H ave you ever felt cheated by purchasing online from Canada what appeared to be a “great bargain” on a website like amazon.com, ebay.com, overstock. com or another American retailer? The $50 (USD) sweet deal was a $110 reality check when your ordered item finally arrived. Don’t feel bad, you are not the only one, and as a Canadian consumer the entire deck is stacked against you and surprise, it is primarily the Canadian gov- ernment doing it. Did you know that if the item you order from a US website is shipped and is over $20 (CDN) Customs can stop it, open it, put a hold on it, add federal and provincial sales taxes, and depending on the origin of the goods impose duty charges? Well it is true and Ottawa’s protectionist policies have influenced US merchants to stop shipping to Canada. US retailers are reporting that the red tape and paper-work has made sending parcels to the customers north of the border more trouble than it is worth. A recent economic study found this exclusionary policy is actually costing Canadian taxpayers real money, out of both your wallet and paycheck. Ottawa spends an average of $166 million implementing these border controls and collects $39 million in taxes and duties. So as taxpayers we cover the other $127 million. In this recent economic study commissioned by eBay, who by the way has been lobbying for years to have that $20 minimum limit raised to a more sensible number. The limit that is known as “de minimus” in the commerce world was reviewed. The study uncovered that Canada has the lowest “de minimus” in the developed world, and we think that Trump wants to protest the US borders. Look at our consumers to the south, as the US retail market consumer enjoys maximum product selection, lowers taxes, free shipping and an $800 de minimus. This limit was recently raised by hundreds of dollars in the US while Canada’s hasn’t changed theirs since 1985, so who is pro- testing borders now. Ottawa is under siege by eBay and similar merchandis- ers, shippers, Canadian businesses, and consumers to address the discrepancy. Proponents suggest that the “de minimus” level needs to immediately increase to $200 and keep pace with that of the United States. So far though, the Canadian government isn’t listening, and is not making any changes to open the borders up to make online shopping any different than it is today. Of course not everyone supports this move to make US online goodsmore accessible. TheCanadian Retail Council and most customs brokers want the level to remain where it is. The Council has gone so far as to distribute a pre- scripted letter to its members urging them to send a copy to their Member of Parliament. Their motivation is nothing more than their own economic safety and security with hungry American merchants looking for new territory and
a greater share of the North America market. The Retail Council cites an apparent unfairness with tax collection for its members as a reason they oppose changes. They say their supporters are forced to administer the tax collection process for Federal and Provincial governments while US merchants are excused, but we ask would that not be the same for US consumers buying goods from Canada, but their government does not think that it is such a big issue in today’s global market place. Karl Littler, spokesperson for the Retail Council, says that raising de minimus “would create an automatic 12.3 percent tax disadvantage for our members.” Littler goes on to say that once the door is opened to American online sellers they would expand their “free shipping” policy to Canada causing US sales totals to grow “exponentially.” Canadian retailers who create approximately 2 million jobs in Canada would be in jeopardy of laying off employ- ees with a change in de minimus according to Littler. Christine McDaniel, as chief economist at Sidley Austin LLP in Washington, says Ottawa must look long term. McDaniel suggests any savings on duties and taxes for buyers would create growth within Canada in the long run. McDaniel argues Canadian retailers might need to sharpen their competition skills forcing businesses to be more productive. McDaniel adds it would also smooth commerce between two important trade partners. Online shopping should be no different than crossing the border in person to shop. Today if Canadians travel to the US their de minimus is $200 for 24 hours and $800 after two days. It can also be argued Canadians living a con- siderable distance from the US border to consider a cross border shopping trip are being unfairly penalized with only having the $20 limit for shipping goods from the US. Plus look at the impact these trips can have on dispos- able income when Canadian make the shopping migra- tion to the US as money spent on accommodations and food could be going to increased purchases on Canadian product at home. The ugly truth is Canada wants to maintain a protectionist border system to discourage cross border buying and it is con- sumers that are being told to pay the price not the industry. Canadian Treasury Board President, Scott Brison recently hinted at change when he said “the e-commerce train has left the station, and not just in Canada, but globally.” However, that may just be political jargon as the very threat of job losses in any sector makes governments panic. The powerful forces that control our markets have made it clear fierce competition, low prices and smaller taxes aren’t welcome. So I guess Trump isn’t the only one in government looking to put up walls or at least not looking to break them down.
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JULY 2016 • SPOTLIGHT ON BUSINESS
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