COMMENTS ON THE IMPLEMENTATION OF CANADA’S RETALIATORY TARIFFS; JULY 1, 2018

Notice From our National Association to CBSA

The implementation by Canada of retaliatory tariffs on certain United States goods has been managed in a way that imposes a significant compliance burden on Canadian business.  We understand that Canadians are concerned with the “what” of these measures, and that the political impact of these changes is a focus of attention, but the “how” of implementation is equally important, although poorly understood. Canadian importers and their customs brokers want to be compliant and make every effort to be compliant, but the implementation of Canada’s retaliatory tariffs on July 1st presented serious obstacles to compliance. It is fair to say that implementation of this surtax could not have been done without the efforts of Canada’s customs brokers.  There were only 36 hours between implementation and the issuance of the final list of products and the publication of the Customs Notice indicating how this surtax was to be applied. There were still outstanding policy questions at that time. Implementation was over a weekend – and Canada Day long weekend, at that – with some staff on holidays. Here are some of the specific things that were critical for this implementation.

•  IT departments had to shift priorities to manage programming and testing to accommodate this change, within a very tight timeframe.  Based on previous experience with the application of surtaxes, businesses made assumptions about the use of an Order in Council (OIC) for programming purposes, and then had to change programming at the last minute when this was not the case.

•  Client service departments have pored over database reports of clients to determine which clients were affected. This then had to be validated immediately prior to implementation, on a long weekend, since the final list was available only hours in advance. Clients were contacted to discuss the financial implications of the surtax, including surety bond arrangements and deposit requirements. Many clients had no idea they imported products affected by the surtax. Importers who had never paid duty because their goods were duty free under NAFTA now face a very different financial reality. This client service function represents a net transfer of cost from the public sector to the private sector – can you imagine the burden on CBSA if affected clients were trying to get definitive answers from the Biz Line, and the increased likelihood of incorrect assessments and the related post-entry adjustments?

•  Our Credit departments has had a major challenge to assess and manage the financial impacts of the surtax, including discussions with surety partners, internal client reviews analyzing terms of payment and liaison with clients to  put into place financial deposits or surety bonds. There have been repeated follow-ups with clients, and system updates with new credit thresholds. This is ongoing work as importers assess their next steps, perhaps finding alternate suppliers to reduce their financial exposure.

•  Senior management of our firm has also been affected by this change. We have been making  personal calls to clients explaining financial impacts and options not only with respect to the Government of Canada but with respect to the broker-client relationship. Management has also been reviewing bond requirements and credit policy and reaching out to banking contacts because of potential impacts on the company’s cash flow.

Given our experience with these measures, the following are concrete suggestions for improvement:

1. We must improve the quality and timing of information made available to the private sector.  Appendix A is our list of “FAQ’s” that we have compiled as a service to Canadian business. Many of these questions fill gaps in the Customs Notice, and some key policy questions are still outstanding.  In future, there should be an opportunity for the CSCB to consult on the Customs Notice before publication -  “not enough time” is never a reason not to do this.

2. We have made a request for a waiver of late accounting penalties relating to this implementation, with the rationale for that request. 

3. We encourage CBSA to sign off its long-standing review of release prior to payment security, with a recommendation for implementation of mandatory direct importer security.

4. We recommend that CBSA take immediate action to implement efficiencies in the administration of its financial security programs, a suggestion we first made in 2014. Even if it is decided to do this within the CARM framework, we believe we can start working on elements of this immediately.  

5. The Government of Canada must rescind the application of these retaliatory measures to goods under $20 (PIRO and CIRO).  It is impossible to comply with this requirement

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