NEWS RELEASES
CANADA AND UNITED STATES SIGN AGREEMENT ON PERIODICALS
P-06/99-31 CR990249
CANADA AND UNITED STATES
SIGN AGREEMENT ON PERIODICALS
OTTAWA, June 4, 1999 -- The governments of Canada and the United States have signed the formal Agreement
ending a long-standing dispute regarding access of foreign periodicals to the Canadian advertising services
market.
According to the terms of the Agreement, which comes into effect at the time of signing, the United States has
agreed not to take any action under the World Trade Organization Agreements, the North American Free Trade
Agreement, or section 301 of the Trade Act of 1974, as amended, in response to Bill C-55.
For its part, Canada has agreed to make certain changes to Bill C-55, the Foreign Publishers Advertising
Services Act, to its foreign investment policy and to the Income Tax Act. All of these changes were explained in
the May 26 announcement of the agreement-in-principle.
The United States accepts the terms of the agreement which state that a net benefit review by Canada of new
investments in the magazine industry will include "undertakings from foreign investors that result in a substantial
level of original editorial content for the Canadian market contained in each periodical title." Canada will use
guidelines that call for "a majority of original editorial content for the Canadian market in each issue of each
periodical title," in the review of any new investment in the magazine industry.
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For further information, media representatives may contact:
Jacques Lefebvre
Senior Communications Advisor
Office of the Minister of
Canadian Heritage
(819) 997-7788
Leslie Swartman
Office of the Minister for
International Trade
(613) 992-7332
Copies of the draft guidelines are available on request or on the Internet.
(Available on the Internet at: http://www.pch.gc.ca, under News Releases.)
Text of the Agreements
501 Pennsylvania Ave N.W.
Washington, D.C. 20001
June 3, 1999
Note No. 0198
The Honourable Charlene Barshefsky
United States Trade Representative
Executive Office of the President
Room 209
600 - l7th Street N.W.
Washington, D.C. 20506
Dear Ambassador Barshefsky,
I have the honour to refer to recent discussions with respect to Bill C-55, the Foreign Publishers Advertising
Services Act. In this regard, the United States will take no action under the World Trade Organisation (WTO)
Agreements, the North American Free Trade Agreement (NAFTA), or section 301 of the Trade Act of 1974, as
amended, in response to Bill C-55.
Canada will amend the Foreign Publishers Advertising Services Act to permit foreign-owned publishers of
periodicals to benefit from increased market access with respect to advertising directed primarily at the Canadian
market. In addition, Canada will amend its foreign investment policy with respect to the publication, distribution and
sale of periodicals by issuing foreign investment guidelines for the publication, distribution and sale of periodicals
pursuant to section 38 of the Investment Canada Act. The Income Tax Act will also be amended so as to allow
advertisers deductions in respect of periodicals irrespective of the nationality of the publisher or place of
production. In addition, the allowable deduction will be amended under the Income Tax Act. These initiatives will
provide for greater competition in the periodical publishing sector and are expected to ensure the creation of
increased opportunity for Canadian cultural expression.
For the purposes of this Agreement, a periodical means a printed publication that appears in consecutively
numbered or dated issues, published under a common title, usually at regular intervals, not more than once every
week, excluding special issues, and at least twice every year. A periodical does not include a catalogue, a
directory, a newsletter or a newspaper. A Canadian means a Canadian citizen or a permanent resident of
Canada. Original editorial content means non-advertising content that is: (a) authored by a Canadian, including but
not limited to writers, journalists, illustrators and photographers; or (b) created for the Canadian market and does
not appear in any other edition of one or more periodicals published outside Canada.
Nothing in this Agreement may be invoked to prejudice either party's arguments regarding the nature of the
Foreign Publishers Advertising Services Act,the Investment Canada Act or the Income Tax Act in the WTO or
under the NAFTA.
Canada will amend Bill C-55, prior to it being passed by the Senate of Canada, to exempt from the application of
the Foreign Publishers Advertising Services Act, those foreign-owned publishers whose investments in Canada
with respect to the publication, distribution and sale of a periodical have been reviewed and approved under the
Investment Canada Act. This exemption will continue unless a court determines by final order that the investor has
not complied with the Investment Canada Act. In addition, Canada will allow under licensing arrangements any
activity otherwise permitted under this Agreement.
