Canada set to impose 100% surtax on US imports

On May 18, 2015, the World Trade Organization’s Appellate Body upheld the finding of an October 14, 2014 compliance panel ruling that the U.S. revised country-of-origin labeling (COOL) rules for importations of meat from Canada and Mexico was inconsistent with Article 2.1 of the Agreement on Technical Barriers to Trade (TBT), which requires WTO members’ regulations to treat imports in a manner that is “no less favorable than that accorded to like products of national origin and to like products originating in any other country.” For additional background information on the dispute please refer to our article about the “U.S.-Canada Trade Dispute over Country-of-Origin Labelling Requirements.”

This Appellate Body’s decision cannot be further appealed. It must now be adopted by the WTO Dispute Settlement Body (“DSB”) which will likely occur at the end of June, 2015. Thereafter Canada will be free to proceed to request authorization from a WTO arbitrator to determine the level of nullification and impairment, or damage, caused by the COOL rules to Canadian exports of meat. After the arbitrator issues his decision, Canada will be free to request formal authorization from the DSB to retaliate. Once the DSB grants such authorization, Canada has indicated that it will impose a 100% surtax on the following U.S. imports to Canada:

Live bovine animals
Live swine
Meat of bovine animals, fresh or chilled
Meat of bovine animals, frozen
Meat of swine, fresh, chilled, or frozen
Cuts of offal, fresh or chilled of spent fowl
Cheese, not including the following: fresh (unripened or uncured) cheese, whey cheese or curd; grated or powdered; processed cheese; blue-veined cheese or cheese containing veins produced by Penicillium roqueforti
Apples, fresh
Cherries, other than sour cherries (Prunus cerasus)
Cherries, provisionally preserved (unsuitable in that state for immediate consumption)
Semi-milled or wholly milled rice, whether or not polished or glazed
Prepared or preserved — prepared meals of spent fowl; prepared meals of specially defined mixtures
Prepared or preserved — specially defined mixtures, other than in cans or glass jars; spent fowl other than in cans or glass jars
Prepared or preserved swine cuts, other than ham and cuts thereof, other than shoulder and cuts thereof
Glucose and glucose syrup, containing in the dry state at least 20% but less than 50% by weight of fructose, excluding invert sugar
Other fructose and fructose syrup, containing in the dry state more than 50% by weight of fructose, excluding invert sugar
Chocolate and other food preparations containing cocoa — preparations in blocks, slabs or bars weighing more than 2 kg or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg
Chocolate and other food preparations containing cocoa — chocolate ice cream mix or ice milk mix; chocolates; chocolate coated nuts and other confectionery
Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagna, gnocchi, ravioli, cannelloni; couscous, whether or not prepared
Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes); cereals (other than maize [corn]) in grain form or in the form of flakes or other worked grains (except flour, groats and meal), pre-cooked or otherwise prepared, not elsewhere specified or included
Bread, pastry, cakes, biscuits and other bakers’ wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products
Potatoes, prepared or preserved otherwise than by vinegar or acetic acid, frozen, other than products of heading 20.06
Orange juice, frozen
Tomato ketchup and other tomato sauces
Wine of fresh grapes, including fortified wines; grape must other than that of heading 20.09
Ethyl alcohol and other spirits, denatured, of any strength
Sugars, chemically pure, other than sucrose, lactose, maltose, glucose and fructose; sugar ethers, sugar acetals and sugar esters, and their salts, other than products of heading 29.37, 29.38 or 29.39
Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed
Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal
Other tubes, pipes and hollow profiles, welded, of circular cross-section, of stainless steel
Parts of stoves, ranges, grates, cookers barbecues, braziers, gas-rings, plate warmers and similar non-electric domestic appliances, and parts thereof, of iron or steel
Grinding balls
Swivel seats
Wooden office furniture
Mattresses

Canada has indicated that it will repeal the surtaxes in the event of a negotiated settlement if the U.S. brings its COOL measures into compliance with its WTO obligations.

Companies affected by this measure ought to be informed on steps they ought to be taking to protect and promote their interests throughout the retaliation and settlement process.