Skip to main content

Even with the new NAFTA, boat exports to Canada are still hit with a 10 percent tariff

Canadian dealers are refusing to order boats from U.S. builders until the situation resolves.

Canadian dealers are refusing to order boats from U.S. builders until the situation resolves.

The U.S. and Canadian governments agreed to a trade deal just hours before a U.S.-imposed deadline. The deal, which replaces the North American Free Trade Agreement, will be called the United States-Mexico-Canada Agreement.

It’s unclear whether the USMCA will eliminate the Trump Administration’s Section 232 tariffs on imported Canadian steel and aluminum. Those tariffs prompted Canada to impose retaliatory tariffs of 10 percent on U.S.-built boats, which have hurt U.S. builders that export to Canada and Canadian dealers that represent them.

“It’s clearly a positive thing to have the new agreement, but we don’t know yet if the final deal removes the retaliatory tariffs,” said Thom Dammrich, National Marine Manufacturers Association president, shortly after the announcement. “The administration’s earlier deal with Mexico did not remove the 232 tariffs, so we need to wait for more details. We’re hoping this is the beginning of the removal of the tariffs with our biggest trading partner.”

Several weeks later, the industry was still waiting for clarification. “We haven’t heard a word,” says Rob Parmentier, CEO of Larson-Marquis Group, which is based in Pulaski, Wis. “Canada represents 30 percent of our annual production, and it’s a mess.”

The world’s largest Four Winns dealer says his company is at a “standstill.” 

The world’s largest Four Winns dealer says his company is at a “standstill.” 

Parmentier says many Canadian dealers have asked his company to put their 2019 orders on hold to see whether the tariffs will be lifted. With increasing demand from U.S. dealers, boatbuilders such as Larson cannot afford to tie up production slots that may or may not eventually become solid orders. “What we’re experiencing is really painful,” Parmentier says. “A lot of the dealers up there are saying hold my orders until the boat show season in January. Another had boats in the system before the tariffs came into effect, and we had to help pay the tariffs when the boats shipped across the border.”

“This is the toughest thing I’ve dealt with in my business in 30 years,” adds Dave Mayhew, owner of The Boat Warehouse, which has several locations in Ontario. It is the world’s largest Four Winns and Lowe dealer, and the second-largest Glastron dealer. “We’ve gone through bankruptcies, changes of ownership and tremendous swings in the exchange rate, but we’ve never faced anything like these tariffs. We’re at a standstill.”

The tariffs are not only causing a “tremendous amount of uncertainty” for Canadian dealers, Mayhew says, but they are also a significant drain on cash flow. He says the uncertainty is one of the most painful parts of the tariff scenario. “If we order a bunch of boats and the tariffs are lifted in the next few weeks or a month,” he says, “we have no guarantee that we’ll get repaid that 10 percent. If one of our competitors waits and orders boats, he has a 10 percent competitive advantage, and we’ll likely have to sell the boats without a profit.”

The other issue hurting the dealers is cash flow. “There is no way to finance these tariffs, so we end up paying from our cash reserves,” Mayhew says. “Ten to 12 percent is a significant amount of money. It would end up being $4,000 on a 19-foot sterndrive boat. You can’t add that to the cost of the boat.”

Since The Boat Warehouse is one of Canada’s largest stocking dealers, Mayhew says if he orders the typical number of boats, it could suck $2 million to $3 million for tariffs from the company’s cash reserves. “I consider myself pretty aggressive when it comes to ordering, but I can’t put the company’s future at risk by putting us too far out there,” he says.

This article originally appeared in the November 2018 issue.

Related

Norm

Email Is Your Ticket to Holiday Sales

Developing an effective email campaign can bolster sales and help fill winter coffers at your dealership.

1_NMRA

NMRA Presents Annual Awards

Edson CEO Will Keene and ComMar Sales president Tim Conroy were recognized for their contributions to the marine industry.

1_ PULSE.PING.2

DEALERS: Are Interest Rates Impacting Demand?

This month’s Pulse Report survey asks dealers whether interest rate increases are causing a downturn in boat sales. Take the survey here.

1_EPROPULSION

EPropulsion, Mack Boring Partner with Crest

Pontoon builder Crest will use an ePropulsion Navy 3.0 Evo electric outboard motor and an E175 battery for its 2023 Current model.

1_BENETEAU

Beneteau Reports Significant H122 Growth

The company reported that its revenue grew 8.6 percent and income increased by 30 percent during the first half of 2022.

1_WINTRON copy

Wintron Announces Virtual Show

The electronics distributor will hold its distributor show Nov. 2-9, allowing dealers to interact with sales representatives via phone, email or online chat.

AdobeStock_131758074

Rays of Light

A key indicator of U.S. consumer confidence rose for the first time in four months in August as the economy added 315,000 jobs.

1_YANMAR

Yanmar Announces Sales, Marketing Hires

The company has hired Bas Eerden as global sales manager and Michele Durkin as global marketing manager.