Ottawa has paid out just over $11,000 in duty relief despite collecting more than $286 million in the two months after it slapped retaliatory tariffs on U.S. imports in response to U.S. levies on Canadian steel and aluminum, according to figures obtained by Global News.
Canada Border Services Agency said it distributed just $11,184.35 since July 1, under the duties relief program, one of three programs meant to help industries negatively impacted by the trade dispute over steel and aluminum. Zero dollars were distributed yet under the duty drawback program.
The final relief program is called the remission of surtaxes, and was announced alongside the counter-tariffs. Unlocking those funds requires the extraordinary step of case-by-case cabinet approval, a process that Ottawa hopes to get moving within weeks, Global News has learned.
CBSA in a statement said the majority of applications under the duty relief and drawback programs are still being processed, which could take up to 90 days. The programs are designed either to or to reimburse companies for duties paid on goods that will be later exported out of the country.
Companies struggle to adjust in wake of trade dispute
Meanwhile, Canadian steel manufacturing companies are struggling.
“Having our own government be the one that’s making us non-competitive is the difficult part to deal with,” said Doug Hamre, research and development manager at Edmonton-based Apollo Machine, which machines steel products used in downhole drilling.
Canada picked a list of just over 200 products to levy at a value of $16.6 billion, including steel and aluminum products, to match the American measures. Officials said they tried to keep the list to products that have a substitute in Canada. But not all companies can avoid the tariffs.
Apollo Machine has to use steel specified by customers, and they require specialized grades only produced south of the border and subject to the 25 per cent retaliatory tariff. Hamre anticipates the cost to be upwards of $3 million annually if nothing changes. It’s been a tough blow for a company that just survived the recent oil and gas downturn.
He has applied for the remission of surtaxes and received an emailed response that the process may take weeks. Instead, he wants a simpler solution.
“Really what we are looking for isn’t really help in the traditional handout or subsidy. What we’re really looking for is an exclusion for materials not produced in Canada,” he said.
In southern Ontario’s manufacturing sector, auto parts producer Autotube has already paid $200,000 in tariffs to Ottawa.
“The magnitude was much higher than what we were anticipating,” said Mike Evans, chief operating officer.
Again, their customers pick the type of steel required, leaving little room for AutoTube to adjust to tariffs.
“Not all Canadian tube suppliers can meet the specifications we require to produce the product,” he said, adding that quotes he has received from Canadians suppliers have also been much higher.
The revenue loss has meant tight budgets for the employer of 200 people.
“We can’t take that cash we would normally get and inject that back into the business to invest in robotics and automation we desperately need to be competitive,” he said.
Evans has hired a consultant to try to get the parts reclassified as auto products to avoid tariffs. He understands Ottawa needs to stand up to the White House, but doesn’t think the federal government has done enough to help companies like his.
“Better communication as to what is available. We shouldn’t have to incur expenditures to engage consultants to help us obtain our money back,” he said.
Ottawa offering help for affected Canadian companies
The government, meanwhile, stresses it has plenty of support for businesses. In addition to tariff relief programs, $2 billion is available to Canadian companies impacted by the counter-tariffs through federal programs, announced at the end of June.
Export Development Canada and Business Development Canada received $1.7 billion of the $2 billion for loans, but most has yet to be spent. EDC has distributed $36 million since July, while BDC has authorized loans worth $100 million to 130 companies in the same timeframe. Other funds have been set aside for innovation, work-sharing and the development of export opportunities.
“We are committed to making sure that every dollar raised in reciprocal tariffs is given back in the form of support for the affected sectors,” said Pierre-Olivier Herbert, spokesperson for Finance Minister Bill Morneau.
The industry association which represents many of Canada’s manufacturers said the government’s plan is a good one, especially in such an extraordinary circumstance.
“We have over 2,500 members across the country. I would say right now every company is affected,” said Mathew Wilson, senior vice-president Canadian Manufacturers and Exporters. “The government is learning and trying to deal with new volumes they’ve never seen before.”
Wilson understands the frustration of businesses, but said the government has been listening, adjusting and doing what it can.
“Governments never work fast enough, I think. I think those in power would say the same thing,” he said. “They have to balance that response. They can’t just simply start giving money back to companies because of every claim.”
Companies hoping successful NAFTA can end uncertainty
Even if companies do qualify for government help, they are left with paperwork and uncertainty.
Paul McGrath’s company, JEM Strapping, has qualified for duties relief, but it doesn’t spell the end to all his extra costs.
The tariffs have forced a whole new inventory system to separate product with American and Canadian origins. He’s also had to hire a bookkeeper to deal with the extra paperwork.
“You had a three-month period now where you’ve had companies like myself and many others that are in serious hardship because they’ve had lack of revenue coming in,” McGrath said.
As Canadian companies adjust to their new reality, most are staking their hope on a successful NAFTA deal that will eradicate tariffs on both sides.
“That has to be a must in whatever the Canadian government is negotiating and that’s what we’re telling them,” said Wilson of the CME. “But we’re pretty optimistic there will be a deal done in the next couple of weeks.”
© 2018 Global News, a division of Corus Entertainment Inc.
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