E-commerce has opened up markets shippers never before dreamed of reaching. Suddenly, decent-sized groups of customers for previously obscure products are possible because anyone with a search engine anywhere in the world can find products they didn't even know about before. Add to that the fact that most merchandise these days is manufactured in one (or two, or three) countries and then sold in another, and you’ve got that truly international demand chain everyone keeps talking about.
U.S. businesses have tremendous opportunities to expand their markets by pursuing export opportunities. And yet, less than one percent of all U.S. businesses export, and of those that do, many fail to anticipate the complexity of the Customs review and compliance process.
Often, to consumers, cross-border commerce looks effortless. An Amazon order for books or vintage flatware or even electronics can be fulfilled from half-way across the world and we barely notice. It’s understandable that companies that never before considered exporting across national boundaries are tempted to make the jump — especially to an English-speaking country. Canada, right next door, seems especially attractive.
But what many U.S. companies have found to their cost is that exporting to Canada is certainly far from simple, and is often fraught with barriers, baffles and delays.
While bits and bytes may pass (relatively) freely across the borders of nation states, physical cargo does not. Canada, like every other country, has a well-established Customs administration, and it is not known for being lax. Far from it, in fact.
Even when product gets through, failure to anticipate the complexities of exporting means U.S. companies experience delays and missed opportunities for reduced costs and efficiency.
Zappos.com, the forward-looking online shoe retailer, learned this the hard way. After struggling to deliver its legendary service and free returns to the Canadian market for nearly four years, the company pulled out, in April 2011.
A notice from Zappos explained: “Product selection on canada.zappos.com is limited due to distribution agreements with the brands we sell in the United States. In addition, we have struggled with general uncertainty and unpredictability of delivering orders to our Canadian customers given customs and other logistics constraints.”
Typically, the main culprit is incorrect Customs classification of goods. One of our customers had tremendous success selling in the Canadian market, but hit a problem when some product was returned. Suddenly, they had 75 skids of material refused at the border on their way back into the U.S., because the product was classified wrongly. Although the goods were ostensibly cosmetics, they contained ingredients of interest to the U.S. Food and Drug Administration, and were rejected. The cargo had left the U.S. just fine, but now it couldn’t get back and was stranded! Luckily, as logistics provider, we were able to help them. But, in many of these cases, product can spoil while it’s in administrative limbo. So it’s not just about delays or fines or added logistics expense; you can end up losing your cargo, especially if it has a short shelf life.
Another common mistake is failing to take the time to figure out where is the best location from which to serve a new market. For example, if you’re opening for business in the Netherlands, it makes sense to have a fulfilment location in the Netherlands, because it’s a small, densely populated country. But Canada is big. Really big. Many companies start with a fulfillment facility in Toronto, which is a good start for doing business in the Southeast. But, for many other locations in Canada, you might be better off fulfilling orders from Illinois or the U.S. West Coast.
One rule of thumb there is, if you have high-value product, it makes more sense to fulfill from the U.S., because the cost of transportation is a lower proportion of the overall value.
The good news is that things are changing to make exporting to Canada easier. One of the biggest improvements will be introduction of the Single Window Initiative, which will be fully operational by the end of 2016. Under that Initiative, shippers will be able to submit information and documentation once, and have that info shared with all relevant agencies, eliminating current requirements for U.S. businesses to submit identical information multiple times. Many U.S. federal and state government bodies offer assistance with market research, customer identification and loan procurement.
However, the fact remains that any business planning to export should thoroughly do its homework, and have an understanding of the export process.
Usually, a logistics partner with experience in the country of destination can help. But a business should also ask lots of questions when enlisting a logistics provider, to make certain that any claims of “Customs expertise” can be backed up with legitimate experience.
A good logistics partner will ensure that:
• Every shipment is carefully assigned a proper tariff classification code.
• Duty drawback claims are submitted for every eligible shipment.
• Shipments are consolidated for faster clearance.
• Careful attention is paid to ensuring the carrier is aware of changes to procedures and new requirements.
Personal attention is a great boon. A good partner will know when it’s worth customizing a transit plan to avoid airports with a notoriously busy or inefficient customs process, so that a shipment is not delayed.
There’s no need to put off the benefits of exploring new, foreign markets. Exporting can be a highly profitable source of growth for U.S. businesses. But any business planning to explore this option must enter into an export relationship with its eyes wide open, and do the necessary research to gain at least a cursory understanding of the customs process.
While many businesses choose to enlist an experienced logistics provider or customs broker to manage the customs process, a business should know how the process works, and be aware that there are opportunities to facilitate the process, and even to manage costs.
Source: Purolator International
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