The document discusses foreign exchange rates and customs duties when importing goods into Canada from other countries. It provides examples of calculating costs of purchasing foreign currency and importing items. Foreign exchange rates have a buying rate and selling rate, with the difference earned by the bank. When importing goods, costs include converting currency, paying applicable customs duties and taxes, and GST. Personal exemptions apply to goods travelers bring into Canada depending on trip length.

1. Customs Duties and Foreign Exchange

2. Foreign Exchange
• If you travel to a different country, you need to
purchase the local currency.
• Same thing happens to people from other countries
travelling to Canada, they need Canadian dollars.
• In Canada, you can buy and sell foreign currency at
banks, credit unions and foreign exchange brokers.

3. • Foreign exchange rates are stated with a buying
rate and a selling rate.
the rate at which the currency is bought from you
Buying rate
Selling rate the rate at which the currency is sold to you
The difference is the amount the
Selling rate > Buying rate
bank receives for making the
transaction.

4. Examples
1. You want to buy 1500 Swiss francs. How much will it cost you to
purchase this currency?
Method 1:
Each Swiss franc costs $0.9666 Canadian dollars (selling rate)
1500 x 0.9666 = $1449.90
Method 2:
Let x represent the amount of Canadian dollars needed to
purchase Swiss francs.
1500 Swiss francs = x Canadian dollars
1 0.9666 1x = (1500) (0.9666)
=
1500 x x = $ 1449.90

5. 2. You have 15000 Finnish marks. How much will you receive in
Canadian dollars for this amount?
Method 1:
The buying price for one Finnish mark is 0.2131.
15000 x 0.2131 = $3196.50
Method 2:
Let x represent the amount of Canadian dollars you receive.
15000 Finnish marks = x Canadian dollars
1x = (15000) (0.2131)
1 = 0.2131
15000 x x = $ 3196.50

6. 3. You buy 500 Pounds Starling.
500 x 2.4513 (selling rate) = $ 1225.65
You want to change 500 Pounds Sterling back to Canadian
dollars (sell 500 Pounds Sterling).
500 x 2.2957 (buying rate) = $ 1147.85
The difference: $1225.65 - $1147.85 = $77.80

7. Custom Duties
NAFTA (North American Free Trade Agreement)
- Trade agreement to import goods quot;duty freequot; (no tax)
- Canada, United States, Mexico
• Israel and Chile: no custom duties due to a special agreement.
GP (General Preferential)
- Special lower rates for custom duties
- China, India, many Latin American countries
MFN (Most Favoured Nation)
- most other countries
Custom duties are calculated in Canadian dollars

8. • When you purchase items from another country, you pay
Customs duties and excise taxes (if any).
• Customs duties and excise taxes are calculated in
Canadian dollars.
• Businesses and individuals that import items, must pay
GST.

9. Personal Exemptions:
- if you travel outside Canada, you are allowed to bring a certain
value of goods into Canada, without having to pay the regular
duties.
- personal exemptions depend on the length of time you
have been outside Canada.

10. Examples
1. The Cartier Jewellery Company imports 4000 francs worth of
gold necklaces from France. How much will it cost them to bring
the necklaces into Canada?
Step 1: Change 4000 francs to Canadian dollars
4000 x 0.2384 (selling rate) = $ 953.60
Step 2: Custom duties (France is an MFN country)
$ 953.60 x 5.5% = $52.45
Step 3: Excise taxes
$ 953.60 x 10% = $95.36
Step 4: GST
7% x ($953.60 + $52.45 + $95.36)
= 0.07 x 1101.41
= $77.10
Step 5: Total cost
$953.60 + $52.45 + $95.36 + $77.10 = $1178.51

11. 2. The Klocke Factory brings 25 watches priced at 6000 francs each
from Belgium. What will it cost to bring these watches to Canada?
Step 1: Change to Canadian dollars
1 watch = 6000 x 0.0398 (selling rate) = $238.80
25 watches = 25 x $238.80 = $ 5970.00
Step 2: Custom duties (Belgium is an MFN country)
$ 5970.00 x 5% = $298.50
Step 3: Excise taxes
1 watch = $238.80 - $50.00 = $188.80
$188.80 x 10% = $18.88
25 watches = $18.88 x 25 = $472.00
Step 4: GST
7% x ($5970.00 + $298.50 + $472.00)
= 0.07 x $6740.50
= $471.84
Step 5: Total cost
$5970.00 + $298.50 + $472.00 + $471.84 = $7217.34

12. Assignment
Page: 15
Assignment 1C
(due Tuesday)
Please, show your work!!!