Canadian businesses were initially relieved to find out that the latest tariffs imposed by the Trump administration would exempt companies complying with the Canada-U.S.-Mexico Agreement (CUSMA). However, despite the rush to become CUSMA-certified following last year’s U.S. tariffs, some business owners are now facing frustrations related to compliance.
Ray Kanani, the co-owner of Good Fortune Puzzle Co. in Ottawa, expressed concerns about the brokerage fees charged by shippers for certifying CUSMA goods and other complexities associated with cross-border shipping. These challenges have led his business to limit its product distribution.
Kanani highlighted the additional costs involved in certifying CUSMA-compliant products, stating that the fees paid to brokers for certification surpass the tariffs on non-compliant goods. He mentioned that major shippers like UPS and FedEx are facing increased processing demands for cross-border shipments, making the situation challenging.
Last week, the U.S. government announced plans to impose new tariffs on over 60 countries, including Canada, for allegedly allowing products made by forced labor. These tariffs, including a 10 percent levy on Canadian exports, would only apply to goods that do not meet CUSMA’s rules of origin.
Fitch Ratings Inc. reported a significant increase in CUSMA compliance among Canadian exports to the U.S., with 81 percent of goods being compliant as of mid-August. This surge in compliance followed the 35 percent tariff imposed by Trump on non-CUSMA-compliant goods from Canada last August.
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.Ray Kanani, co-owner of Good Fortune Puzzle Co. in Ottawa
Despite the challenges, Kanani and his partner Jessica Sue were excited to have entirely CUSMA-compliant products. However, even after obtaining CUSMA certification, they faced issues with products being returned from U.S. addresses without explanation, leading them to rely on a fulfillment center in the U.S. to reach their customers effectively.
Good Fortune Puzzle Co. owners Jessica Sue and Ray Kanani, left to right, are dealing with frustrations around CUSMA certification. (Submitted by Ray Kanani)
Due to the high costs of maintaining inventory in both Canada and the U.S., Kanani has prioritized the U.S. market, resulting in limited inventory in Canada and a halt in sales to most Canadian customers, a decision that deeply concerns him.
Dan Kelly, the president and CEO of the Canadian Federation of Independent Business (CFIB), echoed the concerns of small businesses facing CUSMA-related challenges. While larger businesses may find the benefits of certification outweighing the costs, smaller enterprises engaging in low-volume trade might struggle with the complexities and expenses associated with CUSMA compliance.
Ruth Hoang, the owner of Foxwood Gifts in Windsor, Ont., described the CUSMA certification process as a learning curve but relatively manageable financially. Despite additional costs and shipping delays, she has adapted her business to cope with the changing trade policies and shifting customer base.
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