Boost in duty-free amount opposed by retail industry
Canadian retailer says higher cap on duty-free goods would be ‘a catastrophe’
Donald Trump may have unwittingly resurrected an issue that has been hotly contested for years in Canada’s retail industry when he unveiled his list of objectives for the upcoming NAFTA renegotiations.
The White House is demanding Canada raise the value of goods American stores can send to Canada without having to pay taxes or duties. That threshold currently sits at C$20, but the U.S. wants that limit hiked to about US$800 — a move some retailers north of the border fear would spell disaster for their businesses.
“It would be a catastrophe for retail in this country,” Larry Rosen, CEO of Harry Rosen, said in an interview Tuesday.
“There isn’t going to be a person in the country that isn’t going to take all their business to online U.S. retailers.”
He said such an increase would be a boon for U.S. border cities like Buffalo because Canadian retailers including his own would move parts of their businesses such as warehouses south of the border.
The C$20 limit was set decades ago, and some say it’s time for an increase, particularly in an era when more Canadians are buying products from the U.S. online. And of the litany of proposals on Trump’s 16-page NAFTA wish list, it has a broad consumer appeal that the federal government may be willing to budge on.
However, Karl Littler, a spokesman for the Retail Council of Canada, said such a measure would have consequences for all businesses in the country, regardless of their size.
“It would literally be an incentive from government for Canadians to shop anywhere but Canada,” Littler said.
“Is it reasonable to have two completely different tax and duty regimes — one for those who hire and invest here, which would be more negative than the one for those who are outside shipping in?”
There have been questions about the C$20 threshold. Just this spring, federal auditor general Michael Ferguson issued a report saying there was no net revenue for the government on charging duties on U.S. goods with a value of less than C$200.
Robert Wolfe, a professor emeritus at Queen’s University, said while Ottawa has to consider the interests of the private sector during NAFTA talks, it also has to keep in mind consumers.
“It certainly would be to the advantage of the Canadian consumers if we changed this,” said Wolfe, who taught at the university’s School of Policy Studies.
He said it may be premature to say whether the government will concede and raise the threshold, adding that it’s possible a compromise will be reached where a cap less than US$800 is phased in over time.