The words “de minimis exemption” may not be familiar to all Canadians, but the American government’s move to scrap that tariff exemption for low-value parcels may have a significant impact on small businesses across this country.
The exemption excludes duty on shipments of goods into the U.S. that ar e evaluated to be worth US$800 or less, but an executive order signed by U.S. President Donald Trump Wednesday will scrap that provision.
“I am super worried about the logistics and costs of this,” says Tamara Bavdek, founder of Montreal-based jewelry company, ‘This Ilk,’ which she started sixteen years ago. She works in her home studio with vintage lace to fabricate statement pieces including earrings and necklaces sold online, including on Etsy. She ships her unique works of art internationally, but about a third of her business is now with the U.S.
“The words (de minimis exemption) was not part of my vocabulary until Trump started bringing in tariffs,” says Bavdek. “But I was familiar with the provision. It made a lot of sense that for shipments under a certain amount there was no duty.”
De minimis is Latin for “lacking significance or importance, so minor as to merit disregard.”
That disregard, says Bavdek, opened the door to simple small business dealings.
The exemption was introduced in 1938, and now, more than 4 million de minimis packages enter the U.S. daily.
“It was mainly put in place because of the burden that it put on to the U.S. border and customs agencies and they, they just wanted to move things through quickly without having to deal with all of the paperwork and filings that were involved for small value packages,” says University of British Columbia Samuel Roscoe.
Roscoe explained to Bavdek what the impact of lifting that exemption could be on her business and others across Canada.
“Your $100 shipment would be taxed and duty at the same rate as a $2,000 shipment. So, you’re basically going to be paying whatever, rate that is agreed on between Canada and the United States,” he said.
With tight margins for small and medium enterprise owners, that hike in the cost of doing business is likely to be passed on to consumers. But what is also likely to be a concern are the logistics of switching over to a new system.
“I’m sending one package at a time to customers, and if I’m filling out a form every time… I don’t even know where I’m supposed to find this form,” says Bavdek.” I don’t know if my packages can get stuck. I don’t know what kind of delays I can tell my customers to expect. This is super worrisome to me.”
Roscoe considers this an additional barrier, adding that the change is creating a whole new industry of paperwork that businesses will have to fill out. It will also lead to delays as all international shipments coming into the United States will have to go through a documentation and custom clearance process.
“I pretty much guarantee you there is going to be delays, for, for shipments into the States as a direct result of this,” says Roscoe. “I wish I could give you some more good news Tamara, but unfortunately, I think, Trump seems to be making, as difficult as possible to do business with US customers at the moment,” he told Bavdek on a Zoom call.
Both say they hope Canadians will once again hear the message that it is important to support local businesses that may struggle because of this change.
Trump had earlier taken aim at packages shipped from China and Hong Kong, but the applicable duties will kick in for countries around the world as of Aug. 29.
