Notices

Textiles and Clothing

Administration of the North American Free Trade Agreement Relating to Exports of Apparel and Made-Up Goods to the United States and the Application of the Tariff Preference Levels

Transfer Mechanism Supplement

Notice to Exporters
Export and Import Permits Act

Serial No. 115
Date: April 30, 1999

Table of Contents

1.0 Purpose

1.1 The purpose of this Notice is to advise exporters of: (a) the implementation of the system to allow transfer of Tariff Preference Level (TPL) allocations for non-wool (cotton or man-made fibre) apparel TPL quota holders; and (b) an additional transfer mechanism to allow non-manufacturers to receive apparel TPL quota from other manufacturers.

1.2 The mechanism allowing transfer of TPL quota among wool and non-wool apparel quota holders is outlined in Notice to Exporters No. 111, dated September 21, 1998. This Notice is a supplement to Notice to Exporters No. 111. It is recommended that Notice to Exporters No. 111 be read in advance of this Notice.

2.0 Definitions

2.1 For the purpose of this Notice:

(a) "Certificate of Eligibility" means the Minister's certification that a quota holder's goods qualify for preferential treatment pursuant to the NAFTA. The Minister makes such qualification conditional of the quota holder's maintenance of records which allow the Minister's auditors to identify the origins of materials used in the manufacture of goods eligible for access to TPL;

(b) "Company" refers to manufacturer and non-manufacturer;

(c) "Customs Broker" refers to a Canadian customs broker that has on-line access to the Export and Import Controls Bureau's computer system;

(d) "Department" means the Department of Foreign Affairs and International Trade;

(e) "EICB" means the office of the Export and Import Controls Bureau of the Department of Foreign Affairs and International Trade;

(f) "Goods" means NAFTA-specified textile apparel and made-up products which do not meet the NAFTA Rules of Origin specifications for classification as "originating" products (NAFTA, Annex 401);

(g) "Manufacturer" means an exporter that is a quota holder and either: (i) owns the woven or knit fabric used in the manufacture of apparel products, or owns the yarn in the knit to shape of apparel products; or (ii) cuts and sews the woven or knit fabric into apparel products, or knits to shape apparel products;

(h) "Minister" means the Minister of Foreign Affairs;

(i) "NAFTA" refers to the North American Free Trade Agreement;

(j) "Non-manufacturer" means an exporter that is a quota holder but does not meet the definition of a manufacturer, i.e., is a retailer, distributor or wholesaler, etc.;

(k) "Quota" means the amount of SME an exporter may access from the TPL;

(l) "Quota holder" means an exporter to which quota has been allocated to;

(m) "SME" means square metre equivalents;

(n) "Tariff Preferential Level" or "TPL" means the special provisions set out in Annex 300-B, Appendix 6, Part B, of the NAFTA, that provides for the application of a customs duty at a preferential rate to non-originating goods up to a specified quantity, as adjusted under the Agreement, measured in square metre equivalents, and at a rate different from goods that exceed that quantity;

(o) "TPL allocation" means a specific level of quota an exporter is allocated in a year;

(p) "Transfer" means the movement of quota from one quota holder to another quota holder and, if not specifically addressed, also means the return of quota to the Department;

(q) "Transferee" means a quota holder that receives a quota from another quota holder;

(r) "Transferrer" means a quota holder that transfers its quota to another quota holder;

(s) "Year" means the calendar year beginning January 1 to December 31

3.0 Duration

3.1 This Notice shall remain valid until further notice.

4.0 Implementation

4.1 Implementation date: The transfer mechanism for wool apparel quota holders was implemented on October 1, 1998. The transfer mechanism for non-wool apparel quota holders came into effect on January 1, 1999.

5.0 Transfer TPL Without Apparel Goods

5.1 Transfer without goods: The transfer mechanism described in Notice to Exporters No. 111 outlines the features, conditions and procedures necessary to transfer wool and non-wool apparel TPL quota allocation. Transfers of TPL under this mechanism are transfers without apparel goods.

5.2 Transfer Limitations: There are two types of non-wool apparel TPL. One is accounted for through the use of imported fabric. The other is accounted for through the use of imported yarn. Quota holders that have access to non-wool apparel (fabric) TPL may transfer their TPL quota to other quota holders with similar apparel (fabric) TPL. Likewise, quota holders that have access to non-wool apparel (yarn) TPL may transfer their TPL quota to other quota holders with similar apparel (yarn) TPL. Quota holders wishing to conduct transfers of TPL quota between apparel (fabric) and apparel (yarn) quota holders will have to notify the EICB, since Customs Brokers will not have the ability to make such transfers. This is to ensure that the Canadian non-wool apparel (fabric) TPL export sub-limit under NAFTA is not exceeded (see next item).

