Glacier FarmMedia COVID-19 & the Farm

New tariff-free ships seen as Prairie farmers’ gain

A federal decision to remove a 25 per cent tariff on new foreign-built vessels is expected to help Prairie grain growers maintain their ready access to the St. Lawrence Seaway.

While ripped by others as potentially harmful to Canada’s shipbuilding sector, the government’s decision, announced Friday, “has made the purchase of new lakers more economically feasible,” Canadian Wheat Board CEO Ian White said in a release.

About 75 per cent of CWB grain exports through the St. Lawrence port region arrive at transfer elevators on laker vessels, the board said.

A typical laker can haul 26,000 tonnes of wheat, about the same capacity as 300 rail cars, the CWB said. “New lakers in Canada’s fleet will help to ensure that farmers continue to have access to this important transportation corridor.”

The St. Lawrence, White said, is “a strategic gateway for Prairie farmers sending their grain to markets in Europe, Africa and South America.”

According to Bruce Bowie, CEO of the Canadian Shipowners Association, Canada’s shipping fleet is aging, “and as we approached the need for vessel replacement, it was clear that the 25 per cent duty had become a huge impediment to fleet renewal.”

Duty removal, the Ottawa-based association said in its own release, “will encourage new marine transportation initiatives in Canada to take advantage of the underutilized marine highway and relieve congestion currently experienced on ground-based modes of transport.”

According to federal Finance Minister Jim Flaherty on Friday, the new duty remission framework will lower costs by waiving the tariff on imports of all general cargo vessels and tankers, as well as ferries longer than 129 metres.

Remitting the tariff is expected to save shipowners $25 million per year over the next 10 years, the government said.

“Further rationalization”

As well, Flaherty said in his release, “numerous stakeholders,” including ag industry representatives, noted during public consultations last year that the duty costs on imported vessels are passed on to Canadian producers and users through increased shipping rates.

In public consultations last year, the government said, proposed duty relief received support from provincial governments, marine industry associations, vessel operators, port authorities and representatives of the energy, agriculture and steel industries, among others.

The move was telegraphed in March in Flaherty’s budget, which called for eliminating “all remaining tariffs” on manufacturing inputs and machinery and equipment being imported into Canada, with most tariffs to be removed that month and some to be gradually eliminated by Jan. 1, 2015.

But the federal NDP’s shipbuilding critic, Nova Scotia MP Peter Stoffer, on Monday blasted the government’s move as “a reckless and irresponsible decision which can only hurt Canada`s long-term interest in maintaining a vibrant and independent capacity for shipbuilding with the high-quality job(s) and expert services that it creates.”

Stoffer said the domestic industry could be further developed to build “competitively-priced” domestic cargo vessels, tankers and ferries.

“I fear that this decision will lead to the further rationalization of the industry, meaning that only select regional shipyards will remain viable,” he said.

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