Shipping containers are stacked at a port in Shanghai in June. The U.S. had ended the exemption for China and Hong Kong in May, which the White House says have accounted for the majority of de minimis imports.-/AFP/Getty Images
The United States will suspend its duty-free de minimis exemption for low-value shipments, a move that the White House said will close a “catastrophic loophole” used to avoid tariffs or smuggle illegal products, but could also prove devastating for Canadian and international retailers who rely on American shoppers.
U.S. President Donald Trump signed an executive order Wednesday that suspends the exemption for imports valued at or under US$800, making those shipments also subject to the blanket tariffs the U.S. has imposed on trading partners.
Starting Aug. 29, the White House says all imports sent through means other than the postal service will be subject to all applicable duties.
For shipments sent through the postal service, goods will be subject to the tariff rate applicable to the country of origin of the product.
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A specific duty option will also be available for six months that applies a tariff of $80 to $200 an item, depending on the tariff rate applicable to the country of origin of the product.
The U.S. ended the exemption for China and Hong Kong in May, two destinations that the White House says have accounted for the majority of de minimis imports. It cut the de minimis tariff it imposed on China to 54 per cent from 120 per cent that month.
The European Union has also been grappling with how to crack down on low-cost packages from China flooding countries in the bloc.
Dan Kelly, president of the Canadian Federation of Independent Business, said while many businesses have already been affected by the suspension of the de minimis exemption for China because they manufacture their products there, its expansion is “worrisome.”
“There’s a bunch of businesses that I think will now lose a customer base, some of them specifically designed around shipping into the U.S.,” said Mr. Kelly, noting that they may not have much of a Canadian consumer base.
However, Mr. Kelly said it’s difficult to complain about its suspension, given Canada has a much less generous exemption for low-value shipments.
Goods imported from the U.S. or Mexico can enter Canada duty-free if they’re valued at or below $150, though recipients may still have to pay taxes. Meanwhile, only goods valued at $20 or less from another country are exempt from duties.
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The White House says the volume of de minimis shipments entering the U.S. increased to 1.36 billion from 134 million shipments between 2015 and 2024.
“The de minimis exemption has been abused, with shippers sending illicit fentanyl and other synthetic opioids, precursors, and paraphernalia into the United States in reliance on the lower security measures applied to de minimis shipments, killing Americans,” the White House said in a release.
The United States justified applying 25-per-cent tariffs on Canadian imports, with a lower 10-per-cent tariff on energy products, by accusing Canada of allowing fentanyl to flow into the U.S. It has since threatened a 35-per-cent blanket levy that could take place Friday. Data analyzed by The Globe and Mail, however, show that only a small fraction of fentanyl is entering the U.S. from Canada.
The White House did provide an exemption for goods that are compliant with the United States-Mexico-Canada Agreement, allowing the majority of Canadian products to enter duty-free.
That exemption would presumably be available to businesses shipping low-value goods. However, Jesse Goldman, a partner at Osler, Hoskin & Harcourt LLP, said he suspects most goods that entered the U.S. tariff-free because of the de-minimis exemption wouldn’t be USMCA-compliant because they’re manufactured elsewhere.