Thank you, Madam Chair and members of the committee. I appreciate the opportunity to be here today to speak to a specific issue within the excise framework that is having a direct impact on a federally regulated export sector.
I want to start by setting out how our stores operate, because that context matters. Land border duty-free stores are not domestic retailers. We are federally regulated and licensed under the Customs Act and operate under CBSA control.
Our stores are located at border crossings, and we sell exclusively to travellers leaving Canada. We do not have access to the Canadian domestic market. Every transaction is tied to a traveller exiting the country, and every sale is verified as an export through a CBSA-controlled system. That means our only market is outbound travellers and our only competition is the United States.
In many cases, our stores are located just minutes or even metres from U.S. outlets selling the same products to the same travellers. We represent 31 land border duty-free stores. These are long-standing, family-run businesses that have been operated successfully for more than 40 years and are part of the economic and tourism fabric of border communities. The purpose of the stores is to capture spending at the point of exit and keep those dollars in Canada rather than seeing them immediately flow into the United States.
Currently, we are seeing a sharp and sustained decline in cross-border travel by Canadians, with some estimates pointing to declines of more than 40% year over year. The decline in travel is real, but it is not permanent. The issue before you is what is happening alongside it. Our businesses are facing a structural imbalance that makes it harder to compete, particularly in an environment where purchase decisions matter more.
At its core, it's about fair treatment. We compete directly and only with U.S. retailers, but we are not operating under the same conditions. The source of that imbalance is how excise is applied. Excise is intended for domestic consumption. Across Canada's export framework, where goods are destined for export, it is not applied at source. It is applied if and when those goods re-enter Canada. That principle is well established, but land border duty-free is treated differently.
Excise duty is applied at the manufacturer level before export is verified, embedding the cost directly into the retail price. U.S. competitors do not carry that cost. Canadian businesses, operating under full federal oversight, are competing directly with U.S. retailers under a different tax treatment and unlike any other export channel. That is the issue.
Parliament has already established that where products are clearly destined for export, excise should not be applied at source. Our channel meets that test. Every sale is verified through CBSA controls, and last week CBSA confirmed that our program achieves one of the highest compliance rates in the system, at 97%. Despite that, we continue to be treated as though we are part of the domestic market.
The correction required is narrow. We are not asking to remove the tax. We are asking to apply it in the right place—specifically, amending the Excise Act, 2001, to shift the point of excise duty collection from the manufacturer to the border so it applies only where goods re-enter Canada beyond personal exemptions. This aligns duty-free with other export channels, maintains tax integrity, removes the cost currently pushing purchases out of Canada and aligns our export channel with every other export channel in the country.
This is about applying Canada's tax framework consistently, ensuring federally regulated export businesses are not disadvantaged against their only competitors. It is also about sustaining tourism, supporting jobs in very small communities across Canada and maintaining economic activity in border communities.
The path forward is straightforward. What is required is a targeted technical amendment to align treatment as an export channel.
Thank you very much. I look forward to any questions.