Eight U.S. governors have written a joint letter calling on Canada to raise its duty-free limits for online shoppers as part of a renegotiated free-trade agreement.
American business leaders and politicians have long called for Canada to raise its $20 duty-free limit, but the talks to renegotiate the North American free-trade agreement have triggered a heightened lobbying effort on the issue south of the border.
In a letter to Foreign Affairs Minister Chrystia Freeland and United States Trade Representative Robert Lighthizer, the governors of Connecticut, Maine, Maryland, Massachusetts, Montana, Oregon, Utah and Virginia said Canada's current $20 threshold – known as the de minimis – hurts crossborder trade.
"As the global economy continues to see increased online sales that result in direct shipments to purchasers, Canada's low threshold for the collection of duty and taxes creates unnecessary price increases for Canadian consumers and hinders North American manufacturers' supply chains on both sides of our shared border," the letter states.
Canada has not taken a firm position on the issue, but Conservative and Liberal governments have resisted pressure to raise the de minimus level in the face of years of lobbying.
The House of Commons trade committee recently conducted a brief study of issues related to online shopping, hearing arguments both in favour and against raising the threshold.
Critics warned that a higher threshold would chip away at Canada's tax base and would place Canadian retailers who collect sales tax on online sales at a competitive disadvantage.
Peter Simons, who operates a national chain of department stores as chief executive officer of La Maison Simons Inc., recently urged MPs to resist pressure from large U.S. companies to raise the duty-free threshold for online sales.
"De minimis levels must be set at zero," he told MPs during their recent review of the issue. "To not set de minimis levels at zero is basically destroying the idea of localizing tax collection at the point of consumption. Operating in Canada is a privilege. Companies must transparently and honestly accept the responsibilities accompanied with that privilege."
Andrea Stairs, managing director of eBay Canada Ltd., countered that a higher Canadian threshold would be positive for Canadian small businesses and for taxpayers. She said the cost of having Canadian border officials assess small-value packages exceeds the amount of tax revenue collected.
Chloé Luciani-Girouard, a spokesperson for Finance Minister Bill Morneau, said the government would act carefully when it comes to duty-free limits.
"While we're broadly supportive of streamlining custom processing and importation requirements, when it comes to waiving duties and taxes, we need to carefully consider the impact that would have on Canadians and on Canadian businesses, not to mention economic and administrative considerations for both the federal and provincial governments," she said in an e-mail Thursday.
The Commons trade committee did not issue recommendations after its review of e-commerce issues. Liberal, Conservative and NDP members of the committee did not take firm positions and MPs from all parties said the issue deserves more study.
"You will hear very strong arguments on both sides," said NDP MP Tracey Ramsey.