safeguard taken under Article 5 of the WTO Agreement on Agriculture on imports of agricultural goods from other Parties that are subject to preferential tariff treatment.

Footnote 1 (see Article 3.9) clarifies that any agricultural good for which most-favoured-nation (MFN) tariff treatment applies (e.g. Canada’s over-access commitments for dairy, poultry, and eggs and egg products) may be subject to additional duties applied by a Party pursuant to a special safeguard taken under the Agreement on Agriculture.

Paragraph 1 of Article 3.10 addresses transparency regarding measures related to trade in agricultural goods taken by a regional level of government in its territory that may have a significant impact on trade between the Parties.

Paragraph 2 of Article 3.10 commits Parties to work together to discuss and if appropriate, resolve matters arising from grade, quality, technical specifications, and other standards as they affect trade between the Parties.

Article 3.11 lists the two bilateral annexes related to trade in agricultural goods between Canada and the United States and between Mexico and the United States, respectively. It also lists the sectoral annexes for trade in distilled spirits, wine, beer, and other alcohol beverages, and proprietary formulas for prepackaged foods and food additives.

Section B: Agricultural Biotechnology

Article 3.12 sets out definitions for certain terms used within Section B. Key definitions include “product of agricultural biotechnology”, “product of modern biotechnology” and “Low Level Presence (LLP) Occurrence”, which serve to dictate the scope for each of the paragraphs in which they are used.

Article 3.13 requires Parties to designate and notify a contact point for the sharing of information on matters related to this Section in accordance with Article 30.5 (Agreement Coordinator and Contact Points).

Article 3.14 sets out obligations specific to the trade of products of agricultural biotechnology, which includes products of current and future technologies.

Paragraph 1 of Article 3.14 affirms the importance of encouraging agricultural innovation and facilitating trade in products of agricultural biotechnology.

Paragraph 2 of Article 3.14 confirms that Parties maintain the right to determine their national regulatory oversight for products of agricultural biotechnology by clarifying that this Section does not obligate a Party to require an authorization for a product of agricultural biotechnology to be on the market.

Paragraph 3 of Article 3.14 requires Parties to make available to the public, to the extent possible, the following information related to products of agricultural biotechnology: information requirements for a product authorization; a summary of any risk or safety assessment that has led to the authorization of a product; and any list of products that have been authorized in its territory. This information ensures transparency in the authorization submission requirements, and what is already authorized in the territory of each Party.

Paragraph 4 of Article 3.14 includes obligations related to each Party’s domestic authorization procedures to minimize time gaps in authorizations of products of agricultural biotechnology between Parties and reduce the likelihood of trade disruptions in these products.

Article 3.15 sets out obligations specific to LLP occurrences of products of modern biotechnology. The paragraphs under this Article include provisions specific to an importing and exporting Party in the event of an LLP occurrence.

Paragraph 1 of Article 3.15 requires Parties to proactively adopt or maintain policies or approaches to facilitate the management of an LLP occurrence.

Under paragraph 2 of Article 3.15 the exporting Party is required to provide a summary of any risk or safety assessments conducted in relation to the product of modern biotechnology that is the subject of the LLP occurrence, provide a contact who is most likely to have information on that product of modern biotechnology, and encourage that contact to share information with the importing Party that could assist in managing the occurrence.

Paragraph 3 of Article 3.15 requires the importing Party to inform the importer of the LLP occurrence and any information that must be submitted to assist in managing the occurrence, and to provide the exporting Party with a summary of any risk or safety assessments conducted in connection with the LLP occurrence. The paragraph also requires the importing Party to ensure an LLP occurrence is managed without delay while taking into account the risk posed by the occurrence and any relevant product authorizations granted by other countries.

Article 3.16 establishes and sets out the structure and functions of a Working Group for Cooperation on Agricultural Biotechnology.

Paragraphs 1 and 2 of Article 3.16 establish the scope of the Working Group as information exchange and cooperation on various policy and trade-related matters associated with products of agricultural biotechnology, including LLP occurrences.

Paragraph 3 of Article 3.16 requires the Working Group to coordinate efforts to advance transparent, science- and risk-based regulatory approaches and trade policies in other countries and in international organizations.

Annex 3-A contains obligations on trade in agricultural goods between Canada and the United States. Note there is no Annex in CUSMA for obligations specific to trade in agricultural goods between Canada and Mexico.

Paragraph 1 of Article 3.A.1 requires Canada to notify the United States when, due to a change to Canada’s Schedule to the Customs Tariff, a specific good previously not included in Appendix 1 of Annex 3-A is included in that Appendix and for which the rate of duty increases.

Paragraph 2 of Article 3.A.1 requires the United States to notify Canada when, due to a change to the Harmonized Tariff Schedule of the United States, a specific good previously not included in Appendix 2 of Annex 3-A is included in that Appendix and for which the rate of duty increases.

Paragraph 3 of Article 3.A.1 requires Canada and the United States, upon request, to meet and discuss any measures or policies that may affect trade between the Parties of goods included in Appendix 1 or Appendix 2 of Annex 3-A within 30 days of the request.

Paragraph 1 of Article 3.A.2 sets out definitions for certain terms used within the Article.

Paragraph 2 of Article 3.A.2 clarifies that the Article applies to the TRQs established under Annex 2-B, and not the TRQs established under the WTO.

Paragraph 3 of Article 3.A.2 permits the Parties to implement and administer TRQs in accordance with Article XIII of the GATT 1994, the WTO Import Licensing Agreement and Article 2.15 of CUSMA (Transparency in Import Licensing). The Article provides that all TRQs established by a Party under the Agreement are incorporated into that Party’s schedule of tariff commitments.

Paragraph 4 of Article 3.A.2 requires the administration of TRQs under this Agreement to be transparent, fair and equitable, responsive to market conditions, timely, not unnecessarily burdensome, and to use clearly specified timeframes, administrative procedures, and requirements.

Paragraph 5 of Article 3.A.2 requires the publication of all information related to TRQ administration on a Party’s designated publicly available website at least 90 days prior to the beginning of each TRQ year.

Paragraph 6 of Article 3.A.2 requires Parties to administer their TRQs in a manner that allows them to be utilized to the fullest extent possible. Paragraph 6 also prohibits the Parties from introducing new or additional conditions related to TRQ utilization except as provided in accordance with the notification and consultation requirements set out in subparagraphs (b), (c), and (d).

Paragraph 7 of Article 3.A.2 requires Canada and the United States not to impose a condition, limit or eligibility requirement related to a TRQ applicant’s nationality or headquarters location, or their physical presence in the territory of a Party, except that a Party can require that the applicant does business and has a business office, or has an employee, agent, or legal representative in the territory of the Party administering the TRQ. If a Party requires a quota applicant’s physical presence in its territory, for example through a business office, then that Party is not required to consider an employee, an agent for service of process, or a legal representative in its territory as sufficient “physical presence” to satisfy this condition. These requirements are consistent with Canada’s current practices in determining eligibility for TRQ allocation.

Paragraph 8 of Article 3.A.2 requires a Party to have consulted on its allocation procedures for TRQ administration through the issuance of permits and to have implemented allocation regulations or policies upon entry into force of CUSMA.

Paragraph 9 of Article 3.A.2 requires that, prior to any change to a TRQ allocation policy, a Party consults, takes comments into account, and publishes the final policy in accordance with the requirements set out in subparagraphs (a), (b), and (c).

Paragraph 10 of Article 3.A.2 allows for new importers who meet all the other eligibility criteria to be eligible for a quota allocation and prohibits discrimination against new importers.

Paragraph 11 of Article 3.A.2 requires each importing Party to ensure that any person of a Party that fulfills the importing Party’s eligibility requirements is able to apply and be considered for a quota allocation under the TRQ; and, unless otherwise agreed, refrain from allocating any portion of the quota to producer groups, conditioning allocation on domestic production or limiting access to an allocation only to processors. Parties are required to provide allocations in commercially viable shipping quantities; make allocations for in-quota imports available for any tariff lines subject to the TRQ and valid throughout the TRQ year; ensure allocation is equitable and transparent among applicants; provide applicants at least four weeks to submit a request for allocation; and, ensure quota allocation takes place no later than four weeks before the opening of the quota period except in cases where it is based on import performance.

Paragraph 12 of Article 3.A.2 sets out the provisions for determining the volume of the TRQs during the first year of the Agreement (from the date of entry into force until December 31 of that calendar year, or the end of a marketing year depending on the respective TRQ), which will be proportional to the number of months remaining in the TRQ year, including the entirety of the month in which the Agreement enters into force.

Paragraph 13 of Article 3.A.2 prohibits Parties from conditioning the application for, or utilization of, a TRQ allocation on the re-export of a good.

Paragraph 14 of Article 3.A.2 clarifies that the quantity of goods imported under a Party’s TRQ established under CUSMA shall not contribute to the fulfillment of that Party’s TRQ for such goods established under the WTO or any other trade agreement.

Paragraph 15 of Article 3.A.2 requires Parties to ensure that for a TRQ administered by way of allocation there is a mechanism in place for the reallocation of unused shares in a timely and transparent manner so that the TRQ may be filled to the fullest extent possible.

Paragraph 16 of Article 3.A.2 requires Parties to publish regularly on their designated publicly available website information related to TRQ shares that have been allocated, returned allocation shares, shares available for reallocation, application deadlines for allocation and, if available, quota utilization rates.

Paragraph 17 of Article 3.A.2 requires Parties to identify the entity or entities responsible for administering their TRQs and to designate a contact point for communications between Parties concerning TRQs.

Paragraphs 18, 19, 20 and 21 of Article 3.A.2 require Parties to make publicly available on a designated public website information related to how the TRQ is administered; utilization rates and remaining quantities, including notification when a TRQ is filled; and, the names and addresses of allocation holders.

Paragraph 22 of Article 3.A.2 requires a Party administering a TRQ to consult regarding the administration of its TRQ upon written request of the other Party.

Paragraphs 1 and 2 of Article 3.A.3 sets out definitions for certain terms used within the Article.

Paragraph 3 of Article 3.A.3 requires that milk classes 6 and 7, which classify and provide a price for milk and milk components with an end use of making finished products such as skim milk powder and milk protein substances, be eliminated no later than six months after entry into force of CUSMA.

Paragraph 4 of Article 3.A.3 requires that milk and milk components with an end use of making finished products in milk classes 6 and 7 be re-classified into a different milk class based on the end use of those finished products no later than six months after entry into force of CUSMA.

Paragraph 5 of Article 3.A.3 requires that further pricing constraints be applied for non-fat solids used to make three finished products, specifically milk protein concentrates (classified under HS subheading 0404.90), skim milk powder (classified under HS subheading 0402.10), and infant formula (classified under HS subheading 1901.10 that contains more than 10% on a dry weight basis of cow milk solids), no later than six months after entry into force of CUSMA.

Paragraph 6 of Article 3.A.3 clarifies that paragraph 5 does not apply to domestic sales of milk components for non-human consumption.

Paragraph 7 of Article 3.A.3 requires Canada, upon entry into force, to begin monitoring its global exports of milk protein concentrates (classified under HS subheading 0404.90), skim milk powder (classified under HS subheading 0402.10), and infant formula (classified under HS subheading 1901.10 that contains more than 10% on a dry weight basis of cow milk solids) and make available to the United States information on these exports within the timeframes specified in paragraph 13.

Paragraph 8 of Article 3.A.3 requires Canada to apply an export charge of $0.54 per kilogram to Canada’s exports of milk protein concentrates (classified under HS subheading 0404.90) and skim milk powder (classified under HS subheading 0402.10), and apply an export charge of $4.25 per kilogram to Canada’s exports of infant formula (classified under HS subheading 1901.10 that contains more than 10% on a dry weight basis of cow milk solids), when exports of these products exceed certain thresholds specified in the paragraph.

Paragraph 9 of Article 3.A.3 provides that the thresholds referred to in paragraph 8 will increase at a rate of 1.2% each dairy year annually after the second dairy year.

Paragraph 10 of Article 3.A.3 requires both Canada and the United States to publish or provide links to information regarding the laws and regulations (at the federal and provincial level for Canada and the federal and state level for the United States) that govern or implement milk class pricing; the assumed processor margin (in Canada, this is referred to as a “processor margin” and, in the United States, this is referred to as a “make allowance”); milk class prices including the price by milk component; and the yield factor used in Canada and the United States.

Paragraph 11 of Article 3.A.3 requires both Canada and the United States to publish or provide links to information regarding which goods or products that are made from milk or milk components are eligible for a milk class price, and to provide each other or publish or link to a website any amendments to this information, recognizing that information pertaining to individual contractual arrangements is not included. Furthermore, no later than six months after entry into force of CUSMA, both Canada and the United States shall provide each other or publish or link to a website the milk utilization by milk class and by month, including the quantities sold, prices and revenues for milk and each milk component, recognizing that the information to be provided or published is aggregated and not confidential and that the information when first provided or published includes data since the entry into force of CUSMA.

Paragraph 12 of Article 3.A.3 requires both Canada and the United States to notify or announce (at least one calendar month in advance of the effective date), consult and consider comments from each other prior to adopting, amending or revising a milk class that are non-clerical or non-routine in nature. When publishing final measures, both Canada and the United States will allow, to the extent possible, for an interval between the publication of a final measure and its effective date.

Paragraph 13 of Article 3.A.3 provides greater certainty to paragraph 7 by clarifying that the data Canada provides on its total exports of milk protein concentrates (classified under HS subheading 0404.90), skim milk powder (classified under HS subheading 0402.10), and infant formula (classified under HS subheading 1901.10 that contains more than 10% on a dry weight basis of cow milk solids) are provided on a monthly basis and no later than 30 days after the close of each month.

Paragraph 14 of Article 3.A.3 provides a mechanism for Canada and the United States to meet and discuss matters related to Article 3.A.3.

Paragraph 15 of Article 3.A.3 provides the ability for Canada and the United States to enter consultations within 30 days of a written request and, if agreed by both Parties, amend the provisions of paragraphs 7 through 9 pursuant to Article 34.3 (Amendments).

Paragraph 16 of Article 3.A.3 provides the ability for Canada and the United States to modify or terminate the provisions of Article 3.A.3 by mutual consent.

Article 3.A.4 sets out each Party’s responsibilities with respect to wheat.

Paragraph 1 of Article 3.A.4 requires Canada and the United States to treat each other’s wheat imports no less favourably than their own wheat with respect to assignment of quality grades.

Paragraph 2 of Article 3.A.4 prohibits Canada and the United States from requiring a country of origin statement on a quality grade certificate for wheat originating from the territory of the other Party, unless it is in relation to phytosanitary or customs requirements of an importing third country.

Paragraph 3 of Article 3.A.4 allows a Party to request a discussion through existing mechanisms, related to the operation of a domestic grain grading or grain class system, including issues related to the seed regulatory system associated with the operation of any such system. The Parties shall endeavour to share best practices with respect to these issues, as appropriate.

Paragraph 4 of Article 3.A.4 prohibits Canada from applying the Maximum Grain Revenue Entitlement, established under the Canada Transportation Act, or any successor legislation, to movements of agricultural goods originating in Canada and shipped via west coast ports for consumption in the United States.

Article 3.A.5 secures Canada’s existing preferential market access for sugar and sugar-containing products by incorporating obligations from the 1997 market access understanding between Canada and the United States on refined sugar and sugar-containing products. This provides continued predictability to Canada’s sugar industry in the amount of 10,300 metric tonnes (MT) for refined sugar and 59,250 MT for sugar-containing products within the United States’ WTO TRQs. Canada and the United States agreed to terminate the 1997 understanding through an exchange of letters that take effect upon entry into force of CUSMA.

Paragraph 1 of Article 3.A.5 defines how a good can qualify as a “product of Canada” pursuant to a reference to U.S. law. The intention is for the United States to provide the same access for the same products and under the same conditions as in the 1997 bilateral market access understanding.

Paragraph 2 of Article 3.A.5 states the level of in-quota preferential access that the United States will allocate to Canada with respect to its WTO TRQs: not less than 10,300 MT for refined sugar and not less than 59,250 MT for sugar-containing products.

Paragraph 3 of Article 3.A.5 commits the United States to grant Canada access to any in-quota quantity of its refined sugar TRQ that is not allocated to other countries. This access is to be granted regardless of whether Canada has filled its allocation for that period.

Paragraph 4 of Article 3.A.5 ensures that if the United States allocates the refined sugar TRQ reserved for specialty sugar, then the United States will do so consistently with its WTO obligations and in consultation with Canada.

Paragraph 5 of Article 3.A.5 allows Canada to inform the United States that it will not supply the full amount of its share of the sugar-containing product TRQ for any TRQ period. The United States can transfer that quantity of Canada’s share to other supplying countries for that period and must provide reasonable advance notice to Canada of the date that a transfer will take effect. Any transfer occurring under this paragraph will not affect the amount of Canada’s share in subsequent TRQ periods pursuant to paragraph 2.

Paragraph 1 of Article 3.A.6 commits Canada to maintaining current product eligibility for dairy, poultry, and egg products under the Duties Relief Program and Import for Re-export Program or any successor programs as long as such programs are maintained. This commitment does not require changes to Canada’s domestic framework.

Paragraph 2 of Article 3.A.6 sets out that preferential trade between Canada and the United States in margarine (subheading 1517.10) shall be governed by an alternative product-specific rule of origin allowing for the good to be produced from non-originating palm oil under heading 15.11.

Annex 3-C maintains commitments that reflect the unique character of the sale of wine and spirits in Canada and reduces and streamlines labelling requirements for wine and distilled spirits. The Annex maintains a number of commitments between the Parties around the principles of non-discrimination and treating imported products no less favourably than domestic ones (i.e. national treatment) and also maintains exceptions to national treatment that reflect the unique character of the sale of wine and spirits in Canada. Specifically, Canadian wineries and distilleries retain the authority to sell only their own products on-site; Ontario and British Columbia are allowed to continue operating stores that sell only their own products; and Quebec may also continue to require all wine sold in grocery and convenience stores to be bottled in-province. The Annex indicates that no Party shall adopt or maintain a measure requiring that distilled spirits, wine, beer, or other alcohol beverages imported from another Party for bottling be blended with distilled spirits, wine, beer, or other alcohol beverages of the importing Party. The Annex also provides for the protection of Canadian Whisky as a distinctive product of Canada and prevents the use of the term “icewine” to market wine produced from grapes that were artificially frozen in industrial freezers. Lastly, it provides labelling-requirement parameters for wine and distilled spirits, reducing the need for a different approach in each individual market.

Annex 3-D ensures the confidentiality of information regarding proprietary formulas that the Parties require companies to provide in order to meet their technical regulations and standards related to prepackaged food and food additives. The Annex ensures that the Parties retain full rights to require companies to provide information about prepackaged foods and food additives.

2. Canadian Legislation

To implement Canada’s obligations under this Chapter, amendments are required to the Canada Grain Act and the Export and Import Permits Act (EIPA).

Article 3.A.3

To implement paragraphs 7 to 9 and 13 of Article 3.A.3, section 44 of the CUSMA Implementation Act amends the EIPA. The EIPA is the statute that provides the Governor in Council with the authority to control the import and export of goods and technologies for the purposes enumerated in the Act through the issuance of import or export permits. The Minister designated under that Act has statutory authority to determine export access quantities. Section 44 of the CUSMA Implementation Act amends the EIPA to provide the designated Minister with the authority to determine export access quantities for exports of milk protein concentrates, skim milk powder, and infant formula containing more than 10% on a dry weight basis of cow milk solids, and to impose and collect the export charges in accordance with Article 3.A.3. Section 44 amends the EIPA to establish Governor in Council authority to make regulations respecting export charges.

Article 3.A.4

To implement Canada’s obligations under Article 3.A.4, amendments are required to the Canada Grain Act. The purpose of the Canada Grain Act is in the interests of grain producers, to establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets. The amendments to the Canada Grain Act are set out in sections 59 to 69 of the CUSMA Implementation Act.

The amendments in sections 60 to 62 and 68 allow wheat grown in the United States to receive an official Canadian grain grade if it is of a registered variety under the Seeds Act. These amendments establish that grain from the United States delivered into the Eastern and Western Divisions is eastern and western grain and clarify that imported grain refers to any grain grown outside of Canada or the United States.

The amendments in sections 63 to 64 remove the requirement for a country of origin statement for wheat from the United States on a quality certificate.

In addition to the Canada Grain Act amendments required to comply with obligations in CUSMA, several other consequential amendments were necessary to maintain the integrity of the Canadian grain quality assurance system, account for different regulatory environments in Canada and the United States, and ensure that Canadian and United States grain are treated in the same manner. These amendments are set out in sections 65 to 67 and 69 of the CUSMA Implementation Act.

Annex 3-C

Section 70 of the CUSMA Implementation Act amends section 2 of the Importation of Intoxicating Liquors Act (IILA) to replace the definition “NAFTA Country” with the definition of “CUSMA Country”.

Section 71 of the CUSMA Implementation Act amends paragraph 3(2)(c) of the IILA to replace the term “NAFTA country” with “CUSMA country” as it relates to the tariff treatment of bulk spirits imported by a licensed distiller into a province from a Party for the purpose of being packaged by the distiller. In addition, the reference to the Mexico — United States Tariff is removed.

3. Intended Government Action

The Government intends to actively participate in, and contribute to the work of, the Committees and Working Groups set out in this Chapter to advance Canadian agricultural trade interests.

Article 3.A.3

The Government intends to work with provincial governments and industry to ensure compliance with the terms of CUSMA, including the elimination of milk classes 6 and 7.

A new Governor in Council regulation will be created fixing the charges on exports of certain dairy products. In addition, there will be consequential amendments of certain existing regulations under the EIPA, including the Export Control List, Export Allocation Regulations, Export Permit Regulations, and Export Permit Regulations (Non-Strategic).

A new Ministerial instrument – either in regulation or policy – will be created to set out how the Minister will administer, impose and collect the export charges on exports of certain dairy products.

Article 3.A.4

After the CUSMA Implementation Act is brought into force, the Canadian Grain Commission will make consequential amendments to the Canada Grain Regulations and amend its annual Commission Order, Receipt and discharge of foreign grain at licensed terminal elevator, to align with the amended legislation.

The Canadian Grain Commission will communicate all Canada Grain Act and Canada Grain Regulations changes to grain sector stakeholders and update its website and program documentation to reflect the changes.

Article 3.A.5

Upon entry into force of CUSMA, the 1997 market access understanding between Canada and the United States on refined sugar and sugar-containing products will be terminated.

Annex 3-C

No government actions arise from this Chapter regarding amendments to the IILA or from Annex 3-C.

CHAPTER 4: RULES OF ORIGIN

1. CUSMA Provisions

Rules of Origin are an essential part of any FTA. They provide the basis for traders and customs officials to determine whether a good is entitled to receive preferential tariff treatment under an FTA.

This Chapter describes the rules for determining whether a good produced in the territory of the Parties is originating and therefore eligible for preferential tariff treatment under Article 2.4 of Chapter 2 (National Treatment and Market Access for Goods).

The rules of origin ensure that only goods that have undergone sufficient production in one or more of the Parties are eligible for preferential tariff treatment. Goods that do not satisfy the rules of origin are considered non-originating and are not eligible for preferential tariff treatment under the Agreement.

The CUSMA rules of origin are intended to reflect North American supply chains and production processes while advancing each Party’s respective sectoral interests to the extent possible.

The Chapter has two annexes and one appendix. Provisions relating to the rules of origin for textile and apparel goods are in Chapter 6 (Textile and Apparel Goods).

Article 4.1 provides definitions for certain terms used within the Chapter.

Article 4.2 sets out the core rules for determining whether a good is originating:

All of the PSROs in Annex 4-B describe the required conditions for a good to be considered originating. For many goods, the PSROs provide two options: 1) one that requires a change to the tariff classification of the good, but that excludes the use of certain non-originating materials, and 2) an alternative that allows for the use of the excluded non-originating materials, provided that an RVC requirement is fulfilled.

CUSMA provides two calculation methodologies for determining if a good satisfies an RVC requirement:

Article 4.3 sets out the conditions that must be met for a good to be considered wholly obtained or produced, such as minerals that are extracted in the territory of a Party, agricultural goods that are harvested in the territory of a Party, animals that are born and raised in the territory of a Party, and goods that are derived from such live animals. Other wholly obtained or produced goods include fish and shellfish caught in the territorial sea of a Party, or beyond the territorial sea by a vessel that meets certain requirements including registration and entitlement to fly the flag of a Party. Goods that are made exclusively from wholly obtained or produced materials are also considered wholly obtained or produced.

Article 4.4 provides that goods produced from materials that have been recovered from used goods will be treated as originating when the materials are used in the production of a remanufactured good.

Article 4.5 provides the formulas and definitions associated with the two RVC calculation methodologies described above under Article 4.2, as well as setting out other requirements relating to RVC calculations.

Articles 4.6 and 4.7 describe the method of determining the value of originating and non-originating materials for the purposes of an RVC calculation. In the case of non-originating materials, the value is the transaction or customs value at the time of importation, although the cost of transporting the materials from the place of production to the place of importation, as well as any duties, taxes or customs brokerage fees, may be deducted. For originating materials, the value is the transaction value upon import from another Party or price paid or payable by the producer when the material is acquired domestically. To assign a value to a self-produced good, material, labour and all other production costs are included, as well as an amount for profit.

Article 4.8 sets out the conditions under which a self-produced material that is used in the production of a good may be designated as an intermediate material for the purposes of calculating the RVC of a good under Article 4.5. If this intermediate material is subject to an RVC requirement, other self-produced inputs used in its production can also be designated as an intermediate material.

Under Article 4.9, indirect materials, which are materials used to produce a good but are not physically incorporated into the good, such as energy, fuel, lubricants or tools, are considered originating regardless of where they are produced.

Article 4.10 references the Appendix to Annex 4-B that includes additional provisions that apply to automotive goods. The details of this appendix are outlined later in this Statement.

Article 4.11 sets out the requirements pertaining to accumulation. Materials that qualify as originating based on production in the territory of any Party will be treated as originating when those materials are used to produce a good in another Party. In addition, any production undertaken in a Party on a non-originating material, regardless of whether it was sufficient to confer originating status to that material, may be counted toward the originating status of a good subsequently produced with that material.

Under Article 4.12, a good that does not qualify as originating is to be treated as originating if the value of the non-originating materials used in production of the good that do not satisfy the tariff shift requirement set out in Annex 4-B is less than or equal to 10% of the value of the good. This Article does not apply to goods identified in Annex 4-A. Paragraphs 2 and 3 of Article 6.1 (Rules of Origin and Related Matters) outline the de minimis provisions for textile and apparel goods.

Article 4.13 applies to fungible materials and goods, which are defined as materials or goods that are interchangeable for commercial purposes as their properties are essentially identical. In cases in which originating and non-originating fungible materials may be stored together, CUSMA allows producers to use an inventory management system to determine the proportion of materials that are originating for the purpose of determining the originating status of goods made using such materials. Similarly, an inventory management system can be used to demonstrate that certain goods are originating, even if those goods are stored in a manner that led to the commingling of originating and non-originating goods.

Under Article 4.14, accessories, spare parts, tools, or instructional or other information materials are disregarded when determining whether a good is wholly obtained. These materials are also disregarded for origin purposes when they are shipped with a good if the good is subject to a tariff shift PSRO, provided that these materials are invoiced with the good and the quantities and value are customary for the good. However, if a good is subject to a PSRO with an RVC requirement, the value of non-originating accessories, spare parts, tools, or instructional or other information materials is taken into account in determining whether the good is originating.

Article 4.15 provides that materials used to package a good for retail sale are not taken into consideration when determining whether a good is wholly obtained or when a good is subject to a tariff shift PSRO, but if a good is subject to an RVC requirement, these materials are taken into account as originating or non-originating, as the case may be.

Article 4.16 provides that materials used to pack a good for shipment, such as pallets and cargo containers, are not taken into consideration when determining if the good is originating.

Article 4.17 addresses goods that are traded as a set (e.g. a math set consisting of a ruler, compass and protractor). If it is not possible to determine the Harmonized System (HS) classification of a set of goods based on the HS description most closely matching the set or based on the essential character of the set, the set can obtain originating status if the value of non-originating goods in the set does not exceed 10% of the value of the set.

Article 4.18 specifies the conditions under which an originating good retains its originating status when transiting through a non-Party. The good may not undergo any operation outside of the Parties, other than unloading, reloading, or any operation necessary to preserve it in good condition or to transport it to the importing Party. In addition, the good must remain under customs control at all times when in the territory of a non-Party.

Article 4.19 specifies that a good shall not be considered to be an originating good merely by reason of dilution with water or another substance that does not materially alter the characteristics of the good, or as a result of a production or pricing practice, the purpose of which was to circumvent the requirements of this Chapter. These operations are considered to be non-qualifying operations.

Annex 4-A lists the non-originating materials used in the production of specified goods for which Article 4.12 may not be used; for example, non-originating milk used to make dairy products.

Annex 4-B, which provides specific rules for various goods, also includes a tariff item table and an Appendix setting out provisions related to the rules of origin for automotive goods.

Appendix – Provisions Related to the Product-Specific Rules of Origin for Automotive Goods

The automotive appendix sets out the requirements that must be met in order for an automotive good to qualify as originating. This appendix must be read in conjunction with this Chapter as it includes provisions that also apply in determining the originating status of automotive goods.

Appendix Article 1 provides definitions for certain terms used within the Appendix.

Appendix Article 2 sets out the PSROs for vehicles of headings 87.01 through 87.05 of the HS and automotive parts of HS headings 87.06 through 87.08. Many of these PSROs differentiate between the requirements applicable to vehicles that are solely or principally intended for off-road use and those that are not, as well as between parts intended for use in a passenger vehicle, light truck, heavy truck or other types of vehicle.

References to passenger vehicles mean vehicles of subheadings 8703.21 through 8703.90, except for vehicles such as:

References to light trucks mean vehicles of subheading 8704.21 or 8704.31, except for those intended solely or principally for off-road use.

References to heavy trucks mean vehicles of subheading 8701.20, 8704.22, 8704.23, 8704.32, or 8704.90, except for those intended solely or principally for off-road use. Heavy trucks also includes chassis fitted with engines of heading 87.06 for use in the production of the heavy trucks listed in the preceding sentence.

The RVC thresholds specified in the PSROs in Appendix Article 2 are those that will apply at the conclusion of the phase-in periods applicable to passenger vehicles, light trucks, heavy trucks and parts for use in the production of these vehicles.

Appendix Article 3, paragraph 1, sets out the phase-in period for the RVC requirement applicable to passenger vehicles and light trucks. The RVC threshold for these goods under CUSMA will increase to 75% based on the net cost method over three years after the entry into force of the Agreement. Appendix Article 10 sets out exceptions to this requirement for certain types of passenger vehicles and light trucks.

Paragraph 2 of Appendix Article 3 sets out the phase-in period for the RVC requirement applicable to the core parts listed in Table A.1 of the Appendix (i.e. engines, transmissions, bodies and chassis, axles, suspension systems, steering systems and lithium-ion batteries), when those parts are used in the production of passenger vehicles and light trucks. The RVC threshold for these goods under CUSMA will increase to 75% based on the net cost method over three years after the entry into force of the Agreement. These goods can also qualify as originating based on the transaction value method to meet the RVC requirement (increasing to 85% over three years). Appendix Article 10 sets out exceptions to this requirement for parts used in the production of certain types of passenger vehicles and light trucks.

Paragraph 3 of Appendix Article 3 specifies that the core parts listed in Table A.1 of the Appendix can only obtain originating status by satisfying an RVC requirement, except lithium-ion batteries, which can also qualify as originating based on an alternative tariff shift rule of origin.

Paragraph 4 of Appendix Article 3 sets out the phase-in period for the RVC requirement applicable to the parts listed in Table B of the Appendix, when those parts are used in the production of passenger vehicles and light trucks. The RVC threshold for these goods under CUSMA will increase to 70% based on the net cost method over three years after the entry into force of the Agreement. These goods can also qualify as originating based on using the transaction value method to meet the RVC requirement (increasing to 80% over three years) or based on an alternative tariff shift rule of origin.

Paragraph 5 of Appendix Article 3 sets out the phase-in period for the RVC requirement applicable to the parts listed in Table C of the Appendix, when those parts are used in the production of passenger vehicles and light trucks. The RVC threshold for these goods under CUSMA will increase to 65% based on the net cost method over three years after the entry into force of the Agreement. These goods can also qualify as originating based on using the transaction value method to meet the RVC requirement (increasing to 75% over three years) or based on an alternative tariff shift rule of origin.

Paragraph 6 of Appendix Article 3 points to other Articles in this Chapter that are relevant to the RVC calculation.

Paragraph 7 of Appendix Article 3 clarifies that in order for a passenger vehicle or light truck to qualify as originating, the core parts listed in Table A.2 of the Appendix must themselves qualify as originating. It also reiterates that, with the exception of lithium-ion batteries, core parts can only obtain originating status by satisfying the applicable RVC requirement.

Paragraphs 8 and 9 of Appendix Article 3 provide producers with flexibility in determining if the core parts listed in Table A.2 of the Appendix satisfy the applicable RVC requirement. These parts can qualify as originating based on an RVC calculation that:

Paragraph 10 of Appendix Article 3 encourages the Parties to further elaborate on the requirements set out in the Article, including for electric and other advanced vehicles.

Appendix Article 4, paragraph 1 sets out the phase-in period for the RVC requirement applicable to heavy trucks. The RVC threshold for these goods in NAFTA is 60% based on the net cost method, and this threshold will increase under CUSMA to 70% based on the net cost method over seven years after the entry into force of the Agreement. Appendix Article 10 sets out exceptions to this requirement for certain types of heavy trucks.

Paragraph 2 of Appendix Article 4 sets out the phase-in period for the RVC requirement applicable to the heavy truck parts listed in Table D of the Appendix when those parts are used in the production of heavy trucks. The RVC threshold for these goods will increase under CUSMA to 70% based on the net cost method over seven years after the entry into force of the Agreement. These goods can also qualify as originating based on the transaction value method to meet the RVC requirement (increasing to 80% over seven years).

Paragraph 3 of Appendix Article 4 sets out the phase-in period for the RVC requirement applicable to the heavy truck parts listed in Table E of the Appendix when those parts are used in the production of heavy trucks. The RVC threshold for these goods will increase under CUSMA to 60% based on the net cost method over seven years after the entry into force of the Agreement. These goods can also qualify as originating based on using the transaction value method to meet the RVC requirement (increasing to 70% over seven years).

Paragraph 4 of Appendix Article 4 specifies that engines, transmissions, and chassis used in the production of a heavy truck can only qualify as originating by satisfying the RVC requirements set out in this Appendix Article.

Appendix Article 5 sets out special averaging provisions for passenger vehicles, light trucks and heavy trucks, as well as for parts listed in Table A.1, A.2, B, C, D, or E of the Appendix.

Vehicle producers are allowed to average their RVC for passenger vehicles, light trucks and heavy trucks over their fiscal year for the following categories:

Automotive parts producers of parts listed in Table A.1, A.2, B, C, D, or E are allowed to average their RVC over:

Appendix Article 6 establishes steel and aluminium requirements that must be met in order for a passenger vehicle, light truck or heavy truck to qualify as originating. For these vehicles to be considered originating, at least 70% of the producers’ annual purchases (by value) of these metals must also qualify as originating. Producers are given flexibility in terms of selecting the applicable period of time for demonstrating that they fulfill this requirement. Beginning seven years after entry into force of CUSMA, for steel to be considered originating for the purposes of meeting this Appendix Article, all steel manufacturing processes, except for metallurgical processes involving refinement of steel additives, will also need to occur in the territory of one or more of the Parties. These processes include the initial melting and mixing and continues through the coating stage. This requirement does not apply to raw materials used in the steel manufacturing processes, including steel scrap; iron ore; pig iron; reduced, processed or pelletized iron ore; or raw alloys. Appendix Article 6 also requires the Parties, 10 years after entry into force of the Agreement, to consider adjusting the requirement for aluminum to be considered originating under this Appendix Article.

Appendix Article 7, paragraph 1 establishes a Labour Value Content (LVC) requirement for passenger vehicles that must be met for the vehicle to qualify as originating. The LVC requirement for passenger vehicles will be phased-in, starting at 30% when CUSMA enters into force and increasing to 40% over three years.

Paragraph 2 of Appendix Article 7 sets the LVC threshold at 45% for light and heavy trucks, effective when CUSMA enters into force.

Paragraph 3 of Appendix Article 7 provides that the LVC threshold can be met through:

Paragraph 4 of Appendix Article 7 allows producers to average their LVC calculation across vehicles of the same model line or class when produced in the same plant, or across the same model line produced in different plants within a Party.

Paragraph 5 of Appendix 7 allows for LVC averaging across different periods.

Paragraph 6 of Appendix Article 7 provides flexibility for heavy truck producers that exceed the 45% LVC threshold to count their excess LVC points toward the RVC requirement applicable to heavy trucks.

Appendix Article 8 provides producers with flexibility in meeting the RVC and LVC requirements, subject to certain limitations. With respect to the RVC threshold for passenger vehicles and core parts used in their production, the phase-in period for up to 10% of a producer’s North American production of passenger vehicles or light trucks may be extended to five years. For this same quantity of vehicles, the LVC threshold may be reduced by five percentage points. Based on a “detailed and credible plan” provided by producers of passenger vehicles or light trucks, the Parties can also choose to increase the number of vehicles eligible for a five-year phase-in period. In addition, the Article allows for further extensions of modifications to the requirements if the Parties agree that doing so would result in new investment in vehicle or parts production in a Party.

Appendix Article 9 commits the Parties to review the requirements applicable to passenger vehicles, light trucks and heavy trucks to ensure that the requirements reflect technological developments. Advanced technology vehicles such as plug-in hybrid, electric and autonomous vehicles are currently subject to the same rules of origin as internal combustion vehicles. However, paragraph 10 of Appendix Article 3 and paragraph 1 of Appendix Article 9 make clear that the Parties may take different approaches to the rules of origin for advanced technology vehicles. Appendix Article 9 also states that the Parties will use the Uniform Regulations to further clarify provisions in the Appendix.

Appendix Article 10, paragraph 1 establishes a 62.5% net cost RVC threshold for the following vehicles and parts used in their production:

Paragraph 2 of Appendix Article 10 establishes a 60% net cost RVC threshold for the following vehicles and parts used in their production:

Paragraph 3 of Appendix Article 10 outlines the RVC calculation methodology for the vehicles identified in the preceding paragraphs.

Paragraphs 4 and 5 of Appendix Article 10 allow for averaging across different models and classes of vehicles and across different periods.

Paragraph 6 provides flexibility with respect to the RVC threshold for new prototypes of the types of vehicles specified in paragraphs 1 and 2, if these new vehicles are produced in a new plant with substantially new machinery or in a plant that has been refit.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

Uniform Regulations for both Rules of Origin and Origin Procedures will need to be created to give effect to the rules of origin of the Agreement. The content of the Uniform Regulations is negotiated trilaterally to ensure that all of the Parties have a consistent understanding, interpretation and administration of the rules of origin in the agreement.

In addition, other regulations will need consequential amendments (e.g. replacing references to NAFTA with CUSMA) or repeal. For example, the bilateral rules of origin set out in the existing Order Amending the Schedule to the Customs Tariff (Conditions for Special Provisions for the Purposes of the United States Tariff (UST)) have been incorporated into Annex 4-B of CUSMA and will be incorporated into the Uniform Regulations for Rules of Origin, known in Canada as the CUSMA Rules of Origin Regulations. That existing Order will therefore be repealed.

