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Canadian retailers irked by lax enforcement of duty, taxes on U.S. purchases

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Canadian retailers are complaining that their border guards frequently waive duty and taxes on U.S. goods, giving citizens further incentive to shop in America.

Canadian news media reported Monday that a Canada Border Services Agency document reveals that the agency waives taxes and duty when the value is below an established threshold. The specific amount was blacked out from the briefing note sent to the prime minister and released to news outlets this month under an access-to-information law. However, it is believed to be higher than the long-established threshold of $20, according to an official representing Canadian retailers.

The document, dated June 25, 2012, states: “Collections ... may also be waived in cases where the volume in collections would result in unacceptable border processing delays, when interdiction activities are underway, or for reasons determined by local management.”

Canadian border guards take in roughly $150 million annually in duty and taxes, according to CBC news.

Revelations from the document have irked Canadian retailers, who complain the border agency is too lenient on assessing taxes and say they are losing business from shoppers going to the U.S.

Karl M. Littler, vice president for the Retail Council of Canada, said that retailers have found revelations in the released document to be disturbing. The council has no problem with border guards waiving small amounts below $20, he said, but it is concerned that more costly merchandise is getting a free pass.

“The issue for us is that we are duty-bound to collect duty and sales taxes, and we’re placed on an even playing field with U.S. retailers,” Mr. Littler said. “We understand that border guards have a lot of priorities, including passports and immigration, and that this is one aspect. But we’re concerned that it’s entirely discretionary for the Canadian officer on the Canadian side of the border to waive taxes. We would expect that they would be more diligent in collecting taxes when they’re owed.”

Canadians already take advantage of a customs rule introduced in June 2012 that expanded the amount of merchandise they’re able to bring back duty free. In 2011, they could bring back only $50 per person in merchandise after a 24-hour visit and $200 after 48 hours. Limits are now $200 after 24 hours and $800 after 48.

Canadian retailers stationed close to the U.S. border are particularly concerned about revelations in the document, because they lose much of their traffic to the U.S. side, Mr. Littler said.

“If they’re close to the U.S. border, it’s obviously a great frustration because you can have people cross over and get groceries or gas,” he said. “That’s obviously very tough to watch someone sailing by over the bridge.”

But news that Canadians are often given a free pass on duty and taxes by border agents after shopping in the north country came as no surprise to Gary S. DeYoung, executive director of the 1000 Islands International Tourism Council. Mr. DeYoung, whose office is at the welcome center off Interstate 81 near the Thousand Islands bridge, said Canadians often report taxes are waived by border agents on U.S. merchandise. They say it isn’t always practical for border agents to assess taxes for small U.S. purchases, because doing so would clog traffic, he said.

“We have conversations with Canadians almost every day, and from time to time they will say that although they always declare everything, sometimes (border guards) don’t think it’s worth taxing,” Mr. DeYoung said. “Canadians know they may be liable for taxes, but their experience is that oftentimes guards don’t bother.”

Canadians who shop in Jefferson County pay 7.75 percent sales tax on purchases. At the border, a 13 percent combined federal and provincial sales tax is supposed to be collected. This does not include duty, which may also apply based on the type of merchandise and where is it produced.

The Canadian policy for sometimes allowing taxes on small purchases to be waived allows border agents to use discretion on what is the best use of their time, Mr. DeYoung said.

“A lot of this is about getting federal employees out of focusing on retail sales and to focus on what they need to do,” he said. “And that’s making sure trade at the border flows well and securely.”

Mr. DeYoung said he doesn’t believe Canadians would be deterred from making U.S. shopping trips if the customs policy is stiffened.

“My sense, after talking to Canadian shoppers, is they’re prepared to pay that duty and understand it’s something that may be collected,” he said. “They’re also happy if they’re waived through and don’t have to go through that process. If the policy changes, they would continue to shop. They’re savvy consumers.”

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