Notice to Exporters

Sugar-Containing Products for Export to the United States (Item 5203 on Canada’s Export Control List)

Serial No. 183
Date: September 14, 2012

This Notice replaces Notice to Exporters No.166 dated August 20, 2009, and will remain in effect until further notice.

This Notice is provided pursuant to the authority of the Export and Import Permits Act (EIPA) and its corresponding regulations.

In Brief:
The United States administers a 64,709,000 kilogram tariff rate quota (TRQ) for imports of sugar-containing products.  The quota year extends from October 1 to September 30, inclusive. 

Canadian exporters have access to a 59,250,000 kilogram country-specific reserve within the US import TRQ.  Canadian exporters may also access the 5,459,000 kilogram global portion of the US import TRQ, which is open to exporters from any country on a first-come, first-served basis.

Exports of sugar-containing products from Canada to the United States are subject to export controls under Canada’s Export and Import Permits Act (EIPA).  Accordingly, an export permit is required for shipments of sugar-containing products from Canada to the United States. 

This Notice to Exporters sets out the policies and practices pertaining to the administration of the export quota, including the allocation policy, under-utilization policy, return policy, and reallocation policy.  This Notice also explains how to apply for export permits. 

Table of Contents

1. Purpose

1.1 The purpose of this Notice is:

  • to set out the policies and practices pertaining to the administration of Canada’s export quota for sugar-containing products destined for the United States;
  • to invite applications – from current allocation holders as well as new applicants – for allocations under the Canadian export quota for the next quota year; and
  • to explain how to apply for export permits for shipments of sugar-containing products destined for the United States.

2. General Information

2.1 Background

2.1.1 In accordance with its commitments under the World Trade Organization (WTO), the United States established a tariff rate quota (TRQ) for imports of sugar-containing products in 1995. 

2.2 Access Level

2.2.1 Under its import TRQ, the United States allows 64,709,000 kilograms of sugar-containing products to enter at the in-quota rate of duty.  The United States administers its import TRQ in two parts:  1) under Canada’s country-specific reserve, 59,250,000 kilograms are reserved for imports from Canada; and 2) under the global portion, imports up to 5,459,000 kilograms are permitted from any country (including but not limited to Canada) on a first-come, first-served basis. 

2.2.2 To facilitate stable and predictable export marketing for Canadian exports of sugar-containing products to the United States, the Government of Canada administers a 59,250,000 kilogram export quota, and issues export permits for all shipments of sugar-containing products destined to the United States.

2.3 Allocation Period

2.3.1 The allocation period for Canada’s export quota for sugar-containing products destined to the United States extends from October 1 to September 30, inclusive.

3. Products Covered

3.1 Tariff Items

3.1.1 This Notice pertains to sugar-containing products for export to the United States under subheadings 1701.91.54, 1704.90.74, 1806.20.75, 1806.20.95, 1806.90.55, 1901.90.56, 2101.12.54, 2101.20.54, 2106.90.78, and 2106.90.95, as described in additional Note 8 to Chapter 17 of the Harmonized Tariff Schedule of the United States (HTSUS).  The list of tariff item numbers that fall under the US import TRQ is attached to this Notice as Appendix 1.  These products were added to Canada’s Export Control List (ECL), a regulation established under the Export and Import Permits Act (EIPA), to ensure orderly export marketing. They appear as item 5203 on the ECL.

3.1.2 Sugar-containing products are defined as articles containing over 10 percent by dry weight of sugar, as described in additional US Note 3 to Chapter 17 of the HTSUS. The aggregate quantity of articles containing over 10 percent by dry weight of sugar is reflected in Note 8 of Chapter 17 of the HTSUS. The text of Additional Notes 3 and 8 to the HTSUS is attached to this Notice as Appendix 2.

3.1.3 Exporters that require a determination as to whether the product they intend to export is eligible under the US import TRQ are encouraged to contact the National Commodity Specialist Division, US Customs Border Protection (CBP), Department of Homeland Security.

3.2 Canada’s Country-Specific Reserve

3.2.1 Only goods that are "product of Canada" may enter the United States under Canada’s country-specific reserve.

3.3 Retail-form Exports

3.3.1 Some of the policies and practices set out in this Notice to Exporters pertain specifically to retail-form exports.  The term retail-form describes exports that are prepared for marketing to the ultimate consumer (not including institutions such as hospitals, prisons and military establishments, or food service establishments such as restaurants, hotels, bars or bakeries), and that are packaged in sizes and with labels that are readily identifiable as being intended for retail sale to the ultimate consumer without any alteration.

