Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

CANADA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: March 25, 1952.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)On January 25, 2006, Canada notified the IMF that in accordance with a UN Security Council resolution, Canada imposes a freeze on assets belonging to the former government of Iraq, Saddam Hussein, and associated individuals and entities.
Other security restrictionsIn accordance with UN Security Council resolutions, Canada imposes economic sanctions against the Democratic Republic of the Congo, Côte d’Ivoire, Iraq, the Democratic People’s Republic of Korea (effective November 9, 2006), Liberia, Rwanda, Sierra Leone, Somalia, Sudan, and certain individuals and entities associated with terrorism.
References to legal instruments and hyperlinksCanadian Economic Sanctions; www.dfait-maeci.gc.ca/trade/sanctions-en.asp.
Exchange Arrangement
CurrencyThe currency of Canada is the Canadian dollar.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the Canadian dollar is determined on the basis of supply and demand; however, the Bank of Canada may intervene in the foreign exchange market on behalf of the federal government to counter disruptive short-term movements in the exchange rate.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward exchange rates are determined freely in the exchange market.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsCanada is a member of NAFTA.
Administration of controlThere are no exchange controls. The licensing of imports and exports, when required, is under the jurisdiction of Foreign Affairs and International Trade Canada, although other departments also issue licenses in specialized areas.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On external tradeReexports of gold of U.S. origin to all countries except the United States require a permit. Commercial imports of articles containing minor quantities of gold, such as watches, are unrestricted and do not require a license.
Controls on exports and imports of banknotesUnder the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, travelers entering or leaving Canada are required to report to a border services officer amounts they are carrying that are equal to or greater than $10,000, or its equivalent in a foreign currency, including any combination of coins, domestic or foreign banknotes, and securities, such as traveler’s checks, stocks, and bonds.
References to legal instruments and hyperlinksProceeds of Crime (Money Laundering) and Terrorist Financing Act (2000, c. 17), http://laws.justice.gc.ca/en/showdoc/cs/P-24.501.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsAssets of certain entities and individuals are frozen in accordance with UN Security Council resolutions. Transactions can be allowed by ministerial certificates pursuant to the regulations.
References to legal instruments and hyperlinksCanadian Economic Sanctions (www.dfait-maeci.gc.ca/trade/sanctions-en.asp); United Nations Côte d’Ivoire Regulations; Regulations Amending the United Nations Democratic Republic of the Congo Regulations; United Nations Iraq Regulations; Regulations Amending the United Nations Liberia Regulations; United Nations Sudan Regulations; United Nations Suppression of Terrorism Regulations; United Nations Afghanistan Regulations.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Negative listImport permits are required for the importation of certain agricultural products, certain endangered species of fauna and flora, natural gas, material and equipment for the production or use of atomic energy, certain military armaments, and certain internationally controlled drugs. In addition, Health Canada does not permit the importation of unregistered drugs. Commercial imports of used motor vehicles (less than 15 years old) have been generally prohibited, except from the United States. The prohibition on imports of used vehicles from Mexico will be phased out by January 1, 2019.
Open general licensesYes.
Licenses with quotasImport controls under the WTO ATC no longer apply.
Other nontariff measuresMeasures consistent with international trade obligations (e.g., countervailing duties) are in effect. Antidumping duties are imposed, taking into consideration competition policy factors as well as other economic costs.
Import taxes and/or tariffsOn average, import tariff rates are low. Canada’s trade-weighted average tariff rate for all products, including agriculture, has been less than 1% since 1998, due in large part to duty-free access provided by the 1988 Canada-U.S. Free Trade Agreement. Free trade agreements with Mexico (under NAFTA) and with Chile, Israel, and Costa Rica, as well as the extension of the General Preferential Tariff and duty-free, quota-free access under the Least Developed Country Tariff, have led to further tariff reductions. The highest tariff rates are applied to a limited number of over-quota, supply-managed agricultural products (dairy, poultry, and eggs). Canada’s other import-sensitive sectors include textiles, apparel, footwear, and ships.
State import monopolyCertain monopolies exist at the federal level.
