Advice for members on how to mitigate risk caused by tariffs

By |September 6th, 2018|Advocacy, CCDC|

On July 1, the Government of Canada imposed a 25 per cent tariff on steel and 10 per cent tariff on aluminum imported from the United States. The tariffs are in response to similar tariffs imposed on Canadian steel and aluminum imports into the U.S.

At July’s Division Meeting, members asked for clarification on the following:

  • whether CCDC standard contracts provide relief for escalating prices as a result of the tariffs imposed; and
  • the qualifying language that members can include with their bids to communicate uncertainty of pricing.

We’ve since received the following advice from the Canadian Construction Association:

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 and encourage 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.

Both VRCA and CCA are continuing to monitor this file.