We are pleased to speak with John Costanzo, the Executive Director of the New York Chapter of MAPLE Business Council to learn more about the MAPLE organization and the opportunities for the New York region to grow its economic ties with Canada.
Q. John – thank you for taking the time to share some of your background and perspectives with our readers. Would you tell us about how you first got interested in cross-border business between Canada and the U.S. or perhaps with New York in particular?
My first experience in supporting NY Area companies’ cross border business goes way back to when, as a young representative of Emery Air Freight in Manhattan, I would help my clients ship documents and product to and from Canada. As part of my service, I recall picking up blank Canadian Commercial Invoices at a local Wall Street based stationary and helping bankers, media executives, accountants and other professional services employees to fill one out for items valued at more than $20 Canadian - the same free duty limit as today as far back as then. Fortunately, under the new USMCA, the maximum duty threshold (referred to as the deminimus rate) has finally been raised to CAD $150 and the taxable value will be raised to $40.
Later as the Northeast Regional VP for Purolator U.S. in the 80’s, I opened a regional air hub at Stewart Air Force base to provide overnight service throughout the northeast, serving markets from Maine to Virginia and western NY. While our operation was the main customer of Stewart at the time, when observing the first night of our operations from the control tower, I noticed two aircraft on the ground that were not ours. One was the Commandant’s of nearby West Point, and the other operated by a small company called “Canadex” that was using Stewart to provide overnight delivery between the U.S. and Canada, serving Ontario, Quebec and the NY Metropolitan area. This was the impetus for a successful extension of that overnight operation to connect with Purolator’s national Air Hub at Mount Hope Airport in Hamilton, Ontario…. serving all of Canada overnight from the Northeastern U.S.
Q. How significant a role has trade and investment between Canada and the U.S. played in your career?
Over the past 17 years leading Purolator’s U.S. cross-border business it’s been everything. 100% of our focus in the U.S. has been on helping U.S. and Canadian companies to launch their business in Canada. I have also led the national and international divisions of four other logistics companies over the past 35 years, and I have found that the “northeast quadrant” of North America, which I define as including Ontario and Quebec and stretches down into the States from Minnesota to Maine and south to Tennessee, has always represented about 65% of our business.
From an economic and cultural perspective, I’ve noticed this quadrant has more in common economically and culturally than with other parts of each country. If it were a separate country, the GDP generated in this quadrant would rank it as one of the largest economies in the world - perhaps 3rd or 4th after the US, China, Japan and the EU countries as a whole. It was always an area of focus for me as result, and particularly the NY tri-state region.
Approx. 10/20% of the revenues generated by Transportation & Logistics companies is generated from Canadian/U.S. cross-border trade. It was also the most profitable part of their business, as most companies entering the cross-border market for the first time needed help to navigate the complexities associated with moving shipments to/from Canada and the U.S. and were willing to pay a fair price for that help.
Like UPS and FedEx, the fastest growing part of Purolator’s US business over the past 7-10 years was our ecommerce business, as new entrants like Amazon, eBay and similar platforms as well as bricks & mortar retailers like Walmart, Abercrombie, Williams Sonoma formed ecommerce divisions to compete. Canada was typically the first or second market they launched outside of the U.S. due to the harmonization of regulatory matters, favorable duty rates through NAFTA and soon the USMCA, and sharing a common language for doing business with most of the provinces. So, Canada has played an important role in my career of helping U.S. based businesses prosper from trade.
Q. You most recently spent 17 years leading Purolator International based in Jericho, NY where, as CEO, you oversaw a ten-fold increase in sales and an expansion from 3 to 32 markets. As a company dedicated to helping American businesses ship to Canada to penetrate the Canadian market, what were some of the most common issues or challenges your clients faced?
There were many. Some examples are:
- Where to fulfill orders from… whether to setup a US or Canadian Distribution Center to fulfill orders. We helped many companies to fulfill orders more efficiently and cost effectively from existing US or Canadian DC’s rather than opening new and expensive DC’s in the US or Canada.
- How to register to do business in each country… i.e., as a Non-Resident Importer (NRI), or registered company.
- What was the Customer Experience they wanted to offer? Overnight, 2 day or longer?
- How to clear Canadian and U.S. customs?
- How to handle return shipments… much different when a border exists, as you must clear these shipments twice… once entering and then exiting Canada or the U.S.
- Offer a Duty paid or Unpaid option to customers?
We always advised our clients to consider these factors carefully before entering the market. Ecommerce companies do a great job “generating” orders through their online platforms. Whether they are profitable or not; however, depends on setting up operations properly from the outset.
Q. What are some of the key trends you’ve seen emerge in recent years with respect to Canada-U.S. trade and investment?
- The lowering and harmonization of duty rates for items sold between each country has been a huge boon to business. After the recession in 2008/2010, duties on about 1,100 items were lowered or eliminated, and trade between the U.S. and Canada boomed.
- This growth, and Canadian/U.S. customers’ expectations for 1-2 day delivery has vastly increased investment by the U.S. and Canada in border infrastructure, and by commercial businesses in distribution and order fulfillment operations across each country.
- The U.S. has led the ecommerce revolution, but Canadian consumers have quickly adopted this as a preferred means of delivery. Given most ecommerce orders in Canada are purchased from U.S. companies, Canadians expect their experience on delivery to be the same as it would be when ordering product in Canada… i.e., no surprises at their front door by logistics companies attempting to collect duty. A survey we conducted at Purolator showed that the majority of Canadian consumers ordering frequently online would not order from a company charging them for delivery or duty. This is a big change in expectations from just a few years ago.
