Теги: Ukraine
What Surprises Ukrainian Food Exporters to Canada Should Be Prepared for?

The Canada-Ukraine Free Trade Agreement (CUFTA), which entered into force in summer of 2017, may potentially open a wide range of opportunities for Ukrainian exports. Now, there is just a little left to do – to take advantage of these opportunities.

Taking into account the fact that Canada, as well as Ukraine, is an export-oriented country, the issue of veterinary and phytosanitary control of imports is a serious challenge.

Canadians strictly control agricultural products crossing their borders, since the importation of a product contaminated by plant pests or pathogens compromises Canada’s own export potential and undermines safety of its citizens.

The Way to Canada

Safety guarantee of the imported goods in Canada has to be supported by:

1) phytosanitary certificate (for products of plant origin that are subject to quarantine);

2) veterinary certificate (for products of animal origin) issued by the competent authority of the exporting country.

The central authority that establishes veterinary and phytosanitary regulations for Canadian manufacturers and importers at the federal level is the Canadian Food Inspection Agency. This is essentially an equivalent of the Ukrainian State Service for Food Safety and Consumer Protection (SSUFSCP).

How does it work in practice? For instance, Ukrainian beef producer sees good prospects for selling its products in Canada. But for the importation to the Canadian territory the Canada Border Services Agency (CBSA) requires that the products have veterinary certificates.

The producer itself or together with the representatives of the respective association of producers approaches the SSUFSCP asking it to initiate the procedure for the approval of veterinary certificates for beef with the Canadian regulatory authority.

In line with the current Canadian official procedure, the Ukrainian party has to provide comprehensive information (questionnaire responses) regarding the legal framework, the competent authority network, the existing state control system and procedures, statistics in Ukraine, etc. Once the Canadian party has processed the information provided to it, the SSUFSCP and the concerned exporters undergo an audit by the Canadian regulatory authority.

Only upon the receipt of positive audit findings and approval of the veterinary certificate form for a specific product category, the SSUFSCP will be given permission to export the appropriate type of product.

It is worth noting that this procedure will not occur automatically, but should be initiated by the concerned Ukrainian producers.

It should also be understood that elimination of these barriers takes time, sometimes years.

Phytosanitary and Veterinary Certificates Approval Procedures

  1. Producer or association of producers sees good prospects for its products in the Canadian market and approaches the SSUFSCP.

  2. The SSUFSCP approaches the appropriate Canadian regulatory authorities and initiates the procedure of certificate approval.

  3. The Ukrainian party provides the Canadian party with all appropriate information on the product safety control in Ukraine.

  4. The Canadian regulatory authority conducts audits of the SSUFSCP and the concerned exporters.

  5. If the audit has been successfully passed, the SSUFSCP is entitled to issue appropriate certificates that are recognized in Canada.

The procedure for recognizing the control system as described above is applicable to both Ukrainian exports to Canada and Canadian imports to Ukraine. Presently, competent Ukrainian and Canadian authorities have approved 15 international veterinary certificates for importing to Ukraine.

Who is Next

However, Ukraine’s trade potential with Canada is much higher. In Ukraine, there is a strong interest in exports of poultry, packages of bees (i.e. live bees) and confectionery and other products to the Canadian market.

Efforts to open the Canadian market for Ukrainian chicken meat continue. In October 2016, the SSUFSCP submitted to the Canadian Food Inspection Agency under the Canadian Ministry of Agriculture and Food three requests for the accreditation of Ukraine to export poultry and poultry products to Canada. While in April 2017, an additional request was sent for the assessment of Ukraine’s status with regard to the export of bee packages to Canada. So far, the only response including additional questions and clarifications that has been received is the one related to the poultry meat. It is currently being processed by the SSUFSCP experts.

The Ukrainian dairy product producers’ will benefit from learning more about the Supply Management System that operates in Canada. This system is based on monitoring the dairy product consumption and a milk quota system for the Canadian farmers.

Canadians strive to satisfy the demand by the local dairy products to the extent possible. Insufficient amounts of these products are compensated through import quotas. Thus, even regardless of sanitary restrictions, market opportunities for dairy products in Canada are very limited.

Communication with the Canadian Food Inspection Agency has revealed that, currently, a ban has been put on the Ukrainian cereals imports to Canada. This is due to the fact that a few years ago, pests were found in one of the lots of imported Ukrainian cereals, although appropriate phytosanitary certificate had been provided.

The lifting of the ban requires additional communication between the relevant authorities of both countries. It is worth noting that the SSUFSCP has not received any requests to resolve this issue from Ukrainian exporters.

Things You Need to Know

Systematically organized information on the documents required to import food products to Canada can be found in the Automated Import Reference System (AIRS) at the Canadian Food Inspection Agency’s website.

It is important to remember that in Canada it is the importer who is responsible for the compliance of the imported products with the local legislation. To this end, a Market Access Secretariat has been established under the Canadian Ministry of Agriculture and Food, which through an ‘open window’ service operating as a publicly accessible e-mail server processes inquiries from Canadian businesses and provides recommendations on ways to access both the domestic and foreign markets.

It is also important that in the second half of 2018 legislative changes will come into effect in Canada that will change the approach to food safety control. These will be based on the risk analysis principle and the need for importers to obtain import licenses for the controlled shipments in the future.

Ukrainian exporters already now need to pay attention to the new Canadian preventive food safety controls.

The implementation of the Free Trade Agreement requires a systematic cooperation between Ukrainian and Canadian government authorities, which has become more active now. In November 2017, with the support of the Canada-Ukraine Trade and Investment Support Project the SSUFSCP delegation visited Canada and established important contacts with local regulatory authorities.

We are sure that in 2018 our joint efforts will make the Canadian market closer to Ukrainian food exporters.

