Preparing for changes to the
GPT list
In the most recent federal budget, the Canadian government
announced several upcoming changes to the General
Preferential Tariff (GPT) regime.
Effective January 2015, the government plans to remove 72
countries from the GPT list, including countries such as China,
Brazil, Thailand and Korea, increasing the tariff rates on goods
from those countries.
These changes are coming fast, and any business that
imports, or deals with suppliers who import, from any of the
72 countries on the list would do well to take some time now
to analyze their supply chains and to determine how these
changes will impact them.
Reduce the impact
“It’s a short window with tight timelines,” said Candace Sider,
director, regulatory affairs, Canada for Livingston International.
As a first step, importers who haven’t already done so should
conduct a thorough analysis of their supply chain, preferably in
partnership with suppliers, to analyze where their goods and
inputs are coming from and what the financial impact will be
to their business.
“You need to consider both direct imports and your
suppliers,” said Sider. “You need to look at your supplier’s
Learn more about the potential
impact of GPT list changes to your
business.
1 Product: Export Process
supply chain to get a clear picture of where the goods are
coming from and how big the impact will be.”
The impact may range from small to substantial. While
estimates for the potential tariff increases are generally in the 3
to 6 percent range, some products in the clothing and textiles
categories could see increases ranging from 16 to 18 percent.
Canada already has trade agreements in place with many
of the countries slated for removal, which should mitigate
any damage. For instance, there are 20 countries on the
GPT list that have preferential tariff treatment through other
agreements. Mexico is covered under NAFTA, and Canada
has free trade deals with Colombia, Costa Rica, Chile, Israel,
Jordan and Peru. Thirteen other countries are covered under
the Commonwealth Caribbean Countries Tariff (CCCT). As
a result, many goods from these countries may already be
duty free, so changes to the GPT shouldn’t have much of an
impact.
Alternative solutions
Companies that look to be affected by the GPT changes
have few options to mitigate the damage. They can continue
to do business with those countries, swallowing the duty
rate increase and passing the increased costs to customers.
Another possibility is looking to alternate sourcing locations,
which can be a good strategy for organizations willing to do
their homework and properly assess the cost of re-engineering
their supply chains. But even this may not help, as the changes
to the GPT could affect some low-cost sourcing locations that
aren’t on the list.
Sider explained that another challenge will be the effect the
GPT removal will have on countries with Less Developed
Country (LDC) rates, including Bangladesh and Cambodia. In
order for an end-product to qualify for LDC tariff treatment,
most manufacturers in LDC-entitled countries must source
materials, components or parts from other LDC countries or
from countries included under the GPT. A significant reduction
in the number of countries qualifying for GPT means less
sourcing options for LDC countries, which could mean that
many goods that today qualify for LDC-reduced duty rates will
not qualify after the GPT changes are implemented.
Potential impact of GPT
changes:
• Expected general increase in tariffs
in the 3 to 6 percent range
• Some clothing and textile products
could see increases ranging from 16
to 18 percent
Stay up to date
“The GPT changes have a far more reaching impact than just
what is immediately understood,” said Sider, who adding
that Livingston will be providing clients with updates on the
changes as they unfold. “You need to stay up to date on the
regulations as they are implemented,” she said.
“You need to look at your
supplier’s supply chain to get a
clear picture of where the goods
are coming from and how big the
impact will be.”
To further complicate matters, the government is also
suggesting that the GPT list be reviewed annually. This is a
definite challenge for businesses that would prefer a certain
level of certainty when dealing with overseas suppliers.
Because contracts with suppliers generally tend to be
multi-year agreements, businesses choosing to source from
even those GPT countries that are not slated for immediate
removal will have no certainty that their landed costs will
remain consistent year over year. This is another reason why
businesses will want to stay on top of the evolving changes
and keep in touch with their service providers to ensure they
have access to the latest tariff changes.
The GPT changes are going to happen, so the best thing
you can do is be prepared. Keep in touch with your service
providers, watch the government websites and stay on top of
the changes as they are implemented, so you can continue to
make the best strategic sourcing decisions for your business.
Contact your Livingston account executive
e-mail us at solutions@livingstonintl.com
or give us a call at 1-800-837-1063
Visit www.livingstonintl.com
2 Preparing for changes to the GPT list