[Congressional Record (Bound Edition), Volume 149 (2003), Part 7]
[Senate]
[Pages 9483-9484]
[From the U.S. Government Publishing Office, www.gpo.gov]




 SENATE RESOLUTION 119--EXPRESSING THE SENSE OF THE SENATE THAT THERE 
  SHOULD BE PARITY AMONG THE COUNTRIES THAT ARE PARTIES TO THE NORTH 
 AMERICAN FREE TRADE AGREEMENT WITH RESPECT TO THE PERSONAL EXEMPTION 
ALLOWANCE FOR MERCHANDISE PURCHASED ABROAD BY RETURNING RESIDENTS, AND 
                           FOR OTHER PURPOSES

  Ms. COLLINS (for herself, Mr. Baucus, Mr. Bingaman, Mr. Domenici, and 
Mrs. Clinton) submitted the following resolution; which was referred to 
the Committee on Finance:

                              S. Res. 119

       Whereas the personal exemption allowance is a vital 
     component of trade and tourism;
       Whereas many border communities and retailers depend on 
     customers from both sides of the border;
       Whereas a United States citizen traveling to Canada or 
     Mexico for less than 48 hours is exempt from paying duties on 
     the equivalent of $200 worth of merchandise on return to the 
     United States, and for trips over 48 hours United States 
     citizens have an exemption of up to $800 worth of 
     merchandise;
       Whereas a Canadian traveling in the United States is given 
     no exemption for trips of less than 24 hours;
       Whereas a Canadian traveling in the United States is 
     allowed a duty-free personal exemption allowance equivalent 
     to, in Canadian currency--
       (1) $50 worth of merchandise, if the trip is over 24 hours 
     but not over 48 hours;
       (2) $200 worth of merchandise, if the trip is over 48 hours 
     but not more than 7 days; and
       (3) $750 worth of merchandise, if the trip is for over 7 
     days;
       Whereas Mexico has a 2-tiered personal exemption allowance 
     for its returning residents, set at the equivalent of $50 
     worth of merchandise for residents returning by car and the 
     equivalent of $300 worth of merchandise for residents 
     returning by plane;
       Whereas Canadian and Mexican retail businesses have an 
     unfair competitive advantage over many American businesses 
     because of the disparity between the personal exemption 
     allowances among the 3 countries;
       Whereas the State of Maine legislature passed a resolution 
     urging action on this matter;
       Whereas the disparity in personal exemption allowances 
     creates a trade barrier by making it difficult for Canadians 
     and Mexicans to shop in American-owned stores without facing 
     high additional costs;
       Whereas the United States entered into the North American 
     Free Trade Agreement with Canada and Mexico with the intent 
     of phasing out tariff barriers among the 3 countries; and
       Whereas it violates the spirit of the North American Free 
     Trade Agreement for Canada and Mexico to maintain restrictive 
     personal exemption allowance policies that are not 
     reciprocal: Now, therefore, be it
       Resolved, That it is the sense of the Senate that the 
     United States Trade Representative and the Secretary of the 
     Treasury, in consultation with the Secretary of Commerce, 
     should continue discussions with officials of the Governments 
     of Canada and Mexico to achieve parity by harmonizing the 
     personal exemption allowance structure of the 3 NAFTA 
     countries at or above United States exemption levels.

  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.''

[[Page 9484]]

  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.

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