The looming end to a key U.S. tariff exemption has B.C. businesses that rely heavily on small exports fearful for the future.
“It’s catastrophic for us, really catastrophic,” said Marion Kao, owner of Korriko Pet Supply, a Langley-based business that makes harnesses and other products for small dogs.
Kao estimates as much as 60 per cent of her business comes from U.S. customers.
On Aug. 29, selling to them could become much more difficult.
That’s when the U.S. is slated to eliminate what is known as the “de minimis exemptions,” a provision in U.S. law that allows imports valued at $800 or less to be eligible for duty-free treatment and exemption from formal entry requirements.
The exemption makes those lower-value imports both cheaper and easier because they involve minimal paperwork.
The White House has described the policy as a “catastrophic loophole,” but for Kao it has been critical to her business’s viability.
“If that gets removed, anybody who orders from the U.S. is going to have to pay duties and tariffs on every single order that gets delivered there, so I think that’s going to eliminate anyone from wanting to even order,” Kao said.
“I don’t know if it could survive, to be honest, like we would definitely have to try and increase our Canadian base, which we’ve been trying to do … it’s already challenging for small businesses, but to lose over half of your revenue overnight is just like unthinkable.”
It’s a story the Canadian Federation of Independent Businesses (CFIB) says it’s hearing from many of its members.
The group conducted a recent survey, which found almost half of B.C. small businesses (46 per cent) would be hurt by ending the de minimis exemption.
“B.C. is actually one of the most reliant on this de minimis exemption in order to do imports and exports. This is going to have pretty wide-ranging impacts and one concern of ours is that many people may not know that this is ending,” said Ryan Mitton, director of legislative affairs in B.C. for the CFIB.
“In order to be tariff-free they’re going to have to suddenly comply with (Canada-U.S.-Mexico Agreement) regulations which is going to mean paperwork, it’s going to mean customs delays and it could snarl our supply chains.”
The CFIB is calling for all revenue collected from counter-tariffs to go to helping affected industries, along with tax relief for small businesses.
Jobs and Economic Growth Minister Ravi Kahlon said the province is watching the situation closely, but stopped short of promising any financial help.
“We’re in conversations with our counterparts on how we can ensure the small business are protected,” Kahlon said.
“It is still a little early to be able to have details on that, but we are working with our stakeholder partners to find a path forward to mitigate those impacts.”
Kao, meanwhile, has been communicating with her U.S. customers, urging them to shop now before the changes come into effect.
In the long term, she’s looking for new markets — and mulling investing in some kind of U.S. facility that would allow her to avoid the tariffs.
“Either we would have to pivot and try to expand to other countries, maybe outside of the U.S. and Canada, or otherwise, we might have to try and find a way that we can ship from within the U.S.,” she said.
“That does come at extra cost. It’s hard for small business to be able to do that.”