End of U.S. Duty-Free Shipping Hits Canadian Small Businesses During Holiday Season

Canadian small businesses are facing significant challenges this holiday season following the end of the U.S. duty-free shipping policy for packages valued under $800. For nearly a century, the de minimis exemption allowed goods to enter the United States without customs duties, but an executive order in August brought the practice to an end.

For many businesses, the impact was immediate and disruptive. Jessica Sternberg, owner of Free Label Clothing, an online clothing store in Vancouver, stopped shipping to the U.S. for nearly three months. She explained that the pause affected nearly half of her business, which previously relied heavily on American customers. With the holiday season approaching, Sternberg and others in her position are now navigating the difficult choice of paying higher shipping and customs fees or risking lost sales from U.S. shoppers.

"The expectations for small business owners to understand all aspects of exporting are unrealistic," Sternberg said, noting the strain on her team as they try to maintain profitability. Her store now accepts orders from the U.S. only on Sundays, giving her team time to manage the necessary paperwork. Even so, she worries that many of her previous American customers may have turned to other options during the shutdown.

Experts say small businesses have had to be creative in adapting to the new trade rules. Samuel Roscoe, a business professor at the University of British Columbia, said some retailers are including customs duties in the checkout price, while others require buyers to pay fees upon delivery. This second approach carries the risk of returns if the fees are not paid. Some companies have gone a step further by establishing distribution centers in the U.S., shipping in bulk to reduce brokerage costs.

A survey conducted in August by the Canadian Federation of Independent Business found that nearly one-third of small and medium-sized enterprises anticipated being affected by the end of the de minimis exemption. Those unable to comply with the Canada-U.S.-Mexico Trade Agreement or afford the guidance of customs brokers often chose to stop U.S. shipments entirely.

Despite these challenges, some American customers remain willing to pay duties themselves. Catherine Choi, co-owner of Hanji Gifts in Toronto, has received messages from U.S. shoppers eager to make purchases despite the new restrictions. Nonetheless, Choi has decided against resuming U.S. shipping due to the complexity of tariffs, customs regulations, and the uncertainty of postal services. Her store will focus primarily on Canadian customers for the holiday season, though she acknowledges the lost potential from online U.S. sales.

The economic implications extend beyond individual businesses. Small and medium-sized enterprises form a critical part of Canada’s economy, employing large numbers of people nationwide. When these businesses face reduced profit margins, they often hire fewer employees, creating a ripple effect that impacts the broader economy. Roscoe emphasized that the elimination of this single exemption can have widespread consequences, affecting not just business owners, but employees and local communities as well.

For Canadian retailers, the end of duty-free shipping to the U.S. is more than an operational challenge—it represents a significant factor in determining whether they can maintain sales, retain customers, and stay afloat during the busiest time of the year. Many are cautiously navigating these changes, hoping to salvage holiday profits while adjusting to a new and more expensive cross-border reality.