With no more duty-free shipping of small packages to the U.S., Canadian online retailers will have to make a tough gamble: pay pricey fees on low-value shipments, or get a holiday sales boost from American customers?
For nearly a century, international packages valued less than $800 US could enter the U.S. duty-free under the de minimis exemption. That policy ended in August when an executive order from President Donald Trump went into effect.
At the time, the choice was clear for some businesses.
“We did not ship to the United States for nearly three months,” said Jessica Sternberg, the owner of Free Label Clothing, an online clothing store based in Vancouver. But that had “a huge impact on our business because nearly 50 per cent of our business comes from the U.S.”
Now, it’s the holiday season — and Sternberg’s small business, like many others, is relying on an online sales boost to break even. At the same time, shipping to American shoppers is more expensive than it has been in a long time,
“We are working so hard to stay above water,” she said. “To expect people who are running a small business that are juggling a million different things to know everything there is to know about exporting is so unrealistic.”
‘We basically isolated half of our customers’
The end of the de minimis exemption has been a “huge adjustment” for small businesses, said Samuel Roscoe, a professor of business education at the University of British Columbia.
Many of them “had to scramble around and find different ways to mitigate those customs and duties charges,” he said.
An e-commerce business might build the duty into the total checkout cost, or have American shoppers pay the duties themselves upon delivery. But in the latter scenario, the Canadian retailers sending them could risk returns or surprise charges if the shopper doesn’t pay.
Back in August, the Canadian Federation of Independent Business surveyed 3,315 of its members, with 31 per cent of those small and medium-sized businesses saying that they’d be impacted by the end of the de minimis exemption either directly or indirectly.
The U.S. has announced it’s eliminating a longstanding trade policy – the de minimis exemption – which has left businesses dealing with yet another trade disruption to navigate.
According to Roscoe, those that couldn’t make their goods compliant under the Canada-U.S.-Mexico Trade Agreement (CUSMA) — or who couldn’t afford to pay a customs broker for guidance — may have decided to stop shipping to the U.S. altogether.
Others have had to get creative, opening up distribution centres in the U.S. where they might ship bulk packages from Canada, rather than paying brokerage fees on small packages individually, explained Roscoe.
Sternberg had to get a little creative herself. Her business now lets American customers place orders once a week on Sundays — giving her team the rest of the week to do the requisite paperwork.
Still, she’s worried that those U.S. shoppers have already moved on after being shut out from her site for months.
“We basically isolated half of our customers and are hoping that they come back to shop this one day for our only sale of the year,” she said. Their annual sale is several days, but hits just one Sunday.
“And this — as most small businesses experience — this one sale is going to make up most of our profit for the year, so this is a big problem.”
“I’m hoping that we do get a lot of traffic on that one day for Americans, but more so, I am hoping that our Canadian customers come and show up for us.”
U.S. shoppers offer to pay duties, says business owner
One small business owner who stopped shipping to the U.S. even before the end of the de minimis exemption says she’s been getting a surprising offer from American customers.
“I’ve had emails saying that they’ll pay the duties and they’ll figure it out,” said Catherine Choi, who runs Hanji Gifts, a trio of South Korean-themed gift shops in Toronto.
Choi decided months ago that — between the imposition of American tariffs and the lingering threat of postal strikes — she wouldn’t take the risk of shipping to the U.S. anymore.
That hasn’t stopped American customers from asking her to. But she’s opted not to reverse her policy — and is even more reluctant to do so with the end of the duty-free shipping.
“The more I [looked] into it and the more complicated it got — it’s just too busy,” she said. She can see that Americans are trying to shop on her site, and abandoning their carts when they realize they won’t be able to check out.
At her shop on Toronto’s Queen Street, elaborate Christmas cards, stocking stuffers and 2026 agendas line the walls. While Choi will make most of her holiday sales from Canadian customers shopping in-store, she knows she’s losing out on U.S. shoppers surfing the web for deals.
“Our online sales are higher than last year. So I know that they’d be even higher if we were able to ship to the States,” she said, adding that she’ll reconsider shipping to the U.S. if things go back to how they used to be.
Roscoe, the professor, called small and medium-sized enterprises the “backbone” of the Canadian economy because they employ so many people across the country.
“If their businesses and their profit margins are impacted, then their employees are impacted. They hire less people. And you then have sort of a knock-on effect,” he explained.
“So just the removal of that one exemption has a ripple effect all across the Canadian economy.”
