Federal Budget – Trade Highlights

The Liberal Government released the Canadian Federal Budget on Wednesday, March 22, 2017. Following a review of this document, the Canadian Society of Customs Brokers (CSCB) have compiled this list of highlights that will be relevant to importers and exporters. Buckland is pleased to share these highlights and we hope that this information will be useful and beneficial to you.

As a customer-focused company, we provide you with a single source of unmatched Customs Brokerage (Canadian, US, Mexican), Trade Managed Solutions, Freight Forwarding, Trade Technologies and Warehousing / Distribution Services. If you have questions, please reach out to Buckland today.

The following are highlights of the 2017 Federal Budgets that members may find of interest.

The full text is available in English at http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf and in French at: http://www.budget.gc.ca/2017/docs/plan/budget-2017-fr.pdf.

1. Eliminating tariffs on a broad range of agri-food processing ingredients, covering approximately $700 million in annual imports, to strengthen the competitiveness of Canadian agri-food manufacturers at home and abroad

2. For over 30 years, Canada has offered duty-free access for products imported from least developed countries (LDCs) as a means of promoting economic growth where its need is greatest. These duty-free benefits are subject to certain origin rules to ensure that benefits actually go to the LDCs. Budget 2017 proposes changes to these origin rules to allow more apparel products imported from LDCs into Canada—particularly from Haiti—to benefit from duty-free treatment. This measure will result in an estimated $17 million in forgone tariff revenues for the Government over five years.

3. Excise taxes/duties are higher largely as a result of higher projected customs import duties. Previously, customs import duties were slated to decline based on the anticipated introduction date of January 1, 2017 for the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the TransPacific Partnership (TPP) agreement. Based on recent developments, CETA is now expected to enter into force in mid-2017, resulting in no forgone revenues in 2016–17, and somewhat smaller forgone revenues in 2017–18. In addition, given the uncertainty surrounding the TPP agreement, it is now assumed that tariffs will continue to be charged at existing rates, and the impact of lower tariffs has been removed from projected revenues. Together, these changes have resulted in an increase in projected customs import duties over the forecast horizon.

4. Customs import duties are projected to remain unchanged in 2016–17 and to decrease by $0.5 billion, or 8.5 per cent, in 2017–18. This decrease reflects the elimination of most of the tariffs/duties on imports from the European Union under CETA. Over the remainder of the projection horizon, annual growth in customs import duties is projected to average 3.7 per cent based on projected growth in imports. Other excise taxes and duties are projected to increase by 0.9 per cent in 2016–17, consistent with year-to-date results. Over the remainder of the forecast horizon, other excise taxes and duties are expected to grow at an average annual rate of 0.7 per cent based on historical consumption trends.

5. Eliminate the surtax on domestic tobacco manufacturers, which now effectively applies to only a small share of tobacco products sold in Canada. Tobacco excise duties, which apply to all tobacco products sold in the Canadian market, will be adjusted to ensure that the peak level of revenues collected under the surtax in the early 2000s will be collected under the excise duty framework. This change will reinforce the goal of reducing tobacco consumption.

6. The Government applies excise levies to products like tobacco, alcohol and certain fuels. These levies are generally imposed at the time of production or importation, and are paid by the manufacturer or importer. Excise levies can also be used to achieve specific policy goals, such as improving health. Excise duty rates on alcohol products have not effectively changed since the mid-1980s. Over time, they have represented a smaller and smaller proportion of the total price of alcohol products, reducing their effectiveness. Budget 2017 proposes that, to maintain their effectiveness, excise duty rates on alcohol products be increased by 2 per cent effective the day after Budget Day, 2017, and that rates be automatically adjusted to the Consumer Price Index on April 1 of every year starting in 2018. As the Government moves forward with a new taxation regime on cannabis, it will take steps to ensure that taxation levels remain effective over time.

7. Further to public consultations undertaken in 2016, Budget 2017 proposes a number of amendments to the Special Import Measures Act (SIMA) and related trade remedy regulations. These amendments will ensure that Canada’s trade remedy system is strengthened and keeps accounting for the views of all stakeholders, while remaining aligned with international trade rules.

Anti-Circumvention Investigations: The SIMA will be amended to allow domestic producers to file a complaint regarding trade and business practices specifically intended to avoid trade remedy duties. With these amendments, duties may be extended to goods found to circumvent a trade remedy measure, following a formal investigation by the Canada Border Services Agency (CBSA), in which all interested parties will be able to participate.

Scope Rulings: The transparency of Canada’s trade remedy system will be enhanced by allowing interested parties to request that the CBSA conduct a formal review to determine whether a specific product falls within the scope of a trade remedy measure. In addition, amendments will be made to enhance the ability of interested parties to monitor and appeal ongoing enforcement decisions.

8. As announced in the 2016 Fall Economic Statement, the Government will invest $10.1 billion over 11 years in trade and transportation projects. To address urgent capacity constraints and freight bottlenecks at major ports of entry, and to better connect the rail and highway infrastructure that delivers economic growth across Canada, the Government proposes to establish a new National Trade Corridors Fund. Investments will target congestion and inefficiencies at marine ports such as Vancouver (vital to expanding Canada’s trade with Asia) and Montréal (critical to the success of Canada’s Comprehensive Economic and Trade Agreement with the European Union), as well as along the busiest rail and highway corridors around the Greater Toronto Area and other urban centres across the country. Budget 2017 proposes to provide $2 billion over 11 years to support the Fund’s activities. At least an additional $5 billion will be provided through the Canada Infrastructure Bank to address trade and transportation priorities.

9. To make smart decisions, government and the private sector alike need access to high-quality, timely and accessible data and analysis. The Government is committed to strengthening Canada’s transportation networks and needs good information to make the targeted investments in trade corridors that will support growth and the creation of good, well-paying jobs. To that end, the Government proposes to establish a new Canadian Centre on Transportation Data, and an open data portal, to serve as authoritative sources of multi-modal transportation data and performance measures. Statistics Canada, other levels of government, industry and educational institutions will be partners in this initiative. The initiative will support innovations that will move goods more efficiently across supply and distribution chains, getting them from the manufacturer and into the hands of consumers more quickly, affordably and sustainably. To support this measure, Budget 2017 proposes to provide $50 million over 11 years to Transport Canada to launch a Trade and Transportation Information System.