The Time is Right for US Expansion - But Do You Have the Right Strategy?

Author: Paula Cruickshank, SVP Ontario, Business Development Bank of Canada (BDC) 

Canadian businesses are well positioned for U.S. expansion. But having the right strategies and fundamentals in place is critical for success. BDC Senior Vice President Paula Cruickshank shares insights into how to get it right.
 
It’s a great time for Canadian businesses to consider expansion into the U.S., and Canadian companies are well positioned to take advantage of the vast market south of the border.
 
Business leaders in Canada can leverage our shared language with the U.S., similar consumer preferences, proximity, close trade relations and Canada’s reputation for innovation and high-quality products.
 
But these advantages don’t mean Canadian companies should proceed without a carefully considered plan. The U.S. is a very large, highly diverse country with a competitive landscape. Expanding can be costly in terms of resources, effort and time. Making such a big investment in an ad hoc way can lead to expensive mistakes and lost opportunities.
 

Planning is essential

To help ensure a successful U.S. expansion, it’s important to have the right strategies and fundamentals in place. 
 
One of the most common mistakes that Canadian businesses make is to assume they know the U.S. and don’t need any special preparation to expand. After all, aren’t Canada and the U.S. about as similar as any two countries can get to each other? We watch the same TV shows and movies and listen to the same music, after all.
 
This assumption often leads to serious missteps. The U.S. isn’t a single, homogeneous market. Its many states and regions have a wide variety of different consumer tastes, regulatory environments, laws, logistics and business cultures. That’s why some homework and planning are essential to improve your odds of success.
 
At BDC, we work with many successful Canadian exporters and and can help businesses with International Expansion, including to the U.S. Benefitting the most from a U.S. expansion often boils down to a few common ingredients.

“Americans may be skeptical about dealing with a non-U.S. company. How will you win them over and differentiate yourself?”

1. Review your company

Before expanding it’s important to step back and review your company. Do you have the resources to expand to the U.S.? Will you be ready to fulfill larger U.S.-sized orders? You may have to wait some time for cash inflows. Until then, do you have the financial resources in place to invest in needed machinery, personnel and material?
 
You also need to have a think about how you’ll adapt your products or services to U.S. tastes and requirements. Americans may be skeptical about dealing with a non-U.S. company. How will you win them over and differentiate yourself?
 
Canadian companies often lag behind the U.S. in using technology and productivity. How digitally mature and operationally efficient is your business? Your business should have strong fundamentals to be competitive in the U.S. You can use BDC’s free online digital maturity tool and operational efficiency quiz to gauge where you stand.
 
It’s probably a good idea to invest in improvements before you embark on an expansion. At least get the ball rolling. Better to invest ahead of time than to find out after the fact that your U.S. competitors have a major edge on you.

“Make sure your team is ready to expand. Is everyone in agreement on the benefits for your business?”

2. Assemble your team

Make sure your team is ready to expand. Is everyone in agreement on the benefits for your business? Do you have employees or outside advisors who are familiar with the U.S. landscape? Your success may depend a lot on personal connections and a good knowledge of the target market.
 
Be sure to have advisors who can help you navigate legal, human resources, accounting, distribution, logistics and marketing issues.
 
It’s important for entrepreneurs to be able to delegate and assemble a team to lay the right groundwork for growth. Find employees who can fill in your expertise gaps, then empower them to make decisions. As a business leader, your job isn’t to micromanage, but to set the vision for where the company will go.
 
Bringing together the right team is more challenging because of Canada’s labour shortage—a difficulty that U.S. businesses face too. BDC research has found that the best solutions are:

• Investing in technology, digitization and automation.

• Developing a people strategy and ensuring you’re an attractive employer.

• Fostering an inclusive, diverse and engaged work environment and expanding your hiring pool to underrepresented groups, such as racialized people, new immigrants, Indigenous People, older people and people with disabilities.

 3. Develop a market entry strategy

A market entry strategy is a must. This is where you do market research to identify specific U.S. states or regions that would be a good fit for your company. You can use trade data from such free online tools as the Canadian government’s Trade Data Online website or the U.S. Department of Commerce’s TradeStats Express site. BDC will follow its clients to about 20 different U.S. states (somewhere in this paragraph).

 
In most cases, we recommend starting small. Choose one state or region to target initially, then expand from there. You can deepen your knowledge by hiring an expert on the target market and attending trade shows, business events or trade missions.

“Logistics is a complex process that may require specialized expertise and good partners.”

4. Plan logistics and distribution

Think about logistics and distribution. Planning ahead will reduce the risk of costly problems down the road. You’ll need to consider:

• Distribution—Will you use a distributor or agent, create a physical presence, sell online or use a multi-channel approach? Will you stock some products locally or ship directly? If the latter, you’ll have to sort out who will pay for duty and shipping.

• Transport—Logistics is a complex process that may require specialized expertise and good partners, such as freight forwarders, carriers, customs brokers and insurance providers.

• Intellectual property—Consider any intellectual property issues, such as IP ownership and employment contracts, IP indemnification and how to protect data. The Trade Commissioner Service offers a useful webpage on IP issues for Canadian businesses expanding to the U.S.

• Packaging, documentation and labelling—You may need to adapt packaging to different consumer tastes and so that your product is protected during shipping. Also be sure to find out about documentation and labelling requirements.

 
Expanding to the U.S. is a fantastic opportunity that should be seriously considered by Canadian companies looking to grow and scale. With the right preparation beforehand, business leaders can significantly improve their chances of making a winning investment.

For more information on BDC, please visit our website: https://www.bdc.ca/en

2024: A Year to Embrace the Evolution of the Logistics Industry

Author: Paul Tessy, Senior Vice President, Purolator International 

Supply chains being moved out of China. The explosion of e-commerce. The rise of machine learning. Fierce competition for skilled workers. Evolving consumer expectations. The march toward corporate sustainability.  

This decade, logistics companies have had to contend with an influx of change, much of it beyond their control. Now, looking ahead through 2024, it’s clear that evolving industry conditions are the new normal, and companies must be prepared to pivot where needed. 

With that in mind, here are the key trends I believe will shape the rest of this year and beyond: 
 

1.    Shaking up global supply chains  

The biggest source of change in logistics is in our supply chains. I’m seeing three key trends playing out now, and in the many months ahead. 

Nearshoring: This phenomenon is picking up tremendous steam as companies bring their production closer to home, to nearby countries with similar time zones. To minimize disruptions to supply chains caused by the questionable durability of global trade agreements and norms, we’re seeing the reverse of what happened when companies outsourced production to China in the 1990s. 

"As business models change, expect more and more reshoring, nearshoring, vertical integration, and increased sourcing from new geographies. This is particularly true alongside economic signals such as China’s pivot away from manufacturing toward a service economy. Clearly, the cross-border trade and investment between Canada and the U.S. will take on an even greater role than ever." 

As business models change, expect more and more reshoring, nearshoring, vertical integration, and increased sourcing from new geographies. This is particularly true alongside economic signals such as China’s pivot away from manufacturing toward a service economy. Clearly, the cross-border trade and investment between Canada and the U.S. will take on an even greater role than ever. 

Changing market demographics: In the U.S. alone, consumers are spending nearly US$60 billion for on-demand services such as online marketplaces and transportation. This is driving high demand for custom goods and fast delivery even while companies seek growth opportunities in new markets and new customer groups. 

I expect such dynamics to push plenty of businesses to situate manufacturing closer to end customers. As a result, by next year, many supply chains will shift toward national, regional, and even local networks of buyers and suppliers.

Automation: Advancing technology will further influence the digitization of supply chains, how products and services are made and delivered, and managing supply chain data in new ways. Companies will revolutionize their supply chain management through innovations in machine learning, blockchain, and augmented reality. 

Ultimate transparency is the name of the game, particularly as suppliers, workers, and communities focus on measuring and reporting on environmental and social performance. 

Partnering with companies that have the technology and tools to drive value, simplicity and efficiency is key to manage the challenges that can come with these trends. For example, offerings such as web portals and virtual assistants can provide unparalleled access to shipment visibility, support and issues resolution, resulting in seamless customer access and experience.   
 

2.    An increased push for sustainability  

Environmental sustainability needs no introduction at this point, but when it comes to trends affecting the logistics industry in 2024, few are as widespread as this one. 

First, we know that climate change puts vulnerable supply chains at much greater risk, due to a reliance on raw materials and in geographic areas that are being impacted by an increasingly warming climate.  

Second, we know that modern consumers care about the carbon footprint of companies they endorse through their wallets. They want to know if a brand puts sustainability first, including all the way through its value chain. More people are adopting greener lifestyles and  purchasing sustainably sourced products. One PwC report found that half of all global consumers say they’ve become more eco-friendly. 

Sustainability is no longer a nice-to have offering; indeed, it is quickly becoming a key factor in carrier selection. Furthermore, there is real economic value in getting out ahead of sustainability efforts before regulatory mandates are imposed. It is imperative that every logistics company embeds purposeful sustainability objectives in strategy and operations planning throughout this decade. 

"We recognize that customers and stakeholders value action on sustainability, which is why Purolator is committed to reducing its Scope 1 and Scope 2 emissions by 42 per cent, diverting 70 per cent of waste from landfill and reducing emissions from electricity use by 100 per cent this decade. This is all in pursuit of our mission to achieve net-zero  by 2050." 

Purolator is leading the way in Canada, making continuous investments toward reducing our environmental impact. As a transportation leader, we have focused on our area of greatest impact: fleet decarbonization. We started with hybrid electric vehicles before introducing all-electric vehicles in 2020. Last year Purolator rolled out a plan to decarbonize our Canadian network, pledging $1 billion to electrify 60 percent of the last-mile fleet by 2030. We recognize that customers and stakeholders value action on sustainability, which is why Purolator is committed to reducing its Scope 1 and Scope 2 emissions by 42 per cent, diverting 70 per cent of waste from landfill and reducing emissions from electricity use by 100 per cent this decade. This is all in pursuit of our mission to achieve net-zero  by 2050. 

Companies must begin their sustainability journey by planning for the nuts and bolts of this transition, from infrastructure to supply chains to technology needs. The shift must also align with overall corporate values and be well-communicated to all internal stakeholders. Keep in mind that meaningful change requires a long-term commitment, and managing such change needs a lot of care and patience while navigating through impacts on operations. 
 

3.    Prioritizing the employee experience

 
Workforce challenges will continue this year, aggravated further by cost pressures. Some roles will be particularly onerous: take freight transportation, for example, with the ongoing shortage of long-haul delivery drivers.  

The result is that all companies will need to evaluate hiring practices and both build and promote a positive company culture so that they can attract and retain skilled employees. Competition in the logistics industry is fierce – we are seeing this not only in labor-intensive jobs in transportation and warehouses, but also with knowledge workers (especially in light of the automation technology being a greater focus as noted above).   

"Companies are best to put in place technology to improve the employee experience and tools, resources and programs so they can develop and grow their skills. These are essential to attracting and retaining skilled professionals to support all sets of workers who must manage supply chains as well as the technology to move things forward." 

Companies are best to put in place technology to improve the employee experience and tools, resources and programs so they can develop and grow their skills. These are essential to attracting and retaining skilled professionals to support all sets of workers who must manage supply chains as well as the technology to move things forward. 

A focus on physical and mental health in the workplace is similarly essential, and there are plenty of great resources out there (like this one) from which to build strategies. Companies are in a unique position to meet these needs head-on by being willing to prioritize the well-being of their most valuable asset: their people. The benefits of doing so are many, both for a worker’s personal well-being and for their overall work performance. Engaged and motivated employees make better decisions, foster a culture of continuous learning, and promote creativity, resilience and innovation. It also cuts down the rising and expensive threats of burnout, absenteeism and turnover.

Across the industry, more is being expected of companies as places not only to earn a paycheck, but to find a sense of belonging and safety. 
 

Opportunities ahead

I believe these trends in the logistics industry are the ones whose influence will be greatest here in 2024, and certainly looking ahead as well. While each possesses challenges, they also offer important opportunities. 

Staying operationally flexible will be key in order to embrace change as it comes – rather than reacting in ways that compromise parts of the business, the brand or the culture. That will position companies well to meet the spiking demand for logistics and transportation assets in today’s climate. 

For more information on Purolator International, please visit our website: https://www.purolatorinternational.com/

The Fighting Against Forced Labour and Child Labour in Supply Chains Act

The Fighting Against Forced Labour and Child Labour in Supply Chains Act 

Authors: Lindsay Clements, Partner; Jennifer Wasylyk, Partner, Cassels Brock & Blackwell LLP.

On January 1, 2024, Canada’s modern slavery legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Act), came into force. With the Act, Canada introduced reporting obligations to combat modern slavery in the supply chains of many businesses and other “entities” with connections to Canada. 

Given the fast-approaching deadline (of May 31, 2024) for the initial report under the Act, businesses should prioritize determining whether they have a reporting obligation under the Act and, if so, gathering the information that they require in order to prepare their initial report.

Who does the Act apply to?

The Act applies broadly to “entities” that:

• produce, sell, or distribute goods in Canada or abroad;

• import goods produced abroad into Canada; or

• control an entity engaged in these activities.

An “entity” is a corporation, trust, partnership, or other unincorporated organization that:

• is listed on a stock exchange in Canada; or

• has a place of business in Canada, does business in Canada or has assets in Canada, and satisfies at least two of the following in at least one of the two most recent financial years, based on its consolidated financial statements:

• had at least $20 million in assets;

• generated at least $40 million in revenue; or

• employed an average of at least 250 employees.

Public Safety Canada has released guidance (the Guidance) about the application of the Act, which includes commentary in respect of several of these items. Companies should consider this commentary in determining whether the Act applies to them. For instance, although the Act does not prescribe a minimum threshold value of goods that an entity must produce, sell, distribute, or import in order for the Act to apply, the Guidance indicates that the Act should be read as excluding very minor dealings.

What needs to be reported under the Act?
Annual reports need to include the following information:

• the steps taken to prevent and reduce the risk of forced or child labour in the entity’s production of goods or in the productions of goods imported into Canada by the entity;

• the entity’s structure, activities and supply chains;

• the entity’s policies and due diligence processes relating to forced and child labour;

• the parts of the entity’s business and supply chains that carry a risk of forced or child labour;

• measures taken to remediate forced or child labour and loss of income to the most vulnerable families resulting from measures taken to eliminate forced or child labour;

• training provided to employees; and

• how the entity assesses its effectiveness in ensuring that forced and child labour are not used in its businesses and supply chains.

What is the filing deadline?
Entities to which the Act applies are required to file a report with the Canadian Minister of Public Safety and Emergency Preparedness by May 31 of each year, beginning May 31, 2024, and to publish such report on a prominent place on their website. Such report will also be made available to the public through an online registry. Entities incorporated under the Canada Business Corporations Act, or any other Canadian federal legislation will also need to provide such report to their shareholders with their annual financial statements.

Entities who fail to comply with the provisions of the Act or who knowingly make a false or misleading statement may be subject to fines of up to CAD$250,000. The directors, officers, and agents of the offending entity could also be held personally liable if they ordered or authorized the infringement or consented to or participated in the same.

Other considerations?
In addition to the annual reporting requirement under the Act, the Guidance introduces a comprehensive online questionnaire (the Questionnaire) that reporting entities are required to complete as part of the process of submitting a report to the Minister of Public Safety. Failure to complete the Questionnaire is an offence under the Act, subject to the same penalties as failure to file a report.

The Questionnaire is designed to collect the information necessary to satisfy the requirements under the Act. Accordingly, the Questionnaire can be used as a guide to develop the entity’s annual report. The Guidance also confirms that there is no prescribed level of detail for Questionnaire responses or the report. Instead, entities should use discretion in determining the appropriate level of detail proportionate to their size and risk profile. However, information provided in the Questionnaire must be consistent with the information provided in an entity’s report. 

