Canada’s unilateral tariff preference programs for imports from developing countries

Overview

Under its Customs Tariff legislation, Canada maintains unilateral tariff preference programs for imports from eligible developing countries. The programs allow goods originating in these countries to benefit from more liberalized tariff treatment over Canada's standard Most-Favoured-Nation (MFN) Tariff. Unlike Canada's free trade agreements (FTAs), the programs are provided unilaterally, meaning that Canada's tariff preferences are not predicated upon any preferential market access for Canadian goods in these developing countries. However, certain program beneficiaries are also FTA partners of Canada and both Canada and these beneficiaries have also provided market opening under those separate arrangements.

In the 1970s, the United Nations (UN) recommended that developed countries grant unilateral tariff preferences to imports from developing countries under a Generalized System of Preferences (GSP), in order to facilitate and promote their export-driven industrialization and development. Since then, Canada as well as many other developed economies, including the European Union, United Kingdom, United States and Japan, have been providing tariff preferences to developing countries. 

Canada's unilateral tariff preference programs

Each of Canada's programs covers different groups of products that may be imported under tariff preferences governed by specific rules of origin requirements, as well as different criteria for country eligibility. With the exception of the tariff scheme for Caribbean countries, the programs expire periodically under the Customs Tariff and have been regularly renewed in the past without any lapse in their operation.

Below are details on each program, along with changes announced in Budget 2023. These changes were the subject of public consultations held in Fall 2022.

General Preferential Tariff (GPT)

Tariff reductions or duty-free treatment for the majority of goods imported from developing countries.

How it works

Established in 1974, and renewed in legislation to December 31, 2034, the GPT program currently grants tariff preferences to 106 developing countries, 49 of which are least developed countries (LDCs) that are also eligible for LDCT preferences. GPT preferences (i.e., reduced tariffs or duty-free treatment) cover over 80% of tariff lines for goods, with the exception of most apparel and textile products, footwear, certain agricultural goods, as well as certain steel products. For further details, including current technical requirements for goods to qualify for the GPT program, please see Memorandum D11-4-4 - Rules of Origin Respecting the General Preferential Tariff and Least Developed Country Tariff (cbsa-asfc.gc.ca).

On the basis of periodic reviews by Canada, beneficiary countries may be graduated out of the GPT program once they meet either one of Canada's two development-based criteria:

• Two consecutive years of classification as an upper-middle or high income economy by the World Bank; or
• A minimum global exports share of 1 percent for two consecutive years according to World Trade Organization (WTO) data.

Former beneficiaries may also request to be re-instated, provided that they fall below upper-middle income status and the 1 percent global exports threshold over two consecutive years.

Beneficiaries

• Afghanistan
• Angola
• Anguilla
• Armenia
• Ascension Island
• Bangladesh
• Belize
• Benin
• Bhutan
• Bolivia
• British Indian Ocean Territory
• Burkina Faso
• Burma (Myanmar)
• Burundi
• Cambodia
• Cameroon
• Canary Islands
• Cape Verde
• Central African Republic
• Ceuta and Melilla
• Chad
• Christmas Island
• Cocos (Keeling) Islands
• Comoros
• Congo
• Cook Islands
• Côte d'Ivoire
• Democratic Republic of the Congo
• Djibouti
• Egypt
• El Salvador
• Eritrea
• Ethiopia
• Falkland Islands
• Fiji

• French Southern and Antarctic Territories
• Gambia
• Georgia
• Ghana
• Guatemala
• Guinea
• Guinea-Bissau
• Guyana
• Haiti
• Honduras
• Iraq
• Kenya
• Kiribati
• Kyrgyzstan
• Laos
• Lesotho
• Liberia
• Madagascar
• Malawi
• Mali
• Marshall Islands
• Mauritania
• Micronesia
• Moldova
• Mongolia
• Montserrat
• Morocco
• Mozambique
• Nauru
• Nepal
• Nicaragua
• Niger
• Nigeria
• Niue
• Norfolk Island

• Pakistan
• Papua New Guinea
• Paraguay
• Philippines
• Pitcairn
• Rwanda
• Saint Helena and Dependencies
• Samoa
• Sao Tome and Principe
• Senegal
• Sierra Leone
• Solomon Islands
• Somalia
• South Sudan
• Sri Lanka
• Sudan
• Swaziland
• Syria
• Tajikistan
• Tanzania
• Timor-Leste
• Togo
• Tokelau Islands
• Tonga
• Tristan Da Cunha
• Turkmenistan
• Tuvalu
• Uganda
• Ukraine
• Uzbekistan
• Vanuatu
• Vietnam
• Virgin Islands, British
• Yemen
• Zambia
• Zimbabwe

Changes coming into effect on January 1, 2025

Based on the most recent available income classifications and export data, the following countries will be graduated from the GPT program:

Based on their requests and latest data verifying that they meet Canada's re-instatement criteria (two consecutive years below the upper-middle income and 1 percent global exports share thresholds), the following countries will be re-instated to the program:

• Lebanon
• Tunisia

See changes coming into effect across all programs.

