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Canada’s “Last Sale” Rule: What It Means for Non-Resident Importers and E-Commerce Sellers

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Global Logistics, Global Trade Daily, International Trade, News

Canada’s “Last Sale” Rule: What It Means for Non-Resident Importers and E-Commerce Sellers

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

When the Canada Border Services Agency (CBSA) finalizes its long-planned valuation-for-duty amendments—expected to take effect in early 2026—it will mark the most significant customs valuation reform in a generation.

At its core, the change replaces Canada’s long-debated “first sale” interpretation with a “last sale” rule. The reform ensures that imported goods are valued at the final transaction that causes them to be exported to Canada, not at earlier transfer prices or intercompany sales in multi-tiered supply chains.

For cross-border ecommerce and logistics platforms, the implications are far-reaching. The rule directly impacts non-resident importers (NRIs) and B2B2C models that rely on transfer pricing or “paper” subsidiaries to minimize declared customs value.

The NRI Use Case: A Legitimate, Substance-Based Model

Under current Canadian law, a foreign merchant can import without forming a Canadian subsidiary by registering as a non-resident importer (NRI). The NRI obtains a Business Number (BN) and the necessary import/export and GST/HST accounts, allowing it to act as the importer of record for its shipments.

If the goods are imported as unsold inventory—meaning they are not yet sold to a Canadian buyer—the NRI may declare its cost of goods (COGS) as the value for duty. This approach complies with the Valuation for Duty Regulations, which recognize a purchaser in Canada only when the importer has entered into an agreement to sell the goods prior to importation.

That distinction matters: an NRI may import goods at cost only while no Canadian buyer yet exists. Once a retail sale to a Canadian customer triggers export, the declared value must reflect that retail transaction.

The CBSA’s Customs Valuation Handbook (2024) reinforces this principle: all imports must declare a value for duty—even when no duty is owed—and the transaction value method applies only when there is a sale for export to a purchaser in Canada. Without a genuine Canadian buyer, NRIs must rely on alternative methods such as computed or deductive value.

The “Paper Subsidiary” Problem

In recent years, some service providers have promoted a turnkey B2B2C “paper subsidiary” model—a structure where a foreign merchant sets up a nominal Canadian entity, often without physical presence, to act as the importer of record. The entity uses an internal transfer price (sometimes 60–80% below retail) as the declared value for duty.

The CBSA has made it clear that this model doesn’t withstand scrutiny. In correspondence with industry stakeholders, the Agency explained that because such subsidiaries lack a fixed place of business in Canada through which they carry on business, they do not qualify as “purchasers in Canada.” As a result, the intercompany sale cannot be used as the sale for export.

The CBSA has also signaled concern about the promotion of these simplified B2B2C models, warning that future compliance verifications may target importers relying on related-party pricing structures.

This mirrors language from CBSA’s 2021 consultation, which clarified that a permanent establishment must have the authority to contract and cannot merely serve as a conduit. In short: a mailing address or GST registration alone does not create a purchaser in Canada.

Without genuine local presence—employees, management control, or operational substance—the intercompany “sale” will be disregarded. The CBSA will instead treat the subsequent retail sale to the Canadian consumer as the relevant sale for export.

The Coming “Last Sale” Rule

The 2023 Canada Gazette proposal formalizes this interpretation, defining “sold for export to Canada” as:

“…to be subject to an agreement, understanding or any other arrangement to be transferred, in exchange for payment, for the purpose of being exported to Canada; and if the goods are subject to two or more such arrangements, the applicable arrangement is the one respecting the last transfer of the goods in the supply chain.”

In practice, that means the last sale—the transaction that actually triggers export to Canada—determines the customs value, even if title transfers later.

This aligns Canada’s approach more closely with the WTO Customs Valuation Agreement, promoting commercial realism and fairness while closing the perceived loophole that allowed some NRIs to under-declare values. Implementation is expected in early 2026.

IOR Reform and Related-Party Pricing: A Tightening Web

Alongside the valuation reforms, the CBSA is also moving to implement joint and several liability between the owner, importer, and importer of record (IOR)—a model inspired by OECD best practices. This shared-liability framework will hold ecommerce platforms, logistics providers, and their clients collectively responsible for duties and taxes.

For related-party transactions, CBSA Memorandum D13-4-5 cautions that transfer prices based on profit allocation methods such as TNMM are often insufficient to prove that prices are uninfluenced by relationships. Importers must demonstrate that the declared price represents an arm’s-length transaction or ensures full cost recovery plus a representative profit.

Together, these reforms form a consistent compliance framework:

The declared customs value must reflect the true, arm’s-length price of the transaction that actually causes the export to Canada.

Practical Takeaways for Cross-Border Sellers

For e-commerce brands shipping directly to Canadian consumers, several key principles emerge:

  • Substance over form. “Paper” subsidiaries without real presence in Canada won’t qualify as purchasers.
  • NRIs remain viable. NRIs can still import without forming a subsidiary—but only for unsold or speculative inventory.
  • Retail sales drive valuation. Once a consumer purchase triggers export, the retail sale price determines the customs value.
  • Prepare for transparency. Expect greater scrutiny of whether declared values align with final retail transactions.
  • Plan for 2026. The last sale rule and IOR liability reforms are expected to take effect together, reshaping how ecommerce imports are structured.

The Bottom Line

As Canada finalizes its new Valuation for Duty Regulations, the message is clear: only the last sale counts.