As well, the Parties have agreed to work together through the Committee on Rules of Origin and Origin Procedures, whose functions are set out in Article 5.18 (Committee on Rules of Origin and Origin Procedures) and include consulting on possible amendments to this Chapter and to the PSROs to take into consideration developments in technology, production processes or other matters. In addition, the Committee will prepare updates to reflect changes to the Harmonized System.

CHAPTER 5: ORIGIN PROCEDURES

1. CUSMA Provisions

Origin Procedures are an essential part of any FTA. They enable the trading community to take advantage of the preferential tariff treatment provided under CUSMA and are used by the customs administrations to administer the rules of origin. The procedures are created to make sure that only goods that meet the rules of origin receive preferential tariff treatment (essentially meaning that importers pay a reduced tariff rate for originating goods under an FTA with Canada than those payable on imports from countries that do not have an FTA with Canada).

The CUSMA origin procedures contain obligations for the Parties in areas such as certification of origin, record keeping, origin verifications, advance rulings, appeals, and penalties. Accordingly, this Chapter prescribes the processes that traders must follow to take full advantage of the CUSMA preferential tariff treatment, and provides the customs administrations with a methodology to ensure that only qualifying goods benefit from CUSMA.

The CUSMA origin procedures support today’s trade environment, provide for paperless processes, and limit the administration costs to traders. This is achieved through electronic processes, voluntary compliance, risk assessment, and reduced government intervention. At the same time, the origin procedures demonstrate an appropriate balance between ensuring compliance and facilitating trade. The CUSMA origin procedures include procedures that Canada is accustomed to and already has in place with its current FTA partners.

Article 5.1 provides definitions for certain terms used within the Chapter.

Articles 5.2 through 5.8 set out the processes and conditions applicable to importers, exporters, and producers in order for traders to take advantage of the preferential tariff treatment under CUSMA. These provisions include the basis on which an importer may claim the preferential tariff treatment; requirements relating to the establishment of the certification of origin; validity period of the certification of origin; exceptions to the certification of origin; and obligations regarding importations and exportations, shipping documents, and record maintenance.

Article 5.2 outlines the requirements for claiming preferential tariff treatment based on a certification of origin which is used to certify that the good meets the rules of origin.

Paragraph 1 establishes that an importer may make a claim for preferential tariff treatment based on a certification of origin completed by either the importer, the exporter, or the producer. Some of Canada’s FTAs do not allow an importer to complete the certification of origin.

Paragraph 2 provides that an importing Party may impose certain obligations on an importer that certifies the origin of the good, including establishing conditions that the importer must meet and requiring the importer to provide documentation to support their certification of origin.

Paragraph 3 requires each Party to allow the certification of origin to be provided in no prescribed format and specifies that it may be placed on an invoice or any other document provided that it contains the minimum data elements set out in Annex 5-A.

Paragraph 4 establishes that a Party cannot reject a claim for preferential tariff treatment only because the invoice submitted was issued in the territory of a non-Party. However, the certification of origin cannot be provided on an invoice or other commercial document that is issued in the territory of a non-Party.

Paragraph 5 provides that the certification of origin may be completed in English, French, or Spanish. If the certification of origin is not in a language of the importing Party, the importing Party may request that the importer provide a translation.

Paragraph 6 requires each Party to allow the certification of origin to be completed and provided electronically and to accept it with an electronic or digital signature.

Article 5.3 establishes the basis upon which a certification of origin may be completed by the importer, exporter, or producer to demonstrate that the good is originating. The certification of origin must be based on information, including documents, that demonstrates that the good is originating. In the case of an exporter, the certification of origin may also be based on reasonable reliance on the producer’s written representation. The certification of origin must be accepted by the customs administration of the importing Party for four years after the date it was completed. Similar to Canada’s other FTAs, CUSMA allows the certification of origin to apply to a single shipment of a good or multiple shipments of identical goods within a period of no more than 12 months. This is referred to as the “blanket period” on the certification of origin in the minimum data elements set out in Annex 5-A.

Article 5.4 outlines the process and conditions that a Party must establish for an importer to claim preferential tariff treatment. If an importer chooses to claim the preferential tariff treatment, the importer upon claiming the preferential tariff treatment in the import document is stating that the claim is based on a valid certification of origin. The importer must have the required certification of origin in their possession; the Canada Border Services Agency (CBSA) does not require the certification of origin to be presented at time of importation, only upon request. If the importer chooses to certify the origin of the good by completing the certification of origin, the importer must demonstrate, upon request by its customs administration that the good is originating. The importer, if requested, must also be able to demonstrate that a good was shipped in accordance with Article 4.18 (Transit and Transshipment).

If the importer becomes aware of incorrect information that could affect the accuracy or validity of the certification of origin, the importer is required to promptly correct the importation document and pay any duties owing. An importing Party is prohibited from subjecting an importer to a penalty for making an incorrect statement if the importer promptly corrects the importation document and pays any applicable duty.

Article 5.5 provides that a Party shall not require a certification of origin if the value of the goods is under US$1,000 or the equivalent amount in the importing Party’s currency, or any higher amount as the importing Party may establish, or if the importing Party has waived the requirement for a certification of origin. In Canada, the certification of origin is waived for commercial goods valued at C$3,300 or less. More information can be found on the CBSA website. Canada waives the requirement for a certification of origin for the importation of casual goods, which are non-commercial goods that are acquired in the United States or Mexico and not intended for resale in Canada.

Article 5.6 sets out obligations regarding exportations, including a requirement on the exporter or producer to provide, upon request, the certification of origin if they completed it. Furthermore, the exporter or producer is required to notify in writing every person and Party to whom they provided the certification of origin of any change that could affect its accuracy or validity should they become aware of any incorrect information. An exporter or producer that voluntarily provides written notification cannot be subject to penalties.

Article 5.7 requires each Party not to reject a certification of origin due to minor errors or discrepancies that do not create doubts concerning the correctness of the import documentation. In cases where the certification of origin is illegible, defective on its face or has not been completed in accordance with this Chapter, the importer must be granted a minimum period of five working days to provide a corrected version.

Article 5.8 establishes the type of documentation and records that the exporter, producer, and importer must maintain, for a time period of at least five years or longer as specified by a Party, to support the originating status of the good and the claim of preferential tariff treatment under CUSMA. Canadian law requires records to be maintained for six years. The importer, exporter, or producer may choose to maintain these records in any medium, including electronic, provided they can be promptly retrieved. Furthermore, importers, exporters, and producers are required to maintain records relating to the origin of a good even if the importing Party does not require or has waived the requirement for a certification of origin.

Article 5.9 is a central component of this Chapter. It provides the methodology to be applied by the customs administration to verify whether goods meet the rule of origin in order to ensure that only qualifying goods receive the preferential tariff treatment under CUSMA.

Paragraph 1 establishes that an importing Party may conduct an origin verification through a written request or questionnaire seeking information from the importer, exporter, or producer of the good, or a verification visit to the premises of the exporter or producer. Also, certain provisions will apply to verification of materials used in the production of a good as provided for in the Uniform Regulations Regarding the Interpretation, Application, and Administration of Chapters 5 (Origin Procedures), 6 (Textile and Apparel Goods), and 7 (Customs Administration and Trade Facilitation) of the Agreement Between Canada, the United States of America and the United Mexican States. In addition, CUSMA allows a Party to conduct verification visits of textile and apparel goods in an alternative manner as provided under Chapter 6 (Textile and Apparel Goods).

Paragraph 2 allows the importing Party to initiate a verification with the importer or whomever completed the certification of origin.

Paragraph 3 requires the importing Party, during a verification of origin to accept information directly from the importer, exporter, or producer.

Paragraph 4 requires that if the importing Party intends to deny a claim for preference, the Party must verify with the trader that certified the origin of the good. For example, the importing Party may accept information from the importer to substantiate the origin of the good, but if the claim for preferential tariff treatment by that importer was based on a certification of origin completed by an exporter, the importing Party must verify with that exporter, before it may deny the claim for preferential tariff treatment.

Paragraph 5 identifies the information that must be included in the request for information or the request for a verification visit. This includes the identity of the customs administration issuing the request, the object and scope of the verification (in other words, the reason for the request), and in the case of a verification visit, a request seeking written consent from the exporter or producer whose premise is to be visited.

Paragraph 6 requires the importing Party to inform the importer of a verification initiated with a producer or an exporter.

Paragraph 7 provides that the importing Party that is conducting the verification must allow 30 days for the importer, exporter or producer to respond to a request for information and 30 days for the exporter or producer to provide consent for, or refuse, a verification visit.

Paragraph 8 provides that the exporting Party may, upon request of the importing Party, assist with the verification, for instance by providing relevant information.

Paragraph 9 requires the importing Party conducting a verification visit to provide a copy of the verification request to the customs administration of the Party in whose territory the visit is to occur, and, if so requested, to the embassy of that Party.

Paragraphs 10 and 11 provide that the exporter or producer may, on a single occasion, make a request to postpone a verification visit for a period of up to 30 days and the customs administration in whose territory the visit is to occur may postpone the verification visit for a period of no longer than 60 days from the proposed date or longer as the customs administrations of the countries of export and import may decide.

Paragraph 12 indicates that a Party cannot deny preferential tariff treatment to a good only because the verification visit was postponed.

Paragraph 13 permits an exporter or a producer to designate two observers to be present during the verification visit.

Paragraphs 14 to 16 include obligations that require the importing Party, once the verification of origin is concluded, to provide the importer, exporter, or producer that certified the good and was the subject of the verification with a written determination of whether or not the good is originating. The importing Party is required to make a determination on the originating status of a good and provide the written determination within 120 days of receiving all the necessary information. Additionally, the importing Party who, prior to issuing a written determination, intends to deny preferential tariff treatment is required to provide to the importer, and any exporter or producer who were subject to the verification and provided information, with the preliminary results of the verification and a notice of intent to deny. The importing Party is also required to allow those persons at least 30 days to submit additional information relating to the origin of the good. The importer must always receive a written determination and a notice of intent to deny preferential tariff treatment.

Paragraph 17 provides that if there is a pattern of conduct of false or unsupported representations by the same exporter, producer, or importer that a good qualifies as an originating good, a Party may withhold preferential tariff treatment to identical goods until compliance with this Chapter, Chapter 4 (Rules of Origin), and Chapter 6 (Textile and Apparel Goods) is established.

Paragraph 18 states that all communication to the exporter or producer and to the customs administration can be sent by any means that can produce any confirmation of receipt.

Article 5.10 outlines the cases where an importing Party may deny a claim for preferential tariff treatment, including if the customs administrations determine that a good does not qualify for preferential tariff treatment or the exporter or producer does not provide written consent for a verification visit.

Article 5.11 provides that an importer may apply for a refund of excess duties paid after importation, if the importer did not claim preferential tariff treatment at the time of importation. In order to apply for a refund, the importing Party may require the importer to make a claim for preferential tariff treatment and provide a copy of the certification of origin and other documents relating to the importation of the good, no later than one year after the date of importation, or a longer period as specified in the importing Party’s law. Canada currently allows four years from the date of accounting for importers to claim a refund.

Article 5.12 imposes obligations on the Parties with respect to the handling of information provided by a Party under this Chapter, which has been designated as confidential by that Party or is confidential under the receiving Party’s law. The Article requires that the receiving Party keep such information confidential, and also limits the disclosure of the information that could prejudice the competitive position of the trader providing the information. Where information is collected from a trader, the Article requires a Party to apply the provisions set out in Article 7.22 (Protection of Trader Information).

Article 5.13 requires each Party to maintain criminal, civil, or administrative penalties for violations of its laws and regulations related to this Chapter.

Article 5.14 provides for the issuance of advance rulings for origin in accordance with the procedures set out in Article 7.5 (Advance Rulings), and requires each Party to have uniform procedures throughout its territory for the issuance of advance rulings on origin.

Article 5.15 requires each Party to grant to an exporter or producer substantially the same rights of review and appeal of determination of origin and advance rulings issued by its customs administration as provided to importers in its territory.

Article 5.16 requires the Parties to have, by the date of entry into force of this Agreement, Uniform Regulations regarding the interpretation, application, and administration of this Chapter, Chapter 4 (Rules of Origin), Chapter 6 (Textile and Apparel Goods), and Chapter 7 (Customs Administration and Trade Facilitation). This Article also details the role of the Committee on Rules of Origin and Origin Procedures with respect to those regulations. The Uniform Regulations for this Chapter, the Verification Section of Chapter 6 (Textile and Apparel Goods), and Chapter 7 (Customs Administration and Trade Facilitation) will be published in their entirety in a CBSA departmental memorandum on CBSA’s website and certain provisions will also be implemented through regulations and policy. Uniform Regulations related to Chapter 4 (Rules of Origin) and the rules of origin provisions set out in Chapter 6 (Textile and Apparel Goods) are addressed in Chapter 4 (Rules of Origin) of this Statement.

Article 5.17 requires each Party to notify the other Parties of determinations, measures, and rulings regarding determinations of origin issued as a result of a verification, determinations of origin that are contrary to rulings issued by other Parties, measures establishing or modifying administrative policy likely to affect future determinations, as well as rulings modifying or revoking an advance ruling issued pursuant to Article 5.14 and Article 7.5 (Advance Rulings).

Articles 5.18 and 5.19 establish the Committee on Rules of Origin and Origin Procedures (Origin Committee) and the Sub-Committee on Origin Verification. Issues related to textile and apparel goods are addressed by the Committee on Textile and Apparel Goods.

Annex 5-A (Minimum Data Elements) sets out the information that is required to be contained in the certification of origin.

2. Canadian Legislation

To implement this Chapter, the Customs Act will be amended by the CUSMA Implementation Act to address provisions relating to proof of origin under CUSMA, the refund of duties for CUSMA eligible goods and origin verification procedures, including the method of verification, notice requirements, any redetermination of origin and possible withdrawal of preferential tariff treatment.

3. Intended Government Action

Existing regulations under the Customs Act will be amended to address CUSMA provisions relating to certification of origin for exported goods, proof of origin for imported goods, proof of exportation for certain goods, advance rulings and refund of duties. The regulations to be amended include the Certification of Origin of Goods Exported to a Free Trade Partner Regulations, Exporters’ and Producers’ Records Regulations, Free Trade Agreement Advance Rulings Regulations, Refund of Duties Regulations, Proof of Origin of Imported Goods Regulations, and the Certification of Origin of Goods Imported from a Free Trade Partner. A new regulation under the authority of the Customs Act will be developed to address verifications of origin under this Chapter and Article 6.6 (Verification) of Chapter 6 (Textile and Apparel Goods).

The CBSA has published Customs Notice CN 20–22 on its website, which publicly announces the proposed regulatory amendments and new regulations made under the Customs Act. These regulatory amendments and new regulation will be enacted on a date following entry into force of the Agreement. However, as is standard practice, they will be made retroactive to the date of the public announcement made prior to or on the date this Agreement enters into force in accordance with paragraph 167.1(b) of the Customs Act. As a result, the CBSA will have the necessary tool to ensure compliance with the Agreement as of the date it enters into force.

The CBSA will cooperate with its counterparts in the Parties as required by various provisions of this Chapter. As well, the Parties have agreed to work together through the Committee on Rules of Origin and Origin Procedures.

The CBSA has published Customs Notice CN 20–14 on its website, which summarizes the requirements in order to benefit from CUSMA’s preferential rates of duty once CUSMA enters into force. For importers, the information provided will pertain to claiming the preferential tariff treatment when accounting for goods imported under CUSMA, information concerning the proof of origin requirements to support this claim, any shipping requirements the goods must meet in order to be eligible for CUSMA preferential tariff treatment as well as information pertaining to the refund provision for CUSMA eligible goods. For importers, exporters, and producers, information will be provided concerning how to complete the proof of origin required by the importer to claim the CUSMA preferential tariff treatment. Additionally, this Customs Notice will direct readers to the CBSA Border Information Service (BIS) for further information pertaining to the origin procedures contained in CUSMA. The BIS is an automated telephone service that answers incoming calls and provides general information on CBSA programs, services and initiatives through recorded scripts, as well as providing access to a live CBSA officer. CBSA officers will have general information relevant to the origin procedures contained in CUSMA and will be able to respond to questions from the public concerning the import or export of goods under this Agreement.

CHAPTER 6: TEXTILE AND APPAREL GOODS

1. CUSMA Provisions

This Chapter includes specific provisions relating to textile and apparel goods. Many of the provisions within Chapter 4 (Rules of Origin) and Chapter 5 (Origin Procedures) also apply in determining the originating status of textile and apparel goods. This Chapter also includes an obligation on the Parties to cooperate through various means to address matters related to this sector. The Product-Specific Rules of Origin (PSRO) applicable to textile and apparel goods are found in Annex 4-B (Product-Specific Rules of Origin).

Article 6.1 sets out rules of origin provisions specific to textiles and apparel. First, it includes a de minimis provision that allows textile goods that do not qualify as originating under the PSROs to be considered originating if the total weight of the non-originating materials is less than 10% of the total weight of the textile good; of that total 10%, any non-originating elastomeric content may not exceed 7% of the total weight of the textile good. The de minimis provision for apparel and made-up textile goods (e.g. bedsheets) requires that the total weight of all the non-originating fibres and yarns in the component that determines the tariff classification of the good be less than 10% of the total weight of that component. For example, in the case of a shirt, the fabric that makes up the main body of the shirt would be considered the component that determines the tariff classification of the shirt, and not any other different fabrics, such as the collar or a pocket. The 7% limit on non-originating elastomeric content also applies to apparel and made-up textile goods.

This Article also includes provisions on textile and apparel sets (e.g. layette sets for babies), which require that each of the goods in a set of apparel be originating, or that the total value of the non-originating component of the goods in the set be less than 10% of the total value of the set.

Article 6.2 provides that certain hand-crafted folklore, cottage industry or Indigenous goods exported to another Party are eligible for duty-free or preferential tariff treatment if any requirements mutually agreed by the importing and exporting Parties are met. This Article is meant to facilitate trade and make it more inclusive for certain groups who may not otherwise take advantage of the Agreement.

Article 6.3 refers to Annex 6-A which sets out special provisions applicable to certain textile and apparel goods, such as cotton and man-made fabrics and made-up goods, and acrylic yarn. Section A of Annex 6-A sets out the definitions specific to the Annex. Section B of Annex 6-A sets out tariff treatment of certain textile and apparel goods between the United States and Mexico. Section C sets out the tariff preference levels (TPLs) for certain non-originating textile and apparel goods and materials that do not meet the applicable rules of origin but undergo significant processing in the FTA area and therefore benefit from tariff preferences subject to an annual volume limit. The TPL volumes are calculated on the basis of square meter equivalents. TPLs are included in the agreement in recognition of the need for flexible sourcing of inputs for producers to help address a lack of regional commercial availability of certain materials and to support the regional competitiveness of this sector. The TPL annual volume limits are set out in Appendices 1 through 3. These special provisions apply to both imports and exports from Canada, albeit with varying volume limits.

In addition, the following changes to the list of goods eligible for preferential tariff treatment under this Chapter were made:

Annex 6-B establishes the applicable conversion factors that are to be used when calculating the square meter equivalents for goods that are seeking preferential tariff treatment under TPLs.

Article 6.4 sets out the process for the Parties to trilaterally amend the product-specific rules of origin for textile and apparel goods to address issues of availability of supply of fibers, yarns or fabrics in the territories of the Parties. The process also outlines notional timelines for concluding domestic consultations with respect to potential amendments.

Articles 6.5 to 6.9 provide for enhanced cooperation amongst the Parties and a verification method that will enable the Parties to more effectively verify claims for preferential duty rates under CUSMA and address customs offences for trade in textile or apparel goods. For these goods, the importing Party is not obligated to provide the exporter or producer with advance notice afforded through the 30-day window to consent to a visit, as required by paragraph 7 of Article 5.9 (Origin Verification). These provisions are explained in more detail below.

Article 6.5 provides for cooperation amongst the Parties through information sharing and other activities for the purposes of assisting each other in the enforcement of laws and regulations related to customs offences on matters related to trade in this sector, in accordance with Articles 7.25 through 7.28 of Chapter 7 (Customs Administration and Trade Facilitation).

Article 6.6 includes an alternate approach to verification of origin visits that the importing Party may choose to apply, in place of the verification visit process established in Article 5.9 (Origin Verification), to verify whether the good meets the rule of origin and is entitled to the CUSMA preferential tariff treatment and to determine whether any customs offences have been committed. The verification procedures in this Article relate specifically to site visits to an exporter or producer of textile or apparel goods and differ from those provided under Article 5.9 (Origin Verification). In a verification conducted under this Article, the importing Party must request permission from the exporter or producer to access the relevant records or facilities; however, there is no requirement under this Article to provide a 30-day consent period for the exporter or producer and the scope of the visit may extend to addressing customs offences. Furthermore, the importing Party may request the cooperation of the exporting Party. The exporting Party may also request a copy of the findings of the visit.

Paragraph 4 establishes obligations on the importing Party requesting a site visit to notify the host Party of the proposed dates, indicate the number of exporters or producers to be visited, identify whether any assistance is required by the host Party, any suspected customs offences to be verified and factual information, and whether the importer claimed the preferential tariff treatment.

Paragraph 7 obligates the importing Party to request permission from the exporter or producer or a person having capacity to consent on behalf of the exporter or producer, to access the relevant records or facilities. This paragraph also contains provisions for carrying out the site visit on the following day or alternative dates.

Paragraph 8 identifies what the importing Party must do when the site visit is completed. This includes the obligation to inform the exporter or producer that they are entitled to request a written report of the results of the visit. Once this request has been received, the importing Party must provide the report within 90 days.

Article 6.7 sets out the basis on which claims for preferential tariff treatment for textile and apparel goods can be denied.

Article 6.8 establishes the Committee on Textile and Apparel Trade Matters to consider any matter under this Chapter, including reviewing its implementation, consulting on any technical or interpretative issues that may arise, and discussing ways to improve the effectiveness of cooperation between the Parties. The Committee will also assess the potential benefits and risks that may result from the elimination of existing restrictions on trade between the Parties in worn clothing and other worn articles, and consult to prepare updates to this Chapter prior to changes in the Harmonized System.

Article 6.9 establishes that the confidentiality provisions contained in Article 5.12 (Confidentiality) apply to the information collected from a trader or provided by another Party under this Chapter.

2. Canadian Legislation

The implementation of this Chapter will be enabled through amendments to the Customs Act.

3. Intended Government Action

In addition to the legislative changes referred to above, the Imports of Certain Textile and Apparel Goods from Mexico or the United States Customs Duty Remission Order – which implemented the TPL commitments of NAFTA – will need to be amended to implement the TPL commitments in CUSMA. The Import Control List and the Issuance of Certificates Regulations will also need to be amended in order to replace NAFTA TPL goods with CUSMA TPL goods. The regulations necessary to implement Article 6.6 of this Chapter will be included within the new regulation that is being created under the authority of the Customs Act as identified under Chapter 5 (Origin Procedures) to address verification of origin.

The Parties have agreed to work together through the Committee on Textile and Apparel Trade Matters, including on possible amendments to the rules of origin related to the commercial availability of fibres, yarns or fabrics.

The CBSA has published Customs Notice CN 20–14 on its website, which summarizes the requirements in order to benefit from CUSMA’s preferential rates of duty once CUSMA enters into force. For importers, the information provided will pertain to claiming the preferential tariff treatment when accounting for goods imported under CUSMA, information concerning the proof of origin requirements to support this claim, any shipping requirements the goods must meet in order to be eligible for CUSMA preferential tariff treatment as well as information pertaining to the refund provision for CUSMA eligible goods. For importers, exporters, and producers, information will be provided concerning how to complete the proof of origin required by the importer to claim the CUSMA preferential tariff treatment. Additionally, this Customs Notice will direct readers to the CBSA Border Information Service (BIS) for further information pertaining to the origin procedures contained in CUSMA. The BIS is an automated telephone service that answers incoming calls and provides general information on CBSA programs, services and initiatives through recorded scripts, as well as providing access to a live CBSA officer. CBSA officers will have general information relevant to the origin procedures contained in CUSMA and will be able to respond to questions from the public concerning the import or export of goods under this Agreement.

CHAPTER 7: CUSTOMS ADMINISTRATION AND TRADE FACILITATION

1. CUSMA Provisions

This Chapter aims to streamline customs procedures, reduce red tape and ensure greater predictability in customs matters. This Chapter was not found in NAFTA and its inclusion in CUSMA will provide additional benefits for Canadian traders.

Section A of the Chapter establishes obligations that seek to reduce the transaction costs incurred by traders by simplifying, standardizing, and modernizing trade-related customs procedures. This section addresses various stages of the customs process with a view to reducing red tape at the border, thereby contributing to greater predictability, consistency, and transparency when trading goods. The trade facilitative measures set out in Section A apply to all goods traded amongst the Parties, not only those that qualify as originating under CUSMA.

Section B of the Chapter provides for cooperation amongst the Parties to assist each other in the enforcement of laws and regulations related to customs offences in goods traded amongst the Parties. This Section also requires the Parties to strengthen enforcement efforts, enhance cooperation, and assist customs administrations in detecting fraudulent acts in trade.

SECTION A

Article 7.1 affirms the rights and obligations of the Parties under the WTO Agreement on Trade Facilitation, establishes the commitment to administer customs procedures in a manner that facilitates the movement of goods while ensuring compliance with law, and establishes an ongoing commitment to explore additional means to facilitating trade.

Articles 7.2 requires each Party to publish online information relevant to the importation, exportation and transit of goods, including information that encourages traders to voluntarily comply with trade-related laws, regulations, and procedures.

Article 7.3 requires that each Party publish in advance, to the extent possible, any trade and customs regulations of general application that it proposes to adopt, and that each Party provide the public with an opportunity to comment on such regulations. Each Party must also maintain a forum through which it regularly communicates with the trading community and allows that community to have an opportunity to address emerging issues and views on trade-related customs procedures.

Article 7.4 provides that each Party maintain at least one enquiry point to address enquiries regarding trade-related customs procedures free of charge and within a reasonable amount of time. A Party may require a fee or charge for requests made pursuant to, in the case of Canada, the Access to Information Act and the Privacy Act.

Article 7.5 requires the customs administration of each Party to adopt or maintain procedures for the issuance of advance rulings on tariff classification (including whether a good is subject to a quota or a TRQ), on whether a good qualifies as originating under the Agreement, and on the application of customs valuation criteria. In Canada, Advance Rulings are provided in response to enquiries concerning tariff classification and the origin of a good, while National Customs Rulings are provided in response to enquiries concerning applicable customs valuation methodology. This Article establishes that advance rulings are issued prior to the importation of a good, within 120 days of receiving all necessary information, they are applied throughout a Party’s territory to the persons to which they are issued, and they remain in effect unless modified or revoked. Rulings may be modified or revoked if there is a change in the law, facts, or circumstances on which the ruling was based, or if the ruling was based on inaccurate or false information, or on an error. A Party may decline or postpone the issuance of an advance ruling under certain circumstances. A Party cannot require a person seeking an advance ruling to establish a contractual or other relation with a person in the territory of the importing Party. Lastly, each Party has agreed to publish its rulings in accordance with its laws, regulations and procedures; in Canada, rulings will continue to be published in accordance with the publication procedure which is subject to trader consent.

Pursuant to Article 7.6, the Parties commit to providing traders with advice or information regarding the application of duty drawback or deferral programs, within a reasonable timeframe.

Under Article 7.7, the Parties have agreed to adopt or maintain procedures that allow for the immediate release of goods upon receipt of the customs declaration and fulfillment of all applicable requirements. When goods are not promptly released, the Party must inform the importer including, to the extent permitted by law, the reasons why the goods are not being released and which border authority has withheld their release. To facilitate the immediate release of goods prior to the final determination and payment of customs duties, taxes, fees or charges, a Party may require a security from the importer as a condition for release.

Article 7.8 provides that each Party must maintain minimum de minimis thresholds for low-value goods imported by courier from another Party. This means that neither customs duties nor taxes will be assessed at the time or point of importation on such imports valued at or below the threshold specified for each Party. This is contingent on the shipment not forming part of a series of shipments carried out or planned for the purpose of evading duties or taxes or for the purpose of evading any regulation applicable to the formal entry procedures required by the importing party. This commitment does not apply to imports of restricted or controlled goods. Canada has agreed to maintain a de minimis threshold of at least C$150 for customs duties, and C$40 for taxes, for goods imported by courier from Mexico or the United States. This Article also provides that each Party must apply fewer customs formalities than those applied under formal entry procedures for express shipments below a certain value; for Canada this applies to express shipments valued at less than C$3,300.

Article 7.9 requires each Party to use information technology and electronic systems to facilitate the movement of goods and communication between traders, the customs administration and other border authorities.

Article 7.10 provides for the establishment or maintenance of a single window that enables importers to submit the documents and data required for importation electronically, through a single entry point, and allows the Party to communicate the release status of goods to the importer. Each Party is required to periodically review its single window system if the existing system does not provide for all trade in goods (including export and transit movements), and to streamline its single window system on an ongoing basis, for example by adding functionality to facilitate trade.

Article 7.11 requires each Party to apply its customs procedures in a manner that is transparent, predictable, and consistent throughout its territory and to review its requirements and procedures to ensure that this objective is met. A Party is allowed to differentiate its requirements and procedures for reasons identified in the Article, such as the nature and type of goods, or their means of transport.

Article 7.12 obligates each Party to adopt or maintain a risk management system that enables its customs administration and other border authorities to focus their inspection activities on high-risk goods, and to facilitate the release and movement of low-risk goods.

Article 7.13 requires each Party to adopt or maintain post-clearance audit to ensure trader compliance with customs laws and regulations. A trader that is the subject of an audit must be informed of the audit results, including a rationale supporting the results and the trader’s rights and obligations. These audits are to be conducted in a risk-based, transparent and informative manner, with a view to promoting the voluntary compliance of traders in the future.

Article 7.14 provides that each Party shall maintain an “Authorized Economic Operator” (AEO) program in accordance with the World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade. The Parties are to endeavour to cooperate by sharing information and experiences relating to the administration of their respective AEO programs.

Article 7.15 establishes that each Party shall ensure that a trader who is issued a customs determination has access to both administrative-level and quasi-judicial or judicial-level of review or appeal, and is provided with information on how to seek such review or appeal. Where a review or appeal decision is made, written reasons for the decision must be provided by the Party to the trader, and that decision must be applied consistently throughout the Party’s territory with respect to that trader.

Article 7.16 requires each Party to provide a procedure through which a customs office, on its own initiative or at the written request of an importer or exporter in its territory, may seek guidance from an appropriate authority within the customs administration as to the proper application of laws, regulations, and procedures for importation, exportation, or transit purposes with respect to a specific customs transaction. The appropriate authority is only required to provide guidance where there is an inconsistency between the customs treatment provided on the specific customs transaction and the customs treatment provided on transactions that are identical in all material respects. The appropriate authority is not required to provide guidance in the following circumstances: consistent treatment has been applied throughout the territory; a determination is under review, pending or has been issued; or an administrative procedure is available to address the customs treatment such as a ruling, review or appeal.

Article 7.17 sets out that a Party’s requirements and procedures with respect to goods in transit (i.e. goods not intended for release into that Party’s domestic market) must not be more burdensome than necessary to identify the goods and to ensure compliance with the Party’s transit requirements. A Party may require a trader to post security to ensure that the Party’s transit requirements are met.

Article 7.18 requires that each Party adopt or maintain measures that allow the customs administration to impose penalties on traders that contravene the Party’s customs laws, regulations, or procedures with respect to trade in goods. The measures administered must be objective (i.e. avoid conflicts of interest) and the penalties imposed must depend on the facts and circumstances surrounding the contravention and be proportionate with the severity of the contravention.

With a view to encouraging the voluntary compliance of traders, the Parties have also agreed not to impose penalties on traders who voluntarily disclose and seek to correct errors before they are detected by the customs administration, provided that the traders do so in accordance with the Party’s laws, regulations, or procedures, and are not fraudulent. As well, the Parties have agreed not to impose penalties on traders for clerical or minor errors, unless the trader has repeatedly committed such errors.

Article 7.19 establishes an obligation for each Party to adopt or maintain measures that promote integrity and professionalism amongst customs officials and prevent internal corruption that may create barriers to trade. To further strengthen the obligation, each Party must provide traders with a redress mechanism for lodging complaints regarding perceived improper or corrupt behaviour of customs officials, and must take appropriate and timely action on a complaint.

Pursuant to Article 7.20, each Party must allow importers and any other person it deems appropriate to file import or transit declarations and supporting documentation directly to the customs administration, including through electronic means, without the services of a customs broker. Each Party’s requirements for qualifications, licensing, and registration to become a customs broker must be transparent and based on objective criteria, promote integrity and professionalism and be uniformly administered in its territory. Parties may not impose arbitrary limits on the number of ports at which a customs broker may operate, and each Party must allow a customs broker to electronically submit an import declaration and supporting documentation to request the release of goods at any port within its territory.

Article 7.21 requires the Parties to cooperate as appropriate to promote the efficient and effective processing of goods at ports of entry. Within its territory, each Party must conduct inspections with appropriate coordination between the customs administration and other border authorities and, to the extent practicable, simultaneously within a single location.

Article 7.22 requires that a Party’s customs administration apply measures regarding the management of information collected from traders. Confidential information must be protected from use or disclosure that could prejudice the competitive position of the trader to whom the information relates. However, a Party may use or disclose the information in the administration or enforcement of customs laws, or as provided for under its law.

Article 7.23 establishes an ongoing commitment for the Parties to cooperate in developing and implementing trade facilitative measures involving information sharing or collaboration.

Article 7.24 establishes a Committee on Trade Facilitation, comprised of government representatives of each Party. The role of the Committee is to provide a forum to facilitate the exchange of information on existing customs policies and procedures, to consult and endeavour to resolve issues relating to this Chapter, to consider new measures that facilitate trade, and to engage in other activities as the Parties may decide.

SECTION B

Article 7.25 provides for cooperation amongst the Parties in order to assist each other in the enforcement of laws and regulations related to customs offences, which includes ensuring the accuracy of claims for preferential tariff treatment under CUSMA. The Parties agree to strengthen and expand their customs and trade enforcement efforts through various mechanisms, including bilateral cooperation mechanisms, and by adopting measures that enhance coordination amongst the Parties, and between the customs administration and other agencies within a Party. The Parties also commit to share information with respect to imports, exports, and transit of goods, and to develop customs enforcement initiatives through means such as the creation of task forces and coordinated data analysis.

Article 7.26 provides that Parties may request specific confidential information from one another regarding the importation, exportation and transit of goods, and specifies the method in which to make such a request.

Article 7.27 provides that a Party may request, in writing, the assistance of another Party, in the form of a verification or a site visit, in determining whether customs offences are occurring or have occurred. This Article also sets out the obligations on the Party that has been requested to perform such a verification, which include providing a prompt response to the request, indicating whether or not it intends to conduct the verification, and providing a report once the verification has concluded.

Article 7.28 imposes obligations on the Parties with respect to the handling of information provided by a Party under Section B of this Chapter, which has been designated as confidential by that Party or is confidential under the receiving Party’s law. This Article requires that the receiving Party keep such information confidential, and also limits the disclosure of confidential information that could prejudice the competitive position of the trader.

Article 7.29 establishes a Sub-Committee on Customs Enforcement. The role of the sub-committee is to identify regional priorities of mutual concern, exchange customs and trade information, and provide a forum to discuss proposed customs enforcement initiatives.

2. Canadian Legislation

Section 39 of the CUSMA Implementation Act adds a provision to Schedule VII to the Excise Tax Act to implement Canada’s de minimis commitment in Article 7.8, in respect of the GST/HST. This provision provides that the GST/HST does not apply to goods transported by courier that are imported from Mexico or the United States and that have a value of not more than C$40, other than goods that are prescribed for the purposes of section 7 of Schedule VII to the Excise Tax Act. Prescribed goods include items such as alcohol and tobacco products.

3. Intended Government Action

A regulatory amendment to the Courier Imports Remission Order will implement Canada’s de minimis commitment in Article 7.8, in respect of customs duties.

In addition to the passage of the CUSMA Implementation Act and related regulatory and administrative action, the Government intends to work with provincial governments to facilitate compliance with the terms of CUSMA, including the de minimis commitment in respect of taxes for low value courier shipments.

The CBSA has published Customs Notice CN 20–18 on its website, providing information on the procedures that traders must follow in order to claim the CUSMA de minimis thresholds with respect to the application of customs duties and taxes on goods imported into Canada and transported by courier from the United States or Mexico.

As well, existing regulations under the Customs Act will be amended to address CUSMA provisions relating to advance rulings and to raise the low-value threshold for express shipments from C$2,500 to C$3,300, below which fewer customs formalities would apply than those applied under formal entry procedures. The regulations to be amended include the Free Trade Agreement Advance Rulings Regulations and the Accounting for Imported Goods and Payment of Duties Regulation.

The CBSA has published Customs Notice CN 20–15 on its website, announcing that as of the date from which CUSMA will be applied, the low value shipment threshold administered by the CBSA will increase to an estimated value for duty not exceeding C$3,300.

The CBSA will publish a Customs Notice on its website announcing the proposed amendments to regulations made under the Customs Act. These regulatory amendments will come into force on a date following entry into force of the Agreement. However, in accordance with paragraph 167.1(b) of the Customs Act, the Customs Notice enables the regulatory amendments to have retroactive effect back to the date of the public announcement. As a result, the CBSA will have the necessary authorities to ensure compliance with the Agreement as of the date it enters into force.

The Parties have agreed to work together through the Committee on Trade Facilitation and the Sub-Committee on Customs Enforcement.

CHAPTER 8: RECOGNITION OF THE UNITED MEXICAN STATES’ DIRECT, INALIENABLE, AND IMPRESCRIPTIBLE OWNERSHIP OF HYDROCARBONS

1. CUSMA Provisions

This Chapter was included at the request of Mexico. The Chapter does not create any new rights or obligations for Canada, or for the other Parties, but does expressly recognize Mexico’s sovereign right to reform its Constitution and domestic laws, as well as its ownership of hydrocarbons in areas within its jurisdiction, including its national territory, the continental shelf and exclusive economic zone off Mexico’s coast. Canada did not seek to include similar language in CUSMA as, even without the provisions contained in this Chapter, all three Parties are afforded these rights under the Agreement.

Article 8.1 paragraph 1 reaffirms the Parties’ sovereignty and right to regulate with respect to hydrocarbons. Paragraph 2 recognizes Mexico’s right to reform its Constitution and domestic legislation, as well as its ownership over hydrocarbons that have not yet been extracted from the subsoil of its territory. While not explicitly included in the text of the Chapter, by virtue of their sovereignty, Canada and the United States also reserve the right to reform their respective Constitutions and domestic legislation, and maintain ownership (whether at the federal or sub-federal levels) over un-extracted hydrocarbons in their territory, including their continental shelf and exclusive economic zones.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

No government actions arise from this Chapter.

CHAPTER 9: SANITARY AND PHYTOSANITARY MEASURES

1. CUSMA Provisions

Building on the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and NAFTA, this Chapter maintains each Party’s sovereign right to take the SPS measures necessary to protect against risks to human, animal or plant life or health while requiring that such measures be science-based, transparent and not applied in a manner that creates unnecessary barriers to trade. The objective is to ensure that CUSMA’s market access benefits are not undermined by unjustifiable SPS-related trade restrictions.

The Chapter also reflects the three Parties’ extensive trade and regulatory relationship in food safety and animal and plant health. The Chapter includes many new obligations, including on science and risk analysis, how Parties determine the equivalence of SPS measures of another Party with their own, and greater predictably in the audit process. It also creates a new mechanism to resolve issues cooperatively and includes provisions to enhance compatibility of SPS measures among parties, a first of their kind for the three Parties. The Chapter also includes improved procedures for import checks and regionalization, and establishes an SPS Committee to provide a forum to enhance communication and cooperation and discuss specific SPS-related trade issues.