Canada will further amend Bill C-55 to exempt those foreign publishers whose revenues from the sale of
advertising primarily directed at the Canadian market represent 12 percent
or less of the total revenues from the sale of advertising in an issue of the periodical that contains such advertising
in Canada. Within 18 months after Bill C-55 comes into force, this percentage shall be increased to 15 percent,
and within 36 months after Bill C-55 comes into force, this percentage shall be increased to 18 percent. The
percentage of advertising space containing advertisements directed primarily at the Canadian market in the
Canadian issue of the periodical will be deemed to represent the same percentage of advertising revenues earned
in Canada by that issue of the periodical. In the event that this percentage is exceeded by the publisher, a demand
letter will be issued by the responsible Minister prior to any further enforcement action being taken under the
Foreign Publishers Advertising Services Act.
Canada will amend its foreign investment policy with respect to the publication, distribution and sale of periodicals
in Canada by issuing foreign investment guidelines for the publication, distribution and sale of periodicals pursuant
to section 38 of the Investment Canada Act. Under such guidelines, the establishment and expansion of foreign
businesses, and the acquisition, direct or indirect, of existing foreign businesses to publish, distribute and sell
periodicals in Canada will be permitted on the condition that such investments are of net benefit to Canada.
Effective 90 days after the entry into force of this Agreement, and subject to net benefit review under the Investment
Canada Act, Canada will permit up to and including 51 percent foreign ownership in the establishment and
acquisition of businesses to publish, distribute and sell periodicals except for the acquisition of Canadian-owned
businesses.
Effective one year after the entry into force of this Agreement, and subject to net benefit review under the
Investment Canada Act, Canada will permit up to and including 100 percent foreign ownership in the
establishment and acquisition of businesses to publish, distribute and sell periodicals except for the acquisition of
Canadian-owned businesses.
Partnerships of foreign investors with majority Canadian ownership will be permitted.
Foreign investments with respect to the publication, distribution and sale of a periodical are subject to review for
net benefit to Canada pursuant to Part IV of the Investment Canada Act, including the investment's compatibility
with Canada's cultural policy. In its net benefits review of an investment under Part IV of the Investment Canada
Act, Canada will consider a combination of undertakings as compatible with Canadian cultural policy.
Net benefits review will include undertakings from foreign investors that result in a substantial level of original
editorial content for the Canadian market contained in each periodical title. The amount of original editorial content
for the Canadian market will be determined as a percentage of the total space occupied by the total editorial
content contained in the periodical.
Net benefits review may also include undertakings by the foreign investor that:
i) create an employment infrastructure by directly employing an editorial staff and support staff composed of people
resident in Canada with respect to each periodical title in Canada and establish or expand a place of business in
Canada; or
ii) support the infrastructure in the publishing sector by having their titles edited, typeset and printed in Canada.
Under the Investment Canada Act and the Related Business Guidelines, an investment by a non-Canadian in a
periodical title is deemed to be a new Canadian business and is subject to notification and review under the Act.
Investors may submit a single application under the Investment Canada Act covering one or more titles concerning
the publication, distribution and sale of periodicals. Investors will be required to report quarterly on their
performance in relation to their undertakings, which will be reviewed on an annual basis.
Within one year of the entry into force of this Agreement, Canada will amend section 19 of the Income Tax Act so
as to allow advertisers deductions in respect of periodicals containing the requisite levels of original editorial
content irrespective of the nationality of the publisher or place of production.
Canada will also amend the definition of "Canadian issue" in section 19(5) of the Income Tax Act to conform with
the definition of original editorial content as set forth in this Agreement. Canada will further amend the definition of
"Canadian issue" in section 19(5) to remove exclusions on issues of a periodical published under a licence granted
by a person who produces or publishes issues of a periodical that are printed, edited or published outside
Canada.
Canada will further amend the Income Tax Act to modify the amount of the allowable deduction and original
editorial content requirement to permit: a) half the deduction of advertising costs for advertisers in publications
with zero to 79 percent original editorial content; and b) a full deduction of advertising costs for advertisers in
publications with 80 percent or more original editorial content.
Canada and the United States agree to consult annually upon request within 20 days on any matter relating to this
Agreement.
