Canada: Swiveling Between Home And The Office: A Case For The Common Swivel Chair

Last Updated: March 10 2015
Article by Jean-Marc Clement

Swivel chairs have been around for centuries. Some even say Thomas Jefferson sat on one while preparing the Declaration of Independence. And so this may come as a surprise but confirming which tariff applies to them when imported into Canada has only been settled just recently. For more than two years IKEA tried to convince the Canada Border Services Agency that their swiveling work chairs should not be viewed as domestic furniture. In customs tariff lingo, "domestic" means "not for commercial use". Why would anyone insist for so long on being right over what seems to be a trivial question of semantic? Well it's worth noting that while swivel chairs meant to be used in a business environment are entitled to duty free import into Canada, an 8% tariff would apply if they are meant to be used in a home office. Make sense? Let's leave the answer for the conclusion. But for now, guess which tariff IKEA was told applied to its swivel chair?

For many importers the simple answer might have been to conceal the 8% tariff in the retail price and charge more to Canadian consumers, a familiar occurrence in the Canadian retail landscape. Well, hiking retail prices was not going to be the answer for this retailer: IKEA decided to fight back!

Domesticating the work chair: Intention is all that matters

The battle ultimately ended up in court in Ottawa last June (IKEA Supply AG v. President of the Canada Border Services Agency, CITT AP-2013-053). The Canadian International Trade Tribunal heard from an IKEA witness who reiterated the point that had been made all along: swivel chairs are anything but "domestic" furniture by their very own nature. In fact they are just the opposite. Height-adjustable swivel chairs are ubiquitous objects found in most workplaces. Granted some people might use one in their home office, but there is nothing inherently domestic about this kind of chair.

The Tribunal agreed. It accepted the notion that a work chair like the swivel chair in question was not furniture of a kind normally intended for home use. As it turns out determining whether or not a swivel chair should be treated as domestic furniture happens to be a question of intention, nothing more. And who best to reveal how furniture was intended to be used than the furniture designer? This one actually took the stand. Now normally intention is something that can easily be confirmed: simply by asking. But simply stating that intention was not going to be enough in this case, it would have to be justified a number of ways: by looking at how the chair was constructed, how it was advertised and priced, examining competing products in the market place, etc. Upon looking at the evidence the Tribunal agreed without hesitation that this swivel chair, one that is commonly found in workplaces everywhere, was not meant to serve domestic purposes primarily.

And so there will not be an 8% tariff applied to IKEA's swivel chair after all. But can other furniture companies count on this favourable precedent for their own imports? What if the precise intention of the furniture designer happens to be unknown? Furniture wholesalers who ignore that intention or who are simply indifferent to it might be at a disadvantage and still be caught with an 8% tariff. Only time will tell but we suspect other similar disputes will find their way to the Tribunal again in the future.

Should tariffs discriminate against home furniture buyers?

In the United States, home furniture buyers are not discriminated against; Canada is unique in that it subjects home furniture to import tariffs while commercial furniture is exempt. But it's up to anyone's guess what furniture should be considered primarily as domestic versus commercial. Before delving into a debate of intention it's fair to ask what furniture would normally be found in homes as opposed to commercial establishments. In today's world it's not infrequent to see home interior designs looking more and more like commercial spaces and vice versa. The line between domestic and commercial furniture is increasingly becoming blurred. Does it make sense for Canada to keep imposing that kind of distinction in respect of most furniture? It certainly appears questionable to impose it on articles primarily intended for public workplaces, such as swivel chairs.

Tariffs serve two main purposes: afford some level of protection to a local domestic industry against imports and provide revenue to governments. From the latter point of view, tariffs contribute less than 2% in total to the Canadian consolidated federal revenue annually and so one might wonder how much enthusiasm and persistence should be directed at furniture tariffs, who only account for a fraction of that small percentage. As for affording protection to the local furniture industry, we should question whether making a distinction between domestic use and commercial use is the right approach we should have, or continue to have, from a Canadian tariff policy perspective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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