Recent changes in Canadian tariff rules have introduced new complexities for e-commerce businesses, particularly for those sourcing products from China. Understanding how these changes affect your supply chain, shipping strategy, and compliance is crucial to avoiding unexpected costs and delays. Here’s what you need to know.

1. Defining “Made in China” Under the New Rules

One of the biggest challenges businesses face is determining what qualifies as “Made in China.” The definition isn’t always straightforward—does it refer to raw materials, final assembly, or processing done in Canada? Since there are no definitive answers yet, businesses must assess their supply chain carefully to understand when a product officially transitions from being “Chinese-made” to “Canadian-made.”

2. Mixed-Origin Shipments: Should You Ship Separately?

If your inventory consists of products from both China and Canada, you must decide how to handle shipping.

Key considerations:

• Separate Shipments May Be Beneficial: If 75% of your order is from Canada and 25% from China, it may be more cost-effective to ship them separately. This avoids unnecessary tariffs and delays on non-Chinese goods.
• Proper Documentation is Critical: If you do mix shipments, you must clearly label each item’s Harmonized System (HS) Code and country of origin to ensure only the appropriate goods are subject to tariffs.
• Consult a Customs Broker: If you’re unsure about proper classification, consider consulting a broker to ensure compliance.

Failing to declare this properly could result in Canadian customs assuming your entire shipment originates from China—leading to unexpected costs.

3. New Compliance Requirements: What Businesses Must Do

Previously, low-value shipments under $800 could pass through Canadian customs without issue. Now, if a product is from China, it requires formal clearance, paperwork, and a declaration process, which adds time and cost.

Action steps for businesses:

• Track and document the country of origin for all products.
• Classify all items with proper HS codes to avoid unnecessary duties.
• Maintain proof of origin in case of audits.
• Consult a customs broker for classification and compliance support.
• Use ShipSavvy’s upcoming HS Code resource to help navigate product classification (a link will be provided soon).

4. DDP vs. DDU: Who Pays the Tariffs?

Another major decision is determining who will be responsible for tariff costs—your business or the end customer.

• DDP (Delivered Duty Paid): The seller (you) covers all customs duties upfront. This ensures faster delivery and a smoother customer experience.
• DDU (Delivered Duty Unpaid): The customer pays the duties upon receiving the package. However, this can result in unexpected costs, leading to “sticker shock” and potential customer dissatisfaction.

Hidden Costs to Consider:

• Beyond the tariff itself (which could be 10% to 35%), brokerage fees can be substantial. Some businesses report fees as high as $100 per package, with some DHL charges exceeding this amount, making DDU a risky option.

5. Looking Ahead: Adapting Your Supply Chain Strategy

With these tariff changes, businesses should reassess their sourcing strategies:

• Is sourcing from China still cost-effective?
• Should you explore alternative suppliers or manufacturers?
• How can you optimize shipping and compliance to reduce costs?

6. Avoid Compliance Pitfalls: The Risks of Misrepresentation

Some businesses might be tempted to mislabel products to bypass tariffs. This is not worth the risk.

• Severe penalties apply for falsely declaring a product’s country of origin.
• If misrepresentation is detected, both the seller and the shipping platform (like ShipSavvy) could face consequences.
• Transparency and compliance are the best strategies for long-term success.

7. Preparing a Formal Entry: Work in Progress

ShipSavvy is actively developing a formal entry process to make compliance easier for businesses. The process is still to be determined, but updates will be shared as soon as they are finalized. Our goal is to offer cost-effective, hassle-free solutions for handling tariff compliance and declarations.

Next Steps: How ShipSavvy is Helping Businesses Adapt

ShipSavvy is actively working on a streamlined process to help businesses manage these changes with minimal disruption. While details are still being finalized, our goal is to offer cost-effective, hassle-free solutions for handling tariff compliance and declarations.

How We’re Communicating These Updates

• Blog Post & LinkedIn Updates: We will share insights and recommendations via LinkedIn and our blog.
• Email Updates (Later): Since the situation is still developing, we will hold off on email updates until we have more concrete solutions to share.

Stay tuned for updates on our new process, and in the meantime, start implementing the strategies above to stay ahead of these changes.

Recent adjustments to trade policies have temporarily reinstated Section 321 for shipments from China. While this provides short-term relief, it remains uncertain how long this exemption will last. Businesses should use this time to prepare for potential future changes and ensure their supply chains are compliant and adaptable.