22 June 2018
Canada: Market Profile
- Canada maintains a liberal trade regime. There are no foreign exchange restrictions, and import licenses are only required for a limited number of goods. Imports are generally subject to import duties.
- Hong Kong's total exports to Canada decreased by 1% to US$1.9 billion in the first ten months of 2017, while imports from Canada fell by 7% to US$1.1 billion.
- The inflows of foreign direct investment (FDI) to Canada exceeded US$33.7 billion in 2016, with China contributing US$2.9 billion. As of the end of 2016, China’s total stock of FDI to Canada topped US$12.7 billion, up from US$1.3 billion in 2007. Meanwhile, Hong Kong, holding an FDI position of US$9.1 billion, was Canada’s 10th-largest FDI investor in 2016, behind only Japan and the Chinese mainland in Asia.
- Canada was the 10th-largest destination of Hong Kong’s outward FDI, with a stock of US$9.4 billion (or HK$72.5 billion) as at the end of 2016. Meanwhile, Canada has a substantial investment in Hong Kong, with a total stock of US$5.5 billion (or HK$42.6 billion) as at the end of 2016.
- On 27 November 2013, the Government of Canada launched an updated foreign policy and trade plan, entitled the Global Markets Action Plan (GMAP) as a means to encourage market diversification while concentrating its efforts on the markets that hold the greatest promise for Canadian business. Under the Plan, 20 emerging markets and 22 priority sectors have been highlighted with strong competitive advantages or dynamic growth opportunities for Canadians, including aerospace, agriculture and processed foods, education, information and communications technology, life sciences, sustainable technologies and transportation with regard to Hong Kong.
- On top of the Foreign Trade Zones – Marketing Program (FTZ-MP), one of four components of the Global Commerce Support Program and funding opportunities for businesses, the Invest Canada – Community Initiatives (ICCI) programme, as one of the many tools under GMAP, provides financial support to communities for their foreign direct investment initiatives and activities. More information on the investment environment and the relevant regulations can be found at Canadian Trade Commissioner Service.
- As an important step in accommodating greater synergies, Hong Kong signed a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) with Canada on 11 November 2012, which entered into force on 29 October 2013, and has an Air Services Income Agreement with Canada effective since 20 December 1996. Also, Hong Kong concluded an Investment Promotion and Protection Agreement (IPPA) with Canada on 23 May 2015.
Current Economic Situation
Until recently, Canada’s healthy banking and financial system, plus continued growth in non-commodity export-related industries aided by a weak Canadian dollar, has lent support to domestic business and consumers amid soft crude oil prices and weak investment in the oil and gas sector. In 2017, Canada is estimated to see its economy grow by 3.0%, way ahead of all the other G7 countries.
Looking ahead, while the Canadian economy is expected to strengthen in line with the stronger US economy and the stabilisation of commodity prices, the end of the era of ultra-low interest rates, plus uncertainties stemming from NAFTA renegotiation and the US’s post-QE policies and tax reform will likely cloud the country’s growth ahead. On the whole, the Canadian economy is forecast to see a 2.1% growth in 2018.
Canada maintains a liberal trade regime. There are no foreign exchange restrictions, and import licenses are only required for a limited number of goods. Imports are generally subject to import duties.
Import licenses are required for items regulated under the Export and Import Permits Act. The Act lists various agricultural products (poultry, eggs, and dairy products), a number of textile and clothing items, and certain steel products.
The importation of certain commodities is however tightly controlled. Examples of regulated goods include: food products, drugs and medical devices, hazardous products, some offensive weapons and firearms, endangered species and motor vehicles.
Duties are assessed on the transaction value (the price actually paid or payable for the goods), including commission, brokerage, packing, royalties and transportation to the Canada point. Hong Kong and China origin goods are eligible for the preferential tariffs under the Canadian General Preferential Tariff (GPT) Scheme.