For ecommerce merchants evaluating B2B2C import solutions, it’s critical to scrutinize any provider offering “duty savings” through creative valuation schemes. Under the new framework, what looks like a compliant optimization today could amount to a misdeclaration of value for duty tomorrow—a serious compliance risk in an era of heightened CBSA enforcement.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily, Imports/Exports, International Trade

The NRI Reckoning: How U.S. Import Reforms Are Reshaping Cross-Border E-Commerce

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

Read also: The Future of Cross-Border E-Commerce in Emerging Markets

After years of operating quietly in the background, the U.S. Non-Resident Importer (NRI) program is suddenly in the spotlight. Once a little-known mechanism for enabling foreign entities to import goods without a U.S. presence, NRI has become a flashpoint in trade policy — especially as the U.S. clamps down on duty-free de minimis shipments and ramps up tariff enforcement.

For e-commerce brands and global merchants alike, the rules of engagement have changed. Understanding how the NRI framework works — and how it’s evolving — is now critical to maintaining access to the U.S. market.

From Regulatory Footnote to Policy Flashpoint

The NRI framework, established under the Tariff Act of 1930, has long allowed foreign businesses to act as Importer of Record (IOR) without setting up a U.S. entity. Historically, it served traditional B2B trade: a foreign company could import by appointing a U.S. resident agent and posting a customs bond — procedural steps, not policy controversies.

That all changed with the rise of cross-border e-commerce. What was once a niche mechanism became a mainstream strategy as online shopping accelerated globally. Millions of overseas merchants adopted NRI status to sell on marketplaces and hold unsold inventory in the U.S.

Amazon FBA and the Rise of the Foreign Seller

Amazon’s Fulfillment by Amazon (FBA) program turned NRI from a technical footnote into a mass-market enabler. FBA created both opportunity and necessity: to reach Prime customers with fast delivery, foreign sellers needed to pre-position inventory in U.S. warehouses. But Amazon doesn’t act as the Importer of Record — that responsibility falls on the seller.

Enter the NRI solution. By securing a CBP-assigned importer number and a surety bond, foreign sellers could import inventory into U.S. fulfillment centers — without forming a U.S. entity or maintaining domestic assets. Today, Chinese and Hong Kong sellers are estimated to make up more than 60% of all third-party sellers on Amazon.

This boom also fueled an entire service ecosystem: bundled “FBA importer packages” offering NRI setup, resident agent services, surety bonds, and customs filings marketed directly to global merchants. For many Chinese sellers, the path from factory floor to Amazon warehouse became remarkably streamlined.

Meanwhile, the 2016 increase in the de minimis threshold from $200 to $800 — and the 2019 introduction of Type 86 entries — opened the door for another surge in direct-to-consumer shipments. Platforms like Shein, Temu, and AliExpress built business models around duty-free entry, accounting for an estimated 30%+ of all U.S. low-value package shipments by 2022.

But with the de minimis program now suspended, those models are in crisis — and the NRI system is under renewed scrutiny as a workaround for foreign merchants to evade U.S. duties.

De Minimis Ends, Tariffs Rise, and Scrutiny Grows

On August 29, 2025, an executive order suspended de minimis treatment for all countries. Overnight, every inbound parcel — regardless of value — now requires a full customs entry and duty payment. For millions of foreign merchants, the door that once bypassed customs clearance has effectively closed.

At the same time, tariffs are rising sharply: reciprocal duties between 10% and 41%+, plus additional Section 301, 232, 201, and anti-dumping/countervailing measures. CBP audits have increased by more than 150% year-over-year, with growing attention on undervaluation, misclassification, and transshipment.

The convergence of these pressures has forced thousands of foreign sellers to seek alternative import pathways — often with questionable results.

The Workarounds: “Modified DDP” and Compliance Risk

As duties and oversight rise, a parallel market of workarounds has emerged. Some overseas suppliers now offer to ship on “Delivered Duty Paid” (DDP) or so-called modified DDP terms, effectively acting as the Importer of Record through NRI status.

In these arrangements, the foreign manufacturer — not the U.S. merchant — declares the import value to Customs, often far below the true transaction value. Some industry executives estimate that “modified DDP” transactions now make up roughly 10% of all U.S. imports.

While marketed as convenience and cost savings, the risk is real. When duties are underpaid or declarations are falsified, liability can extend to the U.S. buyer. Both CBP and the Department of Justice have warned that U.S. companies won’t be immune from enforcement simply because their supplier “handled the import.”

In short: when a deal sounds too easy, it usually is.

The Collectability Crisis

At the heart of Washington’s concern lies one word: collectability — CBP’s ability to recover unpaid duties and penalties from foreign importers with limited or no U.S. presence.

When a U.S. company defaults, CBP can seize assets, pursue claims, or collect through domestic legal channels. But with NRIs, options are limited: the bond is the only real security, and resident agents aren’t financially liable.

The math doesn’t work. A foreign merchant importing $1 million in goods with a 50% tariff owes $500,000 in duties — ten times the minimum $50,000 bond. If they default, the surety pays only that bond limit, leaving the rest uncollected. CBP has documented cases of “ghost importers” that rack up debt, dissolve, and reappear under new names.

A Lenient Framework by Design

The U.S. NRI model stands out for its leniency. Unlike the UK and EU, which require a co-liable “Indirect Representative” who has a physical presence in the market to share financial responsibility for customs debt, the U.S. relies solely on the importer’s bond. Brokers act as agents, not guarantors.