Reports must be approved by the entity’s governing body and include an attestation (the required form of which is provided in the Guidance) signed by one or more members of the entity’s governing body, together with the approving member’s name and title, the date of signature and a statement that the approving member has the legal authority to bind the entity.

Reports must be in English and/or French and the Guidance provides they cannot exceed 10 pages in length (or 20 pages in length if the report is in both English and French) and must be submitted as a PDF file which does not exceed 100MB.

An entity may submit a joint report covering its own actions and those of any entities it controls. However, the Guidance provides that a joint report should only be submitted if the information provided applies generally to all entities covered by the report.

Next steps?
Given the scope of information that must be reported under the Act and the diligence and resources that may be required to gather such information, businesses within the scope of the Act should be gathering the information required to prepare and submit their initial report before the May 31st deadline.

2024: The Year of Small Cap Comeback? - Spotlight on TSX Venture Exchange

Authors: George Khalife (Chicago), Erik Andersen (Dallas), Delilah Panio (Southern California)
 

Heading into 2024, there's a growing sense of optimism in the financial sector, especially regarding small-to-mid cap stocks. 

Interest rate hikes, a tool used to mitigate recession risks, have significantly influenced small-cap stocks, particularly in the aftermath of the 2021 capital markets surge. This shift is not only due to the Federal Reserve's strategy of maintaining higher rates but also because of a change in valuation perspectives. With rising interest rates, the discounted cash flows of these companies are viewed differently i.e. when interest rates rise, the cost of borrowing increases which translates to a higher cost of capital and therefore a higher discount rate, resulting in much lower valuations. This change in financial assessment has made these stocks less attractive to investors who are now more critical of balance sheets that don't showcase strong potential for growth.
 
Moreover, the market looks to have observed a pivotal shift in investor sentiment, transitioning from favoring growth to prioritizing value. Investors who might prefer larger companies with more stable cash flows and dividends, may re-allocate capital away from small-to-mid cap companies impacting their valuations. This shift places small caps in a challenging situation, as they must adapt to investor interests to secure capital. This adaptation is essential because, traditionally, small caps have been celebrated for their potential for robust earnings growth. However, under current market conditions, their ability to deliver this growth is questioned.
 
Richard de Chazal, a macro analyst at William Blair, aptly compares small caps to speedboats in the equity world. They are agile but highly sensitive to market changes, unlike larger, more stable 'supertanker' stocks.[1] This analogy highlights the current vulnerability of small caps in a rapidly changing economic environment, where investor priorities and the broader economic framework have shifted significantly since 2021.

Key to this sensitivity is small caps' reliance on capital markets for growth funding, often necessitating more frequent borrowing. This makes them first in line for less favorable borrowing conditions and more susceptible to interest rate fluctuations and economic cycles than larger-cap stocks.

At the recent Annual Economic Outlook hosted by the Executives’ Club of Chicago, John W. Rogers, Jr., Chairman and Co-CEO of Ariel Investments, shared his insights, suggesting that 2024 might be a landmark year for smaller and value stocks. These stocks had taken a back seat throughout most of 2023, overshadowed by the market rally led by the "Magnificent 7," which now command a market cap more than triple that of the Russell 2000.

Rogers drew parallels between the current market and the internet bubble era, noting, “We think it’s an extraordinary time for smaller and value stocks. It's reminiscent of the internet bubble period. When that bubble burst, it was a great period for small and value stocks as the larger market started to falter.”

He also highlighted the potential in small-cap companies beyond the Magnificent 7[2]. According to Rogers, these stocks are often "hidden gems," overlooked and undervalued in the current market landscape. Contrasting with Warren Buffet's general advice to invest in the S&P 500Ⓡ, Rogers emphasized the current opportunity in stocks that are "misunderstood, neglected, not well-followed, [and] not well-researched," describing them as "extraordinarily cheap" and ripe with investment potential.
 

Historical patterns indicate a potential shift in stock market dynamics, where small-cap stocks may  take the lead, particularly in the event of an economic downturn. According to an article by Barrons which analyzed the trends from the last 11 recessions reveals an interesting pattern: small-cap stocks have historically outperformed large-cap stocks by approximately 16% in the year following the onset of a recession. Take, for instance, the era surrounding the dot-com bubble burst. Between 1995 and 2000, the S&P 500 consistently outperformed the Russell 2000, averaging an eight-percentage-point lead annually. However, the tables turned in the period from 2001 to 2004. During these years, the S&P 500 experienced a decline of about 2%, whereas the Russell 2000's value segment witnessed a remarkable surge of 80%.[3]

A research report dated January 16, 2024 by National Bank of Canada Financial Markets (NBCFM), anticipates a period of "catch-up" for small-to-mid cap stocks within their scope of analysis.4 The report observed that numerous small-to-mid cap companies have implemented strategies to improve their capital allocation, similar to their larger counterparts. However, these strategic moves have not yet been fully reflected in the valuations of many such companies. This discrepancy may present a unique opportunity in the market for these undervalued stocks.

TSX Venture Exchange: A Haven for Small-to-Medium Cap Companies
 
Amid these challenges, TSX Venture Exchange (TSXV), the junior market to Toronto Stock Exchange (TSX), stands out as a unique and tailored solution for small- and mid-cap companies. Increasingly, U.S. companies are looking to TSXV as a financing option. In the past five years, 55 U.S. companies listed on TSXV accessing public venture capital for their growth funding. And in the past two years, even under tough market conditions, notable U.S. companies such as Midwest Energy Emissions, Full Circle Lithium, The Fresh Factory, and Yerbae Brands listed on TSXV. Leveraging TSXV as an alternative to private capital options, in the past five years, TSXV U.S. companies raised CDN$7.8B through 490 financings, representing an average of CDN$15.9M, which is truly venture capital. 

You can hear from the CEOs about their capital raising options and why they chose TSXV through the TMX Presents podcast.

TMX Presents: The Podcast with Highlighted U.S. Companies

• Yerbae Brands Corp (TSXV:YERB.U) - LINK to Podcast Episode 030

• Full Circle Lithium Corp (TSXV:FCLI) - LINK to Podcast Episode 033

• Midwest Energy Emissions Corp (TSXV:MEEC) - LINK to Podcast Episode 031

Graduates from TSXV to TSX further exemplify TSXV’s efficacy as an incubator marketplace. Several U.S. companies graduated in the last five years, including Real Brokerage, Quipt Home Medical Corp, and Hamilton Thorne.

TSXV offers U.S. companies an alternative avenue to U.S. public capital and traditional private venture capital, with TSXV issuers raising, typically between $2mm-$25mm. This path, scarcely available in the United States, is bolstered by an ecosystem of retail and institutional investors, investment bankers, and analysts specifically attuned to small cap stocks. The cost savings, coupled with more significant employee incentive mechanisms, make TSXV an attractive option for the right U.S. company. Successful companies on TSXV have the opportunity to graduate to TSX and potentially cross-list on a major U.S. exchange.

In conclusion, 2024 has the potential to be a landmark year for small-cap stocks. TSXV emerges as a beacon of opportunity in this landscape, offering a unique pathway for growth and success to U.S. companies. For companies considering going public, the choice of market is crucial. TSXV not only presents a viable option but also a unique value proposition in the dynamic world of small-to-mid cap stocks. As we venture further into 2024, let's watch closely as this exciting chapter in the financial markets unfolds, potentially reshaping the future of micro caps.

Visit the U.S. Website to connect with your regional representative and for more information. 

 
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Copyright © 2024 TSX Inc. All rights reserved. Do not copy, distribute, sell or modify this document without TSX Inc.'s prior written consent. This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this article, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. This article is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication. TMX, the TMX design, TMX Group, Toronto Stock Exchange, TSX, TSX Venture Exchange, The Future is Yours to See., and Voir le futur. Réaliser l'avenir. are the trademarks of TSX Inc. All other trademarks used in this article are the property of their respective owners.

This document may contain "forward-looking information" (as defined in applicable Canadian securities legislation) that is based on expectations, estimates and projections as of the date the content is published. Wherever possible, words such as "will" "ensure that" "anticipate", "believe", "expects" and similar expressions have been used to identify these forward-looking statements. Information in this document has been furnished for your information only, is accurate at the time of posting, and may be superseded by more current information. Except as required by law, we do not undertake any obligation to update the information, whether as a result of new information, future events or otherwise. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by the forward-looking information.
Unless otherwise specified, data sourced from TSX/TSXV Market Intelligence Group, as of December 31, 2023.
 

[1] “Markets Brief: Is It Finally Time to Buy Small-Cap Stocks?”, Morningstar, Inc., https://www.morningstar.com/markets/markets-brief-is-it-finally-time-buy-small-cap-stocks

[2] “Ariel Investments says ‘Magnificent 7’ stocks could underperform while neglected names rebound next year”, CNBC
https://www.cnbc.com/2023/12/12/top-investors-say-magnificent-7-stocks-could-underperform-while-neglected-names-rebound-next-year.html

[3] “Small-Cap Stocks Can Shine in a Recession”, Barrons. https://www.barrons.com/articles/small-cap-stocks-buy-recession-invest-b3377cae
4 “Technology Year Ahead 2024, Still More Upside”, NBCFM Thematic Research.
https://nbfm.ca/research

Our MAPLE Community in 2023

MAPLE-US Commercial Service in Canada SelectUSA Event at Microsoft Vancouver BC 

Author: Stephen Armstrong, Co-founder 

It is my pleasure to share some of the highlights of 2023 for our Canada-U.S. community. It was a privilege for our MAPLE team to engage with organizations across sectors and markets throughout the year many of whom we have since welcomed as new members. Networking and storytelling are the building blocks of MAPLE and events, both our own and partner programs, our MOMENTUM e-publication and our Conversations video series all played important parts in connecting people and ideas together. 
 
As we now lean into a brand new year, our members are working in over 25 sectors and are based in over 25 markets across Canada and the United States supported by 5 chapters each led by an Executive Director. In addition to celebrating our 8th anniversary last June, we celebrated our 6th anniversary in British Columbia, 3rd in New York and our 1st anniversaries in Ontario and Colorado although our programming began in Ontario all the way back in 2016.  I’d like to thank all our Chapter Executive Directors for the time and insights they give to our community connecting with regional partners and hosting memorable events.  

MAPLE Southern California Spring Reception Los Angeles 

Among some of the special programs  MAPLE chapters  hosted last year were:

• An afternoon exploring how to scale to the US with expert speakers held at Microsoft’s Vancouver campus in collaboration with the US Commercial Service and US Consulate General in Vancouver. 

• Touring the world class scientific facilities and hearing from the leadership of the Advanced Energy Research and Technology Center at Stony Brook University and Brookhaven National Laboratory on Long Island, New York.

• Connecting with the start-up community in Kitchener-Waterloo on the campus of Communitech  with a panel discussion spanning talent, tax, and intellectual property when scaling your business to the US. 

• Bringing Canada’s game (and even a NHL alum or two) to World Trade Day in Denver as part of the MAPLE exhibit

• Celebrating Southern California’s economic ties with Québec at the home of Québec Delegate General in California, David Brulotte, with economic insights from Investissement Québec

• Touring the Vancouver port as guests of Global Container Terminals

A special moment was hearing from one of our corporate members whose presentation included how they have leveraged the MAPLE community to expand their business network and forge new partnerships and customers. Their MAPLE membership experience was shared in the spirit of encouraging other firms to recognize what is possible through their active membership too. Thank you! 

MAPLE Colorado at World Trade Center Denver's World Trade Day

The stories that we had the privilege of sharing through our monthly e-publication MOMENTUM were very special and provided terrific insights into many markets and sectors. 

• Trade with a View: A profile of the international bridges that connect Ontario and the US from Natalie Kinloch, CEO of the Federal Bridge Corporation.

• Celebrating Canada on the World Stage: The story of the largest Canada Day celebration outside of Canada held in Trafalgar Square in London, England as described by former Canadian Ambassador to the UAE and current Celebrate Canada Worldwide Chair, Marcy Grossman.

• In Uncertain Times, Stronger Together: The origin story of ‘Fast in the 6’ – an annual interfaith celebration of Ramadan in Toronto that unites Canadians through a free public iftar meal from co-founder Dany Assaf.

• The Latino GDP Project: An introduction to important economic research by the Center for Economic Research and Forecasting at California Lutheran University in Greater Los Angeles as described by its Executive Director, Matthew Fienup PhD.

• Leveraging Generative Artificial Intelligence in Business: Operations and Risks was the focus of both an article and two episodes of our Conversations video series by several partners and attorneys at IP law firm, Knobbe Martens dialing us into the new world of AI.

• The strength of the life sciences sector in Ontario was the focus of an article by Ontario Trade & Invest who later shared a broader look at what’s new and notable in the Province at our fall reception in Los Angeles and who connected with the Long Island business community at our recent New York reception.

MAPLE BC touring Global Container Terminals, Vancouver BC

We also had the pleasure of interviewing leaders who are guiding and shaping the tremendous relationship that Canada and the U.S. share. Our thanks to the those we had the pleasure of interviewing in 2023:

• Québec Delegate General in Los Angeles David Brulotte (video)

• Canadian Consul General in New York Tom Clark 

• Québec Delegate General in New York Martine Hébert who spoke beautifully of the longstanding ‘love story’ between New York State and Québec (video)

• U.S. Ambassador to Canada David Cohen on the occasion of the 8th anniversary since founding MAPLE Business Council

These interviews along with the articles shared in 2023 are accessible on our Cross-Border Insights website as well as the content pages of our community website.
 

MAPLE New York tours Brookhaven National Laboratory

Our Conversations video series which we launched in 2019 now has more than 75 episodes. In 2023, we had the pleasure of speaking with Quebec's Delegate Generals in Los Angeles and New York, David Brulotte and Martine Hébert, as well as explore the topic of generative AI and content development for brands with IP law firm Knobbe Martens, and interview the Toronto-based founder of QA Consultants, Alex Rodov. Find our entire library of episodes on both of our websites including the Conversations pages of our community website. And we have already released our first two episodes of 2024 with Toronto-based immigration law firm, Greenberg Hameed PC. 
 

MAPLE Conversation with Québec Delegate General in New York, Martine Hébert

A special thank you to our partners who shared their missions with us in 2023:

• Early in 2023, we signed a MOU with Vancouver-based Latincouver, the cultural and business hub for the diverse 100k+ strong Latin communities in British Columbia. A special shout-out to founder Paola Murillo! 

• Panel collaborations with Kitchener-Waterloo-based Communitech Outposts in Toronto and Waterloo region sharing how Canadian companies’ hiring of US talent can be optimized (and easier than you may think) and one member's experience scaling to the US.

• Start-up community insights from our friends and partner, The Alliance for Southern California Innovation, based in Pasadena, California.

• Collaborating with the US Commercial Service in Canada and the US Consulate General offices in Vancouver, Calgary, and Toronto to co-host our annual "Select USA” event in Vancouver

• The outstanding work of Canada’s Trade Commissioner teams at the Consulate General of Canada with whom we have the opportunity to collaborate in Southern California, Denver and New York.

As a community that is now in our 9th year, we also must bear witness to the challenges that life inevitably brings and we experienced the sudden loss of a dear friend and board member, Anna Innis of Air Canada. Anna’s legacy is of a joyous spirit that overcame borders of all kinds to bring people together and to make amazing things happen. We are grateful to have known her and her spirit of giving and fellowship will live on in the hearts and minds of everyone her counted her as a friend and colleague.
 
