Senator Collins Introduces North America Trade Resolution

Ms. COLLINS. Mr. President, I am pleased today to introduce a resolution seeking parity among the United States, Canada, and Mexico with respect to the personal exemption allowance for merchandise purchased abroad by returning residents. I am especially pleased to be joined today by Senators BAUCUS, BINGAMAN, DOMENICI, and CLINTON as original cosponsors.

For Maine citizens living near the U.S./Canadian border, moving freely and frequently between the two countries is a way of life. Cross-border business and family relationships abound. The difference in personal exemption allowances, however, puts Maine businesses near the Canadian border at a considerable disadvantage in relation to their Canadian counterparts.
A United States citizen traveling to Canada for fewer than 24 hours is exempt from paying duties on the equivalent of $200 worth of Canadian merchandise. For trips over 48 hours, the exemption increases to $800 worth of merchandise. This means that a Mainer living in a border community has the option to shop in both the United States and in Canada, seeking the best price and products. Under U.S. laws, Canadian stores are able to serve both Canadian and American customers, and, because of the high exemption level, Americans are able to bring home from Canada a significant amount of merchandise duty free.

Unfortunately, these advantages are a one way street. A Canadian citizen is given no dutyfree personal exemption allowance for trips under 24 hours. Canadian Customs is instructed to begin collecting duties and taxes on merchandise as long at it can collect three Canadian dollars. Canadian duty and sales tax rates range from seven to fifteen percent depending on the policies of the Canadian province; Nova Scotia, New Brunswick, and Newfoundland enforce a 15 percent Harmonized Sales Tax, HST on all imports. Assessing a 15 percent combined duty and tax rate, Canadian Customs begins to collect the duty and tax on the equivalent of only approximately $14 worth of U.S. goods. Compare this to the $200 limit given to U.S. citizens.

This means that a Canadian shopping for the day in Fort Kent, Madawaska, or Calais can bring home only $14 worth of merchandise before a 15 percent duty is imposed. The exemption limit rises to a mere $50 for trips between 24 and 48 hours. Restrictions such as these are a significant deterrent to Canadians who would otherwise shop in Maine communities.

In August of 2002, I brought two top Treasury officials to Maine to meet with our affected border communities to hear their concerns about this problem. In the meeting held in Calais, small business owners such as Louis Bernardini, owner of the Boston Shoe Store, and Bill Francis, owner of Knock on Wood gift shop, explained that Canada's duty barriers cost their businesses thousands of dollars in estimated revenue on an annual basis. These losses are compounded by other challenges facing their and other small businesses—an economic recession, the weakness of the Canadian dollar, and additional restrictions on border security following September 11.

This discrepancy in personal exemption allowances gives an enormous competitive advantage to the Canadian and Mexican retailers in border communities. It gives the retailers of our neighbors to the north and the south access to the cross-border shoppers while, in effect, denying that same opportunity for American retailers. This is not fair nor free trade.

In June 2002, I wrote to the Bush administration requesting that it raise the issue with its Canadian counterparts as soon as possible. Former Treasury Secretary O'Neil responded to my request and wrote to John Manley, the Canadian Minister of Finance and Deputy Prime Minister, asking him to adopt "a more trade-friendly and less administratively burdensome system of personal duty allowances."

I had the opportunity to meet personally with John Manley this week regarding border issues. During this meeting, I told him that Canada's restrictive personal exemption policies threaten the economies of its neighboring communities. I was encouraged by Minister Manley's understanding of my concerns and acknowledgment that this issue needs to be resolved.
Currently, Treasury officials are actively negotiating with Canada to try to resolve the problem. The resolution I am introducing today expresses the Sense that the Secretary of the Treasury and the United States Trade Representative should continue discussions with officials of the Governments of Canada and Mexico to achieve parity with respect to the personal exemption allowance structure. Passage of this amendment will send a clear message to these governments that the duty disparity unfairly disadvantages American businesses and must be corrected. I urge my colleagues to support its swift passage.