Least Developed Country Tariff (LDCT)

Comprehensive duty-free treatment for virtually all goods imported from least developed countries (LDCs).

How it works

In place since 1983, and renewed in legislation to December 31, 2034, the LDCT program currently applies to 49 least developed countries (LDCs) and provides the most comprehensive coverage of Canada's programs – duty-free treatment for all imports except over-access, supply-managed dairy, poultry and egg products. For further details, including current technical requirements for goods to qualify for the LDCT program, please see Guide to the Least Developed Country Tariff (cbsa-asfc.gc.ca).

GPT membership is a pre-condition for LDCT eligibility. While Canada relies on the United Nations (UN) List of Least Developed Countries to determine and update countries' eligibility for the LDCT program, this is ultimately subject to the discretion of the Governor-in-Council, on the recommendation of the Minister of Finance, as provided under Section 38 of the Customs Tariff.

The UN Committee for Development Policy (CDP) reviews the list of LDCs every three years and makes recommendations on graduation on the basis of (1) meeting thresholds related to income, the Human Assets Index, and the Economic Vulnerability Index, for two consecutive reviews and (2) complementary information, including the LDC government's views. A recommendation by the CDP needs to be endorsed by a resolution of the General Assembly. Graduating countries are provided with a preparatory period, generally of three years, ahead of the actual graduation date to allow for a smooth transition.

Several LDCT beneficiaries have been identified for prospective UN graduation in the coming years:

• Sao Tome and Principe in 2024;
• Bangladesh, Laos and Nepal in 2026; and
• Solomon Islands in 2027.

Three-year transition policy

While LDCT eligibility will remain subject to the discretion of the Governor-in-Council, on the recommendation of the Minister of Finance, it is Canada's intent to apply a new, standard transition policy that will allow LDCT beneficiaries an additional three-year period to retain full tariff benefits under the program following formal change in their status at the UN. The transition period will enhance the transparency of the LDCT program, providing Canadian importers and beneficiary countries with predictability and valuable lead-time to make sourcing adjustments, as necessary, in order to minimize potential disruptions to supply chains reliant on LDCT duty-free treatment. The new policy will also provide additional support and facilitate a smoother transition for former LDCs from a market access perspective. This is in line with the WTO General Council decision of October 2023 calling on developed countries to extend unilateral tariff support measures for graduating LDCs.

Beneficiaries

• Afghanistan
• Angola
• Bangladesh
• Benin
• Bhutan
• Burkina Faso
• Burma (Myanmar)
• Burundi
• Cambodia
• Cape Verde
• Central African Republic
• Chad
• Comoros
• Democratic Republic of the Congo
• Djibouti
• Eritrea

• Ethiopia
• Gambia
• Guinea
• Guinea-Bissau
• Haiti
• Kiribati
• Laos
• Lesotho
• Liberia
• Madagascar
• Malawi
• Mali
• Mauritania
• Mozambique
• Nepal
• Niger
• Rwanda

• Samoa
• Sao Tome and Principe
• Senegal
• Sierra Leone
• Solomon Islands
• Somalia
• South Sudan
• Sudan
• Tanzania
• Timor-Leste
• Togo
• Tuvalu
• Uganda
• Vanuatu
• Yemen
• Zambia

Changes coming into effect on January 1, 2025

The following countries, three of which have already been graduated from the UN List of LDCs for at least three years, will be graduated from Canada's LDCT program in 2025:

• Cape Verde
• Samoa
• Vanuatu
• Tuvalu (graduation from Canada's GPT program requires LDCT graduation in Canadian legislation)

See changes coming into effect across all programs.

Commonwealth Caribbean Countries Tariff (CCCT)

Duty-free treatment for the majority of goods imported from Commonwealth countries and British overseas territories in the Caribbean region.

How it works

Established in 1986, this program (which does not expire in legislation) provides duty-free treatment to 18 Commonwealth countries and British overseas territories in the Caribbean region. Coverage of products under this program, currently similar to that of the GPT program, is to be expanded on January 1, 2025, as noted below. For further details, including current technical requirements for goods to qualify for the CCCT program, please see Memorandum D11-4-5 - Rules of Origin Respecting Commonwealth Caribbean Countries (cbsa-asfc.gc.ca).

