Thank you, Chair and members of the committee.
I represent our association and the operators of 31 land border duty-free stores in small communities across Canada. My family has operated our store at Blue Water Bridge for more than four decades. We employ Canadians, buy Canadian products and contribute to our community and border economy.
I want to clarify what land border duty-free actually is. We are not simply retailers located at the border that are given a tax break. Our stores were created by the federal government as a highly regulated export industry to capture a Canadian sale from a traveller already leaving the country before the sale moves to the U.S. Our stores are federally licensed and overseen by the Canada Border Services Agency, or the CBSA. We cannot sell into the Canadian domestic market. Goods are sold tax- and duty-free because they are leaving Canada. If they return, applicable taxes and duties are assessed through normal customs processes.
Our only market is a departing traveller, and we compete only with U.S. retailers and U.S. duty-free stores metres away in the U.S. For more than 40 years, operators have built viable businesses around that mandate, supporting Canadian jobs, suppliers and border communities.
Today, we are under extraordinary pressure from circumstances we did not create and cannot control. When the trade dispute began, Canadian leaders encouraged Canadians to reconsider travel to the U.S., and Canadians listened. In August, automobile travel by Canadians to the U.S. remained more than 27% below 2024 levels. For most businesses, losing customers on that scale means finding another market. We cannot. We are export only, yet travellers still cross today. These are customers we can continue to serve. Our opportunity is to compete for those sales and keep that spending in Canada.
Today, I have two asks. First, ensure that Canadian land border duty-free shops can access a regional tariff response initiative, if needed. We are viable Canadian businesses directly exposed to Canada-U.S. trade disruption through no fault of our own.
Second, remove Canadian barriers that make it harder for us to compete for an export sale. Canadian excise is embedded in the price of tobacco sold through our stores, even though the product is sold exclusively for export. Consumers choose where they shop and what they buy. If we are not competitive, they can buy the same or substitute products in the U.S. without Canadian excise embedded in the price. The customer does not disappear. The sale simply moves outside of Canada. A 2024 econometric study found that every dollar lost in a tobacco sale in a duty-free store takes another $1.15 of other duty-free purchases. That is lost to the U.S.
We are not asking Parliament to eliminate the tax or reduce the rate. We are asking for consistent treatment of a verified export channel. That precedent already exists. The Excise Act already provides relief for Canadian manufacturers exporting tobacco to foreign countries with proof of verified export, yet when that same product is sold through a Canadian land border duty-free store, which is also a verified export channel, the excise tax is embedded in the price before it even reaches us. That is the asymmetry we are asking the government to correct today.
Our proposal is simple. Do not collect the excise before the product leaves Canada. If it comes back to Canada and tax is owed, collect it at that point, the border, through the normal customs process. The tax is not eliminated. The collection point is moved. Canada retains its ability to tax Canadian consumption, the CBSA retains oversight, and Canadian businesses can compete for a sale that would otherwise move across the border. This is revenue-positive for Canada.
Our stores were created to keep travellers' spending and economic activity in Canada. Ensure that we can access federal tariff support, and remove the Canadian barriers that make it harder for us to compete.
We are not asking for special treatment. We are asking for consistent export policies to be applied to a verified export channel so that we can compete effectively and keep more sales, jobs and economic activity in Canada. That is the mandate of duty-free.
Thank you.