Again this morning, we are seeing headlines that say "Canadian Dollar Hits a Three Year High"
What exactly does this mean to you when purchasing an item in the U.S. and importing it?
Well, quite simply 'A lot!' - it means that you're saving a lot of money on the exchange, and again on Duties and Taxes.
When you buy an item in the U.S. and pay U.S. dollars for it - that amount is always converted into Canadian dollars before you pay any Duties and Taxes on it. So, if the exchange rate is lower - you are not only going to spend less Canadian dollars for the actual purchase - but you are are also going to spend less in duties and taxes because of that low exchange rate.
These headlines that we see are sometimes confusing so I thought I would do a bit of history of exchange rates over the past 10 years - from 2001 to 2011.
Below, you will see the difference in exchance rates and the impact they have on the purchase price. To give a broad range / idea - I did the calculations at $300 (About how much you'd spend on some clothes), $3000 (About how much you'd spend on some high end electronics), $30,000 (About how much you'd spend on a nice car), and $300,000 (About how much you'd spend on a condo in Phoenix, Arizona!).
In the last 10 years, the cost of buying and importing these goods has declined signficantly! (Espcially for that condo in Phoenix!)
Take a look at the chart below - and you'll realize the huge savings and why now is a fantastic time to import.
I often get asked what the duty rate is for this item or that item - people want to know what the various duty rates are for the items they want to import.
My first response is always "Where is it made?" This is because no matter what item it is - if it's made in the U.S.A., Canada or Mexico - the item will be duty free regardless of what it is. To get more technical, though - the item also has to qualify for NAFTA (North American Free Trade Agreement) - which makes these items duty free.
But, as a rule of thumb, if it's made in those 3 countries - you can be 90% sure it will not have any duty. (There will still be taxes, of course!)
There are other countries that have trade agreements with Canada and the U.S. as well - but the NAFTA agreement covers U.S., Canada and Mexico - as long as the items are made / manufactured in those countries - they will be duty free!