FEDERAL REG

SOR/2016-313: Schedule to the Customs Tariff, 2016-2 (Agri-food Inputs) — Order Amending Customs Tariff

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
December 17, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: The Order Amending the Schedule to the Customs Tariff, 2016-2 (Agri-food inputs) eliminates customs duties on a number of goods used mainly in the production of agri-food products. Reducing tariffs on manufacturing inputs helps lower production costs for Canadian businesses to enhance their o... (Click for more)


Published on December 17, 2016

Bill Summary

SOR/2016-313: Schedule to the Customs Tariff, 2016-2 (Agri-food Inputs) — Order Amending Customs Tariff

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Order.) Executive summary Issues: The Order Amending the Schedule to the Customs Tariff, 2016-2 (Agri-food inputs) eliminates customs duties on a number of goods used mainly in the production of agri-food products. Reducing tariffs on manufacturing inputs helps lower production costs for Canadian businesses to enhance their overall competitiveness, both domestically and abroad. This Order delivers on a Budget 2016 commitment. Description: This Order eliminates tariffs on certain inputs used by Canadian agri-food processors in their operations. This is consistent with long-standing tariff policy and follows broad-based measures in 2009 and 2010 to make Canada a tariff-free zone for industrial manufacturers. Cost-benefit statement: Based on recent import levels, an estimated $48 million in tariff revenues are collected annually on the products subject to this Order. This Order removes the tariffs on these products, leading to cost savings for Canadian manufacturers and commensurate revenues foregone by the Government. These cost savings will help bolster the competitiveness of the Canadian agri-food processing industry. “One-for-One” Rule and small business lens: Given that the proposal does not impose any new compliance or administrative costs on business, including small business, the “One-for-One” Rule and small business lens do not apply. Domestic and international coordination and cooperation: There are no implications with respect to domestic or international coordination and cooperation. Issues It is long-standing government policy to provide unilateral tariff relief on manufacturing inputs to enhance the competitiveness of Canadian businesses. Budget 2016 announced the Government’s intention to launch public consultations on eliminating tariffs on certain food manufacturing ingredients, other than supply-managed products. This measure aims to support investment and job creation in the agri-food processing industry, Canada’s largest manufacturing employer and an important contributor to the Canadian economy. Objectives This initiative implements tariff relief on a range of agri-food inputs that are used by Canadian food processors in their operations. Such relief lowers costs for businesses and bolsters their competitiveness in domestic and foreign markets. Description The Order Amending the Schedule to the Customs Tariff, 2016-2 (Agri-food inputs) reduces the Most-Favoured Nation (MFN) rate of customs duty to “Free” on certain imported ingredients that are used in the agri-food processing industry, including certain fruits and vegetables, cereals and grains, spices, fats and oils, food preparations, and chocolate products. In certain instances (e.g. where the affected tariff items include both inputs and goods for retail sale), new tariff classifications are created to afford duty-free status only to goods used in processing. In addition, the Order also makes revenue-neutral technical changes to the Schedule to the Customs Tariff in order to simplify its structure. Specifically, when the measure creates a duty-free item in a subheading where there are already other duty-free items, one new tariff classification has been created to replace all of the duty-free items of that subheading, which facilitates the classification of goods. These changes will be effective as of January 16, 2017. Regulatory and non-regulatory options considered An order made pursuant to section 82 of the Customs Tariff is the most appropriate mechanism to implement these changes. It is long-standing government policy to implement tariff reductions by order in council in order to provide timely benefits to Canadian manufacturers. Benefits and costs Based on recent import levels, an estimated $48 million in tariff revenues are collected annually on the products subject to this Order. This Order removes the tariffs on these products, leading to cost savings for Canadian manufacturers (i.e. they will no longer need to pay customs duties on their imported inputs) and commensurate revenues foregone by the Government. Benefits are expected to be widely distributed across Canada’s agri-food processing industry. This Order will reduce their production costs by reducing the cost of imported ingredients, thereby improving their competitiveness. “One-for-One” Rule The “One-for-One” Rule does not apply to this Order, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to this Order, as there is no change in administrative or compliance costs to small business. Consultation Public consultations were launched on April 23, 2016, through a notice of intent, published in the Canada Gazette, Part I (www.canadagazette.gc.ca/rp-pr/p1/2016/2016-04-23/html/notice-avis-eng.php#ne3), seeking comments for a 60-day period. Twenty-four written submissions were received in response to the notice from companies and associations representing a broad range of processors, producers, distributors and retailers. The consultations confirmed broad interest in eliminating tariffs on imported ingredients in order to strengthen the competitiveness of Canadian agri-food processors in domestic and foreign markets. A number of stakeholders also expressed a desire to see the Government proceed with tariff elimination as soon as possible. Some stakeholders expressed concerns with respect to tariff elimination on a limited number of products. In those cases, tariffs were maintained, or were only eliminated when used for processing, but not for other uses. All comments from stakeholders have been taken into consideration in developing this Order. Rationale This Order is consistent with the government’s long- standing policy of providing tariff relief to enhance competitiveness. Eliminating tariffs on these items will lower production costs for Canadian businesses and enhance their overall competitiveness. Implementation, enforcement and service standards The Canada Border Services Agency is responsible for the administration of, and compliance with, customs and tariff legislation and regulations. In the course of its administration of these tariff changes, the Agency will inform the importing community. Contact Kimberly McIntyre International Trade Policy Division Department of Finance Canada Ottawa, Ontario K1A 0G5 Telephone: 613-369-4075 Fax: 613-369-4024 Footnote a S.C. 1997, c. 36 Footnote 1 S.C. 1997, c. 36

This Bill does not amend any statutes.

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