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SURTAX ON STEEL DERIVATIVE GOODS

BUSINESSES AND CONSUMERS TO FEEL FINANCIAL IMPACT OF NEW SURTAX

During the Christmas holiday season, the Federal Government of Canada quietly adjusted its trade policy QUITE significantly.  A significant development on this front is likely Canada’s enactment of the Steel Derivative Goods Surtax Order (the “Steel Derivative Surtax”) through an Order in Council.

We report below on the application of the Steel Derivative Surtax, and the particular goods targeted by these measures, and potential financial relief that may be available for businesses.

Steel Derivative Surtax

Unlike the United States Surtax Order (Steel and Aluminum 2025), which applies to steel goods of US Origin, the Steel Derivative Surtax is a global trade measure that applies a 25% surtax to imports from any country (with some exceptions covered below).

Any good listed in Schedule 1 of the Steel Derivative Surtax (i.e., properly classifiable in one of the listed HS codes) will be subject to a 25% surtax upon importation into Canada.  The application of the surtax is also not limited to the steel content of the goods but rather applies to the total value for duty of the good.

The Steel Derivative Surtax will likely have negative financial effects on Canadian wholesale, retail and distribution business, with attendant rises in costs for consumers.  Some notable consumer goods caught by the Steel Derivative Surtax are the following:

• Doors, windows and their frames (even with limited or effectively zero steel content);
• Iron or steel woven cloth;
• Seats with metal frames;
• Metal office furniture; and
• Washers, rivets, and screws.

Limited Exceptions BUT No Stacking

The application of the 25% Steel Derivative Surtax is subject to a few exceptions, most of which are industry specific and time limited.

For example, the automotive, aerospace, and energy sectors are the primary beneficiaries of the following exceptions:

• Goods for use in the manufacture of motor vehicles or chassis or parts of or accessories therefor;
• Goods for use in aircraft, ground flying trainers or spacecraft or parts therein; and
• Utility wind towers imported for energy projects located west of the Ontario-Manitoba border.

There is also an exception for casual goods, but that exception will most likely not be available due to its restrictive definition.  Crucially though, there is an exception where certain other Canadian surtaxes apply, meaning the Steel Derivative Surtax will not stack on top of other surtaxes.

Possible Remission?

While there is no announced remission order or remission framework currently in place for the Steel Derivative Surtax, we understand that limited remission may be available.  Importers affected by this new surtax should reach out to Experienced International Trade Counsel to explore remission opportunities.

Takeaways

The Steel Derivative Surtax will likely cause financial difficulties for businesses and consumers alike moving forward.  However, there may be an opportunity for remission, and importers should contact Experienced International Trade Counsel to explore that option. 

For help with Steel Derivative Surtax, please click here.

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