Safer passage

When Creaform inc. started exporting in 2005, selling to the U.S. was a natural fit. The Lévis, Que.-based manufacturer found an eager market for its 3D scanners stateside, and you couldn’t beat the firm’s proximity to the U.S. But when it came time to ship the first scanner, Creaform realized how much of a barrier the border can be. Along with scads of security and customs forms, it had to get approval from two U.S. federal agencies because the scanners contain lasers and transmit radio frequencies.

This was all new to Creaform, and its trial-and-error approach to border compliance didn’t always work. “At the start, I thought, ‘I’ll put a stamp on it, and I’ll be done,’” says Marco St-Pierre, the company’s vice-president of innovation and technologies. “But when you’re crossing borders, it’s not that easy.” Indeed, several shipments were blocked or delayed—all while clients waited.

Creaform has since improved its exporting processes, but variations on its early experiences are common among importers and exporters. Many smaller Canadian firms find it difficult to keep up with the complex and ever-changing rules governing cross-border trade, never mind doing so in a cost-effective way.

The Canada/U.S. border is now more fortress than freeway. Since 9/11, both countries have increased security rules to thwart terrorism. Add pressure to provide correct tariff classifications (known as HS codes), product documentation, NAFTA eligibility data and product-of-origin labels, and you have a big bureaucratic burden. “Trying to understand all this is daunting for SMEs,” says Corinne Pohlmann, vice-president of national affairs with the Canadian Federation of Independent Business (CFIB)[linkto: http://www.cfib-fcei.ca/english/index.html].

Yet, that’s no reason to stop selling to and buying from Canada’s largest trading partner. In fact, with simple research, planning and partnerships, you can carry out cross-border trade with a minimum of hassles.

Get educated
Before you ship anything, it’s critical to research the rules that will apply to your product as it enters Canada or the U.S.

Think NAFTA has you covered? Think again. Complex rules-of-origin requirements mean that if any part of what you’re shipping came from outside Canada, the U.S. or Mexico, you’ll have to pay extra-sharp attention to your paperwork to avoid paying extra duties. And even if your product is unquestionably North American, you’ll still have to file additional paperwork if your product falls under restrictions in the destination country, as do some foodstuffs, for example.

Remember, your company ultimately bears at least some responsibility for the products it imports and exports. If shipments fail to meet security requirements or are incorrectly classified (a very common problem), it’s you who will ultimately have to pay—and, likely, incur future border inspections. Much to the frustration of many SMEs, there are often inconsistencies in how and when customs penalties are applied, so it pays to err on the side of caution.

If you’re shipping often — say, every other day — a good way to increase your chances of compliance is to provide HS codes to border officials yourself, says Benn Bekic, vice-president of the trade software arm of Waterloo, Ont.-based Descartes Systems Group Inc. This means your customs broker, who is unlikely to know your product as well as you do, won’t have to guess the code—and won’t be able to bill you for such service, either. Even better: if you’re always importing the same type of product, ask the Canada Border Services Agency (CBSA)[linkto: http://www.cbsa-asfc.gc.ca/menu-eng.html] for a ruling on the HS code you should use. “Getting a ruling is really inexpensive,” says Bekic, “and it’s a ‘Get Out of Jail Free’ card going forward.”

Both Canada and the U.S. are notorious for changing the rules, which means importers and exporters must be extra diligent. It’s in your best interest to stay up to date on all the rules, St-Pierre advises: “Otherwise, you might have some bad surprises.” A good way to keep informed of changes is to subscribe to the SME Newsflash email alerts published by the CBSA. You can also send your staff to conferences and courses hosted by organizations such as the Canadian Association of Importers and Exporters[linkto: http://www.iecanada.com] and the Canadian International Freight Forwarders’ Association (CIFFA)[linkto: http://www.ciffa.com].

Of course, if you don’t want to deal with the headaches, you can always pay someone to do it. There are many independent and carrier-affiliated consultants who specialize in helping SMEs comply with border rules.

Get electronic
Once upon a time, a truck driver could approach a border plaza, hand over some paperwork, wait for the go-ahead and drive on through. No longer. Now, border officials want their shipment data electronically—and well in advance. The U.S. requires security filings and customs data to be submitted to officials at least an hour before the goods reach the border, and Canada is following suit. On either side of the 49th parallel, without advance security and customs data, your shipment will not be admitted. “The flow of data has become more important than the flow of goods,” says Bekic. “That’s the new reality.”

