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Re: UPS got me again!

Posted by Frank E (A) on May 18, 2005 at 15:36:56

In Reply to: Re: UPS got me again! posted by Bruce from DC on May 18, 2005 at 12:53:42:

Hi Bruce,

You have some very good questions, the answers to which should benefit all. This is my take on it.

The GST is a "goods and services tax" that is levied at point of sale on pretty much all goods and services sold in Canada, regardless of their country of origin (only those in NAFTA).

NAFTA was brought in by the same outfit that is trying to get back into power here as we speak. IIRC, one of the ideas of NAFTA was for US and Canadian producers of goods and services to be treated equally in both countries in terms of taxes and regulations, such that as far as possible the border would seem invisible.

To this end Canada, (read government), abolished the "manufacturer's sales tax" , a hidden tax, on goods produced in Canada to put the US-produced goods on a level playing field. I assume something reciprocal was done in the US regarding US goods & services.
Canada then applied a new tax, the GST, to make sure that the government lost nothing in the process.

So in theory, this should work perfectly. The problem I am presently facing exists, IMO, because the main purpose was to open up both markets (US & CAN) to PRODUCERS in both countries, and was never an initiative to benefit consumers, although it might be politicized as such. In other words, NAFTA's purpose is to give the producer better access to the market, not primarily to give the consumer better access to the product.

The problem appears when I buy a US product from a US supplier and have the item shipped to Canada. The fact that it is produced in the US frees it from any import taxes or duties and for this purpose the border should be transparent. However, the CAN government in not wanting to miss any opportunity to collect taxes that are due requires the shipping agent (in this case UPS) to collect the GST at the port of entry. For this, UPS charges a brokerage fee, which is in this case $17.00 to collect $2.17 GST.

Now regarding UPS' brokerage fee: Yes, it is likely there is some processing to do such as checking a little box on the weigh bill that the item is US-produced and then there would be the collection and submission of GST. Although the execution of the documentation isn't likely manually cumbersome considering the computerization of such today, it would no doubt invoke a considerable overhead.

In comparison, for shipments sent USPS, there is a flat charge of $5.00 plus the GST. They waive charges on anything less than $20. I don't know the difference in terms of brokerage effort required between USPS and UPS, but $12 is $12.

Now to be fair to UPS, from all I've heard they seem to be an economical service between US points. And the same appears true between Canadian points. The real problem is their brokerage fee. Canadians who buy from the US know about the high brokerage, or at least after receipt of their first UPS shipment they do. It's just that sometimes we forget to ask for an alternative carrier.

I would assume that UPS makes it clear to shippers that there may be a brokerage fee, but I can also understand why US shippers wouldn't pay much attention. First, it is likely one of those statements buried in the fine print list on the bottom or rear of the shipping manifest. Second, US shippers who do volume shipping probably get good rates and have few problems with UPS. Third, US shippers likely send only a small fraction of their product to Canada, and so are like us CAN recipients, who tend to forget about the problem, until it bites us.

To answer your question about the CAN government regulations regarding NAFTA products. The regulation requires the shipper to manifest the US origin and to collect the appropriate taxes, but doesn't stipulate or limit the amount of the brokerage fee.

For the benefit of you Canadians out there, I did manage to get a CBSA agent on the line. I asked if I could make a complaint about the brokerage process, but she said no, they don't accept complaints. She said that the only complaint I could make would be to my member of parliament (who being a Liberal has bigger concerns right now I'd say), which I plan on doing.

Finally, I'm not saying that UPS is doing anything underhanded, but that I believe their brokerage fees collected in Canada are exhorbitant, or at the least not at all in-line with the competition.

Now, do you want to hear about the time my amplifier manufacturer sent my tube order in split shipments?

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