Manitoba Small Businesses Halt U.S. Shipments Amid New Fees

As the deadline for low-cost parcel shipping to the United States approaches, small business owners in Manitoba are suspending their U.S. sales in response to impending fees. This significant change stems from a recent executive order by U.S. President Donald Trump, which suspends the de minimis exemption that previously allowed Canadian exports valued under US$800 to enter the U.S. duty-free. The new restrictions will take effect on August 29, 2023, prompting local entrepreneurs to reassess their cross-border operations.

One such business owner, Leiah Bauer, who runs Apothecandy, plans to stop U.S. orders on her website starting August 18. Bauer, who has sold goat milk soap to American customers for over 15 years, expressed her disappointment, stating, “It’s sad to tell them that I can’t ship them some of their favourite products.” The U.S. market constitutes at least 30 percent of Apothecandy’s sales, and Bauer has not yet devised a strategy to compensate for the anticipated loss.

The changes in duty exemptions have left many Manitoba entrepreneurs bewildered. For instance, Brad Skibinsky, owner of Eye and Ear Control Records, has also paused shipments to the U.S. While he notes that a percentage fee on his products could be manageable, a flat fee would be unfeasible. The executive order specifies various new charges, with fees on certain goods ranging from US$80 to US$200, depending on the tariff rate associated with the goods’ country of origin.

Widespread Impact on Small Businesses

According to Alan Dewar, executive vice-president of GHY International, the requirement for customs declarations on low-cost packages will lead to significant complications. Previously, many small shipments were processed without these declarations, but now all will require them, resulting in what Dewar describes as “staggering” increases in processing times and costs.

A report from the U.S. Congressional Research Service shows a remarkable increase in de minimis entries, with over one billion recorded in 2023 compared to just 153 million in 2015. This surge followed a change in 2016 when the threshold for duty-free imports was raised from US$200 to US$800. The Canadian Federation of Independent Business (CFIB) indicates that approximately 16 percent of its 4,500 Manitoba members engage in U.S. exports, relying heavily on the de minimis exemption.

Tyler Slobogian, a senior policy analyst with the CFIB, noted that many businesses have already paused marketing efforts in the U.S. and are exploring alternative markets. Some owners, like Milena Lye of Just the Goods, anticipate needing to raise prices for American customers, which could drive some away. Yet, Lye remains hopeful that the weaker Canadian dollar may keep her products competitive. “I feel like I’m making skin care products for a community of friends. I don’t want to cut them off,” she shared.

Shifting Strategies for the Future

In light of the new shipping challenges, some business owners are pivoting their focus towards Canadian customers. Natassia Bezoplenko-Brazeau, who operates Northlore, a body care company based in Winnipeg, has begun forging new partnerships with retailers in Saskatoon and Ottawa. She is preparing to notify her American customers of potential price increases due to the U.S. measures.

These developments reflect a broader concern among Manitoba entrepreneurs who rely on U.S. sales. With the U.S. government citing drug trafficking, including fentanyl, as a primary reason for the suspension of the de minimis exemption, the implications are profound for local businesses that depend on affordable cross-border trade.

As the August deadline approaches, many Manitoba business owners are left grappling with uncertainty and seeking ways to adapt to the new landscape of international trade. The evolving situation emphasizes the need for support and clear communication from both government and trade organizations to help small businesses navigate these challenging times.