‘The fallout is going to be real’

Manitoba exports may become more expensive for American customers, but the proposed change is being met with skepticism.

Since 2016, exporters could ship parcels valued at US$800 or less into the United States tax-free.

That’s changing, according to an executive order U.S. President Donald Trump signed Wednesday. He’s suspending the global exemption — called the de minimis exemption — starting Aug. 29.

New charges will vary. If a good is sent through the postal service, it’ll be hit by a tariff rate from its country of origin.

In other cases, the fee could range from US$80 to US$200, depending on the tariff rate at the package’s country of origin. This option has a six-month time line.

Canada is among the countries negotiating new trade pacts with the United States. Freshly signed deals with the U.S., including those by the European Union and Japan, have come with 15 per cent tariffs.

“The fallout is going to be real,” said Tyler Slobogian, a senior policy analyst with the Canadian Federation of Independent Business.

Roughly 16 per cent of the CFIB’s 4,500 Manitoba members export to the United States. Most ship using the de minimis exemption.

Losing the immunity will likely result in companies changing their export models or dropping American sales, Slobogian forecast.

Already, 31 per cent of Manitoba CFIB members have shifted to domestic suppliers within Canada amid U.S. trade uncertainty. Another 31 per cent are considering doing the same, per CFIB polling.

Meantime, 14 per cent have moved their export markets outside of the United States.

On Thursday night, Trump announced 35 per cent tariffs (up from 25 per cent) on Canadian goods not covered by the Canada-United States-Mexico Agreement on trade, with the new number going into effect today.

“It’s just another degree of uncertainty,” Matt Poirier, Retail Council of Canada vice-president of federal government relations, said of the de minimis change. “Who knows if this order will see the light of day by the end of August?”

He was echoed by Riley Slater, a K9 Storm employee. The Winnipeg company ships collars and leashes, among other things, to U.S. clientele under the exemption.

“Everything is kind of fluid,” Slater said. “Things that are said today (are) not necessarily how it’s going to be once trade deals are all worked out and finalized.”

K9 Storm’s wares comply with CUSMA and are not subject to current tariffs. It’s unclear how the de minimis exemption’s repeal might affect exports.

A majority of Manitoba exports are CUSMA compliant, customs brokers have noted.

The Retail Council of Canada has championed Canada’s low de minimis rates, which is generally set at $20.

“Companies based outside of Canada (shouldn’t) have a selling advantage into Canada,” Poirier said.

“The U.S. has the right to do that for themselves, too, obviously, but the way they’re yo-yo-ing back and forth on this … that’s going to impact their consumers.”

Alan Dewar, executive vice-president of GHY International, expressed his surprise in a 2016 LinkedIn post following a change in the U.S. de minimis exemption from US$200 to US$800.

Dewar labelled foreign businesses among the “winners” in the 2016 policy change. Direct-to-consumer shipments from international businesses, like Chinese-based Shein and Temu, have since increased.

Dewar expects Trump’s executive order on the issue will affect all Manitoba companies who export south of the border.

“Everybody ships something that is probably worth less than $800,” he said Thursday.

Once companies need declarations to ship their lower-value packages, brokerages like GHY will get busier, Dewar predicted. A combined cost of duties and intermediaries — like brokers — will raise the price of goods entering the U.S., he added.

The Trump administration slashed the de minimis exemption on Chinese and Hong Kong imports in May. It initially set a tariff rate of 120 per cent on incoming goods from China, but later lowered the fee to 54 per cent.

Manitoba businesses reliant on Chinese parts, and identifying their products’ country of origin as China, have lost the de minimis exemption on applicable goods.

gabrielle.piche@winnipegfreepress.com