Blog September 23, 2025

Lululemon’s $240M Hit: The Hidden Story Behind a Cross-Border Tax Rule

How a Little-Known Trade Policy Cost Lululemon $240 Million

By: Jeremy Rotenberg

Updated: September 23, 2025 | 3 Minute Read

When Lululemon announced that a change to a US trade policy would deliver a $240 million blow to its gross margin, it sent a shockwave through the retail world. The culprit is the “death of de minimis,” a policy shift that closed a loophole Lululemon had brilliantly leveraged into a core part of its e-commerce strategy. The story behind it is a fascinating lesson in how deeply trade regulations can impact even the biggest brands.

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What is the “De Minimis” Loophole?

The “de minimis” concept in customs refers to a threshold below which goods can be imported without duties or taxes. In the US, this de minimis value was set at $800. Originally intended for tourists bringing back souvenirs, it created a massive opportunity for e-commerce. Lululemon took advantage of this by fulfilling nearly two-thirds of its U.S. online orders from fulfillment centers in Canada, shipping them directly to American customers duty-free.

A Policy Change with an Ironic Twist

It was a clever strategy, but it existed within a loophole that was being exploited on a colossal scale by international e-commerce giants. The sheer volume of duty-free packages entering the US forced the government to act, shutting down the provision for many countries.

Herein lies the great irony. During the 2017-2018 USMCA trade negotiations, the US government actively pushed for Canada to raise its own de minimis threshold to match the American $800 level. Canada refused. Had Canada agreed back then, it could have negotiated a specific carve-out, potentially exempting Canadian companies like Lululemon from the recent crackdown.

Now, Lululemon is forced to shift its e-commerce operations into the United States, a move that will undoubtedly increase costs. The brand’s $240 million pain is a stark reminder that when it comes to global commerce, the fine print of trade policy can matter more than you think.

The consultants at LIDD work with organizations across the supply chain to build more efficient, sustainable, and resilient operations. If you’re looking to turn your business into a powerhouse of operational excellence, reach out to LIDD today.

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