A large number of shippers, whether new or experienced, encounter unnecessary headaches when shipping small parcel to Canada. These headaches often translate into increased rates of customer complaints (compared to domestic shipping) over things such as delays, inconvenience upon delivery, high costs, or a combination of issues. This is especially true for shippers in the B2C market. Yet many of these headaches can be avoided by understanding ways to work with the carriers to make Canadian shipments more efficient, which creates a much-improved experience for customers, and, in turn, leads to increased sales.
Complaint #1: Shipping Delays
We’ll start with the number one driver of Canadian customer complaints in the small-parcel shipping environment (FedEx/UPS): shipping delays. There are many reasons why a shipment gets delayed in transit across the border. Is this simply part of doing business in Canada? Sometimes. Other times delays are 100% avoidable. Here are two major causes of delays that can be avoided by understanding a few basic guidelines.
Declaration of Broker
When sending a shipment via FedEx or UPS, most shippers assume that the carrier will automatically be responsible for clearing the shipment through customs. Canadian law, however, states that the importer has the right to declare the broker for shipments they receive. If the importer declares a broker other than the carrier, it may cause an unnecessary delay because the carrier will have to provide paperwork to the broker and wait for notice that the broker has completed the necessary clearance. Many receivers, particularly end-consumers, do not realize that this decision may have a negative impact on the time they receive their shipment.
Shippers can help avoid this type of delay in one of two ways:
- They can encourage their customers to declare the carrier being used (FedEx or UPS) as the broker.
- The shipper can become the importer of record — discussed further below — and declare the carrier as the broker. By declaring the carrier as the broker, delays are avoided because shippers eliminate the administrative step of awaiting a transfer of information from the carrier to a third-party broker.
Shipper fails to provide proper classification codes on the commercial invoice
To receive customs clearance, the broker must classify all goods crossing the border. The classification determines whether or not duties and/or taxes are due, and, if so, for what amount. If goods have not already been classified with accurate tariff codes on the invoice, then the broker must research and make a determination of the appropriate code, which can take time and result in delays.
Shippers can avoid this type of delay by listing accurate classification codes for their products on the commercial invoice attached to each shipment. If a shipper does not know the proper codes for their goods, he or she can consult a licensed Customs Broker. In other cases, shippers can work with their Carrier Reps to provide detailed descriptions of their goods, at which point, the Carrier Rep forwards to the Carrier’s Brokerage division to help with classification.
Complaint #2: Delivery Inconvenience
Another big cause of customer complaints — particularly in the business to consumer market — is inconvenience upon delivery, which is mainly about payment for duties and taxes at time of delivery. Parcel Carriers will typically pay the duties and taxes when a shipment is processed through brokerage and then collect the money due from the receiver. Many consumers do not realize this will be the case, and even if they do, they may not have the appropriate amount when the delivery driver brings the shipment to their door with a cash on delivery (C.O.D.) amount due.
One of the best ways to avoid this type of customer complaint is for the shipper to become the official Importer of Record. This can be accomplished by registering as a “Non-Resident Importer,” often referred to as an “NRI,” with Revenue Canada. When shippers establish themselves as “importers” in Canada, duties and taxes can then be billed to the shipper and shipments will not have any amount due from the receiver upon delivery. As an added benefit, the shipper — as the official importer — is the one to declare the broker for all shipments helping avoid delays as discussed above. The shipper must determine whether the benefits to their customers is worth having duties and taxes billed to them (the shipper), and then determine how they will reconcile that with their customers, e.g. should shippers build these costs into their charges? The major carriers can help shippers with this process, if desired.
Shipper Considerations with Regards to Costs
When evaluating cost of shipments to Canada, there are a few things a shipper should consider.
Shipping via air versus ground: For air shipments to Canada, the parcel carriers do not charge a separate fee for brokerage of the shipment. The cost of brokerage is included in the freight rates, if the carrier is declared as the broker. However, this is not the case for ground shipments where carriers charge separate brokerage fees for clearance of shipments (please note that duties and taxes are governmental charges and are not the same as brokerage fees. Brokerage fees refer to costs associated with brokering the shipment, i.e. entry preparation fees, disbursement fees, etc.). To make an accurate value comparison between ground and air, shippers must evaluate total cost for each type of shipment considering, among other things, the following:
- For ground shipments, total cost (freight + brokerage fees) must be determined and compared against the freight rate for air services.
- Discounts on the freight rates for air services are usually much higher than those for ground
- Time in transit difference
Depending on the shipment characteristics, there are situations where cost differences between air and ground are small and worth the cost for the improvement in time in transit.
Reducing brokerage cost when shipping ground – Typical brokerage fees associated with ground shipments normally include a “disbursement” fee for the carrier paying the duties and taxes and recovering that amount later. If the shipper is established as an NRI, they can work with the carrier and many times eliminate or reduce this fee by establishing electronic transfer of funds, or a deposit.
Shipping to Canada certainly presents new challenges compared to domestic shipping. However, by understanding the rules and guidelines, shippers can absolve many of the inconveniences and customer complaints that arise in the ship-to-Canada arena.
Carl Hutchinson is Chief Operating Officer at iDrive Logistics, where he has helped shippers address their shipping challenges for the past 10 years. Prior to iDrive, Carl spent more than 20 years at UPS where he helped shippers with international products and later managed corporate international pricing and cost modeling. Carl can be reached at 678.294.5724 or email@example.com.