Notice to Importers

Administration of the Canada-Honduras Free Trade Agreement Relating to Imports of Apparel, Textiles and Made-Up Goods from Honduras and the Application of the Tariff Preference Levels

Serial No. 856
Date: October 1, 2014

Table of Contents

1.0 Purpose

1.1 The purpose of this Notice is:

a. To provide an explanation of the provisions of the Canada- Honduras Free Trade Agreement (CHFTA) as they relate to apparel, textiles and made-up goods;

b. To outline the Tariff Preference Level (TPL) import quotas for (i) Apparel; and (ii) Fabric and made-up textiles goods, and the Minister’s policy regarding the administration TPL imports; and

c. To explain how to apply for import permits required for the importation of TPL-eligible goods under the CHFTA.

2.0 General Information

2.1 The CHFTA enters into force on October 1, 2014. Upon entry into force of the CHFTA, importers will benefit from the immediate elimination of tariffs on originating and TPL-eligible textile and apparel goods as set out in the Schedule of Canada in Annex 3.4.1 of the Agreement.

2.2 The Rules of Origin for apparel, textiles and made-up goods are set out in Chapter Four, Annex 4.1 and Chapter Three, Annex 3.1. Although there are several specific exceptions, in general, the rule of origin may be described as a "yarn forward" rule, requiring that the yarn, fabric and finished product all originate from the CHFTA countries, namely, Honduras and Canada.   

2.3 A notable exception to this rule is contained in the Note to Section XI, Annex 4.1 of Chapter Four which provides for U.S. or Mexican yarns of heading 52.05 through 52.07, or heading 55.09 through 55.11 that is used in the production of goods of Chapters 50 through 63, to be recognized as originating under the CHFTA. Further, originating yarn from the United Sates or Mexico may be used in the production of sewing threads of headings 52.04, 54.01, and 55.08 which are made in Canada or Honduras.

2.4 Non-originating apparel, textiles and made-up goods, i.e. goods that do not meet the requirements under the rules of origin, may still qualify for a preferential duty rate, up to a specified annual quantity.  This preferential rate for non-originating goods is called Tariff Preference Level (TPL) and is equivalent to the rate applied to goods that meet the rules of origin. The scope of TPL-eligible goods covered in the CHFTA and additional information related to TPL applicability are set out in Section 5 of Annex 3.1 of the Agreement. Once the TPL specified annual quantity has been fully utilized, non‑originating apparel, textiles and made-up goods will be subject to the Most-Favoured-Nation tariff rate for the remainder of that TPL year.

2.5 TPL imports into Canada under the CHFTA must be accompanied by an import permit. The Minister issues import permits to persons who are eligible for TPL imports under authority of the Export and Import Permits Act (see Section 6 of this Notice) and TPL quantities are normally allocated to qualified applicants in accordance with the TPL Allocation Policy expressed in Section 5 of this Notice.

2.6 This Notice shall remain valid until further notice.

3.0 Scope and Coverage

3.1 This Notice pertains to Chapter Three, Annex 3.1 which sets out special provisions applicable to certain apparel, textiles and made-up goods. Under Section 5 of Annex 3.1, Tariff Preference Level-eligible goods which would not otherwise satisfy the CHFTA Rules of Origin (Chapter Four, Annex 4.1), will nevertheless qualify for CHFTA preferential duty rates up to specified annual levels. Above these levels, non‑originating apparel, textiles and made-up goods will be subject to the Most-Favoured-Nation tariff rate.

4.0 TPL Levels

4.1 Importers should note that primary units of measure (kilograms, numbers and pairs) are converted into Square Metre Equivalents (SME) by means of conversion factors identified in Schedule 1 to Annex 3.1.

4.2 The annual TPL levels for imports of non-originating goods from Honduras to Canada under the CHFTA, based on a calendar year, are as follows:

  1. Apparel goods: 4,000,000 SME; and
  2. Fabric and made-up goods: 1,000,000 SME.

4.3 The TPL year runs from January 1 to December 31.  The TPL levels for the period October 1 to December 31, 2014 will be 3/12ths of the annual levels specified in paragraph 4.2.

5.0 TPL Allocation Policy

5.1 Until further Notice, each of the TPL levels for imports will be made available on a "first-come-first-served" basis under the CHFTA.  Once the specified annual quantity has been fully utilized, non‑originating apparel, textiles and made-up goods will be subject to the Most-Favoured-Nation tariff rate for the remainder of that TPL year.

6.0 Import Permits

6.1 Canadian importers require a shipment specific import permit for all CHFTA TPL imports into Canada.  TPL-eligible shipments entering Canada under a shipment-specific import permit can normally do so at the rate equivalent to the originating rate.

6.2 Shipment specific import permits for TPL-eligible imports into Canada under the CHFTA are issued on a first-come, first-served basis and can be applied for on-line.

7.0 Further Information

7.1 For a detailed list of the commodities that are subject to trade controls, including those covered by Section 5 of Annex 3.1, consult the Handbook of Export and Import Commodity Codes

7.2 If you have an enquiry concerning this Notice or other administrative policies related to TPL-eligible goods under the CHFTA, refer to Clothing & Textiles – Specific Enquiries at Contact Us.

7.3 This Notice and other pertinent information on TPL provisions in Canada's free trade agreements are available on the Department's internet site: List of Notices to Importers/Exporters.

7.4 The Canada-Honduras Free Trade Agreement is available on the Global Affairs Canada website.