Canadian cross-border shoppers aren't just looking for great deals on gifts this holiday season. Many are also looking for cheap tires.
Bob Bignell, chair of the tire price disparity committee of the Tire Dealers Association of Canada, says November and December are the most popular months for Canadians to cross the border for cheap tires.
In some cases, tires cost half as much in the U.S. The average price gap is 32 per cent.
Bignell said Canadians in border towns like Windsor and Niagara Falls in Ontario, as well as in Vancouver, get their tires changed while holiday shopping south of the border.
'They are in stock, $300 cheaper. It's worth coming.' - Gary Pepper, resident of Windsor, Ont.
He said those three cities “take the brunt of it” when it comes to Canadians buying tires in the U.S.
Dave Santing, president of Santing OK Tire in Windsor, said the price gap has been a problem since the 1970s.
“People will go across the border and buy the product over there at a significantly cheaper price and we don't gain the sale,” Santing said.
Windsor resident Gary Pepper shopped on the American side of the Detroit River for the first time recently.
"I had priced tires in Windsor. They were around $1,000, which we probably would have bought, but it was a five-week wait to get them. Here they are in stock, $300 cheaper here. It's worth coming," said Pepper, who also said he would be declaring his new tires at the border.
Dollar's parity partly to blame
Bignell said the high-flying loonie has only magnified the gap.
“When there’s a 20 or 30 per cent difference in the dollar, people don’t notice it. But there’s really no reason for that type of a gap,” he said.
Earlier this year, the Senate committee on finance confirmed the Tire Dealers Association of Canada's findings that "country pricing" by tire manufacturers forces consumers across Canada to pay anywhere from 30 to 50 per cent more for the same tires selling in the U.S.
Bignell said Michelin tires manufactured in Nova Scotia are sold at a lower price in Michigan than they are in the province.
"Many U.S.-based tire manufacturers use their supplier contracts with Canadian tire retailers to force them to buy tires wholesale, directly from their Canadian affiliates, rather than directly through much less costly U.S. wholesale distribution channels," Bignell said. "If a Canadian retailer buys wholesale tires from a U.S. wholesale distributor rather than through the manufacturer's Canadian sales division, both the Canadian retailer and the U.S. distributor have their supplies of tires cut off by the manufacturer.
“In the end, it's the Canadian tire consumer who gets gouged by higher tire prices."
Michelin and Bridgestone each have two tire plants in Canada. Bridgestone did not immediately respond to questions from CBC.
A spokesperson from Michelin North America replied in a written statement that the company faces a different cost structure in Canada.
"We price our tires based on industry norms here in Canada. Many prevalent factors, which are beyond our control, influence those norms. They include local market conditions and the other costs such as duties, taxes, wages, logistics and transportation. The cost structures in Canada are different than in the U.S. and that reflects in the tire prices."
CBC asked Michelin to compare the cost of wages, logistics and transportation on both sides of the border, but did not immediately hear back.
“We have been told by the manufacturers, it's marketplace that plays a role in price variation, being that the U.S. is such a large marketplace in comparison to Canada,” Santing said. “Usually, the average gap will range anywhere from $250 to $300 on a complete set once you put it all together, taxes and everything.”
According to the Retail Council of Canada, its members were told by manufacturers that there are three main reasons for country pricing:
- Canadians are used to paying more for products in Canada.
- The higher prices charged to retailers in Canada subsidize the costs of maintaining suppliers' offices and operations in Canada.
- The higher prices are necessary to compensate Canadian distributors and wholesalers, which face higher costs in Canada.
“Manufacturers have control. They’re the ones that need to close the gap to make it a more competitive marketplace in a border town,” Santing said.
Santing said he gets at least two calls a week from Canadians asking him to price match quotes from Detroit tire dealers.
“We lose most of them,” he said.
Santing said he tries to offer rebates, free tire rotation and other extras, but it’s not enough to convince people to shop locally.
Meanwhile, U.S. tire dealers in Michigan have started offering a $20 rebate of their own to help Canadians pay their tolls at either the Windsor-Detroit Tunnel or the Ambassador Bridge.
Environmental fee also skirted
People who buy passenger car tires in the U.S. also avoid paying an Ontario Tire Stewardship fee of $5.85. The money funds programs that divert more than 12 million tires from landfills each year.
“Tires that come across the border don’t pay that fee and the burden of that cost is on those who are paying it,” Bignell said. ”But that really isn’t the issue. We get almost no push back on that. We, as Ontarians, are conditioned to pay that … to keep the environment clean.”
Bignell said there is little he or even the Canada Border Services Agency can do to stop Canadians from buying tires in the states.
According to the CBSA, tires manufactured in the U.S. and that are imported via Ontario are subject to 13 per cent HST and are duty free under the North American Free Trade Agreement (NAFTA), while tires manufactured in other countries are subject to 13 per cent HST as well as seven per cent duty.
The only requirement is that the tires meet Canadian, U.S. or Japanese safety standards.
Bignell said CBSA has “bigger fish to fry” than those people not declaring tires.