Coasting trade, foreign vessels and the Canada-European trade agreement

Canada’s new trade agreement with Europe, called the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA), changes coasting trade rules that apply to the use of foreign vessels.

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Changes to coasting trade in Canada under CETA

The Coasting Trade Act (CTA) sets out the laws governing the use of foreign vessels and non-duty paid vessels in Canada’s coasting trade. CETA will change how the CTA applies to European Union (EU) entities using foreign vessels and the services they provide.

Under CETA, EU owners of eligible vessels can offer a limited number of coasting trade services without a licence. To qualify, EU owners of eligible vessels must complete an advance notification form and demonstrate that they meet new requirements in the CTA.

CETA does not affect any law of Canada that imposes safety and pollution prevention requirements on foreign vessels.

These changes will take effect when CETA comes into force in 2017.

Foreign vessels eligible to provide coasting trade services without a licence

Coasting trade, or cabotage, refers to any marine activity of a commercial nature within Canadian waters and above the continental shelf as defined in the Coasting Trade Act, section 2.1.

Under CETA, Canada agreed that 2 categories of EU entities may provide a limited number of cabotage services in Canada without a coasting trade licence:

  1. Entities incorporated in an EU member state
  2. Entities located outside an EU member state if they are owned or controlled by nationals of the EU or Canada, and meet the following criteria:
    • must always use vessels on an EU member state registry
    • must not be located in the United States

Entities include (but are not limited to) non-profit, private and government-owned corporations, trusts, partnerships, sole proprietorships and joint ventures.

Coasting trade services that can be provided by foreign vessels

Under CETA, eligible EU entities can provide the following coasting trade services without a licence:

Feeder services between the Ports of Halifax and Montreal

  • Continuous services – for international cargo onboard vessels that are registered on the first (national) registry of an EU member state
    • For example, a qualifying EU-registered vessel could provide a weekly scheduled service between the Ports of Halifax and Montreal to move international cargo
  • Single voyage – solely for international containerized cargo onboard vessels that are registered on first or second (international) registry of an EU member state
    • For example, a qualifying EU vessel on an international voyage could load full containers in Montreal, that are part of one leg of an exportation of goods from Canada, and drop them off in Halifax on its way overseas
    • New regulations will identify qualifying EU second registries

Read our guidance documents on:

Repositioning empty containers

  • Allowed between locations in Canada, only if the containers are empty, owned or leased by the vessel owner, and repositioned as a non-revenue service
    • Financial gain or in-kind transactions are not allowed
  • No restriction on the registry of the vessel that may be used for this type of service for EU entities that are located in an EU member state
  • EU entities located outside an EU member state, that are owned or controlled by nationals of the EU or Canada, must always use EU-registered vessels

Read our guidance document on repositioning empty containers in Canada’s coasting trade.

Dredging services

  • Canadian companies will have the flexibility to hire dredging services from EU entities
  • EU entities located in an EU member state may use vessels of any registry
  • EU entities located outside an EU member state, that are owned or controlled by nationals of the EU or Canada, must use EU-registered vessels

There are no changes in procurement practices below the government procurement threshold of $8.5 million Canadian for dredging services and/or dredging services included in construction services. Only Canadian registered and manufactured vessels or vessels that have been substantially modified in Canada, resulting in a predominantly Canadian added-on value and pre-qualified, may provide federally procured dredging services.

A coasting trade licence will continue to be required for federally procured dredging services with a contract value below $8.5 million when using foreign and Canadian non-duty paid vessels.

A vessel not built in Canada must obtain a certificate of qualification from the federal government to be certified. Vessels must meet the following criteria:

  • substantially modified in Canada to the point it has predominantly Canadian equipment (including add-on value)
  • registered in Canada
  • Canadian-owned for at least 1 year

CETA changes procurement practices at or above the government procurement threshold for construction services currently valued at $8.5 million Canadian, including the coasting trade licence requirements for dredging services and dredging services incidental to construction services.

