2 boutique owners are rethinking whether their business is still viable after a long-standing tax exemption ended

Owners of Diesel and Lulu's are left wondering if they can continue their business after the de minimis exemption ended.Diesel & Lulu'sBoutique owners are left wondering if they can continue their business after the de minimis exemption ended.The two owners describe their packages stuck at customs as a "hostage situation."The boutiques are also grappling with a tourism downturn and low consumer sentiment.Two boutique owners are rethinking whether their business is still viable after a long-standing tax exemption ended.For 13 years, longtime college friends Perry Olson and Kristin Trainor have carved out a niche in tourist towns across the Northeast with their boutique, Diesel and Lulu's.The boutiques, which now have six locations and are named after two of Olson's dogs, are known for their curated European linen and knitwear, jewelry from local artists, and a shopping experience where customers are encouraged to bring their kids, pets, and coffee.But the end of the de minimis exemption — a rule that allowed businesses to import shipments under $800 duty-free — is threatening to unravel their business model, which primarily imports small batch, hard-to-find products from Europe."We're just taking it day by day now," said Olson. "For our stores, everything has been impacted."A shipping nightmareUp until the de minimis exemption ended on August 29, Olson said that ordering from a vendor in Europe was simple. It would usually involve a text message and a bank transaction, and a box would show up on the doorstep in two weeks. Now, Olson faces unexpected fees on top of existing tariffs on EU countries, confusing paperwork, and orders that she said are facing a "hostage situation" at customs.Olson recently ordered a package of goods from Europe that cost $680, but shipping alone was $150, up from $90 just a few weeks earlier. Then came a $251 duty bill from customs, which she must pay for the shipment to be released, or else the order will be returned to Europe with no responsibility to offer refunds on the vendor's end."A $680 order cost me $400 in fees," Olson said. "That's like 65% all day long. That's not a number I can absorb."Trainor, who took it upon herself to gather information on how to make the process smoother, is also finding custom codes extremely hard to understand. She said that the charges on a product vary greatly depending on details like material, shape, and even which province it came from, which makes it nearly impossible to predict exactly how much the fee will be ahead of time."You don't know what you're going to be hit with until the item actually arrives at a port and you get a surprise bill," Trainor said. "Every day is mitigating risk. Do I want to risk placing another $600 order to get $400 in duty, or do I not, and then not have that product in the stores?"Small businesses create domino effectsDiesel and Lulu's model relies on buying in real time, not seasons in advance like many large retailers. That means higher responsiveness to trends, but also greater exposure to new tariffs and duties. The consequences, Olson said, extend well beyond their business."If my business were to fold, you're not talking just about me," Olson said. "You're talking about our employees, about the fundraisers and community support we do for families and animals, and about the local jewelry artists whose work we carry. The dominoes are going to fall indefinitely."Trainor said that while people more frequently discuss the big box stores or the auto industry and their profit margins, they are in a much better position to handle sudden policy changes and afford extra hands to help, whereas the small businesses that hold communities together can't afford the volatility.While the boutique would absorb some of the rising costs, Olson said that a portion would have to be passed on to customers because of the magnitude of the costs."Right now you can walk into my store and put on something adorable without flipping the tag over to see if you can take it home," Olson said. "Looking good and feeling good — that should not be based on your income — and that was our vision."The business is facing blows from all frontsFor now, Olson and Trainor are searching for workarounds by negotiating with vendors, absorbing part of the costs, and carefully rationing what to import. But the business is also handling other crises aside from tariffs and duties."All of this is happening simultaneously, while tourism took a major swan dive this summer, when five out of six of my locations are in tourist areas," said Olson. "This is the last possible time people could tolerate price increases, and all of these are on top of other policy issues that are already crushing us."Olson said that her self-employment health insurance will be going away as part of the Trump administration's cuts, while Trainor said her father could lose VA benefits."We are just adorable little stores, but we're also a very big piece of how this machine operates," Olson said. "If small businesses were to fall in this country, it's not just about the little bakery around the corner, it's about half of our economy collapsing."Read the original article on Business Insider

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