U.S. Eyeing New Border-Crossing Fee for Canadians

The United States is exploring how to save money on security by charging a toll to Canadians crossing the border by ground – a possible new traveller’s tax that immediately raised fierce opposition from political and business leaders in both countries.

The idea of a “crossing fee” was revealed in a recent budget request by the Department of Homeland Security, which was seeking funds to study the cost of collecting a new toll for people walking and driving into the United States from the north and south.

In addition to the economic cost of reducing trade and cross-border shopping between Canada and the United States, Canadian Chamber of Commerce President Perrin Beatty argued that piling a revenue-raising fee on cross-border shoppers, sports fans, even the peewee hockey team heading south for a tournament would diminish a sense of “North American community.”


“Building the walls higher and making the borders stickier and thicker is exactly the wrong way to go,” he said, noting that the Chamber of Commerce is arranging discussions on the subject this week with its American counterparts. “Anything that drives up costs discourages traffic.”


According to Foreign Affairs, Canadians spend $21-billion each year in the United States. “Any fee on travellers crossing the Canada-US border would be bad for travellers and bad for the economy,” said department spokesperson Emma Welford. “Canadian officials will vigorously lobby against this proposal.”


While the proposal is only a study at this point, the lobby group against a new “crossing fee” may have a hard case to make – in the face of security concerns, a shrinking budget and seemingly irrepressible Canadian cross-border bargain-hunters.


The United States is desperately trying to find cost-effective ways to relieve a crippling debt. Whether or not an additional fee would reduce risks at the border, it’s being linked by Homeland Security Secretary Janet Napolitano to improving security, an especially significant public issue, in the wake of the Boston Marathon bombings. In a written statement about the budget, Ms. Napolitano stressed the need to find new revenue to cover increasing costs at a border, which, she said, processes 350 million travellers each year. “As the complexity of our operations continue to expand the gap between fee collections and the operations they support is growing, and the number of workforce hours [that] fees support decreases each year.”


Travellers are already used to paying infrastructure tolls for bridges at the border, and Mr. Beatty pointed that other charges, including inspection fees, have also been rising. Since November 2011, for example, Canadians flying into the United States have been subject to a $5.50 “passenger inspection fee,” formerly an exemption dating back to 1997 and NAFTA, which was also, incidentally, eliminated with a small-print line in the budget documents for that year. Yet despite these incremental fees and difficult economy, in February, Statistics Canada reported that the number of Canadians heading south for American bargains was up 25 per cent in December compared to the previous year.


Previous attempt to hike fees for incoming travellers have prompted particular objection from politicians in northern states, who argue that levies charged at the Canadian-U.S. border are being used cover the more significant security issues in the south. In a budget hearing, Western New York congressman Brian Higgins expressed his opposition to the study, by stressing the long-term economic consequences. “I was shocked to see a proposal for a new toll at the northern border,” he said in a statement. “I will fight to put the brakes on this shortsighted fee.”


Robert Wolfe, professor of policy studies at Queen’s University, suggests that the Homeland Security study seems particularly geared to determining the cost of putting the fee in place – rather than giving full consideration of the economic consequences down the road. “This isn’t a new idea, it’s probably been around for a while,” he said. “And one can expect that in the context of an agency under tremendous budgetary pressure, someone says, ‘Let’s dust this one, and do a study and see if we can get some money out of this.’”


Canadian officials, Prof. Wolfe says, need to make sure the larger questions get asked. “We know that any kind of transaction tax has some effect,” he said. “How many people wouldn’t buy a ticket to a baseball game in Detroit, who wouldn’t go shopping in Watertown in upstate New York?”