Pay high duties or lose U.S. shoppers? Some Canadian retailers forced to choose amid holiday sales

With no more duty-free shipping of small packages to the U.S., Canadian online retailers will have to make a tough gamble: pay pricey fees on low-value shipments, or get a holiday sales boost from American customers?

For nearly a century, international packages valued less than $800 US could enter the U.S. duty-free under the de minimis exemption. That policy ended in August when an executive order from President Donald Trump went into effect.

At the time, the choice was clear for some businesses.

"We did not ship to the United States for nearly three months," said Jessica Sternberg, the owner of Free Label Clothing, an online clothing store based in Vancouver. But that had "a huge impact on our business because nearly 50 per cent of our business comes from the U.S."

Now, it's the holiday season — and Sternberg's small business, like many others, is relying on an online sales boost to break even. At the same time, shipping to American shoppers is more expensive than it has been in a long time,

"We are working so hard to stay above water," she said. "To expect people who are running a small business that are juggling a million different things to know everything there is to know about exporting is so unrealistic."

The end of the de minimis exemption has been a "huge adjustment" for small businesses, said Samuel Roscoe, a professor of business education at the University of British Columbia.

Many of them "had to scramble around and find different ways to mitigate those customs and duties charges," he said.

An e-commerce business might build the duty into the total checkout cost, or have American shoppers pay the duties themselves upon delivery. But in the latter scenario, the Canadian retailers sending them could risk returns or surprise charges if the shopper doesn't pay.

Back in August, the Canadian Federation of Independent Business surveyed 3,315 of its members, with 31 per cent of those small and medium-sized businesses saying that they'd be impacted by the end of the de minimis exemption either directly or indirectly.

According to Roscoe, those that couldn't make their goods compliant under the Canada-U.S.-Mexico Trade Agreement (CUSMA) — or who couldn't afford to pay a customs broker for guidance — may have decided to stop shipping to the U.S. altogether.

Others have had to get creative, opening up distribution centres in the U.S. where they might ship bulk packages from Canada, rather than paying brokerage fees on small packages individually, explained Roscoe.

Sternberg had to get a little creative herself. Her business now lets American customers place orders once a week on Sundays — giving her team the rest of the week to do the requisite paperwork.

Still, she's worried that those U.S. shoppers have already moved on after being shut out from her site for months.