It’s not possible to sum up an entire year in just a few words, but we definitely left 2023 richer for the people we met, the ideas and expertise shared, and the knowledge that what Canada and the US share is incredibly important and vital and it will continue to grow and strengthen one conversation, one insight, and one handshake at a time. 
 
Thank you for being part of our community in 2023 and we look forward to connecting with you in 2024. 
 
Stephen Armstrong
Co-Founder

MAPLE Ontario panel discussion at Communitech campus Kitchener-Waterloo 

H1-B Visa Headaches? Canada Emerges as an Attractive Alternative for Corporate Immigration

Author: Marc Pavlopoulos, founder/CEO, Syndesus

The H-1B visa program, designed to bring highly skilled foreign workers to the US, has become increasingly complex and competitive. With annual visa caps and lengthy processing times, many companies struggle to secure H-1B visas for their talented employees. As a result, many companies are turning to Canada, a country with a strong tech talent pool and a more streamlined immigration process. 
 
In this article, I will discuss the problems with the H-1B program and why Canada has become such an attractive option for corporate immigration. We will also discuss how companies can leverage the expertise of a Professional Employer Organization (PEO) to skip lengthy immigration processes, relocate their foreign staff to Canada, or hire remote employees in Canada, whether they have a Canadian office or not.
 
Let’s jump in.

The H-1B visa has become more challenging, here’s why

The H-1B visa program poses several challenges for businesses hiring foreign employees. Each year, there is a cap on the number of visas that can be issued, and the demand for H-1B visas typically exceeds the supply. Due to the limited number of visas available — currently capped at 85,000 — inevitably, some won’t be selected, and companies may feel out of options. A lottery system randomly selects individuals to determine who can apply for the visa, which adds uncertainty to the process. 
 
On top of this, there is a significant green card backlog to contend with and long processing times, making it difficult for companies to hire critical talent on time.  With the situation as it is, it’s no surprise that employers are exploring alternative solutions, and Canada is coming out top.

Canada is an attractive alternative for corporate immigration

Canada stands out in the race to attract global tech talent, offering many advantages for foreign companies seeking to hire or retain talent. This includes a lower cost of doing business overall, possible tax breaks, and a streamlined immigration process that is more predictable than the US system. Canada’s world-class immigration program, the Global Talent Stream (GTS) — part of the Global Skills Strategy — is a great option for Canadian and foreign businesses who want to hire foreign talent. Employers can speed up the process of hiring foreign workers to fill specialized jobs in a matter of weeks.
 
GTS is currently one of the world’s fastest immigration pathways for skilled workers and offers a fast-track pathway to residency in Canada. Employees can obtain a Canadian work visa, relocate, and quickly start working; furthermore, Canadian permanent residence can be possible in one to two years, and citizenship can be acquired in around five years. Once the employee has permanent residence status, they can get most social benefits Canadian citizens receive, a more affordable cost of living, accessible healthcare, and markedly more reasonably priced education. 
 
It’s no surprise that Canada is a desirable option for immigrants, especially when compared to the uncertainty of life on a work visa in the US. Employees can even move back to the US in the future, with new experience gained while working in Canada — opening up new immigration pathways to the US. If the employee becomes a Canadian citizen, business travel becomes significantly easier as Canadian citizens don’t require visa stamps from a consulate abroad. It would also benefit them when reapplying for a Green Card (US permanent residency) because they wouldn't have to wait as long as when they were applying from countries such as India or China, which have a greater backlog.
 

Should you open a Canadian office?

Not necessarily, but for companies that are looking for a more permanent presence in Canada, opening an office can provide several advantages. It can allow the company to build a closer relationship with Canadian employees and customers and facilitate hiring additional Canadian talent. Canadian offices owned by US-based companies are more than legal entities on foreign soil; they can function as strategic hubs for global talent acquisition.
 
When opening an office in Canada, companies can either handle all employment-related matters themselves or engage the services of a Canadian PEO.  One of the simplest solutions for US companies looking to scale up and navigate the complexities of managing Canadian operations is to work with a PEO or an Employer of Record (EOR) that understands Canadian tax laws. 

PEOs and EORs streamline hiring in Canada

These organizations provide a simple way for US companies to hire tech talent in Canada. They act as the legal employer for the worker, handling all aspects of payroll, taxes, and HR compliance. This can significantly reduce the administrative burden for foreign companies, allowing them to focus on their core business activities. By working with a third-party employment service, companies can hire abroad even if they don’t have an office in that country, offering an easier way for companies to take advantage of a global talent pool.
 
Working with a Canadian PEO is a viable option for businesses that are not ready to open a physical office in Canada. The PEO acts as a co-employer and handles all employment-related matters for the worker, including onboarding, payroll, benefits, and termination. This allows the US company to maintain control of the worker's work and direction while the PEO takes care of the administrative details.
 
An EOR acts as an employee’s legal employer and provides all the HR, legal, tax, payroll, and immigration services needed for remote hiring to enable companies to hire workers remotely in a country where they don’t have an office. So, US employers who want to hire a remote tech worker in Canada don’t need expertise in Canadian immigration or employment law, nor do they need to hire attorneys, accountants, and other professionals.
 
In both cases, the foreign company hires and retains key talent in Canada, avoiding the difficult H-1B visa process altogether, and has easy access to that employee when needed. Employees can continue working for their employer and retain a US salary while reaping the benefits of life in Canada. US companies can get value both in the short term, given the quick timeline of the GTS compared to the H-1B process, and in the long term, given Canada's quick route to permanent residency and eventual citizenship. 
 
The GTS offers creative and forward-thinking ways to keep skilled and much-needed employees. Don’t sleep on Canada.
 
Syndesus helps companies leverage Canada’s tech talent and favorable immigration laws with turnkey PEO and EOR services. Reach out to us to learn more.

Marc Pavlopoulos, founder/CEO Syndesus

The Challenge of Taxing Digital Services

Authors: Daniel Mahne, Senior Manager; Olukayode Akinbosede, a Senior Associate, RSM Canada

Introduction: The challenge of taxing digital services
The digital economy has presented complex challenges in the allocation of taxation rights between countries. Large multinational corporations, without establishing a physical presence or tax base in Canada, have been generating substantial revenues through digital services within the country. These activities include selling digital services, collecting and monetizing user data, providing social media services and delivering digital advertisements to Canadian users. Under the current multilateral tax frameworks, these digital service revenues remain largely exempt from taxation in Canada unless allocated to a physical presence. This challenge is compounded by the exponential growth of the digital economy, which now accounts for nearly 20% of the global economy.

The future of digital taxation in Canada: A comparative analysis

The Digital Services Tax Act (DSTA): A Stop-Gap Solution
The DSTA, slated to take effect on or after Jan. 1st, 2024, introduces a new tax regime for the taxation of digital services within Canada. It is a unilateral measure designed to address two critical issues:

1.    Taxation of revenues generated by large corporations from digital services within Canada.

2.    The absence of a multilateral instrument to effectively regulate the taxation of digital services revenue across multiple jurisdictions.

The DSTA will impose a three percent tax on in-scope revenues exceeding $20 million in a calendar year, generated by corporations with global annual revenues surpassing €750 million. The DSTA's application will be retroactive to Jan. 1, 2022, for corporations meeting the specified threshold.

The OECD's Pillar One: An evolving multilateral solution
The Organization for Economic Cooperation and Development (OECD) proposed an initiative under the Base Erosion and Profit Shifting (BEPS) project, known as Pillar One, which aims to address the taxation of digital services. The current draft of Pillar One is composed of two primary elements: "Amount A" and "Amount B", having since dropped an originally proposed “Amount C”.

Amount A: Under Pillar One, a market jurisdiction–determined by sourcing rules such as where customers and users are located–gains the authority to tax the income of foreign multinational corporations even in the absence of a physical presence. Adjusted global profits before tax are calculated and utilized to reallocate a portion of profits to the respective market jurisdiction for taxation. Multinational corporations with global revenues of €20 billion or more and profits exceeding 10% fall within the scope of Pillar One Amount A’s application. The amount of an MNEs global profits subject to reallocation to a market jurisdiction is 25% of the total profit amounts exceeding the 10 profit threshold.

The proposals also include a marketing and distribution profits safe harbor mechanism to avoid conflicts with existing profit allocation rules and prevent double taxation.

Amount B: This element simplifies transfer pricing rules for marketing and distribution activities by standardizing pricing and streamlining the process. The final framework for Amount B, encompassing scope, pricing methodology, documentation requirements, and tax certainty considerations, is still under development by the OECD.

Comparing DSTA and Pillar One Framework
While both the DSTA and Pillar One address the taxation of revenues from digital services in Canada, they differ significantly in two key aspects.

Thresholds: The DSTA applies to corporations with global revenues above Euro 750 million, whereas Pillar One sets a substantially higher threshold of Euro 20 billion. This variation in thresholds significantly impacts the potential tax base.

Taxable Base: Pillar One reallocates profits exceeding 10 percent across market jurisdictions, with only the profit amount above this threshold subject to reallocation. In contrast, the DSTA imposes a 3% tax on revenues exceeding $20 million CAD, representing a tax on gross revenues rather than net profits.

The decision ahead: DSTA and the future of Pillar One
The OECD has released the multilateral convention (MLC) to implement Amount A of Pillar One on Oct. 18, 2023. The crucial question arising from recent developments is whether Canada will sign onto the multilateral Pillar One framework as presently constituted and repeal the DSTA, which is designed as a proxy to Pillar One. The decision hinges on several factors:

1.    Amount B's significance: Amount B's finalization is crucial for efficient tax base determination under Pillar One. Without clear guidance on related party transaction valuation, MNEs may exploit existing transfer pricing rules and reduce taxable profits under Pillar One or evade its application entirely.

2.    Revenue projection: The DSTA's projected revenue may surpass that of the Pillar One Framework, mainly due to lower thresholds (i.e., DSTA scope test being purely revenue-based vs. Amount A scope test being partly profit-based).

3.    Negotiation complexity: Negotiating and finalizing multilateral agreements for Pillar One is expected to be a protracted process, unlikely to conclude within 12 weeks.

4.    Ratification process: Once Canada agrees to the Pillar One framework, the DSTA must be repealed. The details of the MLC will need to be reviewed and approved by the Canadian government. In addition to these steps, new domestic legislation will be required to implement the Pillar One framework into domestic law or applicable existing tax legislation (i.e., the Income Tax Act), will need to be amended.

Conclusion
In conclusion, while both the DSTA and Pillar One aim to address the taxation of digital services in Canada, the differences in thresholds, taxable base and negotiation timelines may lead to the DSTA remaining in effect for the foreseeable future. The decision to sign onto the multilateral framework and repeal the DSTA hinges on several complex factors, and a definitive resolution is not expected in the near term. The DSTA serves as a practical stop-gap solution until the multilateral framework becomes operational.

For more information on RSM,  please visit  us in Canada at https://rsmcanada.com/ and in the United States at https://rsmus.com/
 

Daniel Mahne, Senior Manager; Olukayode Akinbosede, a Senior Associate, RSM Canada

Doing Global Business in These Times

Author: Bill Edwards, CEO and Global Advisor, Edwards Global Services, Inc. (EGS)

Doing business cross border has significantly changed due to the pandemic.  This article looks at changes in doing global business in recent years from a practitioner's perspective, specific trends and factors that impact successful brand entry into a new country and how several countries where you might take your business are expected to do economically in 2024. Data referenced in this article is sourced from the EGS Global Business Bi-Weekly Newsletter, monitoring over 40 online information sources, visiting many of the countries listed post-pandemic and input from the EGS network of in-country associates who live and work in their economies.
 
The pandemic kept us from visiting other countries and face-to- face establishing or building business relationships as we were limited to phone calls, emails and zoom meetings. As Terri Morrison summarizes in her landmark book on doing business in 60 countries, “Kiss, Bow, or Shake Hands”, much of the world does business based on establishing relationships which I have found to be true over four plus decades of doing business on six continents. This means face-to-face relationship building is required to secure new business in other countries. Well, travel is back, and your competitors are traveling to do business! But beware, business travel to the Americas, Asia Pacific, Europe and the Middle and Near East has become considerably more expensive since the pandemic.
 
What has changed and what is the picture for doing cross border business in 2024? Below are some factors to keep in mind when planning your 2024 new country marketing budget. And while there is war and unrest in parts of eastern Europe and the Middle East, interest rates are high and inflation remains a concern, there are several countries where the GDP growth will be high in 2024, where governments are increasingly business friendly and local businesses are making new investments. Several factors will impact the ability to do cross border business in 2024.
 
According to the London magazine, the ‘Economist’, there will be “more than 70 elections in 2024 in countries that are home to around 4.2 billion people.” Elections bring uncertainty as to what business policies the winner will try to put into place.
 
Interest rates directly impact the ability of companies in countries to fund new investments and are expected to stay at multi-year year highs during 2024. Higher interest rates in a country tend to dampen new investment.
 
The International Monetary Fund (IMF) projects 2024 annual GDP growth in OECD countries at 2.2%, in developing countries at 4.6% and world GDP growth at 3.0 as of their October 2023 report.  The IMF expects greater variation in growth rates among OECD countries, with some countries experiencing strong growth and others experiencing weak growth. GDP growth rate provides a broad measure of economic activity and can be a useful tool for analyzing the investment climate in a country. Generally, the higher the GDP annual growth rate, the more new investment is likely to happen in a country in a year. The more new investment, the better the business climate for international brands trying to enter a country and do business.
 
And then there is inflation which continues to drop in most countries. According to the International Monetary Fund (IMF) in their October 2023 report inflation in OECD countries is expected to decline from 7.0% in 2023 to 5.2% in 2024, while inflation in developing countries will average 5.4% in 2024, down from an estimated 6.7% in 2023.  The U.S. is expected to see 2.5% and Canada 2.4% inflation.
 
Considering the above factors, there are some interesting countries to consider for doing business in 2024. For each of the countries below, the IMF projected GDP growth percentage for 2024 is shown.
 
Americas
 
Brazil – 3.1% - Although the country recently elected a left leaning President, he and his party are pushing for new laws that would greatly reduce the extremely cumbersome regulations for trying to do business in the country. If this happens it could especially help foreign companies trying to penetrate this large consumer market. Plus, the unemployment rate is relatively low, supporting consumer spending.
 
Chile – 2.5% - This country has a free-trade agreement with over 60 countries, giving foreign businesses access to a large consumer market. Recent political turmoil may be lessening, and the middle class is growing rapidly. This has been a good market for foreign brands for some years. Prior to recent political turmoil, Chile was known as the European level country tacked on to the side of South America.
 
Mexico – 2.3% - Nearshoring of foreign companies wishing to sell into Canada and the U.S. is accelerating. This includes Chinese companies who are making massive investments especially in the area around Monterrey and taking advantage of lower wages and more space available to build factories. The upcoming election and change of President will have business policy implications.  Meanwhile, the Mexican peso has appreciated against the US dollar, making imports cheaper and boosting purchasing power. 
 
Asia Pacific
 
China – 5.2%? – As mentioned above, companies are expected to continue to move manufacturing and sales to countries other than China in 2024 due to rising salaries and more restrictive Chinese Communist Party policies related to private businesses, both local and foreign. Few new foreign entrants are expected as mainland China investors are currently reluctant to take on new projects until they feel the government is on the side of businesses.
 
Indonesia – 5.3% - This country has a population of 280 million with a fast-growing tech savvy middle class over 52 million. A pending election could change a pro-business attitude in this natural resource rich country. This growth is driven by strong domestic demand, rising commodity prices, and government investments in infrastructure and human capital. 
 
Japan – 1.6% - Major corporations for the first time in decades are looking to diversify into new industries. This brings new opportunities for foreign companies seeking to enter this normally mature market. Although its population is old and declining, the country has a large and growing middle class. And there is a growing awareness and acceptance of non-salaried career paths, including entrepreneurship, among young professionals. Consumer spending is expected to remain strong, supported by a huge rebound in tourism.
 
