Why it’s a Good Time to Buy
Federal budget makes Canada a tariff-free zone for machinery and equipment.
BY SIMON FRIDLYAND
The 2010 Canadian federal budget takes further action to improve conditions for investment in manufacturing, enhance competition, and reduce barriers for businesses. It makes Canada a tariff-free zone for industrial manufacturers by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing. When fully implemented, this will provide $300 million in annual duty savings for Canadian businesses.
“Making Canada a tariff-free zone for manufacturers will keep us ahead of the pack and show the rest of the world that we’re open for business,” said Minister of Finance Jim Flaherty. “It will help keep good manufacturing jobs here in Canada, and create many more.”
This historic step will position Canada as the first among its G20 partners to allow manufacturers to operate without the cost of tariffs on inputs or machinery and equipment. This tariff elimination is expected to result in the creation of up to 12,000 jobs over time.
The existing tax break that allows for an accelerated write off of machinery and equipment is set to expire at the end of 2011. Tariff elimination combined with the high Canadian dollar and an accelerated write-off period make the perfect condition for purchasing new equipment now.
Bringing the best world technology into Canada will greatly enhance Canadian productivity and competitiveness. Productivity is at the heart of economic and trade competitiveness, which in turn has an impact on Canadian economic performance and the standard of living of Canadians. In manufacturing, for example, low productivity raises production costs. Manufacturers with poor productivity must either price themselves above more productive competitors to attempt to recover their high costs, or lower prices to match the competition.
Either way, the outcome is undesirable: high-cost manufacturers quickly lose market share and those selling at a loss are in the fast lane to corporate death. Low productivity can produce a whole cascade of ailments: poor sales, lower corporate tax revenues and job losses.
When purchasing new equipment, one needs to remember that it must meet all regulatory compliance requirements of the home province and Canada.
Usually equipment and processes originating from outside of Canada require compliance to the Occupational Health and Safety Act through Pre-Start Health and Safety Reviews (PSRs) in the following areas:
* Storage, handling and processing of flammable liquids
* Machine guarding
* Potentially explosive processes
* Dust collection systems
* Hoists and cranes
* Racking and stacking systems for storage
* Molten metal and foundries
* Exposure to hazardous substances.
Also necessary are approvals from the Electrical Safety Authority (ESA); Technical Standards and Safety Authority (TSSA) for issues related to pressure vessels and piping, boilers, fuels etc.; Ministry of Environment certificates of Environmental Assessment; and municipal building permits related to construction issues.
Non-compliant equipment problems
Purchasing non-compliant equipment could be extremely costly and it may take a long time to upgrade it to meet Canadian standards. Most important is the fact that it is not always possible to get equipment upgraded since it was originally designed to meet different standards.
By definition, safe equipment means equipment which meets current and applicable standards. For example, equipment originating from Europe is designed to meet European requirements. These requirements are different from Canadian requirements. The same applies to US-sourced equipment; it does not always meet Canadian requirements.
There are many horror stories associated with bringing in non-compliant equipment and trying to meet local requirements here. Obviously, the best method is to ensure that the equipment meets all Canadian regulatory compliance rules before it is shipped. S.A.F.E. Engineering Inc. pioneered a purchasing specification concept by which purchasers can pass on the responsibility for compliance to their suppliers through S.A.F.E. Engineering before the shipment is accepted.
S.A.F.E. Engineering professionals will work with the suppliers and end users during the manufacture of the equipment, advise the supplier about the local compliance requirements, and co-ordinate any potential issues with the end users. This approach will ensure that when equipment arrives at its final destination, it is immediately operational. The compliance certification will come with the equipment and S.A.F.E. Engineering will assume the liability associated with this process.
Equipment suppliers can also be enrolled in a program that will enable them to advise their clients that they can supply equipment complete with PSRs and other regulatory compliance documents. This will enhance their marketing ability. Combining all regulatory compliance issues under one umbrella creates efficiency, simplifies the process and provides cost savings.
There are two dimensions of productivity growth: technological productivity growth and organizational productivity growth. On the technological side, productivity can be raised by buying new productive equipment and upgrading the existing equipment. Organizationally, companies can capitalize on better organizing their processes.
For example, process organization relates to purchasing practices, (such as the purchasing specification approach), efficiency and the effectiveness of dealing with differences in regulatory requirements in places outside of Canada.
Companies that implement technological and organizational productivity growth today will become leaders of tomorrow. The time to buy new equipment is now.
Simon Fridlyand, P.Eng., is president of S.A.F.E. Engineering Inc., a Toronto-based company specializing in industrial health and safety issues and PSR compliance. He can be reached 416-447-9757 or firstname.lastname@example.org. For more information, visit www.safeengineering.ca.