Sony says so-called iPod tax too hard to avoid

Canadian consumers could soon face higher prices on electronics like TVs and iPods because it's going to be all but impossible for importers to exempt the products from a controversial tariff, a major electronics maker warns.

Importers are being asked to jump through too many hoops in order to qualify for a special exemption from the tariff on the popular products, said Mark Trylinski, logistics director at Sony of Canada.

Trylinski who predicted a price spike of about five per cent said companies may eventually decide the customs duties that are imposed on some items mean it no longer makes financial sense to import them.

The Canada Border Services Agency has ruled that importers who use the special tariff classification must get certificates from the end users consumers, in most cases that certify the product will be used with a computer.

'For the most part, these are going to be costs that are not going to be borne by the manufacturers.It's going to be passed on, ultimately, to the consumers.' Claudia Feldkamp, lawyer, Canadian Importers 9948 Fair Treatment Coalition

The Customs Act states that the verification certificates should be signed and show "the user's name, address and occupation and indicate the actual use made of the commercial goods."

The exemption has also been interpreted to apply only to devices in "continuous use" with computers, which means iPods and other MP3 players are unlikely to qualify.

"What that would mean is that if you go into, for example, Future Shop or Best Buy, and you were to purchase an MP3 player, you would in essence have to provide your private information and sign a certificate that states that you would be using this product in accordance with the code," Trylinski said in an interview.

"As a consumer, CBSA would have the right to come into your home and validate your use of this particular piece of equipment."

But that's not all, Trylinski said: the exemption rules also require that importers retain the certificates and verify over time that the device is still being used in accordance with the rules.

"I would have to get it from the actual store itself, maintain it, and in addition to that, verify that you are continuing to use it and have not diverted it in any way over a period of time."

Back payments on previously imported TVs

The border agency wrote to Trylinski last November indicating Sony would be required to pay what amounts to back taxes on previously imported televisions.

The letter also makes it clear the requirement would not only apply to televisions, "but also any other goods that have been accounted under [the tariff] and for which no certificate or other record signed by the user of the commercial goods are available."

In other words, anything imported under the special tariff classification provision without an end-user certificate.

The federal government points to the exemption as proof there's no such thing as an "iPod tax," but Trylinski said it simply isn't going to be practical for importers to apply for it, given the requirements.

Since most importers are unlikely to comply with those requirements, customers will likely end up paying more, Trylinski said.

"One of the key points for consumers to be aware of is that this will increase the cost to the end consumer," he said.

"And it will probably reduce the assortment of goods that they have available to them."

The "iPod tax" issue is politically embarrassing for the Conservative government. It was the Conservatives who attacked the NDP in 2010 for the suggestion of a tax on the popular portable music players.

Sony is part of a group known as Canadian Importers 9948 Fair Treatment Coalition that has lobbied the government over the tariff issue.

The Lobbying Commissioner's registry shows the group has had 11 "communications" with MPs and senior officials since December.

Group remains hopeful

Lawyer Claudia Feldkamp of Fasken Martineau, who represents the group, said she remains hopeful the agency will yield on the tariff issue.

No one from the Canada Border Services Agency was immediately available to comment. The agency did issue a statement last week on the tariff treatment of MP3 players, pointing out that MP3 players were eligible for tariff relief.

"Customs duty will be relieved on those imported goods that meet the requirements of tariff item 9948.00.00."

However, importers who do not meet those requirements are not likely to eat those added tariff costs, Feldkamp said.

"For the most part, these are going to be costs that are not going to be borne by the manufacturers," she said.

"It's going to be passed on, ultimately, to the consumers."