April 12, 2006
Concerns
RCC is concerned with the impact the proposed changes will have on large and small retailers; these changes will likely increase retailers' financial burden, and in some cases, their administrative burden. Furthermore, since the preset amount has not been specified in the proposal, it is difficult to determine how suppliers will be designated.
RCC understands that for phase 2 of the consultation process, ARMA will be sending the supplier classifications to all large and small registrants indicating which "level" their business has been designated. Registrants will then be asked to examine their classification and if they feel they have been improperly classified they may contact ARMA. RCC believes that suppliers should have the opportunity to advise ARMA on their preferred level of classification. RCC does not support the proposed changes if they require that retailers be classified as "Level 2" suppliers.
The proposal states that under the new system, suppliers will experience a reduction in their administrative burden since they will no longer have to remit fees to ARMA on a monthly basis, and they will no longer require remittance fees. However, RCC believes that it will increase the financial burden to retailers, particularly smaller retailers. As a "Level 2" supplier, retailers will have to pay for the Advance Disposal Surcharge (ADS) upon purchase of the item from the manufacturer/distributor (vendor). Therefore, retailers could end up carrying the cost of the ADS for unsold products, which may result in an increase in retailers' financial burden; particularly smaller retailers who generally have lower cash flow than larger retailers.
Under the current system, most retailers enter into arrangements with vendors to remit the ADS directly to ARMA on all eligible merchandise based on sales. Through this agreement, vendors are not invoicing retailers on their behalf since they are not remitting directly to ARMA; the retailer is remitting on the vendor's behalf. Under the proposed system, "Level 2" suppliers will now be required to show the ADS on their invoice, which may increase retailer's administrative burden.
Furthermore, retailers do not have the ability to determine, at the point of sale, which item should be charged the ADS; or if it should be exempt since a "Level 1" supplier may have already paid the surcharge. This would create an unlevel playing field as it could result in confusing point-of-sale transactions between retailers and consumers, as consumers may question why one item has an ADS levy while another item does not.
In some instances, large national or regional retailers do not order products on a per-province basis; rather they order products in bulk and then distribute them to warehouses and stores as required. In these cases, the merchandise is shipped from vendors to retailers' warehouses where it is centrally stocked and then allocated and shipped via their internal supply chain to stores across the country; therefore, requiring "Level 2" suppliers to pay the ADS on unsold merchandise that is being stored in warehouses. RCC supports the current system of remittance as it allows retailers to pay the required remittance based on sales at the end of the month, or after the sale to the consumer. Under the proposed changes, if retailers are classified as "Level 2" suppliers, they would then be invoiced for the ADS at time of purchase, therefore having to incur additional costs for merchandise that is not yet sold. RCC does not support this change as retailers would not be willing - and some may not be able — to pay the ADS on unsold merchandise.
Also, if retailers were considered "Level 2" suppliers, this may require an assessment and possible changes to their inventory systems. ARMA has proposed the elimination of the remittance certificate process by July 1, 2006; three months is not a sufficient amount of time to approve and implement changes to retailers' inventory system.