Authors:

Boris Kobal, Director, Food Safety and Veterinary Service Department, State Service of Ukraine for Food Safety and Consumer Protection

Olena Kuryata, Chief of Unit for Foreign Relations and European Integration Deputy Chief of Directorate for International Cooperation State Service of Ukraine on Food Safety and Consumer Protection

Source: European Pravda

Standards in Canada: How to Overcome Barriers and Take Advantage of the Free Trade Agreement

It will soon be six months since the free trade regime came into force between Ukraine and Canada. How can Ukrainian exporters leverage the regime to get the highest possible advantage?

It is not a secret that after the abolition of tariff barriers, it is the non-tariff requirements that are sometimes rather difficult to overcome. Accordingly, the compliance of Ukrainian products with the regulatory requirements of the Canadian market becomes the key issue for exporters.

It is known that requirements for goods are usually issued in the form of standards and technical regulations. The former is voluntary, while the latter is mandatory to comply with. However, in Canada, one will not find such a clear division.

The standards in Canada can be conventionally divided into:

  1. Standards developed by standardization bodies;
  2. National standards;
  3. “Obligatory” standards. Right, don’t be surprised, I mean the obligatory standards.

Now, let’s take a detailed look. In Canada, nine organizations have an accreditation of the Standards Council of Canada to develop standards.

It is important that the Standards Council of Canada does not develop any standards. It accredits standardization organizations and compliance assessment bodies. However, the Council has the right to approve the standards as national standards of Canada (which, however, remain voluntary). There are currently around 3 thousand of such national standards.

Although the standardization organizations in Canada compete with each other, they have a certain specialization. 

For example, Canadian General Standards Board (CGSB) is traditionally specialized in developing standards for public procurement, organic products, office equipment, fireproofing of textile products, etc. It was CGSB that developed the standard for Canada’s national flag.

This organization, by the way, has existed since 1934, and works based on the principles of self-sustainability without receiving any state funding.

Importantly, it is currently the only one of the nine Canadian standardization organizations whose standards can be obtained for free.

Canadian Standardization Association (CSA Group) is another influential Canadian standardization organization specializing in products like electrical appliances, construction materials, vehicles, etc. For example, CSA is the author of the Canadian Electrical Code – a collective name for the standards that set requirements for underground and terrestrial electricity distribution networks, street lighting, household appliances, etc.”

Standards become obligatory when they are referenced in Regulations of Canada.

The Regulations of Canada are somewhat similar in nature to by-laws in Ukraine – they detail and supplement the provisions of Laws (in Canada – Acts). For example, in addition to the Consumer Product Safety Act, about 35 Regulations were adopted.

Public authorities in Canada increasingly use standards when drafting Regulations – the standards (or their parts) are incorporated into Regulations and thus become mandatory.

According to recent estimates, there are references to approximately 1,000 standards in the Regulations at the federal level. Hundreds of standards are referenced in provincial-level Regulations.

As for the compliance assessment bodies, there are more than 400 of them in Canada. They are also accredited by the Standards Council of Canada.

What does this mean for a Ukrainian exporter in practice?

The key question is “How to find out what requirements are put forward to your product?” The best way is to get in touch with a regulatory authority in Canada. Believe it or not, but this recommendation came from the Canadian regulatory authorities themselves. Our experience shows that requests are taken seriously and responses are sent by the authority within one to two weeks (depending on complexity of the request).

For example, medical equipment, toys, pesticides, pharmaceuticals, radiation equipment are managed by Health Canada. Innovation, Science and Economic Development Canada is engaged in management of telecommunication equipment, and Transport Canada deals with vehicles and tires.

In addition, attention should also be paid to provincial-level requirements that may differ from those of the federal level.

For example, the requirements for electrical appliances are contained in the Canadian Electrical Code developed by the CSA and adopted at the federal and provincial levels (in ten provinces and three territories of Canada). However, there are additional requirements in Ontario (so-called “deviations”) outlined in the Ontario Electrical Safety Code.

Taking into account the existence of the Free Trade Agreement between Ukraine and Canada, many producers consider Canada as a hub for exports to North America or as a starting point for exports to the United States. In terms of technical regulation, this approach may be fully justified as many US and Canadian standards are harmonized or developed jointly.

Thus, CSA has the accreditation of the American National Standards Institute, and the Air-Conditioning, Heating and Refrigeration Institute (AHRI) is accredited by the Standards Council of Canada.

Finally, it is worth remembering the famous phrase: where there is a will there is a way.

There are many more ways to export to Canada than reasons to be afraid of the Canadian standards. So, feel free to contact Canadian regulatory authorities, bring your products to the level of Canadian standards and expand your business horizons.

Author: Oleksandra Brovko, CUTIS Senior Trade and Investment policy expert

Source: European Pravda

U CAN Export: F.A.Q.

Want to export to Canada, but do not know where to start? We have prepared the answers to the most frequent questions exporters ask us.

I would like to join the export support program U CAN Export? What should I do?

The CUTIS project has now completed the selection of the first wave of the U CAN EXPORT Export Support Program participants in four priority sectors: clothing, footwear, furniture, and confectionery. The final stage of selection of participants from the IT services sector will take place in the spring of 2018.

The selected participants, with the support of Canadian industry consultants, are preparing to participate in exhibitions in Canada throughout 2018. Applicants who were not selected were included in the reserve of the participants of the U CAN EXPORT program. They will have a chance to take part in an integrated level of the program in the future, as well as take advantage of all the opportunities of its educational/consultational level. The rotation of the companies will take place after the project’s cooperation with the current program participants will be completed.

If your company is not among selected ones but wishes to enter the U CAN Export Support Program, please fill out a short application form here. The selection of companies from the reserve will be conducted on a competitive basis, by filling out special questionnaires, interviewing company representatives and visiting applicants’ production (if needed).

After completing the application, your company will also be included in the CUTIS project exporter database and will receive information and training materials, invitations to trainings and other project activities.

My company is not in the priority sectors. What should I do?

For companies in all other sectors, we have developed a step-by-step export guide to Canada I CAN EXPORT. It covers most of the issues faced by exporters, such as:

  • consumer preferences of Canadians
  • search for partners in Canada
  • the procedure of crossing the border and the requirements for the documentation
  • regulatory constraints on the Canadian market
  • logistics, etc.

