Surface trade between the United States and Canada jumped by more than 11 percent during December 2011, and has soared by 27 percent since 2009, according to the U.S. Department of Transportation. This in turn has fueled a spike in U.S. businesses looking to Canada for export opportunities. After all, Canada’s close proximity to the U.S., our similar cultures, and that country’s thirst for high quality U.S. goods make Canada a logical place for U.S. businesses seeking to expand their customer base. But before you build Canada into your business model, there are some important issues to take into consideration.
Doing business in Canada is an international transaction, complete with multiple customs and regulatory issues, along with demographic and economic issues that are uniquely Canadian. Many businesses make the mistake of treating Canada almost like a 51st state, only to learn the hard way that shipping to Canada can be very technical and exacting.
Following is an overview of some of the top issues that U.S. businesses must take into consideration, before reaching out to the Canadian market:
- Understand the Canadian Market. The number one mistake U.S. businesses make, is a failure to do their homework and take the time to understand the nuances of the Canadian market. Don’t assume, for example, because a product is “hot” in the U.S, that it will meet the same receptive audience in Canada. U.S. businesses need to do their market research, and customize their advertising and marketing. Another consideration is that Canada is officially a bi-lingual country, and one-third of the population list French as their primary language. Businesses will need to make sure that (a) they have a way to communicate with this segment of the population and that (b) all packaging/labeling will be understandable.
- Don’t Get Hung Up at the Border. This cannot be overstated. Complying with Canadian customs/border clearance mandates is a very bureaucratic and confusing process. And this is despite the pro-trade NAFTA agreement that in place to facilitate trade. Although NAFTA eliminated tariffs on domestically produced products traveling between the U.S. and Canada, there are myriad other regulations with which to contend.
In addition, increased security measures have further exacerbated the clearance process, adding additional paperwork and mandates. And, compliance processes and standards can change at a moment’s notice. Most businesses delegate the clearance process to an experienced customs broker. It’s important though, to make sure that a broker claiming to have expertise with the border clearance process, can back up those claims.
- Take Advantage of Trade Incentives. Both the U.S. and Canada are committed to fostering and growing the two countries’ trade relationship. Each country has established “trusted shipper” programs designed to facilitate the clearance process for frequent shippers. In addition, programs are in place to “level the playing field,” so that U.S. exports can compete more equitably on the Canadian market, and vice versa. These programs include:
Certified Cargo Screening Program (CCSP): Program developed by the TSA to facilitate implementation of 100 percent screening mandate for cargo travelling aboard U.S. passenger planes. CCSP allows qualified businesses and logistics and transportation providers to screen cargo off-site, thereby allowing shipments to arrive at the airport pre-cleared and ready for boarding.
Customs-Trade Partnership Against Terrorism (C-TPAT): Voluntary program administered by U.S. Customs Border Patrol (CBP) through which businesses and shippers agree to take steps to ensure the safety of their supply chains, in exchange for expedited clearance upon arrival at the border.
Duty Drawback program: Trade-enhancement program administered by CBP that allows U.S. businesses to be reimbursed for any duty collected on materials that are subsequently used in the manufacture of products intended for export. The duty drawback program prevents U.S. businesses from being taxed twice for the same product.
Free and Secure Trade (FAST) program: Joint U.S./Canadian security program designed to facilitate cross border trade by allowing qualified shippers expedited processing.
Non-Resident Importer (NRI): Canada Border Services Agency (CBSA)-administered program that allows U.S. businesses to act as “importers of record,” thereby allowing pre-payment of all taxes, duties and fees before a shipment arrives at the border. Pre-payment of fees allows U.S. businesses to charge their Canadian customers for all costs at time of purchase, and it levels the playing field for U.S. businesses interested in competing in the Canadian market.
Partners in Protection (PIP) program: CBSA-administered program through which businesses agree to voluntarily ensure the security of their supply chains.
- Be sure you can reach your customers. Canada is the second largest country in the world, based on land mass (Russia is first, China is second, the U.S. is fourth). And while roughly 80 percent of the population live within 100 miles of the U.S. border, it is essential to have capacity to reach Canadians located in non-urban areas. Partner with an experienced logistics provider. Businesses entering the Canadian market rely on their logistics partner to not only transport their shipments, but also to offer recommendations about how to improve performance, for insight into the “Canadian way” of doing things, and for help in developing an efficient supply chain.
The problem though, is that not every logistics provider can deliver as advertised. Quite simply, they do not have the expertise in the Canadian market that they claim. It’s very important to research a potential logistics partner. Ask a lot of questions, demand documentation and check with other businesses. You don’t want to find out the hard way that your self-described “Canadian expert” is not who they claimed to be.
- Don’t Forget about Returns. Last year U.S. consumers returned more than 8 percent of their purchases – a figure that exceeded $200 billion. Businesses shipping to Canada can expect to see a similar returns volume, and need to be prepared. International returns, however, can be tricky because a second trip across the border is involved. Make certain that your logistics partner has options available for an efficient returns process that can satisfy your business demands and your customers’ expectations.