Small businesses brace for higher costs as U.S. ends shipping-fee exemption

Melissa Caracas Le-Fort poses in this undated handout photo. Caracas Le-Fort, founder of Tag4MyPet, says she's pausing shipments to the United States as the de minimis exemption — which allowed packages under $800 to ship south of the border — ends on Friday. THE CANADIAN PRESS/Handout - Tag4MyPet

As the latest change to the Canada-U.S. trade relationship is about to take effect, Melissa Caracas Le-Fort is facing a deadline of her own.

After Caracas Le-Fort announced on social media mid-August that her business would no longer take orders from American customers after Aug. 26, requests for custom-made pet tags began pouring in.

Now, she and her husband, Carlos, are putting in 12-hour days to fulfil over 300 orders before Friday, when the costs of shipping items south of the border will go up exponentially.

“We cannot ask the U.S. customers to pay that, and we can’t absorb it ourselves,” said Caracas Le-Fort, founder of Winnipeg-based Tag4MyPet.

“It’s a lot. It’s so sad.”

The United States is eliminating what’s known as the de minimis exemption, which had allowed packages worth $800 or less to ship south of the border without duties, on Aug. 29. Many small businesses are bracing for higher operational costs and are scrambling to keep their American customers, as many shipments will start carrying a 35 per cent tariff going into the U.S.

At Tag4MyPet, each pet tag costs about $20, but determined that duties and other costs would add $80 to the shipment bills — making it unviable to either absorb the increase or pass it on to their customers.

The couple said pausing their shipments to the U.S. — which makes up over 40 per cent of their clientele — would allow them time to assess and adjust to their new reality.

The de minimis is used quite extensively among small Canadian businesses that ship directly to their American customers, said Corinne Pohlmann, executive vice-president of advocacy at the Canadian Federation of Independent Business (CFIB).

Pohlmann says one business told her that the product they shipped to the U.S. was worth $40. Without the de minimis exemption, they would pay an extra $33 in duties and another seven dollars in taxes on the same package — doubling the price.

“That becomes, obviously, a lot less attractive to the American consumer who they’re selling to and is unlikely to be able to retain those types of customers,” Pohlmann said.

A CFIB survey released last week suggested one-third of small- and medium-sized businesses expected to be affected by the loss of de minimis exemption.

While many businesses such as Caracas Le-Fort’s decided to halt U.S. delivery rather than facing skyrocketing costs, at least for now, others are still shipping south of the border — along with warnings that their prices may go up soon.

Milena Lye, founder of the plant-based skin care line Just the Goods, said she will ship to her American clients.

“I don’t want to discontinue shipping to the U.S. — I’ve built relationships with so many people over the years, and I know what I do genuinely helps them,” Lye said in an email. “I don’t want to cut them off.”

Lye said she has been transparent about her pricing as she switches to an American broker for her shipments from the current Canadian broker. And if needed, price increases are on the table to cover costs for tariffs and the added administrative process.

Pohlmann said many businesses are also hoping they can potentially be Canada-United States-Mexico Agreement (CUSMA) compliant to bypass the tariffs.

“They will then still have to deal with the paperwork and the complexity of understanding how to make sure that they have the right tools in place to show that their product is CUSMA-compliant,” she said.

“That doesn’t happen overnight, and trust me, it’s a very complicated process.”

Edmonton-based Carley Pettitt has already sent in her paperwork for CUSMA compliance, which could take up to three months to process. Until then, the founder of Nest Embirdery will keep her shipments to the U.S. open.

“I don’t see the point in just cutting that cord entirely when there are still possibilities,” she said. “I’m giving the U.S. citizens there that choice, like, they can decide if they want to spend that money because it’s not me spending that money, it’s them.”

Pettitt said she still expects her sales to drop among her U.S. customers, which make up more than half of her business.

As she waits for her CUSMA compliance, Pettitt said she’s focusing on maintaining relationships with her U.S. retailers who buy her embroidery kits wholesale — a possible way to keep costs down for her customers. She is also finding new retailers and customers outside of the U.S. and Canada, such as in New Zealand.

The CUSMA trade agreement is set to be reviewed as early as next year, and it’s not clear how large an overhaul the deal might face.

Retail analyst Bruce Winder says small businesses are left with fewer options at hand to deal with the incoming tariffs.

He said businesses could hire people to deal with the administrative burden of shipping, try and lower the costs of their products or open a small warehouse in the U.S. to ship from that location.

“Whatever the solution is, it’s probably significant,” Winder said. “It requires cost and a lot of change on behalf of the Canadian entity.”

This report by The Canadian Press was first published Aug. 27, 2025.

Ritika Dubey, The Canadian Press