Also, our project is currently developing an export portal with useful information for Ukrainian exporters.

We encourage you to subscribe to our Facebook page, where we constantly publish interesting information on trade with Canada and announce all our events. You can also subscribe to our e-mail newsletter.

I want to get a comprehensive help to enter the Canadian market. Who should I contact?

Unfortunately, our project does not have the resources to systematically help all the companies that contact us. However, there are other organizations that have a lot of experience in helping Ukrainian companies to enter the Canadian market.

For example, you can contact the Canadian-Ukrainian Chamber of Commerce (CUCC), which is a partner in implementing our project. CUCC has been supporting trade and investment development between Canada and Ukraine for more than 25 years and has offices in Toronto, Alberta and Ukraine. The Chamber organizes business forums, trade missions and conferences in Canada, promotes business contacts between the two countries, has partnerships with Governments of Canada and Ukraine, and provides a wide range of assistance services for Ukrainian exports to Canada.

Follow CUCC on Facebook

Life-hacks to successfully negotiate with a Canadian partner

In Canada sellers are fully responsible for the quality of the goods on their shelves. Therefore, Ukrainian companies that work with Canadians have to follow the regulatory and certification requirements closely.

Musthaves for exporters

To get your goods to the supermarket shelves, you have to ensure 101% compliance within the letter of the law. The requirements are quite strict in Canada. Automated Import Reference System (AIRS) may help to learn all regulatory requirements for the food products. You need to enter the product code or name and the website will automatically generate the list of requirements.

If entrepreneurs intend to supply non-food products to Canada they will have to study sector-specific legislation. No single magic portal contains all the information.

Also, there is a number of “voluntary-compulsory” certificates in Canada. In this market, sellers bear full responsibility to end consumers for the goods on their shelves.

Sellers are interested to have not simply good but the best products, which are fully certified and safe.

I, therefore, recommend exporters to start reviewing GFSI certification right away, as it includes the following certificates: BRC global standard for foods safety Issue 6; FSSC22000; SQF code 7th Edition Level 2; IFS Foods Standard Version 6; Global Aquaculture Alliance Seafood BAP Seafood Processing Standard. These are the certificates that will make your goods much more attractive for retail chain representatives. It is hard but necessary.

In addition, large Canadian supermarket chains often require their suppliers to go through a corporate social responsibility (CSO) audit before the supply of goods. Canadians are known to be “moral buyers”. Canadian business prefers the suppliers who do not violate labour, gender or human rights. Nevertheless, few Ukrainian companies can boast of something else within the CSO framework than charity campaigns or formal policies.

Veni, vidi, vici 

As a rule, Canadian companies plan their meetings well in advance and will not meet you at inconvenient time even if you need it urgently and “it will take only five minutes”. No cancellation or force majeure, unless you want to lose your partner’s trust.

Based on my practical experience, it took 5 months to organize a meeting of Ukrainian food manufacturers with a supermarket chain in Canada. The Canadian party’s timetable is booked for months to come.

In 99% of cases, the first meeting is held personally: no Skype or teleconference. If you want a result, you will have to travel to Canada. The meeting itself goes quickly and intensively. You must take product samples with you. Most likely, the importer will ask you of the possibilities to change the products: packing design, labelling, taste line, frequency of supplies.

The first meeting may last 7 to 30 minutes. The first contact is the indicator of interest. If a company manages to catch the interests of Canadians their quality and safety specialists will need to analyse the samples in detail.

After the meeting, there may be two possible case scenarios. Under the negative scenario for the Ukrainian company, it will hear of the Canadians’ decision within a month or a month and a half; a positive outcome will, most likely, be known within about a year.

First scenario: the products have been tested and they are not different from those of the existing supplier. This means there is no sense to continue negotiations. A letter on such a decision will come, as a rule, 1-1.5 months after the meeting. The answer is usually straightforward: “Thank you, but our company decided to extend its contract with the existing supplier”.

Second scenario: the partner liked your products but this is only the beginning of further work. Depending on individual Canadian food importers, the working process with supplying companies takes 2 months to one year between the discussion and negotiation and the first supply of your products to the supermarket or warehouse.

As soon as the importer confirms its intentions, you will be entered into the internal system and an individual project will be launched with a dedicated manager. Further, step by step, you will be discussing prices, mix, packing, design and batch volumes over the phone or Skype.

In addition, a schedule is mandatorily developed for provision of necessary start-up documents. For instance, a future supplier should submit a third party insurance agreement, a goods insurance agreement, a confirmation of the goods’ compliance with Canadian organic standards. It will take time and financial resources to compile and coordinate those documents. This is a part of the process, however, and one may only get the goods to the supermarket shelves upon successful passage of this phase.

Author: Olga Vergeles, Project Manager, Canada-Ukraine Trade and Investment Support Project (CUTIS)

Source: Delo.ua

The nearby market of distant Canada: free trade and its opportunities for Ukrainian exporters

The first day of the last summer month was marked by the long-awaited launch of a free trade agreement between Ukraine and Canada. Finally, upon completion of ratification procedures, the Canada-Ukraine Free Trade Agreement (CUFTA) came into effect.

Let us take a look at the Agreement from a practical standpoint and analyse the following:

  • how to work under the Agreement and properly understand the meaning of staging categories in the tariff schedules of Ukraine and Canada;
  • how to confirm the origin of goods; and
  • what are regulatory requirements to your goods.

Canadian market is diverse and rather heterogeneous. Therefore, interesting facts are provided at the end of this article for you to get oriented when looking for a niche for your goods at Canada’s store shelves.

Staging categories in tariff schedules of Canada and Ukraine

As a rule, Ukrainian manufacturers are interested in two things:

  • whether zero-rate import duty will be applied for exports to Canada;
  • how will import duty change for imports into Ukraine.

