The Budget and Cross-Border Shopping - Good News/Bad News
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Overview
Just when you thought cross-border shopping may have peaked given the minimal amounts you could bring back duty-free on a one-or 2 night stay, the Federal budget released March 29, 2012 raised the duty-free limit commencing June 1, 2012 from $50 to $200 for a 24-hour visit to the U.S. and from $400 to $800 for a 48-hour trip. If you remember, it was in 2007 that the loonie reached parity with the U.S. dollar in 2007 and as a result, cross-border shopping received a boost here in Canada that continues to this present day and made up for all those years when the Canadian dollar was far below parity with the American dollar.
Last week's increase in the duty-free limits should push cross-border shopping by Canadians to an even greater level. However, just like when a door opens for one person it closes for another, there are some who stand to suffer by the increase in the duty-free limits. Certainly, it's likely that retailers, especially those close to the American border, stand to lose.
Given that our dollar remains close to parity with the American dollar and commencing June 1, Canadians will be allowed to spend even more of their dollars in the US on American retailers and bring those goods back to Canada on a duty-free basis. That can't be good for many Canadian retailers. It is however good news for American hotels and motels that are close to the Canadian border as they should see increase in reservations from Canadian visitors and a longer stay which means more revenues. The same applies to border restaurants and bars.
What are your thoughts? Are you a retailer, close to the American border? If you are Canadian, are you planning to take more frequent visits to the United States to do some shopping. Given the increase in the duty-free limits?
