Automakers are breaking U.S. law in order to prevent Canadians from buying cheaper cars there, according to an Ottawa trade lawyer and anti-trust expert, by ordering their American licensed dealerships not to sell new cars to Canadians.
The big five automakers — Ford, GM, Chrysler, Honda and Toyota — fear they could lose their Canadian franchises if people were crossing the border to buy their vehicles, says Michael Hart, who holds the Simon Reisman chair in trade policy at Carleton University.
This forces Canadians to buy from dealerships north of the border, where prices tend to be thousands of dollars higher.
The Canadian prices for Canadian-made vehicles tend to be lower or on par with American prices for the more affordable vehicles like the Honda Civic or Toyota Corolla, consumer advocates have told CBC News.
But for more expensive vehicles, the price differences are particularly noticeable, especially considering the relative dollar parity between Canada and the United States.
Dealerships fear breaking rules
Hart added the companies are guilty of "refusal to deal," which is an automatic offence under U.S. anti-trust laws, but the government is not acting to help consumers.
"It can also be solved, in part, by the government," said Hart. "I mean the government can reduce the current incentives not to buy in the U.S."
Jack Backus, who owns Backus & Sons GM in Ogdensburg, N.Y., said he received a letter five years ago from General Motors directing him to sell only to Americans.
The dealer sales and service agreement included a clause that authorized his dealership to sell "only to customers located in the United States".
A Chevrolet-Oldsmobile dealership owner in Massena, N.Y., confirmed he has received a similar letter from GM. He said the first-time breaking the rule would only lead to a slap on the wrist, but after a few sales there is a fear he would lose his business.
Customs system discouraging
Hart added the Canadian government has played its part, too, in setting obstacles for Canadian car buyers who want a deal. The paperwork is both complicated and costly, costing hundreds of dollars depending on the vehicle.
"The whole customs system is set up to discourage Canadians from going down to the U.S. and saving money," he said.
Hart also alleged car companies are making purchases less attractive by refusing to honour warranties on their own models when Canadians buy them in the U.S.
He said there is currently a class-action suit in a U.S. court against several automakers alleging anti-competitive practices, but it has lagged there for many years.
The Competition Bureau has said in an email response it conducts its investigations confidentially and so would not comment on whether it had received any complaints about anti-competitive practices by car manufacturers or whether it has any investigations on the subject.
The Rules Have Changed
The biggest change to cross-border shopping is the increased allowances to duty-free purchases. Canadian travellers outside the country for more than 24 hours can now bring in up to $200 in goods. The previous limit was capped at $50. <a href="http://www.flickr.com/photos/blmurch/" target="_hplink">Photo courtesy of: Flickr/ blmurch </a>
The Rules Have Changed: Part II
As of June 1, Canadians who find themselves outside of the border for 48 hours or longer will have their allowance double from $400 to $800. The limit for travellers outside of the country for more than seven days has also changed. <a href="http://www.cbsa-asfc.gc.ca/media/facts-faits/106-eng.html" target="_hplink">Their limit has increased by $50 from $750 to $800</a>.
It's All About Timing
For those looking to capitalize on the new duty-free rules, here's some advice: plan accordingly as the new rules are still time sensitive. For example, Canadians can't claim duty-free status on any goods if their trip less than 24 hours. Also, the date you left Canada <a href="http://www.taxfreetravel.com/Canada Duty Free Exemptions" target="_hplink">doesn't count towards your trip length</a>, but the day you return can.
Personal vs Commercial Use
The duty-free status still only applies if your purchases are for personal use. That means it can be for your house, a souvenir, or anything else for your own personal enjoyment. However, if it's anything for commercial use, expect to pay full duties. Also, while you can bring back gifts for other people under your duty-free allowance, that allowance can't be shared with other people.
The Rules To Alcohol Still Apply
The rules regarding alcohol purchases outside of Canada still hold true, despite the increased in allowance. For example, you can only claim duty-free status if your trip is 48 hours or longer in length. Also worth noting is that only <strong>one</strong> of the following items can count towards your allowance: 1.14 L (40 oz.) of liquor; OR 1.5 L of wine; OR 24 X 355 ml (12 oz.) containers of beer.
Shoppers can expect to rake in many goods across the border with Canada's new rules, but certain items are still off limits. For example, certain fruits, meats and vegetables are prohibited from entering Canada as are weapons such as guns, mace, and pepper spray -- something worth noting if you find yourself at the local gun show.
The Rules To Tobacco Still Apply
Much like alcohol, the rules to tobacco are still in effect. Canadians need to be outside of the country for at least 48 hours but can bring in any of the following as part of their duty-free purchase: 200 cigarettes; 50 cigars or cigarillos; 200 tobacco sticks; and 200 g (7 oz.) of manufactured tobacco.
Ready Your Receipts
Now that the purchases have been made, all that's left is to get them back into Canada and that's where receipts come into play. Canadian Border Services Agency workers may ask for proof of any purchase and having them on hand may be the difference maker between a five-minute process and a five-hour delay. Receipts can also help verify how long your trip was based on the date of your purchases.
Don't Forget To Pack Your Goods
Canadians can now make more purchases over the border but they still need to be sure that they can bring everything back. That's because the CBSA still limits the duty-free status to goods on your possession when returning. There is one exception to this rule though: travellers gone longer than seven days can have the duty-free status apply to their <a href="http://www.cbsa-asfc.gc.ca/media/facts-faits/106-eng.html" target="_hplink">goods delivered to them via mail, courier, or by a delivery agency.</a>