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Hidden in the recent talk around tariffs and trade wars was another announcement that could have an equally large impact on the Canadian direct selling industry. The US Government has chosen to remove its existing duty exemption for small packages, known as the duty-free de minimis treatment. This is a backflip from policy the US championed in the lead up to the 2020 signing of the new NAFTA agreement, when they sought higher de minimis exemptions across trading partners.

Under the new rules, Canadian-based direct selling companies, who ship products direct to US consumers, will have to complete full US customs documentation for each package and duties must be collected from the customer, regardless of the order value. If the Canadian Government were to retaliate in-kind – which has not been officially suggested at this stage but is a possibility – all products delivered direct to Canadian consumers from the US would face the same burdensome requirements.

In an industry such as direct selling, which runs on tight margins and on-time fulfilment, this change to a more bureaucratic approach, with added cost to consumers, will be a major headache. 

At this stage, negotiation and industry consultation on this issue seem unlikely to take place. However, as an alternative, DSA Canada would advocate for a reduction in the US de minimis threshold, perhaps from $800 to the Canadian standard of $150, as being more practical for the US. Such a change would provide some customs and commercial flexibility, while also helping the US to overcome the perceived problem they are trying to fix, which is the sheer weight of direct shipping from Chinese e-commerce giants (and the illicit goods that could be in those shipments).

The vaguely positive news so far is that when the US first removed the de minimis exemption in early February, U.S. Customs and Border Protection was unable to cope with the added workload and the change was paused until March. But it seems it will be back, and direct selling companies must be ready to deal with the challenges that the removal of de minimis exemptions will create. 

DSA Canada will continue working to update members and advocate for their businesses on this and other issues.