Canadian luxury fashion retailer SSENSE has said it plans to file for bankruptcy protection, partly citing pressure from US tariffs including on US-bound low value parcels, which just came into effect.
In an email to staff from CEO Rami Atallah, the Montreal-based firm said it was “surprised” by the elimination of the de minimis exemption for shipments to the US.
The de minimis exemption allowed for duty-free shipping to the US on packages worth $800 (C$1,100; £592) or less, and was widely used by e-commerce firms and global retailers to ship small packages to the US.
President Donald Trump issued an executive order suspending the exemption last month.
“In the past year, our landscape has shifted dramatically with tighter liquidity and increased trade pressures,” said Mr Atallah in the Thursday email, which was quoted by several media outlets and confirmed by a company spokesperson to the BBC.
This, along with the suspension of the de minimis exemption and the lenders’ move to sell the company without its consent, has “created an immediate liquidity crisis no short-term fix could solve”, he said.
Mr Atallah said SSENSE will file for creditor protection “to protect the company, retain control of our asses and operations, and defend our future”.
It plans to continue to pay salaries and benefits coverage for employees, and “intends to operate on a business-as-usual basis”, he said.
In a statement, a spokesperson for SSENSE said the firm believes “in the fundamental strength of our business”.
“While we sought a collaborative path forward, our primary lender has chosen instead to place the company under CCAA [Companies’ Creditors Arrangement Act] protection and commence a sale process without our consent.”
The firm will file its own CCAA application – which allows financially troubled firms to restructure – to safeguard the company, the spokesperson said.
SSENSE was founded by Mr Atallah and his brothers in 2003 and has become a popular online fashion retailer, employing around 1,200 people globally.
Sequoia Capital, a US venture capital firm, valued the company at $4bn in 2021.
The retailer has been hailed for its “great business model” and its unique branding that has made it among the most competitive in the online luxury retail space, said Charles de Brabant, the executive director of the Bensadoun School of Retail Management at McGill University in Montreal.
But Mr de Brabant told the BBC that its recent struggles are “not surprising,” with luxury sales trending downwards due to inflation squeezing peoples’ wallets.
Added to that is the “double whammy” of US tariffs on Canada and the suspension of the de minimis exemption, he said.
“It’s not an easy landscape for retailers and brands at the moment, and in my view there is more to come,” Mr de Brabant said, noting that US consumers make up a big chunk of business for both North American and global companies.
The Canadian retailer is one of many small- and medium-sized businesses that have expressed concerns about Trump’s cut of the long-standing de minimis exemption on US-bound shipments.
Tapestry – the parent company of US fashion brand Coach, which sells leather bags from roughly $200 to $1,000 – told analysts this month that it expects to take $160m hit to its profits due to changing tariff policies, with about a third of that attributed to the elimination of the de minimis rule.
Some, like Canadian clothing retailer Province of Canada, have paused shipments to the US “until further notice” due to the additional tariffs.
Last year, almost 1.4 billion packages – worth a total of more than $64bn – entered America without being charged duties under the exemption, according to US customs.
The de minimis exemption was introduced in 1938 to avoid the expense of collecting only small amounts of import duties in the US.
The rule’s threshold rose over the years, and was widely used by e-commerce companies and global retailers.
Trump and his predecessor, Joe Biden, criticised the policy as harmful to US businesses and said it has been abused to smuggle illegal goods, including drugs like fentanyl.
Businesses and individuals shipping to the US will now pay duties based on the country of origin’s US-imposed tariff rate. Otherwise, they can choose to pay a fixed fee between $80 and $200 per package, according to the White House.
Canada faces a 35% tariff on goods shipped into the US, though a bulk of that is exempt under a North American free trade agreement. It also faces sector-specific tariffs on metals and vehicles.