1. Business
Matters
Matters
There are tactics relevant to U.S. companies both with and without
a current presence in Canada that can help capitalize on the sales
opportunities in Canada while significantly minimizing exposure to
unfavorable currency exchange rates.
number of factors,
some of recent origin
and some longstanding,
have converged today
to create unprecedented
opportunities for U.S.
companies with an
eye on the Canadian
market.
The strong
Canadian economy
and strong Canadian
dollar (CAD) make
U.S. exports more
attractively priced
than they have been
in decades, but the
cost of operating
in the Canadian
market has risen
as much as 50 percent over a 24-month
period. Any discussion of opportunities in
Canada must begin with certain caveats,
some driven largely by the current strength
of the Canadian dollar, and others that have
always been part of the Canadian market
landscape but were often disregarded
during the days of the weaker Canadian
dollar.
U.S. companies should understand that
Canada’s commercial opportunities are
best realized by those who appreciate,
and address, the differences between the
two nations. There are tactics relevant to
U.S. companies both with and without a
current presence in Canada, that can help
capitalize on the sales opportunities in
Canada while significantly minimizing
exposure to unfavorable currency exchange
rates.
Issue: Crossing the Canadian border
Though the United States and Canada
have undertaken efforts to streamline
cross-border trade over the years, moving
goods from the United States to Canada
will never be as simple as shipping from
Kansas to California. How a U.S. exporter
manages the complexities of crossing the
border has an enormous impact on the
experience of the Canadian customer.
Doing so successfully requires mastery of
Canada’s:
• Customs documentation and import
requirements
• Trade and security regulations
• Federal and provincial sales tax
accounting requirements
While the usual practice of choosing an
express courier delivery service appears, at
first glance, convenient and economical,
the true picture is somewhat different.
When it comes to dutiable shipments
(those valued at more than CAD $20),
Key Issues Challenge
Companies with an
Eye on CanadaBy John Costanzo
Editor’s Note: This article is based on a white paper entitled
“Five Issues that Challenge Your Competitive Edge in
the Lucrative Canadian Marketplace.” For a copy of the entire
paper for free, please visit http://info.purolatorusa.com/
forms/PR-WhtPpr1Form.
1 COURIER MAGAZINE | July/August 2008

2. July/August 2008 | COURIER MAGAZINE 2
issues arise the moment the package arrives
at the border. The package must be cleared
individually through Canadian customs,
with attendant paperwork and potential
delays; additionally, the Canadian importer
is typically assessed brokerage charges,
related fees, and Canadian customs duties,
as well as for federal and provincial sales
taxes.
In the end, the total cost to the Canadian
customer is much higher than anticipated.
In fact, it is not uncommon for these
fees and charges to exceed the value of the
parcel.
In any event, they are an unpleasant and
painful surprise to the Canadian customer,
as evidenced by a recent class action lawsuit
filed in a British Columbia court over un-
contracted brokerage fees charged by a
major courier company on goods imported
from the United States.
According to the law firm that filed the
suit, Poyner Baxter, LLP, it all began when
Canadian Robert McFarlane, purchased
a telephone device from Arizona online.
McFarlane understood that he would be
responsible for shipping, handling, duties
and taxes, but he was also ordered to pay
a nearly $40 brokerage fee, which came as
a complete surprise. “It’s a surcharge that
nobody agrees to, nobody knows anything
about it until the delivery person is at the
door,” said attorney, Jim Poyner.
These and other considerations suggest
that knowledge and thorough preparation
are required to minimize potential
cross-border problems and optimize
opportunities for business expansion in
Canada.
Seek guidance from a Canada Expert
Those who feel they require expert
advice can obtain it from international
trade professionals, who can either
offer procedural consultation, or take
over management of a good deal of the
research and paperwork. Another option
is to partner in the supply chain with
a Canadian company that is intimately
familiar with all requirements. Such a
partnership can result also in an enhanced
competitive marketing position.
A U.S. company with sufficient volume
to Canada may benefit by consolidating
their small package shipments before
they reach the border. Streamlining the
supply chain via consolidation optimizes
delivery speed by turning time-consuming,
per piece border clearances into a single
clearance. This can reduce the incidence
of delays, ensuring that Canadian sales are
not put at risk by quality-of-service issues.
Consolidation also opens the door to cost
savings by eliminating expensive per piece
customs clearance charges.
Per piece customs clearances, which are
typically charged according to a shipment’s
value for duty, can quickly add up, even
when shipping as few as five packages at
one time.
In these situations, consolidated customs
clearance, which is often based on the
number of HS lines to be processed,
can result in significant costs savings.
Combining a customized shipping service
with Canada’s Non-Resident Importer
program is a next step in making the
transaction resemble a Canadian domestic
transaction. NRI status allows the U.S.
exporter to bundle all shipping, customs
clearances and duties and taxes in the
customer’s shipping and handling fees.
These can then be charged in Canadian
dollars. Customers in Canada then see
the entire transaction, from ordering to
delivery, exactly as they would a domestic
transaction.
