Duty-free shopping limits on the line in NAFTA negotiations

Amid the Trump administration’s list of NAFTA demands, at least one potential concession could feel like a win to Canadian consumers: a lift in the duty-free limits for online shoppers.

American businesses and online retailers have fought hard to get Canada and Mexico to raise their “de minimis thresholds” — the value of postal and courier shipments that can be imported without duties or taxes.

Fact sheets released by the United States Monday suggest Mexico agreed to do just that: doubling its duty-free threshold on courier, though not postal, shipments. The U.S. wants to see some movement from Canada too — requesting a new threshold that would match the American level, currently set at US$800.

That would be significant for Canada — where the duty-free threshold of $20 hasn’t budged in more than three decades and is now among the lowest in the industrialized world, according to Michael Smith of RBC Capital Markets. It would also be too much for Canadian bricks-andmortar retailers, who could be flooded with competition from their online counterparts.

“But if they raised it to $200 or even $300, I think it could work,” Smith said. “It would be a give to Canadian consumers and it would play to our Prime Minister’s stated goal of modernizing NAFTA, because it’s a rule that was put in place before the advent of the internet.”

And it would also level the playing field among shoppers. In a separate report on the issue, Scotiabank noted that Canadians able to take a trip across the border — and stay at least 24 hours — can qualify for a $200 duty- and tax-free limit. Stay for 48 hours and that limit jumps to $800.

“Canadians who live far from the U.S. border would be the most immediate beneficiaries of an increase,” the report states.

But the proposition has come up against fierce opposition from Canada’s bricks and mortar retailers who argue it would put them at significant disadvantage and result in lost jobs and government revenue.

“The only country that would benefit from this — the only country — is the U.S.,” said Diane Brisebois, president and chief executive of the Retail Council of Canada.