Whether you’re a U.S.-based brand importing raw materials or a cross-border store shipping to the U.S., the end of the de minimis exemption has likely touched some aspect of your operations and revenue.
In this guide, we’ll break down what changed, how the end of de minimis affects Canadian, American, and cross-border ecommerce merchants, and what steps businesses can take to protect margins, reduce friction, and keep selling into the U.S. market without getting buried in customs duties for themselves and their customers.
What Is the De Minimis Exemption?
Initially designed for travellers bringing home souvenirs to the United States, the de minimis exemption meant that any single shipment valued at $800 or less could enter the U.S. duty-free and tax-free, with minimal customs bureaucracy.
With the proliferation of the internet and online shopping, this rule became a massive ecommerce loophole, allowing merchants and marketplaces to ship low-value orders directly to U.S. consumers without duty fees, tariffs, or paperwork.
Companies worldwide, from fast-fashion drop shippers in China to boutique manufacturers in Canada, built cross-border strategies around this rule, often referred to by shippers as “Section 321” entries after the U.S. customs code section that codified the de minimis process.
Breakdown of the 2025 - 2026 Shift to a Global Surcharge
In a major policy shift, the U.S. government eliminated the de minimis exemption for all countries effective August 29, 2025, ending duty- and tax-free entry for imports under $800. Every international shipment to the U.S., regardless of value, now faces full customs processing and applicable duties.
This change was implemented via an executive order and came much sooner than expected: the exemption was initially set to phase out by 2027, but it was suddenly suspended with barely 30 days’ notice. Many merchants were blindsided by this accelerated timeline, having anticipated more time to prepare.
In early 2026, trade was further complicated when the President signed a new Proclamation invoking Section 122 of the Trade Act of 1974. Section 122 grants the executive branch the specific statutory authority to impose temporary import surcharges to address fundamental international balance-of-payments deficits and dollar crises.
This resulted in a new 10% global surcharge on all imports. Initially, it was scheduled to last for 150 days, but the administration has since signalled that they may wish to increase the amount to 15%.
While Section 122 does include specific exemptions for USMCA-compliant goods originating from Canada and Mexico, as well as certain agricultural products, pharmaceuticals, and minerals, the surcharge applies broadly to the vast majority of commercial ecommerce consumer goods.
There was also a parallel Executive Order signed on February 20, explicitly reaffirming the continued suspension of the de minimis exemption. As a result, North American merchants operate in a strict zero-tolerance environment where no shipment is considered too small to be taxed.
Impact on Canadian Merchants
For Canadian merchants selling into the U.S., the biggest change is that low-value orders no longer get a free pass just because they are under US$800. That means more duties, more customs clearance, more paperwork, and a higher risk of delays or additional brokerage costs for U.S.-bound orders.
Export Development Canada has explicitly warned Canadian exporters to expect higher shipping costs, increased compliance requirements, and a greater risk of delays under the suspension.
If, however, the goods are genuinely of Canadian origin and qualify under USMCA rules of origin, the importer may still be able to claim preferential tariff treatment, but not through the old de minimis route. CBP says a proper formal or informal entry is now required to claim USMCA preference, and the Commerce Department’s USMCA guidance says the agreement no longer requires a specific form, but it does require the minimum origin data elements.
The gist: Canadian-made goods may still avoid some tariffs, but they don’t avoid the new customs friction. Canadian merchants selling non-Canadian-origin goods into the U.S. are in a tougher spot because being a Canadian seller does not shield the shipment from the U.S. suspension.
That is why many Canadian merchants now need to rethink fulfilment. EDC specifically points to U.S.-based fulfilment centres, 3PL partners with customs expertise, and other distribution-model changes as ways to reduce per-unit shipping costs and simplify compliance.
Impact on American Merchants
For American merchants that import goods into the U.S., especially brands that rely on direct-to-consumer parcel imports or low-value replenishment shipments, the main impact is higher landed cost and more administration.
They no longer have the old de minimis shortcut, so more shipments now require proper customs handling and duty assessment. CBP’s guidance ties the change directly to the end of low-value duty-free treatment, and CBP says informal entries are usually for imports under US$2,500.
That means U.S. merchants sourcing from Canada, Mexico, Europe, or Asia can no longer assume that a parcel valued under US$800 will pass duty-free. If their goods qualify for USMCA, they may still get preferential treatment, but again, they need to make the claim through the normal entry process.
For American merchants exporting to Canada, the U.S. rule does not change Canada’s own import thresholds. Canada still applies its separate de minimis rules: for courier shipments from the U.S. or Mexico, up to C$40 is duty- and tax-free; above C$40 to C$150 is duty-free, but taxes still apply; and above C$150, duties and taxes apply.
Strategies for Merchants to Navigate the Post-De Minimis Era
While the de minimis exemption ending creates a ton of new challenges, merchants can take proactive steps to minimize the impact and continue selling cross-border. Below are strategies for U.S. and Canadian ecommerce merchants to adjust their operations and customer approach to continue with cross-border ecommerce sales.
1. Rethink Your Fulfillment and Inventory Model
One of the most effective adaptations is to localize inventory in your target market. Instead of dropshipping each order from overseas or across the border, consider bulk importing your products into the destination country (the U.S.) and fulfilling orders domestically.
By bringing goods in via formal bulk shipments, you can often reduce the effective duty rate and per-unit shipping costs. For example, when you import in bulk, duties are assessed on the wholesale cost of goods rather than the retail price, which can significantly reduce the duty percentage per item. You also eliminate repetitive per-package fees: a single large shipment incurs a single customs clearance, rather than hundreds of small packages each incurring a fee.
