The closing of a little-known U.S. shipping loophole could add insult to injury for Canadian businesses already facing a potential tariff war.
Driving the news: Buried in the fine print of the pending U.S. tariffs on Canadian goods is an order to close a nearly 100-year-old shipping loophole called the de minimis exemption, which has allowed packages worth less than US$800 to enter the U.S. duty free.
- Canada’s own de minimis exemption for U.S. goods is far lower at C$150 (US$116.50), a discrepancy that some shipping companies say creates an unneeded trade barrier.
Why it matters: In 2023, an estimated US$54.5 billion worth of goods came into the U.S. using the exemption, many from small businesses. For some Canadian companies that rely on American customers, the loophole getting closed is a serious threat to their business.
- The CEO of Montréal-based Sheertex cited the potential closing of de minimis as a factor for having to temporarily lay off 40% of the company’s workforce.
- The Sunscreen Company, based in Grimsby, Ontario, says U.S. order accounts for 40% of its sales. Sheertex is even more reliant, with 85% of its sales coming from the States.
Bottom line: One international trade expert told The Logic that even if the threats of 25% tariffs are dropped, de minimis is likely still at risk of being axed given the Trump administration’s focus on boosting tariff revenues.—LA