Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

A tax dispute over iPod devices centres on the question of which tariff code should apply to MP3 players. (APPLE)
A tax dispute over iPod devices centres on the question of which tariff code should apply to MP3 players. (APPLE)

Sony tariff case provides further evidence of an iPod tax Add to ...

The current iPod tax dispute is, at its core, over the proper tariff code for MP3 players. Can importers use a provision (9948.00.00) in the Customs Tariff that allows for the tariff-free import of computer-enhancing items, or must they file solely under other classifications that will see increased rates for products from the 72 countries losing their GPT status come 2015?

More Related to this Story

The Canada Border Security Agency’s (CBSA) formal position on 9948.00.00 is that use of this tariff item requires the collection of end use certificates. But would the CBSA actually enforce the requirement that importers of MP3 players obtain end-use certificates from consumers to avoid the dreaded iPod tax? As it turns out, the CBSA may already be enforcing this requirement.

I have obtained a letter from the CBSA that indicates that the agency is currently enforcing the tariff item 9948.00.00 requirement of collection of end-use certificates for MP3 players. I have posted a copy of the letter so that you can read it for yourselves.

The letter, dated Nov. 20, 2012, is in respect to an ongoing case (Case 11414) between the CBSA and Sony of Canada Ltd. In the letter, the CBSA has identified five Sony television models that were, in the CBSA’s view, incorrectly imported tariff-free into Canada under 9948.00.00:

“End-use certificates or other records signed by the user of the commercial goods have not been provided for the goods of the five sampled B3 transaction lines verified. The provisions of tariff item 9948.00.00 have not been met and therefore, the provisions of tariff Item 9948.00.00 are not applicable.”

Although the enforcement action only lists televisions, the letter indicates the scope of the action includes all products for which Sony has claimed 9948.00.00 status:

“These tariff classification re-determinations will affect not only the transactions verified, but also any other goods that have been accounted for under tariff items 9948.00.00 and for which no certificate or other record signed by the user of the commercial goods are available.”

In my view, then, the question of “would the CBSA require end use certificates for imported MP3 players and iPods” has now been answered. If Sony has previously claimed 9948.00.00 status on any of their Walkman MP3 models but has not collected end-use certificates, Case 11414 indicates that Sony must correct the tariff classification and retroactively pay any back duties owing. From the CBSA’s 9984 Enforcement Memo, we are informed of the CBSA’s position that “the vast majority of the end-users of these products are consumer, it is expected that the required certification will not be available.”

It is difficult to reconcile the CBSA’s position in Case 11414 that MP3 players require an end-use certificate (which they cannot reasonably acquire) to claim 9948.00.00 status, with the Finance Department’s recent statement that “devices like iPods are imported into Canada duty-free under a long-standing special tariff classification from 1987.”

Easier to reconcile is the CBSA’s recent press release stating that those importing “MP3 players continue to be eligible to apply for tariff relief under Tariff Item 9948.00.00”. While importers of MP3 players are able to apply for tariff relief, the standard for actually obtaining tariff relief, as currently set by the CBSA, cannot reasonably be met for products that are being sold to consumers.

Mike Moffatt is an assistant professor in the Business, Economics and Public Policy group at the Richard Ivey School of Business, University of Western Ontario

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular