Hot Tips for Shipping to Canada

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.
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EU Green Tax Sparks International Outrage

As many as 30 different countries, including the United States, China and Russia, have joined forces to oppose a European Union edict to impose fines on international air carriers using its airspace.  Opposition has become so strident, that the issue has the potential to escalate into a full-blown trade crisis.

Effective January 1, 2012, the EU began subjecting international flights to its controversial “emissions trading scheme (ETS),” which imposes fines for carbon emissions that exceed a predetermined, government-authorized allocation.  ETS is similar to the “cap and trade program,” which has been a source of great debate in the United States.

The EU first announced its intention in 2009, and that announcement drew immediate and harsh rebukes from across the globe.   In the U.S., the Air Transport Association of America filed suit to challenge the EU’s legitimacy to exercise such power under international law.  That lawsuit was denied, in December 2011 by the Court of Justice of the European Union.  The U.S. Congress is expected to formally express its opposition to the carbon tax in the coming weeks.

In China, that country’s Civil Aviation Administration issued a directive banning domestic airlines from complying with ETS, and ordered that no fines be paid.  China estimates that it will be assessed as much as $125 million in annual ETS fines. 

“We hope that the EU understands the global negative response to its scheme and cancels or revises its plan,” Chai Haibo, deputy secretary-general of the China Air Transport Association told ChinaDaily.com

According to Reuters, China, India and other countries have called the EU law a violation of their sovereignty.  To consolidate their opposition, a meeting took place in Moscow in late February that included representatives from 26 nations opposed to ETS.  Participants reportedly agreed to a list of retaliatory measures, which include “barring national carriers from participating in the ETS and lodging formal complaints with the International Civil Aviation Organisation (ICO).”

For its part, the EU affirmed that any congressional action could “harden diplomacy” and result in an all out trade war.  Do you agree with the EU’s effort to minimize emissions by imposing fines?

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Does Your Supply Chain Include a “Plan B”?

At one point last winter, Florida was the only one of the 50 states that did not have snow on the ground.  The. Only. One.  That meant that winter weather was a factor in places that don’t even own snow removal equipment – places like Mauna Loa, Southern California and Dallas.

But what do you do when you’ve got a shipment of goods that need to be delivered by a drop dead date, and simply cannot be sidetracked by an unexpected snowstorm or other unexpected malady?  Last year, for example, Purolator received a call from a Chicago business that absolutely had to have a package delivered to Vancouver by the following morning.  Why the urgency?  The package to be delivered was a plaque that was needed for the opening ceremonies of the Vancouver Special Olympics.  

Fortunately for this particular business, Purolator was able to help, and the package arrived in Vancouver in time for the ceremony.  But what if it’s not as lucky next time?  And what if it’s your business, and your reputation on the line if a package does not arrive in time.  In fact, a study conducted by Accenture consulting found that while 73 percent of respondents experienced supply chain disruptions in the past five years, 94 percent said the disruption impacted profitability and affected their ability to meet customer expectations.  And 36 percent said it took more than a month to recover.  A month!  Does your business have the luxury of that much time?

The key to a solid “Plan B,” lies with your logistics provider.  A good provider will be able to work with you to develop contingency plans in case something goes wrong.  But you’ll need to be proactive in making sure that your carrier has the capability to offer a Plan B.  A few questions to ask:

  • What is the carrier’s modus operandi for when a truck breaks down?
  • Does the carrier have flexibility to re-route shipments that have been delayed, either due to equipment problems, infrastructure delays or processing errors?
  • How deep is the carrier’s distribution network?  Can it accommodate late-breaking changes and urgent shipping needs?
  • If a shipment involves a border crossing, can the carrier ensure that all paperwork will be completed, and no unnecessary delays will be incurred?
  • While no one can predict the weather, does the carrier have resources to ensure a rapid recovery and alternate routing should inclement weather be a factor?  Does the carrier have access to multiple modes?

And the list goes on.  If your carrier cannot satisfy your concerns about being able to offer a viable Plan B – time to look for a new carrier.   Like it or not, the unexpected will happen!

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TSA missed Deadline to Screen International Cargo

Maybe it wasn’t such a big deal when Transportation Security Administration head John Pistole announced that his agency would miss a December 31 deadline to begin screening 100 percent of all cargo arriving via international flights, but that the agency was pursuing a risk-based strategy that would focus resources on “high risk” shipments.

The mandate to screen 100 percent of arriving international cargo came from Congress, in the wake of last year’s attempt by al Qaeda operatives to send bomb-laden printer cartridges into the U.S., on board a flight that had originated in Yemen.  While Congress’ intent may have been laudable, a closer analysis shows that the mandate is neither feasible nor warranted.

For one thing, treating every piece of cargo the same, and demanding across the board screening ignores the simple reality that some cargo poses a greater threat.  Forcing airport personnel to screen obviously low-risk shipments from known shippers diverts precious resources from focusing on riskier shipments from unknown or flagged sources.  Instead, the TSA should be allowed to explore options for a “trusted shipper program.”  Business groups including the International Air Transport Association and the U.S. Chamber of Commerce support a process, whereby companies would be certified as trustworthy – and emphasis would be given to suspicious packages and shipments from unknown businesses.

And worth noting is the fact that the U.S. is not the first country to think about screening international cargo.  For example, the United Kingdom has maintained an international screening program for many years that incorporates a trusted shipper component.  Other countries, including Israel, have had success at implementing screening programs, albeit on a much smaller scale.

The 100 percent mandate also ignores political reality.  TSA Administrator Pistole has spoken out about the difficulty of reaching agreements with foreign nations, basically asking them to agree to implement U.S. standards in their airport practices.  Pistole says that agreements have been reached with countries that account for roughly 80 percent of all incoming cargo, but the remaining have so far eluded him.

In a recent blog post, security industry expert Chris Battle wrote that Congress was “arrogant” in thinking it could dictate policy to the nearly 100 countries from which it imports air cargo.   “Certain members of Congress continue to demand that the U.S. government, via TSA, somehow force other governments to follow U.S. regulations.”  Battle adds: “TSA Administrator John Pistole skirts having to state the obvious – that mandating other governments to do what the U.S. Congress says to do isn’t practical.”

Congress’ mandate to screen 100 percent of all international cargo was a knee jerk reaction to al Qaeda’s attempt to send contraband into the U.S.   Congress clearly over-reached in attempting to legislate – in a year’s time – the creation and implementation of a screening system that would be accepted across the globe. While all parties certainly share Congress’ goal of border security, a more strategic, risk-based approach that drew upon current “best practices” clearly could have provided a more expeditious route.  Hopefully the TSA’s missed deadline will allow the agency some breathing room to develop such a system, with the support of international partners and key domestic audiences.

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Surge in Canadian E-Commerce Opportunities for Global Logistics Providers

While Canadian consumers may have been slow to embrace the Internet and online shopping, the trend has caught on with a vengeance, and volume is expected to more than triple by 2015.  And as it does, there will be a corresponding need for qualified logistics providers with border clearance expertise to move those shipments into Canada.

This was one of the key takeaways from a panel discussion that took place during World Mail and Express America’s conference, which was held in Miami in early February.  More than 200 mail, parcel, logistics and business representatives attended the conference, which focused on key trends in mail and shipping patterns.

Integral to that discussion, is the global surge in e-Commerce, and the implications that growth has had on postal and courier systems.  And among the great e-Commerce success stories, has been the rise of online shopping among Canadian consumers.   Consider these facts about Canadian e-Commerce:

  • According to Statistics Canada, during 2007, more than 70 million online orders were placed by about 8.4 million Canadians.  The value of those orders was $12.77 billion (CAD). 
  • By 2010, those numbers had grown to more than 114 million orders placed with a value of $15.3 billion (CAD). 
  • By 2015, eMarketer predicts that Canadian Internet sales will spike to nearly $31 billion (CAD).

These numbers are even more impressive, when you consider that the population of Canada is roughly 34 million people, versus a U.S. population of 313 million.

Jonathan Routledge, Eastern District Manager for Purolator International, a leading provider of logistics services for shipments to Canada spoke about the surge in Canadian e-Commerce, and noted that, while the trend has created an increase in B-2-C shipments to Canada, there are things about shipping to Canada that should be considered.

Specifically, Routledge focused on four key areas:

  1. Border clearance and customs compliance.  Although Canada’s border clearance process is “probably what you would consider ‘normal,’” he noted that there are “unique aspects that differentiate the Canadian clearance process from other countries.”   For one thing, the U.S./Canada clearance process has become stricter in recent years, as each country has imposed new security requirements.   A 2009 report issued jointly by the U.S. and Canadian Chambers of commerce highlights a “thickening” of the border, whereby new or increasing fees and inspections, uncertainty over wait times, layers of rules and regulations from multiple departments, have combined to create a “perfect storm” for border inefficiency.  And while joint-government efforts are underway to try and ease the clearance process, compliance will remain a source of frustration for shippers and carriers.
  2.  Trusted Shipper Programs.  Canada has attempted to facilitate the border clearance process for high volume and regular carriers through a number of “trusted shipper” programs.  Once approved, program participants are generally assured of fewer inspections, pre-clearance and minimal wait times.  In fact though, carriers have been complaining in recent years that those perks are being ignored, as CBSA has increased its focus on security.  “But nevertheless,” Routledge said, “any carrier interested in providing regular cross border service into Canada needs to be aware of, and participate in these trusted shipper programs.
  3. Tax and Fee Structure.  Canada’s duty and fee structure can be confusing to the uninitiated.  Goods shipped to Canada generally trigger an array of taxes and fees including:  Goods and Services Tax (GST), Provincial Sales Taxes,  Brokerage Fees, Disbursement Fees and Conversion Fees.  In addition, a carrier must be aware of all trade agreements and tariff requirements.
  4. Demographics.  An often overlooked fact of doing business in Canada – are the unique characteristics of Canada itself.  “Because the U.S. and Canada have so much in common,” Routledge told the group, “people tend to assume that a Canadian business transaction will mirror a U.S. transaction.   That sort of thinking gets people in trouble.”  Among the key considerations:  Canada is a bi-lingual country with 23 percent of the population listing French as their preferred language.  And while 80 percent of the population lives within 100 miles of the U.S. border, a carrier must find a way to reach consumers living in the more remote regions of the country.

The growth in Internet sales among Canadian consumers presents a strong opportunity for qualified carriers and logistics providers.  But before a carrier markets itself as “Canada experienced,” there are a few things to be learned.  And as Routledge told the World Mail audience, “it’s better to understand the Canadian market going in, rather than face a ‘trial by fire’ upon arrival at the border.”

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Beyond the Border Agreement Receives Mixed Reviews

With more than $1.5 billion worth of goods and services crossing the U.S./Canadian border every day, and with each country serving as the other’s largest trading partner, you can bet that any border-related government announcement will generate a lot of attention.

Such was the case when the new “Beyond the Border” perimeter and security agreement was announced. As presented, the agreement will help facilitate travel and trade between the two nations, align regulatory requirements, and improve border security.

While the agreement drew barely a mention by the U.S. media, Canadian business leaders and editorial writers expressed a range of opinions. “This is a very scary document,” Michael Vonn of the B.C. Civil Liberties Association told The Huffington Post. “We’re appalled. It is essentially a wholesale adoption of U.S. policy and standards across the board.” Others had a different take, including Canadian Chamber of Commerce Director Perrin Beatty, who called the agreement “Good news for all Canadians,” and the Toronto Star editorial page, which seemed to think the deal would have little immediate impact, calling it a “cautious work in progress that will be figured out, fought over and rolled out in pilot projects for years to come.”

With such a wide range of reactions, what exactly does the agreement claim to do? Canadian Transportation & Logistics outlined the key implications for businesses and transportation providers:

  • Faster border crossings with commercial traffic getting more dedicated lanes and technology.
  • Wait times measured and posted ahead of border crossings.
  • The agreement expands on programs to speed up border crossings for frequent and trusted traders, clearing cargo at the first port of entry.
  • Companies will have a “single window” to submit data required by government for shipments. The cargo clearance pilot project will start in Montreal and Prince Rupert, B.C., by 2013.
  • Consumer health products that have already been approved in the U.S. could be approved faster in Canada, with regulatory bodies sharing information and adjusting labeling standards to make it easier to market a product in both countries.
  • Under the agreement, border and law enforcement efforts will be more integrated, starting with a radio system that will work on both sides of the border, all the way up to integrated criminal and intelligence investigations.

The two countries will also conduct joint investigations to target security threats. While both the U.S. and Canadian government have forecast significant benefits from the agreements – including $16 billion that will be saved by eliminating regulatory redundancies — time will tell if the agreement is a help or a hindrance to the nations’ shared concerns – keeping the border secure and promoting the critical U.S./Canada trade relationship.

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Message to Congress: Highways/Truckers are Top Priority

Don’t underestimate the effect of new regulations on the nation’s commerce, was the unmistakable message delivered by a contingent of shippers, carriers and trade association officials who traveled recently to Capitol Hill. The visit, which organizers named “Stand Up for Trucking,” was intended to convey concern about pieces of legislation currently awaiting action on Capitol Hill, and to remind lawmakers that more than 7 million Americans work in trucking-related jobs. Among the concerns the group took to Washington:

  • Highway Reauthorization Act: The House of Representatives recently began action on a five-year $260 billion surface transportation plan that includes provisions for everything from infrastructure investment to truck weight limits to the hyper-political Keystone pipeline project. The “American Energy and Infrastructure Jobs Act” is expected to receive full House consideration in February. According to Logistics Management, trucking advocates support a “longer-term (six years, ideally) that focuses on funding the 166,000 mile National Highway System, addresses highway congestion and establishes a freight program to address interstate commerce.”
     
  • “Final” Hours of Service Regulations: Industry supporters were alarmed when, in late December the Federal Motor Carrier Safety Administration (FMCSA) issued a final rule that will reduce drivers’ work weeks from 82 hours to 70, and require rest periods that include the hours between 1am and 5am. Trucking advocates oppose the changes, which they say will force the hiring of additional drivers, thereby driving up costs and resulting in more trucks on the road.
  • Interstate Tolls: Some members of Congress are in favor of increasing – and in some instances initiatiing – interstate highway tolls as a way to fund infrastructure improvements. The trucking coalition strongly opposes this, arguing that fuel taxes are a more efficient and fairer way of raising revenues. Plus, the industry argues, tolls amount to double taxation, since trucks pay both existing user fee taxes, and would be forced to pay a toll on top of that.

The more than 100 pro-industry supporters held meetings with a number of influential House and Senate members who will play a role in the legislation that eventually emerges from both the House and Senate. “We have to help our lawmakers understand the impact and dampening effect regulations are having on our businesses,” Dan England, chairman of truckload carrier C.R. England told Logistics Management. “We’re hoping to find people who can see reason.”

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Is Your Logistics Provider a Problem Solver?

With the spotlight pointed directly at the predicted capacity shortage, businesses are looking to ensure that their shipments will not be left behind.  While many businesses are scrambling to lock-in service with a suitable carrier, others may find that the solution may be as easy as a heart-to-heart talk with their current provider.

That’s because a good logistics provider should also be a logistics problem solver.  Rather than just offer scheduled pickups and deliveries, with little room for flexibility, a problem solver will have options at its disposal to meet your specific needs.

In a recent Canadian Transportation & Logistics blog post, Dan Goodwill noted that the issue of delivering solutions had come up at a recent shipper-carrier roundtable he had attended.  “This idea was mentioned by both Heather Felbel, vice president, logistics of Indigo Books & Music, and J.J. Maislin, president of Maisliner, a Quebec-based freight carrier,” Goodwill wrote.  “Shippers are looking for transportation organizations that are problem solvers and can pull together a combination of resources to meet each cluster of customer needs,” he continued.  “Shippers are looking for solutions providers that can provide a range of services and modes, that can offer storage when requested, and that can make available value-added information services as needed.”

So how can your make sure that your logistics carrier is a logistics problem solver?  A few “points of discussion” to consider:

Flexibility:  Does your carrier offer a “one size fits all,” “take it or leave it” approach, or is there a menu of options to choose from to meet your exact needs?

