Cross-border policy that lets shoppers avoid duties and taxes frustrates Canadian retailers

Border crossing. Canadian Press photo
We've got a long weekend coming up; you might want get the kids in the minivan, hop across the border and hit the outlet stores in the United States. And some good news: There's a chance that you won't have to pay any duties or taxes regardless of how much you buy.

A little known Revenue Canada policy giving border guards the authority to let travellers through without charging them duty— during peak cross-border shopping periods — has recently come to light.

[ Related: U.S. budget cuts to affect Windsor, experts warn ]

According to Postmedia News, the policy has been in place since 1999.

Fees on larger purchases can be waived if it’s believed that pulling the traveller over to collect would cause “unacceptable” border delays or if “interdiction activities are in progress.”

While the department argues the law does not allow for any discretion and that duty and taxes must be “collected at all times,” the CBSA counters that a “zero-tolerance approach” would drive up border wait times and adversely impact the “flow of commerce supporting the manufacturing sector.”

While this is good news for cross-border travellers, it's bad news for Canadian retailers who say the no-tax policy gives U.S. outlets an extra competitive advantage.

"Our members have contacted us because they are concerned about unfair competition," Mike Klassen, Director of Provincial Affairs for British Columbia of the Canadian Federation of Independent Business (CFIB) told Yahoo! Canada News.

Klassen adds that his members just want an even playing field with their competitors in the United States.

"If you were to go to your local grocery store or butcher shop and there was a huge line-up...the person at the till couldn't just arbitrarily decide that they were not going to charge taxes," he said.

For what it's worth, in an email exchange with Yahoo!, a spokesperson for the Canadian Border Services Agency (CBSA) said that they are "aware and sensitive to the concerns raised by Canadian small businesses."

Klassen says they'll continue to monitor the situation before filing a formal complaint or lobbying the federal government.

You can't blame Canada's retail industry for being a little sensitive these days; they've had a rough year. In addition to a high Canadian dollar, they've had to deal with an increase in the value of goods that may be imported duty- and tax-free by Canadian residents returning from abroad.

In the last quarter of 2012 — the lucrative Christmas shopping season — the number of Canadians crossing the border was up 14 per cent year-over-year.

[ Related: Cross-border shopping depressed Canadian retail sales in December ]

According to an analysis by Fusion Retail Analytics, a 14 per cent rise in cross-border trips equates to a 0.7 per cent reduction in retail spending in Canada.

(Photo courtesy of the Canadian Press)

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