Philippines – 5.6% - With one of the fastest growing economies in Asia, Manila is a city with lots of cranes indicating strong government and private infrastructure investment. This Asian market is very open to U.S. brands and is the regional headquarters of many foreign companies. Growing disposable income and a young population mean increased demand for consumer goods and services. However, the country is becoming increasingly competitive, meaning foreign companies must compete on a higher level than in the past.
 
Europe and United Kingdom
 
Poland – 3.0% - Coming out of an election that returns a center leaning government to power, the large population is expecting a high GDP growth rate but with higher than EU average inflation. To encourage new investment the government has put in place tax breaks and investment incentives. One area seeing immense change and investment is the health care system that has not fully made the upgrade from communist times.
 
Spain – 1.8% - This GDP growth rate exceeds the European Union (EU) average in a strong employment market. The market is very open to foreign brands and to doing business cross border. Regulations and tax rates are more pro-business than most EU countries. A concern is that there are growing labor shortages in some sectors and commercial property is becoming harder to find and more costly.
 
United Kingdom – 1.4% - While the growing tech sector is a big plus in the United Kingdom, there are labor shortages due to Brexit and an election is looming that might bring a less than pro-business Labor party into power. Inflation and energy prices are higher than most EU countries.  
 
The Middle and Near East
 
India – 6.1% - With the highest expected percent GDP growth in 2024 of a major market, this very diverse consumer market will be even more important to consider for 2024. They seem to need just about anything related to growth. But foreign companies doing business here will continue to find bureaucratic and cultural barriers to entry and success.  
 
Saudi Arabia – 3.4% - This is one of the fastest growing markets in the world. The government is aggressively diversifying their economy away from oil & gas production and has put into place policies and cultural changes to make this happen. Foreign brands are even more accepted than in the past. Consumer spending is high. Even tourism is opening. The old difficult and time-consuming visa procedures have been replaced with a simple online e-visa.
 
Bottom Line: Despite several challenges there remain many places to successfully expand your business into in 2024 from Canada and the U.S. But it is essential to consider the factors highlighted in this article and to do your market research first. Traveling to a country and doing research by walking around remains an excellent way to truly understand the market for your products or services in another country.
 
William (Bill) Edwards is a global advisor to CEOs on taking their businesses global successfully. Download his quarterly GlobalVue 40 country ranking chart at https://edwardsglobal.com/globalvue. Contact Bill at +1-949-375-1896 or bedwards@edwardsglobal.com. 

Mastering the Art of Fundraising: Insights from Experts in Santa Barbara's Startup Ecosystem

Fundraising in Today’s Market Event, Santa Barbara, CA - October 10, 2023

Author: Eric Eide, Managing Director, Alliance for SoCal Innovation

In the thrilling world of startups, there are three kinds of founders: good founders who are good fundraisers, bad founders who are good fundraisers, and good founders who are bad fundraisers. Only the first two categories get their dreams funded. These words of wisdom come from Woody Sears, the CEO and Founder of Autio, a recently funded consumer startup, who participated in a captivating panel discussion on startup investing at a recent founder-centric event hosted by the Alliance in Santa Barbara. The takeaway is clear – founders need to be exceptional at fundraising!

The Alliance for SoCal Innovation understands the importance of fundraising for startups. That’s precisely why we organize the “Fundraising in Today’s Market” event series, aimed at helping founders become more adept at securing the capital they need to grow their businesses. To deliver these valuable insights, we turn to local experts, and on October 10th, Santa Barbara’s SB Biergarten played host to a panel of Santa Barbara investors, including Julie Henley McNamara, Managing Partner at Entrada Ventures, and Mike Tucker, Partner at ScOp Venture Capital, who joined Woody Sears from Autio, on the panel. The event was skillfully moderated by Mark diTargiani, SVP at Pacific Western Bank, and it was a resounding success with 45 enthusiastic attendees from the Santa Barbara startup community. Special thanks to Gavin Block at Countsy for supporting this event and enabling attendees to build relationships over food and drinks. 

Let’s delve into some key themes and advice shared during this enlightening panel:

Building a Strong Community: The Santa Barbara community was highlighted as being exceptionally supportive and tight-knit, providing an excellent environment for startups to thrive.

The Art of Fundraising: Raising money is an essential but challenging task that requires founders to not only understand the game but also actively network with other founders and funders. Viewing every interaction as an opportunity to learn and ask questions, even in the face of rejection, is invaluable.

Targeted Fundraising: To raise funds successfully, founders should target investors based on their company stage, possess a clear message about problem-solving and differentiation, and demonstrate traction through metrics.

Founder Evaluation: Chemistry and alignment are essential factors when determining a potential long-term founder-investor partnership. Authenticity is highly valued, and investors appreciate honest reporting of metrics, even when they are less than ideal. Due diligence plays a vital role in testing the trust that has been established before entering into a long-term financial relationship.

Advice, Insights, and Wisdom from the Experts:
Julie Henley McNamara, Managing Partner at Entrada Ventures:

• Be authentic and honest during investor meetings.

• Focus on building a healthy business rather than being overly concerned with valuation.

• Foster dialogue and understanding between men and women in the startup ecosystem, which hopefully will lead to a more inclusive community.

• Guide the conversation during investor meetings to ensure key information is conveyed.

• Ask investors about the next steps and understand the “homework” founders must do to progress to the next step.

Mike Tucker, Partner at ScOp Venture Capital

• Encourage founders to raise capital at a fair valuation, considering long-term implications.

• Preserve cash and reduce burn to navigate market uncertainties.

• Focus on building a great business and don’t stress too much about capital.

• Seek out the right type of investor for your business and plan funding milestones accordingly.

Woody Sears, Founder & CEO of Autio

• Speak with founders who have worked with potential investors to gain insights into their experiences.

• Founders need to also be sure to do their due diligence on investors by speaking with portfolio companies.

Additional Nuggets of Wisdom for Founders:

• Network and build relationships with angel investors who may provide early-stage funding.

• Consider the differences in funding expectations and requirements for hardware vs. software startups.

• Be mindful of market forces and adjust fundraising strategies accordingly, while focusing on fundamentals.

• Attend upcoming events, both online and in-person, to connect with investors and industry professionals.

• Seek warm introductions to investors to increase the chances of a positive response.

• Apply to the SoCal Venture Pipeline program for assistance with warm introductions to investors.

The Alliance’s SoCal Venture Pipeline (SVP) powered by Pacific Western Bank connects founders with funders, resulting in raises, growth, and quality job creation. The selective program has supported 65 startups with individual investor introductions; 15 of these startups raised an impressive $63 million in investments thus far. Congratulations to Woody Sears and the Autio team for being one of the SVP companies that secured an investment round. The SVP program would not be a free resource to founders without the support of program sponsors Pacific Western Bank, WSGR, and KPPB, who are all committed to assisting SoCal founders in their journey to success.

In the fast-paced world of startups, it’s clear that mastering the art of fundraising is a non-negotiable skill. With the guidance and wisdom shared by these industry experts, founders in the Santa Barbara community and beyond are better equipped to navigate the complex world of fundraising and turn their entrepreneurial dreams into reality. The journey is challenging, but with the right mindset, support, and strategic approach, the sky’s the limit for these ambitious founders.

Eric Eide, Managing Director, The Alliance for SoCal Innovation 

Fundraising in Today’s Market Event, Santa Barbara, CA - October 10, 2023

Four Key Questions to Ask Your Group Benefits Broker for a Successful Plan

Author: Andrew Blanchard, Chief Executive Officer, Sterling Capital Brokers

Navigating the changing world of employee benefits and selecting the best group benefits plan for your organization can be a challenge. In today's dynamic economic climate, marked by unprecedented challenges and shifting priorities, finding the right balance between providing valuable benefits to employees and controlling costs is essential. To navigate this complex landscape successfully, it's essential for organizations to partner with brokers who not only understand their unique needs but also have the expertise to optimize the entire benefits program. To navigate this complex landscape, here are the four key questions to ask your broker about your benefits plan, addressing crucial aspects such as; plan design, the Total Loss Ratio (TLR), ease of administration, and rate lock strategies. These questions will help you make well-informed choices that can result in affordable yet employee-focused benefits solutions.

1. Plan Design: Aligning with Organizational Values
The foundation of a successful group benefits plan is a well-thought-out plan design. It serves as a manifestation of your company's values and objectives. When developing your plan, it is imperative to consider your organization's philosophy. Are your priorities centered on retaining existing talent, attracting specific skill sets, enhancing employee contentment, or cost containment? Understanding your organization's priorities is essential to creating a plan that meets both your employees' and your company's needs. By aligning plan design with your organization's philosophy, you create incentives that lead to long-term success for your enterprise.

2. Total Loss Ratio (TLR): Maximizing Value and Cost Control
Given today's economic climate, effectively managing insurance costs is of utmost importance. The Total Loss Ratio (TLR) serves as a critical metric that reflects the balance between insurance coverage and administrative fees within your plan. It's not just about the immediate costs; it's about ensuring that your plan remains cost-effective over the long term. Brokers with the right expertise and industry connections can assist in driving down the TLR, leading to savings on insurance expenses in the long run. Prioritizing a higher TLR allows you to maximize the value of your group benefits plan and allocate more resources to insurance coverage rather than administrative overheads.

3. Ease of Administration: The Role of Technology and TPAs
As more employees work in hybrid or remote environments, administrative ease is a key consideration. The availability of digital enrollment tools and simple access to plan support is increasingly important for HR teams and administrators. Sterling Capital Brokers believes that providing an administration and service component as part of your benefits plan is essential. This technology layer not only improves the enrollment and service experience for administrators but also grants your team better access to data for improved service, including tasks like managing claims and advocating for clients.

4. Rate Lock: Creating Stability in Plan Pricing
Predictability in your group benefits plan pricing is vital for budgeting and long-term planning. Longer rate lock periods or rate caps on first and second renewals can provide stability, certainty, and more accurate pricing for your organization. These measures allow insurers to evaluate your plan based on multiple years of experience, reducing pricing uncertainties and providing financial security.
 
Conclusion - The Importance of Broker Selection
Selecting the right broker is a crucial decision. You need a broker that can provide expert guidance on plan design, reduce administrative burdens through technology, and effectively advocate for your organization. By asking these four key questions you can build a group benefits plan that aligns your company's principles, protects your financial well-being, and provides valuable benefits to your employees.

At Sterling Capital Brokers, we understand the intricacies of group benefits plans. Our dedicated team is committed to helping you navigate the complexities of your group benefits plan to create a comprehensive and cost-effective solution that benefits your organization and your employees.
 
For more information on Sterling Capital Brokers' services, please visit their website: https://sterlingcapitalbrokers.com/

Andrew Blanchard, CEO, Sterling Capital Brokers

San Bernardino County is Open for Business

San Bernardino County is open for business! This is the premise the County had the pleasure of promoting while hosting a “Growing Global Partnerships” roundtable and tour with the MAPLE Business Council and Canadian business leaders in August.  With Canada consistently a key market for international trade and foreign direct investment, the County was honored to share information regarding its many business advantages, learn more about Canadian business initiatives, and support the MAPLE Business Council by becoming a member. 

"The largest county in the United States and located at the heart of Southern California, its vast borders stretch from the greater Los Angeles area to the Nevada border and the Colorado River, encompassing a total area of over 20,000 square miles."

San Bernardino County is excited to share what makes it an excellent location for Canadian companies seeking to locate or expand in the United States. The largest county in the United States and located at the heart of Southern California, its vast borders stretch from the greater Los Angeles area to the Nevada border and the Colorado River, encompassing a total area of over 20,000 square miles. 
 
San Bernardino County helps businesses thrive as a hub for international logistics and global commerce while located only 40 miles from the Los Angeles and Long Beach Seaport. With 3 major interstate highways, 3 major airports, and 2 major railways, it has an unparalleled network of roadways, runways, and railways that facilitate connectivity to regional, national, and international business centers. Its location is an important trade gateway enabling businesses to bring in supplies through the ports and distribute products throughout the United States, all at reduced leasing rates when compared to coastal counties.

"San Bernardino County’s local ecosystem fuels success with 24 cities, more than two million residents, a workforce of over 999,000, and a population of 2.1 million people. The County also has an innovation corridor of close to two dozen colleges and universities supporting a strong and diverse workforce."

Redlands University, Redlands, CA (San Bernardino County). Photo courtesy of Soly Moses.

San Bernadino County’s local ecosystem fuels success with 24 cities, more than two million residents, a workforce of over 999,000, and a population of 2.1 million people. The County also has an innovation corridor of close to two dozen colleges and universities supporting a strong and diverse workforce. With its affordable industrial and residential offerings, San Bernardino County continues to attract residents and businesses alike. Additionally, its several centrally-located industries and vendors provide a valuable resource pool to support operations and help Canadian firms grow.

"The County’s Economic Development Department welcomes the opportunity to meet with Canadian businesses and provide market analysis assistance, project consultation, permitting assistance, site selection services, employment recruitment services, on-the-job training funds, customized training programs, layoff prevention services, labor market services, America’s Job Center of CA assistance, and referrals for external business resources."

Let San Bernardino County show you what it has to offer! The County’s Economic Development Department welcomes the opportunity to meet with Canadian businesses and provide market analysis assistance, project consultation, permitting assistance, site selection services, employment recruitment services, on-the-job training funds, customized training programs, layoff prevention services, labor market services, America’s Job Center of CA assistance, and referrals for external business resources. To learn more, companies can visit www.SelectSBCounty.com, reach out to us at info@eda.SBCounty.gov or contact us directly at +1 (909)-387-4700.
 
San Bernardino County looks forward to many more exchanges with the MAPLE Business Council, business leaders, and fellow council members as it continues to encourage Canadian companies to come to San Bernardino County and prosper.

Roland DGA Maintains Strong Cross-Border Collaboration to Benefit Clients and Dealers

Don Ross, Roland DGA Canada National Sales Manager, speaking at MAPLE Ontario Fall Reception at Fasken in Toronto, October 2023.

Roland DGA Canada is the Canadian sales arm for Irvine, California-based Roland DGA Corporation, which oversees North American sales, marketing, and distribution for parent company Roland DG Corporation headquartered in Hamamatsu, Japan.

Created in 1995, Roland DGA Canada employs five staff who are responsible for sales and distribution to approximately 50 resellers throughout Canada. 

We recently spoke with Roland DGA Canada’s National Sales Manager, Don Ross, about the strong working relationship between his office and the U.S. office, Roland DGA Canada’s approach to core markets, and his view of the impact current economic trends are having on the Canadian sign and graphics market.

Please describe the relationship between your office and your U.S. counterpart.

Don Ross: Our office oversees Canadian sales and provides support for our network of resellers throughout Canada. Product demonstrations and sample printing are conducted in our Barrie, Ontario office, about an hour north of Toronto. We share responsibility for marketing activities, customer service, and tech support with our U.S. office. We also participate in trade shows and dealer open house events in Canada to maximize interest in our products and cultivate sales opportunities.

We have a very strong working relationship with both U.S.-based Roland DGA and our parent company, Roland DG, in Japan. Roland DGA, the North American headquarters, is our main conduit to Japan, and Japan keeps our office and all the other Roland DG business units worldwide updated on any new product or financial developments. I also make annual visits to Roland DGA and to Roland DG headquarters. 

"We have a very strong working relationship with both U.S.-based Roland DGA and our parent company, Roland DG, in Japan. Roland DGA, the North American headquarters, is our main conduit to Japan, and Japan keeps our office and all the other Roland DG business units worldwide updated on any new product or financial developments."