If you decided to review the Agreement yourself in order to find answers to those questions, please, note the staging categories in the tariff schedules of Ukraine and Canada.

The Tariff Schedule of Canada contains the goods with the import duty rate other than “0” as of the effective date of the Agreement (only 2% of goods). That is, if your goods are not listed in the Tariff Schedule of Canada this means that a zero import duty is applied to them since 01.08.2017. Therefore, there are only two staging categories in the Tariff Schedule of Canada: “7” and “Е”.

Staging category “7” applies to certain vehicles and means that the import duty will become zero in the eighth year of the Agreement (according to the estimates, in 2024) by getting gradually reduced in eight equal stages starting on 01.08.2017. Let us take, for instance, “Non-amphibious all-terrain vehicles of a weight of less than 227.3 kg, having fewer than six wheels and designed to carry only one passenger” (8703.21.10), for which the base rate of import duty is 6.1% and the staging category is “7”. The order of gradual reduction of import duties is shown in the graph below.

It should be noted also that the first year of the Agreement is 01.08.2017 through 31.12.2017. That is, the second year and the next phase of import duty liberalization will start already on 01.01.2018 (and last through 31.12.2018).

The goods in staging category “Е” in the tariff schedules of both states are excluded from the scope of the Agreement. This means that the free trade regime does not apply to those goods and the import duty will continue to be applied at the MFN rate (relevant rates of import duties may be found in Canada’s Customs Tariff).

In the case of Canada, Category “Е” includes the goods subject to Canada’s global tariff quotas. These are mainly certain grain crops and meat and dairy products. The idea of the tariff quota is that a zero or a very low import duty rate is applied within a tariff quota. When the quota is exhausted, however, a higher duty rate is applied (MFN rate in accordance with the Agreement).

It should be noted that Canada’s tariff quotas are international and applied to all countries of the world rather than Ukraine only. Canada reserved the right to set tariff quotas when it became a member-state of the World Trade Organization (WTO). Those quotas are available for all exporters from all countries that are WTO members. Depending on the goods, the tariff quotas are administered on the basis of either of the following principles:

  • “first-in-first-served” (the control of compliance with this principle is exercised by Canada Border Services Agency, CBSA);
  • through a preliminary distribution of tariff quotas by Global Affairs Canada based on applications.

In both cases, the tariff quota is received by an importer in Canada. The list of tariff quota holders may be found on the website of Global Affairs Canada. Following this link, for example, you may see the lists of companies that received a tariff quota for cheese in 2017.

The Tariff Schedule of Ukraine contains a much larger number of staging categories. In particular, this is due to the fact that Ukraine succeeded in claiming the asymmetric nature of the Agreement. Therefore, Ukraine will liberalize import duties for about 80% of the goods of Canadian origin on 1 August already (while Canada will ensure free access to the market for 98% of Ukrainian goods).

That is why, zero-rate import duty will apply to the goods under staging category “0” in Ukraine’s Tariff Schedule as soon as the Agreement comes into force. The plan for the goods under staging categories “1”, “3”, “5” and “7” is shown in the table below.

For the goods under Staging Categories “5А”, “5B”, “5С”, “7А” and “7В”, the import duty rate will be liberalized only in part. As an example, let us take: 1517 90 91 00 – Fixed vegetable oils, fluid, mixed; Base Rate – 15%, Staging category: 5В. The import duty rate will be liberalized as follows (as we can see, the rate will only drop by 4.5% in 6 years):

Staging category “Е” (exclusion from the scope of the Agreement) in the Tariff Schedule of Ukraine applies to sugar.

Rules of origin

Similarly to any other free trade treaty, CUFTA contains provisions on definition of origin of goods. For instance, the rules of origin determine, which Ukrainian goods are granted preferential access to the Canadian market within the CUFTA framework, and which are not (and vice versa).

In compliance with the Agreement, goods are recognized as originating from Ukraine if they are:

  1. fully manufactured in Ukraine;
  2. manufactured exclusively from the materials originating from Ukraine;
  3. processed in Ukraine to a sufficient extent.

Definitely, the most complex are the rules of sufficient production that

  • require changing the tariff classification, or
  • impose requirements to the relation of the cost of foreign materials to the transaction cost, or
  • impose a requirement to the relation of the cost of foreign materials to the goods price on the Ex Works terms.

Therefore, exporters should review in detail the rules of origin contained in Chapter 3 and Annex 3-А to the Agreement.

The document confirming the origin of goods is the Declaration of Origin (a template is contained in Annex 3-В to the Agreement). That is, exporters themselves provide information on the origin in the invoice or any other document containing the goods description.

Thus, for the confirmation of the goods origin, Ukrainian exporters do not need any certificates/marks of customs authorities, which reduces the cost and time for customs clearance of goods.

Where to find regulatory requirements to your goods?

Canada is a developed country that sets rather strict requirements to the safety and quality of goods. For those requirements not to become non-tariff barriers for export, it is worth studying them in detail. There is a number of useful resources for that purpose.

For instance, Canada Food Inspection Agency ensures compliance with all regulatory acts dealing with foodstuffs, animals, and plants imported to Canada. There is a very convenient resource on the Agency’s website that allows generating the requirements for import to Canada using the code (or even the name) of goods. The system is called Automated Import Reference System (AIRS) and is somewhat similar to the European Export Helpdesk resource.

For manufacturers of consumer goods, medicines, foodstuffs, medical equipment, health products, the website of Health Canada will be of use.

Manufacturers of washing machines, dish washers, freezers, electric ovens, and refrigerators should review the details of EnerGuide certification requirements on the website of Natural Resources Canada.

If you are a manufacturer of textile, it is worth visiting the website of Canadian Competition Bureau to learn, for instance, about the textile marking requirements.

In fact, there are specific marking rules applied in Canada.

Labels on the packing must be in Canada’s two official languages: French and English, and both texts must occupy the same area.

Therefore, we recommend reviewing the provisions of Consumer Packaging and Labelling Act.