References to legal instruments and hyperlinksExport and Import Permits Act; Customs Tariff; Special Import Measures Act.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasThe Export Control List identifies all goods that are controlled to implement intergovernmental arrangements, maintain supplies, or ensure security. It includes all items identified in various international export control regime lists. In addition, controls are maintained for supply reasons to ensure the orderly export marketing of certain products that are subject to import limitations by other countries, to promote further processing in Canada (e.g., of logs and herring roe), and for nonproliferation purposes (i.e., chemical, biological, and nuclear weapons and their delivery systems). The Area Control List includes countries to which all exports are controlled. At present, Belarus (effective December 14, 2006) and Myanmar are on the Area Control List. Permits are required for the exportation of listed goods to all countries except, in most cases, the United States, as well as for all goods destined for countries on the Area Control List, unless otherwise exempted.
Export taxes
Other export taxesSince 1994, Canada maintains an export tax on some tobacco products. This export tax is administered under the Excise Act, 2001.
References to legal instruments and hyperlinksExport and Import Permits Act; Excise Act, 2001.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsControls apply to the extent that the purchase of shares is affected by laws on inward direct investment and establishment.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentSpecific controls exist on inward direct investments in the broadcasting, telecommunications, transportation, financial, fishery, and energy sectors. In addition, under provisions of the Investment Canada Act (ICA), the acquisition of a Canadian business by a non-Canadian and the establishment of a new business by a non-Canadian are both subject to notification. Under some circumstances, the investment may be reviewable.
Acquisitions in one of four sensitive sectors (cultural industries, transportation services, some financial services, and uranium production) are reviewable for all direct acquisitions over $5 million and indirect investments over $50 million. These same thresholds apply for acquisitions in nonsensitive sectors, provided both the acquirer and seller of the Canadian business are not members of the WTO.
Direct acquisitions in nonsensitive sectors by investors from WTO members are reviewable only if the assets of the Canadian business are greater than $281 million (this threshold is adjusted every year to reflect economic growth in Canada). Indirect acquisitions by WTO members in the nonsensitive sectors are not reviewable.
A direct acquisition occurs when a non-Canadian directly acquires a Canadian business. An indirect acquisition occurs when a non-Canadian acquires a business outside of Canada and that business has a subsidiary in Canada.
Decisions to allow an investment are based on “net benefit” to Canada. The factors of net benefit to Canada are set out in Section 21 of the ICA. Decisions regarding noncultural industries are made by the minister of industry. The minister of Canadian heritage makes the final decisions on cultural industries. A complete list of cultural businesses can be found in Schedule IV of the ICA.
Ministers have 45 days in which to make a decision on a reviewable investment. The review period may be extended by another 30 days and beyond that only with the agreement of the investor.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Sale locally by nonresidentsThere are no controls; however, withholding taxes apply.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksInvestment Canada Act, http://investcan.ic.gc.ca.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Investment regulations
Abroad by banksBanks are generally free to make investments in financial entities, subject to approval. However, certain limitations apply to the types of commercial entities in which they may invest, both domestically and abroad.
In banks by nonresidentsNo controls are placed on the ownership of banks that specifically preclude nonresident ownership. Although the shares of large banks must remain widely held, fit and proper investors may own up to 20% of voting shares or 30% of any class of nonvoting shares, provided no single shareholder or group of shareholders controls the bank. Medium-size banks may have individual shareholdings of up to 65% with a public offering of at least 35% of the voting shares. Residents or nonresidents may set up or acquire a smaller bank, subject to ministerial approval.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Pension funds
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Exchange measuresJanuary 25. Canada notified the IMF that in accordance with a UN Security Council resolution, a freeze was imposed on assets belonging to the former government of Iraq, Saddam Hussein, and associated individuals and entities.
November 9. In accordance with UN Security Council resolutions, Canada imposed economic sanctions against the Democratic People’s Republic of Korea.
Exports and export proceedsDecember 14. Belarus was added to the Area Control List, requiring an export permit for the exportation of all goods to Belarus.

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