Aug. 23, 2012, 12:01 a.m. EDT

Canadians make run for the border

Commentary: New duty-free limits increase cross-border shopping

By Bill Mann, MarketWatch

PORT TOWNSEND, Wash.(MarketWatch) — For an increasing number of Canadians, back-to-school shopping means cross-border shopping.

A stronger loonie plus higher duty-free exemptions caused Canadians to flock to the States — mostly to big retail outlets — in June, new numbers released by Statistics Canada show.

The Statistics Canada report released Tuesday says that overnight trips to the U.S. rose 7.5% in June compared with May, to 1.9 million. That’s the highest level since 1972, when the agency began keeping records of cross-border jaunts.

The new exemptions, which let those on an overnight trip to the U.S. declare $200 worth of purchased goods — up from $50 — are now similar to U.S. customs limits.

This news comes amid a mini-furor last week when a Facebook page in the border town of Bellingham, Wash.,asked the local Costco, which is jammed with bargain-hunting Canadians, to institute American-only shopping hours. The local business community quickly assailed the page, which later posted apologetic, pro-Canada comments.

Meanwhile, British Columbia’s Minister of Tourism, Pat Bell, chided Canadian shoppers for their runs to the border, telling them to stay home and shop in B.C. Canadian retailers, meanwhile, who’d predicted they’d be hurt by the new relaxed duty rules, couldn’t agree with Bell more.

“I want British Columbians to stay at home and shop at home,” the minister said., “If they (Americans) don’t want Canadians to go across the border and shop there, I’m OK with that. I want them staying in B.C. and shopping here.”

This came after the cross-border controversy made its debut on You Tube: A short video was posted showing a three-tiered stack of milk — about 150 gallons in all — being snapped up by apparent Canadian shoppers in less than a minute.

As we mentioned here last week, a local dairy near Bellingham has set up a pair of border-hugging milk convenience stores, selling milk at U.S. prices — about $2.50 a gallon. Shoppers from Vancouver, about 40 miles north of the border, pay twice that at Canadian supermarkets. Canadian dairy farmers don’t receive government subsidies like their American counterparts.

Similar long lines at the border are being reported in upstate New York, with Canadian shoppers from Toronto — and, near Detroit, in Windsor, Ont., lined up in lengthy queues to get back into Canada with their shopping goodies.

RBC economist Pat Ferley told a Vancouver daily, “There was concern about the higher exemptions, that it could prompt increased shopping trips into the U.S.

“Certainly this new data suggests that’s what’s played out.”

Yes, it certainly does. But cross-border shopping by Canadians is hardly a new — or duty-free-driven — phenomenon. It’s been going on for decades, and the stronger loonie, which just passed the greenback, couldn’t have come at a worse time for Canadian retailers who rely heavily on back-to-school shopping.

The new Canadian government figures, showing June (the month the exemptions kicked in) also revealed that, not surprisingly, most overnight travel was by car. In June, Canadians took more than 1.2 million trips to the U.S. — a 10% increase from May.

The rules for same-day (non-overnight) visits to the U.S. are loosely enforced. Canadians have to pay provincial taxes, around 10%, if stopped. Which doesn’t happen very often. Canadians traveling to the U.S. for 2-7 days are allowed to declare $800 of goods duty-free, up from $400.

One bright spot for Canada: Statistics Canada reports that travel TO Canada also rose by 0.5% in June to around 2.1 million trips.

Back in Bellingham, Wash., Ken Oplinger, CEO of the local chamber of commerce, says Costco is now looking to build a second location in that border city.

He adds: “I wouldn’t be surprised if you don’t see some sort of local ad campaign here thanking Canadians for shopping here.”

Coming to billboards, most likely, between Bellingham and Vancouver.

Bill Mann is a MarketWatch columnist, based in Port Townsend, Wash.

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