The vessel used for federally procured dredging services at or above the government procurement threshold must be:

  • registered in Canada, or
  • registered in an EU member state and granted a temporary licence under the Coasting Trade Act
    • The granting of this temporary licence will not be subject to the condition that no suitable Canadian duty or non-duty paid vessel be available

It must also be:

  • of Canadian or EU make or manufacture, or
  • predominantly modified in Canada or the EU and owned by a person located in Canada or the EU for at least a year before the bidder submitted the tender
    • For non-Canadian or EU make or manufactured equipment, the applicant must obtain a certificate of qualification from Innovation, Science and Economic Development Canada to be pre-qualified)

Canada will ensure that the federal government policy, which governs how it procures dredging services or dredging services included in construction services contracts, is in line with CETA’s negotiated outcome.

Once the agreement is implemented, the Canadian dollar value of the government procurement threshold will be listed for construction services. These thresholds are the same as the World Trade Organization Government Procurement Agreement thresholds for construction services.

Read our guidance document on federally procured and private dredging services in Canada’s coasting trade.

Requirements for foreign vessels

Eligible EU entities must take measures to meet any applicable requirements before using a foreign vessel to provide coasting trade services without a licence in Canada:

Advance notification – Transport Canada

EU entities are required to complete an advance notification form before providing cabotage services (feeder services, repositioning empty containers, dredging services) without a coasting trade licence:

Advance notification – Canada Border Services Agency

The Advance Commercial Information program requires marine carriers to electronically transmit the marine Cargo Report and Supplementary Cargo Report (if applicable) to the Canada Border Services Agency (CBSA) 24 hours before loading the cargo at a foreign port (not including the United States).

Marine carriers must also electronically transmit a:

Vessel duties and taxes

Goods imported into Canada are subject to applicable customs duties. Rates are set out in Canada’s Customs Tariff. For vessels temporarily imported to provide services permitted under CETA, duty reductions are calculated according to the Vessel Duties Reduction or Removal Regulations.

Contact the Border Information Service with questions about applicable duties and taxes:

Telephone (in Canada): 1-800-461-9999
TTY (in Canada): 1-866-335-3237
Telephone (outside Canada): 204-983-3500 or 506-636-5064 (long distance charges will apply)

Agents are available Monday to Friday (8 am to 4 pm local time) except during holidays.

Marine safety and pollution prevention regulations

CETA does not affect any law of Canada that imposes safety and pollution prevention requirements on foreign vessels. Contact the Transport Canada marine transportation office in your region for more information.

Foreign workers – Assessments and work permits

Canada regulates the use of temporary foreign workers. For immigration purposes, most foreign nationals entering Canada on a vessel who are deemed to be working in Canada need a:

Pension and employment insurance requirements

The Canada Revenue Agency (CRA) manages coverage and contribution provisions under the Employment Insurance Act (EIA) and Canada Pension Plan Regulations (CPP).

These two social programs are designed to protect Canadians and offer them benefits under certain circumstances. The general principle is that an employment in Canada is insurable and pensionable unless that employment is excluded under certain circumstances.

In the case of a foreign employer and/or foreign employee, CRA needs to assess the facts on a case-by-case basis and determine if an employment is subject to the EIA or the CPP.

Employment insurance

The employment of a person who resides in a country other than Canada is not insurable if premiums regarding the employment are payable in the other country in accordance with Employment Insurance Regulations, paragraph 7d. Therefore, employment of foreign workers who work on vessels undertaking activities under CETA will not be subject to EI premiums if they contribute to a similar plan in the other country.

Canada Pension Plan

The employment of a person with an employer who does not reside in Canada and who has no establishment in Canada is not pensionable and is not subject to CPP contributions, as defined in the Canada Pension Plan Regulations, subsection 22.1. Therefore, the employment of foreign workers who work on these vessels will not be subject to CPP contributions as long as the employer does not reside in Canada and has no establishment in Canada.

If the employer has an establishment in Canada, the employment will be pensionable unless the employment is subject to a social plan/regime from another country under a Social Security Agreement (Canada has entered into an agreement with all member states of the EU).

If the employer has an establishment in the province of Quebec, refer to the Quebec Pension Plan (QPP).

An employer or an employee can request a ruling regarding the status of a worker under the CPP and the EIA. To request a ruling, complete the Canada Revenue Agency form [PDF, 53 KB] and send it to your local tax service office.

Contact Transport Canada’s Domestic Marine Policy Group

Email: tc.coastingtrade-cabotage.tc@tc.gc.ca

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