Article 9.1 sets out the definitions that apply to this Chapter. They include the definitions in Annex A of the SPS Agreement and specific definitions, such as: competent authority; import check; relevant international organizations; relevant international standards, guidelines, or recommendations; risk management; and WTO SPS Committee.

Article 9.2 defines the scope of the Chapter to include all SPS measures that may directly or indirectly affect trade between the Parties.

Article 9.3 sets out the objectives of the Chapter, which are to protect human, animal or plant life or health while facilitating trade; strengthen communication and cooperation between the Parties; ensure that the Parties’ SPS measures do not create unnecessary barriers to trade; reinforce and build on the SPS Agreement; enhance transparency; encourage the development and adoption of science-based international standards, guidelines, and recommendations; enhance the compatibility of SPS measures; and advance science-based decision making.

Article 9.4 affirms the rights and obligations of the Parties under the SPS Agreement and clarifies that SPS measures taken by the Parties in conformity with this Chapter or relevant international standards, guidelines and recommendations are presumed consistent with the obligations in Chapter 2 (National Treatment and Market Access for Goods) and Article XX(b) of the GATT 1994.

Article 9.5 requires each Party to provide a list of its central level of government competent authorities, and upon request, provide contact information or written descriptions of SPS responsibilities of its competent authorities. Each Party must also designate and notify to the other Parties a contact point for matters arising under this Chapter and promptly inform the other Parties of any change to its competent authorities or contact point.

Article 9.6 requires that each Party must base its SPS measures on the relevant international standards, guidelines, or recommendations, provided that doing so meets the Party’s appropriate level of sanitary or phytosanitary protection. If a relevant international standard, guideline, or recommendation does not exist or if the SPS measure is not based on the relevant international standard, guideline, or recommendation, a Party must take an SPS measure based on an assessment of risk.

This Article builds on the obligations in the SPS Agreement by requiring that, if a Party takes a provisional SPS measure when relevant scientific evidence is insufficient, it must complete the risk assessment after obtaining and reviewing the requisite information and then revise the provisional SPS measure if appropriate. Furthermore, each Party must conduct its risk assessment and risk management for SPS regulations in a manner that is documented and provides the other Parties and persons of the Parties an opportunity to comment. The Chapter also clarifies that each Party must consider, as a risk management option, the option of not taking an SPS measure.

If an importing Party requires a risk assessment to authorize the importation of a good, it must provide an explanation of the information required for the risk assessment upon request. Parties must provide information on the status of a request to authorize importation of a good. If an importing Party plans to put in place an SPS measure as a result of a risk assessment that will facilitate trade, it must do so without undue delay. Lastly, if a Party has reason to believe that an SPS measure adopted by another Party is constraining, or has the potential to constrain its exports, the Party adopting the SPS measure must provide an explanation of the reasons and pertinent relevant information, upon request.

Article 9.7 encourages the Parties to enhance the compatibility of their SPS measures in order to reduce unnecessary obstacles to trade. The Parties recognize that enhancing the compatibility of their SPS measures may facilitate trade while maintaining each Party’s right to determine its own appropriate level of sanitary or phytosanitary protection.

Article 9.8 outlines that the Parties endeavour to cooperate on the recognition of pest- or disease-free areas and areas of low pest or disease prevalence. This Article requires an importing Party to communicate and share with the exporting Party, in a timely manner, its rationale and process for determining regional conditions, as well as the decision and measures applied as a result of the determination. Additionally, this Article provides that an importing Party must consider upon request if a streamlined process may be used for the determination of regional conditions. If the importing Party decides that a request for determination of regional conditions is a priority, and upon receipt of sufficient information, the importing Party must establish reasonable timelines and may establish a work plan to finalize the determination, which may have a positive or negative result. A work plan will be carried out in normal circumstances. Normal circumstances do not include extraordinary or unanticipated situations, such as unanticipated risks to human, animal, plant life or health, or resources or regulatory constraints of the importing Party.

Article 9.9 establishes a process for the Parties to assess, determine, and recognize equivalence of an exporting Party’s SPS measure and includes obligations for information sharing concerning equivalence. The Parties must recognize the equivalence of an SPS measure or, to the extent feasible and appropriate, a group of SPS measures or system by taking into account the relevant international standards, guidelines and recommendations, and the relevant guidance of the WTO SPS Committee. The Article specifies that if the exporting Party’s measure, group of measures or system differs from that of the importing Party, an importing Party must recognize equivalence if the exporting Party objectively demonstrates that its measures achieve the importing Party’s appropriate level of protection, taking into account the outcomes that the exporting Party’s SPS measure, group of SPS measures, or system achieves. The Article also contains obligations concerning the maintenance of equivalence when a Party revises an SPS measure that is the subject of equivalence recognition.

Article 9.10 establishes a process to conduct audits, including requirements for information exchange and applicable procedures. All audits must be systems-based and designed to check the effectiveness of regulatory controls. In cases where an importing Party has recognized the equivalence of an exporting Party’s system of SPS measures, the scope of the importing Party’s audit must be limited to verifying that the exporting Party’s system achieves an outcome equivalent to the importing Party’s appropriate level of SPS protection and to verifying the exporting Party’s implementation of its oversight and control system. Lastly, if an importing Party makes a final audit report available to the public, the final audit report must incorporate or be accompanied by the comments or response to the draft audit report made by the exporting Party.

Article 9.11 sets out obligations that require that import checks be based on the risks associated with importations, be carried out without undue delay and that information be shared on processes and decisions related to import checks. The importing Party must undertake the import checks in a location that does not cause unnecessary inconvenience to an applicant or its agent and so that the integrity of the imported good is preserved. If an importing Party restricts an import due to an adverse import check, it must notify the importer or its agent, the exporter, or the manufacturer of the reasons for the non-compliance within five days. The importing Party must also provide an opportunity for a review of its decision and must consider any relevant information submitted. The importing Party is allowed to dispose of goods that, if urgent regulatory action is not taken, can cause damage to human, animal, or plant life or health.

Article 9.12 requires that an SPS certification requirement be based on the relevant international standards, guidelines, or recommendations or that the certification requirement be appropriate to the circumstances of risks to human, animal, or plant life or health. If certification is required, the importing Party must ensure that the certification requirement is applied only to the extent necessary to meet the importing Party’s appropriate level of protection and must limit the required information and attestation to essential information.

Article 9.13 requires the Parties to notify all proposed SPS regulations that may have an effect on trade, including those that conform to relevant international standards, guidelines, and recommendations, by using the WTO SPS notification system. This Article formalizes transparency provisions developed by the WTO SPS Committee, including the obligation to normally allow at least 60 days for interested persons and other Parties to provide written comments on proposed measures and to notify and publish adopted SPS measures. This Article also requires the Parties to allow reasonable requests to extend the comment period and to make available a summary of written comments that a Party has received from the public.

Article 9.14 establishes that an importing Party must notify affected Parties if it adopts an emergency measure to address an urgent problem of human, animal or plant life or health, must review the scientific basis of an emergency SPS measure that it has taken within six months of taking the measure and must make available the results of this review to the other Parties.

Article 9.15 requires that if a Party requests information from another Party on an SPS-related matter, the Party that receives this request should provide available information to the requesting Party within a reasonable amount of time, and if possible, by electronic means.

Article 9.16 establishes that Parties must explore opportunities for further cooperation, collaboration and information exchange on SPS-related matters, including developing common principles, guidelines, and approaches and promoting compatibility of their SPS measures. Specifically, Parties emphasize the importance of cooperating on enhancing the compatibility of risk management approaches through joint scientific data collection, undertaking joint risk assessments, and cooperating on aligning data requirements for risk assessment. Furthermore, Parties emphasize the importance of providing access to their respective completed risk assessments and the data used to develop the risk assessments, as appropriate.

Article 9.17 establishes an SPS Committee to replace the NAFTA SPS Committee and serve as a forum for the Parties to consider any matter related to this Chapter. The role of the Committee is to enhance cooperation and information sharing between the Parties, and identify and discuss, at an early stage, proposed or revised SPS measures that may have a significant effect on trade in North America including for the purpose of avoiding issues and to facilitate greater alignment of SPS measures. Furthermore, the Committee may undertake a number of tasks, including the establishment of technical working groups, taking into account existing mechanisms of cooperation.

Article 9.18 outlines how, if established, technical working groups will function and specifies the activities that a technical working group may undertake.

Article 9.19 establishes that technical consultations may be used when seeking to resolve any matter arising under this Chapter. Such consultations are a prerequisite to a Party seeking to use dispute settlement under Chapter 31 (Dispute Settlement). A request for dispute settlement may be made once the consulting Parties have met within 30 days of the responding Party’s receipt of request to meet or if the Parties do not meet within 30 days of that request.

Article 9.20 specifies that if a dispute involves scientific or technical issues, a panel should seek advice from experts chosen by the panel. In order to do that, the panel may establish an advisory technical experts group or consult the relevant international standard setting organizations.

2. Canadian Legislation

There are no amendments to Canadian legislation arising from this Chapter.

3. Intended Government Action

Canada reserves the right to maintain measures necessary to protect human, animal or plant life or health. At the same time, CUSMA provides a framework for reducing the unjustified use of SPS measures as barriers to trade. The Government intends to make use of the SPS Committee to identify and discuss issues that could have an impact on trade and to work cooperatively with the other Parties on SPS matters of mutual interest.

CHAPTER 10: TRADE REMEDIES

1. CUSMA Provisions

This Chapter preserves, without any substantive changes, a critical aspect of NAFTA: the binational panel dispute settlement mechanism under NAFTA Chapter 19 (Review and Dispute Settlement in Antidumping and Countervailing Duty Matters) that provides an impartial and binding mechanism to review antidumping and countervailing duty measures imposed by the Parties. This mechanism has been used regularly and successfully by Canada to defend Canadian economic interests, notably in connection with antidumping and countervailing duties imposed by the United States on softwood lumber.

This Chapter also retains the exclusion of the Parties from global safeguard actions, which was previously included in NAFTA Chapter 8 (Emergency Action). This requires a Party to exclude the other Parties from a global safeguard action, under certain circumstances. This protection limits the uncertainty and potential trade disruptions that could result from the application of a global safeguard. Of note, the NAFTA Chapter 8 bilateral safeguards provisions are not included in CUSMA, as they were transitional provisions related to NAFTA tariff reduction or elimination.

This Chapter also reaffirms the Parties’ WTO rights and obligations concerning antidumping, countervailing and global safeguard measures and includes provisions to strengthen cooperation between the Parties to address the potential evasion of trade remedy duties by third party countries. These provisions will strengthen Canada’s trade remedy system and further protect Canadian industry from third countries’ unfair trade practices.

Finally, this Chapter reinforces certain international best practices related to transparency and procedural fairness in antidumping and countervailing duty investigations.

Section A: Safeguards

Article 10.1 defines the competent investigating authority for each Party.

Article 10.2 requires a Party to exclude imports of a good from another Party in its global safeguard action unless two key criteria are met: (1) imports from that Party must account for a substantial share of total imports to the affected Party; and, (2) these imports must contribute importantly to the serious injury, or threat of that injury.

Further, any action imposed against a Party must not reduce imports of the good below the trend of imports of that good over a representative base period allowing for reasonable growth.

Article 10.3 addresses the way a Party administers an emergency action, requiring that determinations of serious injury/threat of serious injury be performed by a competent investigating authority, which is defined in Article 10.1.

Section B: Antidumping and Countervailing Duties

Article 10.4 provides definitions for certain terms used within the Section and Annex 10-A.

Article 10.5 reaffirms the Parties’ WTO rights and obligations under Article VI of the GATT 1994, the Anti-dumping Agreement and the Agreement on Subsidies and Countervailing Measures (SCM Agreement). In other words, the existing WTO disciplines on trade remedies remain in place between the Parties, but are not part of CUSMA itself. This Article further specifies that, except as provided in Annex 10-A, the Agreement does not confer any rights or impose any obligations on the Parties with respect to antidumping and countervailing duty measures. It also excludes any matter related to antidumping and countervailing measures from regular state-to-state dispute settlement under Chapter 31 (Dispute Settlement).

Annex 10-A recognizes certain best practices related to transparency and procedural fairness in the conduct of antidumping and countervailing duty investigations.

Paragraph 1 specifies the information each Party must publish online. The expression “publish online” includes referencing a document online and making it available upon request through electronic means.

Paragraphs 2 to 4 require each Party to implement an electronic filing and registry system no later than five years after the entry into force of the Agreement. This system must be used for all investigations initiated after the implementation of the system. The information listed in paragraph 2 should be archived in the system and managed in accordance with the Parties’ respective archiving practices.

Paragraph 5 requires a Party to notify another Party when an antidumping and countervailing duty complaint with respect to its imports has been filed (in other words, when a complaint is properly documented). This notification must be made no later than seven days before the initiation of an investigation.

Paragraph 6 includes transparency provisions for the conduct of antidumping and countervailing duty verifications. Among other elements, it specifies that a non-confidential verification report must be made available to all interested parties in sufficient time for them to provide comments and defend their interests.

Paragraph 7 requires that counsel from a company with a calculated antidumping or countervailing duty rate be given the calculation sheet for that company, after both the preliminary and final determinations. Counsel from companies with an “all others rate” can see how the rate was calculated, although they cannot access the numbers on which the average is based, as it is business-confidential information. This provision provides an opportunity to review and correct calculation mistakes, but is not intended to give interested parties the right to make new arguments.

Paragraph 8 specifies that each Party can, if appropriate, use non-confidential versions of antidumping and countervailing duty complaints received by other Parties to determine whether they would like to self-initiate an investigation on the same product. The paragraph does not require the sharing of complaints (e.g. they can be proactively shared, provided on request, or made available online).

Paragraph 9 stipulates that Parties may exchange non-Parties’ subsidy information to determine whether relevant actions are warranted, including self-initiation of a countervailing duty investigation.

Section C: Cooperation on Preventing Duty Evasion of Trade Remedy Laws

Article 10.6 recognizes the Parties’ shared concerns regarding the evasion of trade remedy duties and the importance to cooperate and strengthen efforts to address this issue.

Article 10.7 establishes a cooperation mechanism to address the evasion of trade remedy duties.

Paragraphs 1 to 4 require each Party, subject to its law, to cooperate and exchange information with other Parties for the purposes of enforcing their respective measures concerning the evasion of trade remedy duties. These provisions do not oblige the Parties to conduct a joint analysis or investigation, nor do they require that customs authorities conduct additional analysis to provide the requested information. The information collected should be used only for the intended purpose (to address trade remedy duty evasion) and should not be shared for use in other proceedings, except for related court proceedings.

Paragraphs 5 and 6 allow a Party to request that another Party conduct a trade remedy duty evasion verification in the requested Party’s territory for the purpose of enabling the requesting Party to determine whether evasion of trade remedy duties is occurring. If the requested Party refuses to conduct the verification, it should provide a response explaining why it refused. If the requested Party will conduct the verification, it must provide the requesting Party with a verification report promptly after the verification. Duty evasion verifications conducted under paragraph 5 are subject to the conditions of paragraph 7, which include the requirement that Parties establish mutually-agreed conditions and procedures (e.g. conditions on the sharing of confidential information).

Paragraph 7 provides that a Party, through a mechanism other than paragraph 5 (e.g. under this paragraph or through a Customs Mutual Assistance Agreement), may request that a duty evasion verification be conducted in the requested Party’s territory. The requesting Party must normally be allowed to participate in the verification, either as the Party conducting the verification or to participate in a verification conducted by the requested Party. Paragraph 7 also sets three important parameters that must be respected in order for a verification to be conducted: there must be mutually-agreed conditions between the Parties (including on the purpose and scope of the verification); there should be an advanced notice to the requested Party; and the parties to be verified need to consent to the verification.

Paragraph 8 requires that each Party maintain a mechanism for the sharing of confidential information under paragraphs 3 and 6, for the limited purpose of determining whether evasion of trade remedy duties is occurring. Each Party shall keep the information confidential in accordance with its law. Failing that, a Party may refuse to provide another Party with confidential information in response to subsequent requests. The receiving Party may use or disclose the confidential information only for the purposes of administration or enforcement of its customs law, including in related administrative, quasi-judicial, or judicial proceedings, or when otherwise required under its law.

Section D: Review and Dispute Settlement in Antidumping and Countervailing Duty Matters

Article 10.8 provides definitions for certain terms used in the Section and Annexes.

Article 10.9 provides that a panel review of a final antidumping or countervailing duty determination applies only in respect of a good of another Party. This article also clarifies that CUSMA does not impose any obligation on a Party in respect of a Party’s antidumping and countervailing duty law, except for Article 34.5 (Entry into Force).

Article 10.10 specifies that each Party retains its right to apply its antidumping and countervailing duty laws and reserves the right to amend these laws.

Article 10.11 provides for binational panel review of a Party’s amendments to its antidumping and countervailing duty statutes for conformity with WTO rules or CUSMA.

Article 10.12 provides that domestic judicial review of a Party’s final antidumping and countervailing duty determinations must be replaced with binding binational panel review if a request is made in the appropriate time. For example, a Canadian company subject to a United States antidumping or countervailing duty determination has the option to seek a binding binational panel review of the United States final determinations instead of a review by the United States Court of International Trade.

Article 10.13 and Annex 10-B.3 provide that a Party may request a review of a binational panel decision under certain circumstances, such as a panel manifestly exceeded its powers, authority, or jurisdiction.

Article 10.14 sets out that Section D of this Chapter only applies prospectively to the final determination of a competent investigating authority after the date of entry into force of CUSMA. For example, if a Party started a binational panel review of a final determination under NAFTA Chapter 19 before the entry into force of CUSMA, then NAFTA Chapter 19 would continue to apply to that matter. Similarly, Section D only applies prospectively to amendments to antidumping and countervailing duty statutes made further to an Article 10.11 declaratory opinion enacted after the date of the entry into force of CUSMA.

Article 10.15 provides a consultation mechanism for the Parties to consider any problems that may arise with respect to the implementation or operation of Section D.

Article 10.16 provides that each Party must maintain a Secretariat to facilitate the operation of this Section and, in particular, to assist panels or committees in their work and to act as the repository for panel and committee records.

Article 10.17 requires the Parties to establish or maintain a code of conduct for panellists and committee members.

Article 10.18 requires the competent investigating authorities to provide access to public information submitted to it in an antidumping and countervailing duty investigation.

Annexes 10-B.1, 10-B.2, 10-B.3 and 10-B.4 provide detail on the panel, extraordinary challenge committee, and special committee review processes (in other words, the composition of rosters and the selection of panel and committee members, and the rules of procedure for each of them). Annex 10-B.5 sets out amendments to the Parties’ domestic laws.

2. Canadian Legislation

To implement Canada’s obligations under this Chapter, amendments are required to the Special Import Measures Act (SIMA), the Canadian International Trade Tribunal Act (CITT Act), the Customs Tariff, and the Customs Act. These amendments are set out in sections 72 to 107, section 120, sections 138 to 151, section 185, and sections 196 and 197 of the CUSMA Implementation Act.

SIMA is the primary law governing Canada’s antidumping and countervailing duty system. The Canadian system provides for the application of antidumping and/or countervailing duties to remedy injury to domestic producers caused by dumped and/or subsidized imports. Canada’s antidumping and countervailing duty investigations are conducted by the CBSA and the Canadian International Trade Tribunal (CITT).

CUSMA does not affect Canada’s right to apply its antidumping and countervailing duty law nor does it substantively diverge from the NAFTA outcome with respect to antidumping and countervailing duties. That said, a number of consequential amendments are required to SIMA to ensure that NAFTA trade remedy commitments under SIMA, which are preserved “as is” in Section D of this Chapter, are continued under the revised SIMA. These consequential amendments are set out in sections 72 to 107 of the CUSMA Implementation Act.

The CITT conducts all safeguard inquiries under the CITT Act, and safeguard measures are imposed pursuant to provisions in the Customs Tariff and the EIPA. To implement Section A of this Chapter, the CUSMA Implementation Act amends the CITT Act and the Customs Tariff to remove provisions that allowed the CITT to conduct bilateral safeguard inquiries in accordance with NAFTA, and to remove the possibility of implementing bilateral safeguard measures in accordance with NAFTA provisions. The CUSMA Implementation Act also makes consequential amendments to the CITT Act and the Customs Tariff to preserve the exclusion from global safeguards that was an outcome of NAFTA, and which are preserved in CUSMA. These amendments are set out in sections 138 to 151, section 185, and sections 196 and 197 of the CUSMA Implementation Act.

To implement Article 10.7, section 120 of the CUSMA Implementation Act also amends the Customs Act to add provisions to allow regulatory (non-penal) trade remedy duty evasion verifications to be conducted in Canada.

3. Intended Government Action

To implement this Chapter, consequential amendments to the Special Import Measures Regulations, the Members of Committees and Special Committees (NAFTA) Regulations and the Members of Panels (NAFTA) Regulations were required to allow Canada to maintain the NAFTA antidumping and countervailing duty dispute settlement mechanism as well as certain NAFTA transparency obligations that are incorporated into CUSMA. The Special Import Measures Regulations includes provisions relevant to the binational panel dispute settlement mechanism as well as certain transparency provisions related to CUSMA. The Members of Committees and Special Committees (NAFTA) Regulations and the Members of Panels (NAFTA) Regulations establish the processes to appoint members for NAFTA Chapter 19 Extraordinary Challenge Committees, Special Committees, and binational panels.

Consequential amendments to the Canadian International Trade Tribunal Regulations were required to remove references to bilateral safeguard provisions repealed from the CITT Act through the CUSMA Implementation Act.

The CBSA may also modify administrative policies in order to implement some of the provisions in Article 10.7 and Annex 10-A. The CITT and the CBSA will work toward implementing an electronic filing system no later than five years after the entry into force of the Agreement, as required in Annex 10-A.

The Government will ensure that transparency and due process requirements are followed, as well as monitor overall compliance by the Parties with the obligations of this Chapter.

CHAPTER 11: TECHNICAL BARRIERS TO TRADE

1. CUSMA Provisions

This Chapter aims to ensure that technical barriers to trade (TBT) measures are applied equally to products and goods originating in both Canada and the other Parties. These measures include technical regulations, product standards, and conformity assessment procedures employed by regulators to ensure the protection of human, animal or plant life or health, and protection of the environment. This Chapter requires that trading partners do not use technical requirements relating to products as a means of blocking imports as tariffs are eliminated.

Under the WTO Agreement on Technical Barriers to Trade (TBT Agreement), Canada and the other Parties have already made a number of commitments with respect to TBT measures. This Chapter incorporates and builds on those commitments. Importantly, the obligations in this Chapter help to ensure that market access gains made in other parts of CUSMA are not undermined by TBT measures.

This Chapter requires that TBT measures are applied equally to products and goods originating in both Canada and the other Parties. Where differences in regulations or standards arise, this Chapter tries to promote convergence of respective practices of the Parties if possible, while protecting each Party’s right to regulate in its own best interests. Nothing in this Chapter forces Canada or the other Parties to lower their safety standards and regulations.

Below are some important terms used with regard to TBT:

Article 11.1 sets out the definitions that apply to this Chapter, which includes the definitions contained in Annex 1 of the WTO TBT Agreement as well as additional definitions specific to CUSMA.

Article 11.2 provides that this Chapter applies to the preparation, adoption, and application of all technical regulations, standards, and conformity assessment procedures made at the central level of government (in other words, for Canada, the federal Government) that may affect trade in goods between the Parties. In some cases, particular obligations also apply to government bodies at the level directly below that of the central level of government (in other words, for Canada, provinces and territories). The Article also clarifies that the Chapter does not apply to government procurement technical requirements or to sanitary and phytosanitary measures.

Article 11.3 incorporates key provisions of the TBT Agreement into this Chapter. They include provisions related to TBT measures, such as requiring national treatment (NT) and most-favoured-nation treatment; avoiding creating unnecessary obstacles to trade; and basing technical regulations on appropriate international standards unless those standards would be ineffective or inappropriate for the regulatory purpose.

Article 11.4 promotes the use of international standards and acknowledges their role in supporting greater regulatory alignment, good regulatory practices, and in reducing unnecessary barriers to trade.

Article 11.5 promotes good practices in the area of technical regulations including requiring a Party to conduct an appropriate assessment concerning any major technical regulations it proposes to adopt. Parties are also required to periodically review technical regulations and conformity assessment procedures and maintain a process whereby a person of another Party may request a Party’s regulatory authorities to review a technical regulation or conformity assessment procedure. The Article also promotes the use of international standards in technical regulations by requiring a Party to explain when it substantially deviates from or does not use a relevant international standard.

Article 11.6 provides NT for conformity assessment bodies between the Parties, which will help to streamline duplicative testing requirements. The remaining provisions impose additional requirements to ensure that conformity assessment procedures are conducted in a fair and impartial manner (such as providing a rationale for not accepting the results of a conformity assessment procedure conducted in the territory of another Party, and limiting conformity assessment fees to the approximate cost of services rendered).

Article 11.7 builds on transparency obligations under the WTO TBT Agreement obligations, reflects decisions taken by the WTO TBT Committee, and sets out additional transparency procedures between the Parties. Notably, it requires Parties to allow interested persons from another Party to participate in the development of technical regulations and conformity assessment procedures, and sets out a variety of requirements for publication, provision of information, and receiving and responding to comments.

Article 11.8 states that, normally, a period of not less than six months is a reasonable interval between publication of technical regulations and conformity assessment procedures and their entry-into-force. This is intended to ensure that businesses have sufficient time to meet any new technical requirements.

Article 11.9 promotes cooperation and trade facilitation and requires that a Party give consideration to a request made by another Party with respect to any sector-specific proposal for cooperation.

Article 11.10 requires information exchange and technical discussions between the Parties, if requested by a Party, so that concerns may be addressed and dealt with as quickly as possible.

Article 11.11 establishes a Committee on Technical Barriers to Trade (TBT Committee), and provides that it will address matters arising in the areas of technical regulations, standards, and conformity assessment procedures with a view to facilitating trade between the Parties.

Article 11.12 provides for contact points for this Chapter to help facilitate communication between the Parties.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will continue to comply with existing obligations from the TBT Agreement incorporated into this Chapter, and will comply with those additional obligations and procedures described above. Notably, the Government will continue to be bound by transparency obligations through incorporated provisions from the TBT Agreement.

The Government, with its CUSMA counterparts, will establish and engage in the TBT Committee to ensure the effective implementation of this Chapter. This trilateral committee will share expertise and information in the areas of technical regulations, standards, and conformity assessment procedures.

CHAPTER 12: SECTORAL ANNEXES

1. CUSMA Provisions

This Chapter incorporates sector-specific outcomes concerning chemical substances, cosmetic products, information and communication technology, energy efficiency, medical devices, and pharmaceutical products. These sectoral outcomes build on and complement the obligations in Chapters 11 (Technical Barriers to Trade) and 28 (Good Regulatory Practices), which promote regulatory transparency and predictability while preserving each Party’s right to regulate in the public interest to achieve legitimate public policy objectives, such as the protection and promotion of public health, safety and the environment. The commitments outlined in the sectoral annexes are designed to promote effective regulation that facilitates trade between the Parties in these specific sectors of the North American economy.

Annex 12-A (Chemical Substances) provides for enhanced regulatory compatibility between the Parties and recognizes that the protection of human health and the environment remains the principal regulatory objective for this sector. The Parties commit to strengthen regulatory cooperation and to seek to align their risk-assessment methodologies and risk-management measures for chemical substances, if appropriate, as well as to continue to improve their respective levels of protection (including for health, safety and the environment). Lastly, the Chapter recognizes the importance of avoiding unnecessary economic barriers or impediments to technological innovation, and requires Parties to seek to use a risk-based approach to the assessment of chemicals, where appropriate.

Annex 12-B (Cosmetic Products) provides for enhanced regulatory compatibility between the Parties, encourages Parties to better align regulations and regulatory activities for cosmetic products, including through international initiatives and standards, and requires imported and domestic products to be treated in the same manner. This Annex requires Parties to take into account the nature of cosmetic products (i.e. that cosmetic products generally present a lower risk to human health than other products such as medical devices or pharmaceuticals), and to regulate them accordingly. Importantly, this Annex preserves the right to regulate in the public interest with a particular focus on the protection of human health in measures applied to ensure safety, effectiveness and quality. This Annex also commits Parties to not require marketing authorization for a cosmetic product unless it identifies a human health or safety concern and a less trade-restrictive alternative cannot effectively address the identified risks. The obligations in this Annex help to reduce trade-restrictive labeling practices by requiring a Party to permit re-labelling of cosmetic products with the required information after importation. The Parties are also required to seek to align their requirements for the labelling of cosmetic ingredients, including with respect to the International Nomenclature of Cosmetic Ingredients (INCI).

In Appendix 1 (Enhancing Regulatory Compatibility for Products Recognized as Being at the Interface of Cosmetics and Drugs), the United States and Canada agree that if an importing Party has authorized for sale products such as some toothpastes, mouthwashes, sunscreens, and shampoos, it cannot subject these products to re-testing or quarantine unless there is an identified human health concern or the products are subject to inspection through an established human health inspection system.

Annex 12-C (Information and Communications Technology Products) provides added protection for information and communications technology products that use cryptography by preventing Parties from requiring that a manufacturer transfer or provide access to proprietary information as a condition of import or sale. Exceptions are provided for related to government production, sale, or use of a product as well as for requirements a Party’s government maintains related to the networks it owns or controls or measures it takes related to financial institutions or markets. This Annex updates the commitments from the original NAFTA related to the safe attachment of telecommunications equipment to public communications transport networks. It also requires a Party to accept a supplier’s declaration of conformity that information technology equipment meets a standard or technical regulation for electromagnetic compatibility provided that such a declaration satisfies that Party’s testing requirements. Finally, this Annex encourages Parties to implement the Asia-Pacific Economic Cooperation (APEC) Mutual Recognition Arrangement for Conformity Assessment of Telecommunications Equipment of May 8, 1998 (MRA-TEL) and the APEC Mutual Recognition Arrangement for Equivalence of Technical Requirements of October 31, 2010 (MRA-ETR) with respect to each other, and considers other arrangements to facilitate trade in telecommunications equipment.

Annex 12-D (Energy Performance Standards) recognizes the Parties’ interest in harmonizing energy-efficiency performance standards and test procedures. This Annex promotes enhanced regulatory compatibility to facilitate trade between the Parties, and includes transparency requirements. This Annex identifies areas for future cooperation building on the existing regulatory cooperation between the Parties.

Annex 12-E (Medical Devices) provides for enhanced regulatory compatibility between the Parties, and requires that imported and domestic products be treated in the same manner. This Annex requires that the marketing authorization for medical devices be done in a timely, reasonable, objective, transparent and impartial manner and focus on safety, effectiveness and quality requirements. For example, each Party is required to administer authorization procedures that allow companies to efficiently track the progress of their product applications, while ensuring timely mitigation measures if a product application is not approved or is deemed deficient. Also, recognizing that different medical devices pose different levels of risk, each Party is required to classify medical devices based on risk and regulate accordingly.

This Annex preserves the right to regulate in the public interest, with a particular focus on the protection of human health in measures applied to ensure safety, effectiveness and quality. This Annex provides that the Parties must seek to better align their regulations and regulatory activities for medical devices, including through international initiatives such as the International Medical Device Regulator’s Forum and the Global Harmonization Task Force. The Parties must also recognize audits that are made in accordance with the relevant requirements established by the Medical Devices Single Audit Program (MDSAP) and conducted by an auditing organization that is authorized by the regulatory authorities participating in MDSAP.

Annex 12-F (Pharmaceuticals) provides for enhanced regulatory compatibility between the three Parties, and requires that imported and domestic products be treated in the same manner. This Annex requires that the marketing authorisation process for pharmaceutical approvals focus on safety, effectiveness and quality requirements. For example, each Party must administer authorization procedures that allow companies to efficiently track the marketing approval progress of their pharmaceutical products, while ensuring timely mitigation measures if a product application is not approved or deemed deficient. The requirements for Parties to establish this new and transparent marketing authorization process will help reduce the regulatory uncertainty for Canadian pharmaceutical companies.

This Annex preserves the right to regulate in the public interest, with a particular focus on the protection of human health in measures applied to ensure safety, effectiveness and quality. This Annex requires the Parties to seek to improve collaboration on pharmaceutical inspections through increased notification of, and cooperation concerning, inspections of a pharmaceutical manufacturing facility within the territory of another Party.

Lastly, this Annex requires that the Parties establish mechanisms to permit the exchange of confidential information to facilitate greater cooperation between regulators, including for example good manufacturing practice reports, without redactions. The Food and Drug Administration, as the competent authority in the United States responsible for implementing and enforcing measures regulating pharmaceutical products, will begin the United States domestic process of certification of Health Canada as a trusted Canadian counterpart to receive unredacted good manufacturing practice reports. This type of cooperation among regulators can mitigate risks to consumers and increase efficiency.

2. Canadian Legislation

The CUSMA Implementation Act amends the Food and Drugs Act to comply with Appendix 1 of Annex 12-B. This change will permit the distribution of certain low risk non-prescription drugs and natural health products as samples, under certain conditions, as prescribed in regulations.

3. Intended Government Action

Canada will amend the Food and Drug Regulations and the Natural Health Products Regulations in order to comply with Appendix 1 of Annex 12-B. This change will permit the distribution of certain low risk non-prescription drugs and natural health products as samples, under certain conditions, as set out in the regulations.

CHAPTER 13: GOVERNMENT PROCUREMENT

1. CUSMA Provisions

This Chapter does not apply to Canada. Canada and the United States will maintain access to each other’s procurement markets through the WTO Agreement on Government Procurement (GPA). Canada and Mexico will maintain access to each other’s procurement markets through CPTPP. The WTO GPA and CPTPP include comprehensive procedural rules that are roughly equivalent to those in this Chapter.

Government procurement rules apply to the purchase of goods and services by a government from private-sector suppliers. This represents a very significant market, as the Organization for Economic Co-Operation and Development (OECD) and the WTO both estimate that government purchases represent approximately 15% of a country’s gross domestic product (GDP).

This Chapter sets out obligations such as non-discriminatory treatment of goods, services and suppliers and procedural rules that are based on transparency, fairness and accountability. Article 13.2 sets out the scope of the Chapter and establishes that it applies only as between Mexico and the United States.

This Chapter also provides that the United States and Mexico have in place domestic review procedures that allow a foreign supplier to challenge a procurement process when the obligations under this Chapter are not met. The Chapter also creates a forum (Committee on Government Procurement) to address matters related to the implementation and operation of the Chapter, provides that the United States and Mexico will make their best effort to facilitate the participation of SMEs in government procurement, and sets out rules that govern the collection and reporting of statistics. For the United States and Mexico, the market access commitments set out in Annex 13-A are essentially the same as those made by the United States and Mexico in NAFTA.

2. Canadian Legislation

Legislative changes are not required to implement this Chapter because it only applies between Mexico and the United States. However, changes will be required to remove references to NAFTA in our relevant laws upon entry into force of CUSMA:

3. Intended Government Action

No government actions arise from this Chapter because it does not apply to Canada.

CHAPTER 14: INVESTMENT

1. CUSMA Provisions

The purpose of this Chapter is to maintain privileged access to the markets of the other Parties for Canadian investors, and to protect the interests of Canadian investors established in the territories of the other Parties. This is achieved through a set of obligations that provides investors with a predictable, stable, transparent and rules-based investment framework and helps ensure that Canadian investors are treated fairly, while reinforcing the continued right of governments to regulate in the public interest. If another Party fails to meet its obligations, Canada may invoke the dispute resolution mechanism contained in Chapter 31 (Dispute Settlement).

This Chapter contains definitions and substantive obligations that offer protection to investors. The definitions of “investment” and “investor of a Party” establish the beneficiaries of certain substantive protections such as non-discriminatory treatment, the minimum standard of treatment at customary international law, the right not to have one’s property illegally expropriated, and the right to transfer funds into and out of the host country. The annexes to this Chapter clarify the Parties’ shared understanding of the meaning of “customary international law” (Annex 14-A) and “expropriation” (Annex 14-B). Annex 14-C addresses the transition between NAFTA to CUSMA regarding “Legacy Investment Claims and Pending Claims”. Two annexes (Annexes 14-D and 14-E) only apply between Mexico and the United States regarding investment disputes.

This Chapter must be read together with Annexes I and II, which contain country-specific reservations with respect to certain obligations of this Chapter. In addition, certain general exceptions contained in Chapter 32 (Exceptions and General Provisions), such as the essential security exception, apply to this Chapter. This structure of reservations and exceptions is similar to past Canadian FTAs.

Article 14.1 sets out definitions that are specific to this Chapter. Among those:

Article 14.2 circumscribes the application of this Chapter to a measure adopted or maintained by a Party relating to an investor of the other Party and to covered investments of those investors. Articles 14.10 and 14.16 apply to measures relating to all investments in the territory of the Party. Consistent with the principles of attribution under customary international law, the obligations in this Chapter apply to central, regional and local levels of government, as well as to any person or body exercising authority delegated to it by one of those levels of government.

Article 14.2(4) clarifies that an investor may only submit a claim to arbitration as provided under Annex 14-C relating to legacy claims and pending claims, and the Mexico-United States Annexes 14-D and 14-E relating to investment disputes. Paragraphs 4 and 5 of Annex 14-C clarify that an investor-State arbitration initiated pursuant to paragraph 1 of this Annex, or to section B of Chapter 11 of NAFTA while it was in force, may proceed to its conclusion. Paragraph 1 allows the submission of a new claim by an investor in accordance with Section B of Chapter 11 of NAFTA, with respect to legacy investments, meaning those established or acquired while NAFTA was in force and in existence on the date of entry into force of this Agreement, for an alleged breach of an obligation under Section A of Chapter 11, or Articles 1503(2) and 1502(3)(a) of NAFTA. Paragraph 2 establishes the requirements for the submission of a claim while paragraph 3 provides that claims with respect to legacy investments may only be brought within three years after NAFTA is terminated or superseded by this Agreement pursuant to paragraph 1 of the Protocol Replacing the North American Free Trade Agreement with the Agreement between Canada, the United States of America, and the United Mexican States. Once three years have elapsed, no investor-State claims may be brought by Canadian investors or against Canada under NAFTA or CUSMA.

Article 14.3 provides that where there is an inconsistency between this Chapter and any other CUSMA Chapter, the other Chapter prevails to the extent of the inconsistency. If a measure relates to a financial institution, an investment in a financial institution, or cross-border trade in financial services, that measure is subject to the specific obligations in Chapter 17 (Financial Services) and this Chapter does not apply. Paragraph 4 refers to the bridge between this Chapter and Chapter 15 (Cross-Border Trade in Services). It specifies that Article 15.5 (Market Access), and Article 15.8 (Development and Administration of Measures) apply to measures adopted or maintained by a Party relating to the supply of a service in its territory by a covered investment. For further explanation of these articles, please refer to the section on Chapter 15 (Cross-Border Trade in Services), under Articles 15.5 (Market Access), 15.7 (Non-Conforming Measures) and 15.8 (Development and Administration of Measures).

Together, Articles 14.4 and 14.5 prevent nationality-based discrimination against CUSMA investors and their investments, during the whole life cycle of their investments (i.e. their establishment, acquisition, expansion, management, conduct, operation, and sale or disposal).

National treatment (NT) requires each Party to treat CUSMA investors and their investments no less favourably than it treats, in like circumstances, its own domestic investors and their investments. Paragraph 3 of Article 14.4 clarifies what NT means for a government other than at the central level and provides that a Canadian province, for example, is required to accord CUSMA investors the most favourable treatment that it accords, in like circumstances, to Canadian investors within that province. A Canadian province or territory is not required to give to CUSMA investors the treatment that another province or territory gives to Canadian investors.

