September 20, 2024
International Trade Policy Division (Steel and Aluminum Surtaxes)
Department of Finance
90 Elgin Street, 14th Floor
Ottawa, Ontario K1A 0G5
tariff-tarif@fin.gc.ca
Re: CBA Response to Notice of intent to impose surtax on Aluminum from China
On behalf of the Canadian Beverage Association (CBA), the national voice for more than 60 brands of nonalcoholic beverages, we urgently and respectfully request that HTDS Code 7606.12.00 (aluminum non-clad can sheet) be exempted from the list of aluminum and steel products from China subject to a 25% surtax, scheduled to take effect on October 15, 2024. Should our request for exemption not be granted, we alternatively ask that the surtax be delayed until at least late 2026 to allow for a sufficient supply of aluminum can sheet in North America.
The Canadian beverage sector is a significant economic driver, contributing over $5.37 billion in GDP and directing over $977.3 million in federal tax revenue. The industry is also an important engine of job creation across Canada. Economic activities from the beverage industry generated $3.4 billion in labour income and supported 55,868 full-time-equivalent jobs across Canada in 2019. For every production dollar the sector earns, 88 cents is retained in the Canadian economy, supporting local businesses, hardworking families – the majority of which are middle class – and the communities where they live and work.
If an exemption for aluminum can sheet cannot be implemented, the CBA recommends delaying the implementation of any new surtax measures until 2025 to mitigate the impacts. It typically takes eight months to a year to qualify for new suppliers, and there is a history of significant delays related to tariffs. The recent retaliatory tariffs announced by the United States, which Canada responded to, is the result of a nearly two-year process of review and analysis, with a four-year transition period after the initial announcement. Should these tariffs proceed as scheduled, Canadian beverage companies will have less than two months for consultation and adaptation, which will undoubtedly disrupt the supply chain.
CBA commends Canada for taking a strong stance on international geopolitical disputes, especially between the United States and China. However, a tariff will not stop the flow of can sheet aluminum from China, and thus, there will be a direct price increase for producers and consumers. Moving forward with this rushed timeline also risks significant and impactful consequences for Canadian food and beverage products, including those already in transit. In our current climate of increased cost pressure on the beverage sector, it is expected that these changes may be passed on as increased costs for consumers.
While it is challenging to quantify the full extent and impact of the proposed surtax across the supply chain, this will substantially impact beverage producers. Initial estimates from individual beverage producers are in the millions of dollars annually. There are also no aluminum can sheet mills in Canada, and the raw materials for aluminum beverage containers must be imported from abroad, so there is no opportunity for cost relief.
Cans account for a significant portion of Canada’s beverage producers as they are highly recyclable and produce a net positive to the circular economy. Whenever possible, CBA members prefer to source their packaging materials domestically, within North America or from countries with similar values. In recent years, the reliable supply of aluminum can sheet within North America has become severely constrained by increased demand and the lack of manufacturing capacity. Investments are being made to expand North American production, but sufficient capacity increases are not expected before late 2026. Until the production of commercially viable can sheet in North America sufficiently increases, it is crucial to have the option of sourcing from foreign suppliers to meet our customers’ demand for sustainable aluminum beverage packaging.
As non-alcoholic beverage producers, we are proud of the significant investments made by our sector in the circular economy. Aluminum cans have some of the highest recycling rates of all beverage containers across Canada, an impressive 80%, according to the Beverage Container Recycling Network of Canada (BCRNC). Should aluminum be further restricted due to cost, more beverages will be packaged in plastic packaging, causing more plastic to enter our environment. While the CBA and the broader beverage industry are working to ensure we get every can and bottle back, there remains a risk of increasing the amount of plastic waste in our environment, especially as plastic has lower recovery rates.
CBA members strongly believe that exempting this HS code, or at a minimum, delaying its implementation, will not diminish the Government of Canada’s stated intent to penalize China for unfair trade practices. Should this surtax be imposed through a hasty, rushed process, we believe this could likely result in increased prices for consumers at a critical time.
We appreciate your consideration of this request. Please contact us directly to answer any questions or provide additional information.
Sincerely,
Krista Scaldwell
President