WASHINGTON, D.C. — Darya Kosilova’s online vintage store, specializing in garments from the 80s and 90s, has drawn attention from celebrities, including Hailey Bieber.
Her Vancouver-based Cherish the Label has been in business for five and a half years, and for much of that time, Kosilova has enjoyed six-figure years, with nearly 90 per cent of her sales going to the United States. But this year, orders have dropped amid trade tensions, and Kosilova is concerned that things are about to get a whole lot worse.
Like many small business owners, Kosilova has shipped the vast majority of her U.S.-bound parcels without incurring duties because the contents, valued under $800, qualified for the de minimis exemption. But as of Friday, Aug. 29, President Donald Trump is cancelling the 95-year-old trade policy that allows these low-value goods to enter the U.S. duty-free.
“I only have one of everything in stock, so it takes a lot of effort and push on my end to get this product out into the world, and I can only sell it once,” Kosilova said. “So, if all of a sudden my market just disappears, it’s a big impact.”
With nearly four million de minimis packages entering the U.S. each day, international businesses and shippers are scrambling to determine whether they can still get their products into the U.S. — and at what cost. The new duties will be at the country of origin’s International Emergency Economic Powers Act (IEEPA) tariff rate or, for six months, at a flat duty rate ranging from $80 to $200 per package.
While many Canadian products qualify under the Canada-United States-Mexico Agreement (CUSMA) and can avoid the new duties, that’s only true of businesses that meet the CUSMA rules of origin — a certification process many small traders previously ignored due to the de minimis exemption.
Now, sellers of Canadian-made goods are scrambling to obtain proper certification. As a curator of vintage clothes, however, Kosilova cannot easily provide the required documentation to prove where components of her sales items were made.
How we got here
De minimis, which means “of trifling importance,” was set up to spare the U.S. government from having to collect duties on imports of little value. It started in 1938, under the Tariff Act of 1930, allowing for imports of up to $1 in value to enter the U.S. duty-free.
While many countries offer some form of a de minimis exemption, Washington’s level became an outlier. Over time, the values grew. By 2015, it was $200, with roughly 134 million de minimis parcels entering the U.S. A year later, the limit rose to $800, and 220 million packages flooded in, and by last year, a whopping 1.36 billion units arrived.
More than half of those shipments came from China, which has long been accused of using the exemption to send fraudulent products and illicit drug components into the U.S. market. So few were surprised when Trump ordered that the de minimis exemption be suspended for China and Hong Kong in May. The rest of the world was told via the One Big Beautiful Bill Act that it had until July 2027 before the exemption would expire — but an executive order issued under IEEPA in late July upended that, catching many off guard.
Canadian businesses have made good use of the exemption, with just over 85 per cent of Canadian exporters shipping to the U.S., according to Statistics Canada.
Fearing the worst
Larger Canadian businesses are used to dealing with clearing customs and paying duties. But now, small and medium-sized businesses are trying to work out solutions for shipping in bulk and, where needed, leasing warehouse space in the U.S.
Mark Becker, CEO of Wisconsin-based G10 Fulfilment, a 3PL company offering storage and inventory management, said small Canadian businesses either have to “figure out how to get the customer to pay more for their product,” or they will have to stock goods in a U.S. warehouse. Or both, given that the latter adds operational costs.
This is especially true for businesses whose products contain components originating from places like China, Vietnam, or India, because the new duties relate to the origin countries, not the sellers’.
Jesse Mitchell, director of business development for Strader-Ferris International, a Canadian & U.S. customs brokerage, cross-border logistics, and warehousing company, offered an example: If an international business ships a $200 shirt to the U.S. but that shirt was originally made in China for $10, the duty could end up being several times more than the cost to make it.
“Those companies are going to be in big trouble,” said Mitchell. “If they owned a 200,000 square foot warehouse in Canada and 80 per cent of their business was in the U.S., they’re going to be shot,” he said, noting how they will have to downsize in Canada and open a warehouse in the U.S.
But even businesses selling CUSMA-compliant products are worried.
Lucie Quigley, owner and president of Gutter Saver Pro, based in Musquodoboit Harbour, Nova Scotia, is proud to make her ladder gutter protectors in Canada — notably with Texas-made plastics — but worries she may soon have to move products to storage in the U.S.
