Urgent Update: Duty-Free Changes Hit Northern Ontario Businesses Hard

UPDATE: Small businesses in northern Ontario are facing an urgent crisis as changes to duty-free shipping have dramatically impacted their operations. Since the United States altered its policy in August 2023, many local retailers are struggling to survive, with some reporting a staggering drop in sales from U.S. customers.

Derek Pearce, owner of The Brickspace in Sault Ste. Marie, Ontario, states that his business has been “barely staying afloat.” The new rules eliminated the “de minimis” duty-free treatment, which previously allowed goods valued at $800 or less to be shipped without tariffs. Now, items shipped to the U.S. are subject to tariffs based on their country of origin—meaning Pearce’s custom LEGO sets, made in Canada but reliant on materials from Denmark and China, are hit with tariffs as high as 34 percent.

“Since August, we’ve had maybe one or two orders from the States,” Pearce lamented. He has officially suspended all sales to U.S. customers to avoid the burdensome paperwork and high duties on low-value products, stating that filling out forms for a $40 LEGO set is “just not worth it.”

The holiday season, typically the busiest time for his business, has taken a devastating hit. Pearce has even had to cancel charitable initiatives to keep his operations afloat. He’s considering alternatives, such as allowing U.S. customers to pick up their orders in person near the border, a move that might allow them to claim the items upon re-entry into the U.S.

Mark Gagné, an artist from Sudbury, Ontario, is also feeling the pinch. Gagné, who owns Mindmelt Studio, saw 90 percent of his sales come from U.S. customers before the policy change. He initially stopped shipping to the U.S. but has recently resumed using an app called Zonos to navigate the new rules.

Despite finding a workaround, Gagné recognizes that the high cost of living is further stifling sales. “Things are definitely getting a lot tougher to be a self-employed artist,” he expressed, reflecting on what he calls his “hardest year” in 2023.

Many retailers are now grappling with the dual challenges of increased costs and decreased consumer spending. The once-popular “buy Canadian” movement, which surged during earlier economic uncertainties, seems to have lost momentum. “It was certainly an election slogan that got a lot of attention, but I think things are leveling off,” Gagné noted.

As these small businesses struggle to adapt, they are calling for a new trade deal that could address the issues surrounding duty-free shipping. The urgency for solutions has never been more pressing as the holiday season approaches, a time when many businesses rely on increased sales to survive the year.

With the holidays rapidly approaching, the situation for northern Ontario businesses remains dire. The lack of customers from the U.S. could lead to long-term impacts on their viability. Local entrepreneurs are urging the community to support their businesses and are hopeful for a resolution to these new tariffs.

As developments unfold, the focus remains on how these small businesses can navigate the evolving landscape and whether authorities will step in to alleviate the burden imposed by the new regulations.

Stay tuned for further updates on this critical situation affecting northern Ontario’s economy.