FEDERAL REG

SOR/2016-140: Ferry-Boats Remission Order, 2016 Customs Tariff

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
June 15, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: Budget 2016 announced that the 25% tariff on all ferries would be waived to facilitate the fleet renewal plans of Canadian ferry operators. Waiving the tariff is expected to result in savings that will allow ferry operators to reinvest in their fleet renewal plans, enhance ferry services and/... (Click for more)


Published on June 15, 2016

Bill Summary

SOR/2016-140: Ferry-Boats Remission Order, 2016 Customs Tariff

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: Budget 2016 announced that the 25% tariff on all ferries would be waived to facilitate the fleet renewal plans of Canadian ferry operators. Waiving the tariff is expected to result in savings that will allow ferry operators to reinvest in their fleet renewal plans, enhance ferry services and/or lower their fares for passengers and commercial users. Description: The Government is putting in place a new framework that remits the customs duties paid or payable for all ferries, imported as of October 1, 2015. Cost-benefit statement: It is estimated that the amount of duties foregone will be $118 million over six years. This will be of primary assistance to Canadian ferry operators as they embark on fleet renewal, as well as ferry users that are expected to benefit from enhanced services and/or lower fares. “One-for-One” Rule and small business lens: The “One-for-One” Rule does not apply to this Order, as it does not result in any administrative costs or savings to business. Domestic and international coordination and cooperation: There are no implications with respect to international co-ordination and cooperation. Background Under the Customs Tariff, imported ships are subject to tariffs of up to 25% at the time of importation. In recent years, the Government has taken a number of actions to lessen the impact of tariffs on shipowners/users, notably by waiving the tariff on certain classes of vessels. Since 2010, the Government has been waiving tariffs on imported cargo vessels, tankers and large ferries (129 m or more in length) by means of the Ferry-Boats, Tankers and Cargo Vessels Remission Order, 2010 to facilitate shipowners’ fleet renewal plans. Customs duties have continued to apply to other classes of vessels, including ferries under 129 m in length. Issues Budget 2016 announced that the 25% tariff on all ferries would be waived to facilitate the fleet renewal plans of Canadian ferry operators. A 25% tariff applied on the purchase of a ferry represents significant costs for ferry operators. Waiving the tariff is expected to result in savings that will allow ferry operators to reinvest in their fleet renewal plans, enhance ferry services and/or lower their fares for passengers and commercial users. Objectives Waiving the tariff on imported ferries will facilitate fleet renewal and investment in critical transportation links, including those servicing remote communities. It will provide ferry operators with savings that are expected to be reinvested in fleet renewal plans, enhancing ferry services and/or reducing fares for its users. Description By means of this Remission Order, made pursuant to section 115 of the Customs Tariff, the Government is putting in place a new framework for all ferries imported as of October 1, 2015. Remission will only apply to the first importation of a ferry, thereby maintaining the duty incentives for repair, refit and conversion work to be done in Canadian shipyards. This Order makes consequential amendments to the Ferry-Boats, Tankers and Cargo Vessels Remission Order, 2010 to consolidate remission of customs duties for ferries under one order, with an appropriate transition period of October 1, 2017. Remission of customs duties for tankers and cargo vessels under the 2010 Remission Order will remain unchanged. Regulatory and non-regulatory options considered A remission order made pursuant to section 115 of the Customs Tariff is the most appropriate mechanism to implement the initiative. A similar approach has been used since 2010 with respect to cargo vessels and tankers, as well as ferries of a length of 129 m or more. Benefits and costs Canadian ferry operators indicate that they will be making significant investments in fleet renewal over the next 5 to 10 years. The current tariff rate of 25% increases costs significantly for ferry operators. The waiving of the customs duties will assist Canadian ferry operators to cost-effectively invest in, and renew, their fleet with more efficient, technologically sophisticated and environmentally advanced vessels. It will also provide ferry operators with savings that are expected to be reinvested in their fleet renewal plans, enhancing ferry services and/or lowering fares, which would benefit ferry users. Tariff incentives to have repair and refitting work done domestically are retained by maintaining customs duties for vessels exported, and then re-imported, solely for repairs, refit and conversion. “One-for-One” Rule The “One-for-One” Rule does not apply to this Order, as it does not result in any administrative costs or savings to business. Small business lens The small business lens does not apply to this Order, as there are no costs to small business. Consultation Multiple stakeholders have requested, including through pre-Budget 2016 submissions, that the federal government waive the duties on ferries of all sizes. Stakeholders’ views were taken into consideration when designing the measure. The measure was announced in Budget 2016. Rationale The Government is implementing a new remission framework to facilitate ferry operators’ plans to renew their aging fleet. This measure will allow ferry operators to reinvest the savings in their fleet renewal plans, enhance ferry services and reduce fares for passengers and commercial users. This new duty remission framework for the importation of ferries will bring certainty and predictability to all stakeholders in the marketplace. With this framework in place, the Government will no longer entertain duty remission requests in respect of past importations, that is with respect to ferries of a length of 129 m or more, those imported prior to January 1, 2010, as specified in the Regulatory Impact Analysis Statement to SOR/2010-202; and with respect to ferries of a length of less than 129 m, those imported prior to October 1, 2015. The new duty remission framework should have minimal practical effect on Canadian shipyards, as these vessels are generally not available from domestic producers on a cost-competitive basis. The new framework will also retain longstanding customs duty incentives for having repairs, refit and conversion done in Canada. It is expected that small, non-ocean-going vessels (e.g. less than 30 m) will continue to be primarily sourced domestically. Implementation, enforcement and service standards The Canada Border Services Agency will administer the Order and ensure compliance with its terms and conditions in the normal course of its administration of customs and tariff-related legislation and regulations. Contact Jason Christie International Trade Policy Division Department of Finance Canada Ottawa, Ontario K1A 0G5 Telephone: 613-369-4035 Footnote a S.C. 2005, c. 38, par. 145(2)(j) Footnote b S.C. 1997, c. 36 Footnote 1 SOR/2010-202

This Bill does not amend any statutes.

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