This structural gap is now at the center of proposed reforms. Lawmakers argue that the absence of a co-liable representative has enabled undercapitalized foreign sellers to operate in the U.S. market with little accountability — and left CBP with limited recourse when duties go unpaid.

Legislative and Industry Pushback

Reform is gaining bipartisan momentum. The Leveling the Playing Field 2.0 Act (H.R. 1548/S. 691), introduced earlier this year, would require NRIs to maintain U.S. assets sufficient to cover potential duty liabilities and post enhanced bonds — with exemptions for C-TPAT Tier 2/3 participants. Violations could trigger penalties up to $50,000 per shipment or 50% of shipment value.

Separately, Senator Bill Cassidy is considering legislation that may go further, seeking to eliminate NRI eligibility for most foreign merchants except those in Canada. Trade groups like the Alliance for Trade Enforcement are also urging the U.S. to end NRI authorization altogether and require domestic Importers of Record or joint-liability structures.

The August suspension of de minimis privileges amplified these calls, revealing just how deeply foreign NRI operations are now embedded in U.S. e-commerce — and how fragile the current system has become.

Pathways Forward for Foreign Sellers

For legitimate merchants and platforms, adaptation is key. Several practical pathways exist:

  • Use an Importer of Record Service: Partnering with a licensed IOR service provider adds cost but provides accountability and smoother compliance. 
  • Leverage In-Country Fulfillment: Combined with an IOR service, import inventory in bulk to U.S. warehouses, paying duties on cost-of-goods rather than retail prices to reduce per-unit costs. Research shows that 94% of ecommerce leaders plan to expand in-country fulfillment within five years. 
  • Join Trusted Trader Programs: C-TPAT certification and similar initiatives may offer safe harbors under future legislation and demonstrate a proactive compliance posture. 

The New Reality

The NRI pathway that helped fuel global e-commerce growth isn’t closing — but it’s narrowing. The U.S. is shifting from permissive growth to accountability and enforcement.

Foreign sellers, especially those that once relied on de minimis exepmtion and lenient import programs, face new complexity and cost. But those who view compliance as an investment — not an obstacle — can turn this moment into a competitive advantage.

The door to American consumers remains open. It’s just no longer frictionless.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily, News

Canada’s Cross-Border Crossroads: What Ecommerce Leaders Need to Know Now

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

Read also: The Trade Deficit Myth: Why America Quietly Wins with Canada

For U.S. ecommerce brands, Canada has long been the most accessible international market — close in proximity, aligned in culture, and historically stable from a trade perspective. But as we move into Q4 2025, the landscape is shifting fast. Three concurrent developments are reshaping how brands sell, ship, and comply north of the border:

  • The removal of Canada’s 25% surtax on select U.S. goods, opening new opportunities for competitive pricing and margin recovery.

  • Full enforcement of CARM (CBSA Assessment and Revenue Management), a new customs system transforming how B2B and Non-Resident Importer (NRI) shipments clear customs.

  • A nationwide Canada Post strike, forcing merchants to rethink last-mile delivery strategies — and reconsider whether DDP or DDU shipping models can withstand service-level shocks.

Taken together, these changes mark a pivotal moment. For some brands, they signal opportunity; for others, potential disruption. The key lies in understanding how these policies interact — and adapting your cross-border strategy accordingly.

1. Tariff Relief Re-Opens a Door

After many months of escalating tariff pressure, Canada’s decision to eliminate its 25% surtax on select U.S. products offers some breathing room. This policy shift, effective September 1, 2025, rolls back duties on thousands of American-made goods that were implemented in March of this year as a retaliatory trade measure.

For U.S. brands in affected categories — particularly cosmetics, consumer goods, homeware, and select apparel — this means:

  • Lower landed costs and more flexibility to reduce prices or boost margins

  • New room for promotional spend ahead of Black Friday/Cyber Monday

  • Opportunity to regain competitiveness in a market that’s increasingly price-sensitive

Smart brands are already reassessing their pricing models, updating checkout configurations, and reallocating marketing dollars to re-engage Canadian shoppers who may have previously been priced out.

The takeaway: tariff volatility cuts both ways. When relief comes, agility determines who benefits most.

2. CARM Enforcement Redefines Compliance

If tariff relief is the carrot, CARM enforcement may be the stick. The Canada Border Services Agency’s (CBSA) Commercial Accounts Registration and Movement (CARM) program represents a fundamental shift in how duties and taxes are paid at the border. Rather than relying on customs brokers to remit payments, CARM transfers this responsibility directly to the Importer of Record (IOR).

On May 20, 2025, CBSA made CARM mandatory for all commercial importers, including U.S. Non-Resident Importers (NRIs). While customs brokers were initially permitted to continue paying duties and taxes on behalf of NRIs as a transitional measure, that grace period ends on October 21, 2025. This means that all commercial importers — including U.S. NRIs — should be prepared to pay duties and taxes through the new CARM Client Portal.

This change has deep implications:

  • Customs brokers no longer hold Release Before Payment (RPP) privileges for shippers

  • Importers must register in the portal, purchase their own surety bond, or pay duties and taxes upfront

  • Merchants shipping as NRIs must now assume full responsibility for customs compliance, including registration, bonding, and remittance

For many direct-to-consumer (DTC) brands, this enforcement creates a decision point:

  • Continue shipping as an NRI and absorb the added administrative burden, or

  • Revert to a consumer-as-importer model, leveraging de minimis thresholds and simplified clearance

The latter often makes more sense for DTC shipments, allowing brands to reduce the administrative burden of CARM compliance while maintaining speed and affordability. But whichever path you choose, failing to register or adapt can result in costly holds and clearance delays — particularly as the CBSA ramps up audit activity in 2025.