4. Allocation Policy

4.1 Allocation Method

4.1.1 The sugar-containing products export quota is allocated to two groups:

  • eligible applicants that were allocation holders in the previous year, to the extent of their previous year’s allocation, as adjusted since, (e.g., for under-utilization); and
  • eligible new applicants, to the extent of the availability of quota within the (up to 100,000 kilogram) retail-form new entrants pool.

4.2 Eligibility

4.2.1 To be eligible for an export allocation, all applicants must demonstrate their active involvement in the production of sugar-containing products that are eligible for export to the United States. Active involvement is normally understood to mean the production of these sugar-containing products in the applicant’s own facility, and includes continuing to contribute to employment and value added activities.

4.2.2 To be eligible for an export allocation, new applicants must be processors that are not current allocation holders and that produce retail-form sugar containing products that are eligible for export to the United States.

4.3 Applications for Allocations

4.3.1 Applicants that wish to apply for an allocation under the sugar-containing products export TRQ are invited to submit their application form (EXT1685-2) no later than September 1, immediately preceding the opening of the quota year. The application from is available on the Foreign Affairs and International Trade Canada (DFAIT) web site (a paper copy will be provided upon request): Application Form for an Allocation (EXT1685-2) (PDF*, 1.36 MB).

5. Under-Utilization, Return and Reallocation Policies

5.1 Under-utilization Policy

5.1.1 An allocation holder with a utilization rate less than 90% in the previous quota year may have its allocation adjusted downward by an under-utilization penalty for the new quota year.Footnote 1

5.1.2. For allocation holders that under-utilized in the previous quota year, allocations in the new quota year will reflect the previous year’s actual level of use during the previous year (assessed in kilograms or based on percentages, whichever is lower).Footnote 2

5.1.3 Allocation holders that under-utilized during the previous quota year will be advised of the applicable under-utilization penalty before the allocations are finalized for the new quota year. 

5.2 Return Policy

5.2.1 Allocation holders may return any portion of the balance of their allocation no later than the return deadline of April 1.  Quantities returned no later than the return deadline will be reallocated, for use within the quota year, on an equal share basis to other allocation holders for production within their own facilities. 

5.2.2 An allocation holder with an allocation:

a) of less than 500,000 kg (in the current allocation year) with an average rate of returns over 50% in the two previous consecutive quota years may have its allocation adjusted downward in the new quota year by a return penalty of 20% of its average returns during the two previous consecutive years;

b) greater than or equal to 500,000 kg with an average rate of returns over 25% in the two previous consecutive quota years may have its allocation adjusted downward in the new quota year by a return penalty of 20% of its average returns during the two previous consecutive years.Footnote 3

5.3 Reallocation Policy

5.3.1 Quantities collected from the application of the under-utilization and return penalties will be put toward the new entrants pool as required.

5.3.2 Any portion of the (up to 100,000 kilogram) new entrants pool derived from under-utilization or return penalties that remains unallocated (due to lack of demand from eligible new applicants) will be reallocated on an equal share basis to existing allocation holders (that were subject neither to under-utilization nor return penalties) for use in retail form within the new quota year.

5.3.3. Any quantities above 100,000 kilograms derived from under-utilization or return penalties will be permanently re-allocated on an equal share basis to existing allocation holders (that were subject neither to under-utilization nor return penalties) for use in retail form.

6. Permanent Transfer Policy

6.1.1 The Minister may, at his sole discretion, consent to the permanent transfer of an allocation from one allocation holder to another allocation holder or to an eligible new applicant.  All requests for permanent transfers of export allocations must be sent to DFAIT.

6.1.2 Allocation holders with an allocation greater than 100,000 kg that have been authorized by the Minister to transfer permanently any portion of their allocation may have one percent of the transferred quantities earmarked for the new entrants pool.  If there are no eligible new applicants, or if sufficient amounts of quota are made available through the return and under-utilization penalties to create the new entrants pool on an annual basis, the earmarked quantities will be made available to the transferee for use within the quota year.  The earmark will continue to be made available to the transferee for use within successive quota years until the earmark has been completely drawn upon for the new entrants pool.

6.1.3 If there are multiple earmarks available (resulting from multiple permanent transfers), they will be drawn upon, as needed, on a pro-rata basis, based on the size of the transferees’ total allocations at the time that the earmarks are drawn upon.  Earmarks will be drawn upon for allocations to eligible new applicants as needed, only during quota years when the new entrants pool is not fully supplied through returns and/or under-utilization penalties. 

