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Loonie Takes Flight

Loonie Takes Flight

September 21st, 2007  · stk

For the first time in 31 years, the Canadian Loonie opened today, on par against the U.S. dollar. The Loonie has gained 17% in value this year! Find out why and what it means for both Canadians and Americans.

Canadian Dollar at Par with a U.S. Buck

For the first time since 1976, the Canadian dollar opened today's trading valued on par with the United States dollar. One Canadian dollar is equivalent to one U.S. dollar.

Wow!

The Canadian dollar has been soaring against the U.S. dollar in recent years and more dramatically so, in recent months. A decline in the U.S. currency is cited as the main reason for the recent and dramatic rise of the loonie's value.

The loonie has steadily gained ground against the U.S. dollar, starting from its all-time low of $0.62, which it hit in early 2002.

For more about the flight of the loonie ... read on.

 

Charting the Flight of the Canadian Loonie

A graph shows just how steadily and dramatically the Canadian dollar has been gaining value, measured against the U.S. dollar. Since its low of 62 cents in early 2002, the Canadian Loonie has appreciated in value over 60%. That's like 10% per year! Astounding.

What's even more amazing, are the recent gains. The Loonie started 2007 valued at about 85 cents U.S. Now on par, it's appreciated in value by 17% in less than a year.

 

Let's Go Shopping!

Canadian Loonies

The "Loonie" is a nickname that Canadians have given to the gold-colored one-dollar coin that was released in 1987, which depicts a loon on the back.

(Canadians no longer have a $1 paper bill, nor a $2 paper bill. Both are coins. The $1 is called a "loonie" and the $2 coin a "toonie". Get it? Loonie Canadians!)

There's an interesting story behind the "Loonie". Originally, the Royal Canadian mint meant for the $1 coins to have a voyageur theme on the back, rather than the image of a loon. However, the stamping dies were lost during shipment by Canada Post, to the Royal Canadian Mint.

To avoid counterfeiting, the design was changed to a loon. Though never intended for public consumption, the new $1 coin rapidly gained favor with the public and tourists alike. Canadians quickly dubbed the coin a 'loonie' and that name has stuck. (It stuck so well that the Royal Canadian Mint has secured legal rights to the name "Loonie").

Sources: here and here

Most Canadians are reveling in the recent surge, which means that they can head across the U.S. border and take advantage of their strong currency and U.S. prices (which are often inexplicably lower than those in Canada).

U.S. retailers near the border are not unhappy, as they notice a lot of Canadian license plates on cars in the parking lot. In northern Washington state, retailers that are about an hour's drive from Vancouver, are seeing double-digit sales increases, month-over-month, compared to a year-ago.

Gasoline in New Brunswick was selling for $1.04 a liter (roughly $4.16 a gallon). In Calais, Maine, just across the border, the same gas was $0.81 per liter (about $3.24 per gallon).

In Woodstock, New Brunswick, a gallon jug of milk costs $6.70. Across the border in Houlton, Maine, it's selling for $3.89.

Unfortunately, there are monetary limits on how many goods Canadians can bring back, without paying import duty taxes. If Canadians spend less than 48 hours south of the border, they can only bring back $50-worth of items, before they have to pay duty. All liquor or tobacco items are charged duty, unless Canadians stay longer than 48 hours.

After 48 hours in the U.S., Canadians can bring back goods worth up to $400 duty-free, along with 1.14 liters of wine and liquor or 24 cans or bottles of beer.

It's important to note that under NAFTA, items made in the United States (or Canada) are exempt from import duties. This is easy to claim if the item has a "Made in the U.S.A." label, but can be problematic if it doesn't. (See comment #10 for further detail).

t while groceries are duty-free, there are limits on quantities.

For many items, it's still cheaper to make a purchase in the United States and pay the import duty. Plus the selection is often greater, with more brands, styles, manufacturers and models available.