CARM is ultimately a modernization effort — one that rewards brands with strong compliance infrastructure. The challenge is that many smaller merchants, especially those without Canadian entities, are now playing catch-up.

3. Strikes Stress-Test Shipping Models

Finally, the Canada Post strike underscores an often-overlooked reality: cross-border logistics isn’t just about crossing borders — it’s about what happens after.

Since September 25, Canada Post workers have been on a nationwide strike, halting all parcel processing and delivery. USPS continues to accept parcels bound for Canada, but those shipments are being staged, not delivered. The ripple effects are widespread:

  • Priority DDU shipments reliant on USPS handoffs to Canada Post are stuck in limbo

  • Delivery guarantees — including USPS’s PMEI service — have been suspended

  • Rural and P.O. Box deliveries, which depend exclusively on Canada Post, are paused indefinitely

For brands still relying on postal DDU (Delivered Duty Unpaid), the strike is a wake-up call. Without diversification, a single labor disruption can derail weeks of customer orders — especially during peak season.

By contrast, brands leveraging Delivered Duty Paid (DDP) models with multi-carrier networks have been able to reroute around Canada Post, maintaining service continuity for 90%+ of Canadian customers.

The lesson? Resilience requires redundancy. In-country fulfillment, alternative carriers, and DDP routing aren’t just “nice to have” — they’re shock absorbers for moments like this.

Canada’s Evolving Trade Equation

Zoom out, and a pattern emerges. Canada’s trade and logistics environment is evolving toward greater compliance accountability, operational complexity, and network diversification.

For brands, this moment is a test of readiness. Those who treat Canada as a mature, strategically distinct market — not just an “extension” of U.S. operations — will find room to grow even amid uncertainty.

The next quarter will reveal which merchants can pivot quickly, manage compliance proactively, and maintain customer trust through disruption. For everyone else, it’s a reminder: international growth doesn’t pause for policy shifts — it rewards preparation.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily, News

96% Expect International Growth in Q4, But Only 31% Feel Ready: The Make-or-Break Peak Season for Global Ecommerce

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

Read also: Despite 7 in 8 Ecommerce Brands Raising Prices to Offset Tariffs, 96% Still Expect International Sales to Rise in Q4

Peak season 2025 presents an unprecedented convergence of challenges and opportunities. Trade headwinds are intensifying: tariff costs continue climbing, the U.S. de minimis exemption has ended, and customs holds and audits are at an all-time high. Meanwhile, customer expectations for speed and transparency continue to rise.

Yet market conditions aren’t uniformly bleak. Canada’s elimination of its 25% surtax on select U.S. products offers relief, tariff volatility is stabilizing after six months of upheaval, and a weakened dollar is boosting American product competitiveness abroad.

For ecommerce brands, these shifting trade dynamics are colliding with holiday-level order surges. And the numbers tell a stark story: based on a Passport and Drive Research survey of 200 senior ecommerce leaders across the U.S., UK, and Canada, 96% expect international order volumes to grow this Q4 — but only 31% say they’re fully prepared to handle it.

That gap between optimism and readiness makes the coming weeks critical. Brands can’t undo policy shifts or rewind their planning calendars. But they can act decisively now to put systems, strategies, and safeguards in place that will determine whether this season is profitable or painful.

Early Movers vs. Late Starters

Most ecommerce leaders recognize the stakes. 86% began peak planning in the first half of the year, and a small but savvy group (17%) started as far back as late 2024. Those early movers gained time to stress test fulfillment systems, coordinate across marketing and ecommerce teams, and build tariff mitigation into their budgets.

But 1 in 7 leaders admit they didn’t start planning until Q3 — or haven’t started at all. For them, compressed timelines mean fewer opportunities to refine systems or stress test strategies before the busiest sales window of the year. What proactive planners spread out over months, late starters are now racing to solve in weeks.

Pressures Driving Peak Priorities

Survey respondents consistently ranked three priorities as mission-critical this Q4:

  • Fast, reliable delivery (57%)
  • Reducing shipping costs (41%)
  • Customer satisfaction (37%) 

But external factors — especially tariffs and trade policies — are reshaping how brands approach those priorities:

  • 99% say tariffs are impacting their peak planning. Section 301 tariffs on China (7.5%–25%) and new IEEPA tariffs (20% for China-origin products) are compounding costs. Reciprocal tariffs ranging from 10% to 50% add more complexity.
  • 7 in 8 have already raised prices to offset higher landed costs. For many, the challenge is balancing margin protection with maintaining conversion rates in an increasingly price-sensitive market.
  • In Canada, the recent removal of a 25% surtax on U.S. goods has opened new opportunity. Brands selling into Canada are reassessing pricing strategies and marketing budgets to capitalize on lower costs — just in time for Black Friday and Cyber Monday.

The message is clear: ecommerce leaders are walking a tightrope between cost control and customer experience. Those who can protect margins without eroding trust will be the ones that come out ahead.

