i.e.NOW

Between 2004-2008, Canadian exports to the U.S., excluding oil products¹, decreased 11.9%.² Some will be tempted to explain these figures by pointing out the economic downturn. But by taking a look at the 2005-2007 statistics, we also notice that exports fell 5.9%. In other words, even though the crisis undoubtedly exerted a negative pressure on the demand for our exports from down south, other causes are at play.

A recent survey conducted by the Institut de la statistique du Québec provides part of the explanation. Québec exporters have been asked to identify the main barriers to their export potential. Here is what they answered:

While on one side there is not much companies can do to lower the value of the loonie, on the flip side, tighter logistics and border management will bring about direct economies to most companies. In fact, supply chain management costs are 11 percent higher in Canada than in the U.S. And things are not getting any better. Estimates put the new transaction costs of doing business across the border at 2-3 percent of total trade, or $15-20 billion annually.³ In some industries, that may represent the difference between profits and losses. While our international competitiveness is at stake, the key question that needs to be addressed is "What can Canadian exporters do in order to cope with the rising costs?"

Strategically, three kinds of actions are in the scope of entrepreneurs: 1) reducing actual costs, 2) prevent future fees and fines, and 3) adapt to new technologies.

Nowadays, many Canadian exports contain a broad array of foreign components (think of electronics). Every imported good to Canada is being taxed 5 percent GST. If the aforesaid import is being re-exported abroad, it is eligible to a drawback claim to Canada Customs and Revenue Agency. In short, you will be reimbursed the GST, and even any customs duties or countervailing duties you paid on that re-exported component. That's easy money; in fact, that's your money.

It may be a fair investment to have a dedicated in-house resource that follows compliance to trade agreements such as NAFTA (if export volume is sufficient). These trade rules do not only impact shipping and exports as most understand, they have repercussions on the whole supply chain. In order to meet the North American content rule, a company needs to analyse every link of its logistics chain starting from sourcing, to production, sales and then exports. After reviewing these processes, maybe Asian sourcing will no longer appear as a great deal, when considering zeroed customs fees that will apply upon sourcing in a NAFTA country. If hiring a NAFTA specialist is beyond your budget, software solutions that automate certificate of origin creation and simplify compliance with rules of origin can save you a lot of Full Time Equivalents (FTE).

Companies with export values exceeding 2 – 3 million dollars per year could see advantages upon negotiating their own cargo insurance policy, instead of relying on their freight forwarder’s insurance service. This could mean thousands of dollars in savings, just a few phone calls away. Another best practice in today's highly volatile transportation market is constant cost validation. Make sure you rely on more than one carrier and ask for quotations every few months. You might be surprised by the gaps you will see between the different quotations you get.

Because of a 31 percent drop in imports of goods at the U.S. border between Q3 08 and Q3 09⁴, U.S. Customs and Border Protection's (CBP) current user fees are down 10 percent. That amounts to 950 positions that have to be reduced, according to Thomas Winkowski, CBP's Assistant Commissioner.⁵ In short, CBP is looking for money.

Fee adjustments, for instance the APHIS fee rise of October 1st 2009, are one of the measures taken by CBP. Another is stricter implementation of current actual rules and issuing fines to wrongdoers. Tariffs, Bill of materials, NAFTA Bill of Origin – every form you submit to the border authorities has to be perfectly compliant. Now is a perfect time for every company to invest in a full review of what it declares to customs.

Also, make sure to adapt to new tracing prerequisites. For instance, as of 2009, your wood exports will not go through the border if they do not travel with a "Lacey Act" declaration. This form indicates the latin name of the tree species that your furniture is made from, and the specific geographic location of the forest that it has been cut from. Hence, another good practice is to ask all of your suppliers to provide you with written information on what they sell to you.

Over the past decade, CBP's practices evolved a great deal in terms of technology. It has done so to such an extent that it is now mandatory for all carriers and brokers to transmit electronic-only data to CBP. This portal is referred to as Automated Commercial Environment (ACE) in the community. Unfortunately, all exporters did not adapt to the paperless era, as some still fax their shipment information to their brokers and freight forwarders.

Nowadays, many brokers offer a free computer-to-computer portal to exchange business documents with their customers. The broker is still the one sending your information to CBP, but instead of retyping all of your entries, they will only audit them. That means your broker will be billing reduced fees to your company.

Recent advances in Radio Frequency Identification Devices (RFID) render the price of this technology accessible to most small businesses. In logistics, RFID is referred to as the use of a tag incorporated into a product for the purpose of identification and tracking using radio technology. It is used in enterprise supply chain management to improve the efficiency of inventory tracking and management. RFID reduces losses due to theft as well as misplacement. It is also useful in locating particular products in a container, or tells the exact final destination of a pallet in a less than truck load shipment (LTL). Their use has greatly reduced costs such as replacement costs and capital costs, increased customer satisfaction, and helped in ensuring the assets are in the correct place at the right time

With rising energy and transportation costs, a better coordination of transportation lanes can green your supply chain while making it more efficient. If you own a truck fleet, a fleet management on-line solution can decrease the average of empty travel you do, and therefore, your costs. There are websites that link demand for transportation and supply of capacity. Often, businesses located in the same industrial park source and sell to the same industrial park abroad (think of aeronautical cluster in Québec or automobile industry in southern Ontario for instance). Hence they would save money in sharing their transport capacity and demand.

If your organization has not seriously reviewed its logistics and border conformity functions over the past decade, it is likely that meaningful improvements can be made. If you undertake this process, make sure to contact your department of economics and export trade; they have a bounty of advice and probably even support for you.

This article was written by Chantal Castonguay, North American Director with the office of international economic affairs to Quebec’s Ministère du développement économique, de l'innovation et de l'exportation (Ministry of economic development, innovation and exports).

¹ Oil products refer to all Canadian exports of HS Chapter 27.

²Industry Canada, (2009) Trade Data Online, Trade by Products (HS Codes), http://www.ic.gc.ca page consulted November 12 2009,

³ Carleton University: Canada-US Project (January 19 2009), " From Correct to Inspired: A Blueprint for Canada-US Engagement", http://www.ctpl.ca/conferences/Canada-US-Project-2008.htm page consulted November 20th 2009.

⁴ US Census Bureau (November 13 2009), page consulted November 28th 2009, http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf Q1-Q3 2008 goods imports : 1,647,857 M $, while Q1-Q3 2009 goods imports: 1,131,350M $.

⁵ Thomas S. Winkowski (September 21 2009) “U.S. Canada Border Issues and Priorities” CAN/AM Border Trade Alliance Conference, Washington D.C.