CUSMA a blessing for some Canadian businesses, a pain for others despite escaping U.S. tariffs

A suspire of ease power feature been expected when canadian river businesses learned the Trump administration's latest tariffs would spare companies that comply with the Canada-U.S.-Mexico Agreement (CUSMA).

But after scrambling to become CUSMA-certified in the face of last year's U.S. Tariffs, some business owners say compliance has brought its own set of frustrations.

Ray Kanani, co-owner of Good Fortune Puzzle Co. In Ottawa, said brokerage fees that shippers are charging to certify CUSMA goods, and other complications around cross-border shipping, have forced his business to restrict where it sends its products.

"Right now, a made-in-China product has a 10 per cent tariff. So if I'm selling a $50 product, I pay $5," Kanani said. "But if I sell a CUSMA-compliant product, I'm paying $10 to the broker just to certify and have the paperwork that it's CUSMA compliant."

Kanani said those costs involve shippers including UPS and FedEx, which are doing more work for cross-border processing.

"It's actually quite a nightmare."

Last week, the U.S. Announced plans to impose new tariffs on over 60 countries that are allowing goods allegedly made by forced labour. The new levies would include 10 per cent on exports from Canada.

The tariffs would apply only on goods that don't comply with CUSMA's "rules of origin," a set of standards that determine how many goods should be produced in North America.

Last August, Trump hit non-CUSMA-compliant goods exported to the U.S. From Canada with a 35 per cent tariff, sparking a scramble for Canadian companies to comply.

Fitch Ratings Inc. said 81 per cent of goods exported to the U.S. From Canada were compliant with CUSMA by mid-August, up from 56 per cent three months earlier.

Kanani said he and partner Jessica Sue, who work with a Canadian jigsaw puzzle manufacturer to develop artistic puzzles representing Asian cultures, were excited to have an entirely CUSMA-compliant product.

But even after completing paperwork to get CUSMA-certified, some products sent to addresses in the U.S. Were returned with no explanation. Kanani said they found the most reliable way to reach customers south of the border was through a fulfilment centre in the U.S.

Kanani said it's too expensive to have major inventory sites in both countries, so he has prioritized the U.S. Because it's the bigger market. Ironically, that means Good Fortune now only keeps a small amount of inventory in Canada and has had to stop selling to most customers here.

"We love our Canadian customers and we love being in Canada. It pains us not to be able to serve the Canadian market because of what's happening," Kanani said, adding he hopes to figure out a solution before the holiday season.

Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB), said he's heard similar concerns from other small businesses about CUSMA complications.

Kelly said that for large businesses, the benefits often outweigh the costs of certification, but the reverse can be true for small businesses doing low-volume trade.

Some smaller companies find tariffs a "less bitter pill" to swallow than "all of the headaches and costs associated with demonstrating CUSMA compliance," he said, including the sometimes laborious paperwork around getting certified.

"If you're, let's say, a distributor of nuts and bolts, you might have a thousand products in your inventory. Even as a small business, you're now going to have to have documentation certificates of origin for everything."

Ruth Hoang, owner of Foxwood Gifts in Windsor, Ont., said the CUSMA certification paperwork was a "huge learning curve," but it hasn't been a significant financial burden in her case.

Hoang, who sells to American customers on Etsy, said she ships goods through Stallion, costing an extra $2 per package and adding a few days to the shipping time.

But she's been hit hard by back-and-forth U.S. Trade policies, losing 60 per cent of her U.S. Customers after last August's tariff announcement.

Hoang suspects many American Etsy customers, not knowing the distinction between CUSMA-certified and non-CUSMA-certified products, have filtered out international shippers out of fear of having to pay tariff costs.

Thankfully, she's been able to make up for the loss by shifting to wholesaling in Canadian gift shops.

"It was a great pivot, especially last year with all this stuff going on."

The U.S. Mandates that duties and tariffs be prepaid on all packages entering the country through the international postal network, even if they qualify for duty-free status under CUSMA. CUSMA exemptions can only be claimed when using commercial couriers.

Those couriers say they've had to add extra charges because the rush to CUSMA compliance has strained them as well.

UPS spokesperson Natasha Amadi said the specific fees levied on products shipped from Canada to the U.S. Vary widely.

Kelsey Irvine, CEO of Northbrook, Ont.-based skin-care company Birch Babe, said her business was planning a major U.S. Launch before the 2024 U.S. Election, but instead pulled out of the U.S. Entirely rather than deal with complications around tariffs and CUSMA.

"You're watching the devastating impact that it was happening and all the stress it was causing to so many other small businesses, and so we just stayed the course," Irvine said.

That ended up being a blessing, as Birch Babe saw major growth in Canada.

Irvine said the company meets CUSMA requirements, but has found a creative way to re-enter the U.S. Market by developing a medical-grade sunscreen that's approved by the U.S. Food and Drug Administration (FDA). Because some over-the-counter drug products have been exempt from tariffs, she said, this adds a potential "extra layer of protection" amid changing tariff rules.

"The amount of stress that we would be putting towards trying to figure out this CUSMA thing that's changing every single day, and the logistics behind it, and revising everything, only to have it retracted and changed again — we just put that energy towards ... A really innovative product."

Global Affairs advises small- and medium-sized businesses to work directly with U.S. Importers and direct any refund‑related questions to U.S. Customs and Border Protection.

Digital Writer

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