Posted on August 23rd, 2018 in Manufacturing & Distribution, Construction, Cross-Border Tax

Advice for Dealing with Tariffs on Steel and Aluminum Products

Advice for Dealing with Tariffs on Steel and Aluminum Products

Tariffs between the USA and Canada on steel and aluminum products are creating uncertainty in the construction industry.  There are concerns around shortages of material that have a direct impact on estimating pricing and timelines on projects.  With little resolution in sight, the Canadian Construction Association (CCA), has offered some advice on how to mitigate risks caused by these tariffs.

For signed contracts:

  • Review your contract to determine if there are provisions that provide for price adjustment due to changes in taxes and customs duties, e.g. Conditions 10.1 of CCDC 2 ‘Stipulated Price Contract’ and CCA 1 ‘Stipulated Price Subcontract’ (“Duty Provisions”)
  • If your contract does not include such duty provisions, you may be liable for covering the increased cost.  CCA urges all owners to be fair to contractors caught in this situation and give sympathetic consideration to requests for price adjustment where the contractor has been hit with cost increases that could not be reasonably foreseen.

For new contracts:

  • If the contract of a potential project does not have duty provisions, particularly if you are aware of proposed new or increased taxes and customs duties that are to be implemented, you should formally raise this to the owner to include such duty provisions or address that in the bid documents

Other considerations:

  • You may want to use the general argument that you cannot anticipate new or increased taxes and customs duties and therefore the increase in cost is recoverable.  This may be difficult without duty provisions as the general rule is that the contractor bears the risk of loss in a situation like this.
  • If a change, delay, or suspension in the work of an ongoing project causes delays in the purchase of materials that have escalated in price, then, in some circumstances, the contractor may be entitled to recover the increased cost.

If you have further questions related to the steel and aluminum tariffs, one of our DJB advisors would be happy to help.

Advice points provided by the Canadian Construction Association.