International Trade Committee on Oct. 30th, 2018

[Dave Heath]

We're pretty much at a critical point. We really haven't brought a whole lot of steel in, yet we've paid probably over a quarter of a million dollars in tariffs just in these three months alone.

The problem is that a lot of our customers rely on that steel base. As I said before, they have contracts with the big OEMs. They have to finish producing parts, and they're sort of in the middle. We've been able to manage to pass on....

We've been working closely with government to try to work, again, as I said, within the guidelines. We worked with the duty drawbacks first, as it seemed to be the easiest one. We're working now with the remissions. They're all relying on us. I get calls every day to ask where we are and how are we addressing this. Our customers are probably feeling it the worst.

Again, our company is lucky enough that our reputation is to have inventory. We have a lot of inventory on the floor.

[Dean Allison, Conservative, Niagara West, ON]

It would be once that inventory runs out....

[Dave Heath]

Absolutely, which is starting to happen.

[Dean Allison, Conservative, Niagara West, ON]

As you're trying to mitigate whether you're passing it on, eating the cost or whatever, is there a concern that suppliers—as it relates to OEMs among others in the supply chain—may say, “You know what? Your product's too expensive. We're going to source it in the U.S.”? Is that a very real possibility?

[Dave Heath]

That is exactly what's happening with our Canadian customers. All the OEMs are very nervous about what's going to happen with their costs. They're placing programs in the U.S. with the competition, our Canadian competition.

[Dean Allison, Conservative, Niagara West, ON]

Once you lose that business, that's gone. I mean, it takes years and years to build that business, right?

[Dave Heath]

Absolutely.

[Dean Allison, Conservative, Niagara West, ON]

Hence the reason why this needs to be resolved, like, yesterday.

Luke, thank you very much. Listen, I'll give credit where credit's due. If you guys have seen some ability in terms of aluminum cans now that the government's worked with you, we'll give kudos where kudos are due in terms of that. That's good to hear.

Talk to me about the price. We've heard everywhere for steel and aluminum that, as a result of tariffs and duties on these things, producers have decided to take price. You kind of alluded to that in there, because now we see the price of aluminum going up. If one of your sole sources for aluminum cans is the U.S., what you're saying is that they've taken price even though they're not now doing the countervailing duties on you. It's being raised.

[Luke Harford]

To kind of describe it a little bit, you have the cost of aluminum that a brewer would pay the can manufacturer, and then inside that, one of the lines is this Midwest premium they have to pay. That is supposed to be for the cost of storage and transportation.

As I mentioned in my remarks, it's gone up by 100%. It's now 20¢ a pound. The interesting thing is that there is a lot of aluminum, recycled metal in the United States that's tariff paid that is being recycled, yet that premium, which does capture the tariff piece, hasn't come down. I think there has been some discussion about having two different prices, but we're not seeing that as of yet.

[Dean Allison, Conservative, Niagara West, ON]

Okay, I have just one final question. You did talk about tax hits that the industry has taken. Talk to me about an escalator in excise and how that affects the beer industry and why it's a bad idea.

[Luke Harford]

The starting point for brewers in this country in terms of tax is egregious. Half the price of beer is already tax. Most of that comes at the provincial level, but yes, the federal government in 2017 has piled on not just one increase but an annual increase that will take place automatically. Our big concern is that there's no mechanism in this legislated escalator that will require the government to review this tax to see the impact it's having on the industry.

[Dean Allison, Conservative, Niagara West, ON]

What's—

[The Chair, Liberal, Mark Eyking]

Sorry, Mr. Allison.

[Dean Allison, Conservative, Niagara West, ON]

Thanks.

[The Chair, Liberal, Mark Eyking]

I know you have your clock there.

[Dean Allison, Conservative, Niagara West, ON]

I was just waiting for you to cut me off. I have a lot of great questions. I'm just getting started. I have a lot of good questions.

[The Chair, Liberal, Mark Eyking]

I know you're on a roll. You're doing a good job, but we have to move over to the Liberals here.

Mr. Sikand, you have the floor.

[Gagan Sikand, Mississauga—Streetsville, Lib.]

I'm going to start with you, Sean. You were talking about the Japanese footprint. Is that an entry into the U.S. market, or is there reciprocity, with their products going back to Japan as well?

[Sean Dyke]

I would say the majority of it, quite honestly, is product going to the U.S. and Canada. They are supplying companies like Toyota in Woodstock and Cambridge. They're supplying GM. They're supplying Ford. Those products go across the border multiple times, and oftentimes they are getting hit by tariffs more than once.

[Gagan Sikand]

On that point, can you talk about harmonization and the level of impact that has on your town?

[Sean Dyke]

It's a challenging one as far as our community goes.

I don't have a good answer for you, to be honest. I don't think so, on that one.

[Gagan Sikand]

Fair enough, thanks.

I'm going to move over to Luke. I represent a riding that has a lot of aerospace manufacturers, and the type of specialty aluminum they need for what they manufacture can pretty much only be found in the States.

Is the composition of the aluminum cans, beer cans, something that's readily available in the world—that composition of the aluminum?

[Luke Harford]

I'm not an aluminum expert. I do know there's a lot of innovation that goes into that can. It's quite surprising how they can manufacture it so thin and so light but still able to contain a product that's under pressure and still be safe for delivery, bouncing around in trucks. There is a lot of innovation in the can, but as to its makeup, I'm not an expert in that area.

[Gagan Sikand]

You should see some of the cans that survive my camping trips.

[Luke Harford]

Right.