2016 Federal Budget Highlights

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Canadian Society of Customs Brokers Mar 29, 2016

The full text of the budget is available at: http://www.budget.gc.ca/2016/docs/plan/budget2016-en.pdf

Expanding Trade Opportunities

An open trade and investment environment allows firms to thrive and provides better jobs for the middle class. The competitiveness of Canadian businesses in the international marketplace will be enhanced by breaking down barriers to trade, both internal and abroad, and providing the appropriate tools and policy framework that allow Canadians to take advantage of new trade opportunities.

The Government recently completed the final steps of the Canada-European Union Comprehensive Economic and Trade Agreement. Canada and the European Commission are committed to swift ratification so that our citizens can quickly reap the benefits of this high-quality agreement. The Trans-Pacific Partnership (TPP) would offer opportunities to grow Canadian trade with Asia-Pacific countries, enhance North American production and improve job quality in Canada. The Government continues to consult Canadians in an open and transparent manner on the merits of ratifying the TPP.

Going forward, the Government is also committed to deepening trade relationships with large emerging markets, including China and India.

Supporting Manufacturers Through Tariff Relief

Canadian manufacturers need a wide range of inputs to produce their high-quality products. Some of these manufacturing inputs are imported and may face tariffs when entering Canada. Such tariffs are a non-recoverable charge that increases the production costs of Canadian manufacturers, affecting their competitiveness at home and abroad. It has been a longstanding practice to eliminate such tariffs to support Canadian manufacturing.

Budget 2016 announces that the Government will eliminate tariffs on about a dozen manufacturing inputs, providing an estimated $9 million in tariff savings over the next five years to Canadian manufacturers in the consumer goods and transportation sectors.

Budget 2016 also announces the Government’s intention to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products. These ingredients are primarily used in the agri-food processing industry, Canada’s largest manufacturing employer and an important contributor to Canada’s economy. Eliminating tariffs on imported ingredients will support investment and job creation in this important sector by strengthening the competitiveness of Canadian agri-food processors in domestic and foreign markets.

Strengthening Canada’s Response to Unfair Trade

A modern and effective trade remedy system is an important part of the Government’s commitment to support Canadian jobs and investment. Fostering the conditions for manufacturing growth and new investment requires open markets both in Canada and abroad, as well as the ability to address unfairly traded goods entering the Canadian market. As part of Budget 2016, the Government is taking steps to improve its ability to effectively remedy dumped and subsidized imports, including through specific legislative amendments. Further, the Government will consult stakeholders to ensure that Canada’s trade remedy system offers Canadian businesses the ability to respond to changing global trade conditions.

Gordie Howe International Bridge Project

The Government of Canada has been working with the State of Michigan and the U.S. Federal Government to construct a new international crossing between Windsor and Detroit since the early 2000s. A significant milestone towards the construction of the Gordie Howe International Bridge project was achieved on January 20, 2016, with the completion of the first phase of the procurement process and the announcement of three short-listed bidders for the project. In the coming months, the Request for Proposals will be launched to select a private sector partner for the construction and ongoing operation of the new crossing.

Investments such as the Gordie Howe International Bridge project will help stimulate the local, regional and national economies by creating jobs and opportunities for the middle class. The new crossing at the site of the most important international land crossing in North America will contribute to the economic growth and continued prosperity of both Canada and the United States.

Investing in Infrastructure for Security Agencies

As part of the federal infrastructure initiative in Chapter 2—Growth for the Middle Class, Budget 2016 proposes to provide more than $128 million over two years on a cash basis, starting in 2016–17, to improve the physical infrastructure that is relied upon by law enforcement and intelligence agencies across the country on a daily basis. This investment will contribute to the rehabilitation, construction and modernization of facilities of the RCMP, the Canadian Security Intelligence Service and the Canada Border Services Agency. The investment will address health and safety concerns for officers, ensure the continuity of mission-critical operations, repurpose existing spaces to better meet program requirements and upgrade training facilities, in particular those at the RCMP Depot Division located in Regina, Saskatchewan.

Improving Export Verifications

Canada needs to ensure that its exports do not pose health, safety or security threats to Canadians and its allies and that Canada continues to respect international commitments. The Canada Border Services Agency’s export verifications support this objective by preventing the proliferation of weapons of mass destruction and the export of goods that have been obtained illegally. Budget 2016 proposes to provide $13.9 million over five years, starting in 2016– 17, to improve export verifications by enabling the Agency to enhance identification processes and increase examination rates of high-risk shipments.

Restricting the Relief of Excise Tax on Diesel and Aviation Fuel

Subject to limited exceptions, the Excise Tax Act (Canada) imposes an excise tax on diesel and aviation fuel manufactured and delivered in, or imported into, Canada.

To ensure that the scope of these limited exceptions remain targeted, the Government proposes to clarify instances where relief from excise tax is provided relating to diesel fuel used as heating oil or to generate electricity.

To ensure that the relief provided for heating oil applies only to heating in respect of buildings, the Government proposes to define heating oil as fuel oil that is consumed exclusively for providing heat to a home, building or similar structure, and is not consumed for generating heat in an industrial process. The Government also proposes to remove the generation of electricity exemption for diesel fuel used in or by a vehicle, including a conveyance attached to the vehicle, of any mode of transportation.

Both measures will apply to fuel delivered or imported after June 2016, and to fuel delivered or imported before July 2016 that is used, or intended to be used, after June 2016.

Customs Import Duties Projections

Customs import duties are projected to increase by 13.2 per cent in 2015–16, reflecting strong year-to-date overall import growth and the removal of benefits for certain countries under Canada’s General Preferential Tariff regime, effective January 1, 2015. Customs import duties are projected to decrease slightly over the remainder of the projection period, mainly as a result of the expected impacts of the ongoing implementation of the Canada-Korea Free Trade Agreement, as well as the planned introduction of the Canada-European Union Comprehensive Economic and Trade Agreement and the potential introduction of the Trans-Pacific Partnership.