Swiveling between home and office: A case for the common swivel chairNovember 7th, 2014
JEAN-MARC CLÉMENT | Montreal
Swivel chairs have been around for centuries—it has even been said that Thomas Jefferson sat on one when he wrote the Declaration of Independence. It may therefore come as a surprise that the issue of which tariff applies to swivel chairs imported into Canada has only been settled recently. For more than two years IKEA tried to convince the Canada Border Services Agency (CBSA) that its swiveling office chairs should not be considered 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 semantics? Because, while swivel chairs meant to be used in a business environment can be imported into Canada duty-free, an 8% tariff applies if they are for use in a home office. Does that make sense? We’ll answer that in our conclusion. For now, you can guess which tariff IKEA was told applied to its swivel chairs.
For many importers the simple response might have been to hide the 8% tariff in the retail price and charge Canadian consumers more, but hiking retail prices was not the answer for this retailer. IKEA decided to fight back, and it spent two years doing so.
Domesticating the office chair: intention is what counts
The battle ended up in court in Ottawa last June. The Canadian International Trade Tribunal heard from an IKEA witness who repeated what IKEA had been saying all along: swivel chairs are by nature anything but “domestic” furniture. In fact, they are just the opposite. Height-adjustable swivel chairs are ubiquitous objects found in most workplaces. Although some people may use one in their home office, there is nothing inherently domestic about this kind of chair.
The Tribunal agreed. It accepted the notion that an office chair like the swivel chair in question was not furniture of a kind normally intended for home use. Determining whether or not a swivel chair should be treated as domestic furniture is a question of intention, nothing more, and who best to say how furniture was intended to be used than the designer? This one actually took the stand. Normally intention is something that can easily be confirmed by asking, but simply stating that intention was not enough in this case, it had to be justified in a number of ways, by looking at how the chair was built, advertised and priced, examining competing products in the marketplace, etc. After examining the evidence, the Tribunal readily agreed that this swivel chair, which is commonly found in workplaces everywhere, was not primarily meant for domestic purposes.
So an 8% tariff will not be applied to IKEA’s swivel chair after all, but can other furniture companies apply this precedent to their own imports? What if the furniture designer’s intention is unknown? Furniture wholesalers who are unaware of that intention or simply indifferent to it might be at a disadvantage and could still be hit with an 8% tariff. Only time will tell, but we would expect similar disputes to find their way to the Tribunal in 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 business furniture is exempt. However, it is anyone’s guess what furniture should be considered primarily domestic versus commercial. Before going into a debate about intention, it’s fair to ask what furniture would normally be found in homes as opposed to commercial establishments. In today’s world, home interior designs are looking more and more like commercial spaces and vice versa. The line between domestic and commercial furniture is becoming blurred. Does it make sense for Canada to keep imposing that kind of distinction for most furniture? It certainly appears questionable to impose it on items primarily intended for public workplaces, such as swivel chairs.
Tariffs serve two main purposes: to provide some level of protection to a local industry against imports and provide governments with revenue. Regarding the latter purpose, tariffs contribute less than 2% to Canada’s consolidated federal revenue annually and we wonder how much energy should be spent on furniture tariffs, which only account for a fraction of that small percentage. As for protecting the local furniture industry, we question whether distinguishing between domestic and commercial use is the right approach to take, or continue to take, from a Canadian tariff policy perspective.