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?
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