The biggest mystery in Canadian business these days is, “What’s up with NAFTA?”
Ever since U.S. President Donald Trump threatened to tear up the North American Free Trade Agreement, the negotiations between America, Canada and Mexico have been shrouded in secrecy.
Occasionally, we’ll hear negotiators say something along the lines of, “We’re making progress” without actually saying what could be changed. Nobody knows how extreme American demands are or how willing Canada and Mexico are to make concessions to reach an agreement.
Despite these unknowns, one thing that’s clear is a new NAFTA deal could have a big impact on the shopping habits of Canadians who like finding deals in the U.S.
That’s because the U.S. wants big changes in the area of “threshold”, which is the maximum value of an item that Canadians can buy/order from a foreign country without paying duties or taxes.
Right now, Canada has what is often referred to as a “de minimis” threshold of just $20, one of the lowest numbers in the world and a figure that was set way back in 1985.
Because of this low number, many Canadians order items online and have them shipped to a U.S. depot near the border, where they can pick it up themselves in order to save sales taxes, customs duties and brokerage fees.
The U.S. (which has a threshold of $800) wants Canada and Mexico (which has a threshold of $200) to significantly raise their own thresholds.
Depending on if Canada and Mexico agree to raise this figure – and by how much – Canadians may be able to start simply shipping items directly to their doorsteps.
The Canadian Finance Ministry has said that it is “broadly supportive” of making it easier to get items across the border, but added that it isn’t interested in entirely waiving duties and taxes because of the potential impact on Canadian businesses.
What’s perhaps most important here is noting that when the original deal was signed in 1994, online shopping was still very new. Twenty years ago, most people crossed the border to buy items and, if they stayed longer than 24 or 48 hours, the threshold increased dramatically.
It’s unclear when a new NAFTA deal could be reached. President Trump wants it before November mid-term elections, but most experts believe this is unrealistic due to the scope of the deal.