Canadian Company Says U.S. Border Rules Killed Its Drop-Shipping Business — and Could Push It South

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For a Canadian company that makes most of its money from American customers, a border that becomes harder to cross can quickly turn into a business problem rather than a paperwork inconvenience. Vancouver-based Quark Baby says that is exactly what happened after changes to U.S. tariffs and customs rules disrupted the way it manufactured, stored and shipped its baby products.

Founder and CEO Garett Senez says roughly 90% of Quark’s business comes from the United States. The company has already shifted significant production away from China, changed its warehousing strategy and absorbed millions of dollars in costs. Now another possibility is being discussed: whether remaining headquartered operationally in Canada still makes sense if cross-border commerce stays this difficult.

Quark Built a Canadian Business Around American Demand

Quark Baby began in 2021 with six product SKUs, according to Senez, and has since expanded to roughly 45. The Vancouver company sells baby-feeding technology and accessories, including bottles, feeding products and portable milk warmers. Although its corporate roots and employees are in Canada, its customer base is overwhelmingly on the other side of the border. Senez says approximately 90% of its business comes from the United States, giving every change in American trade policy an outsized effect on the company. What might be a manageable inconvenience for a business selling primarily inside Canada can become a major operating problem when nine out of every 10 dollars of business are connected to U.S. demand.

That exposure was once easier to manage because Quark could organize inventory across Canada and the United States and move relatively small customer orders south efficiently. The company says it operates through four warehouses and regularly shifts merchandise between the two countries. In that model, the border was part of the supply chain, but it was not necessarily the defining cost of every individual transaction. The combination of tariffs, sourcing changes and tougher low-value import rules has altered that calculation. Instead of simply choosing the warehouse closest to available stock, Quark increasingly has to consider where goods originated, where they are stored and what customs process will apply when they move.

The End of the $800 Exemption Changed the Shipping Math

One of the biggest changes came from the U.S. decision to suspend duty-free de minimis treatment. Previously, qualifying shipments valued at $800 or less could enter the United States under the Section 321 exemption, allowing enormous volumes of low-value e-commerce orders to move through a simplified customs system without ordinary duties. An executive order issued in July 2025 suspended that treatment globally effective August 29, 2025. The U.S. government subsequently continued the suspension in February 2026, meaning the old $800 duty-free channel has not returned.

For companies such as Quark, the significance goes beyond the possibility of paying a tariff. Non-postal shipments that previously qualified for de minimis treatment generally must now use an appropriate customs entry and can face applicable duties, taxes, fees and additional compliance work. That does not mean every Canadian product automatically faces the same tariff; the duty ultimately depends on factors including origin and applicable trade rules. The administrative advantage of the former low-value exemption, however, is gone. The scale of the policy is enormous. U.S. Customs and Border Protection reported that more than 1.36 billion de minimis shipments were processed in fiscal 2024, up from roughly 139 million in 2015. A system that had become central to global e-commerce effectively changed almost overnight.

Tariffs Had Already Forced Quark to Rethink China

The border problem arrived after Quark had already begun rebuilding another major part of its supply chain. Senez says a substantial portion of the company’s products had historically been manufactured in China, where Quark had established factories, tooling, moulds and production processes. When U.S. tariffs made that structure more expensive, the company examined alternative manufacturing locations including Vietnam, Thailand, Indonesia, Cambodia and South Korea. It ultimately moved a significant amount of production to South Korea. Quark’s own product documentation now identifies Seoul as the manufacturing location for its BuubiBottle collection, providing visible evidence of that shift.

Moving production was far more complicated than finding another factory with available machines. Product moulds can physically be relocated, but manufacturing knowledge, quality-control routines, production speeds and supplier relationships take time to reproduce. Senez estimates that relocating production and dealing with related mould and manufacturing expenses cost Quark just under $1 million. There were also commercial consequences while the transition was underway. He says the company had to decline some large purchase orders because certain products were no longer economical to supply, while other items went temporarily out of stock. Quark says its operations have since stabilized, but the experience shows how quickly tariff changes can force a relatively young consumer-products company to rebuild a supply chain that took years to establish.

Moving Inventory Across the Border Became the Next Problem

Resourcing production did not solve Quark’s American fulfillment challenge. Senez says the cancellation of the $800 de minimis treatment effectively stopped the company’s existing U.S. drop-shipping operation from Canada. Quark responded by finding additional warehousing inside the United States, allowing products intended for American customers to be positioned on the U.S. side before individual orders are fulfilled. Even that adjustment has been messy. Senez says some inventory remains stranded and that the company has already worked through multiple drop-shipping providers while trying to establish a reliable replacement system.

