United States Surtax Order (Aluminum 2020): SOR/2020-199
Canada Gazette, Part II, Volume 154, Number 20
SOR/2020-199 September 16, 2020
P.C. 2020-651 September 14, 2020
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance and the Minister of Foreign Affairs, pursuant to subsection 53(2) footnote a and paragraph 79(a) footnote b of the Customs Tariff footnote c, makes the annexed United States Surtax Order (Aluminum 2020).
United States Surtax Order (Aluminum 2020)
Definition of goods that originate in the United States
1 In this Order, goods that originate in the United States means goods that are eligible to be marked as goods of the United States in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations.
2 This Order does not apply to goods that originate in the United States that are in transit to Canada on the day on which this Order comes into force.
Surtax — tariff items set out in the schedule
3 Goods that originate in the United States that are classified under any of the tariff items set out in the schedule are subject to a surtax in the amount of 10% of the value for duty determined in accordance with sections 47 to 55 of the Customs Act.
September 16, 2020
4 This Order comes into force on September 16, 2020, but if it is registered after that day, it comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
On August 6, 2020, the United States announced the imposition of tariffs of 10% on imports of certain aluminum products from Canada. The United States (U.S.) tariffs took effect on August 16, 2020. In response, Canada announced its intention to impose countermeasures in the form of surtaxes of 10% against $3.6 billion in imports of aluminum and aluminum-containing products from the United States.
On May 31, 2018, the United States announced tariffs under Section 232 of the Trade Expansion Act of 1962 on imports of Canadian steel (25%) and aluminum (10%), on the basis that the imports threatened U.S. national security. On the same day, the Government of Canada announced its intention to apply surtaxes on imports of steel, aluminum, and other goods from the United States, accounting for $16.6 billion in annual imports (i.e. the amount of affected Canadian exports). After the U.S. tariffs took effect on June 1, 2018, the Canadian surtaxes took effect on July 1, 2018, under the United States Surtax Order (Steel and Aluminum) and the United States Surtax Order (Other Goods).
On May 17, 2019, Canada and the United States reached an understanding through a joint statement to repeal the U.S. tariffs and Canadian surtaxes. The Canadian surtaxes and U.S. tariffs were repealed on May 19, 2019.
Under the Joint Statement, the United States may re-impose tariffs if imports of specific Canadian products surge meaningfully any time thereafter (i.e. 25% tariffs on steel or 10% tariffs on aluminum). Should the United States decide to do so, Canada may apply retaliatory surtaxes on imports from the United States within the affected sector (e.g. Canada may impose surtaxes on imports of U.S. aluminum and aluminum-containing products if the United States applies tariffs on Canadian aluminum).
On August 6, 2020, the United States announced that tariffs of 10% would be reapplied on imports of unwrought unalloyed aluminum from Canada. These tariffs took effect on August 16, 2020. Canada strongly disagrees with the U.S. tariffs, including because U.S. imports of unwrought unalloyed aluminum from Canada have not surged meaningfully, and that these imports do not pose a threat to U.S. national security.
In response to the U.S. tariffs, the Deputy Prime Minister announced the Government’s intention to impose countermeasures, in the form of 10% surtaxes, against $3.6 billion in imports of aluminum and aluminum-containing products from the United States, representing the value of Canadian aluminum exports affected by U.S. tariffs. Canada continues to advocate for the full and permanent removal of the U.S. tariffs.
Canada’s aluminum industry provides approximately 10 000 well-paying, direct jobs in primary aluminum production, and supports tens of thousands more in related downstream sectors.
Canada and the United States share a highly integrated aluminum market. Combined bilateral trade in primary and semi-finished aluminum products between 2017 and 2019 averaged CAN$11.1 billion annually.
The objective of Canada’s countermeasures is to encourage a prompt end to U.S. tariffs on Canadian aluminum exports to the United States, as they impact the integrated North American aluminum industry. U.S. tariffs on imports of Canadian unwrought unalloyed aluminum are unwarranted and unjustified.