Fully seventy-five percent of Canadians live within 160 kilometers of the U.S. border. Canadian retailers should remember this and keep prices competitive with U.S. retailers, if they don't want to lose customers.

Besides limits and import duties, there other problems with cross-border shopping. The biggest one: in this post-9/11 era, border security is more stringent, which often means delays when crossing the border.

 

Not All Great News for Canadians

Canadian manufacturers will be concerned about the strength of the Loonie. Most Canadian-manufactured goods are sold south of the border, so this will mean that U.S. buyers will have to pay more and may buy elsewhere, to save costs.

The slumping U.S. economy, which is contributing the rise of Canadian currency, also has a negative impact on the Canadian economy. Some products, notably lumber, are much less in demand. A weak U.S. housing market means fewer orders, lower lumber prices and this has negatively impacted Canadian producers.

 

Impact at Home

I first began began making long stays in Canada during 2000. Then, if I wanted to have $1,000.00 in Canadian money, I'd write a U.S. check for about $625.00 U.S. It was great!

I felt like I was getting value for my hard-earned, U.S. dollars!

Now the tables are turned. When I buy $1,000.00 of Canadian spending money, I have to bring more than $1,000.00 U.S. across the border (banks really sock it to you when they perform a simple monetary conversion ... sometimes, in excess of 10% ... the robbers).

So let's see. The cost of goods are higher in Canada, compared to the U.S. (generally speaking). The Canadian dollar is on par with the U.S. dollar (and likely to rise higher). This doesn't bode well for this American's bottom line!

Canadians may be happy, but American tourists aren't!

 

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1.flag Danny Comment
09/21/07
We could start a smuggling ring. I'll send milk and petrol up to you, and you send cheap pharmaceuticals back down this way.
2.flag stk Comment
09/21/07
ffs ... you've ruined our whole plan by posting it for the world to see. :|

I think, however, we'd make more money if I sent down B.C. Bud. ;)

Shhhh. Darn ... I can't keep my mouth shut either!

-stk
3.flag Carol Comment
11/16/07
How much can a Canadian citizen bring back from the U.S. if they stay down there for a month?
4.flag stk Comment
11/16/07
Carol,

Answer: As much as you can carry! :p (Though, I bet, you mean duty-free?) ;)

The information about personal exemptions can be found here.

Bottom Line: The amount of duty-free items a Canadian can bring back, depends on how long they're in the United States.

0-24 Hrs - Nada
24 to 48 Hrs - $50 CAD of goods
48 Hrs to 7 Days - $400 CAD of goods
More than 7 Days - $750 CAD of goods

(There are limits for how much alcohol and/or cigarettes you can bring back). See the Canadian Border Services Agency link, above, for all the specifics.

Cheers.


5.flag Jim Purdie Comment
11/20/07
What is the duty on extra wine or liquor brought back into Canada?
6.flag stk Comment
11/21/07

Jim - This is a very thorny question. First, let's state how much duty-free beer, wine or alcohol Canadians can bring back, then I'll try to answer costs about "extra".

Canadians returning from the United States, must be gone for 48 hours (or more) to bring back any duty-free alcoholic beverages. (Two nights away, is the general rule). The amount you can bring back duty-free are the same if you're gone 48 hours or 48 days.

Duty-Free Allowances (per drinking-age person):
 • 1.5 litres (2x750ml bottles) of wine;
 • 1.14 litres (40oz) of liquor;
 • total of 1.14 litres (40oz) wine AND liquor; or
 • 24x (355ml or 12oz) cans/bottles beer or ale.
[source]

You can bring in more than the free allowance of alcohol (except in Nunavut and the Northwest Territories). How much depends on the limit set by the Province or Territory. You will have to pay both customs and provincial/territorial assessments on the excess. How much you'll pay, is an overly complicated and not-well-documented calculation involving Federal fees, GST/HST/PST rates and handling fees, all of which (of course) vary by Province - the Province into which you return, not in which you reside.


