Businesses preparing for the elimination of the de minimis exception
The closure of the de minimis exemption by President Donald Trump has sent ripples across the Canadian business landscape, particularly for small businesses that heavily rely on U.S. sales.
Canada Post has announced its decision to use a third-party service, Zonos, to collect duties from customers and send them directly to U.S. Customs and Border Protection. This move comes in the wake of the de minimis exemption being closed, which previously allowed duty-free entry for packages worth less than US$800.
The closure of this exemption means that most Canadian packages will now be subject to a 35% duty or tariff. Dave Pelkey, owner of The Vintage Crate, an antique business that represents 60% of his total business, is one of many who will now have to bear the brunt of these new costs, along with brokerage fees, and rely on more expensive shipping companies. Pelkey stated that it's historic that post offices around the world have stopped shipping to the U.S. due to the closure of the de minimis exemption.
Elana White, owner of Outer Layer, a Toronto-based card and gift store, has suspended shipping to the U.S. for the same reason. Korriko Pet Supply, a B.C.-based pet ware business, saw more than half of its business disappear when it halted shipping to the U.S. due to the closure of the de minimis exemption.
Canadian companies involved in logistics, shipping, and retail sectors fear losing connections to their U.S. customers. Cal Green, owner of Raised By Wolves, an Ottawa-based streetwear brand, is concerned about the high costs of shipping to the U.S. and plans to pass them off to American customers.
Samuel Roscoe of the University of British Columbia stated that the de minimis exemption was mainly put in place to reduce the burden on U.S. border and customs agencies. The exemption was designed to expedite their work and avoid dealing with paperwork and filings for small value packages.
The suspension of package deliveries to the U.S. is not limited to Canada. Fourteen European countries, Russia, China, India, and Mexico have also halted deliveries. The UN reported that 25 countries, including American allies like South Korea, Australia, Taiwan, and New Zealand, have suspended postal service to the U.S. The Mexican postal service is among those that have temporarily stopped package deliveries to the U.S.
The closure of the de minimis exemption is expected to have a large effect on Canadian commerce. The uncertainty and additional costs could potentially force some businesses to reconsider their strategies, including shutting down their online stores to U.S. customers, as Pelkey is contemplating.
This development underscores the far-reaching implications of trade policies and the need for businesses to adapt and navigate the changing landscape.
