No new tax on iPods, Ottawa says

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The agency in charge of administering Canada's trade and tariffs regulations has assured Canadians they won't face a new levy on imported iPods and similar digital-music devices, in an attempt to clear up uncertainty among some observers and even some shippers.

In a brief statement late Friday, the Canada Border Services Agency clarified that iPods "continue to be eligible to apply for tariff relief" under code 9948.00.00 of the tariff code – a special exemption from tariffs for a category for devices that connect to and "enhance the function of" computers.

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

The statement confirms an advisory from Finance Minister Jim Flaherty's office late Thursday that iPods would not face a new tax as a result of last month's federal budget – a possibility that turned into a minor tempest Thursday after a Canadian professor went public with his interpretation that new tariff rules in the budget could mean a new tariff on iPods.

Mike Moffatt, a business professor at the University of Western Ontario and a regular contributor to The Globe and Mail's Economy Lab blog, announced via Twitter that he had discovered that the iPod Shuffle, iPod Nano and iPod Classic products faced a 5-to-6-per-cent tariff effective Jan. 1, 2015 as a result of the budget changes – up from zero previously. His views, based on his own research of the tariff codes, were widely circulated via social media and caught the attention of mainstream press, and he blogged on the topic on The Globe and Mail's website. The opposition NDP issued a press release criticizing the Conservative government's new iPod "tax."

News of the story spread and Finance Minister Jim Flaherty's press secretary, Kathleen Perchaluk, issued a statement to media Thursday evening saying that Finance department officials had looked into the matter and concluded that Mr. Moffatt's views were "incorrect."

"I want to clarify that there is no iPod tax," she wrote.

At the root of the uncertainty is confusion as to how iPods are classified under Canada's tariff codes.

Mr. Moffatt argues that iPods (and other digital music players) should rightly be classified under code 8519, "sound recording or reproducing apparatus." (The sub-classifications under 8519, which like much of the coding system are vague and general, don't specifically mention iPods or digital music players.) Imports under that code, he said, face the new tariffs if they come from any of the 72 countries that will lose their General Protective Tariff status as of Jan. 1, 2015. The countries on the list include China and other major emerging-market electronics manufacturers.

The devices aren't an obvious fit under the 9948 special exemption, because they wouldn't seem to enhance the function of a computer when connected to it – rather, the computer serves to enhance the music player by downloading music to it.

Nevertheless, the exemption has been applied to iPod imports and will continue to do so, both the CBSA and the Finance department indicated.

Adding to the confusion is the fact that major shippers, such as Canada Post, have long advised customers to use 8519 as the tariff code for their imports of iPods and similar devices. In fact, it appears that the products correctly belong to both classifications – but that the 9948 exemption overrides the tariffs, an official said.