Five Moves Leaders Are Making

To manage these competing pressures, brands are leaning into five strategies that stand out in the data and in practice:

  1. Expanding in-country enablement. Nearly 1 in 4 brands plan to open or expand fulfillment operations in new countries this year, reducing tariff exposure and getting closer to customers. As Sean Frank, CEO of Ridge, put it: “If we’re going to take this seriously, we should have localized inventory on a localized website so that a customer in Germany can get their order in two days like they expect.” 
  2. Using Delivered Duty Paid (DDP) shipping. More brands are opting to handle duties and taxes upfront to prevent cart abandonment and avoid surprise fees. Kristina Lopienski of ShipBob noted: “To minimize wait times and cross-border complexities, you can even store inventory in those countries, leveraging an established partner with a global fulfillment network.” 
  3. Mitigating tariff costs. Duty drawback has reemerged as a powerful lever in the post–de minimis environment. Brands like Dolls Kill have recovered millions in duties on goods that were imported to the U.S. and later exported, boosting cash flow without raising prices. 
  4. Optimizing operations. From supplier diversification to warehouse automation, leaders are fortifying their supply chains. Kabir Samtani of Fulfil.io summed it up: “If you can execute internationally, it can be a big differentiator for the brand.” 
  5. Elevating customer experience. Leaders are setting clear cut-off dates, testing pricing tolerance, scaling support, and offering real-time tracking. Avi Moskowitz of PrettyDamnQuick stressed: “It puts you in a much better position in terms of how you communicate before the order’s even placed — from the product page all the way through checkout.”

The Global Trade Context

Ecommerce doesn’t exist in a vacuum — it operates at the mercy of policy and global trade shifts. This year alone:

  • The end of the U.S. de minimis exemption means every package bound for U.S. customers now requires a full customs entry, increasing compliance burdens and clearance costs.
  • New tariff layers — from Section 301 and IEEPA to reciprocal tariffs — are forcing brands to revisit sourcing strategies, fulfillment locations, and pricing models.
  • Canada’s surtax removal is a rare bright spot, opening the door to more competitive U.S.–Canada trade flows during the holiday rush.

These shifts amplify the stakes of peak season readiness. The brands that adapt to regulatory changes quickly — and pair compliance with customer-first experiences — will be best positioned to thrive.

The Bottom Line

Q4 2025 will be a dividing line. Some brands will view tariffs, compliance, and shifting trade rules as insurmountable headwinds. Others will see them as opportunities to differentiate, building resilience into their systems and trust into their customer relationships.

The takeaway is simple: brands can’t control tariffs or policy shifts, but they can control how prepared they are when the rush hits. The leaders who reinforce operations, align pricing strategies, and invest in customer trust today will be the ones turning this challenging peak season into a profitable one.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily, International Trade, News, Uncategorized

Turning Tariffs into Refunds: How Duty Drawback Helps Brands Win in the Post–De Minimis Era

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

The end of the U.S. de minimis exemption for all countries on August 29 isn’t just a policy change — it’s a profitability shockwave. Every shipment, no matter how small, now needs a full customs entry and will incur applicable duties. For many ecommerce brands, that means higher landed costs, tighter margins, and a scramble to adapt before peak season.

Read also: The End of De Minimis: How Global Ecommerce Brands Can Adapt and Win in the New U.S. Trade Era

But there’s an underused tool in the tariff survival kit — one that can put real money back in your pocket without changing your supply chain, product design, or market strategy. It’s called Duty Drawback, and if you’ve ever imported goods into the U.S. and then exported them again, you may already be sitting on a refund opportunity worth six or seven figures.

Why Duty Drawback Belongs in the Conversation Now

In Passport’s 2025 Peak Season Playbook survey with Drive Research, 99% of ecommerce leaders said tariffs and trade shifts are already affecting their Q4 planning. That’s not surprising when you consider how stacked the costs have become:

  • Section 301 tariffs on Chinese goods (7.5%–25%) 
  • IEEPA emergency tariffs (20%) layered on China-origin goods 
  • Reciprocal tariffs ranging from 10% to 41% on other origins, plus Merchandise Processing Fees and Harbor Maintenance Fees 

For brands used to shipping low-value orders under de minimis, those costs hit hard — especially if returns, re-exports, or multi-market fulfillment are part of the mix.

That’s where duty drawback comes in. The U.S. government has offered this refund mechanism since 1789, but most ecommerce companies have never heard of it, much less used it. In essence, drawback allows you to recover up to 99% of duties, tariffs, and certain fees paid on goods that are imported and later exported in the same condition.

Duty Drawback 101: How It Works

Think of drawback as a “second chance” on duties you’ve already paid. If you import goods into the U.S. and then export them — to a customer overseas, to an international warehouse, or even back to the manufacturer — you can claim a refund on almost all the duties and fees for those units.

For ecommerce brands, the most relevant categories are:

  1. Unused Merchandise Drawback – Finished goods imported and later re-exported unchanged (e.g., apparel shipped from a U.S. warehouse to a customer in Canada). 
  2. Rejected or Destroyed Merchandise Drawback – Goods that are defective, returned, or destroyed under customs supervision. 
  3. Manufacturing Drawback – Less common for DTC brands, but applies if imported inputs are used to make a product in the U.S. that is then exported. 

Key rule:  “Unused Merchandise” must leave the U.S. in substantially the same condition they arrived. Repackaging for shipping is fine; altering the product is not.

The Opportunity in Real Numbers

Here’s a simple scenario:

  • You import $500,000 worth of footwear from Vietnam into the U.S., paying 12% in duties plus a Merchandise Processing Fee and Harbor Maintenance Fee. 
  • Over the year, 10% of that inventory ships to customers in Canada and the UK from your U.S. warehouse. 
  • That 10% is eligible for drawback — nearly $6,000 in recoverable duties for just one product category, one year. Multiply that across multiple SKUs and multiple years (claims can be filed retroactively for up to five years), and the total refund can climb into the six or seven figures. 

