Imported cargo ships, tankers and large ferries will no longer be subject to a 25 per cent tariff, Finance Minister Jim Flaherty announced Friday.

The measure is aimed at making it cheaper for Canadian shipowners to replace aging fleets with more modern and more efficient vessels.

Waiving the tariff will save the industry $25 million a year for the next 10 years, the government estimates.

"These were tariffs that don't serve any purpose because … the ships to which they apply are not capable of being made competitively in Canada," Flaherty told reporters in St. Catharines, Ont.

"There's a big business … in refitting ships and a lot of that happens here and that is not affected by this tariff," he said. "This is one of those tariffs that had outlived its usefulness." 

The tariff removal will be retroactive to the start of the year. The measure applies to all general cargo vessels, tankers, and ferries longer than 129 metres.

BC Ferries to benefit

The government said it acted to remove the tariff following pleas from "numerous stakeholders" who said the tariff duties assessed on imported vessels were passed on to Canadian producers and users through increased shipping rates.

Ottawa also said it would also refund the $15.3 million in customs duties Algoma Central Corp. paid on two tankers imported from Turkey in 2008 and 2009.

It will also refund $119.4 million in customs duties paid on four large-sized ferries imported from Germany by BC Ferries between 2007 and 2009.

The duty remission to BC Ferries will allow it to implement a two per cent rate reduction for its users later this month, the Finance Department said.