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.

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.

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

5 hours ago

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.

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.

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.

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The chief executives of Canada’s three largest telecom companies stressed that phone and internet prices are coming down during an appearance before MPs on Monday, noting that increased data usage and high spectrum costs may be some reasons Canadians feel otherwise.

The three CEOs – Rogers Communications Inc.’s RCI-B-T Tony Staffieri, BCE Inc.’s Mirko Bibic BCE-T and Telus Corp.’s T-T Darren Entwistle – appeared virtually at the House of Commons industry committee meeting.

Committee members voted unanimously last month to summon the trio to testify after a previous invitation to the chief executives resulted in other corporate representatives showing up instead.

The committee is studying the accessibility and affordability of wireless and broadband services – an issue that came to the forefront in January when Rogers confirmed it was raising prices by an average of $5 for some wireless customers not on contract.

Mr. Staffieri was pressed on the matter Monday, with Liberal MP Francesco Sorbara suggesting the move was “tone-deaf.”

“Would you not admit that the timing was not great?” he asked.

Mr. Staffieri replied that the price hike only affected customers on legacy plans.

“It was important to us to make sure that these customers had choice,” he said. “With two clicks, they could get onto a plan that was in market and give them the best value for money for their circumstance.”

Conservative MP Ryan Williams questioned Mr. Bibic and Mr. Entwistle on whether Bell and Telus would raise their prices in response to Rogers’s move.

Mr. Bibic would not say whether Bell plans to follow suit, insisting the company’s focus is on lowering costs, while Mr. Entwistle said he remained confident Canadians would see price declines but was “not going to talk about price setting in a forum with my two competitors sitting right here.”

Some members of the committee have said they are concerned about cellphone and internet prices in Canada, arguing Canadians pay too much for those services.

But the CEOs cited recent Statistics Canada data showing wireless prices have declined 16 per cent in the past year and 47 per cent over the past five years.

“If you just compare in Canada, 2019 to 2024 alone, we’re offering in some cases 10 times more data for $40 less a month,” Mr. Bibic said. “You can see the massive drop.”

Mr. Entwistle said that “massive increase in data consumption” partly explains why some Canadians may hold the perception that their telecom service prices have gone up. He said Canadians are “amongst the highest data consumers in the world,” which is why the major companies are offering them bigger plans than before.

“If you mathematically cut the cost in half, but the user uses twice as much data as what they did, historically, the cost is going to look the same to the user,” he said.

Mr. Entwistle added the “missing” element of the conversation pertains to the cost of the physical cellphone itself, which he said can make up nearly half of an overall mobile bill.

“That’s an area where we do not control the economics,” he said.

“At the end of the day, those economics are determined by the device manufacturers.”

The three chief executives also each told the committee that the cost they pay in Canada for wireless spectrum – the electromagnetic frequencies that enable smartphone communications – are among the highest in the world and make it more expensive to operate.

Last November, Canadian wireless companies collectively spent about $2.1-billion on chunks of 5G bandwidth in the federal government’s most recent spectrum auction. At the time, experts said the cost of spectrum incurred by the carriers could lead to higher mobile prices as companies recoup their investments.

Mr. Entwistle said that in 2021, spectrum fees accounted for $100 on the annual wireless phone bill of every Canadian.

“That fee reflects the fact that Canadian wireless operators have historically paid the highest prices for spectrum through successive spectrum auctions in the world,” he said.

“That is a significant part of our cost base and I would argue it’s inconsistent with a policy of trying to improve affordability.”

Mr. Bibic added that if government-imposed spectrum prices in Canada followed the global average, “every Canadian’s wireless bill would be $5 per month lower.”

But Conservative MP Rick Perkins suggested the blame also falls on the companies themselves. He said Rogers’s quarterly earnings reports frequently “brag about your average revenue per user going up every year.”

“That’s why Canadians feel they’re paying more, because you’re charging them more,” he said during an exchange with Mr. Staffieri.

“Average revenue per user does not equal price,” Mr. Staffieri replied, noting it is “an accounting metric … and it includes services that the customer can choose to add on.”

“And yours has gone up from $50.75 in 2020, to almost $60 now, in only four years,” Mr. Perkins said.

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Sports Illustrated will resume publishing after its owner reached a new rights deal with digital media company Minute Media, which will reportedly operate the magazine for at least 10 years.

Monday’s announcement comes nearly two months after owner Authentic Brands terminated its publishing deal with The Arena Group, which led to mass layoffs at the venerable sports magazine.

Minute Media, best known for its sports sites The Players’ Tribune and FanSided, said it reached a long-term partnership with Authentic Brands to “usher in the future of the [Sports Illustrated] brand.”

“Sports Illustrated is the gold standard for sports journalism and has been for nearly 70 years across both print and digital media. The weight and power of that distinction cannot be understated,” Minute Media founder and CEO Asaf Peled said in a statement.

“At Minute Media, our focus will be to take that legacy into new, emerging channels enhancing visibility, commercial viability and sustainable impact, all while ensuring that the [Sports Illustrated] team is inspired to flourish in this new era of media,” he said.

Unclear what deal means for writers

There are plans for the publication’s print edition to continue for at least a decade under its new ownership, according to The New York Times, which first broke the story.

What this means for the writers and others who produce Sports Illustrated remains to be seen. Sports Illustrated co-editor-in-chief Stephen Cannella told employees in a memo to continue operating as though it were business as usual.

“We have said from the start that our top priorities are to keep Sports Illustrated alive, uphold the legacy of the institution and protect our union jobs. We look forward to discussing a future with Minute Media that does that,” said Emma Baccellieri, an SI staff writer and vice-chair of the employee union that the NewsGuild represents.

Authentic Brands split with The Arena Group in late January after the latter missed a $3.75 million US payment for licensing rights.

WATCH | Sports Illustrated announced mass layoffs in January: 

Sports Illustrated lays off most of its staff

2 months ago

Duration 2:02

The owner of Sports Illustrated delivered layoff notices to most of its staff on Friday after nearly 70 years in operation. While it may not mean the end for sure, the future of the magazine is uncertain.At the time, Authentic vowed that the Sports Illustrated brand would continue in some capacity.

“We are confident that going forward, the brand will continue to evolve and grow in a way that serves sports news readers, sports fans and consumers,” the statement said.

As part of the deal, Authentic will also acquire an equity stake in Minute Media.

A challenging period

Sports Illustrated has had a rough six years. It was acquired by Meredith Publishing in 2018 as part of the purchase of Time Inc., which started the magazine in 1954.

Less than a year later, Meredith sold the magazine’s intellectual property to Authentic for $110 million. Authentic owns the intellectual property of many brands and stars, including Marilyn Monroe, Elvis Presley, Muhammad Ali and Reebok.

Once a weekly publication, Sports Illustrated was reduced to biweekly publishing in 2018 and became a monthly in 2020.

In December, it fired chief executive officer Ross Levinsohn when the magazine’s alleged use of AI-generated stories drew a public backlash.

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