Are you ready for Europe?

August 30th, 2017

Now signed, the new Trade Deal with the EU enters into force in September 2017

By Didier Culat, Legal Counsel

On October 30, 2016 Canada and the European Union finalized their Comprehensive Economic Trade Agreement (“CETA”). Now in force provisionally since September 21, 2017 meaning that almost all provisions have taken effect as of that date. However, a limited number of provisions will only apply once CETA is fully implemented after its ratification by all Member States. As with the European Union’s free trade agreement with South Korea, which entered provisionally into force in 2011, the process could take several years as the last countries to ratify that agreement did so in 2015.

An example of provisions that will apply immediately are those governing custom duties. On average Canadian businesses currently pay 14% duties for the products they sell in Europe, but 98.6% of those will be eliminated when CETA enters provisionally into force. However, such provisions as those dispute settlements will only apply after all Member States ratify the agreement.

Businesses wanting to take advantage of the generational opportunities offered by CETA need to be ready to do business in Europe. In order to do so, they need to ask themselves some of the questions set out below.

Do You Have a Tax Plan?

Do you know in which Member States you intend to do business? Does Canada have a tax treaty with that Member State? If yes, what are the tax rules applicable to a Canadian business operating in that Member State? What are the tax rates in that Member State? Are there any particular rules applicable to the free flow of capital between Canada and the Member State? Are there any strategies that can be put in place to minimize the negative impact of any particular rules? Our team can help you answer these questions.

Do You Have a Business Plan?

How do you intend to do business in Europe? Will you hire a local employee to promote your business in Europe? Are you aware of the requirements of the employment laws of the Member State where you hire the employee? Would you prefer to enter into a distribution agreement with a business in a Member State already in your line of business? What rules will govern that relationship? When and how will you be paid, and in what currency? Will you want the protection of a non-competition or non-solicitation clause? Are those type of clauses enforceable in the Member States where you are entering into these commercial agreements? What laws will govern your business relationship? Will you go before the civil courts or settle your disputes by arbitration, and in what location? Which language will be used to settle the dispute? Would you prefer to acquire a business in a Member State? If yes, what are the critical questions that you need to answer in your due diligence? Are there any special rules or authorizations that will apply to your business in Europe? Would you prefer to set up your own new business in a Member State? How easy is it to incorporate a subsidiary in a Member State? Does a director of such a subsidiary need to be a resident of the Member State? What potential liabilities does a corporate director have in the Member State and can such liability be covered by director’s insurance? Would you prefer to do business in Europe from your electronic platform? Does your website comply with European law and that of the Member State where you have customers? Does your website comply with applicable consumer protection, confidentiality and sales tax legislation in Europe and in the Member State where you have customers? Your strategy will depend on your objectives. Have you defined them? Our team can assist you in that regard.

Do You Have an Intellectual Property Plan?

Are your trademarks and patents registered in Europe? Do the licenses that you hold on third party intellectual property grant you the rights you need to do business in Europe? Do your products violate the intellectual property rights of another party already registered in Europe? For that part of your intellectual property that is not protected by trademarks and patents, do you have confidentiality agreements in place with your European business correspondent and are such agreements enforceable in the Member State where you are conducting business? Our recognized intellectual property team can assist you in defining your strategy.

Do you Have a Rules of Origin Plan?

Rules of origin determine if your product is considered “Made-in-Canada” for purposes of CETA, and therefore eligible for duty-free access to Europe. Are your goods made in Canada? Are the components of your products made in Canada? Are the raw materials of the components incorporated in your products sourced in Canada? Do they come from a Member State of the European Union? Do they come from a country that has a free trade agreement with the European Union?

Do You Have a Personnel Mobility Plan?

Do you intend to send Canadian employees to Europe to raise business? Do those employees require a visa, a work permit, or both? How do the immigration rules apply to short-term business trips versus long-term stays? Do you intend to attract skilled workers from Europe to your business in Canada? Do you require a labour market impact assessment (“LMIA”)? Are the offers of employment for such Europeans LMIA exempt under CETA? With our global employee mobility team at BCF, you can rest assured for your employee relocation needs and business immigration strategies.

These are a few of the questions you need to address when you seek to expand your market outside of Canada.

BCF Our specialists at BCF will be pleased to advise you concerning the opportunities offered by the public procurement markets made available with the implementation of CETA. Notably at BCF we can assist you prepare for this opportunity as you prepare entry in the European market with your intellectual property plan, your tax plan, your commercial business implementation plan, your rules of origin plan or your labour mobility plan.