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.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
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.