To enhance the productivity and boost the overall competitiveness of local businesses, Canada has become the first G-20 economy to eliminate all remaining tariffs on manufacturing inputs, of which about 76% are textiles items and the remainder includes chemicals, plastics and articles, and certain articles of wood, glass, aluminium and graphite, and machinery and equipment. Duties on 1,541 tariff lines were eliminated on 5 March 2010, while duties on an additional 381 tariff lines were phased out over a five-year period and removed altogether by 2015.
A provincial sales tax (PST) is assessed on all imports to Saskatchewan (5%), British Columbia (7%), Manitoba (8%) and Quebec (9.975%). Additionally, a broad-based value-added sales tax, known as the goods and services tax (GST/HST), is levied at 5%, 13% (New Brunswick, Newfoundland and Labrador, and Ontario), 14% (Prince Edward Island) and 15% (Nova Scotia), effective since 1 April 2013. In addition, excise duties and taxes are charged on goods such as spirits, wine, beer, tobacco products, fuel-inefficient vehicles, automobile air conditioners and certain petroleum products.
Canada may impose anti-dumping (AD) duties on imports considered to be priced less than the "normal" price charged in the exporter's domestic market and caused material injury to the concerned industry in Canada. Furthermore, if a country is found to be unfairly subsidising its exporters, Canada is authorised to impose a countervailing (CV) duty equal to the amount of the subsidy expressed as a percentage of the export price of the goods. These duties remain in place for five years and can be renewed for additional terms of five years.
Currently, Canada imposes AD and/or (CV) duties on several imports from the Chinese mainland, including aluminum extrusions; carbon and alloy steel line pipe; carbon steel welded pipe; concrete reinforcing bar; copper pipe fittings; copper tube; fabricated industrial steel components; fasteners; flat hot-rolled carbon and alloy steel sheet and strips; large line pipe; oil country tubular goods; photovoltaic modules and laminates; piling pipe; polyethylene terephthalate resin; pup joints; seamless casing; silicon metal; stainless steel sinks; steel grating; steel plate; thermoelectric coolers and warmers and unitised wall modules. Meanwhile, Canada has also imposed on imports of certain concrete reinforcing bar from Hong Kong a definitive AD duty of 108.5% (except one company with individual rate of 54%) for a period of five years from 4 May 2017.
Canada may also invoke China-specific safeguard against imports from China if such imports are being imported in such increased quantities or under such conditions as to be a significant cause of market disruption to domestic producers of like or directly competitive goods in Canada. The first case was initiated in July 2005 and involved self-standing barbeques for outdoor use from China. In that instance, the Canadian International Trade Tribunal (CITT) allegedly found evidence of market disruption and established a 15% safeguard duty for a period of three years. The provisions relating to safeguard inquiries specific to China under the Protocol on the Accession of the People’s Republic of China to the World Trade Organization expired on 11 December 2013.
The safety Bill C-36, known as the Canada Consumer Product Safety Act (CCPSA), received Royal Assent in late 2010 and came into force on 20 June 2011. The Act establishes a broad prohibition against manufacturing, importing, advertising or selling consumer products that pose an unreasonable hazard to human health or safety by requiring industry members to report when they become aware of a serious incident or death related to their products, and manufacturers or importers to provide test/study results on products when asked. It also empowers Health Canada to recall dangerous consumer products.
Canada requires bilingual labelling (English and French) for most products. Bilingual designation of the generic name on most pre-packaged consumer products is required under the federal Consumer Packaging and Labelling Act. Under this Act, the product identity declaration, net quantity declaration and dealer’s name and principal place of business must appear on the package/label of a consumer good sold in Canada. In addition, Textile Labelling and Advertising Regulations have been amended to allow the use of lastol and PLA (or polyactic acid) as generic fibre names in textile and apparel labels in April 2010.
The agency responsible for inspection of imports, Canada Customs and Revenue Agency, also requires an indication of the country of origin on several classes of imported goods. Goods not properly marked will not be released from Canada Customs until suitably marked. In general, environmental claims that are ambiguous, misleading or irrelevant, or that cannot be substantiated, should not be used.
