Canadian online retailers are facing a challenging decision following the end of duty-free shipping for small packages to the U.S. They must now decide whether to absorb expensive fees on low-value shipments to attract American customers during the holiday season or risk losing that market entirely.
Previously, packages valued under $800 US could enter the U.S. duty-free, but this changed in August due to an executive order by President Donald Trump. This shift forced businesses like Free Label Clothing, an online store in Vancouver, to halt shipping to the U.S. for nearly three months, significantly impacting their sales since half of their business comes from American customers.
With the holiday season underway, small businesses like Free Label Clothing are striving to boost online sales while grappling with increased shipping costs to the U.S. Despite the challenges, many are finding ways to adapt. For instance, some businesses are incorporating duty fees into checkout costs or requiring American customers to pay duties upon delivery, although this approach poses potential risks.
A survey conducted by the Canadian Federation of Independent Business revealed that 31% of small and medium-sized businesses anticipated being affected by the end of the de minimis exemption. Businesses that couldn’t comply with the new regulations or afford customs guidance may have opted to cease shipping to the U.S. altogether.
Innovative solutions have emerged, such as establishing distribution centers in the U.S. to streamline shipping processes and reduce costs. For instance, Free Label Clothing now allows American customers to place orders on Sundays to manage paperwork efficiently.
Despite these efforts, concerns linger about losing American customers permanently. The impact of the de minimis exemption’s end extends beyond individual businesses, affecting the broader Canadian economy. Small and medium-sized enterprises play a vital role in Canada’s economic landscape, and any disruption to their operations can have far-reaching consequences, affecting employment and overall economic stability.
