The Canadian government may lift a duty on large foreign-built cargo ships as of January 1 in a move that would speed up the replacement of older vessels.
The Canadian government may lift a duty on large foreign-built cargo ships as of January 1 in a move that would speed up the replacement of older vessels and save costs for carriers and shippers, the Chamber of Marine Commerce said. Canada is considering scrapping its 25 percent duty on imported ships longer than 129 metres (423 feet), which haven't been built in Canada for 23 years, said Stephen Brooks, vice-president of the Ottawa-based group.
The duty adds about C$13 million ($12.4 million) to the price of a new vessel, with the cost absorbed initially by carriers but passed via freight rates to shippers, he said.
"It will be a general, overall benefit to everybody (if Ottawa removes the duty)," Brooks said.
Currently, there are 70 Canadian-owned ships that are 129 metres or longer. The average age of the vessels, which carry bulk commodities like grain, coal, iron ore, steel and aluminum, is 35 years and many could be due for replacement in the near future.
"The industry is quite zealous to renew their fleet," Brooks said. "I would expect in the next three to five years, if this goes through, quite a lot of new ships being built.
The carriers that own the vessels include Canada Steamship Lines, Seaway Marine Transport and Upper Lakes Group.
China, South Korea, Turkey and Japan make the size of vessel needing replacement, Brooks said.
Lifting the duty would make it cheaper for farmers to export grain, Canadian Wheat Board spokesman John Lyons said. Similar costs reductions would likely be expected by other bulk shippers.
The government gathered public input on the duty this autumn until December 11. It is now assessing submissions before officials make a recommendation to Finance Minister Jim Flaherty.
He would then make a recommendation to cabinet, David Barnabe, a spokesperson for the Finance Department, said on Wednesday.
Barnabe couldn't say how soon a decision would be made but said lifting the duty could be made retroactive to January 1 if a formal decision comes later.
A spokesman for the Shipbuilding Association of Canada could not be immediately reached for comment.