The North American Free Trade Agreement (NAFTA) signed by Canada, the US and Mexico took effect in January 1994. This agreement marks the beginning of Canada’s wide array of free trade agreements (FTAs) with its trading partners such as South Korea, Israel, Chile, Costa Rica, the European Free Trade Association (EFTA consisting of Norway, Switzerland, Iceland and Liechtenstein), the EU and Ukraine. More recently, Canada is a member to the Trans-Pacific Partnership (TPP) Agreement, which was formally signed by its 12 signatories in February 2016 although the new US president Donald Trump signed an executive order formally withdrawing the country from the trade deal in January 2017. Despite the absence of the US from the agreement, the remaining 11 TPP nations officially agreed on key aspects of the trade pact on 11 Nov 2017 and aimed to sign the document in early 2018. In the meantime, Canada is proactively pursuing other possible FTAs, including the ones with India, Japan and Singapore.
Canada signed on 11 November 2012 an agreement with Hong Kong for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in Canada, while double taxation will be avoided in that any Canada tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income. Meanwhile, the withholding tax on interests and royalties received from Canada will be reduced from 25% to 10%, while the withholding tax on Canada dividends will be reduced from the current rate of 25% to 15% (and will be further lowered to 5% upon fulfilling certain conditions). The agreement entered into force on 29 October 2013, and will be effective from the year of assessment 2014/2015.
Hong Kong's Trade with Canada 
Hong Kong's total exports to Canada decreased by 1% to US$1.9 billion in the first ten months of 2017, after a slide of 12% to US$2.4 billion in 2016. Major export items in January-October 2017 included telecommunications equipment & parts (shared 19% of the total), articles of apparel, of textile fabrics (8%), computers (8%), toys, games & sporting goods (5%), women’s or girls’ wear of textile fabrics, not knitted (5%), electrical apparatus for electrical circuits (4%), jewellery (4%), footwear (3%), and electrical machinery & apparatus (3%).
Hong Kong’s total imports from Canada fell by 7% to US$1.1 billion in the first ten months of 2017, after decreasing by 9% to US$1.5 billion in 2016. Leading import items in January-October 2017 included crude vegetable materials (shared 9% of the total), telecommunications equipment & parts (9%), fresh, chilled or frozen meat of bovine animals (7%), crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (6%), medicaments (including veterinary medicaments (4%), fresh, chilled or frozen meat & edible meat offal (4%), fixed vegetable fats and oils, soft, crude, refined or fractionated (3%), measuring, checking, analysing & controlling instruments & apparatus (3%), non-electric engines & motors & parts (3%) and parts & accessories of office machines/computers (3%).
Canadian Involvement in the Hong Kong Economy
Hong Kong is home to a large Canadian business community. As of 1 June 2017, there were 19 regional headquarters and 30 regional offices of Canadian companies in Hong Kong. Many leading Canadian banking institutions are represented in Hong Kong, including Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce (CIBC), National Bank of Canada, Scotiabank (Hong Kong) Limited, Manulife Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank. Other Canadian companies which are also active in Hong Kong include Air Canada, Bombardier Transportation, Delmar (logistics), Four Seasons Hotel, Lululemon Athletica, Manulife International, Maple Leaf Foods, Neverblue (media), Port of Montreal and Sun Life Assurance.
Canada was the 10th-largest destination of Hong Kong’s outward FDI, with a stock of US$9.4 billion (or HK$72.5 billion) as at the end of 2016. Meanwhile, Canada has a substantial investment in Hong Kong, with a total stock of US$5.5 billion (or HK$42.6 billion) as at the end of 2016.
Representing some 1,100 members with business interests in Canada, the Chinese mainland and Hong Kong, the Canadian Chamber of Commerce in Hong Kong is the largest Canadian business organisation outside Canada. It is also one of the largest and most active international chambers in Hong Kong and one of the most influential business groups in the Asia Pacific. On the other hand, the Canada-based Hong Kong-Canada Business Association (HKCBA), with over 1,000 members in eight major cities (Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal and Atlantic) coast to coast, is one of Canada’s largest bilateral trade associations.
Reflecting Canada’s diverse activities, there were about 401,022 Canadian nationals visited/resided in Hong Kong in 2016, many of whom are of Chinese origin.
 Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.