Canada Tariff Program Changes Could Impact Your Bottom Line - GPT and LDCT

The next year could see significant changes to Canada’s Customs Tariff rules, impacting importers’ bottom line. The General Preferential Tariff (GPT) and Least Developed Country Tariff (LDCT) will undergo a comprehensive review, which could result in increased tariffs for some products and other financial consequences for businesses importing to Canada.

As part of the review, the government will seek opinions from stakeholders, such as the Canadian business community and non-government organizations (NGOs), before potentially renewing these tariff programs. Feedback from stakeholders will help shape proposed changes that could soon impact your bottom line.

Why do some countries get lower tariff rates from Canada?

Canada’s tariff preference programs were inspired by the United Nations (UN), which recommended a Generalized System of Preferences (GSP) for international tariffs during the 1970s. The UN encouraged developed countries to stimulate economic trade and development through lower tariffs for developing countries.

Some of the largest economies, including the U.S., EU, Japan, and the U.K., followed UN recommendations to establish preferential, non-reciprocal tariff rates for developing countries. Canadian tariff preference programs, such as the GPT, LDCT, and CCCT, were also established to follow UN advice.

What are Canada's GPT, LDCT, and CCCT programs?

The Canada Customs Tariff outlines how the Canadian government chooses to provide preferential, non-reciprocal tariffs to some developing countries that qualify for MFN tariffs. Canada’s three GSP programs are defined by a range of differing qualifying criteria, product types, jurisdictions, and tariff rates.

1. General Preferential Tariff (GPT) – The GPT program covers agreements for duty-free or reduced tariff treatment for some imported goods arriving from developing countries.
2. Commonwealth Caribbean Country Tariff (CCCT) – The CCCT program refers to Canada’s GPT program with 18 different Commonwealth Caribbean countries – an agreement that hasn’t changed since it was established in 1986. This grants preferential treatment for some products from the Caribbean, similar to the other GPT programs that offer reduced tariffs or duty-free imports.
3. Lead Developed Country Tariff (LDCT) – Nations that qualify as a Least Developed Country (LDC) can access improved tariff benefits and qualify for preferential treatment for a wider range of products under the LDCT program.

The GPT program was established in 1974, while the LDCT program started in 1983. Both of the programs are renewed every ten years, and they’re scheduled to sunset on December 31, 2024. Proposed changes for the GPT and LDCT could significantly change the way these GPT programs operate.

Upcoming tariff changes proposed for GPT, LDCT, and CCCT

Canadian businesses, NGOs, civil groups, and individuals have an opportunity to provide feedback on four proposals that will be explored by the Canadian government. Each proposal could significantly impact GPT and LDCT programs.

GPT, LDCT, and CCCT program proposals for 2025

1. Creating a new GPT program called GPT+
2. Update GPT eligibility for countries and explore five-year reviews
3. Transition periods for countries graduating from the LDCT
4. Technology improvements and simplification that improves access to programs

A GPT+ program could offer deeper tariff reductions on a wider range of products for countries that meet environmental and labour rights objectives. The government will also consider reducing the time to review these programs and the eligibility of countries from ten years to every five years.

Improving access to the GPT, LDCT, and CCCT will also be up for discussion. In addition to improvements driven by technology, the government could change the requirements that determine whether an imported item qualifies for reduced tariff programs.

For example, a thorough bill of lading is currently required for documentation, a potential roadblock to compliance for some businesses. Garment manufacturers from developing countries can run into compliance issues due to yarn, fabric, and assembly requirements, so the government seeks to improve access to reduced tariff programs by simplifying or eliminating requirements. 

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