Doing things this way might increase the need for inventory/demand forecasting since this requires stockpiling more goods in advance, but it will save you money in the long run. It also enables faster delivery to customers.
You can offer 2-day or even next-day shipping domestically from your U.S. stock, rather than a 1-2 week international transit. If you’re a Canadian merchant with a high amount of U.S. sales, this could mean partnering with a 3PL warehouse in the U.S. or even using fulfillment centers provided by marketplaces like Amazon FBA or Shopify’s fulfillment network.
2. Offer Duty-Inclusive Pricing and DDP Shipping
No one likes having to pay surprise import charges at their front door. In fact, these are not only a nuisance at the moment, but they also actively turn customers away from purchasing from you in the future. To avoid this, consider moving to a Delivered Duty Paid (DDP) model: the seller calculates and collects all applicable import duties/taxes at checkout, and ensures the package is sent with those fees prepaid to customs.
Many ecommerce platforms, like Shopify and Adobe Commerce, allow integration with duty calculators or global shipping apps that can display estimated import fees in the cart. Test whether to embed the extra costs in the product’s listing price or present them as a separate line item in the cart to see which results in lower cart abandonment rates.
The downside to shipping DDP is that you, as the merchant, take on the responsibility of remitting the duty to the authorities, which requires accurate classification of goods and ensures that the duty is correctly calculated. The tradeoff is the improvement in the overall customer experience.
3. Leverage Free Trade Agreements and Proper Documentation
When importing in bulk or even shipping individual orders, make sure you’re not overpaying duties unnecessarily. North American merchants should take advantage of free trade agreements like USMCA/CUSMA between the U.S., Canada, and Mexico.
If your product is actually made in Canada, the U.S., or Mexico (meeting the agreement’s rules of origin), it can still enter another NAFTA country duty-free, but only with the correct paperwork. During the de minimis era, many small shippers ignored certificates of origin because shipments were waived. Now that every package is scrutinized, it’s worth determining if your goods qualify for preferential treatment. Note that this won’t remove any processing fees; however, it will just remove any tariff charges.
Due to the complexity of cross-border fulfillment, it may be worth consulting a licensed customs broker to review your product catalogue and ensure you’re leveraging available tariff reductions or free trade provisions.
You could also consider tariff engineering: the process of slightly modifying your product or supply chain to qualify for a lower-duty category. For example, an apparel brand could switch materials or finish assembly in a different country to reduce the overall tariff rate.
4. Partner with Logistics Experts or 3PL Services
As we touched on briefly above, partnering with a third-party logistics provider or cross-border shipping specialist can really help you ensure that you have all your bases covered as you build your strategy around the de minimis exemption ending. Many 3PLs anticipated this de minimis change and have set up infrastructure to help brands import in bulk and distribute locally.
Some providers even offer services like bundling and consolidating international orders. For example, collecting a week’s worth of your orders and shipping them as a single batch to the U.S., then breaking them down for domestic delivery. This kind of consolidation can reduce the number of customs entries and fees you incur, though it might slow delivery.
Another option is using platforms and apps that specialize in cross-border ecommerce. Solutions like FlavorCloud, Zonos, Passport, and others can automate duty calculations, generate required customs forms, and handle DDP payments.
5. Optimize Costs and Recapture Where Possible (Duty Drawback, Returns)
Even with all the best planning and workarounds, you might still end up paying a lot in import duties. For merchants with high cross-border volume, explore ways to recapture or offset some of those costs. One opportunity is duty drawback programs. The U.S. allows importers to recover up to 99% of duties paid on goods that are later re-exported or returned.
If you import items into the U.S. and then eventually ship them back out, say, if a customer returns a product and you send it back to your overseas supplier, or you consolidate unsold stock to sell abroad, you can file for a refund of the duties originally paid. While the paperwork for duty drawback can be hefty, it is worth looking into for high-value items or high volumes.
6. Communicate with Customers and Adapt Sales Strategies
Finally, don’t forget the human element. International trade is already confusing enough without all these constantly shifting rules, so proactive communication with shoppers is key to ensuring that no one feels cheated or unaware of additional costs when shopping with you.
If you’re a Canadian or foreign merchant who must now adjust how you sell to the U.S., inform your customers. Update your website with a notice about potential duties or shipping delays, so they’re not caught off guard. If you’ve moved to a DDP model, highlight that so shoppers don’t wonder whether they will be hit with extra charges.
It might also be necessary to shift your marketing and sales approach. For example, if international shipping has become too costly for low-priced items, consider setting an order minimum or encouraging larger basket sizes to offset the impact of fixed costs. You could also run promotions for U.S. customers that offset duties.
Above all, be upfront in your messaging. Let customers know that you’ll need to adapt to serve them. If there are any delays or extra costs, explain why and how you’re handling them. A banner on your homepage or a small message in the cart can go a long way towards preventing confusion or frustration.
Conclusion
The end of de mininis is clearly a massive disruption in global trade. For ecommerce businesses on either side of the U.S.-Canada border, it marks yet another growth obstacle. With a proactive approach, merchants can come out on top and use it as an opportunity to build a tighter, more customer-friendly global operation.
At Blue Badger, we’re helping our clients on both sides of the border navigate the end of the de minimis exemption and ensure they come out on top. Get in touch with us today to learn more about how to shift your strategy and keep your customer base informed and happy.
