Canadian online retailers are facing a challenging decision following the termination of duty-free shipping for small packages to the U.S. They must now weigh the option of incurring expensive fees on low-value shipments to attract American customers during the holiday season or risk losing those customers altogether.
Previously, international packages valued under $800 US could enter the U.S. duty-free under the de minimis exemption policy. However, this changed in August due to an executive order from President Donald Trump.
Jessica Sternberg, the owner of Vancouver-based online clothing store Free Label Clothing, highlighted the impact on her business, stating that they paused shipments to the U.S. for nearly three months, affecting almost half of their business that comes from American customers.
As the holiday season approaches, Sternberg and other small businesses are striving for an online sales surge to offset costs. However, shipping to the U.S. has become more costly, posing challenges for retailers trying to navigate the new regulations.
The end of the de minimis exemption has forced small businesses to adapt, with some integrating duty costs into checkout prices or having American customers pay duties upon delivery. The Canadian Federation of Independent Business surveyed its members, revealing that 31% of small and medium-sized businesses anticipated being impacted by the exemption’s end.
Samuel Roscoe, a business education professor at the University of British Columbia, emphasized the adjustments businesses have made to mitigate customs charges. Some businesses have explored setting up distribution centers in the U.S. to streamline shipping processes.
Despite challenges, some American customers are willing to pay duties to continue purchasing from Canadian businesses. Catherine Choi, owner of Hanji Gifts in Toronto, shared experiences of American customers offering to cover duties, showcasing their dedication to supporting Canadian retailers.
Roscoe highlighted the significance of small and medium-sized enterprises in the Canadian economy, emphasizing that any disruptions to their businesses could have far-reaching implications on employment and economic stability.
The removal of the de minimis exemption has triggered a ripple effect across the Canadian economy, prompting businesses to rethink their strategies for engaging with American customers and navigating the new trade landscape.