One should be very careful with statements concerning the goods. For instance, under Canadian rules the skin antiaging agent may only prevent signs of aging rather than reducing wrinkles. The same refers to foodstuffs where statements concerning the goods may be of three types only:

  • general impact on health,
  • functional impact on health,
  • reduction of disease exposure.

For each type of statements, individual rules are applied. For instance, if you position your goods as “natural” you have to make sure they do not contain any additional vitamins, minerals, nutrients, artificial flavours or food supplements, and no elements were excluded (except water) or significantly modified, while the physical, chemical or biological condition of the goods remains unchanged.

Usually, your Canadian partner would tell you about all regulatory requirements to the goods and how to prove compliance with them because it will be the Canadian importer who will be liable in case of incompliance. Therefore, when developing a bilingual label remember that the final word of the design approval rests with your partner.

Concerning the search for partners, Canadian Importer Database is an extremely useful resource that contains lists of companies that import their goods to Canada with a breakdown by products, cities and countries of origin.

Canada: Facts and Opportunities

Finally, some words about Canada and Canadians. Canada is the second largest country in the world. However, about four fifth of its population live in the area 150 km away from the US border.

More than 6 million Canadian citizens are those who immigrated from other countries; they represent about 20.6% of the country’ entire population (35.9 million people in total).

In Canada, there are 1.3 million Ukrainians; Ukrainian community is one of the largest in Canada. Originally, Ukrainians immigrated to the prairie provinces (Manitoba and Saskatchewan) but lately have been also discovering Ontario and Quebec.

Canada’s multiculturalism opens broad opportunities for business on condition of detailed market analyses aimed to detect target consumers. For example, cosmetic manufacturers export skin bleachers to British Columbia because of many people of South Asian descent living there.

Due to the increase of the Muslim community, demand for Halal products is steadily growing. Interestingly, more than 95% of Canada’s Muslim population live in cities.

According to the latest research of Business Development Bank of Canada Canadian consumers prefer:

  • Internet search before purchasing the goods (they carefully study other buyers’ reviews and feedback);
  • health lifestyle (as estimated, almost 31% of Canadian consumers are ready to pay more for healthy goods);
  • individual approach; and
  • good quality at lower price.

Also, about 6 of 10 Canadians consider themselves to be “ethical consumers” and are willing to spend their money for the goods produced under certain ethical standards. For instance, Canadians are ready to pay more for the goods that are not connected with the use of children’s labour.

Canadian market of organic goods is the fifth largest in the world and 56% of Canadians buy organic products every week.

Thus, Canadian market is closer than it may seem in the beginning, and the Free Trade Agreement does bring many opportunities for Ukrainian exporters considering significant and immediate cancellation of import duties and a large Ukrainian diaspora in Canada that may become a bridge to Canadian consumers, distributors, agents, retail operators, etc.

So don’t be afraid to capture new markets even though they are located far.

Author: Oleksandra Brovko, CUTIS Senior Trade and Investment policy expert

Source: European Pravda

Four stereotypes about trade with Canada: What blocks Ukrainian export

March 14, 2017, will undoubtedly go down in the history of Canadian-Ukrainian friendly relations, because on that day the Ukrainian parliament has ratified Canada-Ukraine Free Trade Agreement (CUFTA).

Now we are waiting for ratification from the Canadian side, the exchange of the instrument of ratification – and the free trade zone will work in full.

Therefore, in 2017 we will celebrate not only Canada’s 150th anniversary but also the beginning of our free trade with the country.

The team of the Ministry of Economic Development and Trade managed to fix in the Agreement positions that are more favorable for domestic exporters and a broader time frame for abolishing import duties. The agreement will immediately open for Ukrainian exporters duty-free access to 98% of the Canadian market. This applies to both industrial goods and agricultural (except 108 tariff lines, which can be exported without duties within Canada’s global quotas).

Deputy Minister of Economy, Ukraine’s trade representative, Natalia Mykolska noted Ukrainian exporters would get short-term and long-term prospects for entering the Canadian market, and national producers would have incentives to improve the quality and competitiveness of their products.

The time does not wait, and Ukrainian exporters should start exploring the Canadian market and the tastes and preferences of Canadian consumers regarding their goods. So when the agreement enters into force, they can begin exporting the first lots of goods without paying import duty. The Office for Export Promotion under the Ministry of Economic Development might help conquerors of overseas markets to find business partners and necessary information.

Related: Senate of Canada ratifies free trade agreement with Ukraine
Unfortunately, the long-term orientation to the markets of the nearest neighbors generates a lot of fears among Ukrainian exporters about the free trade agreement with Canada.

Many Ukrainian businessmen are convinced that Canada is far away, so transporting would be expensive, and Ukrainian products does not hold water before competitive American goods – accordingly, there is no place for Ukrainian goods in the Canadian market. That is, the tariff and non-tariff barriers are paralleled with the mental ones.

In this article, we will try to analyze how these and other stereotypes are justified.

Stereotype 1: “Canada is far away. Transport costs would make the goods uncompetitive”

CUFTA is the first transatlantic free trade agreement concluded by Ukraine. Although the Canadian market may seem distant, and the delivery of goods to Canada can look expensive and long, technological progress allows you to ignore the long distances in international trade of the 21st century.

Look at the shelves in supermarkets in Ukraine. You will see pears from China, wine from Chile, and these goods are sold at relatively reasonable prices.

Imagine that according to the Sea Distances portal the cargo from Shanghai to Odesa (8379 nautical miles of distance) would be delivered in 35 days, moving at a speed of ten knots per hour. In the case of Chile, time and distance are almost the same. Overcoming so many kilometers is not cheap. In addition, Ukraine still has no free trade with China and Chile. This means that the goods are imported with payment of import duties on the Ukrainian border.

Undoubtedly, transportation costs determine the potential for entering foreign markets, and the cost of delivery affects the variable costs of doing business. Moreover, a long distance can become a challenge if the product spoils rapidly (for example, fresh fruits, and vegetables) or depends on consumer preferences (for example, high fashion collections).

