DAVID ADAMS ARGUES THAT CURRENT VEHICLE TARIFFS ARE HINDERING ELECTRIC CAR ADOPTION RATHER THAN ENCOURAGING IT
Over the more than a quarter century that I’ve been involved in the auto industry, I’ve had the opportunity to see more than a few things that don’t make a lot of sense where different levels of government are involved. Overlapping or contradictory pieces of legislation, regulation or public policy are not anything new, and, in fairness to governments of all political stripes, there has been more focus on trying to address outdated, redundant or conflicting legislation and regulations over the past five years than at any point in recent history.
If you’ve spent any time in the realm of customs you may recognize that 87.03 is the Harmonized System or HS code in the Customs Tariff for “Motor cars and other vehicles principally designed for the transport of persons (other than those of heading 87.02), including station wagons and racing cars.” 8703.10 brings further specificity to the tariff item being “Vehicles specially designed for travelling on snow; golf carts, and similar vehicles” with 8703.10.90 providing even more clarity “Other” followed by the even more specific 8703.10.90.91 “Powered by an electric motor.”
In simple terms, 8703.10.90.91 is the HS code for an electric vehicle. In the customs world there is an HS code for everything. As the Canada Border Services Agency (CBSA) website indicates, the Customs Tariff is based on the World Customs Organization’s (WCO) Harmonized Commodity Description and Coding System (HS). Good to know right? For all items in the Customs Tariff there is a table that shows the tariff item code, the sub-code, a description of the goods, the most favoured nation (MFN) tariff and a list with any other preferential tariff agreements and tariffs are applied to all items in the Customs Tariff, even if that tariff is zero.
SAME RATE FOR EVs
Any idea what the tariff is on battery electric vehicles being brought into Canada from elsewhere? Well it is 6.1 per cent, the same for other vehicles sourced from overseas.
However, the real issue is whether a tariff on electric vehicles makes sense, especially in light of the very stringent greenhouse gas emissions regulations the government has imposed upon the auto industry, through the year 2025. As a result of these standards, OEMs will need to utilize electric vehicle technology as a compliance mechanism in order to achieve the GHG reductions demanded by the new regulations.
Although EVs can be imported from the U.S. duty free if they are built there, realistically, the bulk of global technological development in this area is in Asia and Europe, which means that all of these imported EVs will attract a 6.1 per cent tariff. If the duty value for an EV happens to be $25,000, then the tariff adds an extra $1,525 to the vehicle. As a result, such tariffs don’t make much sense, especially when provinces like Ontario, B.C. and Quebec are providing taxpayer funded incentives to EV purchasers of up to $8,000 per vehicle to help broaden their appeal.
AT ODDS
Last fall, the federal government made the Canadian consumer the focus of its Throne Speech. Removal of the tariff on EVs would not only fit right into that agenda but the feds could also be viewed as doing something for the environment as well — a potential benefit in light of the continued controversy and environmental impact from pipelines and the Athabasca oil sands.
Furthermore, if the removal of the tariff coincides with further provincial incentives to put more EVs on Canadian roads then just perhaps, OEMs around the world will start to consider Canada for some potential EV research and development investment. So there are potential economic development benefits as well.
Consumers would benefit from lower EV prices, which may finally tip the scale in favour of purchasing such vehicles and manufacturers would benefit from hopefully being able to sell more EVs with the additional federal “incentive” in the form of tariff removal.
Rather than have federal tariffs at odds with provincial incentive programs on EVs, isn’t it time that both levels of government worked together to get more of these advanced technology vehicles on the road that will benefit everyone?
