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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Duration 1:54
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.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
