Feds tighten tariff exemption on TVs, iPods by demanding consumer proof of use - Macleans.ca

Feds tighten tariff exemption on TVs, iPods by demanding consumer proof of use


OTTAWA – The federal government is tightening up tariffs on imported products such as televisions and iPods that receive a special exemption when used with computers.

Importers owe about $16 million from 2011 alone due to a reassessment of customs duties, according to a memo from the Canadian Border Services Agency, released under the Access to Information Act and obtained by The Canadian Press.

The memo from March 2012 — which includes a handwritten notation to keep “the minister” informed — says the crackdown “will likely result in a significant amount of customs duty being reassessed, and will not be well-received by the importing community.”

The agency has ruled that importers who use the computer exemption must get certificates from the end users — consumers, in most cases — that certify the product will be used with a computer.

No certificate, no exemption, says the agency.

“As the vast majority of end-users of these products are consumers, it is expected that the required certification will not be available as the onus is on the importer to have the required certificate completed by the consumer, typically at the time of sale,” says the document.

The Customs Act states that such verification certificates should be signed and show “the user’s name, address and occupation and indicates the actual use made of the commercial goods.”

And the exemption has been interpreted to apply only to devices in “continuous use” with computers, which means iPods and other MP3 players are unlikely to qualify.

The crackdown predates the Harper government’s 2013 budget delivered last month, which has sparked a hot debate over whether new tariffs effectively impose a politically awkward “iPod tax.”

Finance Minister Jim Flaherty’s office pointed to the computer exemption this week as evidence that tariffs on iPods are not increasing.

“Music devices like iPods are imported into Canada duty-free under a long-standing special tariff classification from 1987,” Kathleen Perchaluk, Flaherty’s spokeswoman, said in an email Thursday.

“That special tariff classification was in no way altered by recent changes to the General Preferential Tariff foreign aid program.”

But as recently as Dec. 7, the CBSA informed one importer in writing that the “iPod Touch 8GB” is subject to end-user verification in order to get the tariff exemption, according to correspondence obtained by The Canadian Press.

“Certificates or records of actual use must be obtained and readily available for inspection by an officer,” the letter states in bold print.

The March 2012 CBSA memo, meanwhile, said the agency was planning to extend the verification demands to other items “such as CDs, DVDs and computer speakers.”

None of this was publicized at the time, but the memo said “the program is currently working with the Communications Directorate to prepare reactive media lines.”

Three different ministerial offices, contacted on the memo Friday, were not immediately available to comment.

Canada’s complex tariff regulations have become a political football since the Harper government announced in last month’s budget that it is reducing tariffs on a few popular items — while quietly raising tariffs on thousands of other consumer products.

Some economists have suggested the budget changes will increase tariffs on MP3 players, including iPods.

“The larger thing that is coming out of all this is that the rules are so vague and so open to interpretation that you could probably ask 10 different people at the CBSA and I suspect you’re going to get 10 different answers,” economist Mike Moffatt, assistant professor at the Richard Ivey School of Business, said in an interview.

The debate has prompted the federal NDP to accuse the Conservatives of hypocrisy, since the Conservatives mounted a high-profile campaign in 2010 accusing New Democrats of wanting to impose an iPod tax.

“During this fragile economic recovery, the last thing Canadian families and consumers need is a massive new tax on iPods,” three senior Conservative ministers said in a joint release on Dec. 14, 2010.

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Feds tighten tariff exemption on TVs, iPods by demanding consumer proof of use

  1. I hate that this all boils down to whether an “iPod” is going to be tariffed. The problem is that it is clear that a lot of new things are going to be tariffed, and tariffed at a higher rate thanks to changes the Conservatives made and also by CBSA agents deciding to change interpretation of the rules. Instead, what SHOULD be happening is the rules should be changed to drop many of the tariffs we pay.

    The Conservative party has hit the height of hypocrisy on this. They are the party of “free trade” and “free markets” supposedly. You’d think they’d be reigning in the CBSA, not allowing them to run wild, or vastly expanding the list of countries that are charged higher tariffs. Problem is, since “tariff” is a different word than “tax”, they can continue to claim to be tax-cutting superstars while costing Canadians millions or billions by raising the tariffs.

    If I was an opposition party, I’d follow the changes closely then roll out ads the next election clearly spelling out a list of popular products and how much they increased in cost because of the tariffs changes. That is the concrete, easy-to-understand stuff that gets people riled up.

  2. Well “Economic Action Plan” ads don’t pay for themselves.

  3. I ordered a small piece of hardware that I use for my contracting business, and UPS contacted me a day later telling me I owed them $116 in custom’s duties. That was about 4 times what the item cost. I thought there must be some mistake. But I spoke with a couple others in same line of business and they had similar experiences – one had just received a bill for $92 for the a similar item.

    That such a thing as a tariff or duty even exists in this day and age is of concern enough. Why do these fossils pollute our legislation at all? Instead of running around signing trade complicated agreements with cumbersome dispute mechanisms, governments should focus on cleaning up their own backyard – eliminate your own tariffs, duties and other barriers and let the other countries worry about eliminating theirs. Since it is clear that even a unilateral elimination of trade barriers has economic benefits – even if other countries maintain their barriers against your goods – these relics serve no purpose at all other than the pretense (and it is a pretense) of protecting jobs. And in the case of iPods, even that pretense doesn’t exist. We don’t make iPods here.