Given that the CCCT program targets a specific sub-group of developing countries and is separate from the Generalized System of Preferences, it requires a waiver from Canada's Most-Favoured-Nation obligations at the World Trade Organization. Canada's current waiver has been granted until December 31, 2033.

Beneficiaries

• Anguilla
• Antigua and Barbuda
• Bahamas
• Barbados
• Belize
• Bermuda

• British Virgin Islands
• Cayman Islands
• Dominica
• Grenada
• Guyana
• Jamaica

• Montserrat
• St Kitts and Nevis
• St Lucia
• St Vincent and the Grenadines
• Trinidad and Tobago
• Turks and Caicos Islands

Changes coming into effect on January 1, 2025

As announced by the Prime Minister, in order to advance trade and investment opportunities and further encourage industrial growth in the Caribbean region, duty-free treatment under the CCCT program will be expanded to cover all textiles, apparel and made-up textile articles in Chapters 50 – 63 of the Harmonized System.

See changes coming into effect across all programs.

General Preferential Tariff Plus (GPTP) (not yet in force)

This program will provide additional tariff benefits to GPT countries that adhere to international standards on human rights, labour rights, and sustainable development.

Program design and development

With newly established legislative authority under the Customs Tariff until December 31, 2034, the GPTP is intended to be a new program that provides expanded tariff preferences, going beyond GPT benefits, to those GPT beneficiaries that abide by certain international standards and work to improve conditions relating to human rights, labour rights, and sustainable development, including environmental protection.

The design, development and operationalization of the GPTP will be undertaken in the coming years. GPTP implementation will be subject to future decisions of the Government of Canada to determine, among other aspects, the level of tariff benefits, products affected, country eligibility and compliance criteria.

The GPTP is intended to align with the programs of other like-minded partners, particularly the GSP+ of the European Union, as well as Canada's broader trade policies. It is also envisioned to provide an avenue for Canada to engage directly with beneficiary countries in order to address potential shortfalls in the areas noted above.

More information on GPTP development will be posted here as it becomes available.

Changes coming into effect across all programs

Budget 2023 announced updates, including technical simplifications of the rules of origin and shipment requirements, that apply horizontally across all programs.  

On January 1, 2025, Canada will introduce a number of updates to its unilateral preferential tariff programs to make them easier to use and access for Canadian importers and developing country partners.

Rules of Origin

The rules of origin determine the extent of production required to be carried out in a beneficiary country in order for the imported good to be eligible for tariff benefits. Currently, the LDCT rules of origin for apparel products allow the production of apparel in LDCs from imported yarns and fabrics, as long as a minimum percentage of value is added in the LDC. There is currently no rule of origin for apparel products in the GPT or the CCCT, as those goods are not eligible for preferences under those programs.

To address this, the rules of origin for apparel products will be liberalized and harmonized across all of Canada's programs to allow for the cutting and sewing of fabrics in developing and least developed countries to confer origin on the final apparel product, regardless of the origin of the yarn and fabric^{Footnote 1}. This will reduce issues of compliance identified by apparel importers and stakeholders, thereby helping to maximize the utilization of benefits across Canada's programs, including potential future benefits under the GPT and GPTP programs. The changes will also increase policy consistency for beneficiaries by aligning with the rules of origin for apparel under similar programs of the European Union and Japan.

Shipping Requirements

To be eligible for Canada's unilateral preferential tariff programs, goods must be shipped directly from a beneficiary country to Canada based on acceptable documentation. The direct shipment requirements, currently set in the Customs Tariff, can only be satisfied through one type of shipping document, a through bill of lading, which has become less common over the last several decades. As a result, the programs have become more difficult to access over time simply due to acceptable proof of compliance. Furthermore, in the case of goods transshipped through an intermediary country, the requirements limit the time that goods can remain in storage in the intermediary country to six months, which may create logistical issues for importers.

Recognizing these issues, the shipment requirements are to be removed from the Customs Tariff and re-established with modified parameters in regulations. The regulations will broaden the types of documentary evidence that can serve as proof of direct shipment, beyond a through bill of lading. They will also eliminate the six-month time limit on the storage of goods in an intermediary country. These changes will reflect the way that companies currently do business when shipping goods, ensure that access to Canada's programs is not restricted by administrative or logistical issues, and will align with Canada's shipment requirements under its free trade agreements.

The new regulations on rules of origin and direct shipment

• General Preferential Tariff, General Preferential Tariff Plus and Least Developed Country Tariff Rules of Origin Regulations
• Commonwealth Caribbean Countries Tariff Rules of Origin Regulations
• Direct Shipment (Most-Favoured-Nation Tariff, General Preferential Tariff, General Preferential Tariff Plus, Least Developed Country Tariff, Commonwealth Caribbean Countries Tariff, Australia Tariff and New Zealand Tariff) Regulations