Unless the extra you are returning with was bought at a good sale price or is something that is difficult to obtain in Canada, it's likely not worth the extra cost.

An Internet search didn't turn up much for beer or liquor, but I did find an article that spoke to wine. The computations were involved and the results likely out of date, but the following summary shows just how diverse the final estimates of total cost can be:

Extra Wine Fee Estimates
Purchase/Final Cost ($CAD)
Max Amt $10 $25 $50
BC 45.45 L $21.92 $43.76 $73.10
AB 9.09 L $13.97 $30.02 $56.77
SK 9.1 L $14.30 $31.40 $59.90
MB ANY $15.26 $32.36 $60.86
ON 45L $17.01 $41.51 $82.35
QC 9L $20.08 $47.98 $94.47
NB 45 L $19.26 $47.01 $93.26
NS 9.09 L $15.01 $32.26 $61.01
PEI 2 L $19.20 $41.27 $78.05
NL 9.09 L $15.01 $32.26 $61.01
YT 9.09 L $13.97 $30.02 $56.77
Notes: Basic Formula 0.42+(GST and/or HST)+HF+PST
This is only a guide, actual amounts are likely to vary.
source
7.flag DGS Comment
01/02/08
This author makes a serious error..

Due to NAFTA ANYTHING manufactured in North America (except for tobacco and alcohol) can come across the border into Canada from the U.S. duty free - no matter how long you have been away (including U.S. manufatctured vehicle, notwithstanding warranty issues). You will still have to pay GST and taxes on the items according to the exemptions, but most import taxes were eliminated with NAFTA on Jan 1, 1994 with the remaining duties being eliminated fully by 2004.

I think the issue is that people never really paid attention until the loonie started to rise. Duty free has been there for a long time - it just was not worth it in the past.
8.flag stk Comment
01/22/08
Dear Fred Smith - Thanks for the comment regarding Nokia phone sales. Unfortunately, I have removed your comment, as we don't like spam. However, I've left your email address and anyone wishing to purchase a Nokia phone, from Nigeria, can contact you directly. :D fredsco2008@yahoo.com
9.flag Kevin Comment
01/27/08
In regards to the NAFTA item (#7) regarding items made in any NAFTA country being duty-free, this is true, however I believe the items would need a "country of origin" article available at the time it crosses the border to qualify. This isn't something most companies seem to provide, even if the product does meet the requirements.

This is just my understanding though - I've had to pay duty on goods I bought from the USA which were manufactured in the states. I now believe this is why I had to pay the duty though...

Here's a reference to NAFTA's documents & forms: http://www.cbsa-asfc.gc.ca/trade-commerce/ta-ac-eng.html#nafta

This bugs me, personally... sure, it would help businesses in the "exporting" country to fill these out beforehand, since more North American customers may purchase from them... but most companies don't even know these forms exists, what they're for, and likely don't want to go through the trouble of filling them out for each order from someone outside their country.

Is there an easy way to claim that an item you're bringing back over the border is covered under NAFTA and shouldn't be charged duty?

Kevin.
10.flag stk Comment
01/27/08
DGS - No error - I simply reported the personal exemptions for returning Canadian citizens, as found on the CBSA website - found here.

However, it was an omission that I didn't mention the NAFTA duty exemption (and I've recified that). Thanks for your input. ;)

NAFTA Exemption

To qualify for the NAFTA duty-free rate, your goods must:

  • be for personal use; and
  • be marked as "Made in the U.S.A." -OR- not marked or labeled to indicate they were made anywhere other than the U.S.A. (or Canada)

(source)

Kevin - The only 'easy' way is if the product has a label or stamp that says "Made in the U.S.A."

However ... it's my understanding that your word on it should be good enough, for items not marked "Made in the U.S.A." (provided there's no "mark or evidence to indicate that the goods are not the product of the United States or Canada").

Made in the U.S., Canada, Mexico or Costa Rica == duty-free.