What are the core markets for Roland DGA Canada and how do you go about identifying and capitalizing on new market opportunities?

We address a multitude of markets in the sign and graphics industry, as well as our laboratory and clinical dental business. For the sign and graphics industry, our digital inkjet printers and printer/cutters are used by businesses that focus on signage, advertising, packaging, promotional products, apparel, manufacturing, sports, education, labels, vehicle graphics, and many other applications. Our customers range from small one-person and “mom and pop” operations to some of the largest global enterprises. Roland DGA’s market penetration is very similar throughout North America.

When it comes to identifying and developing new markets for our products, the approach Roland DGA Canada takes differs from most of our competitors. Many manufacturers take a product-centric approach to generating new business, often relying on price and margin reductions to compete. Instead, we aim to provide a “total solution” and approach prospective customers with the goal of developing a long-term partnership rather than simply making a sale. We recognize the importance of creating trust with our customers and we provide them with world-class service and support every step of the way to ensure their success. Developing these partnerships can require additional time and effort, but we find the rewards are well worth the initiative.

"In general, Canadian sign and graphics customers remain early adopters, embracing new technologies very quickly following their introduction into the marketplace. Canadian sales often provide the U.S. team with a preview of the product’s reception and performance, which in turn informs marketing and sales efforts."

What is the current state of the sign and graphics market in Canada?  Do you see any trends emerging?

In general, Canadian sign and graphics customers remain early adopters, embracing new technologies very quickly following their introduction into the marketplace. Canadian sales often provide the U.S. team with a preview of the product’s reception and performance, which in turn informs marketing and sales efforts.

Roland DGA has recently been targeting the SOHO (“small office, home office”) space. The home-based business trend started during the pandemic has continued, and has created opportunities for Roland DG’s line of affordable, professional desktop devices, such as the VersaSTUDIO BN2-20, BN-20 and BN-20A benchtop printer/cutters, along with the BN-20D direct-to-film system, and VersaUV LEF2 Series benchtop UV printers  Each of these devices is essentially a “business in a box,” making it easy for people with limited space and resources to start up a lucrative home-based online business. 

Another area of interest is the personalization and customization market, which has seen continued growth over the past few years. Roland DG sells a variety of benchtop and wide-format devices that meet its clients’ needs for one-off and short run production of custom drinkware, clothing, and event signage.

To find out how people are using our devices, we actively solicit our dealers to submit sample requests to our office in Barrie. This has proven immensely successful. We are able to save the customer the time it would take to receive samples from the U.S., and preparing these samples gives us a view of related market possibilities. 

We are continually amazed by the imaginative products customers print on or fabricate using Roland DG devices. We’ve seen everything from custom-printed hockey pucks to personalized drinkware to full semi-truck trailer wraps. 

"Inflation is affecting everyone to one degree or another. Like people all over the world, Canadians are feeling the impact of higher prices and are being selective about their purchases. One way to reach customers intent on conserving their budgets is by providing extra value and the opportunity for a strong return on investment."

How is the current economic environment impacting business for Roland DGA Canada? 

Inflation is affecting everyone to one degree or another. Like people all over the world, Canadians are feeling the impact of higher prices and are being selective about their purchases. One way to reach customers intent on conserving their budgets is by providing extra value and the opportunity for a strong return on investment. Roland DG has a reputation for manufacturing high-quality products that are versatile, durable, and reliable, and backing them with unparalleled service and support, which helps assure customers that their dollars are well spent.

How do you continue to supply Canadian customers with top-notch service and support that Roland DG is known for?

Our Canadian team is very responsive to calls and emails from our dealer network as well as from our end users. Our staff is typically available from 8:00 a.m. to 8:00 p.m. EST. Our Canadian dealers especially find that we are just as readily available, if not more so, than our U.S. counterparts. We do, however, seek assistance from the U.S. team from time to time if we are unable to resolve certain support cases with our own resources. Our seamless cross-border collaboration results in a timely response to most of our dealers’ and clients’ service and support needs. 

For more information on Roland DGA Corporation, visit their website at https://www.rolanddga.com/. Don Ross was a featured speaker at the MAPLE Ontario Chapter Fall Reception at Fasken in Toronto earlier this month and his presentation is part of our webcast.

Trade with a View: Perspectives of International Bridges

Author:  Natalie Kinloch, CEO Federal Bridge Corporation
 

Have you ever wondered what keeps the heartbeat of Canadian-American trade pulsing? Look no further than Canada's international bridges, the spectacular landmarks that serve as the lifeblood of our economic relationship with the United States. The Federal Bridge Corporation Limited (The FBCL), a Canadian federal Crown corporation, shoulders the responsibility of many of these vital arteries, maintaining them to be open every second of every day, all year round, at strategic locations like Sault Ste. Marie, Point Edward, Lansdowne (Thousand Islands), and Cornwall, Ontario.
 
Nestled mainly on Indigenous ancestral lands, these engineering marvels are much more than just crossing points; they're the backbone of a resilient North American supply chain and a robust tourism industry. At The FBCL, our mandate is a complex but rewarding one, involving partnerships with U.S. federal, state, and local entities. Our operational reality requires a delicate balance of stewardship, risk management, safety and security, traffic fluidity, and bi-national jurisdictional alignment, all while showing respect for the host communities.

"Last year alone, our bridges facilitated an eye-popping $175 billion CAD in trade, with 2.3 million commercial crossings and 5.3 million personal vehicle crossings. These statistics aren't merely numbers; they're real-time indicators of economic conditions."

In terms of sheer numbers, the story gets even more impressive. Last year alone, our bridges facilitated an eye-popping $175 billion CAD in trade, with 2.3 million commercial crossings and 5.3 million personal vehicle crossings. These statistics aren't merely numbers; they're real-time indicators of economic conditions. A surge or dip in these numbers could signify shifts in industries or market responses to specific events, giving us valuable insights into the health of our economy.
 
Our bridges are not just functional assets; they're powerful symbols, representing transition, change, travel, unity, advancement, and much more. They also become stages for human drama, occasionally facing surges or halts in traffic due to various safety or security incidents, which can range from system outages to large-scale social protests.
 
The last three years have tested our resilience, with varying levels of closures and travel restrictions affecting cross-border movement. But we've weathered the storm. Currently, cross-border is healthy but passenger traffic is at about 65% of its normal range, and the outlook remains optimistic. Our ability to maintain a high level of service during these challenges has been due to prudent governance and efficient financial management, allowing us to replenish capital reserves depleted during the crisis.
 
Financial sustainability is not just a corporate catchphrase; it's a cornerstone of our business model. Our focus on self-sufficiency means that we exercise full control over our revenue streams, which are then reinvested directly into the maintenance and rehabilitation of these bridges. Toll rates are set with the utmost consideration, knowing that they contribute to the transportation costs borne by every Canadian. Moreover, nearly 20% of our total expenditures are dedicated to providing free facilities for the Canada Border Services Agency (CBSA) and the Canadian Food Inspection Agency (CFIA), as required by Canadian law.
 
Beyond the movement of goods and people, what is paramount is the structural integrity of our bridges. There's no margin for error here. Our rigorous inspections and lifecycle asset management programs, aided by GPS technology, ensure the bridges' longevity and safety. With many of our major structures approaching their critical age of 75 years, major rehabilitations and replacements are not just planned; they're necessary.

"In essence, our bridges are far more than steel and concrete; they are the ties that bind us, not just to each other, but to a future of endless possibilities."

In essence, our bridges are far more than steel and concrete; they are the ties that bind us, not just to each other, but to a future of endless possibilities. So, the next time you cross one of these marvels, take a moment to appreciate the complex tapestry of planning, engineering, diplomacy, and sheer human effort that makes it all possible.
 
 
SPOTLIGHT ON MAJOR TRADE ROUTES
 
Blue Water Bridge 
 
The Blue Water Bridge is a twinned, international crossing. It is one of Canada’s most vital ports of entry with its standing as the second busiest commercial land port with $145 billion CAD in traded commodities annually. With its linkage from Ontario’s Highway 402 to the U.S. Interstate 94 and Interstate 69 highways, the bridge is the preferred route for goods destined for such points as Chicago and the Southwestern U.S., including Texas and California. Conversely, the bridge facilitates the importing of goods into Canada, primarily into Ontario, Quebec, and the Maritimes.

"The bridge is an integral component of the Canada-United States-Mexico Agreement (CUSMA) Superhighway facilitating trade between Canada and Mexico, as well as to Asian partners overseas via marine ports in California."

The bridge is an integral component of the Canada-United States-Mexico Agreement (CUSMA) Superhighway facilitating trade between Canada and Mexico, as well as to Asian partners overseas via marine ports in California. Most recently, its host community of Sarnia-Lambton was designated a Foreign Trade Zone. The one-window approach makes for easier and more efficient navigation for businesses to access a diverse range of government services and supports that relieve duties, tariffs and taxes for importing and exporting.
 
Thousand Islands International Bridge

The crossing provides an essential connection between the Interstate 81 and Highways 401 and 416 transportation corridors and is known as the Capital Corridor linking Ottawa to Washington D.C. The crossing also provides a vital link to Eastern Ontario and beyond, while also allowing for an efficient trade route from the Eastern U.S. into the Toronto and Montreal areas. The direct access to major highway systems on both sides of the border, combined with $330 million in investments by Canadian and U.S. federal governments in new Ports of Entry that have been made in recent years, has set this crossing up for long-term success as a favoured trade route. In 2022, it carried approximately $25 billion CAD in trade value. It is a vital corridor toCanada’s economy and to tourism as well.

Sault Ste. Marie International Bridge (SSMIB)

The Sault Ste. Marie International Bridge (SSMIB) is northern Canada’s, and, more specifically,Northwestern Ontario’s, portal to international land-based trade. Given its strategic location nestledbetween Lake Superior and Lake Huron, the SSMIB serves as the only land crossing available tonorthern industries, including important steel manufacturing. It is the only vehicular crossing between Ontario and Michigan within nearly a 600 kilometres radius. It links the Trans-Canada Highway and is a convenient route for goods transported from North Eastern and Eastern Ontario, and from Quebec to the Upper Great Lakes states. The crossing connects directly to the major north-south artery Interstate 75 and to Michigan Highway 28, which runs south of Lake Superior into Wisconsin and Minnesota. In 2022, it carriedapproximately $4 billion CAD in trade.

Seaway International Bridge (SIB)
 
The Seaway International Bridge connects Cornwall, Ontario and Massena, New York. It lies across major, rail, shipping, and Highways 401 and New York State Route 37 that connect Ontario and Quebec to the North Eastern United States including the Adirondacks. This crossing is unique in that bridges directly land, traverse and serve the cross-border Mohawk community of Akwesasne. In 2022, SIBC welcomed some 2.1 million vehicles and provided 1.7 million free transits in line with the Crown-mandated free passage obligations afforded to the Indigenous community.

For more information on the Federal Bridge Corporation, please visit their website at https://federalbridge.ca/

Leveraging Generative Artificial Intelligence in Business: Operations and Risks

Authors: Harnik Shukla, Partner; Vlad Teplitskiy, Partner; Justin Theam, Associate, Knobbe Martens

Does your software team rely on ChatGPT for coding?  Or perhaps your sales and marketing departments are harnessing its power for product campaigns?  Generative artificial intelligence tools (AI tools), such as ChatGPT, continue to become integral for day-to-day business operations.  However, without an internal artificial intelligence usage policy (“AI Policy”) in place, these tools can expose the business to significant legal and financial risks.

To draft an AI Policy, a business should first start by auditing all the possible use cases for the AI tools and the types of data that could be entered into the AI tools.  Generally, the risks of using AI tools fall under the following three categories: 

1. Loss of Confidentiality (for instance, sensitive data, trade secrets, etc.)

2. Legal Liabilities (for instance, breach of contract, copyright infringement, etc.)

3. Loss of Intellectual Property (IP) Ownership (for instance, copyrights and patents)

The following example use cases explore how AI tools implicate these risks.
 

Use Case 1: Using an AI tool to streamline internal operations, such as preparing a presentation or manipulating data for an internal meeting. 

"Even if the TOU is acceptable, businesses should reconsider inputting any sensitive data into the AI tool that stores the inputted data to avoid any data loss in case there is a security breach of the AI tool or in case the data may otherwise get leaked." 

Risks: The data input may be stored by the AI tool to be used by others or for internal use of the AI tool maker to refine the AI tool, thereby implicating data security and confidentiality.  The AI tool’s Terms of Use (TOU) dictate how the AI tool can use data entered into the AI tool.  Businesses should avoid using any AI tool with TOU that fails to satisfy the business’s data security and confidentiality requirements or use such AI tools only when confidential data is not implicated.  Even if the TOU is acceptable, businesses should reconsider inputting any sensitive data into the AI tool that stores the inputted data to avoid any data loss in case there is a security breach of the AI tool or in case the data may otherwise get leaked.

What happens when an employee inputs financial records to generate a quarterly fiscal report or inputs a list of contacts (such as employees, third-party partners, or clients) to organize an internal database?  Depending on the TOU, the AI tool can use this information as training data or even an output for other users.  For example, if another user prompts the AI tool for competitor contracts or fiscal reports, that user may learn that your business meets those criteria and use your confidential data to their advantage.  Furthermore, if the data inputted into the AI tool conflicts with confidentiality agreements or contracts with third-party partners, your business could be liable to such partners. 

Use Case 2: Using an AI tool to generate a work product, such as software code or a slogan/image for a marketing campaign.

Risks: Commercial use of the output can lead to legal liabilities to third parties for improper use of their IP rights (e.g., copyrights, trademarks, and patents), rights of publicity, and/or the licenses related to them.  

The use could infringe when protected materials are incorporated directly into the AI tool’s output.  For example, a restaurant may be liable for using a generated marketing image for their restaurant that includes third-party protected material even if the business believed the AI tool provided licenses to the image.   Envision an image with Kobe Bryant in Nike® clothing holding a Coca-Cola® bottle in a restaurant reminiscent of Cheesecake Factory®.  The restaurant should have screened for any protected material before using the output. 

Although third-party material can be more difficult to identify when an employee uses the AI tool to develop software code, similar implications can still arise since third-party code included in the output may be copyrighted.  Even if the third-party code is licensed under an open-source software license, many such licenses impose obligations on the use of the code, such as providing notices.  

"In some circumstances, the AI tool provider may provide a limited indemnity for liability stemming from the unauthorized use of third-party IP included in the output. It is important to review the TOU of the AI  tool to determine whether it offers such limited indemnity."

In some circumstances, the AI tool provider may provide a limited indemnity for liability stemming from the unauthorized use of third-party IP included in the output.  It is important to review the TOU of the AI tool to determine whether it offers such limited indemnity.  

Even if legal liability is not a concern, the business may not have full ownership of the output.  The TOU may include terms by which the AI tool provider retains rights in the output or retains a license to grant other users of the AI tool the right to use the output.  Furthermore, a user’s rights to the output may be limited if they are out of compliance with the TOU, which can be changed at the discrection of the AI tool provider.

Use Case 3: Using an AI tool for innovation and product design, where the business intends to obtain exclusive rights to prevent others from copying.  

Risks: Several recent cases and agency guidance have stated that an AI tool cannot solely generate copyrightable works and cannot solely own a patent for innovations the AI tool generates.  This guidance could mean that innovations or expressions generated or authored solely by the AI tool may not be protectable under patent or copyright law.  Because AI tools are quite new, IP law for patent and copyright protection of material produced with the help of AI tools is still in flux, and the level of human contribution required to obtain IP protections is undetermined.  Under current copyrights laws, only portions of a work that are independent products of human authorship are protectable.  For example, a graphic novel or software code developed with AI tools may have limited copyright protection. 