If either party considers that the other party is not in compliance with this Agreement, that party may withdraw from
the Agreement by written notification to the other party. The Agreement shall become null and void 90 days after
such notification and, at that time, the parties' respective rights and obligations will return to those that existed
immediately prior to the entry into force of this Agreement.
I have the honour to propose that if the proposal contained in this letter is acceptable to the Government of the
United States of America, this letter, in the English and French languages, each text being equally authentic, and
your reply to that effect, shall constitute an Agreement between our two Governments, which shall enter into force on
the date of your reply.
Accept, Excellency, the renewed assurances of my highest consideration.
Yours sincerely,
(Original letter signed by
Raymond Chrétien
Ambassador)
EXECUTIVE OFFICE OF THE PRESIDENT
THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON, D.C. 20506
His Excellency Raymond Chrétien
Ambassador of Canada
501 Pennsylvania Ave. NW
Washington DC 20001
Dear Mr. Ambassador:
I have the honor to confirm receipt of your letter dated
June 3, 1999, outlining a proposal concerning Bill C-55 which reads as follows:
"I have the honour to refer to recent discussions with respect to Bill C-55, the Foreign Publishers Advertising
Services Act. In this regard, the United States will take no action under the World Trade Organisation (WTO)
Agreements, the North American Free Trade Agreement (NAFTA), or section 301 of the Trade Act of 1974, as
amended, in response to Bill C-55.
Canada will amend the Foreign Publishers Advertising Services Act to permit foreign-owned publishers of
periodicals to benefit from increased market access with respect to advertising directed primarily at the Canadian
market. In addition, Canada will amend its foreign investment policy with respect to the publication, distribution and
sale of periodicals by issuing foreign investment guidelines for the publication, distribution and sale of periodicals
pursuant to section 38 of the Investment Canada Act. The Income Tax Act will also be amended so as to allow
advertisers deductions in respect of periodicals irrespective of the nationality of the publisher or place of
production. In addition, the allowable deduction will be amended under the Income Tax Act. These initiatives will
provide for greater competition in the periodical publishing sector and are expected to ensure the creation of
increased opportunity for Canadian cultural expression.
For the purposes of this Agreement, a periodical means a printed publication that appears in consecutively
numbered or dated issues, published under a common title, usually at regular intervals, not more than once every
week, excluding special issues, and at least twice every year. A periodical does not include a catalogue, a
directory, a newsletter or a newspaper. A Canadian means a Canadian citizen or a permanent resident of
Canada. Original editorial content means non-advertising content that is: (a) authored by a Canadian, including but
not limited to writers, journalists, illustrators and photographers; or (b) created for the Canadian market and does
not appear in any other edition of one or more periodicals published outside Canada.
Nothing in this Agreement may be invoked to prejudice either party's arguments regarding the nature of the
Foreign Publishers Advertising Services Act,the Investment Canada Act or the Income Tax Act in the WTO or
under the NAFTA.
Canada will amend Bill C-55, prior to it being passed by the Senate of Canada, to exempt from the application of
the Foreign Publishers Advertising Services Act, those foreign-owned publishers whose investments in Canada
with respect to the publication, distribution and sale of a periodical have been reviewed and approved under the
Investment Canada Act. This exemption will continue unless a court determines by final order that the investor has
not complied with the Investment Canada Act. In addition, Canada will allow under licensing arrangements any
activity otherwise permitted under this Agreement.
Canada will further amend Bill C-55 to exempt those foreign publishers whose revenues from the sale of
advertising primarily directed at the Canadian market represent 12 percent
or less of the total revenues from the sale of advertising in an issue of the periodical that contains such advertising
in Canada. Within 18 months after Bill C-55 comes into force, this percentage shall be increased to 15 percent,
and within 36 months after Bill C-55 comes into force, this percentage shall be increased to 18 percent. The
percentage of advertising space containing advertisements directed primarily at the Canadian market in the
Canadian issue of the periodical will be deemed to represent the same percentage of advertising revenues earned
in Canada by that issue of the periodical. In the event that this percentage is exceeded by the publisher, a demand
letter will be issued by the responsible Minister prior to any further enforcement action being taken under the
Foreign Publishers Advertising Services Act.
