Vol. 150, No. 13 — June 29, 2016

Registration

SOR/2016-140 June 14, 2016

CUSTOMS TARIFF

Ferry-Boats Remission Order, 2016

P.C. 2016-509 June 14, 2016

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 115 (see footnote a) of the Customs Tariff (see footnote b), makes the annexed Ferry-Boats Remission Order, 2016.

Ferry-Boats Remission Order, 2016

Remission

Ferry-boats

1 Remission is granted of the customs duties paid or payable under the Customs Tariff in respect of ferry-boats, classified under subheading No. 8901.10 in the List of Tariff Provisions set out in the schedule to the Customs Tariff, excluding those produced in Canada that have been exported and then subsequently re-imported into Canada.

Conditions

2 The remission is granted on the following conditions:

Consequential Amendments to the Ferry-Boats, Tankers and Cargo Vessels Remission Order, 2010

3 The title of the Ferry-Boats, Tankers and Cargo Vessels Remission Order, 2010 (see footnote 1) is replaced by the following:

Tankers and Cargo Vessels Remission Order, 2010

4 The definition imported into Canada in section 1 of the Order is replaced by the following:

imported into Canada, in respect of tankers and cargo vessels, means permanently imported into Canada for the first time, but does not apply to tankers or cargo vessels produced in Canada that have been exported and then subsequently re-imported into Canada. (importé au Canada)

5 Section 2 of the Order is replaced by the following:

2 Remission of the customs duties paid or payable under the Customs Tariff is granted in respect of tankers classified under subheading No. 8901.20 in the List of Tariff Provisions set out in the schedule to the Customs Tariff and cargo vessels.

6 Paragraphs 3(a) to (c) of the Order is replaced by the following:

Coming into Force

Registration

7 (1) This Order, except for sections 3 to 6, comes into force on the day on which it is registered.

October 1, 2017

(2) Sections 3 to 6 come into force on October 1, 2017.

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

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