"To ensure the ability to secure patent rights and/or copyrights for AI-generated products, businesses should maintain a mindset of using AI tools as assistants, not as creators."

To ensure the ability to secure patent rights and/or copyrights for AI-generated products, businesses should maintain a mindset of using AI tools as assistants, not as creators.  Although AI tools can provide a shortcut to the end product, businesses can avoid IP protection issues by limiting AI tools as assisting, rather than replacing, their employees to maintain the human component.  Products created with the assistance of AI tools should be products that a business could have created or would have known how to create without AI tools. 

Use Case 4: Using an AI tool for direct consumer interaction, such as customer service chat boxes or navigation systems, or using the AI tool as an information source for product design or maintenance. 

Risks: The information an AI tool outputs can be wrong; a recent study found that, in some cases, the accuracy of ChatGPT fell from over 95% to under 3%.[1]  The recent case of New York lawyers sanctioned for filing a legal brief containing fake cases output by ChatGPT serves as a cautionary tale.[2] Although AI tools can automate customer interaction or reduce staffing needs, they could provide inaccurate, misleading, biased, and even false information that may lead to legal liability, broader customer dissatisfaction, or brand degradation if provided to consumers. 

"Businesses should develop internal protocols to routinely check the output of AI tools and provide human oversight when a consumer is dissatisfied with the AI assistance."

Businesses should develop internal protocols to routinely check the output of AI tools and provide human oversight when a consumer is dissatisfied with the AI assistance.  Furthermore, businesses can provide clear indications to consumers that they are interacting with an AI and provide ways to ask for human intervention. 

Recommendations
To maximize benefits and minimize risks, businesses need to be aware of potential legal pitfalls and work with legal experts to craft an AI Policy that allows generative AI technology to be an asset rather than a burden.  Businesses should develop an AI Policy that can adapt to ever-changing regulations and stay updated on legal developments for generative AI.  The AI Policy should, at a minimum, address the following issues.

AI Tool Terms of Use
Businesses should thoroughly review the TOU for any AI tool used by the business to ensure that the terms are acceptable.  The entire TOU should be reviewed with particular attention on the rights for the output, confidentiality of user data, restrictions, compliance, attribution, liability, and licenses offered.  The TOU is typically subject to change, so it is important to stay current and review all changes to the TOU.  

Safety Checks
Businesses should incorporate safety checks to avoid unintentionally using third-party material or inaccurate/biased information.  A human team or inspection software could identify potential issues.  For example, Copyleaks or GPTZero indicate if the content, such as writing or code, is generated by AI.  Other AI tools may include options to exclude open-source code from the output. 

Employee Compliance
What if employees or contractors still want to use AI tools that do not fit the business’s AI policy?  While it is difficult to stop every unauthorized use, certain measures can be taken, such as including terms and conditions in employment or consultant agreements or contracts to prohibit using AI tools without the business’s consent.  Furthermore, to the extent company servers are used, firewalls can be implemented to prevent access to prohibited AI tools.  To the extent AI tools are allowed, AI policy should provide clear guidance on the permitted AI tools and their appropriate uses.   

For more information on the intellectual property legal services of Knobbe Martens, please visit the firm's website: https://www.knobbe.com/.

[1] Chen, L., Zaharia, M., & Zou, J. (2023). How Is ChatGPT’s Behavior Changing over Time? arXiv. https://doi.org/https://arxiv.org/pdf/2307.09009.pdf

[2] https://www.reuters.com/legal/new-york-lawyers-sanctioned-using-fake-chatgpt-cases-legal-brief-2023-06-22/

Harnik Shukla, Partner; Vlad Teplitskiy, Partner; Justin Theam, Associate Attorney, Knobbe Martens Orange County, California.

Stormwater Management for the Future - Permeable Paving

Authors: Authors: Jason Brooks & Mike Coates, Co-CEOs, Ecoraster

With the predicted increase in precipitation and storm events over the coming decades, the issue of how to effectively manage stormwater is becoming more pressing than ever before. 
 
From the water we drink, to the snow that we play in, and the tennis courts we socialize in, all are affected by permeable paving. Groundwater is our source of drinking water, and precipitation can carry harmful chemicals - once those chemicals fall onto the ground and pavement, without a proper filtration system which is included in a permeable solution, those chemicals go back into the environment, including the air and the land. Permeable paving systems help safeguard our health by safely disposing of stormwater runoff. 
 
More and more, we have been “paving paradise” and sealing up areas that were nature’s way of managing stormwater. Permeable paving systems have been developed as a way to “return to nature” and allow stormwater to be managed on-site “where it lands”.Permeable systems are designed not to pave over surfaces, but to become a part of them. The porous surface allows stormwater and water from thawing snow to seep back into the ground rather than running off. By allowing the stormwater to become groundwater, permeable paving becomes a crucial part of water’s natural cycle.
 
It goes without saying that we’re already seeing the effects of increased stormwater in urban settings. Noticeable uptick in hurricanes across North America and flooding in major cities such as New York, California, Louisiana and Texas, to name a few. Projections of future precipitation in a scenario that scientist’s term “business-as-usual” (i.e., a future where emissions continue at their current rate) project annual rainfall to increase by almost 100 ml over the coming century. 

"As the earth heats up, the risk of increased storms in precipitation-prone areas is becoming more acute. While it’s a lesser-known effect of the developing climate crisis, stormwater will nonetheless drastically affect life in many places and particularly in cities, where the higher density of paved surfaces means that the consequences of stormwater runoff are exacerbated."

As the earth heats up, the risk of increased storms in precipitation-prone areas is becoming more acute. While it’s a lesser-known effect of the developing climate crisis, stormwater will nonetheless drastically affect life in many places and particularly in cities, where the higher density of paved surfaces means that the consequences of stormwater runoff are exacerbated. The growth in major city centers and the areas surrounding is far surpassing the ability of the existing municipal infrastructure. Not only are the existing sewers and drainage systems unable to manage the increasing volumes of stormwater, but they are also aging and starting to disintegrate.  
 
This has the potential not only to increase flooding, but also to incur costly and more frequent infrastructure maintenance due to debris being carried into and blocking storm drains. It also poses a risk to the water supply, as factory runoff, chemicals from fertilizers, and other pollutants, such as pet waste, get carried by stormwater traveling over pavement, eventually ending up in SWM (stormwater management) ponds or even contaminating rivers and natural waterways. This contamination can result in serious repercussions for wildlife outside of cities and cause ripple effects all the way into regional biodiversity, and throughout the food chain.
 
These repercussions are certainly the effect of stormwater; however, they are also attributable to the way that municipalities deal with stormwater. While the effects of climate change cannot immediately be reversed, they can be managed through effective planning and infrastructure, including built-in stormwater management. With the exception of parks, trails and some historic districts, a large percentage of spaces in major cities, such as Toronto, are completely paved with asphalt. This impervious substance has been in wide use across the world for over a century, and while it may have been suitable for the conditions of the past hundred years, asphalt is decidedly not a material that can carry us into a sustainable future.

"Change can be hard, understandably, but rest assured, permeable paving systems have been successfully used for over 3 decades across Europe alone."

Change can be hard, understandably, but rest assured, permeable paving systems have been successfully used for over 3 decades across Europe alone. In Europe, landowners are taxed according to the percentage of impermeable surface and homeowners are even forbidden from using solid surfaces such as asphalt for their driveways. The concept that there are incentives and often grants available towards the inclusion of permeable surfaces is something that should be adopted across North America. The realization that when homeowners include permeable surfaces rather than conventional asphalt, municipalities benefit as well, is something that should not be taken lightly. There are even cities which offer additional tax benefits and credits to landowners when they design their facilities to manage additional/overflow stormwater from nearby properties.

When individuals are responsible for managing their stormwater on site “where it lands”, both landowner and municipality benefit!

"Supporting the individual to make these changes is important, however, the greatest and most effective changes happen when we “lead by example”. It is imperative that municipalities “practice what they preach” and start including permeable paving surfaces for their facilities as well."

Supporting the individual to make these changes is important, however, the greatest and most effective changes happen when we “lead by example”. It is imperative that municipalities “practice what they preach” and start including permeable paving surfaces for their facilities as well. All on-ground parking lot surfaces should be permeable, there is no question. All commuter parking lots, all nature pathways, all school parking lots...even sidewalks – And, as an added benefit, many permeable systems are also used as “solutions” for problematic areas. In older city centers especially, there are often underground obstructions such as mature tree roots, pipes and cables that greatly limit the depth of base able to be excavated. Many of these systems can be used as a base reinforcement, allowing you to reduce the required base depth by up to half while ensuring the strength of the base is not compromised. In these situations, permeable systems can also be used as the surfacing material, providing additional benefit to the area with onsite storm water management. Win-win for everyone!
 
It is easier to “go permeable” than you may think. There are many permeable paving systems that offer a scalable and affordable solution to flooding and stormwater pollution in cities.
 
Made in Canada of 100% recycled plastic bags, ECORASTER® permeable paving system of interlocking tiles creates a solid, permeable surface with a guaranteed lifespan of more than twenty years. Ecoraster fits into most municipal budgets, requires less maintenance than traditional asphalt paving, and is AODA / ADA compliant. Able to stop stormwater runoff in its tracks, halt the flow of debris into drains and ponds, and withstand up to 800 tonnes of pressure per square foot, Ecoraster permeable paving is designed with the future of our cities in mind.
 
To find out more about the available range of Ecoraster paving products and their uses, contact ECORASTER®. Our trusted group of Ecoraster distributors are ready to assess the needs of your project and help determine the best Ecoraster product to deliver a durable permeable paving solution. Visit our website at https://www.ecorastergrid.com/ to find out more. 

The World Needs More Canada...Still

Author:  Marcy Grossman, Chair Celebrate Canada Worldwide

The World Needs more Canada….Still.

That’s what I thought when old friend Clark Grue, CEO of Rainmaker Global Market Access,  invited me late last Fall, to co-found and Chair, Celebrate Canada Worldwide;  a not-for-profit committed to bringing Canada to the world stage. After 30 plus years dedicated to representing the country I love, I just couldn’t resist.

Six months later, on June 29, 2023, following a 10-year hiatus and a global pandemic, our flagship event, "Canada Day London" made its triumphant return to Trafalgar Square. 30,000 of our closest friends came together to soak in the goodness of Canadian culture, making it the largest Canada Day celebration in the world outside Canada.

““This was our chance to show off the incredible richness of Canada on the global stage, and at the same time, making it the largest Canada Day celebration in the world, outside Canada.””

The Square was buzzing with Canadian music, Canadian trivia, and Canadian comedy. Our beloved Mounties in their “red serge” made a special 150th Anniversary appearance, taking time to pose for pictures and greet guests.  A Canadian-inspired food truck festival featured fan favourites like Poutine (a must, of course!), Nanaimo bars, Indigenous-style bison burgers, and irresistible lobster rolls. A double-decker bus was decked out as the Molson Canadian bar. There were yard games, cool give-aways, and a dance-off that kept the whole family grinning. And we hosted a VIP tent that even Prime Minister Joe Clark saw fit to visit. This was our chance to show off the incredible richness of Canada on the global stage, and at the same time, making it the largest Canada Day celebration in the world, outside Canada.

As the Chair of the newly minted Celebrate Canada Worldwide I couldn’t be prouder to have been part of the team bringing this iconic event back to London, where it had enjoyed incredible success between 2005 and 2013 under the management of Rainmaker. The last iteration welcomed over 100,000 visitors for a day of festivities topped off with an evening concert headlined by The Tragically Hip, the Arkells, Jann Arden, and The Sheepdogs. The event received widespread media coverage from CBC and eTalk in both Canada and the US, expanding virtual participation to well over one million viewers.

““With big shoes to fill, and very little time, it was a heavy lift by all accounts, rebuilding the muscles and the relationships that had once made this event so successful. What I hadn’t fully appreciated was the enduring love that the city of London and the Canadian expat community had for the event.””

With big shoes to fill, and very little time, it was a heavy lift by all accounts, rebuilding the muscles and the relationships that had once made this event so successful.  What I hadn’t fully appreciated was the enduring love that the city of London and the Canadian expat community had for the event. Every partner, stakeholder, and sponsor had either experienced the festival first-hand or heard of its legacy. What wasn’t to remember? We had a street hockey tournament that even Wayne Gretzky still recalls fondly.  And who could forget Gord Downie belting out Tragically Hip anthems to close out the final show in 2013?

So, our small, dedicated team led by John Baldwin and Cassidy Langen, supported by a few board members and many devoted volunteers got to work in partnership with the Canadian High Commission. Fortunately, we secured the good will of some anchor private sector sponsors like Air Canada, Molson, McCain, Atkins, ClearSky Global and Sussman Corporate Security. We further built strategic alliances with the likes of the National Arts Center and the Terry Fox Foundation.

When it came to the music, we relied heavily on the kindness and generosity of the musicians themselves. Despite having little budget this year to pay the bands, over 300 applied for the privilege to get on that Canada Music Stage.  And with thanks to the National Arts Centre who sponsored our headliner, Neon Dreams, and Air Canada who gave us wings, we were able to attract eight incredible acts, representing Canada in all its diversity.  Next year we are hoping that our partnership with the National Arts Centre will lead to increased funding for our artists as well as an emerging artist’s stage that will bring international exposure to our ever-creative and over-achieving Canadian music scene.

““Five provinces, several corporates, and professional business service firms presented, networked, and connected with 100 UK and Canadian delegates to showcase themselves as ideal partners for expanding their reach and their business to Canada.””

One new addition this year was the “Doing Business in Canada” Conference that took place the day before the festival and was hosted at Canada House. It was a showcase on how UK businesses can establish themselves in Canada to enter the North American market. Five provinces, several corporates, and professional business service firms presented, networked, and connected with 100 UK and Canadian delegates to showcase themselves as ideal partners for expanding their reach and their business to Canada.

So, what’s next on our agenda? Well, now that we’ve ironed out the bugs, we are set to replicate Canada Day in London in 2024 on an even grander scale. More activations, more music, and more visitors. Our goal is to get back to 100,000 in time for 2025, the 100th Anniversary of Canada House on Trafalgar Square. But we are also going to start thinking of other markets. Cities in the US are a logical next step.  With large and engaged Canadian diaspora, and sophisticated trade and investment relationships, we think that with the right partners we can be equally successful.

Why are we so passionate about our mission to bring more Canada to the world stage?  You can call it pride of citizenship, but moreover, like almost all Canadian expats, diplomats or friends of Canada, we know how much our country offers to the world and we think that calls for a celebration. A celebration of cultural excellence, a celebration of innovation, a celebration of our economic prowess and our economic partners, and a celebration of our Canadian values.

In our hearts, we know that the world needs more Canada, still.

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About the Author:  Marcy Grossman is a former Canadian diplomat, most recently Canada’s Ambassador to the United Arab Emirates (UAE). Prior to her tenure in the UAE, she held four postings across the United States, including as Consul General in both Miami and Denver, Deputy Consul General in Los Angeles, and Senior Trade Commissioner in Dallas, where she advanced Canada's economic, political, academic, consular, immigration, and public safety interests.  Recently retired from public life, Marcy is the Chair of Celebrate Canada Worldwide, and holds a senior fellowship at the Atlantic Council, one the US’s leading geopolitical think-tanks where she works on issues that empower women as peace makers in the Middle East.  To reach Marcy, email: MarcyGrossman@Outlook.com

Celebrate Canada Worldwide is a Canadian not-for-profit dedicated to bringing more Canada to the world stage. The Board of Directors, chaired by former Ambassador of Canada, Marcy Grossman, includes, past Lieutenant Governor of Alberta, The Honorable Lois Mitchell; CEO of Rainmaker Global Market Access, Clark Grue; and former President of Saskatoon Regional Economic Development Authority, Alex Fallon. For more information about Canada Day in London, please reach out to info@canadaday.london

Marcy Grossman, Chair, Celebrate Canada Worldwide

Remaining Flexible in a Changing Economic Environment

Author: Glenn Yonemitsu, Managing Director, High-Impact Firms BDC Advisory Services, Business Development Bank of Canada

In Canada, the Bank of Canada recently raised its overnight rate in July by 0.25 basis points to 5.00%.  This leading rate is now close to the US’s Fed Funds rate which is at 5.25%.  Bank prime lending rates are now above 7.00%. 

