MONTREAL - Ottawa's decision to increase tariffs on hundreds of products will drive increased cross-border shopping, the CEO of bike manufacturer Dorel Industries said Friday.
However, Martin Schwartz said he's not concerned that his company will be hurt because it sells bikes and juvenile products on both sides of the border.
"Like everything else, the increase in tariffs is going to be passed on to the consumers... and I think it's just going to force more people across the border to shop," he said in an interview.
The Conservative government announced in its March budget that effective Jan. 1, 2015, tariffs will increase on 1,290 product classes from 72 countries, including China, South Korea and India that previously enjoyed general preferential tariff status.
The change is expected to cost consumers $333 million a year, or more than $1 billion through 2018.
The move will protect some domestic manufacturers, including bike makers in Quebec, where production recently suffered a blow with Raleigh's decision to close its plant in the community of Waterloo, east of Montreal.
Dorel manufactures its line of bikes, including Schwinn and Cannondale, in China, Taiwan and Indonesia.
Schwartz said Canada accounts for less than 10 per cent of its overall bike sales. Revenues in its recreation and leisure segment were US$928.4 million of sales in 2012.
Finance Canada says this is the first time the tariffs have been reviewed in 40 years, and was revised to eliminate "unilateral preferential access" that some countries, including those with GDPs higher than Canada, were still receiving.
Although the government is increasing tariffs on bikes, it is piloting a program to permanently eliminate all tariffs on baby clothes and sports and athletic equipment (excluding bicycles).
The Retail Council of Canada hopes to convince the government to add other products to that list by showing that savings are passed on to consumers.
"I think this is just the beginning of the story," said council vice-president Karen Proud.
"We were successful in the baby clothes and sporting goods and I really do believe that there's still some room to negotiate with the government for another round of cuts come budget 2014."
She said tariffs from preferential status country are expected to increase an average of three percentage points depending on the product.
Proud said the council will meet with its members to determine which products it will seek to have tariffs removed. However, she conceded that a stumbling block to getting tariffs eliminated on bicycles is the existence of domestic manufacturers.
Schwartz said the European Union has a tariff, which it calls a dumping duty, on imports from countries such as China once they exceed one million bikes.
He said the higher tariffs on other products will also give Canadians another reason to seek lower prices in the United States.
"There are going to be a lot of tariffs that are going up and a lot of Canadian consumers are going to end up paying for it."
On the Toronto Stock Exchange, Dorel's shares closed down $1.05 at $41.75 in Friday trading.
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>