While that data are often transmitted by carriers or customs brokers, it’s built on information supplied by the importer or exporter. If, like many SMEs, you submit your details to your partners on paper or by fax, look into an electronic interface; there are many sophisticated software programs available to do this, and even an Excel spreadsheet will often suffice. This reduces rekeying errors. “It decreases the cost of using a broker, because they charge by the line,” says Bekic. “And it decreases the time it takes at the broker, which lets the truck get to the border faster.”

Go the DIY route
Most importers hire a customs broker to manage their cross-border paperwork, but it isn’t a requirement. The CBSA’s Customs Self-Assessment (CSA) program allows eligible firms to submit their own trade data, access expedited customs processing and pay any taxes or duties owing only once a month instead of with each shipment.

To become CSA-certified, companies must undergo a detailed risk assessment, then agree to share their trade records and adopt business systems that are compliant with those of the CBSA. It takes some effort, but for higher-volume or time-sensitive importers, the benefits can be lucrative. Take Empowered Networks Inc., a Pickering, Ont.-based IT vendor and consultancy that imports high-value electronics from the U.S. Two years ago, the company decided to take its customs clearance in-house. “We were paying a customs broker a good fee to look after our shipments, but we were the ones who really knew our products and who would face the consequences if any penalties were applied,” says Cheryl Ramnarace, the firm’s logistics manager. It took three months to get CSA approval, a process that involved an 800-page application, a site visit from the CBSA and a hefty amount of IT work. But since the firm got the go-ahead, shipping costs are down by 75%, thanks mostly to reduced delays and penalties.

Pick the right partners
When it actually comes to delivering the goods, you might find yourself working with several companies: a carrier, a third-party logistics coordinator and a customs broker. Logistics services seldom come cheap, but you can save a lot of money if you choose the right partners.

When hiring a logistics provider, be sure to ask detailed questions. What experience does it have shipping your type of product, with your shipment volumes and with SMEs? Does it have adequate insurance coverage, so that you are not on the hook if the shipment is lost or damaged while in transit? How many border inspections or fees has it accrued in the past 12 months? Look for specific examples and numbers—a good service provider will happily share them.

You’ll also want to check on your partners’ security standing. Since 9/11, Canada and the U.S. have adopted similar voluntary supply-chain security programs. If you’re selling into the U.S., it’s the Customs-Trade Partnership Against Terrorism (C-TPAT) program; if you’re bringing goods from the U.S. into Canada, it’s the CBSA’s Partners in Protection (PIP) program. Open to all players in a supply chain, these programs serve to endorse the integrity of firms’ security practices. “C-TPAT and PIP establish you as a ‘known shipper,’ which is very useful,” explains Bob Ballantyne, president of the Ottawa-based Canadian Industrial Transportation Association[linkto: http://www.cita-acti.ca/english/view.asp?x=1].

But these programs are only as effective as the sum of your supply chain’s parts. For instance, if your company and your trucking firm are C-TPAT-certified but your customs broker is not, your exports will face a normal level of border scrutiny. Only when all players in the supply chain have the all-clear will a shipment be eligible for an inspection-free crossing. Thankfully, safe partners are easy to find: almost all established cross-border carriers and brokers are certified.

Look to creative, lower-cost options
One of the best ways to reduce the costs of cross-border shipments is to slow them down. In logistics, time is money; moving goods by plane is more expensive than by truck, train or boat. Most entrepreneurs default to using couriers, but the fact is not every shipment needs to arrive overnight; perhaps the person expecting the package you sent by express courier wouldn’t mind waiting a few days. Today, traditional couriers such as FedEx, Purolator and UPS offer ground shipping, which is much cheaper than their expedited offerings. There are also many less-than-truckload motor carriers that will bundle your goods with others heading across the border. It’s also worth noting that whenever you can consolidate multiple shipments into one, you’ll save on border costs and paperwork.

Efforts to improve cross-border shipping are well worth the short-term pain for SMEs, says Ruth Snowden, executive director of Toronto-based CIFFA: “You have to do your homework to protect your company. But once you get everything set up, once the first and second shipments have gone through and once everyone knows the regulatory requirements around your product, it’s a wonderful thing.”