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Cross-border shoppers plan bigger haul under new duty-free rules

Pedestrians carrying shopping bags make their way along Fifth Avenue in New York.

Seth Wenig/Seth Wenig/The Associated Press

Canadians are in a U.S. shopping state of mind this summer thanks to changes in regulations that allow them to buy more without paying duty, a new survey suggests.

The Canadian Press-Harris Decima poll on relaxed cross-border shopping limits that went into effect June 1 found a large majority in favour of the changes – and 54 per cent of those planning a trip stateside said they intended to spend more.

Additionally, four in 10 said they were likely to purchase more duty-free goods.

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The telephone survey of 1,000 was conducted between June 14 and 18 and is considered accurate plus or minus 3.2 percentage points, 19 times out of 20.

As outlined in the March budget, the duty-free threshold on stays longer than 24 hours rose to $200 from $50 beginning this month. The limit on stays longer than 48 hours increased to $800 from the current two-tiered levels of $400 and $750, depending on the length of stay.

In the poll, seven in 10 Canadians said they supported the higher duty-free limits, and eight of 10 of vacationers to the U.S. backed the changes.

"The potential number of Canadians travelling to the U.S. this summer is over four million," said Patricia Thacker, Harris Decima's vice-president of travel and leisure.

"With 54 per cent likely to purchase more under the new duty-free limits, that's over two million Canadians spending more in the U.S. this summer alone."

The changes have been criticized by the Retail Council of Canada as just one more blow to merchants who cope with higher costs and must compete with U.S. competitors that often get a better deal from suppliers.

With the new rules in place for a little more than three weeks, it is still too early to determine if Canadians have stepped up their shopping habits, said Karen Proud of the Retail Council. But she believes there will be an impact on retailers.

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"We've seen increases in cross-border shopping ever since the loonie gained parity," she said. "There's been an increase of Canadians shopping in the U.S. and a decrease in Americans coming across the border to shop here.

"The (higher limits are) just added incentive."

Ms. Proud said Ottawa erred in enacting the duty-free changes, which now match those in the U.S., in isolation of other measures to help Canadian retailers compete, including reducing tariffs and tackling the supply management system that protects dairy and poultry farmers in Canada.

"Those products are some of the most cross-border shopped. Dairy, eggs, milk, we know people are filling up their trunks with groceries and then shopping for everything else they can pick up and basically being waved through the border," she said.

A comparison study published by the Bank of Montreal in April found that despite the near-parity of the Canadian and U.S. dollars in most months since 2007, consumer items are still on average 14 per cent more expensive in Canada, and that is before the HST tax is added. Some surveys have found a bigger gap.

The report estimated that Canadian store owners lose about $20-billion a year to cross-border shopping, although with many shoppers not reporting purchases, the exact worth of cross-border shopping is difficult to calculate.

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BMO economist Doug Porter, who has done the price comparison list for several years, said today's shoppers would likely realize somewhat fewer savings because the loonie has dropped below parity in recent weeks. On Friday, it was trading below 98 cents U.S.

But Mr. Porter said that in general his findings stand, and the latest hit on Canadian retailers likely will be significant.

"Cross-border shopping tends to be downplayed by officials and the impact on the Canadian economy, but I do think it's quite significant," he said. The higher limits will just add further juice to what already looked like a "pretty robust cross-border outlook."

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