Cross-border shopping: Increases to duty-free limits hit local businesses
Lower prices on some items lure Canadian shoppers into the U.S., and last year’s increase in duty-free limits has made it easier for travellers to bring home goods.
However, what is beneficial for consumers has many Canadian retailers concerned.
Ed Fast, Abbotsford MP and minister of international trade, said the federal government made the decision with the consumer in mind, saying they want to acknowledge that Canadians often travel to the United States and should have a reasonable opportunity to bring home purchases.
In June of last year, the duty-free limits for visits of more than 24 hours increased to $200 from $50, and for any visit longer than 48 hours, the amount increased to $800 from $400. There is no duty-free amount for visits under 24 hours.
For communities close to the border such as Abbotsford, this change has caused concern for business owners.
“I acknowledge that some of our retailers in Abbotsford have been impacted by the higher duty-free limits. In fact, some very close friends of mine have shared with me that they’ve been impacted, not only by that, but impacted by the high Canadian dollar,” said Fast.
Tina Stewart, executive director of the Abbotsford Downtown Business Association, said the impact since the increases has been noticeable, and for some, devastating.
“We’ve actually had a few businesses that have shut down in the last little while and I attribute it directly to cross-border shopping. It was a very dramatic, sudden difference in their revenue.”
Stewart said individual consumers may benefit from going to the U.S. and buying $200 worth of goods, “but a struggling small business who purchases the same $200, because it’s for their business, gets taxed on that. That doesn’t quite seem fair.”
Fast said one of the primary reasons for the change is the fact that the limits haven’t been increased in many years.
“We felt that it was time for us to recognize the reality that the price of goods has increased significantly in that period of time. But it was also to bring our duty-free limits more in line with the United States.”
He said that while business owners are concerned, it should be seen as a win for consumers. He indicated the government’s next step will be finding ways to help businesses compete with their American counterparts.
“What we’re trying to do is find a way of offsetting some of the challenges that our retailers face by levelling out the playing field for them as well.”
Fast said the effect of cross-border shopping on Canadian businesses is a complex one, impacted by a combination of trade, tariffs and the value of the Canadian dollar. The changes to duty-free limits are part of an overall goal to decrease wait times at the border. He explained that following 9-11, crossing the border – for goods and people – has become increasingly difficult.
“The United States has put up more and more restrictions which really thickened our border and made it difficult for trade to take place between our two countries.”
He said that by decreasing the amount of paperwork for travellers, border crossing is made easier.
“The more efficiency we introduce to the system, the more we encourage trade between our two countries.”
Mark Startup, vice-president of MyStore with the Retail Council of Canada (RCC), said the RCC is advocating that the federal government take steps to level the playing field for Canadian businesses by eliminating tariffs.
“Canadian tariffs are not necessary in order to protect industries, and further, when the Senate acknowledges that country pricing exists, we would hope that the federal government would see that Canadian retail companies can be more competitive if we get rid of those tariffs.”
Startup said the RCC has been lobbying all levels of government, hoping for the immediate elimination of tariffs on finished goods entering Canada.
Fast said addressing the effect on Canadian businesses is the responsibility of finance minister Jim Flaherty, saying he, as well as the senate finance committee, have been examining the issue.
“Right now, importers actually still pay some tariffs that they bring in, that they import. And we are looking at whether there is merit in reducing those or eliminating those, or any other strategies we can employ, that will have essentially the same effect.”