James May, Customs City Global Solutions Inc.
Now that the dark cloud of uncertainty has been lifted from Canada after the signing of the new USMCA (US-Mexico-Canada Free Trade Agreement) it’s time to now look at further diversifying Canada’s trading partners. Canada should pursue an FTA (Free Trade Agreement) with ASEAN (Association of Southeast Asian Nations).
Of interest in the USMCA was Canada raising of the de minimis values for duty and tax from $20 (CAD) to $150 (CAD) for customs duties and $40 (CAD) for taxes. This is a powerful headline but there is still confusion within the trading community as theses new limits only apply to courier shipments but not postal shipments. Adding to the confusion is that postal shipments often do not get flagged for duty and tax as it is my understanding that CBSA (Canada Border Services Agency) does not have the staff to inspect each package. This has led to the trading community playing “duty roulette” with postal packages hoping they don’t get flagged for an inspection.
With the rise of eCommerce shopping in Canada, this is still a welcome change for online shoppers that use couriers as they didn’t appreciate receiving invoices a week or two after receiving their online purchases. These invoices always contained extra fees on top of the duty or GST that the courier paid on the purchaser’s behalf. Canada has a low de minimis was always a losing proposition for the country anyway where we always paid much more to collect the duty compared to the actual duty and tax collected.
Some Canadian retailers are not happy about the new increased de minimis value saying it will hurt their businesses. Canadian retailers say they can’t sell the same product at the same price as the foreign retailer can since they do not receive the same duty exemption as the foreign retailer. I think the same benefit can and should be given to domestic retailers and consultations with CBSA (Canada Border Services Agency) are required.
However, I think Canada can look at a new trade agreement with ASEAN as an opportunity to negotiate to increase the de minimis values in some of the below countries that have very low de minimis values (which happen to be some of the largest and fastest-growing economies in ASEAN.) Ecommerce is growing rapidly in the ASEAN region and Canadian eCommerce companies are looking for new markets to expand.
De Minimis Values in ASEAN
De minimis value $USD
De minimis value "no duty/tax collection" $USD
I am concerned however about an inclusion in the USMCA regarding Clause 32 which requires Canada to inform the US of any intention to pursue negotiations with “non-market” countries. I understand the NAFTA (North American Free Trade Agreement) negotiations were tough and that concessions had to be made. If this is the case let’s pursue a Canada-ASEAN agreement while the USMCA is still being ratified.