The United States Surtax Order (Aluminum 2020) [the “Surtax Order”] establishes surtaxes of 10% on imports from the United States of aluminum and aluminum-containing products classified under 44 tariff items, covering $3.6 billion in imports from the United States annually (2017–2019 annual average).
Applicable surtaxes will be calculated on the basis of the value for duty of the imported goods, as determined in accordance with sections 47 to 55 of the Customs Act. These surtaxes will apply in addition to any applicable customs duty imposed under the Customs Tariff.
The surtaxes will only apply to goods originating from the United States, which are goods eligible to be marked as a good of the United States in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations.
The surtaxes take effect on September 16, 2020, and will remain in place until the United States eliminates its tariffs against Canadian aluminum. The surtaxes will not apply to U.S. goods that are in transit to Canada on the day on which the surtaxes came into force.
On August 7, 2020, the Government of Canada published a notice of intent to apply surtaxes on a list of aluminum and aluminum-containing products covering $5 billion in annual imports from the United States (2017–2019 annual average). The Notice of Intent formally launched a 30-day comment period (ending on September 6, 2020) for Canadians to submit their views on the proposed countermeasures. The final list of products subject to surtaxes has been drawn from the list of products published in the Notice of Intent, taking into account views expressed during the comment period.
During the comment period, a total of more than 750 formal submissions were received, including from industry associations, large corporations, small and medium-sized enterprises, manufacturers, contractors, suppliers and distributors, food processors, retailers, provincial governments, and individual citizens.
Aluminum producers expressed support for retaliation, as did the majority of submissions from individual Canadians. Downstream manufacturers generally expressed concerns regarding increased costs due to the surtaxes and the negative impacts on the competitiveness of their Canadian operations. Likewise, importers of aluminum-containing products cited the negative price and competitiveness impacts of the surtaxes on products they import and sell in Canada.
All comments have been taken into consideration in determining the appropriate course of action, including the scope of products subject to the surtax.
Modern treaty obligations and Indigenous engagement and consultation
Constitutional and modern treaty implications were considered and none have been identified.
Subsection 53(2) of the Customs Tariff provides the authority for the Governor in Council, on the recommendation of the Minister of Finance and the Minister of Foreign Affairs, to, by order, make goods that originate in any country subject to a surtax for the purpose of responding to acts, policies or practices of the government of a country that adversely affect, or lead directly or indirectly to adverse effects on, trade in goods or services of Canada.
Benefits and costs
The costs for the Government associated with the administration of the Surtax Order are expected to be minimal.
In applying 10% surtaxes, the Surtax Order increases costs for importers of the subject goods. Where applicable, importers may change suppliers or pass these costs, in whole or in part, on to their Canadian clients, including downstream manufacturers that use aluminum as a manufacturing input and consumers in general. Otherwise, importers would absorb the cost of the surtaxes.
Small business lens
Small businesses importing products subject to the Surtax Order will be liable for the surtaxes. If they are not directly importing the products, small businesses may be indirectly affected by the surtaxes if they purchase aluminum and aluminum-containing products that have been subject to the surtaxes upon importation into Canada by third parties.
Businesses are expected to incur administrative costs to comply with the Surtax Order. However, most businesses are expected to be able to comply with the Surtax Order with limited administrative costs, as similar surtaxes were recently in effect from July 1, 2018, to May 18, 2019. The Surtax Order is exempted from the one-for-one rule, as it is related to tax and tax administration.
Regulatory cooperation and alignment
The Surtax Order does not have a regulatory cooperation component.
Strategic environmental assessment
In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that the Surtax Order would not have a positive or negative environmental impact; therefore, a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for the Surtax Order.
Implementation, compliance and enforcement, and service standards
The Canada Border Services Agency (CBSA) is responsible for administering the Customs Tariff and its regulations, including the surtaxes imposed under the Surtax Order. In the course of its administration of the United States Surtax Order (Aluminum 2020), the CBSA will inform importers of issues related to the administration of surtaxes, including through the issuance of customs notices.
International Trade Policy Division
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