Bank prime rates were as low as 2.45% in Canada and 3.40% in the US – a scant 16 months ago.  Low borrowing rates hide many problems.  It’s similar to a river with high water levels, which hides the many rocks and problems underneath the water.  As interest rates go up, it is like a lower water level, which then reveals rocks, or many issues where companies need to manage things better, like working capital, the cash gap, inventory, excess labour, and many other things.

While the good news is that inflation has been falling in both countries, which hopefully will limit further interest rate increases, I want to suggest some tried and true ways to remain flexible in a changing economic environment.

Persistent high interest rates will no doubt impact how managers manage.  Decisions surrounding expansion and growth, cap ex, and hiring will be muted.

But if you manage like there is a slowdown coming, expecting a downtick, then you often get what you wish for.  If you cut spending, and everyone does this, then why are we surprised when the economy slows.

The key is my mind is to remain flexible, so when others weaken, you can pounce and take advantage of the situation.

I’ve had a long history in turnaround management and insolvency. My suggestions come from watching how others have managed in downturns.  I’ve also had 20+ years working with high-growth companies and identifying the common things the winners or “market makers” do.  

First, allow me to share a few fundamental issues that shape my thinking…

Number one - Cash is king.  Whenever things turn, often it is those who have cash, who win when opportunity presents itself.  Don’t forget that it isn’t always about profitability, rather companies must ensure they can meet their obligations in a timely fashion…and that means you need cash.

The second thing is that I strongly believe that being proactive offers so many benefits over being reactive. More options and alternatives, more partners, and more opportunities are given to those who act proactively.  This is easier said than done, but if you take action now, you will be more flexible later.  Unfortunately, if you wait, the doors to many options get closed.

With these two fundamentals articulated…lets chat about 7 things you can do to remain flexible.

1. Remain flexible with commitments and obligations
By no means is this suggestion to cut cap ex and other growth plans.  

Rather this suggestion is to build in flexibility to your commitments.  If you are buying new machinery, why not ask for some flexibility in the payment terms?  Ask if you can have the option of a 3 month payment suspension clause, if required?  What is the worst the OEM can say?  No?  But, what is the best they can say?  Sure.  

Remember, OEMs want to keep selling.  If they have a tied financing arm, or a financing partner, that division’s objective is to help sell more equipment, even in a tough economic environment.  My guess is that if you are buying a Heidelberg printer, Heidelberg Financial Services is there to help make the sale possible, no matter the economic environment.  Same for Ford Credit Canada, General Motors Acceptance Corporation, John Deere Financial, Caterpillar Financial Services, and more.  If your OEM doesn’t have a related financing division, chances are they have a partner, like GE Capital, who might be involved.  All of these groups have the goal of getting a deal done…so I suggest it would be beneficial to ask for flexibility. 

2. Intimately understand your working capital levers
Going into a changing economic environment, you need to understand your working capital levers intimately.  You need to make decisions going forward that maximize “sources” of “cash” or working capital, and you have to minimize “uses” of cash. Remember that increasing Accounts Receivable is a “use” of cash and decreasing A/R is a “source”.  Similarily, increasing inventory is a “use” and decreasing is a “source”.   

Conversely, increasing Accounts Payable is a “source” of cash, but you have to use this carefully, as suppliers will be on edge regarding slow payments.  You can only stretch suppliers so far…and don’t forget they have powers or rights that can impair your ability to operate, if you don’t pay them in a timely fashion.  Instead, consider communicating with suppliers now and being up front about your payment terms.  Even if you ask for 45 or 60 days to pay, if you give them “payment certainty” (that is, you promise prompt payment by electronic transfer on the 60 day mark), they will appreciate that compared to not knowing when the amounts owing will be paid.

And, don’t forget about payroll, as every two weeks a lot of cash goes out the door. In this environment of a labour shortage, I’m not saying to lay off quickly.  Rather I suggest that you have two buckets and sort your employees into either “missionaries” and “mercenaries”.  Missionaries work for you because they love the culture, the mission and the work.  Mercenaries work because of the money and they would cross the street to work for your competitor for $10 more. If you need to save money by cutting labour, make your decisions based on keeping your missionaries.

3. Understand your seasonality and the working capital resources required as you “ramp up” 
Many companies are seasonal and as they grow leading up to their busy season, there are significant working capital needs.  Many companies get surprised by the demand on their working capital as they have to invest in payroll, supplies and other expenses, before the revenue and receivables come in.  Make sure you know the amount of working capital that you require.  Construction and agriculture businesses typical face this challenge.  Don’t be surprised.

4. Replenish your working capital 
Many companies, when they have to buy minor capital expenditures, like a fleet of trucks, because they have the cash in the bank, they don’t bother arranging financing.  It’s easier to just pay for it, rather than the paperwork associated with a loan. Consider buying 10 trucks at $75K each…for $750K in total.  As you move into an uncertain economy going forward, replenish your working capital by getting these trucks financed, with the payments spread over a number of years – the useful life of the asset. It will provide cash and replenish your working capital.

5. Arrange additional lines of credit, before you need it
You might not be using your operating line of credit right now. And you can’t imagine that you will need more credit...but, my suggestion is that you should go now to ask your bank for a temporary increase in your authorized operating line.  Why?  Because if you ask later, when the news media is carrying stories about the economic slowdown, you might have a more difficult time getting credit approval.  Managers in credit risk at banks all read the same news, so their perspective will change.  Ask now.

6. Review terms and conditions of your contracts – build in flexibility
Think about the terms and conditions in your contracts with your customers.  You set the terms.  So, if you goal is to be more flexible, why not consider changes in the terms?  If you are a manufacturer, and your normal requirement is a deposit upon signing of 25%, with a progress payment of 25% two months later, and the balance (50%) due upon delivery, why not change the percentages?  Maybe 33% on deposit, with a 33% progress payment and 34% on delivery might give you a few extra dollars that help your working capital.

And, regarding the payments to your suppliers, consider asking them for flexibility in your payments as we discussed earlier, in exchange for payment certainty.

7. Stay close with your banks
And, my final suggestion is not because I work for a bank.  It is a best practice that the best companies use.  Stay close to your bank. Share your positive news, as well as communicating your challenges.  You never know how they can help you.  And, when banks don’t hear from you, make no mistake…they aren’t thinking positive thoughts.  They deal with so many companies who get into trouble, that their minds are bit jaded. 
 
30 years ago, when I was in corporate banking, the President of one of my clients used this approach. When they won awards or signed a big contract, he informed his accountant, his lawyer, his banker, and advisors. He would invite all of us to their company events and celebrations.  He also let us know immediately when there were challenges. Because of this approach, we stepped in proactively when they ran into financial challenges due to an inattentive CFO.  We turned that company around, and in 18 months they returned to profitability.  We all helped and if the situation was left too much longer, maybe the turnaround wouldn’t have been as successful.

By the way, the President and I are now business partners. 

Remaining flexible in a changing economic environment
Why are we focused on helping companies prepare for the uncertainty of a changing economic environment?  

Because over the past 35 years, I’ve seen companies who were having great success, growing the business, gaining market share, beating their competition, get tackled because they took their eye off the ball on one of their fundamentals – working capital.  When interest rates go up as much as they have, many issues come to the forefront, and slower receipts, inflated inventories all hurt your cash on hand.  

If more companies act proactively so they can remain flexible…and take advantage of opportunities that comes when others weaken/fail, then more companies can be the acquirer or can be in a position to win market share, as opposed to their reactive, weaker competitors.

High-Growth Firm Advisory Services 

As Canada’s development bank, BDC is uniquely positioned to be a catalyst in helping high impact firms grow to the next level. This is why we have created a small, team of highly experienced individuals within BDC Advisory Services that is dedicated to increasing the competitiveness of high-impact firms (https://www.bdc.ca/en/consulting/growth-driver-program). 

As Canada’s bank for entrepreneurs, BDC is a partner of choice for all entrepreneurs looking to access the financing and advice they need to build their businesses and tackle the big challenges of our time.

Glenn Yonemitsu, Managing Director, High-Impact Firms BDC Advisory Services, Business Development Bank of Canada

Mid-Year Canadian Dollar Outlook - 2023

The loonie is lifting off.

Fiscal support, stabilising financial conditions, and a historic surge in immigration are helping the Canadian economy - and the loonie - defy bearish expectations. Continued labour market tightness, rebounding housing markets, and high levels of consumer consumption have combined to deliver remarkably-robust growth rates. Although the Bank of Canada's latest Business Outlook Survey showed excess demand and labour shortages coming down to pre-pandemic levels, its Consumer Expectations Survey revealed an improvement in household confidence, with many respondents expecting wages to rise, interest rates to fall, and home prices to climb over the coming year.

The central bank has responded to signs of excess demand-fuelled inflation with a second round of rate hikes, and investors are currently putting 45-percent odds on another move by the October meeting - with rate cuts seen coming later, and at a more measured cadence than in the United States. Interest rate differentials have narrowed sharply from their peaks, and - although its gains look less impressive in nominal terms - the loonie is outperforming many of its counterparts against the greenback.

Yield differentials might narrow – or even flip.

Many things could go right for the Canadian economy in the months ahead. Housing markets have the potential to go from strength to strength as immigration flows lift demand and elevated financing rates limit the supply response from builders and existing homeowners. High and stable equity market valuations may support household wealth effects. Aggregate nominal household incomes might keep rising as persistent labour market imbalances put upward pressure on wages. And exports could hold up, particularly if the US consumption engine keeps running and a comprehensive stimulus effort from Chinese policymakers supports global commodity demand.

 The Bank of Canada - which already sounds more confident than many of its global counterparts - could cut rates more gradually than the Federal Reserve in 2024, contributing to a narrowing in relative rate differentials and providing additional support to the currency.

 But household consumption looks fragile.

Canada’s incredibly-indebted private non-financial sector remains its biggest point of vulnerability. With long-term rates ratcheting higher and the burden on mortgage holders continuing to increase, debt service ratios are set to climb well above records set just before the pandemic. We think this will reduce consumer spending power and business investment at a time when real income growth is fading and lending conditions are tightening. A recent recovery in real estate values is likely to pull new listings into the market, just as rising carrying costs cool demand. This should limit further price appreciation and reduce the likelihood of a “melt-up” in housing activity that leads to overheating in the wider economy. 

More broadly, lending conditions are tightening, job openings have fallen sharply from last year’s peak, and wage growth is slowing. We think a downturn is overwhelmingly likely to begin within the next 12 months, with consumer spending vulnerable to a significant downward adjustment as the elements of a balance sheet recession come into play. If so, the Bank of Canada could pivot more profoundly than markets currently anticipate, meaning that recent moves in yields and the Canadian dollar could unwind rather sharply.

And the loonie might follow a multi-phased trajectory.

Taken in sum, a prolonged period of calm could see the Canadian dollar rally in the short term, outperforming regions that are facing more obvious structural challenges - like the United Kingdom, the euro area, Japan, and China - in capitalizing on dollar weakness. But growth risks, comparatively low yields, and volatility sensitivities - particularly relative to US equity markets - should represent serious headwinds for the exchange rate beyond the early autumn. 

For more information on Corpay global payment solutions, please visit https://www.corpay.com/cross-border/global-payments.

Karl Schamotta, Chief Market Strategist, Corpay

MAPLE Interviews David Cohen - U.S. Ambassador to Canada on the Occasion of Our 8th Anniversary

Ambassador Cohen - thank you very much for taking the time to share a window on your work as well as some perspectives on the economic ties between Canada and the United States with our readers who live and work in over 25 markets and in over 25 sectors across our countries.  
 
For some context, how would you describe the role of the U.S. Embassy in Canada and what are the primary areas of focus of your team?
 
The work we do at the U.S. Embassy in Ottawa – and across our seven consulates throughout Canada – is guided by the Roadmap for a Renewed U.S.-Canada Partnership, which was released by President Biden and Prime Minister Trudeau following their virtual visit in February 2021.  We’re fortunate to have a document where our leaders have laid out a shared vision for how we will revitalize and expand the historic alliance between the United States and Canada.  It’s the kind of shared, ambitious, and strategic vision that could only be put in place by the closest of friends and allies.  
 
The Roadmap is comprehensive – but also with very practical implications.  It’s not just about prosperity, or security, or shared values.  It’s about all these things and more.  The Roadmap is organized around six pillars:  combatting COVID-19; building back better from the pandemic – very importantly, in an equitable fashion; accelerating our climate ambitions; advancing diversity and inclusion; bolstering security and defense; and building global alliances. 
 
With respect to the economic relationship between the United States and Canada, where are you devoting most of your attention this year?
 
As President Biden’s personal representative in Canada, my priority is maintaining and advancing the U.S.-Canada relationship.  That includes restoring trust and re-instilling confidence between partners.  Everywhere I go, I want to make sure Canadians know that the United States is back and that we want to strengthen our partnership with Canada.  
 
With respect to the economic relationship, building back better is a key pillar in the Roadmap for a Renewed U.S.-Canada Partnership and a particular focus of mine.  Building back better is about working to ensure a sustainable and inclusive economic recovery – as President Biden frequently says, building from the bottom up and middle out.  It’s about economic growth that strengthens the middle class, creates more opportunities for hard working people, and ensures people have good jobs and careers on both sides of our shared border.  
 
Building back better also involves working together to create a more just and equitable society.  Small- and medium-sized enterprises were hardest hit by the pandemic – and SMEs owned by women, people of color, Indigenous peoples, and other underrepresented groups were hit hardest of all.  We can’t really build back from the pandemic unless we make sure everyone has a chance.
 
In terms of particular sectors, we have been paying a lot of attention to the energy transition.  We have focused on critical minerals development, on alternative clean energy sources such as electrical vehicle manufacturing and the entire supply chain that supports that development and nuclear, and on clean tech research and development such as carbon capture and lithium recycling.  We also have had a significant focus on defense procurement. 
 
As you consider our bilateral economic ties, which sectors stand out for you as some of the greatest opportunities for collaboration and partnership between our countries in the coming years?
 
In their closing Joint Statement following the President’s visit to Ottawa in March 2023, President Biden and Prime Minister Trudeau outlined key priorities and pledged to work together to catalyze clean energy, create good jobs, and strengthen resilience of critical mineral and semiconductor supply chains. 
 
Under the Biden-Harris Administration, the United States has set ambitious targets to cut U.S. emissions by 50 to 52 percent below 2005 levels by 2030; to reach 100 percent carbon pollution-free electricity by 2035; and to achieve a net-zero emissions economy by 2050. Canada has also committed to net-zero by 2050 with a 40 to 45 percent emissions reduction by 2030 and a pollution-free grid by 2035.  To achieve these urgent emission reduction goals, however, we need to accelerate our transition to clean energy – and to do that, we need critical minerals.  It’s as simple as that.  
 
The International Energy Agency has predicted that demand for most minerals essential to the clean energy transition will increase four to six times over the next decade and a half.   For some minerals, the increase will be exponential.  By 2040, graphite demand, for example, will increase by 25 times, and lithium by 42 times.
 
