John Costanzo is the President of Purolator International
A few years ago, the manager of a Southern California manufacturing company contacted one of Purolator International’s regional offices regarding the manufacturer’s recent expansion into Canada. Things were going very well, the manager explained. The company had lined up an impressive number of Canadian retailers to carry its products, and sales were quite robust. The problem though — and the reason for the call to Purolator— was that shipments seemed to be taking longer than necessary to arrive in Canada. Was it possible for Purolator to find a way to cut the transit time, and make the overall process of shipping to Canada more efficient?
Faster, more efficient service is a common goal of all businesses that ship to Canada, and this need for speed has been exacerbated in recent years, with the surge in e-commerce shipments heading to Canada. Canadian customers share the same delivery expectations as their U.S. counterparts — shipments should arrive within 2-3 days, on-time, and at little or no cost to the customer.
But with an international border to cross, longer distances to travel, and an unknown distribution network to conquer, how could this be done?
In fact, tremendous advances have been madeincross border logistics such that U.S. businesses can now reach the Canadian market faster and with more flexibility than ever before. Much of this innovation has been fueled by technology, and some, by looking at things in a new way.
My company, Purolator International, is a leading provider of logistics services for shipments moving between the United States and Canada. Since this is our area of expertise, we’ve not only had a front row seat to the exciting changes taking place, but we’ve been behind several of them. I’m happy to share a few experience-based tips that can help ensure your shipments enter Canada as quickly and efficiently as possible.
1. With the right provider, you can shave days from your Canadian transit time. For many years, “standard” service from California to Canada included a stopover at a distribution center — often located several hundred miles off-course. After being held at the distribution center, the shipment would be loaded onto an LTL carrier and make multiple stops before finally reaching the border. That’s all changed.
• Today it is possible to have shipments move direct to the border, with no distribution center layover, and no stops along the way. This is because LTL linehauls now operate regularly in California, with direct service to Canada.
• Route optimization is another tool that helps ensure shipments travel on the most expeditious route. This is a technology-based tool that maps out the shortest route possible, taking into account factors like infrastructure delays and weather issues.
• Consolidation can help reduce freight costs and expedite the border clearance process. By combining several smaller shipments into one larger shipment, a business can qualify for reduced freight charges and, since a consolidated shipment can clear customs as a single unit, the process also helps facilitate the border clearance process.
Taking advantage of these options depends in large part on your logistics provider. A provider that owns its own fleet of trucks, for example, is generally locked into using their own vehicles, and customers’ shipments must fit into a pre-determined, inflexible schedule. But if you use a logistics provider that does not own its own assets, but instead has relationships with many different carriers from which it selects the best option for each customer, you will have a lot more flexibility.
2. Make sure you can reach your customers. It’s also important to understand some important nuances about the Canadian market. The population of Canada is almost 37 million people, compared with California’s population of 39.5 million. But, Canada is the second largest country in the world, in terms of geographic area. Imagine if the population of California occupied the entirety of the United States, with room to spare. That’s essentially the situation in Canada.
A U.S. business must do its homework, and make sure its transportation provider has the capacity to guarantee delivery to all parts of Canada. Many parts of the country are remote, for example, and not accessible via traditional distribution networks. Most carriers do not offer service throughout Canada, which often means a shipment will have to be transferred from one regional carriertoanother, and then to a courier for last mile service. There’s a lot of opportunity for shipments to get lost or damaged when that happens, so make certain you’re entrusting your customers’ shipments to a truly experienced provider that can guarantee delivery to all of Canada.
3. Prioritize customs efficiency. Did you know missing or incomplete paperwork and inaccurate tariff classifications are top reasons for border clearance delays? These seem like such obvious “to do’s,” but the fact is many shippers underestimate the scope and complexity of the customs process.
For example, almost 50 different U.S. agencies have some degree of authority over the import/export process. In the United States, these agencies, called Partner Government Agencies (PGAs) range from the Food and Drug Administration which oversees imports ofpharmaceuticals, to the Fish and Wildlife Administration, which regulates wood products, among other things. Depending on a shipment’s contents, the PGA will usually require a shipper to provide additional documentation and receive a permit. In some instances, multiple PGAs have jurisdiction, and a shipper must comply with information requests from each agency. But if a shipper is unaware of this step in the customs clearance process, it will mean delays.
This is exactly what happened to one of our customers, a manufacturer of musical instruments. The company’s guitars included different species of wood, which fell under the scope of the international CITES treaty, which is administered by the Fish and Wildlife Service. The customer’s shipments were routinely being held at the border, accruing fines and wasting time. Fortunately, we were able to intervene and get this situation sorted out, but this customs issue had been a real bottleneck in this customer’s Canadian shipping strategy.
Most businesses choose to enlist a customs broker to handle documentation and customs filings on their behalf, which can be an enormous help. An experienced 3rd party will know precisely which forms and documents need to be submitted to U.S. Customs and Border Protection (CBP) and/or to Canada Border Services Agency (CBSA), and will also assist in ensuring that the proper tariff classification code is assigned to a shipment.
4. Register as a Non-Resident Importer. The Canadian government does not allow U.S. businesses to collect Canadian sales tax or act as an importer of record in clearing goods into Canada. This means a business faces the highly inconvenient and unwelcome dilemma of having to collect taxes from Canadian customers at time of delivery. Further, it is possible the Canadian customer will have to become personally involved in the customs process, by retrieving the shipment from a local customs office. Neither or these situations are helpful to a U.S. business trying to build its brand in the Canadian market.
Fortunately, the Canadian government addresses this problem through its Non-Resident Importer (NRI) program. Businesses are allowed to register with CBSA as an NRI which essentially eliminates these two obstacles:
•Taxes can be collected attime of payment
•NRIs can clear goods through customs.
Having NRI status essentially levels the playing field for U.S. businesses by removing barriers, and allowing them to provide the same types of seamless transactions as Canadian businesses.
5. Duty Paid or Unpaid? Every business that ships to Canada agrees to certain “shipping terms” with its transportation provider as a way to establish each party’s responsibilities in the transaction. Among the many topics addressed:
• Which party is responsible for paying border fees and tariffs?
• Which party will actasimporter of record?
• Where will exact point of delivery take place?
• Which party will have responsibility for unloading the shipment?
To ensure there is no uncertainty, a set of 11 universally-recognized shipping terms — known as “Incoterms” -- establish each party’s responsibility in the shipping transaction. Of the 11 Incoterms, only one — “Delivered Duty Paid” — designates border clearance responsibility to the seller. This allows the seller to ensure that shipments arrive in Canada with all taxes and duties pre-paid. Shipments traveling via any other Incoterm will arrive at the border with taxes and fees to be paid by the buyer.
There are reasons why a business may want its shipments to arrive in Canada with duties unpaid. But for most retailers — especially e-commerce businesses that ship directly to consumers — having to collect dutiesattime of delivery would be highly inconvenient. Choosing the right shipping term can have a consequential effect on your business, yet this is something many businesses know very little about.
Many, many factors come into play in successfully shipping to the Canadian market. These five “tips” though, should be at the top of your list as you think about ways to better serve existingcustomers, or plan to expand your Canadian reach. There’s never been a more lucrative time to be involved in cross border trade or, thanks to better logistics capabilities, an easier time to ensure guaranteed, on-time deliveries into Canada.
Oh, and the California manufacturer who reached out for help in reaching the Canadian market faster? We were able to offer a logistics solution that shaves 2-3 days from its transit time. It’s all about understanding theCanadianmarket, and having the tools in place to succeed.