Canada Imposes Retaliatory Tariffs on Specific U.S. Goods and Groceries – Understanding the Impact on Retailers in Canada

This morning, the United States imposed tariffs on U.S. imports of steel and aluminum products from Canada.

In response, Canada has stated its intention to impose retaliatory tariffs of up to C$16.6 billion on Canadian imports of steel, aluminum, and other products from the U.S. For retailers, the area of particular concern is these “other products”, which contains a long list of grocery items and consumer goods (see the following link: https://www.fin.gc.ca/activty/consult/cacsap-cmpcaa-eng.asp).

These retail goods and grocery items will, as of July 1, 2018, be subject to a 10% import tariff (at the landed price not at the retail price). The tariffs will continue in effect until either: (a) the U.S. withdraws its tariffs on Canadian steel or aluminum; or (b) the amount of tariffs collected by Canada equals the impact of the U.S. tariffs on steel and aluminum.

Important Considerations

• The 10% tariff applies only to goods originating from the U.S., so manufactured there, or in the case of groceries, grown or raised in the U.S. Goods manufactured elsewhere and shipped via the U.S. are not affected, nor are any goods shipped directly to Canada from other countries. For greater certainty as to what is considered a U.S.-originated product, please refer to Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations (SOR/94-23) at http://laws-lois.justice.gc.ca/eng/regulations/SOR-94-23/
• The effective date is July 1, 2018. Any goods in stock or that have been imported to Canada before the end of June 30, 2018 will not be affected and it is also possible that the dispute may have been settled before the tariffs take effect.

The Government of Canada has selected a list of products that it believes can be substituted from other sources, whether from within Canada or from foreign suppliers. For many of these, like coffee, soya sauce, tomato ketchup, plywood or table cloths, there are undoubtedly alternative sources of supply, albeit not typically from the same brand. For other items, like whiskies, orange juice or lawn mowers, the availability of acceptable substitutes may be less certain.

Retailers will each have their own practices but for many, it may be helpful to first determine which items that you sell are of U.S. origin, how much stock you have in-hand and in the pipeline and the expected delivery dates into Canada. Because there is a 30-day window before the tariffs come into effect, there may be the opportunity to order more product that could be received in Canada before the deadline. It will also be worthwhile to determine which products can bear price increases reflecting a 10% tariff at the landed price.

Second, you may want to begin your determination of which of your current U.S.-originated products are substitutable from Canadian or foreign sources, bearing in mind that the length of this dispute is currently unknowable. Some members have also suggested that communications, online and marketing material for the period post-July 1, 2018 may want to include notice to consumers re pricing or availability.

Lastly, a review of contractual obligations with current vendors of U.S.-originated goods is probably in order.

Next Steps:

The Government is opening-up a two-week consultation period for affected stakeholders, including retailers, that closes on June 15, 2018. Retail Council of Canada will be reaching out to members for guidance in our submission to that consultation. To that end, we will be holding a first conference call tomorrow, on Friday, June 1, 2018 at 1:00pm Eastern. Members who are available and would like to join in that call can dial in at 1-866-486-3921; Participant Code: 5038660#.

RCC anticipates that there will be further calls within the two-week consultation window and as needed, over the course of this trade dispute.

RCC has already been in contact with the Foreign Affairs Minister’s Office and with the International Trade Branch at the Department of Finance (which oversees tariffs, including retaliatory tariffs). We have received assurance that our industry will be consulted throughout this process.

There is also the opportunity for a direct submission by individual retailers by following the process stated below. If you do choose to make a direct submission, it would be greatly appreciated if you would provide us with a copy, as issues spotted by any one our members may be of broader application.

Process for direct submission of comments to the Department of Finance.

Written comments should be provided no later than June 15, 2018. Submissions, at a minimum, should include the following information:

1. Canadian company/industry association name, address, telephone number, and contact person.
2. Relevant eight-digit tariff item(s) and description of the goods of particular interest.
3. Reasons for the expressed support for, or concern with, the proposed countermeasures, including detailed information substantiating any expected beneficial or adverse impact
4. If concern is expressed with respect to the proposed countermeasures for one or more eight-digit tariff item(s), please provide views on ways to alleviate such concerns.
5. Please identify if information provided in the submissions is commercially sensitive.

Address for comments

Comments and general inquiries should be sent to the following address:

International Trade Policy Division (U.S. 232 Retaliation Consultations)
Department of Finance, James Michael Flaherty Building, 14th Floor,
90 Elgin Street, Ottawa, Ontario K1A 0G5
613-369-4024 (fax) or by email at fin.tariff-tarif.fin@canada.ca

If you have any questions or concerns, please don’t hesitate to contact: Karl Littler, Vice President, Public Affairs at: klittler@retailcouncil.org or 416-467-3783 or 416-906-0040 (cell)