The finance minister pulls the trigger

In twin announcements by high ranking Conservative Party types, Finance Minister Jim Flaherty in Ontario, and Treasury Board President Stockwell Day in BC, the Canadian government granted the waiver of duties (tax) for imported ships over 129 meters long. This waiver has long been sought by Canadian shipowners, and has been seriously rumored for several years now.

This means that “big ships” coming into the Canadian Register, will not be subject to a 25% tax on their cost. The big winners to start off the new policy, retroactive to the beginning of the year, is BC Ferries and Algoma.

BC Ferries is receiving, according to published reports, $119.4 millions dollars back, on duties paid for their new ferries, built in Germany – the three Coastal Class (Super C), and the new Northern Expedition. It plans to give it’s customers an “across the board”, on all routes, 2% fare reduction, effective later this month.

The press release goes on to mention that BC Ferries will allocate $20 million dollars to “…upgrade key assets in the ship repair and maintenance business in British Columbia.” Further details are to be worked out, but I would assume this means good news for Deas Pacific Marine. Deas Dock, as it is commonly known, is located in Richmond, BC, and a wholly owned subsidiary of BC Ferries, responsible for fleet maintenance.

Meanwhile, Algoma in Ontario, is receiving $15 million dollars back, presumably for duties paid on the rebuilds of the Algobay and Algoport. As you may remember these ship were towed to China, where the fore-body was cut off and new ones attached.

In the Montreal Gazette, industry talking heads heralded this as the needed boost to their business, well, that it is! They go on to say, after how they have “been held back”, ….shackled, from making investment in new equipment … “The waiver will also help to reduce our environmental footprint and provide more jobs”. Who couldn’t be for that! Interesting article really.

Unfortunately, as in Algoma’s case (and as far as I know), the removal of import duties does not mean automatically new ships for Canada’s maritime trade. It could just mean old ships made newer – somewhere else, as in the case of the Algobay / Algoport. Keeping the old engines and expensive bits, hardly counts on improving their environmental footprint. Perhaps, there is some improvements in cargo capacity and handling efficiencies, but I would hardly say that these are environmental selling features.

Perhaps even just old stuff from the international deep sea fleet, coming into the Canadian Register – like CSL Richelieu – will benefit from the waiver of duties. Sure it’s worn out for deep sea trade, but heck, it beats the average age of a Canadian vessel by a few years, that can’t be all bad.

Obviously, a little bit different take on the news clippings. I certainly will not hold my breath to see a major fleet renewal program with modern tonnage on the Great Lakes, why would they. Historically, the shipowners don’t seem to be held to account for much, why start now.

I could not find official government documents on the announcements, stipulating the various conditions, but the above observations should be of concern. Don’t get me wrong, I like to see at least some positive action from the government; its an encouraging sight. Now if we, other stakeholders in the marine industry, could only have a small amount of influence as the shipowners have had over the many decades past. Mmmmmm.

On the ship building side of things, this does not mean the beginning of the end for Canadian shipbuilders, no, no, that was about thirty years ago, but probably the final nail in their coffin. I believe the shipyards in Canada have seen this coming for quite some time. In reading the Globe & Mail‘s article on this, there was an interesting piece attached, regarding international financial policies, which I found interesting and somewhat relevant.

Incidentally, Finance Minister Jim Flaherty is also the same minister who sent me a letter in response to my inquiries for tax relief, for foreign going Canadian seafarers. He responds “Based on this reasoning, it is unlikely that there would be created a new tax exemption for Canadian seafarers”. Maybe he means until it benefits the Canadian ship owners more, and they ask for it, perhaps then… Something to hope for.

This article has 3 Comments

  1. Algobay received new engines – so the environmental benefit is there. Plan for Algoport was to rebuild her engines, however, seeing as she didn't make it to China, this is no longer true. The planned forebody for Algoport will now be entirely new ship, the Canadian Mariner. I believe Algoma is planning on building entirely new ships for most replacements. There may be several rebuilds included, such as the Algowood, John B. Aird. Expect an announcement soon.

  2. Left out of these annoucements was further news on free trade with Norway. If that comes to pass the under 129 meter limit will be irrelevant and smaller ships, tugs, ferries, offshore suppliers, you name it, could be built duty free in Norway.
    Until the feds get their act together on governement ship procurement (i.e. none of this one time stuff, but a long term strategy that will give yards continuous long term naval, Coast Guard and ferry buiding work) Canada's shipbuilding industry will continue to be a mess.
    The long term replacement of Great Lakes ships will obviously mean more ships that can also trade deep sea. CSL has placed orders and Algoma plans to place orders for new ships for domestic trade from offshore yards. The stop gap rebuildings and purchase of tired out ocean ships may never stop, since freshwater seasonal work is pretty forgiving on old ships. However if you want better utilization of new ships they will need to trade year round.

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