Understanding the De Minimis Exemption and Its Impact on Canadian Businesses

Canadian businesses are facing significant challenges in light of recent threats from U.S. President Donald Trump to impose hefty tariffs on goods imported from Canada. A notable concern among these businesses is the potential loss of what is known as the de minimis exemption.

The de minimis exemption currently allows companies to ship packages worth less than $800 to the U.S. without incurring duties. This exemption has been a crucial resource for many Canadian companies that export their products across the border.

One company feeling the heat is Made with Local, an organic snack foods business based in Dartmouth, Nova Scotia. Following Trump's tariff announcement, CEO Sheena Russell halted orders from U.S. customers. She expressed concern that if the de minimis exemption were to disappear, it could create a logistical nightmare and result in higher costs for their customers.

The Stakes for Canadian Companies

Russell described the situation as frustrating, noting, "If our team needs to babysit every single $70 order for two boxes of granola bars going into the States, it quickly becomes unmanageable." She fears that customers will not be willing to pay increased prices that would result from the loss of the exemption.

Many Canadian businesses echo Russell's sentiments. They believe the elimination of the de minimis exemption could be as damaging as the proposed 25% tariff Trump has threatened. Katherine Homuth, CEO of Montreal-based Sheertex, a pantyhose manufacturer, highlighted that the impending tariffs, combined with the potential removal of the de minimis exemption, could lead to layoffs and increased operational costs. Homuth noted that 85% of her company's sales come from the U.S., making it critical for them to navigate these changes carefully.

Preparing for Uncertain Future

While some companies, like Made with Local, are more insulated from U.S. sales, the unpredictability posed by potential tariff and exemption changes still causes concern. Russell stated that her company had ambitious plans for growth in the U.S. market, which are now on hold.

Similarly, Rachael Newton, who runs the menstrual products company Nixit in Toronto, has already moved to stockpile inventory in advance of the potential changes. With fulfillment centers in both the U.S. and Canada, the absence of the de minimis exemption would complicate their operation, adding extra costs that she worries could be difficult to pass on to their customers.

For many Canadian companies, the fate of the de minimis exemption is now intertwined with their operational strategies and potential growth in the challenging U.S. market.

business, tariffs, exemption