A Canadian company that manufactures children’s toy couches finds itself facing a stiff bill for import tariffs after bringing production home to this country.
While Barumba Play is no longer importing a majority of its product, a single component of the couches has been reclassified by the Canada Border Services Agency and is no longer tariff-free.
The company’s flagship product is a couch for children made of pieces that can be easily taken apart and reassembled for play. Sara Feldstein founded the company in Markham, Ont., in 2021 and initially produced the couches entirely in China.
As the couches were classified as a children’s toy, Feldstein told CBC News they were not subject to tariffs and were brought into Canada without import fees. Tariffs can be used by the Canadian government as a form of taxation on imports to protect Canadian economic development.
Trouble started for her in 2023, when Feldstein opted to move production of the couches to Canada from China.
“I on-shored my manufacturing to Canada from China and have been penalized for it,” she said.
Business owner Sara Feldstein sits on a Barumba Play couch. ‘I on-shored my manufacturing to Canada from China and have been penalized for it,’ she said. (Anis Heydari/CBC)
Feldstein was able to manufacture every part of the couch in Canada except for cloth slipcovers, which she had to keep producing in China.
She received a letter from the Canada Border Services Agency in the summer of 2023 indicating it felt classifying the slipcovers as part of a toy was incorrect.This contradicted what Feldstein was told to expect from business advisors and industry experts that she turned to for advice before opting to transfer manufacturing most of her product to Canada.
Instead, Feldstein says the slipcovers have been lumped in with textiles such as carpets, bed linens and table linens — and now she’s expected to pay 18 per cent duty on imports.
These are some of the play couch slip covers that the Canada Border Services Agency has classified as textiles, rather than a component part of a toy. (Submitted by Sara Feldstein)
The CBSA declined an interview request from CBC News. After this article was published, it issued a statement that the Customs Act doesn’t allow it to speak about individual cases, but explained that goods are assessed for tariffs based on how they are “presented at the border,” and that changes to what is being imported can result in a change to tariff classifications.
The CBSA also said if someone importing goods disagrees with a tariff decision, they can appeal, but only after they’ve paid all amounts owed, plus interest.
According to Feldstein, her business now owes at least $47,000 in retroactive tariffs, and she expects costs could escalate up to $70,000 while she waits for the appeals process to play out.
WATCH | How a classification change led to surprise tariffs for this Canadian company:
Ontario company hit with unexpected tariffs for manufacturing in Canada
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After bringing home her manufacturing from China to Canada, Barumba Play founder Sara Feldstein received a letter from the Canada Border Services Agency saying they had reclassified her children’s toy couches from the category of toys to textiles, resulting in an 18 per cent duty that they’re applying retroactively to the past several years of operation. She can appeal but would still need to front the full amount of money owed first.
Businesses must pay, even during appeals
It’s a cost she’s not sure her business can bear, because she must pay the tariffs now even while she tries to appeal the decision.
That appeal process could take close to a year, according to the CBSA’s current processing times.
“It would make me want to tell others, don’t bother bringing your business back to Canada. Do it overseas. It’s safer that way,” she said.
It’s not unusual for businesses to be caught in the complicated web of tariffs, according to lawyer David Rotfleisch of TaxPage.com, a law firm specializing in tax and business.
Tax lawyer David Rotfleisch says businesses have to pay tariffs as assessed before appeals are heard. (Gary Morton/CBC)
He confirmed that businesses such as Feldstein’s need to pay assessed tariffs even while mounting a legal challenge because collection is not paused or halted when an appeal is launched.
“Tariff classifications are complex and make income tax look relatively simple,” Rotfleisch said.
“Wrong assessments affect a lot of businesses because they can’t pay it, and by the time the appeal process runs its course, it’s going to take time and [businesses] can’t manage it. So they have to literally shut their doors.”
Suspending payments may not be solution
But eliminating the requirement to pay, even before appeals are exhausted, may not be the right solution, according to Jenifer Bartman, a business advisor based in Winnipeg.
“You could have companies not paying attention to the rules, saying, ‘We’ll go ahead and do this, and if it goes wrong, we’re not going to be out of pocket any time soon,'” she said.
Business advisor Jenifer Bartman says companies must seek out advice before changing supply chains across borders. (Anis Heydari/CBC)
Bartman pointed out that importing products to Canada, whether partial or fully manufactured, requires a lot of preparation and advice.
“It’s really important for business leaders, especially if they’re venturing into a new aspect of their supply chain … to understand what the rules are in advance because they can save themselves a lot of time and trouble down the line.”
Business owner says she did her research
For her part, business owner Feldstein said she did consult with experts prior to repatriating manufacturing of her couches to Canada. The decision by CBSA to reclassify surprised her.
Feldstein maintains the slipcovers currently being classified as textiles by CBSA should still be considered just a part of the couches she sells as a children’s toy, and not a separate linen that could be used on its own.
If the slipcovers are a part of the toy couch, they would not have the tens of thousands of dollars in tariffs assessed.
According to the CBSA’s website, to be considered a “part,” the item must meet criteria including that it has no alternative function, be marketed and shipped along with other parts of the product, needed for “safe and prudent use” of the item, and be “committed” to use with the unit.
Barumba Play’s founder isn’t sure what comes next, but until the problem is resolved she’s holding off on growing her business.
“I’m very hesitant to spend money on other items right now when this is in limbo,” said Feldstein.
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