Why Brands Miss It

Despite the potential, most brands don’t file drawback claims. Common misconceptions include:

  • “We’re not big enough.” In reality, mid-market brands often see the biggest percentage boost to margins. 
  • “It’s too complex.” While documentation and data matching are required, a licensed customs broker can manage the process. 
  • “It takes too long.” Initial setup can take months, but once in place, refunds can be processed in as little as 3–6 weeks. 
  • “We don’t export enough.” If you ship to Canada, Mexico, the UK, the EU, or Australia from U.S. inventory — even occasionally — you may qualify. 

The Process at a Glance

  1. Eligibility Assessment – Review your U.S. import data and outbound international shipments to identify overlap. 
  2. Privileges Application – File with U.S. Customs and Border Protection (CBP) to get authorized for drawback. 
  3. Data Matching – Match import entries to corresponding export shipments at the SKU level. 
  4. Claim Filing – Submit claims periodically (monthly or quarterly) with all required documentation. 
  5. Audit Readiness – Maintain records for at least five years in case CBP reviews your claim. 

How Duty Drawback Fits a Post–De Minimis Strategy

Drawback works best when integrated into your broader U.S. fulfillment model. For brands shifting to in-country enablement — bulk importing into the U.S., fulfilling domestically, and shipping internationally from U.S. inventory — drawback is a natural fit. Those outbound international orders create an automatic stream of eligible exports.

It’s also powerful for:

  • High-return categories like apparel and footwear, where international returns can be refunded under drawback rules. 
  • Hybrid fulfillment models that blend cross-border DTC shipping with in-country inventory. 
  • Seasonal or promotional exports, like sending U.S. stock to an overseas warehouse for a holiday push. 

Quick Self-Check: Is Drawback Worth Exploring?

If you can answer “yes” to any of these, it’s time to run the numbers:

  • Do you ship from U.S. inventory to international customers? 
  • Do you have returns from international orders fulfilled in the U.S.? 
  • Do you transfer U.S. stock to warehouses overseas? 
  • Have you been importing the same products into the U.S. for several years? 

Why Move Now

In our survey, 81% of ecommerce leaders said tariff costs are significant enough to impact pricing — and 7 in 8 are raising prices to cope. Duty drawback offers a way to protect your margins without passing the entire cost onto your customers. And because you can file retroactive claims for up to five years, waiting means leaving real money on the table.

The Bottom Line

Duty drawback isn’t a loophole — it’s a centuries-old program designed to keep U.S. trade competitive. In today’s post–de minimis, high-tariff environment, it’s one of the few levers that can immediately improve cash flow without disrupting your operations or your customer experience.

If you’re importing into the U.S. and exporting — even occasionally — you could be entitled to a substantial refund. The only wrong move is ignoring it.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a new bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily

The End of De Minimis: How Global Ecommerce Brands Can Adapt and Win in the New U.S. Trade Era

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The Global Entry with Thomas Taggart — A bi-weekly column on navigating global trade, ecommerce, and compliance in a changing world

On August 29, 2025, the U.S. will officially end its de minimis exemption for all countries. Overnight, the trade provision that allowed low-value imports under $800 to enter duty-free will disappear — and every shipment, regardless of value, will face full customs clearance and applicable duties.

Read also: The Rules Have Changed: How to Future-Proof Your U.S. Ecommerce Strategy Before Peak Season

For global ecommerce brands, this is a seismic shift. It’s not just a new cost line in your P&L — it’s an operational, compliance, and customer experience reset. And with tariffs stacking on certain origins, the financial impact can be significant.

According to Passport’s 2025 Peak Season Playbook study with Drive Research, 99% of ecommerce leaders say tariffs and trade shifts are already impacting their Q4 planning. In the same survey, 96% expect global order volume to increase this peak season — meaning these changes will hit during what’s projected to be one of the busiest international holiday periods in recent years.

Why This Change Matters

For years, de minimis made direct-to-consumer (DTC) cross-border shipping to the U.S. simple, cheap, and fast. Brands could fulfill orders from overseas, bypass complex customs filings, and avoid paying duties — all while offering competitive delivery timelines. Entire ecosystems were built around de minimis with many 3PLs setting up bonded programs in Canada and Mexico to help merchants pre-position inventory and reduce delivery times.

That era is over.

Now, every parcel needs a full customs entry, accurate classification, a designated Importer of Record (IOR), and payment of duties and fees. U.S. Customs and Border Protection (CBP) has ramped up enforcement, with audits up more than 150% year-over-year. Undervaluation, misclassification, and transshipping or “origin washing” (routing goods through other countries to disguise origin) are all in the crosshairs.

For brands relying heavily on low-value, China-made products, this is a double hit: de minimis is gone and layered tariffs can push landed costs up by 30% to 100%.

The Impact on Ecommerce Brands

1. Pricing Pressure and Margin Erosion

Tariffs are now unavoidable. A $100 retail item that once entered duty-free could face $20–$40 in duties — before broker fees or clearance costs. That’s why, according to our survey, 7 in 8 brands say they’re raising prices just to offset the impact of tariffs.

Quick win: Model your new landed costs by SKU and identify products that remain viable under the new duty regime.

2. Operational Complexity

Every shipment needs compliant paperwork, a proper HTS code, and an IOR. Without U.S. infrastructure, brands may face customs holds, unexpected fees, and delivery delays. 69% of ecommerce leaders admit they argmn’t extremely confident in their team’s ability to manage cross-border fulfillment this peak season.