5.3 Non-wool apparel and transfer: Of the non-wool apparel TPL, as provided in Appendix 6 B. and Schedule 6.B.1 of the NAFTA, no more than 63,060,603 SME shall be from fabrics which are knit or woven from third-party (non NAFTA) countries. Once this level is reached, non-wool apparel TPL will apply only to apparel goods made from third-party yarn. Quota holders may wish to contact their Customs Broker, or access the Department's web site, regarding the utilization of this sub-limit.

6.0 Main Features and Conditions for Transfers with Goods

6.1 Who can receive transfers: As outlined in Notice to Exporters No. 111, only manufacturers can apply to receive transfers of apparel TPL quota (without goods) from other quota holders. Non-manufacturers are excluded from receiving transfers of apparel TPL quota. However, to respond to requests by the apparel industry, the transfer mechanism has been modified to allow non-manufacturers the opportunity to receive transfers of apparel TPL quota from other quota holders, provided that such quota holders are manufacturers and that such transfers of TPL quota are accompanied with the corresponding apparel goods manufactured by the transferrer.

6.2 Accompanied with corresponding goods: Apparel goods that accompany the transfer of TPL quota must be purchased by the transferee from the manufacturer conducting the transfer. The transferee must also be the final exporter of the apparel goods benefiting from the transferred TPL with goods. The transfer of apparel TPL with goods, including the purchase and export of the corresponding goods, must all be concluded in the same year.

6.3 Level of TPL transfer: The amount of transfer of apparel TPL with goods is not subject to the restrictions as provided for in Notice to Exporters No. 111, paragraphs 5.1 through to 5.5. Return of TPL quota to the Department is considered a transfer without goods. Manufacturers, therefore, will be allowed, without penalty, to transfer out TPL quota with goods to a non-manufacturer to a level not greater than its balance of TPL available at the time of the transfer.

6.4 Maintain records: Quota holders are advised to maintain records on: (a) the country of origin of the imported fabrics and yarns used in the manufacturing of apparel goods; (b) the manufacturing of where the goods have been cut, sewn or otherwise assembled; and (c) the purchase invoices and proof of payment for the apparel products that accompanied the transfer of apparel TPL.

6.5 Revoke and denial of apparel TPL: The Minister may revoke or deny access to wool and non-wool apparel TPL if a company fails to maintain proper and relevant records with respect to the items cited above.

7.0 TPL Allocation in Subsequent Years

7.1 Calculation of transfer with goods and export utilization: For each quota holder, the amount of exports, transfers and returns, measured in SME, in one year will be taken into account when calculating its TPL allocation for the following year. With respect to transfers with goods, the amount of transfer will be reserved and may be given back to the quota holder as part of its TPL allocation for the following year. Transferred in TPL with goods will be considered as part of the quota holders export performance in determining next year's TPL allocation. Examples of TPL allocations for the following year are provided in Notice to Exporters No. 111.

8.0 Transfer Procedures

8.1 Custom Brokers: Canadian Custom Brokers with on-line access to the EICB will be able to make transfers on behalf of quota holders. Information on the role of Custom Brokers are described in Notice to Exporters No. 111. Companies wishing to conduct transfers of TPL between non-wool apparel (fabric) and non-wool apparel (yarn) quota allocations must notify this Bureau of such transactions, as Brokers will not have the ability to make such transfers. Notification must be made to the EICB via facsimile at the number listed below.

9.0 List of Quota Holders

9.1 List of quota holders: A list of current quota holders and related Notices to Exporters can be found under the EICB web site:

English Textiles & Clothing

French Textiles & vêtements

10.0 Information About the Transfer Mechanism

10.1 Who to ask: Inquiries concerning this Notice, or other administrative policies relating to NAFTA, may be addressed to:

Textiles and Clothing Section
Trade Controls Policy Division
Export and Import Controls Bureau
Department of Foreign Affairs and International Trade

Mailing address:

P.O. Box 481
Station A
Ottawa, Ontario
K1N 9K6

Courier address:

Tower C, 4th floor
Lester B. Pearson Building
125 Sussex Drive
Ottawa, Ontario
K1A 0G2

Telephone: 613-996-3711
Facsimile: 613-995-5137