Most-favoured-nation (MFN) treatment requires each Party to treat CUSMA investors and their investments no less favourably than it treats, in like circumstances, investors of another Party or of a third country and their investments. Paragraph 3 of Article 14.5 clarifies what MFN means for a government other than at the central level and provides that a Canadian province, for example, is only required to accord CUSMA investors the most favourable treatment that it accords, in like circumstances, to another Party’s investors or third country investors in that province. It is not required to give to CUSMA investors the treatment that another province gives to third country investors.

For both the NT and MFN obligations, a determination of whether the treatment at issue was given in “like circumstances” requires an analysis of the totality of the circumstances involving the treatment given to the investor as compared with the treatment given to domestic or third party investors, including whether the difference in treatment was accorded in pursuit of legitimate public welfare objectives. Legitimate public welfare objectives include non-discriminatory policies aimed at the promotion of innovation, consumer protection, the efficient functioning of markets, and the protection of intellectual property, for public benefit.

Article 14.6 requires the Parties to accord covered investments a certain baseline of treatment (a “minimum standard of treatment”) in accordance with customary international law, including “fair and equitable treatment” and “full protection and security”. Annex 14-A confirms the Parties’ shared understanding that customary international law results from a general and consistent practice of States that they follow from a sense of legal obligation and that the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the investments of aliens.

This standard includes a requirement not to deny justice to covered investments, and to afford them a level of police protection required under customary international law. Paragraph 3 clarifies that a Party’s breach of another provision of the Agreement – for instance, the NT obligation – does not establish a breach of Article 14.6. Paragraph 4 of Article 14.6 clarifies that a breach of investors’ expectations does not constitute a breach of the minimum standard of treatment guaranteed by this Article.

Article 14.7 requires a Party not to discriminate against investors of the other Parties when it provides compensation for losses incurred during armed conflict or civil strife. If, during such conflict or civil strife, a Party’s forces or authorities either requisition or unnecessarily destroy a covered investment, the Party must provide restitution, compensation, or both. There is an exception for a Party’s existing subsidies or grants that are inconsistent with the NT obligation.

Article 14.8 sets out the conditions under which a Party can expropriate a covered investment, ensuring that an affected investor will receive fair and prompt compensation for its losses. The Article must be read with Annex 14-B which explains the difference between a “direct” and an “indirect expropriation”, elaborates key elements of what constitutes an indirect expropriation, and clarifies that non-discriminatory measures that are designed to protect legitimate public welfare objectives (such as health, safety, and the environment) do not constitute indirect expropriation, except in rare circumstances.

Paragraph 1 of Article 14.8 provides that a Party may not directly or indirectly expropriate a covered investment, except for a public purpose, in a non-discriminatory manner, on payment of compensation, and under due process of law. Paragraph 2 requires, among other things, that any compensation be paid without delay and reflect the fair market value of the investment before the expropriation took place. Paragraphs 3 and 4 set-out the manner in which compensation and interests shall be calculated in the event of an expropriation. Paragraph 5 clarifies that the expropriation determination is made in accordance with paragraph 1 and Annex 14-B, while paragraph 6 stipulates that the Article does not apply to the issuance of compulsory licenses and the issuance, revocation or creation of intellectual property rights, to the extent these are consistent with Chapter 20 (Intellectual Property) and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Article 14.9 ensures that CUSMA investors are able to “transfer” or move funds with respect to a covered investment (e.g. contributions to capital, profits from the investment, payments against loans, etc.) into and out of the territory of the host country freely and without delay, and prohibits forced repatriation of funds by the home government. Transfers may be made in freely usable currencies and as returns in kind. Paragraph 5 creates an exception allowing the Parties to limit capital transfers when applying, in good faith, their laws relating to matters such as the protection of creditors, the dealing in securities, or the satisfaction of judgments.

Article 14.10 sets limits on the types of performance requirements the Parties can impose on foreign investments in connection with the establishment, acquisition, expansion, conduct, operation, and management of investments, such as protectionist or trade-distorting requirements on investments that would impair their success, or otherwise disrupt trade between the Parties. Sub-paragraphs 1(a) through 1(i) list the prohibited requirements, which include requirements to buy local goods, to export a given level of the goods or services the investment produces or to impose requirements to purchase local technologies.

Similarly, paragraph 2 prohibits a Party from conditioning the receipt of an advantage on compliance with certain requirements. An “advantage” could include preferential tax treatment, grants, subsidies, or other government benefits conferred on an investment. This obligation applies to a more limited list of restrictions, listed in subparagraphs (a) through (e), which include requirements that the investment purchase local goods, or balance the value or volume of its imports against that of its exports.

There are certain exceptions to the preceding obligations set out in paragraph 3. For example, the prohibited performance requirements under paragraph 2 of Article 14.10 do not apply to a Party’s requirements to locate production, provide a service, train or employ workers, construct or expand particular facilities, or carry out research and development in its territory. Additional exceptions are created for government procurement; enforcement of a Party’s competition laws and intellectual property rights consistent with the TRIPS Agreement; measures necessary to protect human, animal or plant life or health; or to protect living or non-living exhaustible natural resources, among others.

Paragraphs 4 and 5 clarify that the Article’s obligations do not apply to requirements other than those identified, or to those entered into freely by private parties.

Article 14.11 ensures that investors are able to appoint the senior managers of their choice by prohibiting the Parties from requiring that covered investments appoint senior managers of any particular nationality. However, a Party may require that a majority of an investment’s board of directors be of a particular nationality, provided that requirement does not materially impair the ability of the investor to exercise control over its investment.

Article 14.12 establishes reservations against Articles 14.4, 14.5, 14.10 and 14.11.

These obligations do not apply to existing non-conforming measures that a Party maintains at its “central” (i.e. federal) and “regional” (i.e. provincial and territorial) levels of government, as listed and described in that Party’s Schedule to Annex I. Canada’s Annex I specifically lists all existing non-conforming measures that it maintains at the federal level, including for the Investment Canada Act and other matters such as telecommunications, transport, business services, and energy. It also includes a general reservation for all existing non-conforming measures at the provincial and territorial level, effectively “grandfathering” such measures (Reservation I-C-26). Subparagraph 1(a)(iii) of Article 14.12 grandfathers existing measures at the local (e.g. municipal) level of government for all Parties.

The Explanatory Notes to Annex I clarify that these obligations also do not apply to subordinate measures taken pursuant to the non-conforming measures (e.g. the exercise of a discretion set out in a legislation or regulation listed in a Party’s Annex I), so long as the subordinate measure is taken under the authority of and is consistent with the reserved measure.

Furthermore, these obligations do not apply to the continuation or renewal of listed non-conforming measures and grandfathered measures. This means that these measures can be maintained, but new non-conforming measures cannot be introduced (this is referred to as the “standstill” mechanism). These obligations also do not apply to amendments to such measures provided the amendments do not make the measure less conforming with the obligations (this is referred to as the “ratchet” mechanism, because it ensures that any liberalization by a Party of a non-conforming measure is not later reversed).

Moreover, these obligations do not apply to a measure that a Party adopts or maintains with respect to a sector, sub-sector or activity as set out in that Party’s Schedule to Annex II. Canada has taken Annex II reservations regarding matters such as aboriginal affairs, fisheries, social services, and transport. These reservations apply to measures of governments at any level in Canada. In those sectors, federal, provincial and local governments maintain broad policy flexibility. The “standstill” and “ratchet” mechanisms do not apply to the sectors, sub-sectors or activities listed in Annex II.

A Party cannot adopt a measure that requires that an investor, because of its nationality, dispose of its investment, even if a Party has taken an Annex II reservation against the NT obligation. Paragraph 4 creates an exception against Articles 14.4 and 14.5 for measures falling within applicable exceptions to the NT obligation in Article 20.8 (National Treatment) of Chapter 20 (Intellectual Property) or the TRIPS Agreement. Paragraph 5 creates an exception against Articles 14.4, 14.5 and 14.11 for government procurement and subsidies and grants provided by a Party.

Article 14.13 clarifies that Article 14.4 does not prevent a Party from adopting or maintaining special formalities, although these formalities cannot materially impair the protections afforded under the Chapter. A Party may require investors or their covered investments to provide information about their investments for information or statistical purposes.

Article 14.14 allows the Parties to deny the benefits of the treaty under certain circumstances. Paragraph 1 permits the denial of benefits to an enterprise of another Party, and to its investments, if it is owned or controlled by a person of a non-Party (or the denying Party), and has no substantial business activity in any Party (other than the denying Party). Paragraph 2 permits the denial of benefits to an enterprise of another Party, and to its investments, if it is owned or controlled by an investor of a non-Party against which the denying Party maintains a measure which prohibits transactions with such an enterprise. This provision ensures the maintenance and the integrity of a Party’s sanctions regime.

Article 14.15 ensures that where rights under this Chapter are transferred to a Party or designee of that Party further to payment made under an insurance contract or other form of indemnity, the other Party in whose territory the investment was made shall recognize the subrogation and the investor shall be precluded from pursuing those rights under the treaty.

Article 14.16 clarifies that nothing in this Chapter shall be construed as preventing a Party from enforcing measures otherwise consistent with this Chapter to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health, safety, or other regulatory objectives. This Article supports Canada’s right to regulate in pursuit of legitimate public policy objectives.

Article 14.17 reaffirms the importance of each Party encouraging enterprises operating within its territory or subject to its jurisdiction, to voluntarily adopt internationally recognized standards of corporate social responsibility such as the OECD Guidelines for Multinational Enterprises.

2. Canadian Legislation

Subsection 8(2) of the CUSMA Implementation Act sets out the general prohibition against an individual or entity bringing a claim against Canada for a breach of CUSMA. Subsection 8(3) provides an exception for investment dispute settlement under Annex 14-C in the limited circumstances set out therein.

Section 111 of the CUSMA Implementation Act amends the Investment Canada Act to replace NAFTA related references and definitions with those of CUSMA, including in relation to the authority to purchase a cultural business from a CUSMA investor following a review. Sections 112 and 113 amend the schedule to the ICA to apply the net benefit review threshold of $1.568 billion in 2019 (adjusted annually) in enterprise value to private sector investors from CUSMA countries for acquisitions of control of non-cultural Canadian businesses, similar to what was done for investors from Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and CPTPP countries.

Section 137 of the CUSMA Implementation Act amends the Commercial Arbitration Act to ensure that investment dispute settlement claims under CUSMA Annex 14-C are considered commercial arbitration for the purposes of that Act.

3. Intended Government Action

References to NAFTA will be replaced with the appropriate CUSMA references throughout the Regulations Respecting Investment in Canada.

CHAPTER 15: CROSS-BORDER TRADE IN SERVICES

1. CUSMA Provisions

Services are a key component of global value chains as they promote value-added commercial activities. They represent a high proportion of the value of trade, particularly when accounting for services embedded in traded goods. This Chapter addresses trade in services as supplied on a cross-border basis. The obligations in this Chapter apply in conjunction with those in other services-related chapters of the Agreement, and they collectively establish obligations on cross-border trade in services. Other services-related chapters include Chapter 14 (Investment) for services provided through an investment, Chapter 16 (Temporary Entry for Business Persons) for the entry aspect of the movement of natural persons, Chapter 17 (Financial Services) for services of a financial nature, Chapter 18 (Telecommunications) for telecommunication services, and Chapter 19 (Digital Trade) for services provided through electronic commerce.

The importance of services in the Canadian economy continues to grow. Services have increased from approximately 65% of Canada’s GDP in 2000 to 70% in 2018. The percentage of hours worked in the services sectors consistently grew at an average annual rate of 1.4% during that same time period. Cross-border trade in services is also an increasingly important component of Canada’s international trade. Services imports into Canada totaled $146.2 billion in 2018. The same year, services exports from Canada totaled $120.5 billion, accounting for about 17.1% of Canada’s total exports (goods and services). Domestic services industries contributed 33.3% of the value-added in Canada’s total exports (2015).

The United States is Canada’s largest services trade partner (two-way), with Canadian exports to the United States totaling $63.9 billion and Canadian imports of services from the United States totaling $76 billion on average yearly between 2016 and 2018. Mexico is Canada’s seventh largest services trade partner (two-way), with Canadian exports to Mexico totaling $1.4 billion and Canadian imports of Mexican services totaling $3.1 billion on average yearly between 2016 and 2018. Canadian service suppliers are active in the United States and Mexico across all services sectors of the economy, including travel, business services, as well as transportation services.

Building on the benefits brought by the cross-border trade in services disciplines in NAFTA and the WTO, this Chapter ensures continued predictability for Canadian service suppliers involved in the U.S. and Mexican markets. This Chapter maintains key rules with respect to treatment of service suppliers of the other Party (specifically national treatment, most-favoured-nation treatment, and local presence), establishes market access rules building on the NAFTA Quantitative Restrictions commitments (Article 1207), and preserves the framework for services market access under this Agreement. These key rules and market access commitments facilitate cross-border trade in services across all services sectors, such as professional (e.g. accounting, architecture, engineering, technical testing), consulting and advisory, computer-related, environmental, transportation, and research and development services.

This Chapter generally follows Canada’s traditional approach to cross-border trade in services in its trade agreements with additional rules and guidelines addressing issues such as Development and Administration of Measures, as well as Mutual Recognition Agreements/Arrangements. Overall, it ensures that Canadian service suppliers will continue to benefit from a predictable framework governing international trade in services.

Article 15.1 defines the key terms used in this Chapter. Among those, it clarifies that the cross-border trade in services for the purposes of this Chapter has three modes of supply, namely the supply of a service:

Article 15.2 establishes the scope of the Chapter as applying to any measures relating to the cross-border trade in services by a service supplier of another Party. The scope provision sets out a list of the types of measures that are covered by the Chapter’s disciplines, including measures relating to the production, distribution, marketing, sale or delivery of a service, as well as the purchase or use of, or payment for, a service. The services to which such measures relate can be delivered in person or electronically (such as through the Internet).

The Chapter does not apply to services supplied in the exercise of governmental authority (e.g. services that the government supplies directly through its employees or contractors), financial services, air services (with the exception of certain aircraft repair or maintenance services and specialty air services), government procurement as defined in Article 1.4 (General Definitions), and any measures related to subsidies or government support. Note that most financial services are covered in Chapter 17 (Financial Services). Air services are governed by separate international agreements, including bilateral Air Transport Agreements among Canada, the United States, and Mexico.

Article 15.3 sets out the national treatment (NT) obligation, which protects against nationality-based discrimination affecting CUSMA service suppliers and services. The NT obligation requires each Party to treat services or service suppliers of the other Parties no less favourably than it treats, in like circumstances, its own domestic services or service suppliers.

Article 15.4 sets out the most-favoured-nation (MFN) treatment obligation. MFN requires each Party to treat services or service suppliers of the other Parties no less favourably than it treats, in like circumstances, services or service suppliers of another Party or of a third party.

Article 15.5 prescribes the market access (MA) obligation under this Chapter. This obligation prohibits the imposition of certain types of regulatory measures that would restrict the supply of services. Specifically, this obligation prohibits quantitative limits on the number of service suppliers; the total value of services transactions or assets; the total number of service operations or the total quantity of service output; or the total number of natural persons who may be employed in a particular service sector. This obligation also prohibits a Party from restricting or requiring a specific type of legal entity or joint venture as a condition to supply a service.

Article 15.6 sets out the local presence (LP) obligation, which prohibits a Party from requiring a service supplier of another Party to establish or maintain a business presence, or to be a resident, in the territory of the Party as a condition to supplying a service on a cross-border basis.

Under Article 15.7, the Parties have preserved their ability to maintain certain measures that do not conform with the obligations in Articles 15.3, 15.4, 15.5, and 15.6. Those non-conforming measures are listed in their respective Annex I (existing non-conforming measures) or Annex II (existing or future non-conforming measures).

Annex I lists existing non-conforming measures against the obligations that are maintained at the federal level, and also includes general reservations for all existing non-conforming measures against the obligations at the regional level, effectively “grandfathering” such measures (Reservation I-C-26 in the case of Canada). Subparagraph 1(a)(iii) of Article 15.7.1 grandfathers existing measures at the local (for example municipal) level of government for all the Parties.

Annex II lists those sector, sub-sectors or activities where a Party preserves policy flexibility with regard to the NT, MFN, MA and LP obligations. For instance, Canada preserves policy flexibility with reservations for measures related to health, public education, and other social services, maritime cabotage, fisheries, Aboriginal affairs and minority affairs, among others. In addition, the Parties have embedded a positive list of commitments for the market access obligation in Annex II.

Unless a non-conforming measure is listed in Annex I or II, the services obligations contained in the Chapter apply to all services sectors. In this respect, this approach provides maximum predictability and transparency regarding which measures are excluded from which obligation. Overall, the use of a negative list approach, autonomously capturing future liberalization for non-conforming measures listed in Annex I, and additional services commitments for the market access obligation in Annex II, result in commitments that go beyond commitments taken in the GATS.

For further explanation on the Agreement’s approach to Annexes I and II reservations, please refer to Article 14.12 (Non-Conforming Measures) of Chapter 14 (Investment).

Article 15.8 requires a Party to ensure that all of its measures of general application affecting trade in services (e.g. relating to licensing requirements and procedures, or qualification requirements and procedures) are transparent, accessible, administered in a reasonable period of time, as well as in an objective and impartial manner by regulatory authorities. The goal is to ensure that regulatory measures do not undermine market access gains achieved through other areas of the Agreement. Paragraph 7 exempts from the Article any part of a measure, sector or activity that a Party has set out in its Annex I or Annex II reservations.

Article 15.9 encourages designated regulatory bodies to work with their counterparts so that the education, experience, requirements, licensing, or certification granted in one jurisdiction can be recognized in another Party via harmonization or mutual recognition agreements/arrangements. The MFN obligation does not apply to this Article, meaning that recognition between a Party and a non-Party is not accorded automatically to other Parties. This Article is supplemented by Annex 15-C.

Article 15.10, further to Chapter 25 (Small and Medium-Sized Enterprises), encourages the Parties to support the development of SME trade in services and SME-enabling business models, such as direct selling services, in ways to enable their participation in regulatory policy development and ensure that authorization procedures do not impose disproportionate burdens on SMEs.

Article 15.11 allows the Parties to deny the benefits of this Chapter to an enterprise of another Party, if that enterprise is owned or controlled by a person of a non-Party. The Article also specifies that the benefits of the Chapter can be denied if the service supplier is an enterprise that has no substantial business activities in the territory of a Party other than the denying Party (e.g. a “shell” company).

Article 15.12 prevents a Party from imposing restrictions on payments and transfers into and out of its territory related to the cross-border supply of services, except under specific circumstances, such as insolvency and criminal offence.

Annex 15-A requires each Party that maintains a postal monopoly to define the scope of the monopoly on the basis of objective criteria. It provides that no Party shall allow a postal monopoly to use revenues derived from its services to cross-subsidize the supply of a service not covered by the monopoly, or to unjustifiably differentiate among mailers or consolidators in like circumstances. It requires that the monopoly not abuse its position and act in a manner inconsistent with the national treatment obligations of this Chapter and Chapter 14 (Investment), or the market access obligation in Article 15.5. This Annex allows the Parties to have a universal service requirement with respect to postal services, as long as it is administered in a transparent, non-discriminatory, and impartial way, and does not become a requirement for the supply of a delivery service. The Annex does not apply to maritime, internal waterways, air, rail, or road transportation services. The disciplines and obligations of this Annex are consistent with Canada’s postal and courier regime, as well as Canada’s custom clearance procedures.

Annex 15-B establishes a Transportation Services Committee to discuss issues that may arise from the implementation and operation of the Parties’ obligations under the Agreement related to transportation services.

Annex 15-C supplements Article 15.9 with additional language to encourage the identification of professional services of mutual interest and the establishment of dialogue to consider harmonization of standards, temporary licensing, or authorization facilitation. The Annex includes the possibility to adopt mutual recognition agreements/arrangements for which extensive non-binding guidelines are provided under Appendix 1 (Guidelines for Mutual Recognition Agreements or Arrangements for the Professional Services Sector). A Professional Services Working Group is established by this Annex to support the Parties in this endeavour.

Annex 15-D reaffirms existing Canadian and U.S. retransmission rules regarding copyright. Of note, the Annex ensures that the broadcast of the Super Bowl in Canada is subject to the same rules as any other program originating in the United States retransmitted in Canada. Annex 15-D also requires Canada to authorize U.S. programming services specializing in home shopping, including modified versions for the Canadian market, for distribution in Canada and to allow them to negotiate affiliation agreements with Canadian cable, satellite, and Internet Protocol Television distributors.

Annex 15-E includes a list of Mexico’s cultural exceptions as scheduled in Mexico’s Annex I and Annex II reservations. For further explanation on Canada’s approach to culture, please refer to Article 32.6 (Cultural Industries) of Chapter 32 (Exceptions and General Provisions).

2. Canadian Legislation

To conform with the commitments of this Chapter with respect to Annex 15-D, section 152 of the CUSMA Implementation Act amends section 27 of the Broadcasting Act to authorize the Governor in Council, on the recommendation of the Minister of Canadian Heritage, to issue binding directions to the Canadian Radio-Television and Telecommunications Commission (CTRC) to implement the new broadcasting provisions described in Annex 15-D of the Agreement. The Governor in Council may also provide directions as to the manner in which the CRTC should apply and interpret certain commitments. It may also require the CRTC to cancel any measure it may have taken in the implementation of the home shopping commitment if the Agreement ceases to exist.

3. Intended Government Action

Cross-border trade in services will continue to be a key component of Canada’s international trade profile going forward. The Government will monitor services trade activities, consult with stakeholders, and look for strategies to facilitate greater cross-border trade in services. Where appropriate, Canada will engage with its U.S. and Mexican counterparts through the Transportation Services Committee and the Professional Services Working Group in order to pursue this objective.

Consistent with the new powers provided by the amendments made to section 27 of the Broadcasting Act, the Government will direct the CRTC, which is responsible for the regulation and supervision of broadcasting in Canada, to implement the new commitments identified in Annex 15-D.

CHAPTER 16: TEMPORARY ENTRY FOR BUSINESS PERSONS

1. CUSMA Provisions

The temporary entry provisions of NAFTA have proven to be one of the most widely-used and beneficial aspects of the Agreement. Firms, investors, and other business travelers to the United States and Mexico have found the expedited procedures an essential tool in expanding trade and supporting their North American and global business strategies. The substantive obligations on temporary entry have also facilitated gains across other areas of NAFTA, including cross-border trade in services, investment, and market access for goods.

This Chapter maintains the provisions of NAFTA, including the identification of four categories of travellers eligible for temporary entry: Business Visitors, Traders and Investors, Intra-Company Transferees, and Professionals. This ensures that Canadian business travellers can continue to count on secure access throughout North America in order to pursue the business opportunities facilitated by this Agreement at large, as they have done since 1994.

This Chapter sets out the governing principles and rules under which citizens of each Party may enter the territory of another Party on a temporary basis to pursue business opportunities without needing a labour market test. As with NAFTA, CUSMA does not create a common market for the movement of labour. Each Party retains its rights to protect the permanent base of its domestic workers.

Article 16.1 defines common terms used in this Chapter, specifically “business person” and “temporary entry”. In particular, it clarifies that the term “business person” refers only to citizens of the Parties and provides a reference to the Mexican Constitution in interpreting the use of the word “citizen” for Mexico.

Article 16.2 makes clear that the Chapter does not apply to measures regarding citizenship, residence, employment on a permanent basis or access to the employment market of a Party. It reaffirms that each Party has the right to apply measures in order to protect the integrity of its territories with respect to physical entry of persons and maintains Canada’s ability to regulate its domestic labour market and general immigration measures, as long as the measures do not undermine the benefits of this Chapter. Although this Article was not included in NAFTA, it is consistent with how the Parties understood their NAFTA commitments.

Article 16.3 emphasizes that temporary entry measures should be administered expeditiously to avoid interfering with trade in goods or services or the conduct of investment activity. It encourages the Parties to adopt common criteria, definitions and interpretations for this Chapter. These objectives are consistent with, and will build upon the work previously undertaken by the NAFTA Temporary Entry Working Group.

Article 16.4 commits each Party to grant temporary entry to business persons of another Party in accordance with the provisions set out in this Chapter, including Annex 16-A. This Article clarifies that the general eligibility requirements for entry continue to apply. In addition, it specifies that business persons entering a Party’s territory are not exempt from meeting any applicable licensing or other requirements, including any mandatory codes of conduct, to practice a profession or otherwise engage in business activities. This addition is a clarification of NAFTA, and is consistent with how the Parties applied it.

An exception to the requirement to grant entry is made for persons otherwise qualifying for entry under this Agreement if the person’s entry might adversely affect the outcome of a labour dispute or the employment of a person involved in such a dispute. An additional provision states that the Party denying entry must inform, in writing, both the person refused entry and the Party of which that person is a citizen of the reasons for the refusal.

Finally, this Article requires the Parties to ensure that any applicable fees for processing applications for temporary entry match the cost to the government in processing those applications.

Article 16.5 obliges each Party to publish and make publicly available explanatory material that describes the applicable entry requirements of the Party, for use by business persons seeking temporary entry under this Agreement. This Article also includes an obligation to collect and make available to the other Parties data related to the granting of temporary entry under this Chapter. If possible, this will include data specific to each occupation, profession, and activity covered by this Chapter.

Article 16.6 re-establishes the Temporary Entry Working Group to, among other things, contemplate ways to further facilitate temporary entry, and to consider waiving the labour certification test and similar procedures for spouses of traders and investors, intra-company transferees and professionals. The Working Group may also consider issues related to the implementation and administration of this Chapter. Similar work was previously conducted by the NAFTA Temporary Entry Working Group. This Article also adds to the mandate of the Working Group beyond what was provided for in NAFTA, by recognizing that Parties may consider broader issues relating to temporary entry of business persons, such as the processing of electronic applications.

Article 16.7 provides that the dispute settlement procedures of Chapter 31 (Dispute Settlement) may only be used to challenge a refusal to grant temporary entry, or a particular case under Article 16.3(1), if there is a pattern of practice involved and the business person concerned has exhausted available administrative remedies.

Article 16.8 establishes that except for this Chapter and other specified provisions under other Chapters, no other part of this Agreement imposes limits on the Parties’ immigration systems.

Annex 16-A sets out the specific market access commitments related to the temporary entry of business persons. The Annex is divided into four sections covering four categories of business persons. Commitments are taken on a reciprocal basis, with a common set of commitments applying equally to the Parties.

Section A concerns business visitors. In order to qualify as a business visitor, a business person must be engaged in at least one of the activities set out in Section B of Appendix 1 in a capacity that is international in scope, and must not seek entry into the local labour market. While a business person may show that they meet these requirements by showing documents about their main source of income and their principal place of business, the Agreement does not limit a business person to showing compliance that way. The list of covered activities in Section B of Appendix 1 introduces certain technical clarifications to the list in Appendix 1603.A.1 of NAFTA, however the coverage remains substantively the same.

Business persons seeking entry under this section are exempt from any employment authorization, such as a work permit or work visa. In addition, any prior approval procedures, petitions, labour certification tests or other procedures of similar effect as well as any numerical restrictions, such as a quota, do not apply.

Each Party can impose an entry visa requirement on persons of the other Parties. This Section does not stop a business person from seeking temporary entry as a Business Visitor under a Party’s domestic regime.

Section B concerns traders and investors. In order to qualify as a trader or investor, a business person must be engaged in substantial trade or an investment involving a substantial amount of capital. The business person must be operating in a capacity that is supervisory, executive, or involving essential skills.

Labour certification tests or other procedures of similar effect, as well as any numerical restrictions, such as a quota, do not apply to business persons seeking entry under this Section. Each Party can impose an entry visa requirement on persons of the other Parties.

Section C concerns intra-company transferees. In order to qualify as an intra-company transferee, a business person must be engaged in a capacity that is executive, managerial, or involves specialized knowledge. In addition, each Party can require that the business person has been employed by the enterprise for one continuous year within the three years before admission.

Labour certification tests or other procedures of similar effect, as well as any numerical restrictions, such as a quota do not apply to business persons seeking entry under this Section. Each Party can impose an entry visa requirement on persons of the other Parties.

Section D concerns professionals. In order to qualify as a professional, a business person must be engaged in an occupation set out in Appendix 2 and meet the stated minimum educational requirements. The list of covered occupations in Appendix 2 introduces two clarifying footnotes to the list in Appendix 1603.D.1 of NAFTA, however, these clarifications were previously agreed to by the NAFTA Temporary Entry Working Group and therefore the coverage for professionals remains substantively the same.

Prior approval procedures, petitions, labour certification tests or other procedures of similar effect, as well as numerical restrictions, such as a quota, do not apply to business persons seeking entry under this Section. Each Party can impose an entry visa requirement on persons of the other Parties.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

Canada’s Immigration and Refugee Protection Regulations provide the authorities necessary to implement the temporary entry commitments undertaken by Canada in this Chapter.

In line with the coming into force date of the Agreement, Immigration, Refugees and Citizenship Canada will publish comprehensive program delivery instructions to guide immigration officers on how to assess work permit and business visitor applications submitted under the provisions of this Chapter.

CHAPTER 17: FINANCIAL SERVICES

1. CUSMA Provisions

NAFTA has facilitated the mutually beneficial integration of the North American financial sector by reducing barriers to investment and cross-border trade, promoting regulatory transparency, and encouraging cooperation among regulators.

In this context, a primary objective achieved in the modernization of NAFTA was retaining key protections under NAFTA, notably national treatment (NT) and most-favoured-nation (MFN) treatment, to ensure Canadian financial services suppliers compete on a level playing field in the United States and Mexico. Building on these provisions, the modernized Financial Services Chapter adds a market access obligation, not found in NAFTA, which ensures that financial service suppliers do not face barriers that restrict or limit their access to a foreign market.

Similar to the high ambition outcomes of Canada’s other recent FTAs, this Chapter includes commitments to allow specifically listed financial services, such as portfolio management and electronic payment card services, to be provided on a cross-border basis. The Agreement also secures current market access and other commitments enjoyed by Canadian financial institutions, and will in many areas capture future liberalization undertaken by the Parties. Combined, these commitments improve on NAFTA and provide a high level of confidence to Canadian financial institutions operating in Mexico and the United States.

Another Canadian objective in the modernization of NAFTA was to update the tailored provisions in NAFTA that reflect the unique nature of financial sector regulation and the critical role that it plays in a country’s economy. Consistent with Canada’s approach to financial services in other agreements, a robust prudential exception is included to protect the ability of financial authorities to take measures for prudential reasons, such as protecting investors, depositors, policy holders, or persons to whom a fiduciary duty is owed by a financial institution or a cross-border service provider. Prudential measures can also be taken to protect financial consumers and ensure the integrity and stability of the financial system. The Chapter also includes updated commitments on regulatory transparency that will help financial service suppliers navigate the requirements of the regimes in which they do business.

This Chapter also maintains a state-to-state dispute settlement framework tailored to the financial services sector, similar to the NAFTA. Relative to Canada’s other FTAs, CUSMA further clarifies the level of financial services expertise to be reflected in the composition of a dispute settlement panel. Similar to the outcome in Chapter 14 (Investment), there will be no investor-state dispute settlement (ISDS) provisions applicable to Canada for obligations under this Chapter.

Finally, the Chapter includes modernized commitments that reflect the importance of data in the way that financial services are delivered and consumed today. The commitment with respect to transfer of information provides for the free flow of information, while establishing safeguards to ensure Parties maintain the ability to protect personal privacy and the confidentiality of personal information. While each Party agreed that it would not impose local data storage requirements on branches and subsidiaries of foreign financial institutions of the other Parties, this commitment is subject to a safeguard ensuring that regulators have ongoing and unrestricted access to the financial information they need in order to properly fulfill their mandates. If a foreign financial institution cannot meet these accessibility requirements, a Party can require that the financial institution’s data be stored in that Party’s territory.

Article 17.1 sets out definitions applicable in this Chapter.

Article 17.2 sets out that the Chapter covers measures relating to financial institutions of the other Party, investors of the other Party and their respective investments in financial institutions in a Party’s territory, and cross-border trade in financial services.

Paragraph 2 incorporates certain obligations from Chapter 14 (Investment) and Chapter 15 (Cross-Border Trade in Services) into this Chapter. These include, in particular, provisions that provide: protections against expropriation of an investment in a financial institution, a minimum standard of treatment for an investment in a financial institution, and protections against limitations on an investor’s ability to transfer funds into and out of another Party’s territory.

Paragraph 3 specifies that this Chapter does not apply to measures relating to activities or services that form part of a public retirement plan or statutory system of social security, or that are conducted for the account or with the guarantee, or using the financial resources of a Party. However, this Chapter applies to the extent that a Party allows such activities or services to be conducted by its financial institutions in competition with a public entity or a financial institution.

Paragraph 4 provides that this Chapter does not apply to government procurement of financial services. Paragraph 5 further stipulates that this Chapter does not apply to subsidies or grants for the cross-border supply of financial services, including government-supported loans, guarantees, and insurance.

Article 17.3 applies the NT obligation to financial services. Paragraphs 1 and 2 require each Party to treat financial institutions of another Party, investors of another Party in financial institutions, and their investments in financial institutions no less favourably than it treats, in like circumstances, its own financial institutions and investors and investments in financial institutions.

Paragraph 3 requires each Party to treat financial services or cross-border financial services suppliers of another Party no less favourably than it treats, in like circumstances, its own financial services and financial service suppliers. Paragraph 4 clarifies that this commitment does not require a Party to confer any right to do business or solicit in the Party’s territory with respect to the cross-border supply of financial services that are not listed in Annex 17-A.

Article 17.4 applies the MFN treatment obligation to financial services. It requires each Party to treat financial institutions of another Party, investors of another Party and their investments in financial institutions, and the financial services or cross-border financial services suppliers of another Party no less favourably than it treats, in like circumstances, financial institutions of another Party or of a non-Party, investors of another Party or of a non-Party and their investments in financial institutions, and financial services or cross-border financial services suppliers of another Party or of a non-Party.

As described in Chapter 14 (Investment) and Chapter 15 (Cross-Border Trade in Services), the NT and MFN obligations prevent nationality-based discrimination for the purposes of this Chapter. For both obligations, a determination of whether the treatment at issue was accorded “in like circumstances” requires an examination of the totality of the circumstances, including whether any difference in treatment resulted from the pursuit of legitimate public welfare objectives. Legitimate public welfare objectives include non-discriminatory policies aimed at the promotion of innovation, consumer protection, the efficient functioning of markets, and the protection of intellectual property, for public benefit.

Article 17.5 prohibits a Party from imposing certain market access limitations on a financial institution of another Party, an investor of another Party seeking to establish a financial institution, and a cross-border financial service supplier of another Party supplying the financial services the Party has listed under Annex 17-A. These include imposing limitations on the number of financial institutions or cross-border financial service suppliers, the total value of financial service transactions or assets, the total number of financial service operations, the total number of persons that a financial institution or cross-border financial service supplier may employ, and restricting or requiring specific types of legal entities through which a financial institution or cross-border financial service supplier may supply a service. Paragraph 2 clarifies that for the cross-border supply of financial services not listed in Annex 17-A, a Party may prohibit a cross-border financial service supplier from doing business or soliciting in its territory. Paragraphs 3 and 4 clarify that while a Party cannot require certain cross-border financial service suppliers of another Party to establish or maintain a local presence in its territory, it can require registration or authorization.

Article 17.6 prohibits a Party from adopting a measure that would restrict the types of cross-border trade in financial services that the Party permitted on January 1, 1994, or that would be inconsistent with Article 17.3.3 relating to the supply of those services. A Party cannot define “doing business” and “solicitation” in its law as a means of restricting the types of cross-border trade in financial services that the Party permitted on January 1, 1994.

Article 17.7 provides financial institutions of another Party the right to supply new financial services in a Party’s territory, if the host Party would permit its own financial institutions to do so, in like circumstances, without adopting a new law or modifying an existing one. The host Party retains the ability to regulate new financial services, including the right to determine the form through which the service is to be provided, and to require the financial institution to obtain authorization to supply the new service. Authorization may only be refused for prudential reasons.

Article 17.8 clarifies that nothing in this Chapter requires a Party to provide or allow access to information related to the financial affairs or accounts of individual customers of financial institutions or cross-border financial service suppliers.

Article 17.9 prohibits a Party from requiring that members of senior management or other essential personnel of a financial institution of another Party be of any particular nationality, or requiring that more than a simple majority of the board of directors of a financial institution of another Party be composed of nationals or residents of the Party.

Article 17.10 sets out the mechanics for the reservations taken by the Parties for current and future measures within the scope of this Chapter. Paragraph 3 explains that where a Party has set out a reservation under one of the relevant provisions of Chapter 14 (Investment) or Chapter 15 (Cross-border Trade in Services), that reservation also applies to the corresponding articles in this Chapter, to the extent that the measure is captured by the scope of this Chapter. This provision avoids duplication of reservations by the Parties.

Article 17.11 contains the prudential exception to safeguard the right of Parties to adopt or maintain measures for prudential reasons. As explained above, this includes measures to protect investors, depositors, policy holders, and persons to whom a fiduciary duty is owed, as well as measures to protect financial consumers and to ensure the integrity and stability of the financial system. The prudential exception must not be used as a means of circumventing a Party’s obligations under the Agreement. Paragraph 2 reaffirms a public entity’s ability to pursue nondiscriminatory measures of general application in pursuit of monetary and related credit or exchange rate policies.

Article 17.12 sets out the framework under which a Party may recognize a prudential measure of another Party or non-CUSMA country. The recognition of a prudential measure of another Party or non-CUSMA country does not force a Party to automatically extend that recognition to another Party (i.e. on an MFN basis). However, the Party must provide adequate opportunity for another Party to gain the recognition extended to another Party or non-CUSMA country (e.g. by demonstrating equivalent regulation). Recognition may be accorded autonomously, achieved through harmonization, or based upon an agreement or other arrangement with another Party or a non-CUSMA country.

Article 17.13 recognizes the importance of promoting regulatory transparency for financial services. Paragraph 1 specifies that Chapter 28 (Good Regulatory Practices) and Chapter 29 (Publication and Administration) do not apply to this Chapter. Paragraph 2 requires Parties to ensure that measures of general application are administered in a reasonable, objective, and impartial manner. Paragraphs 3 to 5 require Parties, to the extent practicable, to publish measures before adoption, provide a reasonable opportunity for stakeholders to comment, and allow a reasonable time between the publication and entry into force of the measures covered by this Chapter. The public and the Parties may direct inquires regarding any measure of general application to a mechanism that each Party is required to designate, pursuant to paragraph 6. Paragraph 7 requires a Party to ensure its financial regulatory authorities follow certain best practices with respect to authorizing the supply of a financial service, including with respect to any authorization fees that may be charged.

Article 17.14 requires a Party to ensure that a self-regulatory organization of a Party observes the obligations of this Chapter if membership in, participation in or access to the self-regulatory organization is required to supply a financial service.

Article 17.15 requires a Party to grant, under terms and conditions that accord national treatment, a financial institution of another Party established in its territory access to payment and clearing systems operated by public entities and to official funding and refinancing facilities available in the normal course of ordinary business. The Article does not give access to a Party’s lender of last resort facilities.

Article 17.16 recognizes the importance of maintaining and developing regulatory procedures to expedite the offering of insurance services by licensed suppliers.

Article 17.17 requires a Party to allow the cross-border transfer of information by a covered person, as defined in this Chapter, when this activity is part of the covered person’s business. This commitment is subject to a safeguard that allows a Party to take good faith measures to protect personal data, personal privacy, and the confidentiality of individual records and accounts.