(source)

11.flag Kevin Comment
01/27/08
Thanks for the quick reply, stk.

The "Made in the USA" sticker isn't a guarantee that the components used were made in the States. If gadget A has widget 1, 2 and 3, all made in Taiwan, but they're put together in the States, it still won't qualify... at least, that's what I understand.

The Certificate of Origin form's very first criteria states: quote-- "A. The good is "wholly obtained or produced entirely" in the territory of one or more NAFTA countries, as referred to in article 415. Note: the purchase of a good in a territory does not necessarily render it "wholly obtained or produced". -- endquote. It's letter preferred criteria letter C also goes on about this...

Picky, aren't they?

Kevin.
12.flag Kevin Comment
01/27/08
I see your point though - as long as there isn't anything else on the product stating that parts of it were produced or imported from elsewhere, you should have a case to make. I'm definitely going to make that claim when I do my next border run!

Thanks for the article - good information to know (not just the info about NAFTA & duties either)!

Kevin.
13.flag stk Comment
01/27/08
Kevin,

Ah yes ... the complicated multi-component goods. :p

I've no experience making claims under NAFTA, when returning to Canada. I can only imagine that it's a complete nightmare.

Once a form is required, my eyes generally roll back into my head. I hate chasing my tail in circles to satisfy a goverment beaurocracy that doesn't even know what the rules are intended to do, much less what they the rules require ... and add a customs officer who's having a bad day.

Thanks for your comments and the positive feedback. Hopefully, I'll never have to fill out a Certificate of Origin form.
14.flag Sandra Comment
02/04/08
if we do pay duty... how much is this duty?

if we stay more than 48 hours, is it maximum 50$ per person? how does this work?
15.flag stk Comment
02/05/08
Sandra - The duty rate is affected by a number of variables: the value/kind of goods, country of manufacture & the country from which you are returning. I couldn't find any formulas on the Canada Border Service Agency, but if you have a specific item in mind, you can call the Canada Border Service Agency at 800-461-9999 and speak to an agent by pressing zero (8-4 local time, M-F, except holidays). They would probably be able to provide an estimate.

If you stay more than 48 hours, your personal exemption is $400 CAD, per eligible person. (Even kids can claim an exemption, but the goods that are declared, should be for the child's use).

How it's worked for us (driving back from the U.S.) - When we cross back into Canada, we're asked, "How long have you been in the States?". We say, "Two|three|four nights." (Whatever it is, but agents key in on "nights", not total hours). We're then asked (among other things), "What are you bringing back with you?" We declare what we've purchased and if it's less than $400 CAD (and alcohol / cigarette purchases are in line with our exemptions), we're waved through and on our way. If we're over our exemptions, we got a card and had to pull over and go inside, stand in line and pay the duties/fees, before we could continue on.
16.flag Tim Comment
03/11/08
This thread made me think a lot about all the different possibilities and inspired me to start calculating.

Just for kicks I thought I would try a little experiment. I can't actually afford an Audi, but I chose Audi because I thought it would be kinda neat...

In Canada, an Audi Q7 3.6 sells for $57,800

In the US, an Audi Q7 3.6 sells for $42,500

So I used this Canadian/US savings calculator to check out what my savings would be and it said that I would save $ 18627.71 (Can) or 29%.

What I couldn't figure out of course was the duty on this ... but it seems if you are saving that much money even if the duty was a few thousand that it would be quite the savings indeed.

I found this thread insteresting in that you could actually start on business on this differences between the 2 dollars.


17.flag stk Comment
03/11/08
It's more the difference between the two marketplaces, than the two dollars.

I'm sure you're not alone in your idea of cross-border profit-making and I bet that you could find a way to make it work.

Personally, I'd be happy if NAFTA did what it was supposed to do and eliminate these inequalities, so people on both sides of the border experienced a more egalitarian marketplace.

If the car is manufactured in the U.S., there will be no duties (if they are applicable, I think they're in the 6% range, but I don't know for certain). There will, however, be a raft of other headaches, fees and inspections.