However, at present, logistics and shipping companies offer individual personalized solutions for the delivery of cargo anywhere by air, sea, rail, road transport.

If you plan to export fresh fruits and vegetables to Canada, choose air or sea shipping with temperature control. If your collection is to be shown at the fashion week in Montreal, use fast air travel or even express delivery. If you cannot fill the entire container with your goods, join the group of cargo, which consists of many individual deliveries.

Long sea transport also has the advantage: according to some estimates, an additional kilometer of land transportation will be seven times more expensive than an additional kilometer by sea.

In fact, there is no single solution for all exporters of the issue of the long distance between Canada and Ukraine. Yes, indeed, if the marginality of goods in the Canadian market is low, transportation costs can affect competitiveness.

However, distance is not a problem, because the development of transport technologies offers a variety of options for reducing costs and optimizing the duration of transportation to Canada.

Stereotype 2: “Canada imports everything from the US, Canada has no place for Ukrainian goods”

Common borders and geographical proximity have made Canada and the US the most important trading partners for each other. Canadian consumers are important for US producers, as last year Canada purchased goods and services for $ 337.8 billion from its southern neighbor.

The economies of the two countries are highly integrated, and this process was accelerated by the bilateral free trade agreement of 1988 and the NAFTA in 1994. In addition, a large percentage of Canada’s bilateral trade with the United States consists of intermediate products that enter the integrated supply chain between the two countries.

As a rule, neighboring countries trade more than geographically remote ones. Bilateral trade between close countries is facilitated by a developed regional logistics network, the similarity of the business environment and bilateral customs cooperation.

Think about Ukraine. Now the largest trading partner of Ukraine is the EU. In 2015, almost 40% of Ukrainian goods and services were exported to the EU. The bilateral trade is growing due to a deep and comprehensive free trade agreement between Ukraine and the EU.

However, free trade with the EU does not prevent the presence of pears from China, wine from Chile and Georgia, and dairy products from Belarus on the Ukrainian market.

In addition to NAFTA, Canada has 10 existing free trade agreements, in particular with Korea, Israel, Jordan, and the European Free Trade Association (EFTA).

Obviously, Canada seeks for free trade, and the diversity of intercontinental free trade agreements demonstrates that Canadian foreign trade is multi-vector.

Ukrainian exporter will face competition with the American one and other foreign manufacturers in the Canadian market. However, this competition will stimulate it to improve its products and offer new values to Canadian consumers.

Stereotype 3: “Ukraine would be able to export its goods to the US through Canada without paying import duties”

The free trade regime between Canada and the US can lead to the idea that due to duty-free access to the Canadian market can enable exporting goods through Canada to the US without paying import duties on the Canadian-American border.

Given that there is no free trade agreement between Ukraine and the United States, goods of Ukrainian origin are subject to customs rates based on the most-favored-nation treatment (except for goods falling under the US general preferences system).

In addition, free trade agreements contain rules of origin that the goods must comply in order to have preferential access to the partner market by agreement. According to CUFTA, goods produced in Ukraine have preferential access to the Canadian market.

Remember that in order to cross the Canadian-American border on preferential terms, the goods must be of Canadian or American origin respectively, since NAFTA is still a free trade agreement, not a customs union.

At the same time, Canada might be a regional hub for export sales, logistics planning, distribution, marketing and working out a strategy for entering other markets.

Stereotype 4: “Canadian consumers buy products which are made in Canada only”

Polls show that consumers in Canada are really inclined to buy Canadian products, since the purchase of “made in Canada” products positively affects the economy of the country, creates jobs, etc. A 2013 study indicates that 45% of Canadians are trying to buy goods produced in Canada.

Nevertheless, two out of three consumers indicate that the main factor in buying goods is still a low price.

Thus, to consider that Canadians only buy “made in Canada” products is a big exaggeration. Supporting your country, when the crisis is still palpable, is a completely justified behavior. The same thing is happening in Ukraine in the last two years.

First, remember that the diaspora of Ukrainians in Canada amounts to more than 1.3 million people. Diaspora can help spread information about the product, establish the first business contacts, and reduce initial costs when entering the Canadian market.

The presence of Canadians of Ukrainian origin makes Canada a very welcoming place for Ukrainian small and medium-sized businesses.

Secondly, remember that Canada is a big country, and consumer preferences can be different in Ottawa, Montreal, and French-speaking Quebec City.

Canada is a very diverse country with a multinational population. In 1971, it became the first country in the world where multiculturalism became part of official state policy. One-fifth of Canadians were born not in Canada. Thus, diversity is the strength of Canada and a good opportunity for Ukrainian exporters to find a new market for their goods.

And finally, Ukrainian companies have something to offer to Canadian consumers. We are able to create, surprise, and create a quality product. Even before the era of free trade with Canada, Ukrainian companies successfully establish business contacts, meet with potential partners, participate in exhibitions, calculate logistics, sign contracts, and deliver goods.

When you have a quality product that meets the requirements of the Canadian market and the consumer preferences of Canadians, then there no distance, and competition is not a hindrance.

Author: Oleksandra Brovko, CUTIS Senior Trade and Investment policy expert

Source: European Pravda

CUFTA in 10 minutes

On August 1, 2017, the Free Trade Agreement between Ukraine and Canada entered into force. The way to this historical event was quite long: 6 rounds of negotiations since 2010. In summer 2015 the agreement text was initialed, and in July 2016 it was signed in the course of the Prime Minister of Canada Justin Trudeau’s first official visit to Kyiv, Ukraine.

What will free trade with Canada mean for business? Instead of immersing deep into almost 800-page document we are suggesting a brief overview of the Agreement’s key provisions for your consideration.

Unlimited access to Canadas market

One should note that Ukraine and Canada’s obligations on access to markets are asymmetrical – Ukraine has obtained more favorable conditions and broader timeframes for customs’ duties elimination.

