06/30/2012 03:24 EDT | Updated 08/30/2012 05:12 EDT

Cross-Border Shopping Rules Hit Canadian Stores

Canadian merchants say they're bracing themselves for a difficult Canada Day long weekend which comes one month after the introduction of expanded duty-free limits on shopping in the U.S.

Canadian retailers say they have already been hit hard since the government increased duty-free limits, effective June 1, in this year’s federal budget.

The limit on spending for visits of more than 24 hours quadrupled from $50 to $200. Visits longer than 48 hours allows Canadians to return with duty-free goods worth up to $800, up from $400.

Shafiq Jamal, Vice President of the Retail Council of Canada, says the effect on sales was immediate.

"It's not just limited to locations close to the border. It's having a general negative impact on Lower Mainland stores overall," said Jamal.

"Our members, whether it's independent members we represent, right through to mid to large retailers here in British Columbia, are feeling the negative impact."

Canadian deals

Douglas Porter, deputy chief economist for BMO Capital Markets, published a report in May titled Cross-Border Shopping: Here Comes the Flood.

In that report, Porter estimated that cross-border shopping already drains more than $20 billion from domestic retail sales.

The Retail Council of Canada is still crunching the numbers for June, but Jamal says there is already anecdotal evidence.

"You can't argue when members are giving you that information and telling you what kind of impact it's having on the business because they're seeing it daily,” he said.

But Jamal says local retailers give generously to the communities in which they do business and will be offering deals this Canada Day long weekend, hoping to keep some of that business in this country.

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