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U.S.-Canada Cross-Border Business
From Marketwise
By Betsy Cummings
February 2009

Every time his goods cross the U.S./Mexican border, it’s a problem, says Jerry Mulligan, vice president of sales for Chamberlain Marketing Group (asi/160501). “We almost refuse to ship to Mexico,” Mulligan says, “because 90% of the time anything that goes into Mexico will not be cleared or not received.”
That’s the polite way of saying that most of his products get “pilfered,” he says. Send a shipment of “50 Cutter & Buck shirts, and 20 or 30 may get to your event,” Mulligan says. For that reason, Mulligan, like many others in the industry, are more keen to do business to the north, focusing on opportunities in Canada instead.

But shipping items across the US/Canadian border can pose problems as well, unless you’re adequately prepared. Finding a good broker is key. How? Distributors might start with the Canadian Society of Customs Brokers which lists brokers in cities throughout Canada. But it’s not enough to phone one up and put them on the job. Ask shipping-related questions: Is there a guarantee on your service? What are your fee structures? What technology do you use? Do you work with tradeshows? Any reliable broker will be forthcoming and have answers to these and other questions, says Shelley Gares, vice president of customs/brokerage for UPS Canada. Follow questions by asking for references, Gares adds.

Too many American companies assume that NAFTA means they can ship virtually free into Canada. Not so, Gares says. “NAFTA eliminates duties if goods qualify, and that’s the key word,” she says. Goods that qualify must be made in the US – not purchased in China and decorated in the States. And even no duty charge does not eliminate taxes, she adds, which are always applicable, and not a part of NAFTA.

That said, there are other ways to cut costs going to and from Canada and the U.S. Firms shipping over the border often get tripped up in “line fees,” charges applied to customs entry forms. In Canada, for example, “right now the first five lines of the customs entry can fit on one form,” Gares says. Shipment listings exceeding five lines will be charged for each additional line.

The actual types of items that a distributor ships is also an important factor to consider. Ship 20 different books, and they can all be coded on one line, because they’re a single item category. Ship multiple clothing items – a jacket,T-shirt and baseball cap – and each needs a separate line, Gares says. They may all be apparel, but they don’t qualify as the same line item.

For that matter, Gares adds, boxes vaguely labeled (“tools” instead of “20-foot tape measures,” for example) are likely to be opened and held up along the way. And pasting a label over a box seam, she says, is always dangerous, since boxes are frequently opened and inspected. Inspectors cut through the label and then the box’s shipping address is ruined.

Finally, Gares says that right now all boxes shipped from one country to another are scrutinized by customs agents in both the U.S. and Canada. If you get flagged for breaking the rules once, then your company could be on the radar for inspectors for years to come. To avoid those troubles, distributors doing cross-border shipping should make sure they follow all shipping rules precisely. Render samples useless, for example, by sewing grommets into shirts, to avoid taxation as they cross the border.

And don’t, under any circumstances, Gares says, underestimate the value of shipments. “It’s considered an attempt to evade and an act of smuggling,” Gares says. “Customs can seize the goods, they can fine you, and they will certainly build a file and watch all of your future importations, even if they believed it was an honest mistake.” – BC

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