This business owner brought most of her manufacturing home from China and feels punished for it

A Canadian company that manufactures children's toy couches finds itself fac‐ ing a stiff bill for import tariffs after bringing pro‐ duction home to this coun‐ try.

While Barumba Play is no longer importing a majority of its product, a single com‐ ponent of the couches has been reclassified by the Canada Border Services Agency and is no longer tar‐ iff-free.

The company's flagship product is a couch for chil‐ dren made of pieces that can be easily taken apart and re‐ assembled for play. Sara Feldstein founded the com‐ pany in Markham, Ont., in 2021 and initially produced the couches entirely in China.

As the couches were clas‐ sified as a children's toy, Feld‐ stein told CBC News they were not subject to tariffs and were brought into Cana‐ da without import fees. Tarif‐ fs can be used by the Canadi‐ an government as a form of taxation on imports to pro‐ tect Canadian economic de‐ velopment.

Trouble started for her in 2023, when Feldstein opted to move production of the couches to Canada from China.

"I on-shored my manufac‐ turing to Canada from China and have been penalized for it," she said.

Feldstein was able to manufacture every part of the couch in Canada except for cloth slipcovers, which she had to keep producing in

China.

She received a letter from the Canada Border Services Agency in the summer of 2023 indicating it felt classify‐ ing the slipcovers as part of a toy was incorrect. This con‐ tradicted what Feldstein was told to expect from business advisors and industry experts that she turned to for advice before opting to transfer manufacturing most of her product to Canada.

Instead, Feldstein says the slipcovers have been lumped in with textiles such as car‐ pets, bed linens and table linens - and now she's ex‐ pected to pay 18 per cent duty on imports.

The CBSA declined an in‐ terview request from CBC News. After this article was published, it issued a state‐ ment that the Customs Act doesn't allow it to speak about individual cases, but explained that goods are as‐ sessed for tariffs based on how they are "presented at the border," and that changes to what is being im‐ ported can result in a change to tariff classifications.

The CBSA also said if someone importing goods disagrees with a tariff deci‐ sion, they can appeal, but on‐ ly after they've paid all amounts owed, plus interest.

According to Feldstein, her business now owes at least $47,000 in retroactive tariffs, and she expects costs could escalate up to $70,000 while she waits for the ap‐ peals process to play out.

WATCH | How a classifica‐ tion change led to surprise tariffs for this Canadian com‐ pany:

Businesses must pay, even during appeals

It's a cost she's not sure her business can bear, be‐ cause she must pay the tarif‐ fs now even while she tries to appeal the decision.

That appeal process could take close to a year, ac‐ cording to the CBSA's cur‐ rent processing times.

"It would make me want to tell others, don't bother bringing your business back to Canada. Do it overseas. It's safer that way," she said.

It's not unusual for busi‐ nesses to be caught in the complicated web of tariffs, according to lawyer David Rotfleisch of TaxPage.com, a law firm specializing in tax and business.

He confirmed that busi‐ nesses such as Feldstein's need to pay assessed tariffs even while mounting a legal challenge because collection is not paused or halted when an appeal is launched.

"Tariff classifications are complex and make income tax look relatively simple," Rotfleisch said.

"Wrong assessments af‐ fect a lot of businesses be‐ cause they can't pay it, and by the time the appeal pro‐ cess runs its course, it's going to take time and [businesses] can't manage it. So they have to literally shut their doors."

Suspending payments may not be solution

But eliminating the re‐ quirement to pay, even be‐ fore appeals are exhausted, may not be the right solution, according to Jenifer Bartman, a business advisor based in Winnipeg.

"You could have com‐ panies not paying attention to the rules, saying, 'We'll go ahead and do this, and if it goes wrong, we're not going to be out of pocket any time soon,'" she said.

Bartman pointed out that importing products to Cana‐ da, whether partial or fully manufactured, requires a lot of preparation and advice.

"It's really important for business leaders, especially if they're venturing into a new aspect of their supply chain … to understand what the rules are in advance because they can save themselves a lot of time and trouble down the line."

Business owner says she did her research

For her part, business owner Feldstein said she did consult with experts prior to repatriating manufacturing of her couches to Canada. The decision by CBSA to re‐ classify surprised her.

Feldstein maintains the slipcovers currently being classified as textiles by CBSA should still be considered just a part of the couches she sells as a children's toy, and not a separate linen that could be used on its own.

If the slipcovers are a part of the toy couch, they would not have the tens of thou‐ sands of dollars in tariffs as‐ sessed.

According to the CBSA's website, to be considered a "part," the item must meet criteria including that it has no alternative function, be marketed and shipped along with other parts of the prod‐ uct, needed for "safe and prudent use" of the item, and be "committed" to use with the unit.

Barumba Play's founder isn't sure what comes next, but until the problem is re‐ solved she's holding off on growing her business.

"I'm very hesitant to spend money on other items right now when this is in lim‐ bo," said Feldstein.