Customs tariffs on 201 information and communication technology products to be eliminated
On December 16, 2015, Canada and 53 other members of the World Trade Organization (WTO) reached an agreement on the expansion of the Information Technology Agreement ("ITA"). The result of the agreement will be the elimination of customs duties and charges from 201 information and communication technology and related products (the "Products"). Because the original ITA dated from 1996, it did not apply to many of the technologies that have been developed over the past 20 years. The expansion of the ITA is intended to ensure that the newly innovated Products receive the same tariff treatment as those that were included in the 1996 version of the agreement.
The complete process will involve three steps, with some tariffs being lifted as early as July 1, 2016 and others remaining in effect for up to three years after that date (the final deadline for eliminating the tariffs is July 1, 2019, although an additional delay may be granted for some products under exceptional circumstances). In general, however, the majority of the relevant tariffs will be lifted sooner rather than later: nearly 65% of them, amounting to 88% of imports of the Products, will be eliminated by July 1, 2016. As of today, only 24 WTO members' schedules and staging matrices have been approved (including Canada's).
Among the 201 Products covered by the expansion of the ITA are:
- GPS navigation systems and equipment;
- Video game consoles;
- Video cameras;
- New generation multi-component integrated circuits; and
- Certain medical products (e.g. magnetic resonance imaging equipment and ultra-sonic scanning devices).
The 53 parties to the expansion of the ITA include, inter alia, the United States, countries of the European Union, Australia, China, Japan and South Korea. The agreement imposes an obligation on the 53 WTO members to eliminate tariffs on the Products. The new tariffs (or absence thereof) on the Products will replace the Most-Favoured-Nation rate (the "MFN rate") and therefore all 162 WTO members will benefit from the duty-free access created by the expanded ITA in those specific markets.
The expansion of the ITA is estimated to encompass $1.3 trillion globally in annual trade in the Products. The ITA will eliminate import duties that were as high as 35% in certain countries. Overall, the expanded ITA will improve market access and predictability.
Impact on Canada
The impact of the elimination of tariffs on the Products will nonetheless most likely be uneven in different markets. In Canada, exports totaling nearly $21.7 billion annually will be covered under the expanded ITA. For importation purposes into Canada, most products covered by the ITA are already duty free under the MFN rate. The items upon which tariff rates will be eliminated in Canada include telecommunications satellites, headphones, speakers and optical fibres. The tariff on these products generally ranges from 2 to 8.5%, depending on the product.
Canada's complete schedule to the ITA, as approved on December 16, 2015, is available online via the World Trade Organization's website.
The author wishes to thank Sara Shearmur and Geneviève Beebe for their help in writing this article.