On April 22, 2016, the Federal Government of Canada (in particular, the Department of Finance) launched public consultations on the elimination of unrecoverable customs duties (MFN rate) payable on imported manufacturing ingredients by manufacturers in the agri-food sector. The consultation were first announced in the 2016 Federal Budget. The submissions are due on or before June 21, 2016.
What this means is that Canadian manufacturers (including foreign companies with a manufacturing operation in Canada) may make written submissions to the Department of Finance to request the elimination of customs duties (MFN rate) on imported food manufacturing inputs. Customs duties are an unrecoverable cost of the manufacturer. The elimination of the duties will reduce the cost of production and cause the manufacturer to be more competitive in Canada and in international markets. In addition, food costs for Canadian consumers of processed food products will be reduced as the manufacturer can charge less for the processed foods (if made with some imported food ingredients).
The Government of Canada proposed to reduce to “Free” the MFN rates of customs duty of tariff items listed in Table 1 (which also appears after the page break in this blog post). Some of the food inputs listed in Table 1 include certain edible vegetables, roots and tubulars; certain edible fruits and nuts; certain spices; certain cereals and grains; certain products used in the milling industry; certain flours, malts, starches and wheat gluten; certain flours milled from seeds; certain animal or vegetable fats and oils; etc.
However, the Department of Finance would like input from the food processors who import these goods before they will make the decision to eliminate the duties.
In addition, the Department of Finance will also accept views on other tariff items that could be considered in the context of possible further tariff elimination initiatives designed to assist Canadian industry. For example, corn is not listed in Table 1 and is imported into Canada for further manufacturing in the agri-food sector (e.g., into corn syrup).
The submissions must include, at a minimum, the following information:
- Canadian company/industry association name, address, telephone number, and contact person.
- Relevant eight-digit tariff item(s) and description of the goods of particular interest.
- Reasons for the expressed support for, or concern with, the proposed tariff elimination, including detailed information substantiating any expected beneficial or adverse impact.
- If concern is expressed with respect to the proposed tariff elimination for one or more eight-digit tariff item(s), please provide views on ways to alleviate such concerns (e.g. limiting tariff elimination to certain end uses, gradual tariff elimination over a longer time period).
- Please identify if information provided in the submissions is commercially sensitive.
If submissions are prepared for an item not listed in Table 1, the submissions should demonstrate the benefit to Canada for the elimination. Any company that will increase Canadian jobs by hiring more workers or building another plant should consider make those benefits known in the submissions.
If the submissions are accepted and the tariffs are eliminated on the food processing inputs, the Canada Border Services Agency will no longer collect unrecoverable customs duties in respect of the goods. Any applicable goods and services tax (“GST”) would still be payable, but would be recoverable if the manufactured goods are taxable or zero-rated.
We would be pleased to assist Canadian manufacturers or foreign manufacturers with Canadian food processing operations 9existing or proposed) to prepare their submissions. This is an opportunity that has a small window and long term benefits.
PROPOSED ELIMINATION OF MOST-FAVOURED-NATION RATES OF CUSTOMS DUTY
|Tariff item||Current MFN rate||Proposed MFN rate|
|0702.00.11||1.41¢/kg but not less than 9.5%||Free|
|0702.00.19||1.41¢/kg but not less than 9.5%||Free|
|0703.10.21||2.12¢/kg but not less than 9.5%||Free|
|0704.90.10||2.12¢/kg but not less than 6%||Free|
|0706.90.10||1.41¢/kg but not less than 12.5%||Free|
|0707.00.10||1.41¢/kg but not less than 6%||Free|
|0708.10.10||1.41¢/kg but not less than 6%||Free|
|0708.20.10||1.41¢/kg but not less than 6%||Free|
|0709.20.10||5.51¢/kg but not less than 7.5%||Free|
|0709.51.10||8.43¢/kg but not less than 8.5%||Free|
|0709.59.10||8.43¢/kg but not less than 8.5%||Free|
|0808.30.10||2.12¢/kg but not less than 8%||Free|
|0809.10.10||2.12¢/kg but not less than 8%||Free|
|0809.29.10||5.64¢/kg but not less than 8%||Free|
|0809.30.10||2.82¢/kg but not less than 8%||Free|
|0809.40.10||1.06¢/kg but not less than 8%||Free|
|0810.10.10||5.62¢/kg but not less than 8.5%||Free|
|0811.10.10||5.62¢/kg but not less than 8.5%||Free|
|0812.10.90||9.37¢/kg but not less than 10.5%||Free|
|0812.90.20||9.37¢/kg but not less than 14.5%||Free|
|Goods of Chapter 20
for use in the manufacture
of food products or beverages (see note 1)
|2106.90.96||$0.70/litre plus 19%||Free|
|2207.10.10||12.28¢/litre of absolute ethyl alcohol||Free|
|2207.10.90||4.92¢/litre of absolute ethyl alcohol||Free|
|2207.20.19||12.28¢/litre of absolute ethyl alcohol||Free|
|2208.90.21||12.28¢/litre of absolute ethyl alcohol||Free|
- Note 1
Given the multiple-use nature of most goods classified in Chapter 20 (e.g. retail or production input), the proposed tariff elimination would be limited to goods used in the manufacture of food products or beverages. Current MFN rates would continue to apply to imports of goods classified in Chapter 20 used for purposes other than the manufacture of food products or beverages.