Article 17.18 prohibits a Party from requiring a covered person to use or locate computing facilities in its territory as a condition for conducting business, subject to financial regulatory authorities having immediate, ongoing, complete, and direct access to the information processed or stored outside the Party’s territory. A Party can require that information be stored on computing facilities in its territory if a covered person cannot satisfy these accessibility requirements. A Party may also take good faith measures to protect personal data, personal privacy, and the confidentiality of individual records and accounts.

Annex 17-D stipulates that Article 17.18 does not apply to existing measures of Canada for one year following the entry into force of the Agreement.

Article 17.19 establishes the Financial Services Committee, which is responsible for supervising the implementation of this Chapter and considering issues referred to it by a Party. The Committee is to be composed of an official of each Party’s authority responsible for financial services, as set out in Annex 17-B.

Article 17.20 allows a Party to request consultations with another Party on any matter arising under the Agreement that affects financial services. The Party receiving a request is to give it sympathetic consideration. Paragraph 2 permits a Party to request information on an existing nonconforming measure maintained by another Party at the central, regional or local level of government (the words “regional or local level” refer to measures taken by governments not at the federal level).

Article 17.21 provides that Chapter 31 (Dispute Settlement) will apply to this Chapter, subject to certain modifications. In particular, a panel chairperson must meet certain qualifications, including having expertise or experience in financial services law or practice. Additionally, other panellists must meet certain qualifications, including having expertise or experience in financial services law or practice, or having expertise in international law, international trade, other matters covered by this Agreement or the resolution of disputes arising under international trade agreements. Paragraph 3 provides that a panel making a determination on the suspension of benefits in the financial sector must consult financial services experts, as necessary.

Paragraph 4 sets out the process by which a Party may suspend benefits (i.e. impose trade retaliation) in the financial services sector if an arbitration panel finds that a Party’s measure is inconsistent with the Agreement.

Annex 17-A sets out the Parties’ commitments and obligations with respect to the cross-border trade in or supply of financial services that may be supplied from the territory of one Party into the territory of another Party. For example, the Parties have made certain individualized commitments to allow portfolio management services for collective investment schemes, and electronic payment services for payment card transactions to be provided on a cross-border basis.

Annex 17-C modifies the investment dispute resolution mechanism that applies between the United States and Mexico for investor-state dispute settlement with respect to measures covered by this Chapter. These provisions do not apply in respect of Canada.

2. Canadian Legislation

To implement Canada’s obligations under this Chapter, legislative amendments are required to the Bank Act, Insurance Companies Act, Trust and Loan Companies Act (collectively the federally regulated financial institutions statutes or the “FRFI Acts”) and the Canada Deposit and Insurance Corporation (CDIC) Act.

These amendments are set out in the CUSMA Implementation Act as follows:

Prior to these amendments, all federally regulated financial institutions were required to maintain copies of certain financial and corporate records at a location in Canada. To comply with commitments under Article 17.18, the CUSMA Implementation Act amends the FRFI Acts to create an exception to this requirement for branches and subsidiaries of foreign financial institutions domiciled in the United States or Mexico. The United States and Mexico must provide reciprocal treatment for Canadian financial institutions operating in those markets.

Consistent with the CUSMA commitment on the location of computing facilities, the amendments provide the Superintendent of Financial Institutions with the ability to direct a foreign financial institution to maintain copies of their records at a location in Canada, if the Superintendent is of the opinion that they do not have immediate, direct, complete and ongoing access to those records. The Superintendent must also direct a foreign financial institution to maintain copies of its records at a location in Canada if they are advised by the Minister of Finance that the Minister is of the opinion that it is not in the national interest for the foreign financial institution not to maintain a copy of those records at a place in Canada. The amendments clarify that a financial institution must comply without delay with such an order of the Superintendent. Under the Administrative Monetary Penalties (OSFI) Regulations, the Superintendent may impose a monetary penalty on a financial institution for failure to comply without delay with this order.

Legislative amendments also provide complementary authority for the Governor in Council to make regulations concerning what constitutes immediate, direct, complete and ongoing access to prescribed records.

The amendments to the CDIC Act provide similar statutory authority for the CDIC Board of Directors (the Board) concerning records required of an insured depository institution under the CDIC policy of deposit insurance, as now exists for the Superintendent concerning records proscribed under the FRFI Acts. This includes the authority of the Board to make by-laws respecting what constitutes immediate, direct, complete and ongoing access to these records.

Canada is also obligated to extend equivalent treatment to financial institutions from South Korea, the European Union, and the Latin American countries with whom Canada has pre-existing trade agreements under its MFN obligations in those agreements. The CUSMA Implementation Act establishes a Schedule IV to the Bank Act, in which these trade agreements are listed. For the purpose of implementing Canada’s international trade obligations, the Governor in Council may, by order, amend Schedule IV.

Under the FRFI Acts, Canadian banks and insurers – along with branches and subsidiaries of foreign financial institutions not covered by an applicable trade agreement – continue to be subject to requirements to store copies of their records in Canada. However, these financial institutions can continue to transfer financial information abroad for processing.

Nothing in this Chapter or the corresponding amendments to the FRFI Acts or the CDIC Act alter the statutory requirements of foreign financial institutions under Canada’s privacy framework. Specifically, the Personal Information Protection and Electronic Documents Act continues to apply to all data collected and held by all financial institutions that do business in Canada, regardless of whether the data is processed or stored in Canada or abroad.

3. Intended Government Action

The Government will use CUSMA as a means to support the commercial interests of Canadian financial institutions with operations in the CUSMA countries. This may occur through Canada’s representation on the Financial Services Committee, which provides financial authorities with the opportunity to discuss the functioning of the Agreement as it applies to financial services.

Outside of CUSMA, Canada, the United States and Mexico have also agreed to establish a Financial Regulatory Forum to improve dialogue and regulatory cooperation among North American financial sector regulators. The Forum will provide an annual venue for Canada, Mexico, and the United States to share information and exchange views on cross-border issues, emerging financial sector developments, financial stability risks, and regulatory practices with the ultimate goal of advancing regulatory cooperation.

During the one year transition period afforded Canada under Annex 17-D of CUSMA, the Department of Finance, the Office of the Superintendent of Financial Institutions Canada (OSFI) and the CDIC will work to develop the necessary regulatory mechanisms to ensure appropriate accessibility and compliance standards with regards to eligible foreign financial institutions that elect to solely store their records outside of Canada.

CHAPTER 18: TELECOMMUNICATIONS

1. CUSMA Provisions

Telecommunications services play a valuable role in supporting national economies and international trade. Open markets for telecommunications encourage investment, leading to economic development and stimulating innovation and the availability of innovative services. Furthermore, telecommunications services are key inputs into domestic, regional and international trade, making it possible for goods and service providers in virtually every sector of the economy to penetrate local markets around the globe. They are the backbone of the Internet and electronic commerce, enabling online procurement and the delivery of goods or services through electronic means.

This Chapter enhances regulatory certainty for telecommunications service suppliers by including disciplines to ensure reasonable and non-discriminatory access to and use of telecommunications services, and requiring telecommunications regulators to act impartially, objectively, and in a transparent fashion. This Chapter supports Canadian telecommunications service suppliers and investors by making the regulatory environments in the Parties more predictable and supportive of a competitive market.

Article 18.1 sets out the definitions that are specific to this Chapter.

Article 18.2 explains that the Chapter applies to measures relating to access to and use of telecommunications services, obligations regarding suppliers of public telecommunications services, and any other measure relating to telecommunications services. This Article also ensures that a Party’s measures affecting the broadcast or cable distribution of radio or television programs will not be subject to the obligations of the Chapter, other than to ensure continued access to and use of a public telecommunications networks and services. It further clarifies that the Chapter does not place any requirements on a Party to establish, construct, acquire, lease, operate, or provide a telecommunications network or service that is not offered to the public generally or to force an enterprise that only operates in the broadcast or cable distribution of radio or television programming to make available its broadcast or cable facilities as a public telecommunications network.

Article 18.3 requires each Party to ensure that enterprises will have access to and use of public telecommunications services in the territories of the Parties and across their borders on reasonable and non-discriminatory terms and conditions. Paragraph 5 requires that the Parties ensure that no conditions are placed on access and use of public telecommunications networks and services unless they are necessary to safeguard the public service responsibilities of the public telecommunications network and services operators or to protect the technical integrity of those networks. Under this Article, firms may purchase, lease, or attach private equipment to the public telecommunications network and use these networks to move information within and across the borders of Canada and the other Parties, while allowing Canada and the other Parties to take action to protect the security and confidentiality of telecommunications messages and the privacy of telecommunications users.

Article 18.4 requires the Parties to ensure that all public telecommunications suppliers in a Party’s territory provide interconnection of its networks to other Parties’ suppliers of public telecommunications services. In doing so, the public telecommunications service supplier must take reasonable measures to protect the confidentiality of any commercially sensitive information it receives, as a result of the interconnection arrangements. Paragraph 4 allows the resale of public telecommunication services and paragraph 5 ensures that a Party will not prohibit suppliers of public telecommunications services from entering into an agreement to provide roaming services, including with respect to devices that require roaming on a permanent basis.

Paragraph 6 ensures that public telecommunications service suppliers provide number portability to allow customers to keep their telephone number when changing suppliers at the same geographic location and in the same category of services (e.g. wireless to wireless or landline to landline). Paragraph 7 ensures that all public telecommunication service suppliers provide dialing parity within the same category of service to suppliers of public telecommunications services of another Party. Pre-subscribed long distance services are excluded from the application of this paragraph by footnote 5. Paragraph 8 ensures that all public telecommunications service suppliers are provided with access to telephone numbers on a non-discriminatory basis.

Article 18.5 requires each Party to ensure that a major supplier in its territory treat suppliers of public telecommunications services of the other Parties as well as it does its own comparable subsidiaries, affiliates, or non-affiliated service suppliers. This commitment applies to the provision of telecommunications services, including with respect to rates and quality, as well as the availability of technical interfaces for the interconnection of networks.

Article 18.6 requires the Parties to take appropriate measures to prevent anti-competitive practices by a major telecommunications service supplier that may abuse its dominant position in the market. Those anti-competitive practices include: anti-competitive cross-subsidization, including for the purposes of stopping a competitor from entering, or expanding in, a market; the use of information obtained from competitors, such as through interconnection negotiations, for a competitive advantage; or not making available the necessary technical and commercially relevant information to other service suppliers.

Article 18.7 requires the Parties to ensure that a major supplier in its territory does not impose unreasonable or discriminatory conditions or limitations on the resale of its public telecommunications service.

Article 18.8 requires that the regulatory bodies of the Parties have the authority to require a major supplier to offer access to unbundled network elements that it controls to other suppliers of public telecommunications services on reasonable, non-discriminatory and transparent terms and conditions and at cost-oriented rates. The Parties may determine which network elements are required to be made available by major suppliers and which suppliers may obtain those elements.

Article 18.9 requires the Parties to make sure that a public telecommunications service supplier can interconnect its telecommunications network with a major supplier on transparent, reasonable and non-discriminatory terms and conditions, and at rates that are based on the cost of making that interconnection and sufficiently unbundled to avoid unnecessary costs.

This Article also requires each Party to make public the procedures for interconnection as well as other relevant details. Furthermore, each Party is required to ensure that the major supplier makes available either its interconnection agreements in force, a reference interconnection offer, or negotiate a new interconnection agreement.

Article 18.10 requires each Party to ensure that a major supplier provides leased circuit services to service suppliers of the other Parties on reasonable and non-discriminatory terms and conditions that are based on a generally available offer. Furthermore, each Party must ensure that its regulatory body has the authority to require major suppliers to offer leased circuit services at rates that are based on the cost of providing the leased circuit service and the network capacity used by the service supplier.

Article 18.11 requires each Party to ensure that a major supplier provides physical or virtual co-location to its premises for the installation, maintenance, or repair of equipment necessary for suppliers of public telecommunications services of the other Parties to interconnect their networks with the major supplier or access unbundled network elements. Each Party must also make sure that the terms and conditions offered by the major supplier for co-location are reasonable, non-discriminatory, transparent, and based on the cost of co-location. The Party may determine which premises are to be offered by the major supplier, based on an analysis of the state of competition in the specific market where co-location is required, whether the premise can be economically or technically substituted or other specified public interest factors.

Article 18.12 requires each Party to ensure that a major supplier provides a public telecommunications service supplier of another Party with access to its poles, ducts, conduits, rights of way, or other structures on reasonable, non-discriminatory, and transparent terms and conditions.

Article 18.13 requires each Party to ensure that a major supplier that controls international submarine cable landing stations, for which there are no economically or technically feasible alternatives, gives public telecommunications suppliers of the other Parties access to the landing station consistent with Article 18.9, Article 18.10 and Article 18.11.

Article 18.14 recognizes the importance of value-added services to innovation, competition, and consumer welfare. It prevents Parties from imposing regulatory requirements applicable to a supplier of public telecommunications services on a supplier of value-added services without appropriately considering public policy objectives, the technical feasibility requirements, and the characteristics of that value-added service.

Paragraph 2 makes sure that licensing, permit, registration, or notification procedures of each Party are transparent and non-discriminatory, that applications are promptly processed, and that the Party only requires information necessary to show that the applicant has appropriate financial capacity to provide the services that it is applying to perform. Paragraph 2 also prohibits each Party from requiring a supplier of value-added services to supply those services to the general public, cost-justify its rates for those services, file a tariff for those services, connect its networks with a particular customer or network for the supply of those services, or meet a regulatory body’s requirements for connecting to a network that is not public.

Paragraph 3 permits a Party to fix a practice of a supplier of value-added services that the Party has found to be anti-competitive, or to otherwise promote competition or safeguard the interests of consumers.

Article 18.15 requires each Party to allow public telecommunications service suppliers to determine the technologies they use when providing services, except if there are legitimate public policy interests in restricting that freedom, such as making sure that the technology is interoperable with the network.

Article 18.16 recognises that regulatory needs and approaches differ market by market and that each Party may determine how to implement its obligations under the Chapter, including through regulatory oversight of its telecommunications service suppliers or reliance on market forces to discipline suppliers. When a Party decides not to apply a regulation, it may do so if certain policy objectives will be maintained, including the prevention of unreasonable or discriminatory practices and the protection of consumers.

Article 18.17 requires a Party’s telecommunications regulatory body to be separate from, and not accountable to, any public telecommunications service supplier. The regulatory body must be impartial with respect to all market participants. Furthermore, each Party must ensure that the regulatory body does not hold a financial interest in a public telecommunications service supplier. A Party’s regulatory body must also be able to impose requirements on a major supplier that are different from requirements it imposes on other suppliers.

Article 18.18 prohibits each Party from providing more favourable treatment to a telecommunications service supplier because it owns the supplier.

Article 18.19 permits each Party to define any universal service obligation it wishes to maintain as long as the obligation is administered in a transparent, non-discriminatory, and competitively neutral manner, and that the universal service obligation is not more burdensome than necessary.

Article 18.20 commits each Party to make publicly available any licensing criteria and procedures it requires to supply a public telecommunications service, including the time it normally requires to reach a decision and the terms and conditions of all licences in effect. Furthermore, on request, the Party will provide an applicant for a license with the reasons the Party has denied, revoked, or refused to renew a licence or applied supplier-specific conditions to the licence.

Article 18.21 requires a Party to administer the procedures for the allocation and use of scarce telecommunications resources, including frequencies, numbers, and rights-of-way, in an objective, timely, non-discriminatory, and transparent manner. Furthermore, each Party is required to make the current state of allocated frequency bands publicly available. This Article also clarifies that a Party’s spectrum and frequency management policies, which may limit the number of suppliers of wireless telecommunications service suppliers due to the scarcity of spectrum resources, do not violate the market access obligation in Article 15.5 (Market Access), which prohibits a Party from maintaining measures that limit the number of service suppliers in its territory. The Parties will endeavour to rely on open and transparent processes when allocating spectrum resources for commercial use, and rely on market-based approaches, such as spectrum auctions, when assigning the spectrum to wireless services suppliers.

Article 18.22 requires that a Party’s telecommunications regulatory body or equivalent enforcement body has the authority to ensure that suppliers of a public telecommunications service, including a major supplier, complies with the Party’s obligations under the Chapter.

Article 18.23 requires each Party to ensure that it gives enterprises, including telecommunications service suppliers, a reasonable way to resolve disputes with a telecommunications service supplier regarding the substantive obligations covered in Articles 18.3 through 18.13.

Paragraph 2 prohibits the Parties from treating an application for judicial review of a regulatory body as non-compliance with the body’s determination or decision, unless the judicial body specifically orders it to do so.

Sub-paragraph (d) of paragraph 1 of Article 18.23 (including footnote 16) further ensures that an enterprise affected adversely by a determination or decision of the regulatory body may appeal that body for reconsideration.

Article 18.24 requires each Party to make its laws, regulations and policies relating to public telecommunications services publicly available and to give an opportunity to interested parties to provide input into the development of a proposed regulation.

Article 18.25 provides for cooperation among the Parties in promoting transparent and reasonable rates for international mobile roaming services. Furthermore, it requires that each Party share information on retail rates for international mobile roaming services offered to its respective domestic consumers.

Article 18.26 provides that if there is a conflict between this Chapter and another Chapter, this Chapter has priority.

Article 18.27 establishes a Committee on Telecommunications to review and monitor the implementation and operation of the Chapter, discuss or report on any issue related to the Chapter, or carry out any other function delegated to the Committee. The Committee is not intended to convene on a regular schedule but will meet on an ad-hoc basis to address issues as they arise.

Annex 18-A (Rural Telephone Suppliers) sets out additional provisions relating to the scope of this Chapter applicable to the United States.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

No government actions arise from this Chapter.

CHAPTER 19: DIGITAL TRADE

1. CUSMA Provisions

Digital trade forms an integral part of the daily experiences of businesses and consumers throughout the global economy as innovative information technologies, such as cloud computing, eliminate distances between suppliers and their customers. It is an essential component to modern accounting, inventory management, marketing, distribution, and sales.

Recognizing the growing importance of digital trade in the global economy, as well as the transformative nature of the technology that enables it, Canada and the other Parties have negotiated a stand-alone Digital Trade Chapter within CUSMA. The Chapter includes measures to protect personal information and to facilitate cooperation on issues such as electronic signatures, the treatment of spam and the protection from fraudulent and deceptive commercial practices. The Chapter also includes a commitment to maintain the current framework of not applying customs duties on digital products transmitted electronically, with the goal of further enhancing the transparent and predictable regulatory framework of digital trade.

Article 19.1 defines terms used in the Chapter, including the following key definitions.

“Computing facilities” are computer servers or storage devices for processing and storing information for commercial use. This term effectively refers to a facility where commercial data or information is stored electronically.

A “covered person” is a covered investment, an investor of a Party or a service supplier of a Party. The definition does not include a financial institution or a cross-border financial service supplier that is subject to regulation, supervision, and licensing, authorization, or registration by a financial regulatory authority of the Party.

A “digital product” is a computer program, text, video, image, sound recording, or other product that is digitally encoded, produced for commercial sale or distribution, and that can be transmitted electronically. A digital product must be capable of being transmitted electronically (e.g. sent over the Internet). A book, CD-ROM, or other physical medium containing software or digitally-encoded products, is not a digital product under this definition. Furthermore, it does not include a digitized representation of a financial instrument, including money.

Article 19.2 establishes the scope of this Chapter. The Chapter applies to measures that a Party has in place that affect trade by electronic means, but does not apply to government procurement, or information that is held or processed by or on behalf of a Party, or any measures relating to that information, including measures relating to its collection (except for Article 19.18 – Open Government Data). The Article further clarifies that any measure that affects the supply of a service delivered or performed electronically is subject to the obligations contained in Chapter 14 (Investment), Chapter 15 (Cross-Border Trade in Services), Chapter 17 (Financial Services), and that it is subject to any exceptions or non-conforming measures that are applicable to those obligations.

Article 19.3 prohibits a Party from applying a customs duty on digital products transmitted electronically. Digital products include products that are downloaded from the Internet, such as a song or software. This commitment only applies to customs duties related to importing or exporting content transmitted electronically, and does not apply to an internal tax, fee or other internal charge.

Article 19.4 prohibits a Party from discriminating against digital products, such as a song or software, originating from another CUSMA territory. It does not, however, prevent a Party from offering subsidies, grants, loans, guarantees, or insurance for digital products. Furthermore, a cultural digital product, such as a song or video, is subject to the exceptions on cultural industries in Article 32.6 (Cultural Industries).

Article 19.5 maintains the legal frameworks governing electronic transactions consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996. Furthermore, Parties agreed under this Article to make efforts to avoid imposing requirements that would create unnecessary regulatory burdens on electronic transactions, and to facilitate input by interested parties when developing their respective legal frameworks for electronic transactions.

Article 19.6 prohibits Parties from denying the legal validity of a signature simply because the signature is in electronic form, except in circumstances otherwise provided for under their law. The Article also prohibits the Parties from having in place any measure for electronic authentication that either prohibits parties to an electronic transaction from deciding on the authentication methods for that transaction, or prevents parties to an electronic transaction from having the opportunity to establish before judicial or administrative authorities that their transaction complies with any legal requirements with respect to authentication. However, the Parties recognize there may be situations where a Party may want to ensure that an authentication method meets certain performance standards or is certified for use by an authority accredited under its laws. The Article also encourages the use of interoperable electronic authentication among the Parties.

Article 19.7 requires each Party to have consumer protection laws to protect consumers from fraudulent and deceptive commercial activities that could cause harm when engaged in digital trade. Furthermore, the Parties recognize the importance of having those frameworks, and the importance of their respective national consumer protection agencies and other relevant bodies cooperating on activities related to cross-border digital trade.

Article 19.8 includes commitments related to the protection of personal information online. The primary commitment of this Article requires each Party to have a legal framework to protect the personal information of the users of digital trade. When developing or amending that framework, Parties should take into account principles and guidelines that are published by relevant international bodies, including the APEC Privacy Framework and the OECD Recommendation of the Council concerning Guidelines governing the Protection of Privacy and Transborder Flows of Personal Data (2013). In reference to paragraph 2, key principles include limitations on collection, choice, data quality, purpose specification, use limitation, security safeguards, transparency, individual participation, and accountability. Furthermore, the Parties agree to endeavour to adopt non-discriminatory practices to protect users of digital trade from violations of privacy and to publish information on the personal information protections it provides to users of digital trade, including information on how individuals can pursue remedies, and how businesses can comply with domestic legal requirements. Finally, the Article encourages Parties to develop mechanisms which promote compatibility between their respective privacy regimes, recognizing that the APEC Cross-Border Privacy Rules system is a valid mechanism.

Article 19.9 provides that trade administration documents submitted electronically will be accepted as the legal equivalent of the paper version of those documents.

Article 19.10 recognizes that it is beneficial for consumers to be able to access and use online services and applications of their choice, use the device of their choice, and access information about how the network they are using is managed by their Internet service provider, referred to in the Article as an Internet access service supplier.

Article 19.11 allows for the cross-border transfer of information by electronic means, including personal information, when this activity is for business purposes of a covered person under the Agreement. The Article permits a Party to have domestic measures to achieve a legitimate public policy objective, such as the privacy or security of information, provided that the measure is not arbitrary, a disguised restriction on trade, or unjustifiable discrimination, and does not impose any greater restrictions on the transfer of information than necessary to achieve the policy objective. Footnote 5 clarifies that measures that apply only to cross-border transfers of information and adversely affect the conditions of competition of a service supplier of another Party would not be considered to meet the exceptions for a legitimate public policy objective provided under the Article.

Article 19.12 prohibits a Party from requiring that data be stored or processed within its territory, as a condition of doing business there. This prohibition does not apply to information held or processed by or on behalf of a Party, or measures related to that information, which is carved-out from the application of the Chapter under Article 19.2.3(b). Article 32.1 (General Exceptions) allows a Party to introduce specific measures regarding the location of computing facilities if they meet the requirements of that Article. The Article does not prevent a Party from giving an advantage, such as a subsidy or tax credit, only if the recipient locates computing facilities within its territory.

Article 19.13 requires the Parties to have in place measures to limit unsolicited commercial electronic communications and to ensure that those who send unsolicited commercial electronic communications allow recipients to be able to prevent receiving future messages or require recipients’ consent to receive spam messages. Furthermore, Parties have agreed to endeavour to have in place measures enabling consumers to reduce or prevent spam messages sent other than to a an electronic mail address, and provide recourse against senders of spam messages who fail to comply with the domestic measures that the Party has in place. Lastly, Parties have agreed to cooperate in cases of mutual concerns regarding regulations pertaining to unsolicited commercial electronic communications.

Article 19.14 addresses cooperation between the Parties in a number of areas related to digital trade. These include exchanging information and experiences on measures related to personal information protection, security, authentication and government use of digital tools. Parties have also agreed to cooperate on the promotion and development of mechanisms, including APEC Cross-Border Privacy Rules, that further global interoperability of privacy regimes, participate in regional and multilateral fora, and encourage development of the private sector methods of self regulation in relation to digital trade issues. The Parties have agreed to consider establishing a forum to facilitate cooperation under the Article or any other matter under the Chapter.

Article 19.15 recognizes the importance of building the capabilities of the Parties’ respective national entities that are responsible for cybersecurity, and of using best efforts to collaborate to identify and mitigate cybersecurity threats. The Parties recognize that risk-based approaches may be more effective than prescriptive regulation in addressing these particular threats and as such, have agreed to endeavour to employ, and encourage enterprises within their territory to use, risk-based approaches and risk management to identify and protect against cybersecurity risks and to detect, respond to, and recover from cybersecurity events.

Article 19.16 prohibits the Parties from requiring the disclosure of source code of software owned by a person of another Party, or to an algorithm expressed in source code, as a condition for the import, distribution, sale, or use of such software, or of products containing such software, in its territory. This Article permits a regulatory body or judicial authority to require that a person of another Party preserve and make available the source code of software, or an algorithm expressed in the source code, to the regulatory body for a specific investigation, inspection, examination, enforcement action, or judicial proceeding, subject to safeguards against unauthorized disclosure. The Article does not apply to the government procurement of software, which is carved-out from the application of the Chapter under Article 19.2.3(a).

Article 19.17 ensures that where content can be uploaded by users and stored, processed, transmitted, distributed, or made available by interactive computer service providers, those interactive computer service providers are not held civilly liable for harmful user-generated content, such as defamatory statements that are uploaded to their websites, except to the extent the interactive computer service provider has created the information. The Article also protects an interactive computer service provider from civil liability for voluntarily restricting access to or removing harmful user-generated content, including through technological means. The Article does not affect a Party’s ability to have measures to address harmful online content or enforce criminal law. Moreover, this Article does not apply to any measure of a Party pertaining to intellectual property, including measures addressing liability for intellectual property infringement and the enforcement of intellectual property rights. Footnote 7 allows Canada and the other Parties to comply with this Article through its existing law. In Canada, these issues are primarily addressed through judicial interpretation of legal doctrines such as defamation.

Article 19.18 recognizes that facilitating public access to and use of government information fosters economic and social development, competitiveness, and innovation. The Parties agree to ensure that non-proprietary information held by the central government is available in a machine-readable and open format and can be searched, retrieved, used, reused, and redistributed. Furthermore, the Parties agree to cooperate to identify ways in which they can expand access to and use of government information, including publicly available data, to enhance and generate business opportunities, especially for SMEs.

Annex 19-A sets out additional provisions relating to Article 19.17 of this Article applicable to Mexico.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

No government actions arise from this Chapter.

CHAPTER 20: INTELLECTUAL PROPERTY RIGHTS

1. CUSMA Provisions

Section A: General Provisions

Intellectual property (IP) rights are the rights given to persons over the creations of the mind, including inventions (which can be protected by patents); literary and artistic works (which can be protected by copyright); designs (which can be protected by industrial design rights); symbols, names, and images used in commerce (which can be protected by trademarks); geographical indications; undisclosed test or other data (such as in respect of agricultural chemical products); and trade secrets. Almost all businesses have some form of IP, whether it is a brand, creation, design, trade secret, or an invention.

IP is an increasingly important aspect of international trade agreements, providing Canadian businesses, exporters, entrepreneurs, and investors with a predictable and transparent framework of rules in those markets where they do business. CUSMA contains a comprehensive IP Chapter, and establishes a transparent and predictable standard for the protection and enforcement of IP rights in the North-American region. This gives Canadians confidence that there is a consistent minimum standard of rules across all CUSMA markets.

This Chapter includes provisions in almost all categories of IP rights protection and enforcement (such as trademarks, geographical indications (GIs), industrial designs, copyright and related rights, patents, data protection for pharmaceutical and agricultural chemical products, trade secrets, and civil, criminal, and border enforcement). This Chapter also builds on standards established under several existing international IP agreements, such as the TRIPS Agreement, and certain treaties administered by the World Intellectual Property Organization (WIPO).

Article 20.1 contains a list of definitions of terms used throughout this Chapter. This Article includes definitions of “intellectual property”, as well as various international IP treaties and instruments.

Articles 20.2 and 20.3 set out the objectives and principles of this Chapter.

Article 20.4 sets out the overarching understanding between the Parties in respect of this Chapter, recognizing the need to promote innovation and creativity, facilitate the diffusion of information, knowledge, technology, culture and the arts, and foster competition and open and efficient markets, having regard to the underlying public policy objectives of national systems.

Article 20.5 requires each Party to provide adequate and effective protection and enforcement of IP rights. Article 20.5 indicates that each Party is free to determine the most appropriate method of implementing the obligations of this Chapter within its own legal system and practice.

Article 20.6 affirms the Parties’ commitment to the WTO Doha Declaration on the TRIPS Agreement and Public Health, including the rights of the Parties to take measures to protect public health and promote access to medicines. Further, the Chapter does not prevent the effective utilization of the “TRIPS/health solution” in respect of compulsory licences for export to WTO Members having insufficient drug manufacturing capabilities, and provides that Parties shall immediately consult in order to adapt this Chapter as appropriate in light of a waiver of any provision, or any amendment, of the TRIPS Agreement.

Article 20.7 affirms that each Party is, or will become, a party to the listed international agreements, and will give due consideration to becoming a party to the Patent Law Treaty (PLT). Canada has a transition period of four years from entry into force of CUSMA to take all necessary steps to accede to the Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite (Brussels Convention).

Article 20.8 requires, in respect of all categories of IP covered in the Chapter, that each Party accord to nationals of another Party treatment no less favourable than it accords to its own nationals with regard to the protection of IP rights, subject to procedures provided in treaties concluded under the auspices of WIPO relating to the acquisition or maintenance of IP rights. The meaning of “protection” is set out in footnote 2 to this Article.

Article 20.9 sets out transparency obligations, including that each Party must endeavour to publish online its laws, regulations, procedures and administrative rulings of general application concerning the protection and enforcement of IP rights, as well as public information concerning applications for trademarks, GIs, designs, patents, and plant variety rights, and public information concerning registered or granted trademarks, GIs, designs, patents and plant variety rights.

Article 20.10 addresses the application of this Chapter to existing subject matter.

Article 20.11 concerns exhaustion, which is a limitation on the scope of IP rights, providing when the owner may no longer exercise some or all of its rights with respect to an IP-protected article. Internationally, the precise scope of exhaustion may differ between countries. Article 20.11 clarifies that nothing in the Agreement prevents a Party from determining whether or under what conditions the exhaustion of IP rights applies under its legal system.

Section B: Cooperation

Article 20.12 provides that each Party may designate and notify contact points for the purposes of cooperation under this Section.

Article 20.13 provides for cooperation between the Parties on IP.

Article 20.14 establishes a Committee on IP rights composed of government representatives of each Party, and sets out the tasks and timelines for that Committee. The Committee will discuss a range of IP-related issues, such as proposals to enhance procedural fairness in patent litigation, including with respect to choice of venue.

Article 20.15 provides for cooperation between the Parties’ respective patent offices, including by facilitating the sharing and use of search and examination work, and reducing differences in their respective procedures and processes.

Article 20.16 sets out that cooperation activities under this Chapter are subject to resource availability and on terms and conditions as mutually agreed by the Parties.

Section C: Trademarks

Trademarks are letters, words, sounds or designs that a business uses to distinguish its goods or services from those of others in the marketplace. Over time, a trademark often comes to stand not only for the actual goods and services a business sells, but also its reputation and brand.

Article 20.17 prohibits a Party from denying registration to sound marks or from requiring, as a condition of registering a trademark, that it be visually perceptible.

Article 20.18 requires that trademarks include collective marks and certification marks, and requires that signs that may serve as GIs are capable of protection under a Party’s trademark system.

Article 20.19 requires each Party to provide to trademark owners the exclusive right to prevent third parties from unauthorized use of identical or similar signs where that use would result in a likelihood of confusion.

Article 20.20 allows each Party to provide limited exceptions to the rights conferred by a trademark.

Article 20.21 sets out certain restrictions on conditions for determining whether a trademark is well-known, and requires each Party to provide procedures to refuse or cancel the registration, or prohibit the use, of a trademark where it is likely to cause confusion with a prior well-known trademark.

Article 20.22 sets out requirements for each Party’s system for the examination and registration of trademarks.

Article 20.23 requires that each Party provide for an electronic system for trademark applications and maintenance, as well as an online database.

Article 20.24 requires that each Party adopt or maintain a trademark classification system consistent with the Nice Agreement Concerning the International Classification of Goods and Services for the Purpose of the Registration of Marks (Nice Agreement), and sets out certain requirements for each Party on registrations and publications in respect of using the Nice Classification system.

Article 20.25 requires a minimum 10-year term for the initial registration and each renewal of a trademark registration.

Article 20.26 prohibits a Party from requiring that trademark licences be recorded to establish the validity of the licence or as a condition for use of the trademark.

Article 20.27 deals with country-code top-level domain (ccTLD) names, which are Internet domain names established for countries or territories (for instance, “.ca” for Canada). The Article sets out requirements for the settlement of disputes in respect of ccTLDs, and requires that appropriate remedies be available where a person, with a bad-faith intent to profit, registers or holds a domain name that is identical or confusingly similar to a trademark.

Section D: Country Names

Article 20.28 requires each Party to provide interested persons with the legal means to prevent a country name from being used for commercial use in a way that misleads consumers as to the origin of a good.

Section E: Geographical Indications (GIs)

A GI is a sign used on products that come from a particular place with characteristics or qualities related to that place.

Article 20.29 confirms the Parties’ understanding that GIs may be protected through a trademark system, a sui generis system, or through other legal means.

Article 20.30 sets out the requirements for a Party’s administrative procedures to protect or recognize GIs, if that Party provides for such administrative procedures.

Article 20.31 provides that if a Party protects or recognizes GIs through the procedures referred to in Article 20.30, then that Party is required to provide for procedures that allow interested persons to object to the protection or recognition of a GI, or to seek cancellation of a GI, as well as to allow for the protection or recognition to be refused. This Article also sets out the grounds for an objection to the protection or recognition of a GI, refusal of a GI, or cancellation of a GI.

Article 20.32 sets out guidelines for determining whether a term is the common name for the relevant good in the Party’s territory, and requires that when making such a determination the Party’s authorities have the ability to take into account how consumers in that territory understand the term.

Article 20.33 provides that where a single component of a GI-protected multi-component term is a common name for the relevant good in the Party’s territory, the Party may not protect that individual component.

Article 20.34 states that if a Party protects or recognizes a GI pursuant to Article 20.30, that protection or recognition begins no earlier than the filing date in the Party or the registration date in the Party, as applicable.

Article 20.35 outlines the requirements for administrative procedures where a Party recognizes or protects a GI pursuant to an international agreement. The negotiated CUSMA outcome enables Canada to continue to meet its commitments on GIs in existing international agreements, such as under CETA.

Section F: Patents and Undisclosed Test or Other Data

Subsection A: General Patents

Patents may be granted for inventions that are new, useful and non-obvious, as well as to improvements on products or processes.

Article 20.36 provides that a Party shall make patents available for any invention that meets the enumerated patentability criteria (new, useful, and non-obvious), and provides certain permissible exclusions from patentability.

Article 20.37 requires that each Party provide a grace period of 12 months prior to the filing date of a patent application in respect of information contained in public disclosures when determining if an invention is novel or has an inventive step.

Article 20.38 outlines the conditions under which a patent may be cancelled, revoked, or nullified.

Article 20.39 allows each Party to provide limited exceptions to the exclusive rights conferred by a patent.

Article 20.40 contains an understanding of the Parties that nothing in this Chapter limits a Party’s rights and obligations under Article 31 of the TRIPS Agreement, and any waiver of or amendment to that Article that the Parties accept.

Article 20.41 requires that a patent applicant shall have at least one opportunity to make amendments, corrections, and observations in connection with its application.

Article 20.42 outlines when each Party is to endeavour to publish unpublished pending patent applications.

Article 20.43 sets out the information that each Party shall make available to the public in respect of patent applications and granted patents.

Article 20.44 outlines the requirement to provide for the adjustment of the term of a patent to compensate for “unreasonable” delays in the Party’s issuance of a patent, with permitted exclusions from the determination of “unreasonable” delays. Canada has a transition period of 4.5 years from entry into force of the Agreement to implement this obligation – see Article 20.89(4).

Subsection B: Measures Relating to Agricultural Chemical Products

Data protection refers to a form of protection for test data or other related information that is provided in confidence to a government in order to receive marketing approval to sell an agricultural chemical product (such as a pesticide), or a pharmaceutical product (see Subsection C: Measures Relating to Pharmaceutical Products).

Article 20.45 deals with the provision of at least 10 years of protection in specified circumstances of undisclosed test or other data for a new agricultural chemical product where such data is required to obtain marketing approval. The protection in specified circumstances of undisclosed test or other data for a new agricultural chemical product is also required if submission of evidence of prior marketing approval of the product in another territory is required to obtain marketing approval. Canada does not permit reliance on evidence of a prior marketing approval of the product in another territory as a condition of granting marketing approval for a new agricultural chemical product, and therefore legislative amendments are not required in this area.

Subsection C: Measures Relating to Pharmaceutical Products

Article 20.46 outlines the requirement of, and the conditions for, a Party compensating for unreasonable curtailment in respect of the marketing approval of pharmaceutical products by adjusting patent terms. A footnote to the Article provides that a Party may alternatively make available a period of additional sui generis protection to compensate for the unreasonable curtailment of the effective patent term as a result of the marketing approval process. Canada already provides an additional period of protection for eligible pharmaceutical products under its Certificate of Supplementary Protection (CSP) regime. Canada meets the CUSMA obligation by way of its existing CSP regime.

Article 20.47 requires each Party to adopt or maintain a regulatory review exception for pharmaceutical products. Canada already provides a broad regulatory review exception in its domestic law, which satisfies this obligation.

Article 20.48 deals with the provision of at least five years of protection in specified circumstances of undisclosed test or other data for a new pharmaceutical product where such data is required to obtain marketing approval. The protection in specified circumstances of undisclosed test or other data for a new pharmaceutical product is also required if submission of evidence of prior marketing approval of the product in another territory is required to obtain marketing approval. The footnotes clarify how a Party may meet the obligation. This Article, including the corresponding footnotes, will not require changes to Canada’s regime for the protection of undisclosed test or other data.

Article 20.49 defines a new pharmaceutical product.

Article 20.50 sets out requirements where a Party permits, as a condition of approving the marketing of a pharmaceutical product, reliance on evidence or information concerning the safety and efficacy of previously approved products. This Article contains a second paragraph setting out additional optional measures that a Party may implement as part of its system for approving such pharmaceutical products. This paragraph will not require changes to Canada’s existing patent linkage regime, which already meets the CUSMA obligation.

Article 20.51 outlines when a Party shall not alter a period of protection provided for a product.

Section G: Industrial Designs

Industrial designs are the ornamental or aesthetic aspect of a good. It can include three-dimensional features, such as its shape, or two-dimensional features, such as patterns, lines, or colour.