The Inflation Reduction Act, or the IRA, the Bipartisan Infrastructure Act, the CHIPS and Science Act, modifications to the Defense Procurement Act, and other U.S. programs help address the objectives our leaders outlined, build integrated supply chains, and make North America more competitive.
  
This collection of programs presents incredible opportunities for the United States, and for Canada and Mexico, to open new avenues for trade and manufacturing in clean energy, and to strengthen regional supply chains, which are the lifeblood of our economies.  We are furthering North American prosperity, North American competitiveness, development of North American businesses, and creating an allyship for taking on climate change. 
 
How important is our trading relationship and our overall economic ties in the broader context of the challenges that Canada and the United States face together globally?
 
The trade relationship between the United States and Canada is the envy of the world.  Each day, USD 2.5 billion in trade – that’s CAD 3.25 billion – crosses between the United States and Canada, generating millions of jobs on both sides of the border.  Trade between Canada and the United States grew 19 percent year-over-year in 2022.   Almost all of that is free trade, not subject to any restrictions. 
 
In the broader context of the global challenges that we are taking on together, creating a secure and sustainable economy in the face of the economic and geopolitical realities of today is of the upmost importance to the United States and to Canada.
 
U.S. National Security Advisor Jake Sullivan said in a speech on economic policy in April that while “we will unapologetically pursue our industrial strategy at home, we are also unambiguously committed to not leaving our friends behind.  We want them to join us.  In fact, we need them to join us.”  
 
President Biden said it himself while in Ottawa.  In his address to Parliament, the President spoke about what the future holds for our partnership.  He said, “It’s a future built on shared prosperity, where Canada and the United States continue to anchor the most competitive, prosperous, and resilient economic region in the world.”
 
Is there a role for non-governmental organizations on both sides of the border, particularly at a sub-national level, to encourage more bilateral trade, investment, and innovation collaborations between our nations?
 
Absolutely.  Part of the true strength of the U.S.-Canada relationship is our people-to-people connections, and non-governmental organizations are a key piece of that.  NGOs are moving our societies forward on green business practices, transitioning to the next phase in North American energy independence, and are essential to the innovation and new ideas that have made us such a competitive, prosperous, and resilient economic powerhouse.
 
One of the ways in which NGOs can play an important role is by bringing people together to share ideas and best practices, and to consider solutions to challenges that we face on both sides of the border.   
 
Groups like the MAPLE Business Council are a great example of organizations that are bringing people together across sectors and across our shared border to strengthen the economic relationship between the United States and Canada.  
 
MAPLE Business Council has had the privilege of working with the U.S. Commercial Service in Canada together with the U.S. Consulate General offices in Toronto, Calgary, and Vancouver to co-host SelectUSA events in Vancouver preceding the SelectUSA conference for several years. How can Canadian companies best engage with the SelectUSA program and what can they expect from participating?
 
The U.S.-Canada bilateral investment relationship totals nearly USD 1 trillion.  The United States is Canada’s leading investor, and Canada is the third largest investor in the United States.  
 
SelectUSA is the U.S. federal-level program dedicated to facilitating and promoting high impact business investment into the United States.  It helps Canadian companies gather market information, navigate the regulatory framework, get acquainted with U.S. economic development organizations and the assistance they provide, and get answers to questions about visas and immigration.  We offer support throughout the investment process – from exploration to execution.  We are here to see you successfully expand your business to the United States.   
 
One of the ways that you can engage our SelectUSA team is through our global event.  Held annually in May, the SelectUSA Summit is a massive multi-day event that pulls together senior federal officials and state organizations to inform your decisions.  It is an event with days of panels to explain best practices for investing in the United States.  I have led the Canadian delegation for the last two years and they have been fantastic events. We also have the Canada SelectUSA Conference coming up in Montreal December 12 and we’d be happy to talk with interested Canadian companies about their attendance and participation.  Separate from Summit events and conferences, our team at the U.S. Embassy Ottawa, and at our Consulates in Toronto, Montreal, and Calgary stand ready to support U.S. and Canadian businesses with their investment goals in the United States! To contact our team, visit our website at www.trade.gov/canadaselectusa.
 
What has surprised you the most about Canada since you have become the U.S. Ambassador to Canada?
 
Something that strikes me every time I travel is how unique each city and province across Canada truly is.  I always say that I wasn’t nominated as U.S. Ambassador to Ottawa.  I am the U.S. Ambassador to Canada.  It is important for me to travel and hear from people across the whole country – and I spend a significant amount of time doing just that.  My travels have given me a much better understanding of Canadians and what matters to them, as well as a clear sense of just how deeply connected our two countries are.  
 
One of the key themes that has repeatedly come up on my travels is the loss of trust between Canada and the United States over the past five years.  I am asked by Canadians all the time what has happened to the relationship between the United States and Canada.  To be sure, following President Biden’s election, and especially following his visit to Canada, this trust is coming back.  And it is something that I try to emphasize all the time – the United States simply has no better friend, ally, or partner than Canada.  We are back on the world stage – and we will always have each other’s backs.  
 
What should more American business leaders know about Canada and the relationship that our countries share together? And conversely, what should Canadian executives know more about the U.S.?
 
Canada is the number one export market for 30 U.S. states, and our markets share many similarities: a common business language, similar business practices, strong legal frameworks, and similar cultures.  There are so many similarities between doing business in Canada and the United States, but business leaders on both sides of the border should recognize that each country is unique and that you need to be aware of cultural sensitivities and rules and regulations that may differ in the country you intend to do business.
 
The recent visit to Canada by POTUS and FLOTUS really seemed to underscore the depth of affection and partnership our countries share with one another.  Was there a moment that stood out for you during their visit that underscores the closeness of our nations?  
 
For me, the biggest success of President Biden and Dr. Biden’s visit to Ottawa was the message that the President was able to deliver to Canadians in-person – and that message was that the relationship between Canada and the United States is long-standing, it’s durable, and it’s going to continue to grow.  
 
As President Biden said in his address to Parliament, Canada and the United States have each other’s backs.  On multiple occasions during his visit, President Biden highlighted that, as the closest of friends and allies, the United States and Canada are committed to making life better for people in both our countries, and building a more free, equitable, secure, and prosperous world.  That’s a pretty good credo for any two countries in the world to subscribe to.  I know our team here on the ground felt energized after the President’s visit, and I think Canadians felt energized, too.  There’s nothing like having someone who is as authentic and genuine a communicator as Joe Biden speaking those words here in Canada.  
 
What are some of the opportunities and challenges for our nations in promoting more diversity, equity, and inclusion in cross-border trade and investment?
 
Let me start with the opportunities.  Diversity, equity, and inclusion is not just good for our societies.  Inclusive business IS good business.  We have incredible, diverse talent on both sides of our shared border that offer a tremendous, untapped resource to grow our North American prosperity.  Small and medium-sized enterprises are the backbones of the U.S. and Canadian economies, accounting for 99.8 percent of all Canadian businesses as of December 2020.  And 9.3 percent of those businesses are owned by visible minorities.
 
I’ve had conversations across this country with diverse executives, entrepreneurs, business leaders, and small business owners, and I’ve repeatedly heard people describe systemic barriers to accessing capital.  This presents an opportunity for us to develop solutions to ensure women, people of color, Indigenous peoples, and other underrepresented groups can be a part of the immense economic partnership between our two countries and allows us to continue to promote diverse and inclusive economic growth and inclusion in cross-border trade and investment.
 
We can do this by encouraging financial institutions to meet the credit needs of communities in which they do business and by being strategic in how we use environment, social, and governance (ESG) standards—especially in the world of venture capital—to unlock the business potential of underrepresented entrepreneurs and leaders.  

Do you have a closing thought or message you would like to share with our readers about our Canada-U.S. relations? 
 
I can think of no better way to leave you than with President Biden’s message to the Canadian Parliament.  “The United States chooses to link our future with Canada because we know that we’ll find no better partner...  no more reliable ally, no more steady friend.”  
 
Thank you very much Ambassador Cohen for sharing your insights with us. 

Expanding Your Canadian Business to the U.S. : Cross-Border Tax

Author:  Namir Hallak, CPA, CA, CPA (Kansas), CGMA, Tax Partner, Andersen, Vancouver, BC

Expanding your Canadian business to the United States unveils an exciting growth opportunity that requires a well-planned roadmap. This article aims to identify key tax factors that owner-managers often consider when navigating cross-border business opportunities.   Unfortunately, some business owners leave tax issues to the end not recognizing they are foundational to your business and in some cases are difficult to resolve later.  In addition, unlike Canada’s relatively uniform federal and provincial taxes, the U.S. has over 13,000 taxing jurisdictions between federal, state, county and other political subdivisions for income, sales and other taxes.  Even in an electronic world, U.S. tax law at all these levels may amount to a paper blizzard. This article will focus on the U.S. federal tax consequences. 

Expansion Structure
You may initially decide against setting up a U.S. subsidiary and unintentionally create a U.S. 'branch' with unanticipated tax consequences. If your company's U.S. activities exceed the protections provided by the Canada-U.S. tax treaty, it will be subject to U.S. federal income tax. You need to decide whether or when to continue operating in the U.S. through your Canadian entity ('branch') or establish a separate legal entity.  Generally, branches are not desirable.

You are also faced with the task of evaluating numerous non-tax considerations. These include determining whether you will have unlimited liability from your U.S. branch.  Establishing a subsidiary could be used to restrict its liability solely to investments in it. Additionally, you need to evaluate whether your U.S. business requires separate management, decision-making, brand identity,  financial reporting, etc.

Canadian corporations operating in the U.S. may  risk your Small Business Corporation status in Canada, particularly as your business’ value expands. You need to protect your Small Business Corporation status by carefully adhering to eligibility criteria. This includes ensuring Canadian control of your company and primarily utilizing its assets for active business operations in Canada, or investing in shares or debt of other qualifying corporations.

Failing to meet these requirements could result in the loss of your SBC status, leading to the forfeiture of important tax benefits including: 

• lower Canadian corporate tax rates, 

• lifetime capital gains exemption, and 

• access to certain Canadian tax incentives.

The more successful your U.S. business activities are, the more at risk your Canadian Small Business Corporation status may be.  Solutions may include establishing a distinctive ownership structure for the U.S. business.

There are Canadian and U.S. tax advantages to U.S. subsidiaries that are owned by Canadian corporations, particularly when U.S. earnings are repatriated to Canada.

Whether or not you form  a U.S. subsidiary, doing business in the U.S.  introduces additional tax variables.  Those include:

• Transfer pricing on goods and services

• Financing the U.S. business

• Employees working in the U.S.

• Repatriation of U.S. earnings

For example, “Transfer pricing” determines the fair market prices of goods, services, and intellectual property exchanged between related parties. A well-designed transfer pricing practice should allocate profits and costs between your U.S. and Canadian business activities in a manner that achieves the most attractive tax result and is defensible under examination. 

Funding the U.S. Business
When establishing a U.S. subsidiary, you will  need a strategy to finance its formation, development and growth. The choice between debt and/or equity financing must be evaluated against the relevant tax considerations on both Canada and the U.S. 

Debt financing for the U.S. entity offers advantages, including tax-free principal repayment, deductions from U.S. taxable income through actual (not accrued) interest payments, and exemptions from any U.S. federal withholding tax on interest income. The U.S. subsidiary may be subject to limitations on deducting interest expense, especially if the related companies exceeds $27 million USD in adjusted gross receipts in the previous three years.  Canadian entities financing a U.S. subsidiary should also consider whether a Canadian interest income amount will be imputed, depending on the nature of the U.S. business.

Equity financing does not provide deductions for payment of  dividend from the U.S. earnings.   They are subject to U.S. federal withholding tax.  Unless the U.S. subsidiary’s asset value is more than 50% from U.S. real property,  if the Canadian company sells its shares in the U.S. subsidiary, any capital gain realized would only be subject to Canadian tax.

Canadian businesses should mitigate the risk of scrutiny by the U.S.’ Internal Revenue Service from loans to the U.S. subsidiary, which could result in recharacterization from debt to equity. The IRS examines various market factors to determine the existence of a bona fide loan. If the debt instrument is converted to equity by the IRS, an undesirable cross-border mismatch occurs, with the U.S. denying interest deductions while Canada continues to recognize interest income. Additionally, unexpected U.S. federal withholding taxes may apply to repayments of the debt being treated as distributions of earnings by the IRS.

Canadian Employees Working in the U.S.
Another stop on the road to expanding your business in the U.S., are your Canadian employees’ presence in the U.S. through business travel or extended relocations.
 
Before sending your Canadian employees across the border, it is important to establish the immigration and tax implications to them and your business.  U.S. immigration status can often be achieved at the border, but in other cases may require advance application and advice from U.S. immigration counsel.  Employees who cross the border without appropriate status or seek to deceive U.S. border officials may be barred entry to the U.S.  

Tax implications of Canadian employees working in the U.S. may affect both the employee and employer.  Employees who provide employment services in the U.S. may be taxable in the U.S. and their presence there may subject their Canadian employer to U.S. tax too.  Generally, the Canada-U.S. tax treaty helps limit the application of U.S. tax on Canadians working in the U.S., but it does not protect all situations including where an individual is present in the U.S. for more than 183 days in any 12 month period or where the individual is indirectly paid by a U.S. taxpayer.  

From a corporate perspective, the employee’s U.S. activities will likely obligate the filing a U.S. federal tax return which may only be to disclose that there is a U.S. business activity.  The penalty for failure to disclose is $10,000 USD.  If the activity is taxable in the U.S. there could be substantial additional penalties of $25,000 USD for failure to disclose transactions with non-U.S. related parties.

If your Canadian business relocates Canadian employees to the U.S. on a full-time basis, it should develop a secondment agreement. This agreement should clearly define  the employees' activities, payroll and if there is a U.S. subsidiary or other entity, its obligations for withholding, etc. It is important to continuously track your employees’ tax residency.  Before employees are relocated they should be advised on the tax implications to them including Canada’s “departure tax”, their ability to stay on the much less expensive Canada Pension Plan (U.S. payroll taxes are very high to both the employee and employer), etc. 

Transferring U.S. Earnings to Canada
There are various methods available for Canadian entities to transfer earnings from their U.S. subsidiaries back to Canada. The U.S. subsidiary can distribute dividends to its Canadian corporate parent with a 5% U.S. federal withholding tax. That rate jumps to 15% for other Canadian recipients or 30% for non-qualifying recipient. Where the earnings come from an active business in the U.S., the distributed earnings will not be subject to Canadian corporate income tax and distributions to individual shareholders will be eligible dividends and include a dividend tax credit.  

Royalty payments from the U.S. subsidiary to the Canadian entity, for the use of property owned by the Canadian entity, are subject to a reduced U.S. withholding rate of either 10% or 0%, depending on its character. Also, the Canadian entity can assess a management fee to the U.S. entity for services performed exclusively in Canada, which is exempt from U.S. federal withholding taxes.

These mechanisms allow Canadian entities to transfer earnings from their U.S. subsidiaries while minimizing U.S. withholding taxes, leveraging the provisions outlined in the Canada-U.S. tax treaty and optimizing financial objectives.

Evaluate, Plan and Optimize
If you've already made the decision to expand your Canadian business to the U.S., it's important to remember the significance of evaluating, planning, and optimizing your cross-border tax approach. 

Evaluate the right  structure, funding options and potential risks. 

Strategize your employee deployment, financing and transfer pricing strategy. 

Seek guidance from cross-border tax experts who possess expertise in both U.S. and Canadian tax laws, to take advantage of tax opportunities and avoid tax traps. This comprehensive approach ensures tax efficiency, strategic foresight, and sets the stage for the growth and success of your cross-border business expansion.

For more information, please visit the Andersen LLP website at https://ca.andersen.com/.