Customized Plans:  Does your carrier understand your business needs and objectives?  Have you worked together to develop a logistics strategy that is specifically designed to meet or exceed those objectives?

Out of the Box Solutions:  Can your provider call on different resources to put together unique logistics plans to address unexpected or “rush” situations?

Contingency Planning:  When the inevitable crisis or SNAFU arises, will your carrier be able to offer a “Plan B” to ensure that your shipments are not delayed?

With 2012’s challenging business climate and transportation shortage on the horizon, it’s more important than ever for a business to have confidence that their logistics provider is also their partner.  A few minutes today to discuss your carrier’s service options could go a long way toward addressing your long-term service needs.

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New Driver Regulations Sent Holiday Chill through Trucking Industry

In a late-December announcement, the Federal Motor Carrier Safety Administration (FMCSA) gave the trucking industry what amounted to a lump of coal, when it finalized new rules that it claims will promote driver and highway safety.

FMCSA’s action, which takes effect in 18 months, will place tighter restrictions on the “restart provision,” that resets a driver’s clock following a designated period of rest. According to the Journal of Commerce, the new rule would cut weekly work time from 82 hours to 70 and require rest periods including the hours between 1 am and 5 am.

In a positive turn for the trucking industry, FMCSA opted not to proceed with a proposal to reduce the current 11-hour limit on daily driving.

However, industry groups were outraged by the changes to the restart provision, arguing that the change will reduce efficiency across their supply chains, complicate delivery schedules, and raise costs and possibly even increase incidences of highway accidents.

“This rule will put more truck traffic onto the roadways during morning rush hour, frustrate other motorists and increase the risk of crashes,” said American Trucking Association (ATA) President and CEO Bill Graves.

The National Retail Federation also expressed opposition:  “The current regulations have allowed U.S. retailers to achieve significant efficiencies within their supply chains and distribution networks while keeping safety as their top priority,” said David French, NRF senior vice president.  “We believe the new restart requirement will have a significant impact on the industry, especially those who rely on overnight or early morning deliveries.”

The ATA is considering legal action to try and prevent the rule changes from taking effect.  As currently written, the new rules will take effect in July 2013.

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US Retailers Be Prepared – 62% of Canadian Consumers Buy Online

Late last year the Canadian government reported that Internet sales in that country passed C$15.1 billion during 2009, an 18 percent increase from the C$12.8 billion that was spent online during 2007.  Internet sales were slow to take hold in Canada, but clearly, the option has caught on and is here to stay.  In fact, Canadian shoppers are projected to spend more than C$22.8 billion during 2012.  And the good news for U.S. retailers, is that roughly 62 percent of those consumers will be buying from U.S. retailers.

Canadian consumers are increasingly looking to U.S. retailers, since the stronger Canadian dollar means increased buying power, and since U.S. goods are generally in high demand among quality and status conscious consumers.  But, as a 2010 report by Visa Inc., points out, Canadian consumers have set some specific parameters when it comes to U.S. e-commerce:

  • 82 percent do not want to pay extra shipping charges for cross border sales
  • 75 percent are concerned about being faced with unexpected, or hidden charges
  • 72 percent believe U.S. sites offer a wider selection

Despite the strong demand among Canadian consumers for U.S. goods, a surprising number of American businesses have yet to develop websites targeted at the potentially lucrative Canadian market.  Breaking into the Canadian market can be a difficult process, as U.S. shoe retailer Zappos.com learned.  Zappos, which has established a niche in the U.S. as a result of its “free shipping both ways” policy, found that it could not replicate that service in Canada, nor could it offer the same selection of brands, due to distribution agreements.  The company announced that, effective April 1, 2011, it would no longer offer service to the Canadian market. 

Other U.S. retailers, including Amazon.com had to contend with stiff resistance from Canadian-based businesses, who claimed that the lower-priced U.S. retailer would unfairly infringe on their business.

According to Ksl eConsulting, there is a list of “do’s” for U.S. businesses interested in being “seriously considered as an online shopping destination for Canadians.” Among the tips:  Make sure your website lists prices in Canadian dollars, and be sure to use a Canadian shipping company!

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