Canada urged to ease duties for online purchases

WASHINGTON — Canada is being pressed for freer trade in online goods by a number of American states, with eight state governors writing a letter seeking an expansion of Canada’s low limits for online, duty-free purchases.

Their letter to Foreign Affairs Minister Chrystia Freeland and U.S. trade czar Robert Lighthizer said the NAFTA talks are an opportunity to review the $20 limit for what Canadians can buy online without paying duties on foreign goods.

Canada has one of the strictest duty-free limits in the world for online goods — a mere fraction of the $800 Americans can spend on sites like Amazon and eBay without paying an import fee.

“Canada’s threshold remains among the lowest in the industrialized world,” says the Nov. 21 letter, signed by the governors of Connecticut, Massachusetts, Maine, Maryland, Montana, Oregon, Utah and Virginia.

“Canada’s low threshold for the collection of duty and tax creates unnecessary price increases for Canadian consumers and hinders North American manufacturers’ supply chains on both sides of our shared border ...

“A modernization of the Canadian de minimis level would be beneficial to both countries.”

Changing Canada’s limit is a high priority for the U.S. side in NAFTA talks.

An American source familiar with the talks said that’s one reason the U.S. mentions the issue in its published list of negotiating objectives, which sets a specific $800 target.

The source said it’s no accident that other U.S. demands are vaguely worded and devoid of hard numbers to leave negotiating room; the demand to change the limit known as “de minimis,” on the other hand, is clear and unequivocal.

The change is being fought by retailers within Canada.

They said it would not only send customers abroad, damaging domestic vendors while they’re making investments in new online platforms. But they say it’s also patently unfair — foreign competitors would get tax advantages not enjoyed by vendors in Canada.

The Retail Council of Canada said a higher limit could create an uneven playing field to the detriment of domestic vendors, who are stuck charging federal and provincial sales taxes which average 12.3 per cent. The U.S. has no federal sales tax.

“There is no comparison between Canada and the U.S.,” the council says on its website.

“The United States does not have a federal sales tax, so there is no tax advantage created for inbound shipments. The U.S. also does not collect state and local sales taxes at the border or for interstate shipments.”