Article 20.52 requires that each Party ensure adequate and effective protection of industrial designs consistent with the TRIPS Agreement, and that protection is available for designs embodied in a part of an article.

Article 20.53 requires that each Party provide a grace period of 12 months prior to the filing date of a design application in respect of information contained in public disclosures used to determine whether an industrial design is new, original, or, where applicable, non-obvious.

Article 20.54 sets out a requirement for each Party to provide an electronic industrial design application system, as well as a publicly available electronic information system, including an online database of protected industrial designs.

Article 20.55 requires a minimum 15-year term of protection for an industrial design from the filing date, or the date of grant or registration.

Section H: Copyright and Related Rights

Copyright refers to the rights of authors in relation to their literary, musical, dramatic, and artistic works. Related rights, which are also referred to as neighbouring rights, refer to the rights of creative contributors such as performers and producers of sound recordings (also referred to as phonograms).

Article 20.56 contains a list of definitions used throughout this Section.

Article 20.57 requires each Party to provide a right of reproduction to authors, performers, and producers of phonograms.

Article 20.58 requires each Party to provide to authors a right of communication to the public, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.

Article 20.59 requires each Party to provide a right of distribution to authors, performers and producers of phonograms. This right only applies to fixed copies that can be put into circulation as tangible objects.

Article 20.60 provides that there is no hierarchy when seeking authorization from both the author of a work embodied in a phonogram, and a performer or producer who owns rights in the phonogram.

Article 20.61 requires that each Party provide: to performers a right of broadcasting and communication to the public in respect of their unfixed performances, unless the performance is already a broadcast performance, and a right to the fixation of their unfixed performances; and a right of broadcasting and communication to the public for producers and performers in respect of their phonograms and performances fixed in phonograms, respectively; and the making available to the public of those performances and phonograms in such a way that members of the public may access them from a place and at a time individually chosen by them. Pursuant to subparagraphs (3)(b) and (3)(c) of Article 20.61, the Parties are afforded certain flexibility in implementing this obligation.

Article 20.62 requires the term of protection for a work, performance, or phonogram to be at least “life of the author” plus 70 years where copyright is calculated on the basis of the life of a natural person. Canada has a transition period of 2.5 years from the entry into force of CUSMA to implement this obligation – see Article 20.89(4). Where copyright is calculated on a basis other than the life of a natural person, this Article requires that each Party provide a term of protection for a work, performance, or phonogram of at least 75 years from publication. However, if such a work, performance, or phonogram is not published within 25 years from its creation, each Party is only required to provide a term of at least 70 years from creation.

Article 20.63 requires that each Party apply Article 18 of the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) and Article 14.6 of the TRIPS Agreement, in respect of works, performances, and phonograms, and the rights in and protections afforded to that subject matter as required by Section H (Copyright and Related Rights) of this Chapter.

Article 20.64 concerns limitations and exceptions. Paragraph 1 provides that, for this Section, each Party shall confine limitations or exceptions to exclusive rights to certain special cases that do not conflict with a normal exploitation of the work, performance, or phonogram, and do not unreasonably prejudice the legitimate interests of the rights holder (this is known internationally as the “three-step test”). However, paragraph 2 clarifies that this Article does not reduce or extend the scope of applicability of the limitations and exceptions permitted by the TRIPS Agreement, the Berne Convention, the WIPO Copyright Treaty, or the WIPO Performances and Phonograms Treaty (WPPT).

Article 20.65 deals with contractual transfers in respect of the acquisition or holding of an economic right in a work, performance, or phonogram.

Article 20.66 deals with technological protection measures (TPMs), or “digital locks” on copyrighted works, performances, or phonograms. This Article requires each Party to prohibit the circumvention of effective TPMs that are used by rights holders to protect their copyrighted content. These prohibitions would apply to the act of circumvention, as well as to services and devices used for circumvention. Each Party must provide civil and criminal remedies in relation to violations of these prohibitions. However, paragraph 1 (including footnote 68) clarifies that Parties are not required to provide criminal procedures and penalties in relation to non-profit libraries, archives, museums, educational institutions, or public non-commercial broadcasting entities. Each Party must also confine exceptions and limitations to the obligations in paragraph 1 as prescribed in Article 20.66(4) and (5). However, footnote 64 to paragraph 1 preserves Canada’s current exceptions and limitations, and regulation making powers, with respect to TPMs.

Article 20.67 deals with rights management information (RMI), or “digital watermarks” on copyrighted works, performances or phonograms. This Article sets out requirements to provide civil remedies and criminal procedures and penalties regarding the removal or alteration of RMI, the distribution of RMI that has been altered, and the distribution of content where the RMI has been removed or altered. Footnote 71 indicates that a Party may comply with the obligations in this Article by providing legal protection only to electronic rights management information. Footnote 73 provides that a Party may meet its obligations concerning the distribution of RMI if it provides effective protection for original compilations in specified circumstances. A Party is not required to provide criminal procedures and penalties in relation to non-profit libraries, archives, museums, educational institutions, or public non-commercial broadcasting entities.

Article 20.68 recognizes the important role of collective management societies for copyright and related rights in collecting and distributing royalties based on practices that are fair, efficient, transparent, and accountable.

Section I: Trade Secrets

A trade secret generally refers to business information that provides its owner with a competitive edge because value is derived from maintaining its secrecy. This Section establishes core obligations related to the protection of trade secrets.

Article 20.69 outlines a Party’s obligation to ensure that persons have the legal means to protect their trade secrets.

Article 20.70 requires each Party to provide civil procedures in respect of trade secrets, and to not limit the duration of protection for a trade secret. A footnote also clarifies that civil judicial procedures do not have to be federal provided that these procedures are available.

Article 20.71 requires each Party to provide criminal procedures and penalties in respect of trade secrets misappropriation and outlines certain cases where the availability of procedures or the level of penalties may be limited.

Article 20.72 establishes definitions for “trade secrets”, “misappropriation”, and “manner contrary to honest commercial practices”.

Articles 20.73 and 20.74 outline the authorities in civil proceedings that each Party shall give its judicial authorities in respect of the enforcement of trade secrets.

Article 20.75 outlines the civil remedies that each Party shall make available in respect of the misappropriation of trade secrets.

Article 20.76 requires that each Party shall not discourage or impede the voluntary licencing of trade secrets by imposing excessive or discriminatory conditions or conditions that dilute the value of the trade secrets.

Article 20.77 requires that, in civil, criminal and regulatory proceedings in which trade secrets may be submitted to a court or government entity, each Party shall prohibit unauthorized disclosure of a trade secret by government officials at the central level of government outside the scope of that person’s official duties.

Section J: Enforcement

This Section establishes core obligations related to the civil, criminal, and border enforcement of IP rights. Arrangements for the protection of rights are important for an IP system, because without them there is no way for owners of that IP to enforce their rights effectively. With the rapid development of new technologies increasing the possible ways to infringe IP rights, modernized IP enforcement rules have been reflected in CUSMA. This Section also deals with the liability of those who act as online intermediaries in relation to material that might be protected by copyright and related rights, such as Internet Service Providers (ISPs).

Article 20.78 outlines general obligations relating to the enforcement procedures specified in this Section, including to ensure that procedures are fair and equitable.

Article 20.79 sets out requirements regarding presumptions in enforcement proceedings.

Article 20.80 sets out requirements regarding final judicial decisions and administrative rulings of general application in enforcement proceedings, including a requirement that these decisions and rulings be in writing, and are published or otherwise made available to the public. This Article also requires each Party to make information on IP enforcement efforts available to the public.

Article 20.81 sets out several requirements regarding the availability of procedures and remedies for rights holders to enforce any IP right covered by this Chapter including: injunctive relief; damages; court costs such as attorney fees and other expenses; destruction of infringing goods and related materials; production of evidence; compensation for abuse of procedures; and sanctions. Certain procedures and remedies are also required in relation to TPMs and RMI, including provisional measures; damages; court costs; and destruction of devices and products.

Article 20.82 sets out requirements regarding the availability of provisional measures in instances where a rights holder’s IP right is being infringed or when infringement is imminent.

Article 20.83 sets out several requirements in respect of border enforcement, including on applications to suspend or detain suspected counterfeit trademark, confusingly similar trademark, or pirated copyright goods, as well as customs control authority in respect of suspected counterfeit trademark or pirated copyright goods upon import, or export, in transit, free trade zones, or bonded warehouses.

Article 20.84 requires that each Party provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright or related rights piracy on a commercial scale, including requirements in respect of willful importation or exportation, and in respect of labels or packaging. This Article also requires each Party to provide for criminal penalties in respect of the unauthorized recording of a cinematographic work in a movie theatre.

Article 20.85 requires that each Party provide certain criminal remedies and civil remedies in respect of encrypted program-carrying satellite and cable signals.

Article 20.86 requires each Party to adopt or maintain appropriate measures that provide that its central government agencies use only non-infringing computer software protected by copyright and related rights.

Article 20.87 contains a definition of Internet Service Provider (ISP).

Article 20.88 (including corresponding footnotes 117 through 122, as well as the corresponding Annex 20-A – see below), deals with legal remedies for copyright owners and liability safe harbours for ISPs. This Article requires that legal remedies are available for rights holders to address copyright infringement in the online environment, and that each Party establish or maintain appropriate safe harbours in respect of online services that are ISPs. Paragraph 3 requires that each Party prescribe in its law conditions for ISPs to qualify for the limitations on liability set out in this Article, or alternatively, provide for circumstances under which ISPs do not qualify for these limitations. The obligations in paragraphs 3, 4, and 6 of Article 20.88 must be read in conjunction with footnote 117 to Article 20.89 and Annex 20-A (Annex to Section J), which preserve Canada’s current exceptions and limitations for ISPs and its “Notice and Notice” regime.

Section K: Final Provisions

This Section deals with Party-specific transition periods for the implementation of specified obligations in this Chapter, which are provided in paragraphs 3 (Mexico) and 4 (Canada) of Article 20.89.

Annexes

Annex 20-A sets out obligations that are an alternative to the obligations set out in paragraphs 3, 4, and 6 of Article 20.88. One such obligation is the continued provision of statutory secondary liability for copyright infringement in cases in which a person, by means of the Internet or another digital network, provides a service primarily for the purpose of enabling acts of copyright infringement, in relation to factors set out in a Party’s law.

This Annex preserves Canada’s current exceptions and limitations for ISPs and its “Notice and Notice” regime.

2. Canadian Legislation

No amendments to Canadian legislation arise from Sections A, B, C, D, E, G and K.

For Section F, subsection A, under Article 20.44, Canada has a transition period of 4.5 years to implement this commitment following the entry into force of the Agreement. For subsection B, the CUSMA Implementation Act amends the Pest Control Products Act to remove the reference to the data protection provision of NAFTA. For subsection C, the CUSMA Implementation Act amends the Food and Drugs Act to replace the references to the former data protection provisions of NAFTA with the relevant data protection provisions of CUSMA.

For Section H, amendments to Canadian legislation are required to meet the obligations under Article 20.62 and Article 20.67. The CUSMA Implementation Act implements these obligations by amending the Copyright Act. Canada has a transition period of 2.5 years following the date of entry into force of the Agreement to implement the obligation in Article 20.62(a) related to extending Canada’s general term of protection to life of the author plus 70 years (up from plus 50 years).

For Section I, amendments to legislation are required for Canada to implement its obligation under Article 20.71 and Article 20.72. The CUSMA Implementation Act implements these obligations by amending the Criminal Code to enact criminal offences relating to trade secrets.

For Section J, amendments to Canadian legislation arise from Article 20.83. The CUSMA Implementation Act implements the obligation under Article 20.84 by amending the Trademarks Act and Copyright Act to provide competent authorities at the border with the authority to act on their own initiative (“ex officio”), as appropriate, to detain suspected counterfeit trademark and pirated copyright goods transiting through Canada.

3. Intended Government Action

No further government actions arise from Sections D, E, G, H, I, and J.

For section A, Canada acceded to the Madrid Protocol and the Singapore Treaty on June 17, 2019.

With respect to the Patent Law Treaty, Canada has amended the Patent Rules to complement the already amended Patent Act, as well as made the necessary changes to the relevant administrative systems and procedures. Canada ratified the Patent Law Treaty on July 30, 2019.

With respect to the Brussels Convention, Canada has a four-year transition period following the date of entry into force of the Agreement to take all the necessary steps to accede to this Convention.

With respect to national treatment obligations in Article 20.8, concerning copyright protection accorded to performances and sound recordings, Canada will make the necessary changes to Canada’s Statement Limiting the Right to Equitable Remuneration of Certain Rome Convention or WPPT Countries.

For Section B, the Government will use the mechanisms provided in the Chapter to continue its cooperation and discussions with the Parties on IP issues.

For Section C, no further government action is required. With respect to the Nice Agreement, Canada acceded to this Treaty on June 17, 2019.

For Section F, subsection A, Canada has a 4.5-year transition period following the date of entry into force of the Agreement to take all necessary steps to implement Article 20.44. No further government action arises from subsections B and C.

For Section K, the Government will monitor the Parties’ compliance with their obligations under this Chapter, in view of their respective transition periods. The Government will also make use of the transition periods negotiated under paragraph 4 to implement its obligations after a period of study and consultations as appropriate.

CHAPTER 21: COMPETITION POLICY

1. CUSMA Provisions

Recognizing that anticompetitive business conduct can distort the proper functioning of markets and undermine the benefits of trade liberalization, this Chapter contains competition policy provisions.

Article 21.1 requires each Party to maintain national competition laws that proscribe anticompetitive business conduct, maintain authorities responsible for the enforcement of those competition laws, and try to apply those laws to all commercial activities within their territory. Any exemptions should be transparent and based on public policy or public interest grounds. Each Party’s enforcement policies of its national competition authorities must not discriminate against persons of another Party on the basis of nationality.

Article 21.2 requires each Party to adhere to certain procedural fairness principles in the administration and enforcement of its national competition laws by its national competition authorities, excluding matters occurring before a grand jury. For example, the Article requires each Party to ensure that its national competition authorities:

Article 21.2 also sets out that each Party’s national competition authoritiesfootnote 1

Each Party is also required to make public in writing all final decisions (except for any confidential material) in contested civil or administrative matters related to finding violations of competition laws.

The Article also more generally requires that before it imposes a sanction or remedy against a person for a violation of its national competition laws, each Party gives a person a reasonable opportunity to:

Article 21.3 recognizes the importance of cooperation and coordination between the Parties’ national competition authorities, and requires each Party to adopt sufficient measures to permit negotiations of cooperation instruments that may address enhanced information sharing and mutual legal assistance. Cooperation concerning competition policies and enforcement of national competition laws, which may include coordination of investigations, must be compatible with each Party’s law and important interests and within reasonably available resources. The Parties’ national competition authorities must also consider undertaking mutually agreed technical cooperation activities, including training programs. The Parties acknowledge the importance of international cooperation and coordination, including the work of multilateral organizations in the area of competition policy.

Article 21.4 recognizes the importance of consumer protection in creating efficient and competitive markets, and enhancing consumer welfare. Each Party is required to maintain consumer protection laws or other laws or regulations that proscribe fraudulent and deceptive commercial activities. The Parties emphasize the importance of their cooperation and coordination in this area.

Article 21.5 recognizes the principle of transparency in competition enforcement and advocacy policies. This Article also requires each Party to, on request of another Party, share public information on its national competition law enforcement policies and practices, as well as exemptions and immunities to its national competition laws that may hinder trade or investment between the Parties.

Article 21.6 requires each Party, on request of another Party, to enter into consultations in order to address specific issues that may arise under this Chapter. The receiving Party must accord full and sympathetic consideration to the requesting Party’s concerns.

Article 21.7 states that this Chapter is not subject to dispute settlement under the Agreement.

2. Canadian Legislation

Under Part III of the Competition Act, Canada may negotiate a mutual legal assistance agreement for cooperation on non-criminal competition matters with a foreign state, provided that it contains provisions requiring, among other things, that information provided under the agreement can be used only for the purpose for which it was requested. Foreign states, such as the United States, which have conflicting requirements for agreement provisions of this nature (i.e. limited other uses must be permitted), are therefore unable to conclude such an agreement with Canada.

The CUSMA Implementation Act amends the requirements for mutual legal assistance agreements in the subparagraphs of 30.01 of the Competition Act to permit an agreement in which permissible use of the information provided includes a subsequent mutual legal assistance request for a separate purpose. This amendment will remove a legal obstacle to Canada’s current ability to negotiate agreements for cooperation on non-criminal competition matters.

3. Intended Government Action

In order to maximize the benefits of trade under the Agreement, the Government will continue to cooperate with the United States and Mexico to ensure effective enforcement of our respective competition legislation.

CHAPTER 22: STATE-OWNED ENTERPRISES AND DESIGNATED MONOPOLIES

1. CUSMA Provisions

This Chapter has new rules to address the role of state-owned enterprises (SOEs) in global trade while upholding Canada’s ability to use Crown corporations to serve the public interest.

Canada is not concerned with the existence of state-owned firms, but does have concerns with their economic performance and the effect this can have on international trade. For example, SOEs may enjoy privileges and immunities not available to private firms that give SOEs an undue competitive advantage over their rivals. They also have the potential to distort trade by discriminating between different country markets and providing more favourable treatment for domestic goods and services. With these concerns in mind, CUSMA seeks to ensure that Canadian companies can compete with foreign SOEs on a level playing field.

Article 22.1 sets out the definitions that apply for the purposes of the Chapter. They are important to understand because the obligations in the Chapter apply to the entities as described:

Article 22.13.5 together with Annex 22-A excludes entities below a certain threshold which will initially exclude entities with annual revenue from commercial activities below $320 million (Canadian), and subsequently be adjusted at three-year intervals. The threshold is expressed in Special Drawing Rights, a monetary unit set by the International Monetary Fund. The conversion to Canadian dollars will change periodically with currency fluctuations.

Article 22.2 sets out the scope of the Chapter, stating it applies to activities of SOEs and designated monopolies of a Party that affect trade or investment between the Parties. It also specifies that the Chapter does not apply to:

Article 22.2.5 affirms the ability of a Party to establish or maintain a “state enterprise” (as defined in Article 1.4) or an SOE, and to designate a monopoly. CUSMA does not seek to privatize SOEs, or prevent the establishment of new SOEs. Furthermore, the rules in Articles 22.4, 22.6, and 22.10 do not apply to services supplied in the exercise of governmental authority (such as in fields like health and public education).

Under Article 22.3, each Party must ensure that its SOEs, state enterprises, and designated monopolies act in accordance with CUSMA wherever the entity has been granted regulatory, administrative, or other governmental authority. These are powers that firms could not ordinarily exercise in the absence of a specific act of delegation by government, such as authority to grant import or export licences, approve commercial transactions, or impose quotas, fees, or other charges.

Article 22.4 requires each Party to ensure that its SOEs act in accordance with commercial considerations in a Party – including factors such as price, quality, and availability – when an SOE engages in commercial activities. For instance, an SOE should generally take economic (rather than policy) considerations into account when selecting business partners and awarding contracts. However, the Article does not force an SOE to conduct itself exactly like a private company. The requirement to act in accordance with commercial considerations also does not apply when an SOE undertakes activities on a cost-recovery or not-for-profit basis, or when an SOE provides a public service pursuant to a government mandate in a non-discriminatory manner. Similarly, each Party is to ensure that its designated monopolies act in accordance with commercial considerations when buying or selling goods or services, except when the designated monopoly is fulfilling the terms of its designation.

This Article also requires each Party to ensure that an SOE, when purchasing a good or a service in a Party, does not discriminate against goods or services sold by an enterprise of another Party. Similarly, when an SOE sells a good or a service, a Party is to ensure that the SOE does not discriminate against another Party’s companies. The rule in Article 22.4.1 only applies when the SOE is engaging in commercial activities. Similar rules apply for a designated monopoly when buying or selling a monopoly good or service. For instance, a postal service operator that is a designated monopoly may not charge, for the same letter delivery service, higher prices to firms of another Party than those charged to domestic firms.

Article 22.2.7 makes it clear that these non-discriminatory treatment obligations do not undercut Canada’s reservations for non-conforming measures from Chapter 14 (Investment), Chapter 15 (Cross-Border Trade in Services), and Chapter 17 (Financial Services), including those relating to social services and minority or aboriginal affairs.

Article 22.4.3 provides that an SOE or a designated monopoly can buy or sell goods or services on different terms and conditions (including those related to price), or can refuse to buy or sell goods or services. However, they must do so based on commercial considerations. For example, a designated monopoly can impose differential markups on imported goods if there are higher costs associated with the marketing of those goods.

Finally, each Party is to ensure that each of its designated monopolies does not use its monopoly position to engage in anticompetitive practices that negatively affect trade and investment between the Parties in a non-monopolized market in its territory (e.g. through anti-competitive agreements and abuse of dominant position).

Article 22.5.1 requires each Party to provide its courts with jurisdiction over the commercial activities of an enterprise that is owned or controlled through ownership interests by a foreign government based within a Party’s territory. However, this requirement only applies if a Party provides jurisdiction over similar claims against firms that are not owned or controlled through ownership interests by a foreign government. At the same time, Article 22.5.2 requires each Party to ensure that administrative bodies regulating both state-owned and private firms do so in an impartial manner and do not use their regulatory authority to provide preferential treatment to their SOEs.

Article 22.6 addresses a concern with the potential distorting effect of government assistance granted to SOEs. Among other things, the Article:

Under Article 22.1, “non-commercial assistance” means the direct transfer or potential direct transfer of funds (such as grants, financing on better than commercially available terms, or equity capital inconsistent with usual investment practice), the provision of goods or services other than general infrastructure on better than commercially available terms, or the purchase of goods or services on better than commercially available terms.

Article 22.6.1 prohibits the provision of the following forms of non-commercial assistance to SOEs primarily engaged in the production or sale of goods (but not services) other than electricity or general infrastructure:

Article 22.6 also includes the following obligations:

Importantly, the Article excludes government support provided to an SOE for services supplied in its own territory. The exclusion also preserves policy space for future governments to establish new Crown corporations to provide services within Canada.

Articles 22.7 and 22.8 define “adverse effects” and “injury”. The definitions are important because the obligations in Article 22.6 not to provide non-commercial assistance in certain circumstances only apply if these definitions are met.

Article 22.7 defines “adverse effects” to include displacing or impeding a competitor’s goods or services from a market (involving a significant change in relative shares of the market to the disadvantage of the like good or service); the significant undercutting of a competitor’s prices; or significant price suppression, price depression, or lost sales.

Article 22.8 defines “injury” to mean material injury or threat of material injury to a domestic industry or material retardation of the establishment of an industry. A determination of material injury may involve an examination of the volume of production by the covered investment that has received non-commercial assistance and its impact on the domestic industry producing the like good. A threat of material injury determination is subject to a high threshold and cannot be based on mere allegations.

Article 22.9 permits each Party to list specific exceptions to certain provisions of the Chapter in Annex IV (State-Owned Enterprises and Designated Monopolies Non-Conforming Activities) and Annex 22-D. These exceptions may include information on the relevant entity, the nature of its activities that may not conform to the Chapter, and any relevant government measures.

Article 22.10 requires each Party to provide the other Parties or otherwise publish a list of its SOEs and information on the designation of a monopoly. On request from another Party, a Party will provide further information about policies or programs which allow for the provision of either non-commercial assistance or any equity capital to its SOEs. This includes, for example, information on the form of non-commercial assistance provided, the names of the organizations providing it, the legal basis, the policy objective pursued, and the duration of the policy or program. Other information to be provided will vary depending on the type of non-commercial assistance at issue. Articles 22.10.9 and 32.7 (Exceptions and General Provisions) have protections for confidential and commercially sensitive information.

In Canada, the Financial Administration Act (R.S.C., 1985, c. F-11) outlines the legal framework for the accountability of publicly owned federal organizations.

Articles 22.11 and 22.12 provide opportunities for the Parties to exchange information and views on improving the governance and operation of SOEs, and to promote the principles underlying the Chapter.

In addition to the exceptions noted above, Article 22.13 has a number of exceptions that preserve policy flexibility for governments.

The rules in this Chapter allow each Party to:

Note that the general, cultural, and security exceptions in Chapter 32 (Exceptions and General Provisions) also apply to the obligations in this Chapter (see the description in Chapter 32 for more details).

This Chapter includes six Annexes that provide further details on certain Articles in the Chapter. Some of the Annexes apply to all of the Parties. Annexes 22-E and 22-F are specific to Mexico.

Article 22.14 together with Annex 22-C obliges the Parties to conduct further negotiations on possibly extending the application of the rules in the Chapter to: the activities of SOEs and designated monopolies at the sub-federal levels of government; and to address effects caused in a market of a non-Party through the supply of services by a Party’s SOE that has received non-commercial assistance.

Article 22.15 establishes the scope of application of Annex 22-B. Annex 22-B sets out a process that Parties (and a panel if one has been established) must follow in the event of a dispute under Article 22.4 or Article 22.6 in order to obtain information relevant to the claims that is not otherwise readily available.

Consistent with Article 22.9, Canada has listed in Annex 22-D the following rules that do not apply to SOEs or designated monopolies at the provincial, territorial, or local levels of government:

Consistent with Article 22.9, each Party has set out in its Schedule to Annex IV (State-Owned Enterprises and Designated Monopolies Non-Conforming Activities) a series of reservations specific to its situation and sensitivities. Canada has reservations for the following:

Importantly, to understand the obligations on SOEs, note that Article 32.6 (Cultural Industries) preserves Canada’s flexibility to adopt and maintain programs and policies that support the creation, distribution, and development of Canadian artistic expression or content, including in the digital environment (such as the Canadian Broadcasting Corporation and Telefilm Canada). See that Article’s description for more details.

2. Canadian Legislation

Section 56 of the CUSMA Implementation Act amends the Financial Administration Act by adding CUSMA to Schedule VII, which lists the FTAs subject to Section 89.7 of the Financial Administration Act. Section 89.7 permits the Governor in Council to issue a directive to any parent Crown corporation for the purpose of implementing a provision of CUSMA.

Section 55 of the CUSMA Implementation Act repeals Division V of Part X of the Financial Administration Act which provides for the implementation of NAFTA with respect to Crown corporations, as defined in the Financial Administration Act, therefore removing the reference to NAFTA in the Act.

3. Intended Government Action

The Government will work closely with the provinces and territories to ensure that Canadian SOEs and designated monopolies will accord non-discriminatory treatment to the investments, goods, and services suppliers of the other Parties.

CHAPTER 23: LABOUR

1. CUSMA Provisions

Building on Canada’s past practice of incorporating labour provisions within its FTAs, this Chapter contains comprehensive labour rights obligations, reaffirms the Parties’ commitments to respect and provide protection for internationally recognized labour principles and rights, and commits the Parties to effectively enforce their labour laws and not to weaken or derogate from these laws and standards to encourage trade or attract investment.

CUSMA’s labour provisions provide additional assurances that the Parties will maintain high standards of labour protection and continue to foster good labour governance. This Chapter also helps to ensure that trade and protections of workers’ rights are mutually supportive and reinforcing, and that the increased prosperity resulting from liberalized trade does not occur at the expense of high labour standards.

These objectives are supported by provisions that encourage and promote public participation, allow members of the public to raise trade-related labour concerns, provide a framework for the Parties to cooperate on trade-related labour issues of common interest, establish an institutional framework to address matters arising under this Chapter and allow for recourse to dispute settlement under Chapter 31 (Dispute Settlement).

Article 23.1 provides the definitions for terms used throughout the Chapter.

Article 23.2 outlines a statement of shared commitments in which the Parties affirm their obligations as members of the International Labour Organization (ILO), including those set out in the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up of 1998 (the “ILO Declaration”) and the ILO Declaration on Social Justice for a Fair Globalization (2008).

Article 23.3 requires each Party to adopt and maintain in its statutes and regulations, and practices thereunder, the following internationally recognized principles and rights at work, as stated in the ILO Declaration: freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour and, for the purposes of the Agreement, a prohibition on the worst forms of child labour; and, the elimination of discrimination in respect of employment and occupation. The article establishes that a panel, for purposes of dispute settlement, shall presume that failure to protect these rights is in a manner affecting trade or investment between the Parties, unless the responding Party demonstrates otherwise. To further protect the rights of workers, Article 23.3 commits each Party to ensure it establishes acceptable conditions of work with respect to minimum wages, hours of work, and occupational health and safety.

In Article 23.4, the Parties recognize that it is inappropriate to encourage trade and investment by weakening or reducing the protections afforded in each Party’s labour laws. Accordingly, the Parties commit not to waive or derogate from their respective statutes or regulations in a manner affecting trade or investment between the Parties, or offer to do so. The article clarifies that for purposes of dispute settlement, a panel shall presume that failure is in a manner affecting trade or investment between the Parties, unless the responding Party demonstrates otherwise.

Article 23.5 affirms each Party’s obligation to enforce its labour laws. Each Party commits to promote compliance with its labour laws through appropriate government action, including by appointing and training inspectors; monitoring compliance and investigating suspected violations; providing or encouraging mediation, conciliation, and arbitration services; and, implementing remedies and sanctions imposed for non-compliance with its labour laws. The article clarifies that for purposes of dispute settlement, a panel shall presume that failure is in a manner affecting trade or investment between the Parties, unless the responding Party demonstrates otherwise.

Article 23.6 commits each Party to prohibit the importation of goods produced by forced or compulsory labour, including forced or compulsory child labour. This Article also commits the Parties to cooperate with regard to the identification and movement of goods produced by forced labour.

Article 23.7 ensures that each Party shall not fail to address violence or threats against workers, directly related to exercising or attempting to exercise their labour rights as set out in Article 23.3. The article clarifies that for purposes of dispute settlement, a panel shall presume that failure is in a manner affecting trade or investment between the Parties, unless the responding Party demonstrates otherwise.

Article 23.8 requires that each Party ensure that migrant workers are protected under its labour laws.

Under Article 23.9, the Parties recognize the goal of eliminating discrimination in employment and occupation as well as the goal of promoting equality of women in the workplace.

Article 23.10 commits each Party to promote public awareness of its labour laws, including by ensuring that information related to its labour laws and enforcement and compliance procedures is publicly available.

Furthermore, this Article commits each Party to ensure that persons with a recognized interest have appropriate access to impartial and independent tribunals for the enforcement of its labour laws, with proceedings that are fair, equitable and transparent, comply with due process of law, and do not entail unreasonable fees or time limits or unwarranted delays. These proceedings must also normally be open to the public.

Each Party has the additional responsibility to ensure that the parties to these proceedings are entitled to support or defend their respective positions, that final decisions on the merits of the case must be based on information that the parties to the case were offered the opportunity to speak to, and that those decisions state the reasons on which they are based and are available in writing without undue delay.

Each Party must also provide parties to these proceedings with the right to seek review by impartial and independent tribunals, access to remedies under its law for the effective and timely enforcement of their rights, and procedures to effectively enforce final decisions of its tribunals.

Finally, this Article commits Parties to ensure that other types of proceedings within its labour bodies for the implementation of its labour laws are fair and equitable, conducted by officials who meet appropriate guarantees of impartiality, do not entail unreasonable fees or time limits or unwarranted delay, and document and communicate decisions to persons directly affected by those proceedings.

Article 23.11 commits each Party to provide for the receipt and consideration of public submissions on matters related to this Chapter, and to make the procedures for doing so publicly available. Each Party is required to consider matters raised by the submission, to provide a timely response to the submitter, and to make the submission and the results of its consideration available to the other Parties and the public in a timely manner.

Article 23.12 recognizes the importance of cooperation as a mechanism for effective implementation of the Chapter, to enhance opportunities to improve labour standards and to advance further common commitments regarding labour matters, including the principles and rights stated in the ILO Declaration. In addition, this Article outlines a range of potential areas for cooperation, such as effective implementation of the rights in the ILO Declaration. It also provides a list of potential activities, such as workshops, study trips, and collaborative research.

Article 23.13 sets out a framework for a Party to request dialogue with another Party on any matter arising under this Chapter. A written request must be delivered to the contact point of the other Party and must include information that is specific and sufficient to enable the receiving Party to respond. Unless the dialoguing Parties decide otherwise, dialogue must commence within 30 days of the receipt of the request. If dialoguing Parties resolve the matter, they are to document the outcome, including specific steps and timelines, and make the outcome available to the public, unless they decide otherwise.

Article 23.14 establishes a Labour Council composed of senior governmental representatives at the ministerial or other level, as designated by each Party. The Article outlines that the Labour Council shall meet within one year of the Agreement coming into force, and every two years thereafter, unless the Parties decide otherwise. The Labour Council may consider any matter within the scope of this Chapter and perform other functions as the Parties may decide. It shall make publicly available a joint summary report or statement on its work, which must be made by consensus, at the end of each Council meeting.

Article 23.15 mandates that each Party must designate a contact point within its labour ministry or equivalent entity for the implementation of this Chapter. The contact points must facilitate regular communication and coordination between the Parties; assist and report to the Labour Council; act as a channel for communication with the public in their respective territories; and, work with each other and other appropriate agencies of their governments to develop and implement cooperative activities. For Canada, the contact point required under this Article is the Bilateral and Regional Labour Affairs Division, housed within the Labour Program of Employment and Social Development Canada.

Under Article 23.16, each Party is required to have, and consult with, a national labour consultative or advisory body for members of its public, including representatives of its labour and business organizations, to provide views on matters regarding the Chapter.

Article 23.17 outlines procedures and timelines for consultations regarding any matter arising under the Chapter. The requesting Party must provide sufficient information to enable a full examination of the matter. A third Party may participate in the labour consultations if it considers that it has a substantial interest and delivers a written notice, including an explanation of its substantial interest, to the consulting Parties.

If the Parties are unable to resolve the matter, a consulting Party may request Ministerial Labour Consultations, which must then be held promptly.

If the consulting Parties have failed to resolve the matter within 30 days of the date of the initial receipt of a request for consultations, the requesting Party may request the establishment of a dispute settlement panel under Chapter 31 (Dispute Settlement). The consultation process under this Article would replace consultations under Chapter 31 (Dispute Settlement).

Annex 23-A, on Worker Representation in Collective Bargaining in Mexico, commits Mexico to specific legislative changes for the effective recognition of the right to collective bargaining.

The Annex commits Mexico to provide a number of rights in its labour laws, including the right of workers to engage in collective bargaining, and to organize, form and join the union of their choice. Labour laws must also prohibit employer domination or interference in union activities, discrimination, coercion against workers for union activity or support, and refusal to bargain collectively with the recognized union. Mexico’s labour laws must also provide for an effective system to verify that elections of union leaders are carried out through a personal, free, and secret vote of union members.

Mexico commits to have an independent entity for conciliation and registration of unions and collective bargaining agreements, and independent Labour Courts for the adjudication of labour disputes.

Furthermore, Mexico commits to adopt legislation that requires that initial collective bargaining agreements, and revisions to existing collective bargaining agreements regarding salary and work conditions, be supported by a majority of workers covered by the agreement, through the exercise of personal, free, and secret vote.

The Annex also requires that labour laws provide for the creation of a centralized website that provides public access to all collective bargaining agreements in force, and requires that collective bargaining agreements be made readily accessible to all workers covered by the agreement.

Under the Annex, the Parties agree that the entry into force of the Agreement may be delayed until these legislative changes to Mexico’s labour law become effective.

2. Canadian Legislation

Section 17 of the CUSMA Implementation Act authorizes the Minister of Labour to act as Canada’s senior governmental representative on the Labour Council referred to in Article 23.14 or to designate a representative.

To implement the obligation in Article 23.6 to prohibit the importation of goods produced wholly or in part by forced labour, section 204(8) of the CUSMA Implementation Act amends the Customs Tariff to add this item to the list of prohibited importations. Section 201 of the CUSMA Implementation Act also provides authority for the Governor in Council, upon the recommendation of the Minister of Finance, to make regulations refining the scope of this prohibition.

3. Intended Government Action

The Government will work to implement the commitments in this Chapter. This includes working with the Parties on the Labour Council and undertaking trilateral labour-related cooperative activities.

CHAPTER 24: ENVIRONMENT

1. CUSMA Provisions

This Chapter strengthens and modernizes environmental provisions from the North American Agreement on Environmental Cooperation (NAAEC) by integrating them into CUSMA with an ambitious comprehensive Chapter that is subject to dispute settlement. The objectives of this Chapter are to promote mutually supportive trade and environmental policies; promote high levels of environmental protection and effective enforcement of environmental laws; and enhance the capacities of the Parties to address trade-related environmental issues. These objectives are supported by substantive commitments for Parties to effectively enforce their respective environmental laws, not waive or derogate from such environmental laws to attract trade or investment, and ensure public participation and transparency. The Chapter also contains commitments on a broad range of environmental issues, and creates a framework for cooperation and consultation on such issues. The Chapter is subject to Chapter 31 (Dispute Settlement) if the Parties are unable to first resolve a matter through the consultation and cooperation mechanisms provided under this Chapter.

The Parties also agreed to a separate Environmental Cooperation Agreement (ECA). The ECA ensures that the unique institutions that have existed for over 24 years under the NAAEC are retained and modernized, including the Commission for Environmental Cooperation and its Montreal-based Secretariat. Through the ECA, a modernized Commission will continue the legacy of effective trilateral environmental cooperation between Canada, Mexico, and the United States, including on global environmental issues of importance to Canada, such as climate change.

Article 24.1 defines the term “environmental law” to mean a Party’s laws or regulations, or provisions contained within those laws or regulations, that implement its obligations under a multilateral environmental agreement, the primary purpose of which is the protection of the environment or the prevention of a danger to human life or health. This definition explicitly excludes statutes and regulations that are directly related to worker safety or health, as well as aboriginal harvesting of natural resources. This Article also defines what the term “statute or regulation”, as used in the definition of “environmental law”, means for each of the Parties. In each case, they are limited to federal legislation and regulations.

Article 24.2 outlines the objectives of this Chapter and highlights the importance of enhanced environmental cooperation. It also notes that environmental laws should not be used as a disguised restriction on trade or investment. The Parties also recognize that the environment plays an important role in the economic, social, and cultural well-being of Indigenous peoples and local communities, and acknowledge the importance of engaging with these groups in the long-term conservation of the environment.

In Article 24.3, the Parties recognize the sovereign right of each Party to establish, adopt, or modify its own environmental priorities and levels of protection, while striving for high levels of environmental protection.

Article 24.4 imposes an obligation on each Party to effectively enforce its environmental laws. Specifically, it provides that each Party shall not fail to enforce its environmental laws through a sustained or recurring course of action or inaction in a manner that affects trade or investment between the Parties. It also requires the Parties not to waive or otherwise derogate from their respective environmental laws to encourage trade or investment. For the purposes of dispute settlement, failure to comply with an obligation is presumed to be “in a matter affecting trade or investment between the Parties,” unless the defending Party can demonstrate otherwise.

Article 24.5 imposes an obligation on each Party to set out ways for the public to participate on issues covered in this Chapter. It commits each Party to accommodate, in a timely manner, requests for information received from persons of that Party regarding the implementation of this Chapter.

Article 24.6 sets out requirements to ensure that alleged violations of environmental laws are given due consideration by a Party, and that procedures are available to persons with a legally recognized interest to seek remedies or sanctions. These proceedings must not be unnecessarily complicated or prohibitively costly, or entail unreasonable time limits or unwarranted delays. These proceedings must also be fair, equitable and transparent. Any hearings in these proceedings must be open to the public, except when the administration of justice requires otherwise.

In Article 24.7, the Parties commit to maintain appropriate procedures for assessing the environmental impacts of proposed projects that are subject to an action by a Party’s central level of government that may cause significant effects on the environment, with a view to avoiding, minimizing, or mitigating adverse effects. Parties also commit to ensure that such procedures provide for the disclosure of information to the public and, in accordance with each Party’s domestic law, allow for public participation.

