In 2002, Canada’s MAI was announced and became effective as an individual tariff program for LDC’s on January 1, 2003. The MAI provides that all goods imported into Canada determined to be originating in an LDC will be granted duty- and quota-free status with the exclusion of dairy, poultry and egg products. The MAI enlarges the coverage of the LDCT to bestow duty- and quota-free eligibility on additional products, including textiles, apparel and footwear, provided they meet the RO. New RO has been established to govern the tariff treatment for imports of newly-covered textiles and apparel products from the eligible LDCs. For LDC exports of apparel, the MAI makes provisions that all quotas are removed and all tariffs are eliminated. For LDC exports of textiles, the MAI mandates the reduction of the tariff from roughly 14-16 percent to zero percent while textiles sourced from non-LDC sources would still have tariffs applied. No quotas were applied to LDC textiles so the MAI makes no quota-reduction provisions for textiles. On January 1, 2004, Canada reduced MFN tariffs on textile imports from all countries to 12-14 percent for textiles and to 18 percent for apparel as part of its WTO commitments. Subsequently, on January 1, 2005, Canada eliminated all quotas on textiles and apparel from all countries but is permitted to continue imposing tariffs on these goods as part of the ATC7 . The MAI provides that all goods imported into Canada determined to be originating in an LDC will be granted duty- and quota-free status with the exclusion of dairy, poultry and egg products. To be eligible, regulations pertaining to RO, certification; and direct shipment must be met. There are two methods under which LDC goods can be considered eligible for the benefits of the Canadian MAI. First, all goods currently entitled to the benefits of the LDCT can qualify under two categories: a) wholly produced rule (wholly produced in one or more LDCs); or b) a cumulative manufacturing process in an LDC beneficiary with value-added inputs or cumulations from other LDCs or Canada (general 40% LDC cumulative) (CBSA, 2003a). Second, specifically pertaining to textile and apparel goods, a good can qualify under: a) a wholly produced rule (they have been manufactured or formed from inputs from any of the eligible LDCs,) or b) one of the new specific rules of origin governing the country of origin of inputs and the manufacture of goods. In general terms, the conditions of the new RO are that the products have been formed from inputs from GPT beneficiary countries, provided the value-added in the LDC exporting country is at least 25 percent. Any materials used in these products that originate from Canada are deemed to have originated in the least developed country. (DFAIT, 2003a). For textiles and apparel goods to qualify under either a) or b), the apparel would have to be assembled in an LDCT beneficiary country from fabric cut or knit to shape in that country. The RO for fabrics and yarn is based upon the North American Free Trade Agreement (NAFTA) with full accumulation of originating input from LDCT or GPT beneficiary countries or Canada. For textiles, the NAFTA rule requires double transformation, i.e. the fabric has to be made from territorially (LDC, Canada or GPT countries) produced yarns. The NAFTA rule for yarn requires that it be spun or extruded in the territory (DFAIT, 2003a). A discussion of NAFTA rules pertaining to textiles is provided below. Specific information regarding rules or origin for all goods, including textiles and apparel can be found in Appendix A. For all goods, certificates/proof of origin must be provided. For non-textile goods, samples of the ‘Exporter’s Statement of Origin’ and ‘Form A - Certificate of Origin’ are provided in Appendix B. A sample of the Certificate of Origin for textiles and apparel follows in Appendix C. These forms certify the goods in question as being eligible for MAI treatment. The importer must have proof of origin at the time of accounting and it must be available for presentation to Canadian Customs officials upon request. All commercial shipments must meet this requirement regardless of value. The proof of origin does not have to be an original but it must be cross-referenced with the applicable invoice number. Goods qualifying for the GPT or LDCT tariff treatment must be listed separately on the relevant invoice. (CBSA, 2004a) For goods other than textile and apparel products, currently entitled to the benefits of the LDCT, the existing rules of origin for the LDCT remains in force and may be used by exporters/producers to determine the entitlement of goods to the benefits of the MAI. Shipment of product from the LDC to Canada must be direct, however, transshipment through an intermediate country is allowed so long as the product remains in-transit8. Verification of the origin of imports from an LDC will be done initially through an origin questionnaire or letter sent to the exporter/producer of the goods in question. Subsequent actions will be based on the information provided - whether the goods meet the requirements of the rules of origin, do not meet the requirements or if additional information is required. LDC governments whose exporters or producers wish to claim the benefits of the MAI must sign a Memorandum of Understanding (MOU) with the Government of Canada. The MOU ensures that the LDC Government will provide Canada with information and, where appropriate, with access to the production facility or facilities under investigation. The purpose is to enable Canadian auditors and investigators to obtain required information regarding shipments claiming eligibility under the LDC initiative. Bangladesh submitted its MOU on December 31, 2002. As discussed previously, there are two methods under which LDC goods can be considered eligible for the benefits of the Canadian MAI. First, all goods currently entitled to the benefits of the LDCT can qualify under 2 categories: a) Wholly produced rule (wholly produced in one or more LDCs); or b) A cumulative manufacturing process in an LDC beneficiary with value-added inputs or cumulations from other LDCs or Canada (general 40% LDC cumulative) (CBSA, 2003a). Second, specifically pertaining to textile and apparel goods, a good can qualify under: a) A wholly produced rule (they have been manufactured or formed from inputs from any of the 48 eligible LDCs,) or b) One of the new specific rules of origin governing the country of origin of inputs and the manufacture of goods. In general terms, the conditions of the new RO are that the products have been formed from inputs from GPT beneficiary countries, provided the value-added in the LDC exporting country is at least 25 percent. Any materials used in these products that originate from Canada are deemed to have originated in the least developed country. (DFAIT, 2003a). For textiles and apparel goods to qualify under either a) or b), the apparel would have to be assembled in an LDCT beneficiary country from fabric cut or knit to shape in that country. The RO for fabrics and yarn is NAFTA-based with full accumulation of originating input from LDCT or GPT beneficiary countries or Canada. For textiles, the NAFTA rule requires double transformation, i.e. the fabric has to be made from territorially (LDC, Canada or GPT countries) produced yarns. The NAFTA rule for yarn requires that it be spun or extruded in the territory (DFAIT, 2003a).