Post by : Meena Ariff

This holiday season, Canadian small businesses are grappling with significant hurdles following the cessation of the U.S. duty-free shipping policy for packages valued below $800. The long-standing de minimis exemption allowed goods to cross into the United States without incurring customs duties, but an executive decision made in August has put an end to this practice.

The impact for many local retailers has been instantaneous and troubling. Jessica Sternberg, who runs Free Label Clothing, an online shop in Vancouver, ceased U.S. shipments for almost three months. This break affected nearly 50% of her sales, which were heavily reliant on American clientele. With the festive season approaching, she and others find themselves facing a difficult dilemma: either absorb increased shipping and customs costs or risk missing out on American consumers.

"Expecting small business owners to grasp every aspect of exporting is unrealistic," Sternberg remarked, citing the pressure on her team to maintain profitability. Currently, her store only processes U.S. orders on Sundays to allow for the necessary administrative work. However, she fears that many previous American buyers may have found alternatives during the shipping hiatus.

Experts suggest that small businesses are deploying creative strategies to adjust to the new trade landscape. Samuel Roscoe, a business educator at the University of British Columbia, indicated that some retailers are incorporating customs duties into their total checkout price, while others require customers to settle fees upon delivery—though this latter option increases the chances of returns if payment is not made. Additionally, some enterprises have opted to open distribution centers in the U.S. to bulk ship and diminish brokerage costs.

A survey by the Canadian Federation of Independent Business in August showed that nearly one-third of SMEs expect adverse impacts from the elimination of the de minimis exemption. Many struggling to comply with the Canada-U.S.-Mexico Trade Agreement or afford customs brokerage fees are choosing to halt U.S. shipments altogether.

Nonetheless, some American shoppers are still open to covering duties. Catherine Choi, co-owner of Hanji Gifts in Toronto, noted a number of U.S. customers expressing eagerness to buy despite new hurdles. However, Choi has opted not to resume U.S. shipping, citing the complexity of tariffs and customs rules, along with unpredictability in postal services. Her focus remains on Canadian buyers for the holiday season, although she recognizes the opportunity cost of missed U.S. sales.

The broader economic implications are significant. Small and medium-sized enterprises are crucial to Canada's economy, employing numerous individuals nationwide. When these businesses face a pinch in profit margins, they frequently resort to hiring fewer workers, instigating a ripple effect that could influence the economy at large. Roscoe highlighted that the removal of this exemption could have far-reaching consequences, affecting not just business owners but also their employees and local communities.

For Canadian retailers, the termination of duty-free shipping to the U.S. is not merely an operational obstacle—it serves as a pivotal consideration in their ability to sustain sales, hold onto customers, and thrive during the peak shopping season. Many are cautiously maneuvering through these changes in hopes of salvaging holiday earnings while adapting to a more costly cross-border trade environment.

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