Tax & Trade Blog

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TRUMP TARIFFS & CANADIAN MADE CARS

HARD TIMES REVING UP FOR CANADIAN AUTOMOTIVE SECTOR

On Wednesday March 25^th, the President signed a proclamation which invoked s. 232 of the Trade Expansion Act of 1962, s. 604 of the Trade Act of 1974 and Section 301 title 3 of the U.S. Code.  This new Executive Order has imposed a 25% tariff on imports of automobiles and certain automobile parts. 

What is a tariff?

A tariff is a duty imposed on the import of goods into a country, usually at a stated percentage, with the importer charged the corresponding amount based on the "value for duty" of the good.  A 25% tariff on a $50,000 car is $12,500.  Tariffs, if paid by a wholesaler or retainer are usually passed on down the supply chain and borne by the final consumer.  In that sense, a tariff functions like a tax; the government imposes a price on goods making those goods more expensive.  The hope is that by increasing the price of foreign goods, citizens will purchase homegrown alternatives.

After 35 years of practice in Tax and Trade, one thing I am sure of is that there are no “magic” answers for dealing with administrative delay by the Canada Revenue Agency (“CRA”) or the Canada Border Services Agency (“CBSA”).  

A recent decision of the Canadian International Trade Tribunal (“CITT”) underscores this problem, and leaves taxpayers and importers in some potentially hard situations when faced by governmental inaction.