Clearit.ca's Blog on Customs Brokerage and News Updates
It has been a little over a week since U.S. President Donald Trump announced a new free trade agreement with Mexico and Canada. USMCA dominated the news cycle with experts dissecting the deal, and there’s one point that stands out for Canadians. It directly impacts online shoppers in the north — in a good way!
Canadians have always had the benefit of shopping online from foreign countries, but the Canadian duty-free threshold has also always been considered one of the lowest in the world. The limit hasn’t changed since 1985! In comparison, American online shoppers have the luxury of an $800 duty free limit.
The new agreement will raise Canada’s duty free limit from $20 to $150, meaning Canadian consumers shopping online from the U.S. won’t have to worry about paying duty fees for anything $150 or less. The negotiations also raised the sales tax from $20 to $40.
Why is it significant?
USMCA’s duty-free increase for Canadians is significant on multiple fronts, because it reaches into different areas of the Canadian economy.
On the one hand, a new duty-free limit gives Canadian shoppers more incentive to purchase goods from U.S. stores and import them into Canada at preferred rates.
A new duty-free limit also means more income for the Canadian government. Last year, Canada generated $5.5 billion in duty fees compared to Canadian retailers, who made hundreds of billions of dollars.
But while it’s positive for shoppers and the economy, it has left Canadian retailers feeling a bit worried.
Many retailers and businesses alike that are represented by the Retail Council of Canada feel as though the new agreement will cut into their revenue stream. Retailers will have to pay duties and taxes on anything they purchase outside of the country. Meanwhile, the America online retailers benefiting from a new market of Canadians will experience little to no kickback.
The deal will likely be signed in its current state vis-a-vis duty-free rates, so the companies represented by the Retail Council will need to adjust to the new e-commerce world. It isn’t the end of the world for Canadian business, especially as the duty-free rate is still nowhere near the American $800.
Contact a customs broker
The good thing for worried Canadian retailers is that the agreement doesn’t come into effect until 2019. The announcement is exactly that: an announcement. Canadians won’t be able to take advantage of the new deal this holiday season. The Canadian government will need to introduce the agreement into legislation as well, which can take a few months.
This gives business owners within the retail industry an opportunity to prepare for the new duty-free limit.
The best way to prepare for the agreement is to contact a customs broker. Canadian brokers will help retailers and importers become more familiar with current Canadian trade laws, as well as the new laws that will come into effect in the new year. Brokers are also particularly keen on saving and generating the most revenue for their clients.
Get in contact with a broker today, and learn more about the impending legislation on Canadian duties. Visit Clearit.ca for more information!