Canada Proposes to Eliminate Industrial Tariffs

(Blake, Cassels & Graydon LLP - Greg Kanargelidis et al.)

On August 30, 2008, the Canadian government invited submissions from the public on its proposal to eliminate the Most-Favoured-Nation (MFN) tariff on certain types of machinery and equipment. This initiative is in response to a report that was produced by the House of Commons Standing Committee on International Trade in April 2007, entitled Ten Steps To a Better Trade Policy. The report recommended that the feasibility and consequences of unilaterally eliminating industrial tariffs should be studied. Shortly after the report was released, the government began reviewing Canadian tariff policy with a view to enhancing the competitiveness of Canadian exporters in the global economy.

The government has since identified several opportunities for Canadian manufacturers to maintain or improve their competitiveness, including the proposed elimination of MFN tariffs. The government has worked alongside a number of stakeholders to create a list of proposed machinery and equipment for tariff elimination.

The particular tariff items were selected based on several criteria, such as whether the goods covered by these tariff items are used in the production of other goods, whether tariff elimination could reduce the cost of imported machinery and equipment as well as the impact on Canadian businesses producing similar or substitute goods.
The proposed tariff elimination will affect some 239 tariff items found among more than 50 tariff headings in Chapters 84 and 85 of Canada’s List of Tariff Provisions. These items include: steam and other vapour boilers and turbines; industry or lab furnaces and ovens; weighing machines; fork lifts; mechanical appliances; printing machinery; electrical transformers, static converters and inductors; electric, laser or photon beams; electrical apparatus for circuits; and insulated wire or cable and other insulated electrical conductors. The current tariff rates on these items range from 2% to 11%. The average rate is 5.2%.

This government initiative is a positive step for Canadian manufacturers. Even so, the manufacturers of similar or competing goods may have some concerns about the potential loss of a protective tariff barrier. The government is welcoming the comments and concerns of interested parties. In addition, the government will consider new proposals for further tariff elimination initiatives that may assist Canadian industry.

Interested parties should act quickly as written submissions are requested by September 30, 2008. The tariff elimination initiative should be welcome by manufacturers in Canada, whose costs of production will be reduced by the elimination of the tariffs thereby allowing such manufacturers to become more competitive, both within Canada as well as in export markets. On the other hand, machinery and equipment companies in Canada who produce identical or similar goods should review the detailed list carefully with a view to determining whether the protection afforded by the existing tariff barriers should be continued despite the tariff elimination initiative.