Executive Director of the FDFA met with Mr. Patrick Halley, Director General of Trade Policy Division, and Scott Winter, Senior Chief of Tariff and Trade Policy at Finance Canada on October 10th. The purpose of the meeting was to obtain more information regarding the new United States - Mexico - Canada Agreement (USMCA).

We were able to discuss the highlights on the new agreement, as well as the potential implications the agreement will have on the FDFA members, and the Canadian duty-free industry at large.

We specifically sought clarity on the expansion of the de minimis threshold included in the new agreement. We indicated to the Finance Canada officials that broadening the new de minimis threshold to also explicitly apply to brief cross border trips (i.e. less than 24 hours) would provide consistency in how Canada treats personal importation of goods. It will simplify the border process, and further limit delays in crossing times by clarifying what will and will not require stopping for further inspection or payment.

There was further discussion around the fact that expanding the personal exemptions to include short cross border trips will help retain sales in Canada, as Canadian shoppers opt to purchase goods through the duty free network rather than online from American retailers. Duty free stores may be exempt from sales taxes and other duties, but do pay Canadian income taxes, and employ Canadians.

During the open dialogue, Finance Canada's trade's officials informed FDFA that changes in the threshold will mainly affect commercial couriered shipments as opposed to personal. They also clarified that even with the changes, alcohol and tobacco goods will remain restricted from the threshold.

While personal exemptions will not be expanded further as it stands, we will continue to engage with government departments and trade officials to ensure that FDFA has complete knowledge on potential impacts or unintended consequences of the new USMCA. It was important for us to become part of the conversation and make FDFA a consideration as decisions are made going forward.

Canada and the United States announced an agreement to modernize NAFTA late on September 30th.

The renamed United States-Mexico-Canada Agreement (USMCA) provides a significant amount of cross-border certainty between Canada and the United States. It reaffirms commitments to the flow of goods and people across the border. This is good news for Duty Free stores, where border delays or hassles would only deter cross-border travelers.

The agreement does make a number of significant changes to the existing trade relationship between Canada and the United States, including increasing American dairy access into Canada and setting a limit on auto exports that are exempted by rights from tariffs. This agreement also increases Canada's di minimis threshold - the amount of goods that can be shipped across borders without tax - from the current $20 to $150 for duties and tariffs, and $40 for sales taxes like the HST. This increase had been widely anticipated, though the final structure is much more retailer-friendly than had been originally envisioned.

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