Canadian government customs provisions are expected to soften the blow on the country’s powerful automotive industry from retaliatory tariffs on U.S. steel, according to trade lawyers and industry leaders bracing for higher costs.
Decades-old programs reduce or refund import duties on supplies like steel when companies in Canada can show the material is used in export products. They could protect the auto industry’s supply contracts covering raw materials and parts, which often cross borders several times before a vehicle is finished.
While imposing tariffs against a long list of U.S. products this month, including everything from flat-rolled steel to playing cards and felt-tipped pens, Canada clarified that “duties relief” and “duty drawback” programs would be available to Canadian exporters.
“That provision in the notice is overwhelmingly directed at the auto industry,” said Jesse Goldman, a trade lawyer at Borden Ladner Gervais. Without drawbacks, Goldman said, the Canadian retaliation would have “very significantly and very quickly” hurt the industry.
Some 85 percent of vehicles built in Canada in 2016 were exported, meaning duty relief programs could refund roughly 85 percent of retaliatory tariffs paid by automakers.
Canada has vowed to defend the steel and aluminum industries, but vehicle manufacturing employs some 136,000, according to Statistics Canada, whereas only about 22,000 work in the steel sector, giving the government an incentive to shelter vehicle and parts makers from rising costs.
“These existing programs continue to be in place and any changes would be done in consultation with the relevant stakeholders,” federal Finance Department spokesman Jack Aubry said when asked whether the programs would continue.