Article 24.8 recognizes the important role of multilateral environmental agreements (MEAs) in protecting the environment, and places an obligation on each Party to adopt, maintain and implement their respective obligations under specific MEAs. For Canada, this includes: the Convention on International Trade in Endangered Species of Wild Fauna and Flora; the Montreal Protocol on Substances that Deplete the Ozone Layer, the Protocol of 1978 Relating to the International Convention for the Prevention of Pollution from Ships; the Convention on Wetlands of International Importance Especially as Waterfowl Habitat; the Convention for the Establishment of an Inter-American Tropical Tuna Commission, and the Convention on the Conservation of Antarctic Marine Living Resources. For the purposes of dispute settlement, failure to comply with this obligation is presumed to be “in a matter affecting trade or investment between the Parties,” unless the defending Party can demonstrate otherwise.

In Article 24.9, the Parties agree to take measures to protect the ozone layer through the control of the production and consumption of, and trade in, substances that deplete or otherwise modify the ozone layer. For the purposes of dispute settlement, failure to comply with this obligation is presumed to be in a matter affecting trade or investment between the Parties unless the defending Party can demonstrate otherwise. Further, under this Article each Party commits to making publicly available information about its programs and activities related to ozone layer protection, and to cooperate in addressing areas of mutual interest.

In Article 24.10, the Parties recognize the importance of protecting and preserving the marine environment and agree to take measures to prevent the pollution of the marine environment from ships. For the purposes of dispute settlement, failure to comply with this obligation is presumed to be in a matter affecting trade or investment between the Parties unless the defending Party can demonstrate otherwise. Each Party also commits to make publicly available appropriate information about its programs and activities related to the prevention of pollution of the marine environment from ships, and to cooperate in addressing areas of mutual interest.

In Article 24.11, the Parties recognize the importance of reducing both domestic and transboundary air pollution and commit to cooperate to address matters of mutual interest with respect to air quality. Each Party also commits to make air quality data and information about its air quality programs and activities publicly available and to ensure that the data and information are easily accessible and understandable to the public.

In Article 24.12, the Parties recognize the importance of taking action to prevent and reduce marine litter, including plastic litter and microplastics, in order to preserve human health and marine and coastal ecosystems, prevent the loss of biodiversity, and mitigate the costs and impacts of marine litter. The Parties commit to take measures to prevent and reduce marine litter and to cooperate to address matters of mutual interest with respect to combatting marine litter, such as addressing land and sea-based pollution, promoting waste management infrastructure, and advancing efforts related to abandoned, lost, or otherwise discarded fishing gear.

In Article 24.13, the Parties recognize the importance of promoting corporate social responsibility and responsible business conduct. Each Party agrees to encourage enterprises to have voluntary best practices of corporate social responsibility that are related to the environment, consistent with internationally recognized standards and guidelines that have been endorsed or are supported by that Party.

Article 24.14 encourages the use of flexible and voluntary mechanisms to contribute to the achievement and maintenance of high levels of environmental protection and to complement domestic regulatory measures. Those mechanisms should be designed to maximize their environmental benefits and avoid the creation of unnecessary barriers to trade, should be truthful and not misleading, and based on relevant international standards. Where private sector entities or non-governmental organizations develop voluntary mechanisms for the promotion of products based on their environmental qualities, the Parties should encourage those entities to develop mechanisms that, in addition to being truthful and based on relevant international standards, promote competition and innovation and not treat a product less favourably on the basis of origin.

In Article 24.15, the Parties agree to promote and encourage the conservation and sustainable use of biological diversity in accordance with their laws or policies. The Parties recognize the importance of respecting, preserving and maintaining knowledge and practices of Indigenous peoples and local communities embodying traditional lifestyles that contribute to the conservation and sustainable use of biological diversity. The Parties also recognize the importance of facilitating access to genetic resources within their respective national jurisdictions, consistent with their international obligations, and the importance of public participation and consultation in matters related to conservation and sustainable use of biological diversity. Finally, the Parties agree to cooperate to address matters of mutual interest relating to the conservation and sustainable use of biological diversity.

Article 24.16 commits the Parties to work together to identify ways to assess and address risks and adverse impacts of invasive alien species.

In Article 24.17, the Parties acknowledge the importance of taking measures for the conservation and sustainable management of fisheries. The Parties also recognize the importance of promoting and facilitating trade in sustainably managed and legally harvested fish and fish products, while ensuring that trade in these products is not subject to unnecessary or unjustifiable barriers to trade. The Parties recognize the importance that trade restrictive measures be: based on the best scientific evidence available that establishes a connection between the products affected by the measure and species being protected or conserved; tailored to the conservation objective; and, implemented after the importing Party has consulted with the exporting Party and provided a reasonable opportunity for the exporting Party to take appropriate measures to address the issue. The Parties shall cooperate with, or in, international regional fisheries bodies with the aim of achieving good fisheries governance. The text clarifies that Article 24.17, Article 24.18, Article 24.19, Article 24.20, and Article 24.21 apply only to marine wild capture fisheries and do not apply with respect to aquaculture.

Article 24.18 commits each Party to take measures aimed at the sustainable management of fisheries. Each Party also commits to have measures to prevent the use of poisons or explosives for commercial harvesting and to have measures designed to prohibit the practice of shark finning. Each Party commits to base its fisheries management system on the best scientific evidence available and on internationally recognized best practices for fisheries management and conservation.

Article 24.19 commits each Party to implement and effectively enforce conservation and management measures aimed at promoting the long-term conservation of marine species. Each Party also commits to prohibit the killing of great whales for commercial purposes unless authorized in a multilateral treaty to which the Party is party. The text also emphasizes specifically what is contained in the general exception in Article 32.5 (Indigenous Peoples Rights): that this obligation does not apply to whaling by Indigenous peoples in accordance with a Party’s law, including, for Canada, the legal obligations recognized and affirmed by section 35 of the Constitution Act, 1982 or those set out in self-government agreements between a federal, provincial, or territorial government and Indigenous peoples.

Article 24.20 commits the Parties to not maintain or grant certain subsidies within the meaning of Article 1.1 of the WTO SCM Agreement that are specific within the meaning of Article 2 of the SCM Agreement. This includes subsidies provided to a fishing vessel or operator while listed for illegal, unreported, and unregulated (IUU) fishing by the flag State, the subsidizing Party, or a relevant international regional fisheries body; and subsidies for fishing that negatively affect overfished stocks. Subsidy programs for fishing that negatively affect overfished stocks established before CUSMA becomes legally binding have three years to be adjusted to meet this obligation. Each Party agrees to notify the other Parties of any relevant subsidy that is given within the previous two-year period to persons engaged in fishing or fishing-related activities. Each Party agrees to notify information under Article 25.3 of the SCM Agreement and, to the extent possible, other relevant detailed information (i.e. program name, program authority, catch data, status of fish stock, fleet capacity, conservation and management measures, and total imports and exports per species). To the extent possible, each Party agrees to provide information relating to other fisheries subsidies that the Party gives, particularly with regard to fuel subsidies. Each Party also agrees to notify the other Parties on an annual basis of any list of vessels and operators engaged in IUU fishing. The Parties also commit to work toward strengthening international rules and enhancing transparency on fisheries subsidies in the context of the WTO.

Article 24.21 commits each Party to take measures in support of international efforts to combat IUU fishing and help deter trade in products from IUU fishing. These commitments include actions consistent with the Port State Measures Agreement and other provisions to improve transparency and traceability.

Article 24.22 commits each Party to fulfill its obligations under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), to take measures to protect species at risk, and combat the illegal take of, and illegal trade in, wild fauna and flora, including through the exchange of information and joint activities on conservation issues, as well as through cooperation activities among law enforcement networks.

In Article 24.23, the Parties acknowledge the importance of: the conservation and sustainable management of forests for providing environmental, economic, and social benefits; the critical role of forests in providing numerous ecosystem services; and, combatting illegal logging and associated trade. Each Party commits to maintain or strengthen government capacity and institutional frameworks to promote sustainable forest management, and to promote trade in legally harvested forest products. Parties also commit to exchanging information and cooperating, as appropriate, on initiatives to promote sustainable forest management.

In Article 24.24, the Parties recognize the importance of trade and investment in environmental goods and services as a means of improving environmental and economic performance, contributing to green growth and jobs, and encouraging sustainable development, while addressing global environmental challenges. The Parties commit to try to facilitate and promote trade and investment in environmental goods and services. The Article also notes that the Environment Committee, established under Article 24.26, will consider issues identified by a Party related to trade in environmental goods and services, including issues identified as potential non-tariff barriers. The Parties will try to address those barriers, including by working with other relevant committees established under CUSMA, and by cooperating in international fora.

Article 24.25 commits the Parties to undertake cooperative environmental activities related to this Chapter and the ECA. Activities that the Parties undertake pursuant to the ECA will be coordinated and reviewed by the Commission for Environmental Cooperation (CEC), as provided for in the ECA.

Article 24.26 establishes the Environment Committee, which is responsible for overseeing the implementation of this Chapter. The Committee is also responsible for providing input and information, as appropriate, for consideration by the Council of the CEC as well as any other functions identified by the Parties. Decisions of the Committee are made by consensus, unless the Committee decides otherwise or is otherwise provided in this Chapter, and must be made available to the public. Each Party is also required to designate and notify a contact point to facilitate communication between the Parties in the implementation of this Chapter.

Article 24.27 provides for a process allowing any person of a Party to file a submission with the Secretariat of the Commission for Environmental Cooperation (CEC Secretariat) claiming that a Party is failing to effectively enforce its environmental laws. The Article also sets out the criteria that such submissions must satisfy for the CEC to consider them, as well as criteria to guide the CEC in deciding whether to request a response from the relevant Party.

Article 24.28 outlines requirements and procedures for the development of a factual record in response to a submission on environmental law enforcement matters filed under Article 24.27.

Article 24.29 provides that any Party may request consultations with another Party regarding any matter arising under this Chapter, and outlines procedures that the requesting Party must follow. It also provides for participation in the consultations by other Parties who may have a substantial interest in the matter. The Article notes that Parties shall make every effort to address matters through cooperation and dialogue, including by seeking advice from relevant experts.

Article 24.30 provides that a Party may request that the Environment Committee convene to consider any matter arising from Article 24.29 if the consulting Parties have failed to resolve the matter pursuant to that Article.

Article 24.31 provides for Ministerial consultations if the consulting Parties have failed to resolve the matter under Article 24.30. Those consultations will be confidential and without prejudice to the rights of any Party in any future proceeding.

Article 24.32 provides that if the consulting Parties have failed to resolve the matter under Article 24.29, Article 24.30, and Article 24.31, the requesting Party may go to formal dispute settlement pursuant to the dispute settlement mechanism established in Chapter 31 (Dispute Settlement).

Annex 24-A sets out the measures undertaken by each Party in compliance with their obligations under the Montreal Protocol, and relates to a determination of compliance with Article 24.9.1 as specified in footnote 10.

Annex 24-B sets out the measures undertaken by each Party in compliance with their obligations under the International Convention for the Prevention of Pollution from Ships (MARPOL Convention), and relates to a determination of compliance with Article 24.10.1, as set out in footnote 14.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter or the ECA.

3. Intended Government Action

Amendments to the Commission for Environmental Cooperation Privileges and Immunities Order (CEC Order) will be necessary to reflect the entry into force of the ECA, which will supersede the NAAEC. In particular, the CEC Order will need to be amended to remove the references to the NAAEC, which will enable the CEC Order to apply, without interruption, upon entry into force of the ECA. The CEC Order grants privileges and immunities to: the CEC; representatives of Canada, the United States, and Mexico who are members of the CEC Council; officials of the CEC Secretariat; and experts performing missions for the Commission under section 5(1) of the Foreign Missions and International Organizations Act.

The Government will work with the Parties to implement the commitments in this Chapter. This includes working with the Parties on the Environment Committee and carrying out trilateral environmental cooperation by implementing the ECA and through the work of the CEC.

CHAPTER 25: SMALL AND MEDIUM-SIZED ENTERPRISES

1. CUSMA Provisions

This Chapter reflects the Parties’ shared interest in promoting the participation of SMEs in international trade. It also reinforces Canada’s willingness to ensure that SMEs share in the benefits and opportunities associated with increased trade and investment.

Article 25.1 sets out the general principles of the Chapter, including the Parties’ goal of fostering cooperation among SME’s and collaborating toward the promotion of SME growth and jobs.

Article 25.2 encourages the Parties to facilitate increased trade and investment opportunities for SMEs, including by: promoting cooperation between the Parties’ SME support infrastructures to create an international SME network; exchanging information and best practices on increasing opportunities for SMEs; and strengthening collaboration on activities that promote start-ups, agricultural and rural SMEs, and SMEs owned by under-represented groups.

Article 25.3 commits each Party to create a user-friendly website targeted at SMEs to provide easily accessible information on the Agreement and the ways smaller firms can take advantage of it, including a description of the provisions relevant to them. The website may also include links to other relevant information such as: customs regulations and procedures; regulations and procedures concerning intellectual property rights; technical regulations, standards, and sanitary and phytosanitary measures relating to importation and exportation; foreign investment regulations; business registration procedures; trade promotion programs; competitiveness programs; SME financing programs; employment regulations; taxation information; information related to the temporary entry of business persons; and government procurement opportunities. The dedicated SME website will increase transparency and help facilitate trade by creating a convenient platform for SMEs to access information related to trade.

Article 25.4 establishes an SME Committee that will meet within one year of the date of entry into force, and thereafter annually, to review how SMEs are benefiting, and may benefit further, from CUSMA, and oversee cooperation or capacity building activities to support SMEs. These activities could include, for example, those related to export counseling, assistance, and training programs, such as those for youth and under-represented groups; information sharing; trade finance; competitiveness, digital trade and other activities. The SME Committee also has the ability to review and coordinate the Committee’s work program with those of other committees, working groups and any subsidiary body established under CUSMA to identify appropriate opportunities for cooperation to improve the ability of SMEs to engage in trade and investment opportunities provided by this Agreement. This provision will assist in the integration of SME-related activities and issues in the work of all the Committees under the Agreement.

Article 25.5 creates an SME Dialogue, the purpose of which is to invite views from stakeholders on any matter within the scope of the Agreement and on its implementation and modernization. Participants may also provide relevant information to the Committee, such as technical or scientific information.

Article 25.6 identifies provisions in other chapters of the Agreement that seek to enhance cooperation on SME issues or may be of particular benefit to SMEs.

Article 25.7 provides that this Chapter is not subject to dispute settlement under Chapter 31 (Dispute Settlement).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will establish a dedicated SME website as set out in this Chapter. Access to information regarding export opportunities (e.g. government procurement opportunities, SME financing programs, trade promotion programs, and customs regulations and procedures) is vital for SMEs to be able to take advantage of the opportunities that are created under CUSMA.

The Government, with its CUSMA counterparts, will establish and engage in the SME Committee to ensure the effective implementation of this Chapter. The SME Committee will provide a mechanism to engage in cooperation activities that promote the participation of Canadian SMEs in international trade and help to ensure that SME-related issues are discussed by other subsidiary bodies established under the Agreement. Canada will also convene the SME Dialogue as part of its participation in the SME Committee.

CHAPTER 26: COMPETITIVENESS

1. CUSMA Provisions

In this Chapter, the Parties recognize North America’s unique commercial ties, extensive trade flows and integrated production platform. The Chapter provides opportunities for the Parties to enhance regional competitiveness and grow North America’s exports globally through cooperation to coordinate activities in key policy areas, including infrastructure, technological readiness, and innovation.

Article 26.1 establishes an inter-governmental North American Competitiveness Committee (Competitiveness Committee) to develop and implement an annual work plan of cooperative activities, including: identifying projects and policies to develop modern physical and digital infrastructure to improve the cross-border movement of goods and services; addressing market-distorting practices by non-Parties that affect North America; and sharing best practices on innovation and technology.

The Competitiveness Committee is to meet annually and can seek advice from experts. It will report annually on its work, as well as provide advice and recommendations as appropriate, to the Free Trade Commission. Each Party is also required to designate a contact point for the committee to coordinate with its relevant government departments and agencies. Recognizing the need for a comprehensive and coordinated approach to enhance North American competitiveness, each Party will engage relevant government departments and agencies accordingly.

Article 26.2 requires each Party to establish a mechanism for interested persons to provide input on matters relevant to enhancing competitiveness.

Article 26.3 states that this Chapter is not subject to dispute settlement under Chapter 31 (Dispute Settlement).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will establish a mechanism for Canadians to provide input on matters relevant to enhancing competitiveness, which may include an advisory body to inform Canada’s priorities for the annual work plan. The Government will work with representatives of the United States and Mexico to develop and implement the annual work plan and to report on progress. Particular attention will be paid to enhancing the competitiveness of SMEs and businesses led by women, Indigenous peoples, youth and minorities. The Committee’s annual work plans and reports will be made available on the Global Affairs Canada website.

CHAPTER 27: ANTICORRUPTION

1. CUSMA Provisions

This Chapter includes provisions requiring each Party to have in place laws or measures to combat bribery and corruption, to require enforcement of these laws or measures, to provide protection to whistleblowers, to promote integrity of public officials, and to encourage the private sector and civil society to be active in combatting corruption. This Chapter also recognizes the importance of cooperation, including between law enforcement agencies and internationally, and encourages the Parties to deepen their level of cooperation.

Article 27.1 sets out the definitions that are specific to this Chapter.

Article 27.2 affirms the Parties’ resolve to prevent and combat bribery and corruption and recognizes the need to build integrity within both their public and private sectors. The Parties affirm their adherence to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the Inter-American Convention against Corruption, and the United Nations Convention against Corruption, and reiterate their support for anticorruption principles developed by APEC and G20 anticorruption fora. The Article also recognizes that the Parties’ domestic laws apply with respect to the description of offences, prosecution, and punishment.

Article 27.3 requires that each Party have legislative and other measures to establish as criminal offences under its law the bribery of a public official, foreign public official or an official of a public international organization and embezzlement by a public official, as well as having measures to ensure the proper maintenance of books and records, financial statements, and accounting and auditing standards. This includes making offenders liable to sanctions that take into account the gravity of the offence. The Article also requires that each Party disallow the tax deductibility of bribes, and discourage the use of facilitation payments.

Article 27.4 requires that each Party promote integrity, honesty and responsibility among its public officials and have measures with respect to the selection and training of individuals for public positions, the promotion of transparency in the exercise of their functions and declarations by public officials of potential conflicts of interest. The Article also requires each Party to have codes or standards of conduct and disciplinary measures related to the performance of public functions.

Article 27.5 requires that each Party promote the participation of the private sector and civil society in the prevention and fight against corruption and identifies a number of ways that a Party may consider doing so.

Article 27.6 requires that each Party effectively enforce its laws and measures required to comply with Article 27.3 (Measures to Combat Corruption) and not deviate from them in a sustained and recurring manner in order to encourage trade and investment.

Article 27.7 states that this Chapter shall not affect Parties’ rights and obligations under specified international conventions.

Article 27.8 provides that, with the exception of matters arising under Article 27.6 or Article 27.9, this Chapter is subject to Chapter 31 (Dispute Settlement) if the alleged non-conformity affects trade and investment. If there is a dispute, Parties must involve anticorruption experts.

Article 27.9 recognizes the importance of cooperation and coordination between the Parties in the fight against corruption, particularly between anticorruption law enforcement agencies, and recognizes the value of cooperation and coordination on anticorruption issues in international fora.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will continue its efforts to combat corruption, at home and abroad, in collaboration with other governments, the private sector and civil society actors.

CHAPTER 28: GOOD REGULATORY PRACTICES

1. CUSMA Provisions

Governments use regulations to achieve a range of policy objectives, such as ensuring the health and safety of their citizens, protecting the environment and protecting consumers. While the vast majority of regulations are designed to achieve non-trade-related objectives, they can also have the unintended effect of restricting or distorting trade. As tariffs have decreased globally, regulatory and other non-tariff barriers are the hurdles that Canadian exporters are increasingly facing when attempting to gain access to foreign markets.

This Chapter represents a new approach within trade agreements to help deal with the growing challenge posed by non-tariff barriers. Good regulatory practices are internationally recognized processes, systems, tools, and methods for improving the quality of regulations (e.g. the use of regulatory impact assessments, transparency and openness, and stakeholder engagement throughout the regulatory development process). The Chapter aims to facilitate the adoption of similar regulatory processes between the Parties by encouraging widely-accepted good regulatory practices, which will provide greater regulatory transparency and more predictable access to foreign markets for Canadian companies.

Article 28.1 sets out the definitions that apply to this Chapter.

Article 28.2 describes general provisions relating to “good regulatory practices” and recognizes that implementation of government-wide practices to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability can facilitate international trade, investment, and economic growth, while contributing to each Party’s ability to achieve its public policy objectives (including health, safety, and environmental goals) at the level of protection it considers appropriate. The Article recognizes these practices can support the development of compatible regulatory approaches among the Parties, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements.

Article 28.3 recognizes that the Parties intend to maintain their respective central regulatory coordinating bodies, within their respective mandates and consistent with their law.

Article 28.4 encourages regulatory consultation and coordination within government, which will prevent conflicting or duplicative regulations from being developed by regulators. The Article requires the adoption of processes and mechanisms to pursue a series of related objectives, including for example identifying and developing improvements to government-wide regulatory processes and identifying potential overlap or duplication between proposed and existing regulations. The Parties must make a description of these processes and mechanisms publicly available.

Article 28.5 encourages regulations to be based on information that is reliable and of high quality. Parties should adopt or maintain publicly available guidance or mechanisms that encourage its regulatory authorities when developing a regulation to, for example, seek the best, reasonably obtainable information relevant to the regulation it is developing. The Article also provides guidance for regulatory authorities on collecting information from the public through surveys.

Article 28.6 requires each Party to publish annually a list of regulations that it expects to adopt or proposes to adopt within the following 12 months, and lists other information that should accompany each identified regulation, including a description of the planned regulation and a point of contact.

Article 28.7 requires each Party to maintain a single, free, publicly available website that contains all information that it is required to publish with respect to the transparent development of regulations, as described in Article 28.9.

Article 28.8 encourages Parties to draft proposed and final regulations using plain language to ensure they are clear, concise, and easy for the public to understand.

Article 28.9 provides for the transparent development of regulations including the publication of relevant information prior to finalizing any new regulation. It requires that a Party developing a regulation must publish the text of the regulation, an explanation of the regulation and its objectives, an explanation of the data it relied upon to support the regulation, the name and contact information of the official who can be contacted with questions, and its regulatory impact assessment (if any). This Article also establishes a process for any interested person, regardless of domicile, to provide written comments on the draft regulation and its related information in accordance with specific time periods and at a time that will enable the regulatory authority to take into account the comments received and make revisions to the draft regulation, as appropriate.

Article 28.10 recognizes that each Party may seek expert advice and recommendations from groups that include non-governmental persons in addition to seeking public comment when preparing or implementing regulations. The Article sets out how an expert advisory group may be established and how it should function, and encourages regulatory authorities to ensure that the groups’ membership includes a range and diversity of views and interests, as appropriate to the particular context.

Article 28.11 encourages the use of regulatory impact assessments in appropriate circumstances when developing proposed regulations that have anticipated costs or impacts exceeding certain thresholds established by the Party. The Article requires that each Party maintain procedures that promote the consideration of certain elements when conducting a regulatory impact assessment, such as the need for a proposed regulation, feasible and appropriate regulatory and non-regulatory alternatives, and benefits and costs.

Article 28.12 requires that a Party publish, in a final regulatory impact assessment or other document, relevant information such as the date by which compliance is required and its views on any substantive issues raised in timely submitted comments. Each Party must publish all regulations that are in effect on a free and publicly available website.

Article 28.13 requires that each Party adopt or maintain mechanisms to carry out retrospective reviews of its regulations in order to determine whether modification or repeal is appropriate. The Article encourages the Parties to publish any official plans and results of retrospective reviews.

Article 28.14 requires each Party to provide the opportunity for any interested person to submit to any regulatory authority of the Party written suggestions for the issuance, modification, or repeal of a regulation.

Article 28.15 requires each Party to publish online a description of the processes and mechanisms employed by its regulatory authorities to prepare, evaluate, or review regulations. Each Party must also publish online information related to its regulatory authorities and their procedural requirements, the legal authority for verification, inspection and compliance activities, information concerning judicial or administrative procedures available to challenge regulations, and any fees charged for services rendered in connection with the implementation of a regulation.

Article 28.16 states that each Party must prepare and make freely and publicly available online, to the extent feasible, an estimate of the annual costs and benefits of economically significant regulations issued. It also requires an annual report on any changes, or any proposals to make changes, to its regulatory system.

Article 28.17 encourages the Parties to engage in regulatory compatibility and cooperation activities. It recognizes the valuable work of bilateral and trilateral cooperation fora, as well as the broad range of mechanisms that exist to help minimize unnecessary regulatory differences.

Article 28.18 establishes a Committee on Good Regulatory Practices composed of government representatives from each Party. The Committee will meet at least once a year and consider issues associated with the implementation and operation of the Chapter, and consider developments in the areas of good regulatory practices with a view to making recommendations to the Commission for improvements to the Chapter to enhance the benefits of the Agreement. The Article requires the Committee to provide an annual report to the Commission on its activities.

Article 28.19 requires each Party to designate and notify a contact point for matters arising under this Chapter.

Article 28.20 limits recourse to dispute settlement under Chapter 31 (Dispute Settlement) for this Chapter to one year after entry into force and only for a sustained or recurring course of action or inaction that is inconsistent with a provision of this Chapter.

Annex 28-A includes additional provisions concerning the scope of the terms “regulations” and “regulatory authorities”.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government intends to implement this Chapter and ensure that each Party fully implements the Chapter as agreed to between the Parties.

The Government, with its CUSMA counterparts, will establish and engage in the Committee on Good Regulatory Practices to ensure the effective implementation of this Chapter. This trilateral committee will share expertise and information about approaches to regulatory cooperation.

CHAPTER 29: PUBLICATION AND ADMINISTRATION

1. CUSMA Provisions

This Chapter highlights the importance of transparency. This Chapter commits the Parties to publish their laws, regulations, procedures, and administrative rulings that could affect trade and investment and other matters covered by the Agreement, and outlines fairness and transparency requirements for domestic administrative and judicial proceedings. It also includes a Section on transparency and procedural fairness with respect to pharmaceutical products and medical devices.

Section A: Publication and Administration

Article 29.1 sets out the definitions that are specific to Section A.

Article 29.2 requires that each Party publish its laws, regulations, procedures, and administrative rulings of general application with respect to matters covered by the Agreement. It specifies that laws and regulations at the central level of government (for Canada, at the federal level) must be published on a free, publicly accessible website capable of performing searches and kept updated. For Canada, as specified in Annex 29-A, that obligation is met through the existing website for laws and regulations maintained by the Department of Justice Canada. Article 29.2 also requires that, to the extent possible, each Party publish in advance any measure that it plans to adopt and that interested persons and the other Parties have a reasonable opportunity to comment.

Article 29.3 provides for fairness and transparency in domestic administrative proceedings captured by Article 29.2.1. The Article requires that each Party provide persons of another Party directly affected by such proceedings with reasonable notice of the initiation of a proceeding, as well as the reasonable opportunity to provide input prior to any final administration action.

Article 29.4 requires each Party to have impartial and independent judicial, quasi-judicial, or administrative tribunals to review and if warranted, correct administrative decisions. Parties to proceedings before these courts or tribunals must have a reasonable opportunity to support or defend their case.

Section B: Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices

Section B outlines principles of relevance to the pharmaceutical products and medical devices sectors, such as the importance of innovation and the need to promote timely and affordable public access to these products. Section B also provides a consultative mechanism to discuss issues of interest to the Parties on a broad range of issues pertaining to these sectors.

Article 29.5 sets out the definitions that are specific to Section B, including a reference to the “Party-Specific Definitions” set out in Annex 29-B.

Article 29.6 outlines principles of relevance to the pharmaceutical products and medical devices sectors, such as timely and affordable access to pharmaceutical products and medical devices; protecting and promoting public health; and acknowledging the importance of research and development.

Article 29.7 applies to national health care programs in which a national health care authority makes decisions on pharmaceutical products and medical devices that are eligible for reimbursement. Annex 29-B notes that Canada does not currently operate such a national health care program. The Article and corresponding footnotes outline procedures for listing new pharmaceutical products or medical devices for reimbursement purposes to the extent that a Party’s national health care authority operates or maintains such procedures.

Article 29.8 outlines the ways in which pharmaceutical product manufacturers can disseminate information to health professionals and consumers, and specifies that this dissemination of information be only as permitted under a Party’s laws, regulations, and procedures.

Article 29.9 states that Parties shall provide an opportunity for consultation on issues covered by this Section upon request of another Party.

Article 29.10 provides that the provisions of this Section are not subject to dispute settlement under Chapter 31 (Dispute Settlement).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will continue to promote transparency in laws, regulations, and other proceedings in Canada and in the other Parties.

CHAPTER 30: ADMINISTRATIVE AND INSTITUTIONAL PROVISIONS

1. CUSMA Provisions

This Chapter sets out the framework for the overall management and administration of the Agreement, including the establishment of the Free Trade Commission and the Secretariat. It outlines the structure, functions and procedures of the Commission, which will oversee the implementation and operation of the Agreement with the support of the Secretariat.

Article 30.1 establishes a Free Trade Commission (Commission) which is composed of government representatives of each Party at the level of Minister or senior officials.

Article 30.2 sets out the functions of the Commission including: the consideration of matters with respect to the implementation of the Agreement; the consideration of proposals to modify or amend the Agreement; oversight on work of subsidiary bodies established under the Agreement (such as the various Chapter Committees, sub-Committees, or Working Groups); the consideration of ways to improve trade and investment among Parties; the establishment and amendment of Rules of Procedure and Code of Conduct applicable to dispute settlement; the periodic review of the Dispute Settlement panel roster; working to resolve disputes associated with the interpretation or application of the agreement; issuing interpretations of the provisions of the Agreement; seeking advice from non-governmental sources; and taking any other action agreed to by the Parties.

Article 30.3 provides that the Commission, and all other subsidiary bodies under the Agreement, will make decisions by consensus, unless otherwise set out elsewhere in the Agreement or decided by the Parties.

Article 30.4 provides that the Commission must meet within one year of the date of entry into force of the Agreement and after that as decided by the Parties. Meetings of the Commission will be chaired successively by each Party, and the Party chairing the meeting will be responsible for the related administrative support. The Article also makes clear that the Commission and other subsidiary bodies do not have to meet in person, but can do so by other agreed means such as videoconference or via email.

Article 30.5 sets out the framework to establish an “Agreement Coordinator” and “contact points” for each Party, who will facilitate communications between the Parties on any matter covered by the Agreement.

Article 30.6 provides for the establishment of the Secretariat and outlines its functions, which include providing assistance to the Commission, and providing administrative assistance to panels and committees established under the Agreement’s dispute settlement mechanisms under Section D of Chapter 10 (Antidumping and Countervailing Duty Matters) and Chapter 31 (Dispute Settlement), including under Annex 31-B (Canada-Mexico Facility-Specific Rapid Response Mechanism). As in NAFTA, the Secretariat will be comprised of “national sections”, for which each Party will establish a permanent office, appoint a Secretary, and pay for the related costs.

2. Canadian Legislation

Section 10 of the CUSMA Implementation Act provides the Governor in Council with the authority to designate, by order, any member of the Queen’s Privy Council for Canada to be the Minister for the purposes of the Act (for instance, as the representative of Canada on the Commission as per Section 11).

Section 11 of the CUSMA Implementation Act provides that the Minister is the principal representative of Canada on the Commission. The Minister will be designated by the Governor in Council pursuant to Section 10.

Sections 12 and 13 of the CUSMA Implementation Act provide that the NAFTA Secretariat and the related Canadian Section established under NAFTA will be continued as the CUSMA Secretariat and related Canadian Section.

Sections 14 and 15 of the CUSMA Implementation Act provide that the Secretary of the Canadian Section of the Secretariat will be responsible for fulfilling the Canadian Section’s mandate. The Secretary as well as the officers and employees of the Canadian Section of the Secretariat will be appointed in accordance with the Public Service Employment Act.

Section 18 of the CUSMA Implementation Act provides that the Government will pay its appropriate share of any expenditures incurred by or on behalf of the Commission and general expenses incurred by other subsidiary bodies established under the Agreement.

3. Intended Government Action

The Government will work with the other Parties to implement the Agreement in accordance with this Chapter and will actively participate in regular meetings of the Commission and subsidiary bodies to carry out the commitments of the Agreement.

CHAPTER 31: DISPUTE SETTLEMENT

1. CUSMA Provisions

This Chapter establishes a state-to-state dispute settlement mechanism that provides for a transparent, open and clear means to resolve disputes between Parties regarding the interpretation or application of the Agreement. Almost all of the obligations in the Agreement, including those related to labour and the environment, are subject to this dispute settlement system. The Chapter provides for the ability to resolve disagreements through cooperative means such as consultation and mediation, so that formal dispute settlement is used only if the Parties to a dispute fail to resolve it through other means. If cooperative means fail, the Chapter provides for the creation of arbitral panels to assess whether a Party has violated its obligations. If a Party is found to have failed to implement its obligations under the Agreement, the Chapter also requires the offending Party to bring itself in compliance (in other words, remove the violation), or face retaliation (in other words, the suspension of benefits of equivalent effect). Improving on the dispute settlement mechanism in NAFTA, this Chapter strengthens the dispute settlement mechanism by providing for a panel to be automatically established on request if consultations fail to resolve the matter and ensuring a roster of potential panellists is created. It also establishes Facility-Specific Rapid Response Labour Mechanisms that apply between the United States and Mexico (Annex 31-A) and Canada and Mexico (Annex 31-B). These Annexes create mechanisms for enforcing a failure of covered facilities and companies in Mexico to respect obligations regarding freedom of association and collective bargaining.

The only authorized means for Parties to enforce the obligations in the Agreement against each other is through the dispute settlement mechanism under this Chapter. Notably, CUSMA does not authorize Parties to unilaterally raise tariff levels or otherwise take measures contrary to commitments outlined in the Agreement without first having obtained a favourable panel report under this Chapter, except as specifically permitted, for instance under Article 32.6.4 (Cultural Industries).

Section A: Dispute Settlement

Article 31.1 emphasizes the importance of cooperation and consultations by the Parties to try to resolve disputes.

Article 31.2 establishes that the Chapter applies to any dispute between the Parties concerning the interpretation or application of the provisions of the Agreement, unless otherwise provided elsewhere in the Agreement. For example, Chapter 21 (Competition Policy), Chapter 25 (Small and Medium-Sized Enterprises), and Chapter 26 (Competitiveness) include provisions that exclude those chapters from the dispute settlement mechanism established by this Chapter. Chapter 10 (Trade Remedies), Chapter 16 (Temporary Entry), Chapter 22 (State-Owned Enterprises), Chapter 27 (Anticorruption), Chapter 28 (Good Regulatory Practices) and Chapter 33 (Macroeconomic Policies and Exchange Rate Matters) include provisions that limit or condition the application of this Chapter. Finally, certain chapters such as Chapter 17 (Financial Services), Chapter 23 (Labour) and Chapter 24 (Environment) include provisions that modify the application of Chapter 31 dispute settlement, such as introducing additional procedural steps or experience requirements for panellists.

Article 31.3 allows a complaining Party to choose the forum in which to settle a dispute but specifies that the same dispute cannot be heard simultaneously under the CUSMA dispute settlement process and that of another applicable international trade agreement (for example, the WTO, or CPTPP between Canada and Mexico). This means that, for example, if there is a substantially equivalent provision in CUSMA and in the WTO Agreement, and a panel has been established for the dispute at the WTO, a Party cannot also request the establishment of a panel under CUSMA.

Article 31.4 requires that Parties first seek to resolve a dispute through a consultations process. The consulting Parties are to enter into consultations within 30 days following a consultation request, or 15 days if the matter involves perishable goods. In order to have efficient and productive consultations, each consulting Party must provide sufficient information to enable a full examination of the matter at issue and to protect any confidential information of the other consulting Party.

Article 31.5 provides that Parties may, at any time, voluntarily undertake an alternative method of dispute resolution such as good offices, conciliation or mediation. These proceedings are to be confidential and without prejudice to the rights of the Parties in other proceedings. The Parties may suspend or terminate participation in these proceedings at any time. The Article also provides that these proceedings may continue while a dispute proceeds before a panel established under this Chapter. The Protocol of Amendment removed the provisions requiring a matter to go to the Commission if not resolved during consultations (i.e. before a panel could be requested).

Article 31.6 lays out the circumstances under which a complaining Party may request the establishment of a panel to hear a dispute and the procedure for such a request. The panel is established upon delivery of a request to do so. A panel’s terms of reference are set out in Article 31.7.

Article 31.8 requires that the Parties establish a roster of up to 30 potential panellists by the date of entry into force of the Agreement. Each Party is to designate up to 10 individuals. The Parties will endeavour to achieve consensus on the appointments, however if no consensus can be reached by one month after the date of entry into force of the Agreement, the roster will be comprised of the designated individuals. The roster will remain in effect for a minimum of three years or until the Parties constitute a new roster. This effectively means that an appointed roster will not expire until the Parties appoint a new one. Under NAFTA, rosters expired every three years, which could have caused challenges in establishing a panel.

The Article also sets out the qualifications for panellists, including independence from the Parties, specialized knowledge, and sound judgment. As well, panellists must comply with a Code of Conduct that sets out, among other things, requirements and procedures to prevent panellists from serving if they have actual or potential conflicts of interest that may affect their impartiality or independence. Specific expertise or experience is explicitly required for Party-appointed panellists in disputes arising under Chapter 23 (Labour) and Chapter 24 (Environment), and for other disputes regarding a specialized area of law (e.g. Chapter 17 (Financial Services), Chapter 27 (Anticorruption) and Chapter 33 (Macroeconomic Policies and Exchange Rate Matters)).

Article 31.9 sets out the rules for appointing panel members. Panels are to be composed of five panellists, unless the disputing Parties agree to a panel comprised of three members. With five panellists, each disputing Party appoints two panellists who are citizens of the other, and the disputing Parties together endeavour to decide together on the chair of the panel, within 15 days of the request for the establishment of the panel. Otherwise, rules are set out for selection of the chair by the Party chosen by random selection. The Article provides that Parties should normally select panellists from the roster and lays out the circumstances where a disputing Party may otherwise exercise a peremptory challenge (i.e. reject a proposed panellist without the need to state a reason). A Party can block the selection of panellists that are not on the roster, unless no one available on the roster has the required specialized expertise (e.g. in the case of a panellist for labour or environment disputes), in which case a Party cannot block the proposed appointment but can raise concerns about the appointment. The rules applicable to the replacement of panellists are outlined in Article 31.10.

Article 31.11 explains that the Commission will establish the Rules of Procedure for panels. Those rules must provide for transparent and open dispute settlement proceedings, including by ensuring that panel hearings will generally be open to the public, that submissions will be made public as soon as possible, subject to the protection of confidential information, and that non-governmental entities will have the opportunity to provide written views to the panel. The rules will also include rules of evidence for proceedings.

Article 31.12 modernizes the dispute settlement mechanism by requiring electronic filing of documents.

Article 31.13 describes the role of a panel – to make an objective assessment of the matter before it and to present a report that contains the findings, determinations and recommendations necessary for resolving the dispute, as well as the reasons for the findings and determinations. Paragraph 2 specifies that the findings, determinations and recommendations shall not add to or diminish the rights and obligations of the Parties under CUSMA. Panels must interpret the provisions of the Agreement in accordance with customary rules of interpretation of public international law, and in that regard the Article highlights the relevance of the VCLT, specifically in Articles 31 and 32.

