Urgent: Canadian Businesses Brace for $800 Duty-Exemption End

UPDATE: Canadian small businesses are in crisis mode following President Donald Trump’s recent executive order to eliminate the de minimis exemption, which previously allowed packages valued under $800 to enter the U.S. duty-free. This sweeping change could drastically reshape cross-border commerce, leaving many entrepreneurs questioning their future viability in the American market.

As of August 2, 2023, Canadian packages will face a staggering 35 percent duty, significantly raising costs for customers and businesses alike. This sudden shift means that while packages worth less than $100 sent by individuals remain exempt, commercial shipments are now mired in uncertainty.

Elana White, owner of Outer Layer in Toronto, expressed her immediate concerns: “I suspended shipping to the U.S. earlier this week. It’s confusing, and nobody really knows how much it’s going to cost,” she told CTV News. White’s decision underscores the urgency felt by many business owners, as American customers may soon find themselves unable to purchase Canadian goods without hefty tariffs.

Cal Green, from the Ottawa-based streetwear brand Raised By Wolves, highlighted the implications for his business model: “Our long-standing customers are going to be surprised,” he said. With a substantial portion of his collection produced in Canada, he now faces the challenge of passing increased shipping costs onto consumers. Green is shifting focus to Canadian sales, indicating a significant pivot in strategy amid the chaos.

The fallout is severe for businesses reliant on U.S. customers. Marion Kao, owner of Korriko Pet Supply in British Columbia, reported a collapse of more than half her revenue after halting shipments to the U.S., which accounted for 60 percent of her business. “I don’t know, this could be the end, hopefully it’s not,” Kao lamented, encapsulating the fear felt across many sectors.

The de minimis exemption was originally intended to streamline operations for U.S. customs, but the Trump administration has linked its removal to concerns over potential smuggling of illicit substances. Official statements from the White House suggest that low-value packages have been exploited to bypass regulations, particularly regarding the opioid crisis.

As if the situation weren’t dire enough, 25 countries, including allies like South Korea and Australia, have suspended postal services to the U.S., further complicating international shipping logistics. The United Nations reported on August 1, 2023, that multiple nations have halted mail services, indicating a broader disruption in global trade.

Canada Post is attempting to navigate this crisis by partnering with a third-party service, Zonos, to manage the new duties and fees. Officials confirmed they are taking steps to maintain business continuity as they face these unprecedented challenges. “Canada Post has worked to secure necessary solutions to maintain business continuity for our customers,” they stated.

The impact on small businesses extends to those who sell unique items. Dave Pelkey of The Vintage Crate shared his struggles with the new duties, expressing frustration over the classification of his antique toys as national security issues. “That works out to 60 percent of my antique business,” he stated, highlighting the significant economic repercussions for niche markets.

With the de minimis exemption now fully terminated, Canadian businesses are bracing for a potential reshaping of their operations and customer bases. The urgency for a clear path forward is palpable as entrepreneurs seek to adapt in real-time to these dramatic changes.

What’s Next: Business owners will be keenly watching for updates from the U.S. government regarding potential adjustments to these regulations or support measures. The fallout from this decision will likely continue to unfold in the coming days, with many businesses grappling with the immediate effects on their sales and strategies. As the landscape shifts, one thing is clear: the cross-border trade relationship between Canada and the U.S. is at a critical juncture.