Issue: Reaching rural Canadians can be
challenging
While just over half of Canadians live in
metro centers within easy reach of the U.S.
border, about 16 million Canadians live
elsewhere, many in rural areas that lack a
significant concentration of convenient
retail stores.
This substantial percentage of the market
is highly dependent on goods and services
delivered from elsewhere. However, goods
are often handed over to third parties
for that critical “last mile” of delivery in
remote areas, subjecting rural Canadians
to all the service problems typical of a non-
custodial, open-loop supply chain.
Partner with care
U.S. companies should carefully evaluate
a prospective carrier’s capabilities in both
industrial and rural markets. Obviously,
the ideal partner will retain custody of
goods through final delivery, offering
closed-loop tracking, uniformed drivers
and professionally maintained equipment,
even in remote areas.
Issue: Canadians prefer to do business
with other Canadians
With so many cultural similarities
and close geographic proximity, it’s not
surprising that Canadians have a healthy
awareness of, and interest in American
brands. It’s importantto note, however,
that Canadians also exhibit strong feelings
of national pride and may prefer to do
business with other Canadians, assuming
price and quality are equal.
U.S. companies are wise to consider this
Canadian brand bias in their approach
to this market, and take care to present
themselves as part of the Canadian
fabric. How strong are Canadian brand
preferences? In 2005, a Marketing
magazine study ranked the companies
that earned the highest respect among
Canadian consumers. Conducted by
Leger Marketing and surveying 1,500
Canadians, the study examined two key
points of reputation in the consumer’s eye,
awareness and impressions – the core of
what makes a reputation. More than half
of the companies placing in the top 20 are
homegrown Canadian brands.
Perhaps this advisory from Doing
Business in Canada: A Country Commercial
Guide for U.S. Companies best expresses
a goal that U.S. exporters should set for
themselves:
“The key to achieving market penetration
for export sales to Canada is making the
transaction resemble as much as possible
a Canadian domestic transaction for the
Canadian customer.”
Have a Canadian partner, or presence
The more it is perceived by Canadians
that a U.S. company is partnering with
a Canadian company or investing in
Business
Matters
Matters

3. Canadians, the less likely there will be
issues of national pride obstructing the
path toward increasing sales in Canada.
A physical presence in Canada can
demonstrate the same kind of commitment
to the market by a U.S. company. But given
the high cost of operating in Canada today,
and the availability of innovative tactics
that allow U.S. companies to compete
in Canada without a physical presence,
this approach must be carefully weighed
against all other options.
Issue: English is the official language,
and French
Canada regards both English and French
as the official languages of the country.
That said, English is spoken almost
everywhere, even in Quebec, where French
is the official language and 80 percent of
the population of 7,568,600 call it their
first language.
Know the language(s)
From a relationship-building perspective,
knowledge of French, in particular, and
of other languages as well, will provide a
significant competitive advantage to U.S.
companies by demonstrating an awareness
of, and appreciation of, a business partner’s
cultural heritage. Properly handled, this
will result in a marketing advantage.
By working with an established Canadian
partner, a U.S. company can leverage
the partner’s ability to provide bilingual
customer support, and benefit from the
partners’ visibility (and ideally, prestige) in
French speaking areas. The partner will also
be more familiar with the requirements of
conducting business in a country with two
official languages.
Issue: Canadian operations are no longer
a bargain
The cost of operating in Canada has
increased by nearly 50 percent in just two
years. In 2002, one USD could be used to
purchase $1.57 CAD worth of Canadian
goods and services. By the end of 2006, the
annual average exchange rate had fallen
even further and one USD would only
fetch $1.13 CAD.
The USD has continued to weaken,
and the two currencies reached an
unprecedented level of parity in September
2007. Since then, the CAD has continued
to outperform its U.S. counterpart.
Reduce reliance on Canadian assets
Companies with Canadian Distribution
Centers can reduce or eliminate
dependence on these cost-escalating
centers by sourcing Canadian distribution
from their existing facilities in the United
States. Innovative supply chain solutions
that include consolidating shipments
and customs clearance at the border with
individual package delivery to the Canadian
consumer can help U.S. businesses reduce
reliance on physical assets in Canada.
When used in conjunction with Canada’s
Non Resident Importer program, this
kind of solution can open the door to
competing in Canada without any brick
and mortar presence at all. In addition to
reducing costs, bypassing or eliminating a
Canadian DC can reduce the risk of stock-
outs because fulfillment is from what is
typically a larger, better-stocked U.S. DC.
About the Author
John T. Costanzo became president
of Purolator USA, Inc., a subsidiary of
Purolator Courier, Ltd., in 2001. As a
member of Purolator’s Courier Ltd’s
Executive Council, he is responsible for
Purolator’s $65 million U.S.forwarding and
logistics business and for the development
and execution of a $200 million corporate
strategic plan for the U.S. market.
U.S. companies
are wise to
consider this
Canadian brand
bias in their
approach to this
market, and take
care to present
themselves
as part of the
Canadian fabric.
Business
Matters
Matters
3 COURIER MAGAZINE | July/August 2008