October 25th, 2010 Matt
Some Furniture Costs More In Canada Than In The US. Why? What’s The Difference?
Canadians often consider going across the border to buy furniture from American furniture stores. However, the cost of furniture doesn’t stop with what you pay for in the store. Let’s take a careful look at the costs of cross-border furniture shopping.
Shopping for clothes, electronic equipment, and other small items is different from buying furniture since the latter has its own set of duties. It is essential that you check whether the item you’re buying is made in the US. Furniture pieces manufactured in the US are covered by the North American Free Trade Agreement (NAFTA), which means you do not have to pay duty. However, you still have to pay customs broker documentation fees of $45-150 to be able to process the paperwork for getting the furniture across the border. The fee will be dependent on the rate the broker will charge as well as on the value of your purchase. Even though you don’t have to pay duty on US-made furniture, your home province will still collect sales tax as well as Goods and Services Tax (GST) / Harmonized Sales Tax (HST).
If the furniture piece you want to get is made outside of the US, you’d have to pay duty at a minimum rate of $9.5% as well as broker documentation fees, sales tax, and GST / HST. If the US merchant didn’t charge you sales tax, it doesn’t mean you’ll be exempted from paying sales tax for your purchase to be able to clear customs. You may receive a bill for sales tax from your shipping company before or after the furniture is delivered. If you fail to pay for the bill, the shipping company will refer your account to collections.
Mexico, Chile, and Costa Rica also have free trade agreements with Canada, which means that you won’t have to pay duty or you’ll pay lower duty on furniture made in those countries. Products manufactured in some of the countries on Canada’s Most Favored Nations list also have low duty applied to them so you may want to consult the list as well. Before deciding to purchase a furniture piece from a US merchant, check where it was manufactured so that you will have an idea about how much you’ll be paying for it to get across the border. If you want to know the rates for duties, call the Border Information Service at 1-800-461-9999.
Paying for your new furniture with a Canadian dollar-denominated credit card or bank account means there will be a 2% charge for processing US dollar payments. There is often a flat fee charged for such transactions as well. This is regardless of the current exchange rate.
Big items such as furniture are more costly to ship to Canada from the US compared to small items such as books or DVDs. It is also riskier. If the furniture or a furniture part has to be replaced, shipping costs add up. Shipping items to Canada is a competitive business. Shipping companies charge a premium for getting furniture across the border. Time is valuable and the shipping companies lose money when they wait for customs clearance at the border so they charge for exposure to these risks. An entire truckload can be delayed if one package doesn’t clear customs. Clearance is at the discretion of custom officials so there’s no assurance that furniture will be cleared without a hitch. The extra cost charged by shipping companies for these risks is not a definable amount but can be estimated at 20% premium compared to shipping domestically in Canada.
Shipping US-bought furniture within Canada also drives up costs. Fuel costs, labour, and taxes are higher in Canada. This means that shipping the same item the same distance in Canada costs more than it does in the US.
You should also check the warranty on the product before making a purchase from a US merchant. If the item is defective or needs a part replaced, would the warranty cover the shipping of the item or the part to Canada? What’s the return process with the US merchant for Canadian customers? US merchants typically have a program to serve their US customers when such situation arises, as do Canadian merchants have a program to serve their Canadian customers. Since you’re buying an item from a US merchant, check what cross-border clauses are included in the warranty.
Before you shop for furniture from a US merchant, ask yourself, is it worth it? Add up the price of the furniture piece, the shipping cost, and applicable taxes such as sales tax, and GST / HST. Compare the number you get with the Canadian price of the same item plus the shipping cost. Then you will be able to determine which will be the less costly way to get new furniture.
To make things more convenient for you, find a reputable Canadian merchant that offers the same product and ask them for the best price they can offer. Sometimes Canadian pricing does not keep up with fluctuations in the exchange rate. This can be an advantage or disadvantage, depending on which way the currency is moving.
Of course, buying Canadian made furniture from a Canadian store avoids the costs and hassles of international trade and supports one of Canada’s oldest and most sustainable industries.
Posted in Industry News | No Comments »
