Navigating the end of de minimis: Strategies for Canadian businesses

Businesses commonly affected by the de minimis suspension

The suspension of the de minimis exemption will affect a wide range of Canadian businesses exporting to the U.S. Below are five common business models that will experience operational and financial impacts, along with strategic considerations to help these businesses navigate the change.

1. Online marketplace sellers

Profile:

Businesses selling handmade, vintage, or niche products through platforms like Etsy, eBay, or Shopify. Many ship directly to U.S. consumers and may not fully understand their eligibility under CUSMA.

Impact:

• Previously duty-free shipments will now require full customs documentation.
• Increased costs and longer delivery times may reduce competitiveness.
• Returns may trigger additional duties or require complex re-entry procedures.

Strategic considerations:

• Assess CUSMA eligibility and ensure proper documentation. CUSMA-eligible imports may be more price competitive in the U.S. market than goods of some overseas competitors. While CUSMA-eligible goods remain in many cases duty-free in the U.S., the vast majority of overseas competitor products are now subjected to a minimum additional duty rate of 15 percent.
• Communicate clearly with customers about potential changes in pricing or delivery.

2. Manufacturers and assemblers using non-CUSMA inputs

Profile:

Businesses that import components from non-CUSMA countries (e.g., China, Germany), assemble products in Canada, and export to the U.S. These goods may or may not qualify for preferential treatment under CUSMA. Generally, the simpler the assembly process and the lesser the aggregate value added in Canada, the U.S., and Mexico, the less likely it is that the goods will qualify, even where otherwise considered “made in Canada.” For a professional assessment, connect with your business advisor.

Impact:

• Non-CUSMA goods may face full U.S. tariffs for the country of origin (including Canada, at 35 percent).
• Increased scrutiny and documentation requirements.
• Potential loss of price competitiveness in the U.S. market.

Strategic considerations:

• Re-evaluate sourcing strategies to favor CUSMA-compliant inputs.
• Explore tariff engineering (building a product to fit a tariff classification) or product reclassification (revisiting tariff classification).
• Consider bulk shipping and U.S. warehousing to reduce per-unit costs.

3. Fulfillment-based retailers or drop shippers

Profile:

Businesses that sell online but rely on overseas suppliers to ship directly to U.S. customers. These organizations often never handle the inventory themselves.

Impact:

• Every shipment now requires a formal customs entry and may be subject to duties.
• Fulfillment delays and increased costs could erode margins.
• Customer dissatisfaction due to unexpected fees or slower delivery.

Strategic considerations:

• Shift to U.S.-based warehousing or third-party logistics (3PL).
• Consolidate shipments to reduce customs complexity.
• Organize the customs audit trail: invest in efficient and reliable recordkeeping.
• Invest in customs compliance tools or services.
• Communicate tariff increases transactionally to customers, where strategically appropriate for your business model.

4. Subscription box and direct-to-consumer brands

Profile:

Organizations offering curated boxes or direct-to-consumer products (e.g., wellness, snacks, beauty) shipped regularly to U.S. customers.

Impact:

• Higher landed costs and potential delays.
• Returns may trigger duties or require reclassification.
• Fulfillment disruption due to cross-border friction.

Strategic considerations:

• Reassess product sourcing for CUSMA compliance.
• Consider U.S.-based fulfillment to maintain service levels.
• Update customer communications and pricing models.

5. B2B exporters of low-value components

Profile:

Businesses exporting small parts, samples, or components to U.S. manufacturers or distributors. These shipments often fall under the $800 threshold.

Impact:

• Increased administrative burden and customs costs.
• Potential delays in delivery and reduced competitiveness (except CUSMA-originating goods).
• Risk of losing U.S. clients to domestic suppliers.

Strategic considerations:

• Shift to bulk shipping and U.S. warehousing.
• Offer customs support or bundled services to U.S. clients.
• Re-evaluate pricing to absorb or pass on new costs.

What businesses can do now

The suspension of the de minimis exemption introduces new complexity, but it also presents an opportunity for businesses to reassess their cross-border strategies.

Here are several steps organizations can take to mitigate risk and maintain competitiveness in the U.S. market:

1. Assess your exposure to tariffs

Start by taking stock of the products you export to the U.S. and identifying which ones are most vulnerable now that the de minimis exemption has been suspended. Some goods may still qualify for preferential treatment under CUSMA, but many businesses aren’t fully aware of the documentation required to claim it.

Beyond general duties, it’s also important to evaluate exposure to sector-specific tariffs, particularly in industries like steel, aluminum, and lumber, where punitive rates may apply. To streamline this process, MNP’s Tariff Exposure Risk Assessment Tool can help you quickly pinpoint areas of risk and prioritize where to take action.

2. Re-evaluate fulfillment and logistics

With every shipment now subject to customs scrutiny, businesses should consider whether their current fulfillment model still makes sense. Shifting to U.S.-based warehousing or partnering with a third-party logistics provider can reduce border friction and improve delivery timelines.

Bulk shipping strategies, where goods are consolidated and cleared through customs in larger volumes, can also help lower per-unit costs. And with returns now potentially triggering duties or requiring re-entry documentation, it’s a good time to review reverse logistics processes to ensure they’re efficient and compliant.

3. Strengthen customs compliance

Accurate customs documentation is essential. Every shipment should include the correct Harmonized Tariff Schedule (HTS) classification codes and clearly stated country-of-origin information. Where applicable, CUSMA origin documentation should also form part of a well-managed audit trail, and importers into the U.S. are well-advised to invest in recordkeeping processes.

Businesses that rely on manual processes may find it increasingly difficult to keep up. Investing in customs automation tools or working with experienced advisors and brokers can help streamline filings and reduce errors for these businesses. Staying current on evolving compliance requirements will also be key to avoiding delays, penalties, or reputational damage.

4. Revisit sourcing and product design

The suspension of de minimis is a good moment to rethink your sourcing strategy. Suppliers within CUSMA countries may offer a path to duty-free treatment, helping you maintain margin and competitiveness.

In some cases, product redesigns or reclassifications could qualify your goods for lower duty rates. Trade advisors can help you explore opportunities — such as modifying product composition or packaging — to reduce exposure without compromising quality or brand integrity.

5. Communicate with customers and partners

Transparency is critical. U.S. customers may experience changes in pricing, delivery timelines, or return policies and they’ll appreciate being informed upfront. Updating your shipping terms and finding strategically appropriate ways to communicate the new tariff costs to your customers can help manage expectations and reduce friction.

Internally, collaborating with U.S. partners on logistics or compliance can create efficiencies and help you adapt more quickly to the new environment.