Q. With the USMCA Trade Agreement being activated on July 1st, which as you know is Canada’s national day, what are some of the opportunities that the new agreement presents for businesses in the New York region?
- Some of the better-known benefits are raising the deminimus (max value for duty free entry to Canada) to CAD $150 as well as increasing the taxable value to $40. However, what’s missed is that the advantage is still stronger for Canadian companies entering the US, which has a USD $800 deminimus… over $1,000 Canadian.
- Dairy companies can export nearly four times the value of product to Canada, which is a major boon to NY dairy producers.
- Changes to intellectual property rights and copyrights.
- Finally, perhaps the biggest, yet perhaps the least understood change, is the elimination of Chapter 11 in NAFTA. This clause allowed U.S. or Canadian companies to sue in a local court or a private international tribunal for what they viewed as unfair trade practices by a participating country. This clause was meant to protect U.S. and Canadian companies from unfair court decisions in a developing country. The reality, however, is that major corporations used it to sue a country for unfair trade. For instance, major US corporations sued Canada 41 times since NAFTA was signed, costing Canadian taxpayers nearly $100 million in legal costs and $200 million in fines and there are still more than half these claims yet to be settled. Under the USMCA, companies will need to present their case in a Canadian or U.S. court, and subject to local law correcting this anomaly. It will; however, mean that companies trading in both countries will need to do more due diligence up front to ensure they are complying, but in the end it’s a healthier way of conducting trade.
Q. For those who are not familiar with MAPLE Business Council, what is the mission of the organization and what benefits or opportunities does it offer to businesses?
The pandemic has shown us we can conduct business virtually, and for disseminating information, but it’s also showed us how valuable in-person networking is in business. In-person presentations, storytelling, face-to-face meetings to discuss trade and investment are more effective communication elements than voice or video communication can achieve, and MAPLE will bring this element to the NY area.
Other opportunities include:
- Expanding contact between like-minded people and companies conducting U.S./Canadian trade
- Providing a forum for dissemination of knowledge, information, market research, sources of capital, understanding regulations, the impact of the new USMCA, and more.
Q. Can you talk more about building the New York ‘brand’ so to speak to attract interest from Canadian businesses?
First, learning from MAPLE’s success in establishing a strong brand the Southern California market and leaning on the social media tools already built by the organization for the NY chapter.
My personal experience in building a strong brand is to have a clear message around three things:
o Who we are?
o What we do?
o And who we do it for?
I will work hard with the founders of MAPLE to build strong awareness of the opportunities for growth in our region, and thereby investment by Canadian organizations in the New York market.
Q. We understand the organization began in Southern California which continues as its base of operations. How long have you been involved with MAPLE Business Council, or MAPLE as it is referred to, and what motivated you to launch the organization in the NYC region?
I first became aware of MAPLE Business Council through the west coast District team at Purolator International, who joined MAPLE early on. They invited me to attend a networking event in San Diego, which I found to be very professionally run and well-attended by companies in the area.
I subsequently reached out to MAPLE co-founders, Stephen Armstrong and Robert Kelle, to discuss whether they had any plans or interest in expanding here in the New York area, and to my pleasant surprise they had been contemplating opening a new chapter here. The rest is history.
There is a strong expat association here in New York called CANY that I belong to which is focused on social and philanthropic programs. I hope to develop a strong relationship with CANY and to fill a need for an organization in NY focused on U.S./Canada trade, investment and entrepreneurship.
Q. As we look ahead to economic recovery, what role do you see the MAPLE community playing in terms of regional economic development and how does it relate to the work of the Canadian government’s presence in New York in the form of the Consulate General?
As a member of NY’s Regional Economic Development Council (REDC), I became aware that most trade with Canada is conducted by larger companies, but that small companies make up the majority of businesses in New York which don’t have the bandwidth to research and launch a trade initiative in Canada. Hopefully, MAPLE will help to fill that void, making it easier for small businesses as well as larger companies to compete under USMCA.
Q. As a membership-based organization, from what types of companies are you looking to attract interest?
New York is well known for its Finance, Insurance and Real Estate Industry (FIRE)… one of its largest, and a key focus for the Consulate and will also be for MAPLE. Also other professional services firms such as accounting, trade, & logistics companies based in the area.
- Media is a huge sector in NY
- IT services and ecommerce sector, also a fast growth sector for NY
- Life Sciences and Bio Tech: New York/NJ’s fastest growing sector over the past few years
- Energy, and NY’s need for hydro power from Québec
- Aerospace is still one of NY’s largest sectors and will also be an area of focus
Q. John – would you share a little about other initiatives you are involved with in the community be it economic development-based or other?
I am proud to serve as a member of the Governor’s Regional Economic Council for Long Island reviewing and recommending grants through the governor’s economic development program.
I am on the board and Executive Committee of the Long Island Association (LIA)… Long Island’s largest and most influential business association. I also Chair the LIA’s International Trade Committee.
I am the Co-Chair of the Empire State Development Agency’s Tradeable Sectors committee and a board member of the United Way of Long Island.
Q. Thank you for your time today, John. How can people who are interested in learning more about MAPLE, find more information?
The MAPLE Business Council website is a great resource and provides an overview of our work. www.maplecouncil.org.
Those interested in more information on joining our New York Chapter may contact me at:
- Email: john@maplecouncil.org
- Twitter: @johntcostanzo
- Phone: (516) 588-9165