Quigley has a certificate of origin under CUSMA, so she should receive a zero per cent tariff, but she fears she’s still not in the clear. She cited confusion and said that based on what she has gleaned from shippers, she believes she has two options. “I either have to pay for clearance on every shipment, and the pricing around that is not very transparent … or I have to look at finding a warehouse in the U.S.”
Thousands of entrepreneurs are looking for U.S. warehouse space, but they’ve only been given a few weeks to pivot — and it’s a process that normally takes many months.
Becker says he is quoting more Canadian businesses at the moment than he ever has, but he can’t offer immediate solutions. “I’m already starting to get into the busy season,” he said. “By October, I can’t be moving new customers in. It would just be a recipe for disaster [before the holidays].”
But it’s not just Canadian firms vying for U.S. space – it’s global. “We’re talking hundreds of thousands of companies that are in trouble that now need to find footprints in the States,” Mitchell said.
Given the rapid pace of change and the confusion around pricing, several countries or their mail carriers — including France, Germany, Japan, the UK, Australia, Austria, India, Denmark, and Switzerland — have suspended some shipments to the U.S. as they await clearer guidance. Shipping delays and uncertainty, in turn, are bound to lead to supply chain hiccups.
Clark Packard, a research fellow and trade expert at the Cato Institute, expects the U.S. policy change to raise shipping costs and shipping times, while hurting small and medium-sized businesses in both Canada and the U.S.
“A small business in the United States that’s buying products, coming from Canada or wherever, under the de minimis exemption, you should expect significant delays and higher prices,” he said.
Still, many shippers, businesses, and U.S. authorities are thrilled by the change.
The fentanyl crackdown
According to the Centers for Disease Control, an estimated 48,422 Americans died last year from fentanyl overdoses – down from 76,282 in 2023. De minimis shipments, particularly from China, have long been blamed as an easy conduit for sending precursor chemicals for fentanyl into the U.S.
Brian Townsend, a retired supervisory special agent with the U.S. Drug Enforcement Administration, spent years fighting the fentanyl scourge in America. In fact, in retirement, he’s still fighting – providing drug training to first responders, parents, and youths.
The DEA and other U.S. authorities are tackling the drug problem from many angles, and one of them is the mail system, he explained.
“Drug traffickers are using the de minimis loophole to send fentanyl and other illicit drugs and contraband, knowing that it’s going to go through no or minimal inspection,” Townsend said.
Most trade experts recognize the advantage of closing this path for illicit drugs. Andrew Hale, a senior policy analyst at Heritage Foundation, said he and his colleagues want the U.S. to maintain the de minimis exemption at $800.
“But throw China out of it. That’s been our position,” he said, acknowledging that de minimis shipments from China are used to smuggle drugs.
Reducing the number of packages flooding the U.S. market will reduce the workload for customs and postal workers, experts noted. Between 2016 and 2024, there was over a 500 per cent increase in parcels flowing into the U.S. under the exemption.
Finally, getting rid of de minimis could help boost some firms doing business in the U.S. It makes it harder for bad players to manipulate the system and underprice U.S. competitors with fraudulent customs forms and even fraudulent products, Becker said.
It should give those who are committed to doing business in the U.S. “a fair shot,” he said, of not being undercut by those skirting taxes to win on price.
Still, with so much fluctuation in U.S. trade policy this year, many are wondering whether the change will stick.
What’s next?
Quigley, for one, hopes Mark Carney can come to an agreement with Trump that will help reverse the trade tensions, including the scrapping of de minimis.
“Our prime minister is not doing what he promised in his campaign,” she said. “He promised to negotiate and to come up with a good deal.”
Many trade analysts and Carney himself have pointed out, however, that Canada already has the most favourable trade deal with the U.S. under CUSMA, so it’s unlikely that a tête-à-tête will change a Trump policy impacting the globe.
For now, Canadian business owners should plan on the de minimis exemption disappearing.
“I can tell you we are planning on it not coming back,” said Becker.
But for those hoping to see de minimis revived, there is a legal challenge that could change the game, said Hale.
Any day now, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., should deliver its decision on the legality of Trump’s IEEPA tariffs. If the court affirms a lower court decision against the tariffs, it could mean the de minimis exemption — also an IEEPA measure — could return for some imports.
“The Department of Justice says any potential court order scrapping the IEEPA tariffs would revive de minimis,” Hale explained.
Most experts said some level of de minimis makes sense, but they want to see a lower level to protect against a flood of low-value shipments and better policing of the process to avoid fraudulent and illicit goods from entering the U.S. market.
National Post
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