            What are the conditions for Ukrainian companies to export to Canada?

The Agreement will immediately open customs-free access to 98% of Canada’s market. This refers both to agricultural and industrial goods. However, there are exceptions:

  • For agricultural products. The Agreement provides zero tariff rates for all agricultural products except 108 tariff positions allowed for duty-free export within Canada’s global tariff rate quotas. They include, inter alia, poultry (frozen poultry, poultry fat), dairy products (milk, cream, yogurt, butter), eggs and egg products, cheeses and sugar.
  • For manufactured products. The only exception is cars – 7 years transitional period is set for them within which the duties will be reduced to 0%.

            What are the conditions for Canadian companies to export to Ukraine?

Canada’s situation is more complex. Right after the Agreement comes into force, the duties will be eliminated only for 72% of Canadian goods. The duties for the rest of 27% will be gradually reduced in compliance with transition periods – 3, 5, and 7 years. Besides, the Agreement provides for partial liberalization on the agricultural products key for Ukraine as well as some tariff rate quotas and specific goods. More details can be found at the picture with info graphics below.

Technical barriers

The Agreement regulates the non-tariff technical barriers to trade, because the differences in Canadian and Ukrainian standards on products’ quality and safety requirements, labelling, and certification may become a source of unjustified restraints for free trade.

Within the CUFTA Ukraine and Canada confirmed their commitments regarding the Agreement’s provisions on WTO-related technical barriers to trade’s policy. It also includes a transparent mechanism for developing and application of technical regulations as well as the procedures to evaluate compliance.

The Agreement also ensures provisions for information exchange among the countries with the purpose for the Parties to better understand legislative requirements and potential problems for exporters and importers.

The rules of origin

The duties are eliminated in relation exclusively to the goods originating from Ukraine or Canada. The Agreement includes transparent rules to determine a country of origin: goods must be fully manufactured at the territory of one of the countries or be sufficiently processed in compliance with the detailed rules of origin.

Trade facilitation procedures

The Agreement provides for shared access of the Parties to all necessary regulations in the sphere of trade. CUFTA encourages automatization of customs duties’ procedures and use of IT technologies as well as creating the complaints system regarding the customs services. All these efforts are aimed at facilitating access of the business to the markets in both countries.

Emergency action and trade remedies

In case of a significant growth of import from Canada after elimination of the customs’ duties, Ukraine is entitled to take emergency protection action to stabilize the situation. In particular, in the course of transition period customs’ duties may be raised temporarily to prevent a significant harm to Ukrainian producers.

Sanitary and phytosanitary measures

CUFTA confirms Ukraine and Canada’s commitments within the framework of the Agreement on application of WTO sanitary and phytosanitary standards. The latter provides for the right of the WTO members to protect their citizens’ health given it is scientifically grounded and there are no artificial trade barriers in place.

Fair competition

The free trade area involves creation of a predictable and fair trade environment promoting protection of consumers’ rights. This is the reason why the Agreement includes the chapter aimed at preventing anti-competition conduct within free trade of Canada and Ukraine. In particular, natural monopolies and state-run enterprises of Canada and Ukraine must adhere to the rules of fair competition while implementing the authorities delegated by their countries and prevent discrimination while exporting the monopoly goods.

Government procurement

The Agreement provides both countries’ companies with an opportunity to bid in the course of government procurement. Businesses will have the right for fair and non-discriminated access to government procurement conducted by both countries’ governments, including procurements done by state enterprises (airports, railways, mail networks, public transportation systems).

Intellectual property

CUFTA provides for Ukraine-Canada cooperation in the area of intellectual property rights protection. The Agreement underscores the importance of protection of intellectual property rights to increase competition, develop innovations and attract investments.

Electronic commerce

Currently electronic commerce has become an essential part of our lives. The importance of e-commerce is reflected in the Canada-Ukraine Free Trade Agreement as well. Both countries undertake the commitment to refrain from applying customs duties or any other tariffs in relation to the products delivered in electronic form. This will facilitate the commercial processes for the business involved in on-line trade.

Cooperation on trade issues

The Agreement solidifies the intentions of Canada and Ukraine to cooperate seeking to enhance trade among the countries. In particular, there are provisions to provide technical assistance to develop agricultural goods production and facilitate small and medium companies entering the markets of Canada. There are plans on cooperation to raise the awareness of both countries’ business communities about the benefits of free trade.

The CUFTA’s full text is available here.

Certainly, this short review does not disclose all the nuances of the Canada Ukraine Free Trade Agreement. At present CUTIS project is designing a step-by-step guide; this guide will include the detailed information about all aspects of exports to Canada. We are going to publish short and clear information materials for the businesses interested in doing exports to Canada. Check our updates in social media.

Oleksandra Brovko: Free trade triangle. What are the benefits of Сanada-Ukraine free trade agreement

Free trade agreements or custom unions are a global trend. Their number increases every year, regional agreements evolve into multiregional and even transcontinental.

According to the World Trade Organization (WTO) each of its 164 members had at least one free trade agreement as of June, 2016.

So far, the WTO has information about 635 agreements on preferential trade, 423 of them are effective. 90% of those agreements are about free trade zones and 10% are about customs unions.

Recently, after 7 years of negotiations the EU – Canada Comprehensive Economic and Trade Agreement (CETA) was signed. EU defines the agreement as the largest one because it stipulates cancelation of 99% of the entry charges thus facilitating access to service markets, governmental purchases and promote investments.

Potentially, CETA is beneficial for Ukraine as well. On one hand the Deep and Comprehensive Free Trade Area (DCFTA) came into effect in January 2016. Moreover, Ukraine dramatically enhanced its transcontinental trade by signing the Canada-Ukraine Free Trade Agreement (CUFTA).

When coming into effect the CUFTA will open up to 98% of the Canadian goods markets for Ukrainian exporters. Moreover, the agreement has provisions on elimination of the non-tariff barriers, promotion of the trade, participation in governmental purchases, etc.

