When U.S. President Donald Trump threatened to place 25 per cent tariffs on Canadian goods last week, organic snack foods company Made with Local stopped accepting orders from customers south of the border.
The Dartmouth, N.S.-based company feared the end of a shipping exemption included in Trump’s executive order on tariffs would come with big costs for customers and an administrative nightmare for the company.
“If our team needs to babysit every single $70 order for two boxes of granola bars going into the States … it quickly makes it not really worth it,” said Sheena Russell, the company’s CEO and founder.
“It’s also a really tough thing to imagine that a customer is going to pay more than they already are.”
The issue Russell was talking about is known as the de minimis exemption. It allows global businesses to ship packages valued at less than $800 to the U.S. without having to pay duties.
Canadian companies have long used the exemption when moving products across the border, but Trump’s executive order applying impending tariffs on Canadian goods in a month’s time also scraps the de minimis loophole for shipments entering the U.S. from Canada. Another order has already ended the de minimis for goods moving from China to the U.S.
Canadian companies say losing the exemptions will inflict as much damage to their business as the 25 per cent tariff he’s promising to apply to Canadian goods in a few weeks.
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“We are in a worst-case scenario,” Katherine Homuth, CEO of Montreal-based pantyhose company Sheertex, wrote in a LinkedIn post Wednesday.
The post announced the temporary layoff of 40 per cent of her 350 staff.
Homuth placed much of the blame on the tariffs but also called out the removal of the de minimis exemption.
She said its disappearance would push Sheertex’s costs even higher.
In addition to the 25 per cent tariff, the company faces a 16 per cent duty because its products are not considered “made in Canada” since more than nine per cent of its raw materials are sourced outside the U.S. and Canada, Homuth said.
Eighty-five per cent of Sheertex’s sales come from the U.S.
Meanwhile, Russell considered herself fortunate because no more than 15 per cent of Made with Local’s orders come from south of the border and most of its ingredients are sourced in Canada, where the company produces and packages its snacks.
Yet the company won’t escape unscathed if Trump makes good on his promises.
“We had quite a robust U.S. growth strategy plan for this fiscal year that currently has the brakes pumped on it,” Russell said.
She’s still not sure when her company will accept U.S. orders again, but was treating those that came in before the executive order as a “guinea pig” that she hopes will teach the business how to cope should the de minimis exemption end and she pursues growth in the U.S. again.
Rachael Newton also has worries about the potential end of the de minimis exemption.
She runs Toronto-based menstrual products business Nixit, which makes its cups in Ontario and has fulfilment centres in the U.S. and Canada.
Before Trump delayed the tariffs, Nixit shipped a hefty load of product to the U.S. to build up a stockpile and give the company more breathing room to sort out how it could operate without the de minimis exemption in play.
Passing on the cost to customers will be tough because Nixit’s products are already considered premium owing to their higher price, Newton said.
She still hasn’t decided what the company will do if the de minimis exemption is scrapped.
While Newton is grateful Nixit’s stockpile is giving her more runway to deliberate, she acknowledged that leeway isn’t infinite.
“It’s still going to cause problems down the line,” she predicted.