CTMA Ranger Remission Order: SOR/2024-125

Canada Gazette, Part II, Volume 158, Number 13

Registration
SOR/2024-125 June 10, 2024

CUSTOMS TARIFF

P.C. 2024-658 June 10, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed CTMA Ranger Remission Order under section 115footnote a of the Customs Tariff footnote b.

CTMA Ranger Remission Order

Remission

1 Remission is granted to Gestion C.T.M.A. Inc., of Cap-aux-Meules, Quebec, in an amount equal to the difference between the customs duty paid or payable under the Customs Tariff at the General Tariff and those that would have been payable if the vessel CTMA Ranger that was imported in 2022 had been entitled to the Most-Favoured-Nation Tariff.

Conditions

2 Remission is granted on the following conditions:

Coming into force

3 This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

Gestion C.T.M.A. Inc. (“CTMA”) entered into a contract to purchase a used tug in January 2022, with the bill of sale finalized in February 2022. While most recently registered in Norway and imported from that country, the tug was originally built in Russia in 2007. At the time of purchase, the tug was subject to the Most-Favoured-Nation (MFN) tariff of 25%.

Weather conditions in the North Atlantic delayed the cross-Atlantic voyage until late March 2022, with the tug arriving in Canada in mid-April 2022. By this time, goods of Russian origin were no longer eligible for the MFN tariff in response to the illegal invasion of Ukraine by Russia. The tug was thus assessed a 35% tariff under the General Tariff.

The tug was purchased from a Norwegian company and has never been registered in Russia, and the transaction did not provide any economic benefit to Russia. Given that CTMA could not have anticipated this change in Government policy, which arose in the one-month interval between finalizing its purchase and the tug beginning its delivery voyage to Canada on March 23, 2022, CTMA is requesting the remission of customs duties for the difference between the 25% tariff it expected to pay at the time of purchase, and the 35% tariff that was assessed upon importation, which amounts to $0.6 million.

Background

Ships imported into Canada, including tugs, are generally subject to a 25% Most-Favoured-Nation (MFN) tariff, unless imported under the preferential tariff treatment of a free trade agreement.

On March 2, 2022, Canada withdrew eligibility for MFN tariff treatment for goods produced in Russia and Belarus, in response to the illegal invasion of Ukraine by Russia with the support of Belarus. This meant that goods produced in those two countries were only eligible for the General Tariff, which applies at a rate of 35% for almost all goods, including all ships. The withdrawal of eligibility for MFN tariff treatment for goods of Russian (and Belarussian) origin was enacted without advanced notice in response to Russia’s invasion of Ukraine. It did include an “in-transit” exception, such that goods already en route to Canada could still claim the MFN tariff treatment.

CTMA was unable to take advantage of the “in-transit” exception because the delivery voyage of the tug across the Atlantic Ocean only commenced in late March on account of weather. By this time, Canada had withdrawn eligibility for MFN tariff treatment from goods of Russian origin, and the in-transit exception in that measure did not apply. CTMA could not have anticipated this change in Government policy, which arose in the one-month interval between finalizing its purchase and the tug beginning its delivery voyage to Canada on March 23, 2022.

The tug, named the CTMA Ranger, is used to manoeuvre large tonnage vessels coming into the narrow port of Cap-aux-Meules, the primary port for the Magdalen Islands, Quebec. CTMA is a fully owned subsidiary of a community-based co-operative of the Magdalen Islands, providing ferry services between the Magdalen Islands and Souris, Prince Edward Island, as well as freight transport services for the Magdalen Islands.

Objective

The objective of the Order is to provide remission of customs duties paid by CTMA on the CTMA Ranger resulting from the amount paid beyond the 25% tariff expected by CTMA and used in its assessment of the purchase.

Description

This Order allows CTMA to be eligible for partial remission of customs duties in the amount of approximately $0.6 million — the difference between the 25% tariff CTMA expected to pay, and the 35% tariff it paid.

Regulatory development

Consultation

Given that the Remission Order only impacts CTMA, the organization that requested the remission of customs duties, no consultations were undertaken.

Modern treaty obligations and Indigenous engagement and consultation

An assessment of modern treaty implications did not identify any adverse impacts on potential or established Aboriginal or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982.

Instrument choice

A Remission Order under section 115 of the Customs Tariff is the most appropriate mechanism, as it was created to provide remission of customs duties. As such, no other instruments were considered.

Regulatory analysis

Benefits and costs

This partial remission represents a one-time cost to the Government’s fiscal framework of approximately $0.6 million. This amount is a one-time benefit to the co-operative that operates the tug and other transport services for the Magdalen Islands. It would revert the amount of customs duties paid on the tug to the amount CTMA anticipated to pay under the 25% MFN tariff, and upon which it based its assessment of the purchase.

Small business lens

Analysis under the small business lens concluded that the regulation will not impact Canadian small businesses. CTMA exceeds the threshold for a “small business,” specifically one hundred employees and $5 million in annual revenue.

One-for-one rule

The requirement for CTMA to apply for the remission meets the definition of administrative burden in the Red Tape Reduction Act, and the order is considered to be a new regulatory title. However, the proposal relates to tax or tax administration and is exempt from the requirement to offset administrative burden and regulatory titles under the one-for-one rule.

Regulatory cooperation and alignment

The Remission Order remits customs duties to one organization, CTMA. It has no impact on Canada’s regulatory alignment with other jurisdictions, nor are there any opportunities for regulatory cooperation.

Strategic environmental assessment

A preliminary scan was not conducted, as no environmental impacts are foreseen as a result of this proposal.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

Department officials will advise CTMA that this remission order has been made.

The Canada Border Services Agency is responsible for the administration of, and compliance with, customs and tariff legislation and regulations. The Agency will administer the provisions of this Order in the normal course of its administration of customs and tariff-related legislation.

CTMA may request the remission from the Canada Border Services Agency within two years of the date of registration of the order.

Contact

Brad Norwood
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Email: tariff-tarif@fin.gc.ca