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Revised NAFTA might make U.S. items cheaper for Canadian online shoppers

The Toronto Star with Andrea Stairs 18 July 2017

Larry Rosen doesn’t think anyone would be crazy enough to pay more for Prada shoes or a Hugo Boss sweater in his stores in Canada if they could get them cheaper online in the U.S.

And that worries the CEO of Toronto-based luxury retailer Harry Rosen Inc., since it’s one of the demands on the table from the U.S. for the renegotiation of the North American Free Trade Agreement.

“It would be a very, very serious and hurtful thing for Canadian retailers,” he said in an interview Tuesday.

“American retailers would have an enormous advantage over us,” Rosen noted.

The Canadian government currently allows goods valued up to $20 to enter into the country — whether mailed, delivered by courier or transported — without charging duty or sales taxes.

The U.S. is proposing that the so-called “de minimis” shipment threshold be increased to a “value comparable” to its $800 (U.S.) limit, which will make many of their goods much cheaper for Canadians but, as Rosen said, “basically, you kill your domestic retailers.”

“It would create a tax incentive for Canadians to shop anywhere else but Canada,” said Karl Littler, vice-president of public affairs for the Retail Council of Canada, which has fought for years against raising the limit for fear of how hard it would hit the domestic retail sector.

But online powerhouses including eBay, Amazon and UPS (U.S. companies that operate across North America), are leading the lobby to raise the threshold, arguing it benefits consumers on both sides of the border.

The threshold has been in place for decades and is one of the lowest in the world.

“The current threshold — which was set well before the advent of e-commerce — creates an automatic disadvantage for Canadian small- and medium-sized businesses and it is high time that this regulation be updated to reflect the realities of modern trade,” said Andrea Stairs, managing director at eBay Canada.

Earlier this year, more than 50,000 Canadian eBay users signed a letter to federal Finance Minister Bill Morneau requesting the increase.

Bruce Cran, president of the Consumers’ Association of Canada, is all for raising the threshold, too.

He points out that today, shoppers pay a hefty premium when buying goods online from outside Canada, noting that in addition to sales tax, Canadian consumers face duties of up to 35 per cent.

“We’ve been lobbying for this for years because it allows us access to real-world prices for goods,” Cran said.

A Nanos poll conducted on behalf of the Canadian American Business Council found that 76 per cent of Canadians were in favour of increasing the de minimis limit.

But Rosen said the reason that big players are pushing for the increase is so that they can do business more cheaply by not having to operate distribution centres in Canada.

“If this goes through, I would have to set up a distribution centre in Buffalo to compete,” he added.