A Trade Loophole is Helping Fast Fashion Thrive in Canada

A tax exemption meant for travellers is now fuelling a flood of low-cost fashion into Canada – and Canadian brands are paying the price.

There’s a reason online giants like Shein and Temu can offer $5 dresses and ship them to your doorstep with no added tax or duty: they’re using a trade rule known as de minimis – and they’re using it well.

What Is De Minimis?

In Canada, the de minimis threshold is the dollar value under which imported goods can enter the country duty- and tax-free. Currently, items valued under $40 CAD are exempt from taxes, and under $150 CAD are exempt from duties – so long as they’re sent directly to consumers from abroad.

This system was designed to simplify border processing for small, occasional shipments, but it’s now being used by ultra-fast fashion companies to flood the Canadian market with low-cost, low-quality disposable clothing.

Why Does This Matter?

For starters, it creates an unfair playing field for Canadian businesses. Domestic retailers must collect sales tax and may pay import duties on their inventory – costs that Shein, Temu, and others avoid by shipping small parcels directly to your door.

As a result:

• Canadian brands struggle to compete on price,

• Local jobs and businesses are undercut,

• And tax revenues are lost – dollars that could fund public services or support sustainability innovation.

Beyond economics, there’s a massive environmental cost. These ultra-fast fashion companies sell billions of garments per year, often designed to be worn once, if at all. Items arrive individually wrapped and often end up in landfill within months. And since these companies operate outside of Canada’s policy frameworks, there’s little accountability for how they’re made or what happens to them at end-of-life.

What Other Countries Are Doing

Other governments are waking up to the problem. While tariffs aren’t a perfect solution, the U.S. has taken notable steps to address its de minimis loophole—recently introducing measures that target companies like Shein. Similar conversations are gaining momentum in the UK and EU, where direct-to-consumer e-commerce is under growing scrutiny for its impacts on waste, labour rights, and climate goals.

Should Canada Lower the Threshold?

Many believe that it’s time.

Lowering the de minimis threshold, or applying duties and taxes to all online imports could: 

• Level the playing field for Canadian brands

• Recover lost tax revenue

• Slow down the flood of ultra-fast fashion

• Encourage more mindful consumption

• Increase accountability for imported goods

But the issue is complex. It would also mean higher prices for consumers shopping on these platforms, and more pressure on border processing systems. Like most sustainability challenges, there are trade-offs.

What We Think

At Fashion Takes Action, we believe that all businesses should play by the same rules – and that Canadians deserve a transparent, fair, and sustainable fashion system. That means addressing policy loopholes that allow environmentally harmful and socially exploitative business models to thrive.

We also believe consumers have power. Every time you choose to buy less, buy better, or shop secondhand or local, you’re voting for a different fashion future.

But we need systems change too, and that includes asking tough questions about how international e-commerce is regulated in Canada.

The system may be broken, but awareness is the first step to change. Want more insights on how fashion, policy, and sustainability intersect?

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