7. Export Permits

7.1 Types of Permits

7.1.1 A shipment-specific export permit is required for every shipment of sugar-containing products covered by this Notice destined to enter the United States.

7.2 Accessing Canada’s country-specific reserve

7.2.1 For eligible goods to enter the United States under Canada’s country-specific reserve, the United States requires an export permit issued by the Government of Canada.  These permits are normally issued on demand to allocation holders up to the size of their allocation under Canada’s export quota. 

7.2.2 To claim the in-quota rate of duty, the eight-digit shipment-specific export permit number issued by DFAIT on behalf of the Government of Canada must be indicated on the appropriate US Customs entry document.  Allocation holders are advised to provide their US Customs broker with a copy of the shipment-specific export permit prior to the time of export.  Canadian exporters should retain their original shipment-specific export permit.

7.3 Accessing the global portion of the US import TRQ

7.3.1 Exports of sugar-containing products entering the United States under the global portion of the US import TRQ also require shipment-specific export permits.  These permits are issued by DFAIT on a first-come, first served basis to residents of Canada. Export permits issued for shipments under the global portion of the US import TRQ must not be presented with the entry documents to US Customs.

7.3.2 Canadian exporters seeking to access the global portion of the US import TRQ are reminded that, since the global portion of the US import TRQ is open to exporters from other countries, a Canadian export permit does not itself guarantee access to this portion of the US TRQ.

7.4 How to Apply for a Permit

7.4.1 Information about the permit application process, including information about fees, the monthly billing system, and information required from applicants, is available on the DFAIT website: Applying for an Export Permit.

7.4.2 Exporters that wish to apply for an export permit are required to submit Form EXT1466, "Application for Permit", which can be obtain on the DFAIT website (a paper copy will be provided upon request): Application for Import/Export Permit (PDF * 95.24 KB)

8. Contact Us

8.1 Names and direct phone numbers for quota manager(s), permit officer(s), and the Help Desk are available on the DFAIT website: Contact Us.

8.2 For directory assistance, you may call 613-944-0773.

Footnotes

Footnote 1

The utilization rate (%) will be calculated for every allocation holder, as follows:

Utilization Rate (%) = (Actual Level of Use (kg) / Total Allocation Granted (kg)) X 100%

Where:
Actual Level of Use (kg) = Permits Used (kg) + Returns (kg) + Permanent Transfers Out (kg)

And:
Total Allocation Granted (kg) = Initial Allocation (kg) + Reallocations (kg) + Permanent Transfers In (kg)

Notes:

  • Returns to DFAIT must be received before the return deadline (see section 5.2).
  • Permanent Transfers (Out and In) must be authorized by the Minister (see section 6).

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Footnote 2

Allocation holders that under-utilized in the previous quota year will have their allocations in the new quota year capped at the actual level of use (in kilograms) during the previous year.  Moreover, if the actual level of use (in kilograms) during the previous year was greater than or equal to the allocation that the allocation holder would have been eligible for in the new quota year (if the allocation holder had not under-utilized), then an under-utilization penalty, calculated as follows, will be applied.

Underutilization Penalty (kg) = Pre-penalty Allocation (kg) X Underutilization Rate (%)

Where:
“Pre-penalty Allocation (kg)” is the allocation that the allocation holder would have been eligible for in the new quota year, if the allocation holder had not under-utilized in the previous quota year.

And:
Underutilization Rate (%) = 100% - Utilization Rate (%)

Return to first footnote 2 referrer

Footnote 3

An average rate of returns (%) will be calculated for every allocation holder, as follows, based on returns during the two previous consecutive quota years.

Average Rate of Returns (%) = the MINIMUM of

[(Returns in Year 1 (kg) + Returns in Year 2 (kg)) /(Total Allocation Granted in Year 1 (kg) + Total Allocation Granted in Year 2 (kg))] X 100%

OR

[((Returns in Year 1 (kg) / Total Allocation Granted in Year 1 (kg)) X 100%) + ((Returns in Year 2 (kg) / Total Allocation Granted in Year 2 (kg)) X 100%)] / 2

The return penalty, then, will be calculated as follows:

Return Penalty (kg) = 20% X ((Return in Year 1 (kg) + Returns in Year 2 (kg)) / 2)

Return to first footnote 3 referrer

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