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March 8, 2010

Tariff elimination on manufacturing inputs, machinery and equipment

In its Budget 2010 the Canadian Government proposes to eliminate the remaining tariffs on manufacturing inputs and machinery and equipment. The Department of Finance consulted extensively with stakeholders in preparing this measure, including through the publication of a notice in the Canada Gazette on September 19, 2009.

This measure will assist Canadian industry by lowering the costs of manufacturing inputs and machinery and equipment that are imported from outside North America. Tariffs on the affected goods vary from 2 per cent to 15.5 per cent and represent a non-recoverable tax on production inputs and on new investments that companies make in order to enhance their competitiveness and productivity.

The reductions apply to 1,541 tariff items as currently listed in the Schedule to the Customs Tariff. For these items, the Most-Favoured-Nation (MFN) rates of duty will be reduced to "Free" as outlined in the Notice of Ways and Means Motion to Amend the Customs Tariff. Of these:

• 1,160 tariff items will have the MFN rates of duty reduced to "Free" as of March 5, 2010; and

• 381 tariff items will have the MFN rates of duty gradually reduced, beginning as of March 5, 2010 and going to "Free" by no later than January 1, 2015.

In certain instances, these MFN reductions will lead to consequential reductions to the rates of duty under other tariff treatments, namely the General Preferential Tariff, the Costa Rica Tariff, the Peru Tariff, the Australia Tariff and the New Zealand Tariff. In a few instances, additional tariff items will be created to take into consideration comments received from stakeholders.

The tariff reductions will be given effect by amendments to the Customs Tariff and will be effective in respect of subject goods imported into Canada on or after March 5, 2010. There may be technical delays in actual application and refund claims will be considered.

Further details, including the list of applicable Tariff Items, are availble in Tariff Notice - TN-49.

Do not hesitate to contact our offices if your have any questions on this matter.