Quick win: Evaluate whether a domestic fulfillment model — even partial — could simplify logistics, speed up delivery, and reduce per-order costs.

3. Compliance Risk

Customs penalties can now far exceed the duties themselves. Under the False Claims Act, knowingly undervaluing goods can result in triple damages and civil fines.

Quick win: Work with U.S. licensed customs brokers to ensure that commercial invoice level detail is accurate and compliant.

5 Moves to Make Now

Drawing on strategies we’ve implemented for leading global brands, here’s how to adapt without losing momentum.

1. Rethink Your Fulfillment Model

Under de minimis, shipping directly to U.S. consumers made sense. Now, importing in bulk and fulfilling domestically often yields lower effective duty rates, faster delivery, and better returns management.

In-Country Enablement — where you bulk-import inventory into a U.S. warehouse or 3PL and fulfill orders locally — is one of the fastest ways to protect margins. Duties are calculated on manufacturing cost rather than retail price, often cutting the effective duty rate in half or more.

It’s also what high-growth brands are already prioritizing: according to our spring survey, 94% of ecommerce leaders plan to scale in-country fulfillment in the next five years.

2. Get Pricing Strategy Right

Transparent, duty-inclusive pricing can prevent cart abandonment, but the best model will depend on your products and price points. Test different approaches — from incorporating duties into retail prices to showing them clearly at checkout.

Avoid the “surprise fee” moment on delivery, which often leads to returns and customer churn.

3. Leverage Duty Drawback

If you re-export goods — whether unsold inventory or customer returns — you may be able to recover up to 99% of the duties and fees you paid through duty drawback.

This is especially relevant for brands with high returns or multiple fulfillment locations, a reality for 1 in 3 ecommerce leaders who say lowering failed deliveries and returns is a top partner priority.

4. Audit Classifications and Explore Tariff Engineering

Make sure your HS codes are correct and complete. Even a minor misclassification can trigger penalties. HS codes change, so check with a licensed customs broker to ensure you are using the correct but optimal commodity code.

Some brands are reducing duty rates by modifying product design, materials, or assembly locations — a legal approach known as tariff engineering that large retailers have used for decades.

5. Invest in Compliance as a Competitive Advantage

In this environment, “playing by the rules” isn’t just about avoiding trouble — it’s a market differentiator. 46% of ecommerce leaders say fast, reliable delivery is the top trait they look for in a global partner, and compliance is foundational to delivering on that promise.

Build compliance into your marketing story: reliability and transparency can be as powerful as speed or price.

The U.S. Market Is Still Worth It

It’s tempting to view these changes as a reason to pull back from the U.S. — but that would be short-sighted. The U.S. remains the world’s largest ecommerce market, and brands that adapt now will be positioned to capture share as less-prepared competitors stumble.

We’ve seen brands make the shift in weeks, not months, and enter peak season with stronger operations and happier customers than before. The key is moving fast and choosing the right strategy for your stage, category, and capital.

Your Immediate Checklist

  • Run the numbers: Recalculate landed costs under new duty rates.
  • Pick your model: DTC, In-Country Enablement, or a hybrid.
  • Secure a partner: Work with licensed brokers and compliance experts.
  • Plan your messaging: Be transparent with customers about changes.
  • Stay agile: Build a playbook that can adapt as tariffs and rules evolve.

Final Word: De minimis may be gone, but growth in the U.S. is still within reach. With a proactive, compliant, and customer-first approach, you can navigate the turbulence — and even use it to your advantage.

Author Bio

Thomas Taggart is VP of Global Trade at Passport, a leading global ecommerce solutions provider helping brands like Ridge, HexClad, and Wildflower Cases scale globally with cross-border shipping, expert compliance support, and in-country enablement services. To learn more about Passport, visit passportglobal.com. The Global Entry with Thomas Taggart is a new bi-weekly column in Global Trade Magazine covering the strategies, regulations, and insights shaping the future of cross-border commerce.

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Global Logistics, Global Trade Daily, United states news

The Rules Have Changed: How to Future-Proof Your U.S. Ecommerce Strategy Before Peak Season

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In May 2025, the U.S. revoked the $800 de minimis exemption for all Chinese and Hong Kong-made goods. It was a seismic shift that instantly upended the cross-border playbook for global ecommerce brands. Shipments that once entered the U.S. duty-free now face full customs clearance, layered tariffs, and intense regulatory scrutiny. For many brands—especially those relying on Chinese manufacturing—this policy change is more than an operational headache. It’s a bottom-line threat.

Read also: How Ecommerce Retailers Can Mitigate Shipping Delays and Disruptions

And with peak season fast approaching, these challenges are colliding with the most critical sales window of the year. Brands that haven’t adjusted their import strategy may find themselves facing delays, margin pressure, and compliance risks at the worst possible time.

But while the rules have changed, the opportunity hasn’t. The U.S. remains the world’s most coveted consumer market. Brands that adapt quickly and compliantly can not only stay in the game—they can outperform competitors who stall or shortcut.

What Changed: From “De Minimis” to Maximum Exposure

Until recently, ecommerce brands could ship low-value parcels (under $800) from overseas to U.S. customers without duties or complex paperwork. That’s over—at least for goods made in China and Hong Kong. Now, every shipment must be fully declared and cleared, with tariffs ranging from 30% to over 70% in some cases.