Article 31.14 sets out the rules for the participation of another Party not directly involved in a dispute (known as third party) to participate when it considers that it has an interest in the dispute.

Article 31.15 provides for the use of experts by the panel when the panel and the disputing Parties agree this is appropriate.

Article 31.16 sets out the circumstances in which a panel may suspend or terminate its work.

Article 31.17 outlines the rules applicable to the initial and final panel reports, including the possibility for a disputing Party to submit written comments to the panel on its initial report, and the timelines associated with the process. The final report is to be made public within 15 days of its presentation to the disputing Parties.

Article 31.18 commits the Parties to endeavour to agree on the resolution of the dispute within 45 days from receipt of a final report (in cases where the panel found a violation), which can include elimination of the non-conformity, the provision of mutually acceptable compensation or another remedy agreed by the disputing Parties.

Article 31.19 allows for temporary remedies where the disputing Parties fail to agree on a resolution to the dispute under Article 31.18. When this occurs, the complaining Party is entitled to retaliate (i.e. to suspend benefits to a level equivalent to the nullification or impairment caused by the violation), but only until the Parties agree on the resolution of the dispute. The responding Party is not entitled to counter-retaliate under the Agreement.

The Article also provides that any disagreements on compliance or the equivalence of the retaliation may be referred to the panel for review. If the complaining Party has suspended benefits, this review allows a responding Party to obtain a panel decision as to whether it has in effect taken action that brings itself into compliance, or whether the level of retaliation was excessive.

Section B: Domestic Proceedings and Private Commercial Dispute Settlement

Article 31.20 outlines the process to be followed if a domestic court or other administrative body might interpret CUSMA. It specifies that if that court or body asks a Party for its views, or the Party otherwise wants to intervene, that Party must notify the other Parties before doing so. The Parties, through the Commission, should then try to agree on a joint response.

Article 31.21 prevents a Party from allowing lawsuits under its domestic law against another Party on the grounds that the other Party has violated CUSMA. This means that no proceedings may be brought in domestic courts against foreign governments alleging violations of the Agreement.

Article 31.22 represents a commitment by the Parties to encourage and facilitate the use of arbitration and other means of alternative dispute resolution for the settlement of international commercial disputes in the region.

Annexes 31-A and 31-B: Facility-Specific Rapid Response Labour Mechanisms

The Chapter contains Annexes with separate but virtually identical Facility-Specific Rapid Response Labour Mechanisms between Mexico and the United States (Annex 31-A) and Mexico and Canada (Annex 31-B). The summary below reflects the text of the Canada-Mexico mechanism under Annex 31-B.

Article 31-B.1 establishes that the purpose of this mechanism, including the ability to impose remedies is to ensure remediation of a “Denial of Rights”. This Article confirms that the mechanism only applies between Canada and Mexico. This Article also sets out the scope of claims that can be brought under the mechanism.

Article 31-B.2 sets out that a Denial of Rights is a good faith belief that workers at a covered facility are being denied the right of free association and collective bargaining. In other words, as long as Canada believes in good faith that there has been a violation, Canada can bring a claim. With respect to Canada, claims can only be brought if the facility in question in Canada has had an order enforced against it by the Canada Industrial Relations Board. With respect to Mexico, claims can be made generally regarding alleged violations of legislation required under Annex 23-A (Worker Representation in Collective Bargaining in Mexico).

Article 31-B.3 describes how lists of panellists for Rapid Response Labour Panels are to be established by entry into force of the Agreement. Canada and Mexico are to each appoint three people and agree on a joint list of three more people who can chair a panel. Those people will be appointed for at least four years. The panellists are also required to submit a report to the Parties, which will be made public, every four years on the functioning of the mechanism.

Article 31-B.4 sets out the process for Canada or Mexico to request a review by the responding Party or a Rapid Response Labour Panel as to whether there has been a Denial of Rights. If the responding Party determines that there has been a Denial of Rights, Article 31-B.4 also sets out the process and timelines for consultations to agree on how to address that problem. If the responding Party does not do a review or determines that there was no Denial of Rights and the complaining Party disagrees with that determination, the complaining Party can request a panel verification and determination.

Article 31-B.5 sets out the process for Canada or Mexico to ask a panel to verify the Covered Facility’s compliance with the law in question and/or determine whether there has been a Denial of Rights. Within three business days from the request, the Secretariat will establish the panel by selecting at random one panellist from each Party’s list and one panellist from the joint list.

Article 31-B.6 requires the established panel within five business days to confirm that the request identifies a “Covered Facility”, the respondent Party’s laws relevant to the alleged Denial of Rights and the basis for the complaint.

Article 31-B.7 sets out the process and timelines for conducting a verification. The panel can come to a determination on whether there has been a Denial of Rights even if the request for verification is denied, or there is interference in the verification. If the responding Party has conducted a verification but the complaining Party disagrees with the determination the panel will request the documents establishing the results of the verification. If the responding Party determined there was a Denial of Rights but the complaining Party alleges that measures necessary to correct the situation have not been taken, the respondent must submit to the panel the documents supporting the actions it took to correct the situation. The complaining Party must be given an opportunity to respond to the responding Party’s submission.

Article 31-B.8 sets out the timelines and panel process for a determination as to whether there is a Denial of Rights. The panel must make its determination on whether there has been a Denial of Rights, including its severity, within 30 days after conducting the verification or if it does not conduct a verification within 30 days after the panel is established. Before making the determination, the panel must provide the disputing Parties the opportunity to make submissions to the panel. In addition, if requested by the responding Party, the panel must include recommendations on remediation. Finally, the panel’s determination must be made public.

Under Article 31-B.9, if the panel has determined that there has been a Denial of Rights, the complaining Party can impose remedies after providing at least five business days’ notice to the responding Party. During the five-day waiting period, the responding Party can request consultations with the complaining Party.

Article 31-B.10 paragraphs 2 through 4 allows the complaining Party to impose remedies that are the most appropriate if there has been a Denial of Rights and the Parties have not reached an agreement on remediation. Remedies can include suspension of preferential tariff treatment for goods made at the Covered Facility, or the imposition of penalties for goods made at or services provided by the Covered Facility. If there is a second finding of a violation at the same facility or at another facility owned or controlled by the same company or person, the remedies can be expanded to all facilities owned by the company or person. After a third finding of a violation, the remedies can include prohibiting imports of goods.

If Canada or Mexico has imposed remedies under this Article, the other Party can ask for consultations to discuss those remedies. If there is disagreement as to whether the violation has been addressed, the panel can be reconvened to make a new determination. If the panel determines that the Denial of Rights has not been addressed, the respondent has to wait at least 180 days before asking the panel again to decide if the violation has been addressed. The remedies imposed by the complaining Party can remain in place until either both countries agree that the violation has been addressed, or a panel determines that it has.

Article 31-B.11 requires that the Parties act in good faith in the use of the mechanism. If one Party thinks the other has not acted in good faith, either in using the mechanism or by imposing alleged excessive remedies, that Party can request a state-to-state dispute settlement panel under this Chapter to determine whether a Party did not act in good faith. If a panel makes that determination and the Parties fail to agree on a resolution within 45 days of receipt of the report, the Party that brought the claim that the other Party did not act in good faith can impose a remedy under this Chapter or prevent the other Party from using the mechanism for two years.

Article 31-B.12 essentially allows the scope of the mechanism to be expanded if a state-to-state dispute settlement panel finds that a Party has violated the labour rights obligations in Article 23.3 of the Agreement or has failed to effectively enforce its labour laws under Article 23.5. If that happens, the complaining Party in that dispute can use this mechanism to bring challenges against particular facilities not only for the obligations covered in Article 31-B.1, but also for the obligations that the state-to-state panel found to have been violated. Those complaints can be brought for at least two years, and up to six, depending on when the next joint review under Article 34.7 is concluded.

Article 31-B.13 requires the Parties to review the list of priority sectors on an annual basis and decide whether to add any sectors to the list.

Article 31-B.14 requires each Party to cooperate and support efforts by Covered Facilities to operate in a way to avoid determinations of a Denial of Rights.

Article 31-B.15 sets out a number of definitions, in particular defining a “Covered Facility” as a facility that is in a Party’s territory that produces a good or supplies a service traded between the Parties or that competes with a good or services of the other Party and is in a “Priority Sector”. A “Priority Sector” is defined as a sector that produces manufactured goods, including autos and auto parts and steel and aluminum, that supplies services, or involves mining.

2. Canadian Legislation

Section 11 of the CUSMA Implementation Act provides that a Minister designated by the Governor in Council is the principal representative of Canada on the Commission. Further, section 16 authorizes that Minister to appoint panellists (Annex 10-B.1 or Article 31.9 of the Agreement) and committee members (Annex 10-B.3) and to propose the names of individuals to be included in the roster under Annex 10-B.1 or 10-B.3 or Article 31.8 of the Agreement.

Section 18 of the CUSMA Implementation Act provides the authority for payment of remuneration and expenses incurred by panels and the Free Trade Commission, as well as among other bodies established under the Agreement.

Section 19 of the CUSMA Implementation Act provides a mechanism for the suspension of obligations by Canada in a case where Canada is a complaining Party following a determination by a panel that the responding Party has failed to bring its measure(s) into compliance. Any suspension made under this clause will be in effect only so long as the inconsistent measure is not rectified by that responding Party.

Section 20 of the CUSMA Implementation Act provides authority for the imposition of remedies by Canada under Article 31-B.10 of the Canada-Mexico Facility-Specific Rapid Response Labour Mechanism set out in Annex 31-B of the Agreement when a Rapid Response Labour Panel has determined that there has been a denial of rights at a Covered Facility of the other Party. If the remedies being recommended to the Governor in Council include remedies that suspend rights or privileges granted under the Customs Tariff or remedies such as surtaxes or levies described in the other paragraphs of subsection 53(2) of the Customs Tariff, then the designated Minister must consult with the Minister of Finance before making the recommendation.

3. Intended Government Action

The Government will ensure that the individuals proposed for appointment to a panel or to the roster under Articles 31.8 and 31.9 and the lists under Article 31-B.3 possess the requisite qualifications in order to enable disputes to be heard in a timely, objective and impartial manner.

The Government will also consult closely with affected stakeholders with respect to dispute settlement under this Chapter and with the provinces and territories in the preparation and presentation of submissions in any dispute settlement proceedings in which provincial or territorial measures are at issue.

CHAPTER 32: EXCEPTIONS AND GENERAL PROVISIONS

1. CUSMA Provisions

This Chapter sets out cross-cutting exceptions and other provisions that generally apply to several chapters or the entire Agreement. These exceptions are designed to ensure that Canada and the other Parties maintain the ability to take legitimate policy actions in the public interest, including with respect to health, the environment, indigenous rights, and national security; and for Canada to take measures to promote and protect its cultural industries. Action taken under the authority of the exceptions is permitted even if it otherwise would have violated obligations in the Agreement. The Chapter also sets out some other general provisions, primarily related to information protection and access.

Article 32.1 sets out general exceptions to the obligations in the Agreement. With respect to various goods-related chapters and provisions, the general exceptions in the GATT 1994, and their interpretive notes are incorporated into the Agreement, with the necessary changes having been made to make them applicable to the Agreement. Likewise, with respect to services-related chapters and provisions, the applicable general exceptions in the GATS have been incorporated into the Agreement with the necessary changes having been made to make them applicable to the Agreement. This allows Canada and the other Parties to take, for example, measures (including environmental measures) necessary to protect human, animal, or plant life or health that would otherwise be inconsistent with obligations under the Agreement. In addition, paragraph 4 clarifies that the Parties are allowed to impose retaliation authorized following WTO litigation or litigation under another applicable trade agreement (such as CPTPP with respect to Canada and Mexico), even if that retaliation would otherwise violate CUSMA commitments, such as on tariffs.

Article 32.2 provides a general exception to the Agreement on the grounds of essential security interests. This ensures that Canada and the other Parties are not required to provide or allow access to any information if they determine that doing so would go against their essential security interests. This exception also ensures that Canada and the other Parties may apply measures that they consider necessary to fulfill their obligations on maintaining or restoring international peace and security, or to protect their own essential security interests. In keeping with CPTPP, the exception is more broadly worded than in other trade agreements (such as Article XXI of the GATT 1994). As is the case for other exceptions in this Chapter, a Party could still challenge the grounds upon which this exception is invoked before a dispute settlement panel.

Article 32.3 establishes a taxation exception that generally preserves existing taxation measures and secures flexibility in the development of future tax policies. It also deals with the relationship between CUSMA and tax conventions. Like Canada’s other trade agreements, except for CETA, this exception provides that taxation measures are not subject to obligations in the Agreement, except as follows:

Paragraph 5 provides that Article 2.3 (National Treatment) and Article 2.15 (Export Duties, Taxes or Other Charges) apply to all taxation measures relating to goods.

Paragraph 6(a) provides that Article 15.3 (National Treatment) and Article 17.3 (National Treatment) apply to direct tax measures (in other words, taxation measures on income, capital gains, and taxable capital of corporations) if these measures relate to the purchase or consumption of services.

Paragraph 6(b) provides that the national treatment obligations under Articles 14.4, 15.3, and 17.3, most-favoured-nation obligations under Articles 14.5, 15.4, and 17.4, and Article 19.4 (Non-discriminatory Treatment of Digital Products) apply to indirect tax measures, such as sales and excise tax measures, on services, digital products, and investments.

Paragraph 6(c) provides that Article 19.4 (Non-discriminatory Treatment of Digital Products) applies to direct taxes if these measures relate to the purchase or consumption of digital products.

However, paragraphs 6(a) to (c) do not apply to non-conforming taxation measures in place on the date of entry into force of NAFTA, including their amendments (as long as the amendment does not make the measure more in conflict with other obligations in the Agreement), or new taxation measures aimed at ensuring the equitable or effective imposition or collection of taxes.

Paragraph 7 provides that paragraphs 2, 3, and 4 of Article 14.10 (Performance Requirements) apply to taxation measures on investments.

Paragraph 8 provides that Article 14.8 (Expropriation and Compensation) applies to taxation measures on investments.

Article 32.3 also sets out the relationship between CUSMA and conventions for the avoidance of double taxation. It provides that the Agreement does not affect the rights and obligations of a Party under a tax convention. However, if a Party believes that there is an inconsistency between the requirements of CUSMA and a tax convention, the Article outlines a process for the Parties to resolve that inconsistency.

Article 32.4 allows Parties to adopt or maintain temporary safeguards to address a balance-of-payments crisis. It provides that a Party may put in place a safeguard to restrict capital payments or transfers if there are balance-of-payments or financial crisis difficulties (or the threat of those difficulties) or serious difficulties for macroeconomic management. Any safeguards imposed would have to meet the requirements set out in this Article, including not treating Parties differently than other trading partners, not normally lasting more than 18 months, and complying with International Monetary Fund (IMF) and GATT 1994 balance of payment requirements.

Article 32.5 sets out a general exception on Indigenous peoples’ rights, which confirms that Canada’s commitments under CUSMA do not impact its ability to adopt or maintain measures to meet its obligations to Indigenous peoples under section 35 of the Constitution Act, 1982, as well as those set out in self-government agreements. It likewise recognizes Mexico and the United States’ respective legal obligations to Indigenous peoples. This is the first such provision in any international trade agreement involving the Parties.

Article 32.6 maintains the general cultural industries exception from CUSFTA and NAFTA that ensures the Agreement leaves unimpaired Canada’s ability to pursue objectives related to cultural industries. This exception preserves Canada’s flexibility to adopt and maintain programs and policies that support the creation, distribution, and development of Canadian artistic expression and content, including in the online environment. It allows Canada to take measures with respect to its cultural industries without contravening the obligations in the Agreement, including in the digital space, except for obligations related to tariff treatment of imported goods under Article 2.4 (Treatment of Customs Duties), and certain programming commitments related to simultaneous substitution of advertising during the broadcast of the Super Bowl and access for the United States programming services specializing in home shopping to the Canadian market under Annex 15-D (Programming Services). Paragraph 3 provides that the United States and Mexico each have the right to take a measure similar to one that Canada may adopt or maintain under this exception vis-à-vis Canadian goods, services and content.

Similar to the cultural industries exception in CUSFTA and NAFTA, paragraph 4 allows a Party that has been affected by a measure justified by another Party on the basis of this exception to retaliate (in other words, take a measure of equivalent effect), without needing to go to dispute settlement first. Any dispute regarding that retaliation must take place under the CUSMA dispute settlement mechanism (in other words, such a dispute could not take place at the WTO), unless CUSMA dispute settlement is blocked. The CUSMA panel would only consider whether the challenged measure does fall under the cultural exception and whether the level of retaliation is proportionate.

Article 32.7 states that the Agreement does not require Canada or any other Party to provide or allow access to information that would impede law enforcement, prejudice the legitimate commercial interests of particular companies, or otherwise be contrary to the public interest.

Article 32.8 requires the Parties to adopt and maintain a legal framework that provides for the protection of personal information held by private parties, and to publish information related to this protection, including on individuals’ access to remedy and private sector compliance. This provision is essentially the same as Article 19.8 (Personal Information Protection), but is not restricted to information gathered through digital trade. So it would apply, for example, to personal information recorded electronically from physical sales in store-fronts. This is the first international trade agreement to have an obligation of this broad scope related to personal information protection.

Article 32.9 requires the Parties to maintain a legal framework that provides for access to government information in their respective territory. It specifies that access provided to individuals of another Party shall be no less favourable than that provided to individuals of the Party or of another country, in the Party’s territory. This is the first time Parties in an international trade agreement have committed to open governmental information in this way.

Article 32.10 outlines transparency disciplines regarding FTA negotiations with non-market countries. Non-market countries are those determined by one party to be a non-market economy under its trade remedy laws when CUSMA was signed in November 2018 and do not include countries with which a Party had already signed an FTA at that time (e.g. this provision would not apply to CPTPP Parties). Canada does not designate countries as non-market economies. Rather, determinations may be made on a case-by-case basis, as part of antidumping investigations, particular to the sector under investigation. If a Party plans to negotiate an FTA with a non-market country covered by this provision, it must inform the other Parties of its intention to do so at least three months in advance. If the Party then decides to sign an FTA with that country, it must provide the other Parties with the opportunity to review the full text of the FTA at least 30 days before signing the FTA.

If that FTA with a non-market country then enters into force, and if both of the other Parties so choose, then they may withdraw from CUSMA on six months’ notice and replace it with a bilateral agreement between them. This is effectively similar to the existing withdrawal clause in Article 34.6 (Withdrawal), which enables a Party to withdraw from CUSMA after providing six months’ notice with no reason required. The primary difference is that under Article 34.6 (Withdrawal), one Party chooses to withdraw, leaving CUSMA in force between the other two Parties, while under Article 32.10, two Parties acting together choose to withdraw from CUSMA while maintaining the provisions of the Agreement in force between them as a new bilateral agreement. In other words, irrespective of the transparency disciplines outlined in this Article, each Party always has the right to withdraw from CUSMA at any time, subject to notification, which is a standard provision found in all of Canada’s FTAs.

Article 32.11 reserves Mexico’s right to adopt or maintain a non-conforming measure for which it has not taken a specific reservation under Chapter 14 (Investment), 15 (Cross-Border Trade in Services), and Chapter 22 (State-Owned Enterprises and Designated Monopolies), but only to the extent such measure is consistent with the least restrictive Mexican measure found under reservations and exceptions to parallel obligations found in other trade and investment agreements that Mexico has ratified prior to CUSMA’s entry into force. In effect, this means that Mexican flexibility for these non-conforming measures is limited by commitments it made in previous agreements, such as the WTO or CPTPP.

Article 32.12 provides that a decision made by Canada whether or not to permit an investment following a review under the Investment Canada Act is not subject to the dispute settlement mechanism established in Chapter 31.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

CUSMA allows Canada to take legitimate regulatory action in the public interest including where necessary by relying on the general exceptions of the Agreement.

CHAPTER 33: MACROECONOMIC POLICIES AND EXCHANGE RATE MATTERS

1. CUSMA Provisions

This Chapter establishes commitments for each Party to maintain market-determined exchange rates and to refrain from competitive devaluation. This Chapter includes non-binding commitments relating to exchange rate policy and continued dialogue between the Parties on macroeconomic and exchange rate policies, as well as enforceable commitments for a high level of transparency and public reporting on certain factors that may affect exchange rates and other macroeconomic issues.

Article 33.1 defines various terms for the purposes of this Chapter. Although the definition of “intervention” is broad, this Chapter does not apply to monetary and related credit policy, such as the routine management of foreign reserve portfolios.

Article 33.2 sets out general principles, to which all Parties agree, on the important role that the maintenance of market-determined exchange rates and sound policies play in supporting macroeconomic stability in the region.

Article 33.3 establishes the scope of this Chapter, to ensure it does not capture the routine actions or policies carried out by the Parties’ respective exchange rate, fiscal, or monetary authorities, including their central banks. This helps to clarify that the intent of this Chapter is to target interventions by a Party designed to influence the value of its exchange rate for competitive purposes.

Article 33.4 establishes the general principles for exchange rate practices that the Parties aim to meet under this Chapter. These practices include achieving and maintaining market-determined exchange rates, refraining from competitive devaluation, and pursuing sound macroeconomic policies. If a Party carries out an intervention that falls within the scope of this Chapter with respect to the currency of another Party, it should inform that Party in a prompt manner.

Article 33.5 concerns transparency and reporting. It requires each Party to make publicly available, according to set timelines, certain information on monthly foreign exchange reserves data and forward positions; monthly interventions in spot and forward foreign exchange markets; quarterly balance of payments portfolio capital flows; quarterly exports and imports; and a specific IMF report relating to exchange rates. This is the only Article in this Chapter that can be brought to formal dispute settlement under Chapter 31 (Dispute Settlement).

Article 33.6 establishes a Macroeconomic Committee to monitor the implementation of this Chapter and to facilitate continued dialogue between the Parties on the macroeconomic and exchange rate policies of each Party. The Macroeconomic Committee will meet at least annually, unless the Parties decide otherwise. It will have authority to amend Articles within this Chapter, with the exception of Article 33.3, and to interpret Articles within this Chapter. Any amendments or interpretations issued by the Macroeconomic Committee will require the consensus of the Parties.

Article 33.7 establishes the process for a consultation mechanism to facilitate bilateral dialogue between the Parties if a Party considers another Party to be in violation of Article 33.5 or for issues that a Party may wish to discuss relating to Article 33.4. Although these consultations can be initiated on a bilateral basis to address bilateral concerns, the third Party may be notified and invited to participate. If these consultations reach an impasse, either of the Parties involved in the bilateral issue under discussion may request IMF involvement and input.

Article 33.8 sets out the conditions for which Chapter 31 (Dispute Settlement) is available with respect to this Chapter. A Party may use Chapter 31 (Dispute Settlement) only for a claim that a Party has violated Article 33.5 in a recurring or persistent manner. Before going to formal dispute settlement, the Parties must first attempt to resolve the issue through the consultation mechanism established in Article 33.7. This Article also limits any suspension of benefits (in other words, trade retaliation) to be no greater than the benefits received by the offending Party from its violation of Article 33.5.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Chapter.

3. Intended Government Action

The Government will work with the Parties on the Macroeconomic Committee as required under this Chapter.

CHAPTER 34: FINAL PROVISIONS

1. CUSMA Provisions

This Chapter includes general provisions related to entry into force (when the agreement legally starts operating), amendment (how it can be changed) and termination (how a Party may withdraw from it). The Chapter also outlines a new process for review and ongoing modernization, which will help ensure a stable, up-to-date trading environment for Canadian consumers, businesses and investors. It also includes provisions to ensure the smooth transition from NAFTA to CUSMA.

Article 34.1 provides that any issues under consideration by a body of NAFTA may be continued under an equivalent body of CUSMA and that membership of the NAFTA Advisory Committee on Private Commercial Disputes, a body that includes private parties and continues unchanged in CUSMA, may also continue. It also sets out transitional provisions in relation to the availability of the dispute settlement mechanism for trade remedies established under Chapter 19 of NAFTA and related administrative functions. Finally, it ensures that goods imported before CUSMA enters into force will still be able to obtain appropriate tariff treatment under NAFTA procedures.

Article 34.2 confirms that the annexes, appendices, and footnotes to the text of the Agreement constitute an integral part of the Agreement. This means they are legally part of the Agreement (in other words, CUSMA obligations and exceptions apply to these elements). Note that this also applies to those Side Letters that provide in their text that they are integral parts of the Agreement (Canada-United States Side Letters on Energy, Natural Water Resources, and Research and Development Expenditures).

Article 34.3 establishes that an amendment may be agreed to in writing, and will enter into force 60 days after the date on which the last Party has notified the others, in writing, of its approval of the amendment or on another date agreed to by the Parties.

Article 34.4 provides that the Parties consult on whether to amend the Agreement if a provision of the WTO Agreement that has been incorporated by reference into the Agreement is amended.

Article 34.5 sets out when CUSMA enters into force (legally starts operating). The CUSMA text is an Annex to the Protocol Replacing the North American Free Trade Agreement with the Agreement between Canada, the United States of America, and the United Mexican States (“Protocol”). Paragraph 2 of the Protocol provides that entry into force for both the Protocol and the Annex - and therefore the Agreement - will be on the first day of the third month following the last written notification of the Parties that they have completed their respective domestic implementation procedures (in other words, that they have ratified and are ready to implement the Agreement). CUSMA can only enter into force once all three Parties have provided their notification of ratification. The Protocol also provides that CUSMA will supersede NAFTA once entered into force; until then NAFTA remains in force.

Article 34.6 enables a Party to withdraw from CUSMA after providing six months’ notice to the other Parties. The Agreement would remain in force between the two other Parties (unless one of these also invokes the withdrawal clause). This is a standard provision found in all of Canada’s FTAs which allows a Party to withdraw from the Agreement at any time, subject to notification. The entity entitled to provide that notification is a matter of domestic law for each of the Parties.

Article 34.7 requires the Commission (made up of a Minister from each of the Parties) to conduct a formal review of the operation of the Agreement every six years, starting on the sixth anniversary of CUSMA’s entry into force. It establishes clear review procedures, thereby encouraging Parties to modernize and update the Agreement as required in response to changes in the trade and investment environment. As part of this review, each Party confirms, through a written notice by its head of government, if it wishes to extend the duration of the Agreement for another 16-year period. If all Parties do, the next formal review takes place at the end of a six-year period at the latest. Absent confirmation by one or more Parties, the Commission is required to conduct a joint review every year for the remainder of the 16-year term. During this time, the Parties may confirm in writing their wish to continue the Agreement. If they do not, the Agreement will be terminated at the expiry of the term.

Article 34.8 provides that the English, French and Spanish versions of the Agreement are equally authentic. This means that the three versions of the Agreement have equal legal and interpretative value, unless otherwise provided. For instance, the tariff schedules of each Party (Annex 2-B) are only authentic in their original languages.

2. Canadian Legislation

Section 213(1) of the CUSMA Implementation Act provides that the majority of the provisions of the Act will come into force on the day on which CUSMA enters into force, with the exception of the following sections of the Act which will come into force subsequent to the entry into force of CUSMA:

3. Intended Government Action

The Government will implement the Agreement as per the above provisions. Any amendments made under Article 34.3 will be done in accordance with Canadian law and policy.

CANADA-UNITED STATES SIDE LETTER ON SECTION 232 TARIFFS – AUTOS AND AUTO PARTS

1. Side Letter Provisions

A key Canadian objective in the modernization of NAFTA was to obtain an exemption from future measures taken under Section 232 of the United States Trade Expansion Act of 1962. This objective was achieved for Canada’s automotive sector in the Canada-United States Side Letter on Section 232 Tariffs – Autos and Auto Parts. The Side Letter has already entered into force but the exemption will only take effect should the United States apply Section 232 measures on exports of Canadian automotive goods. The Side Letter ensures that Canadian exports of passenger vehicles and automotive parts within annual quantitative limits, and light trucks, will not be subject to any Section 232 measures the U.S. may impose on automotive goods in the future.

While not legally part of CUSMA, the Side Letter constitutes an enforceable agreement between Canada and the United States which entered into force on November 30, 2018 (the date of its signature) and integrates the dispute settlement mechanisms of NAFTA and CUSMA.

The Side Letter establishes the product scope and the annual quantities for Canada’s exemption from Section 232 measures. The annual exemption applies to 2.6 million passenger vehicles and US$32.4 billion worth of automotive parts. Light trucks (e.g. pick-up trucks) are fully exempt from any Section 232 measure and not subject to any annual quantitative limits. Furthermore, the Side Letter specifies that NAFTA or CUSMA (whichever Agreement is in force at the time) originating and non-originating passenger vehicles, light trucks, and auto parts exported from Canada to the United States are eligible for the exemption from Section 232 measures. For non-originating goods, the customs duty applied by the United States cannot exceed the most-favoured-nation rate that was in effect on August 1, 2018. This means that for passenger vehicles the United States cannot apply a customs duty higher than 2.5% and for pick-up trucks the United States cannot apply a customs duty higher than 25%.

The Side Letter establishes that Canada is solely responsible for the monitoring and administration of the quantities of passenger vehicles and auto parts eligible for exclusion. As such, Canada will develop the methodologies to allocate the quantities of passenger vehicles and auto parts.

In addition, the Side Letter specifies that the Government must consult with Canadian producers exporting passenger vehicles from Canada to the United States in determining the allocation of the annual exemption quantities. It also specifies that Canada shall give priority to the manufacturers of passenger vehicles that are producing vehicles that qualify for preferential tariff treatment under NAFTA or CUSMA, whichever Agreement is in force at the time. The paragraph also provides that in determining the exemption allocation procedures for automotive parts, the Government shall consult with automotive parts producers in Canada. Canada is required to notify and consult the United States on its allocation methodologies at least 30 days prior to publication or implementation of such allocations, whichever comes first.

Finally, the Side Letter provides that the obligations of the United States set out in the letter are subject to dispute settlement under NAFTA Chapter 20 (Institutional Arrangements and Dispute Settlement) or CUSMA Chapter 31 (Dispute Settlement), depending on which Agreement is in force at the time of a dispute. Canada’s recourse to dispute settlement is limited to whether the United States has excluded light trucks, the number of passenger vehicles, and the value of auto parts as set out in the Side Letter.

2. Canadian Legislation

No amendments to Canadian legislation arise from this Side Letter.

3. Intended Government Action

Canada will only implement and administer the exemptions outlined in this Side Letter if the United States imposes Section 232 measures on Canadian exports of vehicles or automotive parts to the United States. Canadian stakeholder views will be considered prior to any decisions being taken on the administration of the excluded quantities.

CANADA-UNITED STATES SIDE LETTER ON SECTION 232 TARIFFS – FUTURE MEASURES

1. Side Letter Provisions

The Canada-United States Side Letter on Section 232 Future Measures outlines certain requirements that must be followed should the United States impose future measures pursuant to Section 232 of the United States Trade Expansion Act of 1962. In particular, this Side Letter requires the United States to delay the application to Canada of any new measure(s) enacted under Section 232 to goods and services, including for passenger vehicles and automotive parts, for at least 60 days after the imposition of the new measure. During this period, the United States and Canada must seek to negotiate an appropriate outcome based on industry dynamics and historical trading patterns.

In addition, the Side Letter clarifies that Canada retains its rights under the WTO to challenge a Section 232 measure taken by the United States. Furthermore, Canada will continue to have the ability to take offsetting (retaliatory) measures of equivalent commercial effect for any measures imposed by the United States under Section 232 that are inconsistent with NAFTA, CUSMA and/or WTO Agreements.

While not legally part of CUSMA, this Side Letter constitutes an enforceable agreement between Canada and the United States which entered into force on November 30, 2018 (the date of its signature).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Side Letter.

3. Intended Government Action

No government actions arise from this Side Letter.

CANADA-UNITED STATES SIDE LETTER ON ENERGY

1. Side Letter Provisions

In the modernization of NAFTA, Canada’s objectives included addressing market access opportunities and commercial irritants; providing for enhanced cooperation and coordination on energy issues; demonstrating the economic importance of the sector; and ensuring that CUSMA supports continued growth and enhanced North American competitiveness.

Based on these objectives, CUSMA includes a Canada-United States Side Letter on energy that goes beyond a focus on energy goods to address issues of importance to the North American energy sector. The Side Letter on energy contains disciplines related to energy regulatory measures and energy regulatory transparency, which are located in an Annex to the letter.

This Side Letter establishes a bilateral agreement between the United States and Canada. The Side Letter is an integral part of CUSMA and will enter into force on the same date. This means that the Side Letter is a legal part of the Agreement (in other words, CUSMA obligations and exceptions apply to the Side Letter) and it is subject to Chapter 31 (Dispute Settlement).

Article 1 sets out the definitions for the Annex.

Article 2 establishes that obligations within the Annex apply to energy regulatory measures proposed, adopted or maintained by the central (i.e. federal) level of government.

Article 3 recognizes the importance of integration in the North American energy markets based on market principles. It encourages the Parties to promote North American energy cooperation, specifically in the areas of energy security and efficiency, standards, joint analysis and development of common approaches.

Article 4 applies to authorizations for participating in energy-related activities in a Party’s territory. This Article requires Parties to maintain or establish independent regulatory authorities. With the goal of supporting North American energy market integration, this Article encourages the Parties to ensure that the implementation of energy regulatory measures is orderly, equitable and avoids disruption of contractual relationships to the maximum extent practicable. It sets out transparency requirements for the authorization process, including the requirement to publish information relevant to the authorization, and encourages Parties to administer their processes in accordance with the published information. Article 4 also encourages Parties to allow certain activities (e.g. performing maintenance work or ensuring the safety of the existing infrastructure) with respect to cross-border infrastructure to be undertaken under the initial authorization. This Article includes obligations concerning monetary payments (e.g. application fees or royalties) for participating in energy-related activities. Finally, it states that Parties must provide the right of appeal or review for decisions concerning authorizations by an independent authority; however, this provision does not apply to specified activities associated with infrastructure at international boundaries.

Article 5 states that measures governing access to or use of electric transmission facilities or pipeline networks, for the purposes of importation from another Party, must be neither unduly discriminatory nor unduly preferential. These measures include any tolls, rates or charges. The term “neither unduly discriminatory nor unduly preferential”, which is commonly-used in the energy sector, is defined in such a manner as to permit discrimination or preference only in accordance with Article XX of the GATT 1994 and its interpretive notes, or Article XIV of the GATS, as applicable.

This article also brings forward a commitment from CUSFTA with respect to the Bonneville Power Administration’s treatment of British Columbia Hydro. This commitment ensures that the Bonneville Power Administration affords BC Hydro treatment that is no less favourable than that afforded to utilities located outside of the Pacific Northwest.

Article 6 specifies that Articles 4 (Energy Regulatory Measures and Regulatory Transparency) and 5 (Access to Electric Transmission Facilities and Pipeline Networks) of the Annex are subject to the relevant provisions, exceptions and non-conforming measures of Chapter 14 (Investment), Chapter 15 (Cross-Border Trade in Services), Chapter 2 (National Treatment and Market Access for Goods), and Article 32.1 (General Exceptions).

2. Canadian Legislation

To implement Canada’s obligations under the Side Letter on energy, amendments are required to the Canada Energy Regulator Act (CERA). These amendments are set out in sections 207 through 212 of the CUSMA Implementation Act.

The CERA establishes an independent energy regulatory body that is responsible for ensuring that energy projects within Parliament’s jurisdiction are constructed, operated and abandoned in a safe and secure manner that protects people, property and the environment. The CERA also outlines regulations for the trade of energy products as well as measures to ensure that hearing and decision-making processes related to energy are fair, inclusive, transparent and efficient.

Sections 207 through 212 of the CUSMA Implementation Act amend the CERA to repeal references to NAFTA which are no longer relevant. Consequential amendments are also made to update references from NAFTA to CUSMA in two sections.

3. Intended Government Action

No government actions arise from this Side Letter.

CANADA-UNITED STATES SIDE LETTER ON WINE

1. Side Letter Provisions

The Canada-United States Side Letter on wine sets out an understanding between the Parties regarding the actions required to reach a mutually agreed solution related to WTO dispute settlement cases taken by the United States regarding the sale of British Columbia wine (namely DS520 and DS531). These cases concern British Columbia measures that allowed only British Columbia wine to be sold on grocery store shelves in the province. This Side Letter sets out modifications to these measures that were to be implemented by British Columbia no later than November 1, 2019. The letter further states that, upon fulfillment of the commitments, both Parties will notify the WTO Dispute Settlement Body that a mutually agreed solution has been reached for cases DS520 and DS531.

While not legally part of CUSMA, this Side Letter constitutes an enforceable agreement between Canada and the United States which entered into force on November 30, 2018 (the date of its signature).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Side Letter.

3. Intended Government Action

The Government of Canada will work with the Government of British Columbia and the Government of the United States to ensure compliance with the letter and notify the WTO with respect to the mutually agreed solution.

CANADA-UNITED STATES SIDE LETTER ON NATURAL WATER RESOURCES

1. Side Letter Provisions

The Agreement incorporates a Canada-United States Side Letter which explicitly confirms that natural water resources are excluded from CUSMA obligations. This Side Letter references and is similar in content to the 1993 Canada-United States-Mexico Declaration on Water Resources and the NAFTA, which was issued to confirm publicly that a NAFTA Party could not be obliged to export bulk water or otherwise require that water in its natural state become a traded commodity.

Specifically, the Side Letter confirms that CUSMA does not create any rights to the natural water resources of the Parties. It clarifies that water is not covered by the Agreement, unless it has entered into commerce and has become a good or product. In other words, the Agreement would only apply to water that has, for example, already been packaged as a beverage for sale, and not to water in its natural, free flowing state, such as water in lakes, rivers, reservoirs, or water basins. It further confirms that nothing in the Agreement requires a Party to exploit its water for commercial use, including its withdrawal, extraction, or diversion for export in bulk.

The Side Letter also notes that international rights and obligations respecting natural water resources are addressed in separate treaties and agreements. Notably for Canada, this includes the Boundary Waters Treaty of 1909, which prevents and resolves disputes over the use of the waters shared by Canada and the United States and settles other transboundary issues.

This Side Letter is an integral part of CUSMA and will enter into force on the same date. This means that the Side Letter is a legal part of the Agreement (in other words, CUSMA obligations and exceptions apply to the Side Letter) and it is subject to Chapter 31 (Dispute Settlement).

2. Canadian Legislation

No amendments to Canadian legislation arise from this Side Letter.

3. Intended Government Action

No government actions arise from this Side Letter.

CANADA-UNITED STATES SIDE LETTER ON GUIDELINES FOR RESEARCH AND DEVELOPMENT EXPENDITURES, 2004

1. Side Letter Provisions

The Side Letter on Guidelines for Research and Development Expenditures intends to provide assurance that, notwithstanding that a NAFTA Chapter 11 Tribunal found the Newfoundland and Labrador Guidelines for Research and Development Expenditures (2004) to be inconsistent with the performance requirements provision of NAFTA’s investment chapter with respect to the Hibernia and Terra Nova projects, not listing this measure as a non-conforming measure will not serve as an impediment to the United States certification process under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (i.e. Trade Promotion Authority). This letter is without prejudice to the United States’ or Canada’s position as to whether this measure is consistent with the Agreement.

This Side Letter is an integral part of CUSMA and entered into force on November 30, 2018. This means that the Side Letter becomes a legal part of the Agreement when it enters into force, and has independent legal standing before then.

2. Canadian Legislation

No amendments to Canadian legislation arise from the Side Letter on Guidelines for Research and Development Expenditures.

3. Intended Government Action

No government actions arise from the Side Letter on Guidelines for Research and Development Expenditures.

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