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Import tariffs being dubbed the 'iPod tax'

Government tightens special exemptions

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OTTAWA -- The federal government is tightening up tariffs on imported products such as televisions and iPods that receive a special exemption when used with computers.

Importers owe about $16 million from 2011 alone due to a reassessment of customs duties, according to a memo from the Canadian Border Services Agency, released under the Access to Information Act and obtained by The Canadian Press.

The memo from March 2012 -- which includes a handwritten notation to keep "the minister" informed -- says the crackdown "will likely result in a significant amount of customs duty being reassessed, and will not be well-received by the importing community."

The agency has ruled importers who use the computer exemption must get certificates from the end users -- consumers, in most cases -- that certify the product will be used with a computer. No certificate, no exemption, says the agency.

"As the vast majority of end-users of these products are consumers, it is expected the required certification will not be available as the onus is on the importer to have the required certificate completed by the consumer, typically at the time of sale," says the document.

The Customs Act states such verification certificates should be signed and show "the user's name, address and occupation and indicates the actual use made of the commercial goods."

And the exemption has been interpreted to apply only to devices in "continuous use" with computers, which means iPods and other MP3 players are unlikely to qualify.

The crackdown predates the Harper government's 2013 budget delivered last month, which has sparked a hot debate over whether new tariffs effectively impose a politically awkward "iPod tax."

Finance Minister Jim Flaherty's office pointed to the computer exemption this week as evidence that tariffs on iPods are not increasing.

"Music devices like iPods are imported into Canada duty free under a long-standing special tariff classification from 1987," Kathleen Perchaluk, Flaherty's spokeswoman, said in an email Thursday.

"That special tariff classification was in no way altered by recent changes to the General Preferential Tariff foreign aid program."

But as recently as Dec. 7, the CBSA informed one importer in writing the "iPod Touch 8GB" is subject to end-user verification in order to get the tariff exemption, according to correspondence obtained by The Canadian Press.

"Certificates or records of actual use must be obtained and readily available for inspection by an officer," the letter states in bold print.

The March 2012 CBSA memo, meanwhile, said the agency was planning to extend the verification demands to other items "such as CDs, DVDs and computer speakers."

None of this was publicized at the time, but the memo said "the program is currently working with the Communications Directorate to prepare reactive media lines."

Three different ministerial offices, contacted on the memo Friday, were not immediately available to comment.

-- The Canadian Press


Republished from the Winnipeg Free Press print edition April 6, 2013 A14

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