Compounding the challenge: the U.S. has introduced multiple layers of tariffs on Chinese goods, including Section 301 duties implemented in 2018, new “Fentanyl” tariffs under the IEEPA, and reciprocal tariffs that may soon become permanent. What’s more, the end of de minimis for all countries is coming. The “one big beautiful bill” which was signed into law on July 4th, will phase out de minimis entirely by 2027 though many expect de minimis to be eliminated by the end of 2025.

Impact on Ecommerce Brands

The immediate consequences are threefold:

  1. Rising Landed Costs: Tariffs can erase margins entirely, forcing brands to raise prices, eat losses, or rethink product mixes. 
  2. Operational Friction: Every parcel will require full documentation, a U.S. Importer of Record (IOR), and precise HTS codes. Compliance errors can result in audits, seizures, or even False Claims Act lawsuits. 
  3. Legal Exposure: U.S. Customs is aggressively auditing entries, and misdeclarations—intentional or not—can lead to heavy penalties.

The “label-and-ship” era of cross-border ecommerce is over. Brands that want to stay in the U.S. must evolve.

Strategic Models to Navigate the New Trade Landscape

At Passport, we’ve mapped out three proven import strategies that smart ecommerce brands are leveraging to turn disruption into opportunity. 

1. Direct-to-Consumer (DTC)

Still viable for brands with high margins, small SKU counts, or non-China sourcing. But for those shipping China-made goods, this model now comes with high duty exposure and fragile unit economics.

Best for: Test-market brands, regulated products (e.g., cosmetics), or sellers with limited SKUs looking to avoid inventory commitments.

2. In-Country Enablement

This increasingly popular model involves bulk-shipping goods into the U.S., storing them domestically, and fulfilling orders locally. It shifts the customs valuation basis from retail price to wholesale or manufacturing cost—significantly reducing duties. It also unlocks faster delivery, simpler returns, and access to marketplaces like Amazon and Walmart.

Best for: Mid-sized to enterprise brands seeking scalability, tariff mitigation, and better customer experience.

Recent research by Passport and Drive Research found that 94% of ecommerce leaders plan to scale in-country fulfillment in the next five years—a clear sign of where the industry is heading.

3. B2B2C (U.S. Subsidiary Model)

This structure creates a U.S. entity to serve as the importer and distributor, purchasing inventory from the parent company at a compliant transfer price. While it offers tariff savings, it requires complex tax and legal compliance and is best suited for mature brands with $10M+ in revenue.

Best for: Operationally sophisticated brands with internal tax, legal, and trade teams.

How to Choose the Right Model

Key considerations include:

  • Tariff exposure: Products with high duty rates (e.g., apparel, electronics, footwear) may benefit most from in-country or B2B2C models. 
  • Sales volume: Brands shipping 1,000+ orders/month or with high return rates gain the most from in-country fulfillment. 
  • Compliance readiness: Acting as IOR and managing customs and tax responsibilities requires internal processes or a reliable partner. 
  • Customer experience goals: Fast shipping, smooth returns, and marketplace access are easier to deliver from U.S.-based inventory. 

The Compliance Imperative

In this new enforcement era, compliance is a competitive advantage. CBP (U.S. Customs & Border Protection) is cracking down on valuation fraud, improper classifications, and origin misstatements. Importers must exercise “reasonable care” or risk serious consequences—from triple damages under the False Claims Act to potential criminal charges.

Brands should work with licensed brokers, maintain airtight documentation, and avoid risky schemes that promise low duties with little transparency. Even if a supplier or vendor files the paperwork, the brand can still be held liable.

Steps to Take Now

If you’re feeling the pressure of tariff reform, here are six immediate actions to protect your U.S. growth:

  1. Run a landed cost analysis: Calculate true per-SKU costs under new tariffs and customs procedures. 
  2. Revisit your pricing strategy: Consider AOV increases, duty-inclusive checkout, or temporary surcharges. 
  3. Evaluate your import model: Is DTC still viable? Should you explore In-Country Enablement or B2B2C? 
  4. Invest in compliance: Partner with trade experts and treat customs and tax compliance as a competitive advantage. 
  5. Improve fulfillment and returns workflows: Especially if you shift to domestic inventory. 
  6. Communicate with customers: Transparency around shipping changes, duties, or pricing reinforces trust. 

Final Thought: Adapt to Win

The end of de minimis for China is just the beginning. U.S. trade policy is shifting toward stricter enforcement and higher import costs across the board. But brands that respond strategically ahead of peak season—rethinking fulfillment, tightening compliance, and delivering great customer experiences—will gain market share while others scramble.

The U.S. market isn’t closed. It’s just changed. And with the right playbook, your brand can still win.

At Passport, we’re helping ecommerce brands do exactly that. As a leading global ecommerce solutions provider, we support brands with compliant cross-border shipping, in-country enablement, and hands-on trade and tax guidance. Our latest product release expands support for UK-based merchants and adds new in-country fulfillment capabilities in the U.S. and Mexico—designed to help brands mitigate tariffs, accelerate delivery, and grow sustainably in key markets.

If your team is rethinking international strategy in light of trade reform, now’s the time to explore new infrastructure. With the right partners in place, tariff turmoil can become a catalyst for stronger, more scalable global operations.

Author Bio

Thomas Taggart is a cross-border commerce leader with more than 20 years of experience in international shipping and regulatory affairs. As the Head of Global Trade, Thomas helps ecommerce brands go global by simplifying international trade, tax, and product compliance issues. Prior to Passport, he brought international shipping solutions to market through multiple roles in UPS’s product development organization.