Canadian businesses worry over potential scrap of de minimis
While much of the attention on former U.S. President Donald Trump’s threatened tariffs has focused on a proposed 25 per cent import duty, small business owners are increasingly worried about another potentially looming change: his plan to scrap a key tax exemption on “low-value” packages shipped to the U.S.
The exemption, known as de minimis — a legal term meaning “too small to be considered”— allows businesses in Canada to send packages valued up to US$800 to American customers without incurring duties. Increased to US$800 in 2016, it has made cross-border sales easier and more affordable.
“It makes them more competitive, and they’re able to go up against those online giants,” Laurie Auger, senior policy analyst for the Canadian Federation of Independent Business, told CTV News.
But now with de minimis on the chopping block, Canadian entrepreneurs fear losing U.S. customers who may be unwilling to pay extra fees or deal with added paperwork.
“Our American online consumers really take advantage of it,” said Joanna Goodman, CEO of Toronto-based Au Lit Fine Linens. “They benefit from that US$800 exemption. I think once that goes, if it goes, that would likely be the end of our American business online.”
Goodman’s company, which sells items like duvets, loungewear, and towels, manufactures its products in Montreal and employs 47 people. While most of its customers are in Canada, about 10 per cent of sales go to the U.S.
“There are businesses where the core of their business is an American clientele. I would not want to be in their shoes right now,” she adds.
“I’m concerned for the economy and concerned for friends in business who are really, really going to take a hit.”
The uncertainty is already hitting Canadian companies hard. This week, Montreal-based pantyhose brand Sheertex announced the temporary layoff of 40 per cent of its 350-person workforce, citing concerns over de minimis and tariffs. Meanwhile, Looped Laces, a Canadian premium shoelace company, announced on its website that it has temporarily shut down operations.
“It’s especially concerning for businesses that rely on being able to ship small items—things like books, arts and crafts, or you’re trying to tap into the U.S. market,” Auger says.
The U.S. did repeal the duty-free handling of smaller packages from China on Tuesday, but the change led to chaos and frustration, as many packages piled up at U.S. customs. On Friday, the de minimis repeal was also paused for China.
While the U.S. de minimis threshold is currently set at US$800, Canada’s is significantly lower. Duties apply to imports over C$150, while taxes kick in at just C$40 — highlighting a contrast in trade policies between the two countries.
This article was first reported by CTV News
