U.S. governors to Canada: Use NAFTA to relax duties on online purchases

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e5a3a6a85b5ef41f32651d0da596bf29 U.S. governors to Canada: Use NAFTA to relax duties on online purchases

Eight governors have written a letter to Canadian and U.S. senior officials seeking a drastic expansion in the $20 duty-free limit Canada allows for online purchases. United States Trade Representative Robert Lighthizer, left, with Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal, right, speaks during the conclusion of the fourth round of negotiations for a new North American Free Trade Agreement (NAFTA) in Washington, Tuesday, Oct. 17, 2017. THE CANADIAN PRESS/AP-Manuel Balce Ceneta

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 says 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 tells The Canadian Press that’s one reason the U.S. mentions the issue and sets a specific $800 target in its published list of negotiating objectives.

The source says that while 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" — is firm and unequivocal.

In Canada, the debate pits importers versus bricks-and-mortar shops. Traditional retailers warn that domestic stores would be hit hard by a change in policy, as Canadian purchases would flow to retailers based outside the country.

The Retail Council of Canada says it’s unfair to compare the duty-free levels between the countries, since the domestic tax burden is different on U.S. retailers. 

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

"First, 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."

The U.S. also dominates the online retail space, the council notes: only 22 per cent of U.S. customers report having made a purchase from a foreign seller, compared with 67 per cent of Canadians.

The U.S. push for changes is not new — raising Canada’s de minimis level was also a priority of the Obama administration.

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