Following the termination of duty-free shipping for small packages to the United States, Canadian online retailers are facing a challenging decision: either absorb costly fees on low-value shipments to attract American customers during the holiday season or risk losing those customers entirely.
For almost a century, international packages valued below $800 US could enter the U.S. without duty fees under the de minimis exemption. However, this policy came to an end in August following an executive order issued by President Donald Trump.
At that time, some businesses had to halt shipments to the U.S. to navigate the changes. Jessica Sternberg, the owner of Free Label Clothing, a Vancouver-based online clothing store, mentioned, “We did not ship to the United States for nearly three months,” noting the significant impact on their business as nearly half of their sales come from the U.S.
With the holiday season underway, Sternberg and many other small businesses are reliant on a surge in online sales to remain financially stable. However, the cost of shipping to American customers has surged, posing additional challenges.
Sternberg expressed her concerns, stating, “We are working so hard to stay above water. To expect people who are running a small business and managing multiple tasks to be well-versed in all aspects of exporting is unrealistic.”
- What strategies are you employing to reduce costs this holiday season? Share your insights with us at ask@cbc.ca.
‘We essentially alienated half of our customer base’
The elimination of the de minimis exemption has presented significant challenges for small businesses, according to Samuel Roscoe, a business education professor at the University of British Columbia.
Many businesses had to quickly adapt to mitigate customs and duties charges, with options such as incorporating the duty into the checkout cost or having customers in the U.S. pay duties upon delivery. However, the latter approach may lead to returns or unexpected charges if the customer refuses to pay.
In August, the Canadian Federation of Independent Business conducted a survey involving 3,315 members, revealing that 31% of small and medium-sized businesses anticipated direct or indirect impacts from the end of the de minimis exemption.
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