Canadian online retailers are facing a tough decision following the discontinuation 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 against the potential boost in holiday sales from American customers.
For almost a century, international packages valued under $800 US could enter the U.S. duty-free under the de minimis exemption. This policy was terminated in August following an executive order by President Donald Trump. The impact was significant for businesses like Free Label Clothing, an online store in Vancouver, which halted shipments to the U.S. for nearly three months, affecting nearly half of its business.
As the holiday season approaches, businesses like Free Label Clothing are banking on increased online sales to offset the impact of pricier shipping to American customers. Samuel Roscoe, a business education professor at the University of British Columbia, noted that many small businesses had to find ways to mitigate customs and duties charges post the exemption’s end, leading to adjustments in their shipping strategies.
Some businesses integrated duty costs into the checkout price or had American customers pay duties upon delivery. However, challenges such as potential returns or unexpected charges arose from this approach. A survey by the Canadian Federation of Independent Business revealed that 31% of small and medium-sized businesses anticipated being affected by the exemption’s end, either directly or indirectly.
Businesses that couldn’t comply with the Canada-U.S.-Mexico Trade Agreement or afford customs broker guidance may have ceased U.S. shipping. Some resorted to innovative solutions, like establishing distribution centers in the U.S. to ship bulk packages from Canada, reducing brokerage costs. For instance, Free Label Clothing now allows American customers to place orders weekly on Sundays to manage paperwork efficiently.
Meanwhile, Catherine Choi, owner of Hanji Gifts in Toronto, decided to halt U.S. shipments preemptively due to tariffs and postal strike concerns. Despite American customers offering to cover duties, Choi remained cautious, especially with the removal of duty-free shipping. She acknowledged the impact on potential U.S. customers and expressed hopes of resuming U.S. shipping if circumstances change.
Roscoe emphasized the significance of small and medium-sized enterprises in the Canadian economy, underscoring the ripple effect of the exemption’s removal on businesses, profit margins, employment, and the overall economy. The adjustment to the new shipping landscape poses challenges for Canadian online retailers, prompting them to reevaluate their strategies and adapt to the changing trade environment.