SURREY - Businesses in Surrey and White Rock are expected to feel the impact of new Canada U.S. duty-free limits, which started today (June 1) and will allow shoppers to bring back more goods to Canada without penalty.
"I already feel it now," said Damian O'Hagan, owner of Peninsula Cycles, which has been around for over a decade. "But yes, there will definitely be an effect on our business."
The duty-free limit for stays of more than 24 hours has jumped to $200 from $50.
Limits for stays longer than 48 hours were previously $400, and $750 for those visiting more than seven days. Both of those have gone up to $800.
O'Hagan said he's a big proponent of shopping locally, and hopes others appreciate what doing so does for the economy.
"I buy my gas here and I make my purchases here. I think it's important to spend your dollars where you live."
Having said that, O'Hagan added he understands why people head south to shop.
"I understand where they're coming from," O'Hagan said. "If you can drive south and save a couple hundred bucks, I get that - I'm a consumer too."
But O'Hagan said there are bonuses for bike-buyers when they purchase locally.
New bikes sold at his shop come with three years of maintenance.
"It's a real hassle when you have bike problems to drive all the way to Bellingham, or wherever you purchased it. That's my biggest sales spiel again and again."
While his business isn't struggling, he knows a lot of shoppers are heading into the U.S. to shop for bikes.
"The road bike scene is so popular now. I do see increases in business month to month. Business is going well, but at the same time, I see the bikes coming in that were purchased in the U.S."
In terms of the bike business, he said the average price difference is about 10 per cent.
O'Hagan said he thinks some business will make its way back to this side of the border when the HST is phased out.
For bikes, he said, consumers previously only had to pay GST. Currently, customers are paying the full 12 per cent, but that will go back to five per cent once the HST is gone.
"That in itself is a bit of savings," he said.
But he said many retailers will feel the impact of the new rules.
"For any retailer that sells general goods that are sold on both sides of the border, there's going to be an effect," he said.
Douglas Porter, deputy chief economist at Bank of Montreal, said in May the allowances wouldn't be an issue if there wasn't a compelling lure for Canadians to cross the border.
In his report, Porter said the retail price gap dropped to about 13 per cent, from 20 per cent last year, yet Canadian visits to the U.S. are expected to accelerate.
"The steady drain of Canadian shoppers heading south is weighing on retail sales in this country. For the first time in years, U.S. retail sales growth is running faster than in Canada," he wrote.
He said he estimates that cross-border spending may, in fact, account for as much as eight to 10 per cent of all outlays on items that can be moved across borders.
"If correct, that represents a real drain on domestic retail sales of more than $20 billion, as well as on employment and government revenues; a drain that looks to deepen."
Anita Huberman, CEO of the Surrey Board of Trade, said as border cities, Surrey and White Rock businesses will be greatly impacted by the rule changes.
"Especially because right now we're in a very soft economy. Consumers are looking for the best deal possible."
Many industries will feel it, she said.
"TVs, tires, clothing, books, soap, coffee, groceries, gas, aspirin - they're all goods that have this price differential. It's very unfortunate."
Huberman said businesses are going to have to get creative in terms of marketing to keep consumers shopping at home, such as partnering with business organizations or charities and using social media to connect with clients.
She said The Shops at Morgan Crossing is a good example of businesses that are looking at creative ways to enhance the shopping experience.
Recently, Morgan Crossing held A Night of Fashion, a free event that featured a fashion show and offered deals at a variety of businesses, such as complimentary makeovers at London Drugs and savings at a variety of other retailers.
"It's about elevating the shopping experience on this side of the border," she said. "And creating incentives to bring customers in."
However, Huberman said the recent cuts to the Canadian Border Service Agency (CBSA) may help the situation, as some expect wait times will increase as a result.
When the federal government released its budget earlier this year, it cut $143 million from the CBSA. The Customs and Immigration Union president Jean-Pierre Fortin said in a statement that the cuts will have an impact on border wait times.
Huberman expects the same.
"People are very busy, and time also has a great value," she said.
The Surrey Board of Trade is so concerned about the changes that it's working with other Chambers to ask the government to look at why Canadian retailers pay more for goods than those in the States.
"Canadian retailers are paying more and are having to charge more," she said.
A dozen eggs costs as average of $3.22 to a Canadian retailer, while a U.S. retailer pays an average of just $1.79, she said. And milk, which costs an average of $2.40 for a Canadian retailer, costs 92 cents on average for those in the U.S.
SBOT wants the government to look at a number of issues: to call on suppliers to explain pricing practices that result in an over-inflation of prices for Canadians, to expedite its review of the tariff system in Canada to minimize the impact of the June 1 changes, to exempt or limit supply managed products (such as butter and dairy) from the limits at the border and to ensure the limits are being strictly enforced at the border.
The resolution will go to the Canadian Chamber of Commerce for approval in the fall, before being forwarded to the government.
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