Canada will amend its foreign investment policy with respect to the publication, distribution and sale of periodicals
in Canada by issuing foreign investment guidelines for the publication, distribution and sale of periodicals pursuant
to section 38
of the Investment Canada Act. Under such guidelines, the establishment and expansion of foreign businesses,
and the acquisition, direct or indirect, of existing foreign businesses to publish, distribute and sell periodicals in
Canada will be permitted on the condition that such investments are of net benefit to Canada.
Effective 90 days after the entry into force of this Agreement, and subject to net benefit review under the Investment
Canada Act, Canada will permit up to and including 51 percent foreign ownership in the establishment and
acquisition of businesses to publish, distribute and sell periodicals except for the acquisition of Canadian-owned
businesses.
Effective one year after the entry into force of this Agreement, and subject to net benefit review under the
Investment Canada Act, Canada will permit up to and including 100 percent foreign ownership in the
establishment and acquisition of businesses to publish, distribute and sell periodicals except for the acquisition of
Canadian-owned businesses.
Partnerships of foreign investors with majority Canadian ownership will be permitted.
Foreign investments with respect to the publication, distribution and sale of a periodical are subject to review for
net benefit to Canada pursuant to Part IV of the Investment Canada Act, including the investment's compatibility
with Canada's cultural policy. In its net benefits review of an investment under Part IV of the Investment Canada
Act, Canada will consider a combination of undertakings as compatible with Canadian cultural policy.
Net benefits review will include undertakings from foreign investors that result in a substantial level of original
editorial content for the Canadian market contained in each periodical title. The amount of original editorial content
for the Canadian market will be determined as a percentage of the total space occupied by the total editorial
content contained in the periodical.
Net benefits review may also include undertakings by the foreign investor that:
i) create an employment infrastructure by directly employing an editorial staff and support staff composed of people
resident in Canada with respect to each periodical title in Canada and establish or expand a place of business in
Canada; or
ii) support the infrastructure in the publishing sector by having their titles edited, typeset and printed in Canada.
Under the Investment Canada Act and the Related Business Guidelines, an investment by a non-Canadian in a
periodical title is deemed to be a new Canadian business and is subject to notification and review under the Act.
Investors may submit a single application under the Investment Canada Act covering one or more titles concerning
the publication, distribution and sale of periodicals. Investors will be required to report quarterly on their
performance in relation to their undertakings, which will be reviewed on an annual basis.
Within one year of the entry into force of this Agreement, Canada will amend section 19 of the Income Tax Act so
as to allow advertisers deductions in respect of periodicals containing the requisite levels of original editorial
content irrespective of the nationality of the publisher or place of production.
Canada will also amend the definition of "Canadian issue" in section 19(5) of the Income Tax Act to conform with
the definition of original editorial content as set forth in this Agreement. Canada will further amend the definition of
"Canadian issue" in section 19(5) to remove exclusions on issues of a periodical published under a licence granted
by a person who produces or publishes issues of a periodical that are printed, edited or published outside
Canada.
Canada will further amend the Income Tax Act to modify the amount of the allowable deduction and original
editorial content requirement to permit: a) half the deduction of advertising costs for advertisers in publications
with zero to 79 percent original editorial content; and b) a full deduction of advertising costs for advertisers in
publications with 80 percent or more original editorial content.
Canada and the United States agree to consult annually upon request within 20 days on any matter relating to this
Agreement.
If either party considers that the other party is not in compliance with this Agreement, that party may withdraw from
the Agreement by written notification to the other party. The Agreement shall become null and void 90 days after
such notification and, at that time, the parties' respective rights and obligations will return to those that existed
immediately prior to the entry into force of this Agreement.
I have the honour to propose that if the proposal contained in this letter is acceptable to the Government of the
United States of America, this letter, in the English and French languages, each text being equally authentic, and
your reply to that effect, shall constitute an Agreement between our two Governments, which shall enter into force on
the date of your reply.
Accept, Excellency, the renewed
assurances of my highest consideration."
I have the honor to inform you that the proposal contained in your letter dated June 3, 1999, is acceptable to my
Government and to confirm that the letter and this reply shall constitute an Agreement between our two
Governments, which shall enter into force on this date.
Sincerely,
(Original signed by the Honorable Charlene Barshefsky
United States Trade Representative)
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