The question arises: what are the benefits of Ukraine-Canada-EU free trade triangle for Ukraine?

Mutual Non-Tariff Barriers Elimination

Both EU and Canada are highly developed countries with the high quality of goods and safety, packaging, labeling, etc. standards. Those standards are often turning into non-tariff barriers in the international trade.

CETA contains important provisions on alignment of the EU and Canada standards without compromising the quality and safety requirements by either side.

The agreement has an unprecedented section on approximation of the technical regulations and standards covering even their development stage. That allows bringing the regulatory approaches in Canada and EU closer.

At the same time CUFTA clearly stipulates that technical guidelines and evaluation procedures must not impede the free trade between Ukraine and Canada. Moreover, there is a strict requirement of transparency of appropriate regulations development.

Approximation and mutual recognition of the technical regulations by the EU and Canada is of special importance for Ukrainian exporters as Ukraine is facing a challenging task of harmonization of Ukrainian legislation with the EU one. The approximation impact will not be limited by the exporters activities only but rather affect all the manufacturers because it introduces universal rules.

So far Ukraine has developed the sanitary and phytosanitary regulations approximation strategy. It also adopted strategy of the technical regulations reform, cancelation of the Soviet GOSTS (USSR technical guidelines) and implementation of the European requirements to goods quality and safety.

Goods manufacturing in Ukraine according to the European standards will facilitate the access of Ukrainian goods to the Canadian market, promote recognition of the evaluation results and reduce the export costs by saving on the administration costs.

Even nowadays those exporters which have EU certificates have advantages in negotiating with their Canadian partners.

From – To: Rules of Origin of Goods

Bilateral free trade agreements establish better trading conditions but only for the parties of the agreement. E.g. goods brought from Ukraine to Canada could not be re-exported to the US customs free because they are of Ukrainian origin rather than Canadian.

Origin of goods rules are the filters for the goods which are allowed to export with zero or considerably reduced duty rates. Each free trade agreement has its own rules of origin which take into account the peculiarities of the international trade of those agreements parties.

Usually, manufacturers have to prove that their goods are 100% domestically made/grown or imported materials of the so-called substantial transformation are added up. Each agreement contains its own substantial transformation criteria. The list may include:

(1)   Classification code changes, e.g. first 4 signs in export commodities classifications;

(2)   Cost of goods change when foreign goods share in final products does not exceed the set limits. Let’s discuss apparel as an example.

According to the Protocol I of the EU – Ukraine Association Agreement containing the main origin of goods requirements, apparel is considered to be of the Ukrainian origin if the fabric’s cost imported from the third countries like Morocco or Turkey does not exceed 8% of goods’ price.

Free trade agreement with Canada recognizes transformation substantial when the commodity line is changed at the level of 2 signs of the export commodity classification.

Origin of goods rules are integral part of free trade agreements because it is the ultimate instrument for identifying partners’ goods. On the other hand, when free trade agreements overlap, they may be difficult for exporters especially because of global value chains.

Asian and Latin American countries experience show that different sets of rules undermine the performance of free trade zones. Nearly 90% of trade in Latin America are preferential however the analysis of the free trade agreements between Mexico, Chili and Peru prove that only 40% of goods follow similar transit of goods rules.

Similar situation is in the South East Asia where the countries are interlinked by the free trade agreements. In 2008 the initiative of reviewing origin of goods rules for their unification was launched within the ASEAN.

Cumulation may be a good solution e.g. bilateral cumulation is stipulated by the CUFTA, the DCFTA, and the CETА. Cumulation means that if raw materials are imported to Ukraine from the EU, the substantial transformation rules do not apply. For example, if apparel is manufactured of the fabric imported from the EU rather than from Morocco, and its share in the cost of goods exceeds 8%, the apparel will be recognized as Ukrainian and exported to the EU without payment of custom duties.

Cumulation is important for the DCFTA – CUFTA – CETA triangle because Ukraine may benefit from the so called cross-cumulation which further reduces the raw materials and goods transit barriers.

In such cases if apparel is manufactured in Ukraine with the fabric imported from the EU, it will be recognized Ukrainian and the rules of substantial transformation do not apply when it is exported to Canada. However, in such cases conditions and rules of goods transit between Canada, Ukraine and EU require additional negotiating.

The free EU-Ukraine-Canada trade cumulation will facilitate the links between the three independent free trade agreements (DCFTA, CUFTA, CETA), will assist in furthering trade between Ukraine and Canada and will promote Ukraine’s integration into global value chains.

Service Trade and Raising Investments

As any comprehensive free trade agreement, the CETA has clauses on services and investments. Trading in services is substantially liberalized because Canada and the EU drew the exemption lists of several sectors like health care and provided free market access for the rest. In addition, the CETA promotes mutual recognition of qualifications which will soon make for the Canadian engineers, healthcare professionals, lawyers, etc. possible to work in the EU and visa versa.

Unlike CETA and the EU-Ukraine association agreement the Canada-Ukraine Free Trade Agreement does not stipulate trading in services and investments. However, in two years after it comes into effect the CUFTA could be revised and amended. Those amendments could well be the provisions on trading in services and on investment protection.

Ukrainian services providers could considerably benefit from the access to the multimillion Canadian market especially when trading services is an essential part of the global value chains.

Experto Crede or Trust the Experienced one

Free trade agreement between the EU and Canada is an important signal for Ukrainian exporters.

First of all, it is a one more “pro” for the trade with Canada as the EU would not waste 7 years on negotiation for nothing. There is an ocean between us and the severe competition with the US but in the XXI century it is a challenge rather than a problem. If you smartly market quality goods, you will adequately address those challenges.

Secondly, there is no time to waste because free trade between the EU and Canada will enhance the competition. Ukrainians would better start looking for their places in the sun right now.

Free trade agreements open many paths because our success will much depend on the businesses’ proactive approaches and readiness to long-term investments.

Oleksandra Brovko, CUTIS Senior Trade and Investment Policy Expert

Source: European Pravda