In last year's November-December edition, we presented a case study of exporting some fruit juices to Canada. At the close of that article, we promised to go a little deeper in a future issue. In this article we will come through on that promise with part 2 of "Getting Started Exporting."
Dimensional weight: In the November article we used a shipper of non-perishable fruit juice under normal environment conditions as our example. We noted that this product would ship at 16 lbs. if shipped via ground service since the shipment is less than 5,184 cubic inches but it would ship at 18 lbs. for international express shipping.
Dimensional weight can be a significant factor and may be worth examining if your cargo has a lot of items shipping at dimensional weight. Larger shippers are sometimes able to negotiate higher dimensional factors, thus reducing their freight costs with small package carriers. If your packages are sturdy enough for double stacking, you also may be able to negotiate better dimensional factors with an LTL carrier. Dimensional factor negotiation is not as common in air freight unless you are shipping air container loads. Professional packaging advice from the small package carrier or a packaging consultant can also be an important resource in reducing the dimensions of your packages while maintaining the protective covering you need.
Shipment Consolidation and NRI: In the November article, we also reviewed shipping costs and concluded that larger volume shipments such as palletized loads were more economical than small package shipments. Many shippers to Canada begin by shipping individual orders via small package and then consolidating the shipments for movement across the border via truck with final delivery via Canadian small package carrier or Canada Post. This also makes Customs clearance less expensive per unit when one clearance is made for all the items in one consolidated shipment.
In order to make one Customs clearance work effectively, the shipper can become the importer of record into Canada as a Non Resident Importer, or NRI. By taking this step, the shipper and/or his agent can easily compute duties and taxes for the Canadian consignee and make it easier to quote the "landed cost" or "delivered cost" to the Canadian customer. Information on how to set up as a Canadian NRI is available at http://medey.com/pdf/Canada%20Non%20Resident%20Importer.pdf and from a number of sites sponsored by forwarders and small package carriers.
If your company becomes a Canadian NRI, it is important to read the tax and Customs rules and put a compliance program in place. Not long ago one customer of ours had to scramble to obtain records and avoid penalties from Canadian Customs because they had not put a Customs compliance program in place. Canadian import records must be maintained with evidence of shipment, classification, duty payments, and payment for the goods kept on file for seven years after the data of Customs clearance.
Duties: Duties on shipments to Canada are calculated on the transaction value or the price paid for the goods. If you do not have a Canadian corporation, your price for duty purposes is the price you charge the consignee exclusive of the freight charge. If you have a Canadian entity, you can sell the goods from the United States to your Canadian corporation at a transfer price rather than the end sale price. The details of transfer pricing are beyond the purview of this article but it can result in legally paying less duties on the goods transferred to your Canadian affiliate.
Summary: This article is part two of a three part series focusing on exports to Canada. The initial article made a quick summary of dimensional weight, shipping costs, harmonized classification and pricing. In this article, dimensional weight, shipment consolidation and importing into Canada are reviewed in more detail. To read part one, scan the QR code below or visit the content library on www.PARCELindustry.com and go to the November/December issue.
If you'd like to read part one of this article, click here.
Tom Stanton, International Analyst, AFMS, LLC can be reached at 503.246.3521.
Dimensional weight: In the November article we used a shipper of non-perishable fruit juice under normal environment conditions as our example. We noted that this product would ship at 16 lbs. if shipped via ground service since the shipment is less than 5,184 cubic inches but it would ship at 18 lbs. for international express shipping.
Dimensional weight can be a significant factor and may be worth examining if your cargo has a lot of items shipping at dimensional weight. Larger shippers are sometimes able to negotiate higher dimensional factors, thus reducing their freight costs with small package carriers. If your packages are sturdy enough for double stacking, you also may be able to negotiate better dimensional factors with an LTL carrier. Dimensional factor negotiation is not as common in air freight unless you are shipping air container loads. Professional packaging advice from the small package carrier or a packaging consultant can also be an important resource in reducing the dimensions of your packages while maintaining the protective covering you need.
Shipment Consolidation and NRI: In the November article, we also reviewed shipping costs and concluded that larger volume shipments such as palletized loads were more economical than small package shipments. Many shippers to Canada begin by shipping individual orders via small package and then consolidating the shipments for movement across the border via truck with final delivery via Canadian small package carrier or Canada Post. This also makes Customs clearance less expensive per unit when one clearance is made for all the items in one consolidated shipment.
In order to make one Customs clearance work effectively, the shipper can become the importer of record into Canada as a Non Resident Importer, or NRI. By taking this step, the shipper and/or his agent can easily compute duties and taxes for the Canadian consignee and make it easier to quote the "landed cost" or "delivered cost" to the Canadian customer. Information on how to set up as a Canadian NRI is available at http://medey.com/pdf/Canada%20Non%20Resident%20Importer.pdf and from a number of sites sponsored by forwarders and small package carriers.
If your company becomes a Canadian NRI, it is important to read the tax and Customs rules and put a compliance program in place. Not long ago one customer of ours had to scramble to obtain records and avoid penalties from Canadian Customs because they had not put a Customs compliance program in place. Canadian import records must be maintained with evidence of shipment, classification, duty payments, and payment for the goods kept on file for seven years after the data of Customs clearance.
Duties: Duties on shipments to Canada are calculated on the transaction value or the price paid for the goods. If you do not have a Canadian corporation, your price for duty purposes is the price you charge the consignee exclusive of the freight charge. If you have a Canadian entity, you can sell the goods from the United States to your Canadian corporation at a transfer price rather than the end sale price. The details of transfer pricing are beyond the purview of this article but it can result in legally paying less duties on the goods transferred to your Canadian affiliate.
Summary: This article is part two of a three part series focusing on exports to Canada. The initial article made a quick summary of dimensional weight, shipping costs, harmonized classification and pricing. In this article, dimensional weight, shipment consolidation and importing into Canada are reviewed in more detail. To read part one, scan the QR code below or visit the content library on www.PARCELindustry.com and go to the November/December issue.
If you'd like to read part one of this article, click here.
Tom Stanton, International Analyst, AFMS, LLC can be reached at 503.246.3521.