The environment is also continuing to change. A separate U.S. executive order issued in June 2026 directed authorities to tighten requirements governing importers of record. Among other changes, it calls for stronger domestic-asset and bonding requirements and directs that foreign importers of record be barred from using informal entry procedures. Those measures are distinct from the 2025 de minimis suspension that Senez blamed for disrupting Quark’s previous model, but they point in the same direction: U.S. customs policy is demanding greater accountability and a stronger domestic presence from companies bringing goods into the country. For a Canadian business already questioning whether cross-border fulfillment remains efficient, every additional layer of customs administration strengthens the economic case for placing more inventory, infrastructure and potentially corporate activity inside the United States.

Senez Puts the Total Damage at About $2 Million

The financial impact has accumulated through several different channels rather than appearing as one large tariff bill. Senez estimates that tariffs, resourcing, intellectual-property-related expenses, logistical changes and lost sales have cost Quark roughly $2 million. Importantly, he does not attribute most of that total to measures specifically targeting Canada. His estimate is that approximately 90% of the damage resulted from tariff exposure connected to China, while around 10% came from Canada-related measures. That distinction matters because Quark’s experience is really a story about several trade disruptions colliding at once: manufacturing in Asia, selling primarily in America and operating from Canada.

The pressure also reached the founder personally. Senez told Business Insider that he put another $300,000 into the company in April 2026 to keep the business moving. For a smaller company, that illustrates how policy-driven costs can affect working capital long before a business actually fails. New moulds, additional warehouses, customs specialists and alternative fulfillment providers have to be paid for even while revenue is interrupted. Quark appears to have made it through the worst of the adjustment; Senez says the business is now back on a steadier track. But surviving required money that otherwise could have been spent on product development, marketing, inventory or hiring. The company has effectively had to invest heavily simply to restore capabilities it already possessed before the trade environment changed.

Moving South Is No Longer Just a Hypothetical Scenario

The most consequential question is what happens if cross-border commerce remains difficult. Senez says Quark is still a Canadian holding company and that its employees are in Canada, and he has emphasized that relocating is not his preferred outcome. Yet he has also said that if Canada and the United States cannot establish a workable trade environment, moving the business south may become necessary. With roughly 90% of sales tied to the American market, locating more operations close to those customers could remove some of the friction created every time inventory crosses an international border.

Quark is hardly proof that Canadian companies as a whole are leaving, but its concern fits a broader pattern. A KPMG Canada survey of 275 manufacturers conducted in May 2026 found that 29% had already moved some or all production to the United States and another 13% planned to do so. Among companies considering relocation, 77% expected a move within two years. Tariff avoidance and trade uncertainty ranked among the leading reasons, along with operating costs, taxation and supply-chain optimization. At the same time, 80% of respondents said they planned to keep their headquarters in Canada, showing that relocation is rarely an all-or-nothing decision. Companies may retain Canadian ownership and employees while putting warehouses, production lines or future investment closer to the U.S. customer.

The Bigger Risk May Be Where Future Growth Happens

Quark’s experience highlights a less obvious consequence of prolonged trade uncertainty. The immediate debate often focuses on whether an existing factory or head office will leave Canada, but businesses make dozens of smaller location decisions before reaching that point. A new warehouse can go to Nevada instead of British Columbia. The next production line can be built closer to an American fulfillment centre. Inventory intended for U.S. shoppers can bypass Canada entirely. Over several years, those individual choices can gradually shift investment even if a Canadian company never announces that it has formally “moved.”

That is why the de minimis change matters well beyond inexpensive packages. U.S. authorities have argued that the extraordinary growth in low-value shipments created enforcement, safety and tariff-evasion concerns, and the old system had expanded to well over a billion parcels annually before it was suspended. For Canadian e-commerce businesses, however, the new environment means the border has become a more significant factor in determining where inventory and operations should sit. Quark has adapted by changing manufacturers, adding U.S. warehousing and rebuilding its fulfillment system. The company remains Canadian, and Senez says the business has stabilized. The unanswered question is whether future expansion happens primarily from Canada or increasingly inside the market that already accounts for almost all of Quark’s sales.

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