Let me know how you make out! :D
18.flag James Comment
03/24/08
I have a question about Duty free.

I just purchased a pair of jeans that are made in the US, online-- i recieved them and had to pay duty. Is that right? If not what should i do?


thanx
19.flag stk Comment
03/25/08
James - I found this page at the Canada Post website. There's a bit in there about duty reimbursement, for situations such as yours.

You have two choices, if you believe there has been an error in the amount of duty you paid.

(a) Tick the E14 Invoice where it says "Return to Customs", add your phone number and the goods will be shipped back to the CBSA for review (they'll call to discuss why you think there's an error).

(b) Pay the amount, then submit a request for adjustment (follow the instructions on the reverse of the E14 Invoice you should have received with the parcel).

Hope this helps and let us know how you make out (we've not done either of these things).
20.flag Moira Comment
03/31/08
How many times can a person cross the border in a year and claim their $400.00 of duty free shoppping?
21.flag stk Comment
03/31/08
Moira - AFAIK, there is no limit. (Although, since you need to be in the States for 7 days to catch the $400 personal exemption, there's a practical limit somewhere around 52) :p
22.flag Moira Comment
04/02/08
Do you not mean 48 hours or two nights instead of 7 days. I thought 7 days was $750.00 for the personnal exemption. We went stateside for New year's, Family Day weekend and Easter. Each time we bought and we would like to go again to buy a flat screen t.v. Can you combine yours and your spouses personnal exemption to make a total of $900.00 for 48 hrs.
23.flag stk Comment
04/02/08
Moira - Yes, you're correct - 48 hrs to 7 days is the $400 personal exemption. (You have to stay over 7 days to catch the $750 exemption). While you can't "combine" them, each person gets an exemption (e.g., if two people travel, they may bring back $400 worth of duty-free -EACH- for every 48hr-7day trip). Make sense?
24.flag Joanne Comment
04/20/08
I have bought a fridge and stove in the US and will be bringing them across the border. I was wondering if anyone could tell me what I will have to pay in duty. The stove is made in the US but the fridge was made in Korea. We are only going to go across the border and pick them up and back again the same day.
25.flag B-dawg Comment
02/09/09
You know instead of spending money in the states why not give our economie a boost?
our dollar in trash now because as soon as our loonie has any value we blow it in the states and thus boosting there economie and bringing ours down then we have ppl getting all ticked off and make stupid threads complaining that our dollar is crap when 2 weeks ago they until down south to buy a new t.v or a fridge. better yet get ride of free trade, kick usa off our land from buying out our companies and closing us down so that every1 else can buy form the states to boost them. i say no more american buy outs january suffered a 6.3 % increase in unemployment because investers pulled out and the states bought and closed to many of our companies so the ycan run them down south. canada doesnt need the united states, the states rnt protecting us from anything, and if any1 did have beef with us then we're still in nado.

and last thing to shut me up im looking out side my window looking at the price of gas .....90.4 why am i paying 90 cents from something we have in our own freaking country.
26.flag stk Comment
02/09/09
B-dawg - Aside from the grammar, spelling, macro economics misconception, disregard for the U.S.A. and inaccurate N.A.T.O. reference ... I have to agree.

Canadians buying Canadian is good for Canada.

But why should Canadians pay so much [extra]?

Case in point: In May 2008, I purchased a Lumix TZ5 digital camera at London Drugs for $379, on sale. By the time I paid tax, the final price was $425 CAD. A week later, I returned it. Why? Because I discovered I could buy the same camera in the States for $279 USD (no taxes to boot!).

I'm all for shopping locally and I do, but only if it makes sense.

Paying roughly 50% more for a digital camera, just to support a Canadian business, doen't make sense. I made the more sensible solution and bought the camera in the States.
27.flag Yves Comment
10/20/09
Eh Danny

First thing who come to my mind is Smugglers Notch, the trail is still there!