Import and Export of Canada

Details for Import and Export

Introduction

The name of my business is Spectre Glassware Company whose headquarters are located in New York City. Currently, the business has spread to ten states in the United States. The business has been in operation for the last ten years. The growth in terms of capital base and profit margins has been significant. The mission of the company is to provide quality glassware to the United States market as well as the rest of the world.

The vision is to expand the bases of operation to reach bigger markets in the US and become a major exporter of glassware. The purpose of this export plan is to guide the whole process of exportation and enable the directors of the company to make informed decisions. Considering that this is the first time the company is exporting its commodities, a detailed plan is necessary to ensure that no mistakes are made. The international market goals are to reach our immediate neighbor, Canada, and integrate into its market before reaching the rest of the world.

Organization

The company is owned by 12 shareholders. It is not yet a company trading publicly through the stock exchange. It is headed by the board of directors. There are 7 directors in total. The everyday operations are run by the Chief Executive Officer (CEO) who is assisted by the Chief Finance Officer (CFO). The company has a staff of about 5,000 workers in the United States employed in different capacities. There is a commitment to integrate into the Canadian market within the next year. The enterprise lacks corporate experience in exporting. For this reason, the company has hired a team of experts well-versed in the exportation business to guide through the whole process.

Products

The company deals in the manufacturing of glassware products. Our products include beakers, beer glassware, cups, coffee cups, jars, mugs, teacups, and tumblers. Over the years, the varieties of our products have been increasing as we gain more experience in the market. Our designs are distinct from those of our competitors. This explains why our market share has been increasing over the last five years. There are no adaptations or redesigns required for the export market since the cultures of the American people and the Canadians have a lot in common. Our market research revealed that most of the types of glassware used in the United States were also used in Canada.

Reasons for Choosing Canada

Before picking Canada as our first export destination, the board examined various factors.

Trade Relations Between the United States and Canada

The two countries enjoy the most comprehensive trade partnerships in the world. Since the North American free trade area came into existence, the amount of trade has increased (The Embassy of the United States of America, 2014). We, therefore, hope that the already established trade relations between the two countries will work to our advantage and make the export process easier. The good economic relations between Canada and the US minimize the possibility of shipment loss or failure of a shipment to reach its destination. The safety of our shipment will also be assured due to the good relations. The integrated cargo security strategy program that was launched in 2011 by the two countries is meant to ensure that goods on transit are safe. We also hope to take advantage of this. Moreover, the two countries have lower regulatory barriers on goods exported from either country compared to the regulatory frameworks that goods from other foreign countries are exposed to. In addition, the customs process in Canada has been streamlined about goods from the US (Zuckerman, Riley, & Inserra, 2013). Therefore, the clearance time in Canada is lower than in other countries. This is beneficial to anyone exporting to Canada since it saves time for other work.

Ready Market

In the year 2012, the population of Canada was estimated to be around 34.9 million (Employment and Social Development Canada, 2015). This population whose bulk is in the economically productive bracket provides a ready market for our commodities. In addition, Canada has always been a trading nation; consequently, trade in this country is likely to become a well-organized affair. It is among the developed countries in the world in terms of commerce and industry. We hope that our products will find a ready market in the big hotels of Canada as well as households. The standards of living in Canada are quite high. This is an indicator that people can afford even the most luxurious glass items.

Strategic Location

Canada shares a huge border with the United States. This is very good for trade along with the fact that the country is accessible from various routes using different modes of transport. Transportation of commodities to Canada can be done through various means. The road transport network is well-connected to that of the US. Railway transport is also well-developed and interlinked with that of the United States. Water transport is another option. Both the US and Canada have ports in the Atlantic Ocean (U. S. Department of Homeland Security, 2015). For this reason, it would be easy to move our shipment of glassware through water transport. Due to the short distance between the two countries, the cost of transportation will be below. Moreover, Canada’s Atlantic gateway is an important access point for visitors from Europe. This translates to the increased market in terms of the number of people. Furthermore, it is well-connected by a four-lane highway to the northern terminus of the United States. This makes border crossing easier since it takes a shorter time.

Economic Stability

Canada has an economic freedom score of 79.1 which makes it the 6th freest economy in the 2015 economic index. It is a country characterized by robust economic growth, monetary and labor freedom. Corruption in the country is also minimal. This provides a very promising business environment for our company. Moreover, it is still one of the stable places to invest in. The business climate is stable, making it an attractive export destination (Cutler & Zacher, 2011). The financial sector of Canada is competitive through support by proper lending practices which reduce the possibility of loss due to economic failure. The robust economy is due to practices that protect private property, and contract enforcement is not a problem in Canada. This is supported by a judicial system that supports independence and transparency. The average tariff rate in Canada is as low as 0.8%, while the country continues negotiating more free trade agreements. This also makes the future of exporting to Canada very promising.

Economic Integration

The economies of the US and Canada have a high level of integration. This process was accelerated by a bilateral trade agreement between the two countries. The countries are developed with an industrial structure that is almost similar for both (Cardarelli & Kose, 2004). Since our business has achieved great success in the United States, we hope the case will be the same in Canada. The US and Canada share more than just a continent. They also share values and ideals.

Corporate Reasons

Part of the reason why we have chosen Canada as an export destination has nothing to do with Canada. We want to increase our sales which are part of our short-term goals. By this, we hope to earn higher profits which will be very instrumental in our expansion process. By spreading our sales to Canada, we aspire to increase our economies of scale. By operating on a larger scale, we will be to decrease overhead costs. We also hope to reduce our vulnerability. Since our business is only based in the United States, we may lose a lot in case of a bad economic policy. To avoid this, we hope to export some of our products to Canada. Finally, we expect to gain new knowledge by exporting our goods to Canada.

Method of Transportation

Various methods can be used to transport glassware from the US to Canada. They include road, railway, water, and air. In our case, we choose to use water transport due for several reasons. First, the goods that we are transporting are fragile. We, therefore, require a mode of transport that is smooth since the nature of our goods is unsuitable for road transport.

The next factor that we have considered in choosing our method of transport is the cost which we want to incur. Water transport is one of the cheapest modes of transportation. We hope to transport a large number of goods. It is within our best interest to go for the cheapest services so long as the goods will reach their destination safely. Air transport could be a suitable model, but it is prohibitively expensive, making it not feasible. To ensure that we cushion our customers in the export market, we have chosen this model to avoid raising the prices of the commodities (Lee & Meng, 2015).

The speed of transport is not a very significant factor in our business. For this reason, we did not choose air transport despite it being the fastest. Although water transport is slow, the distance to be covered is also small, meaning that our goods will still arrive in good time. Flexibility is not a requirement in the transportation of our glassware. If it was the case, we would have chosen another mode of transport.

There are several advantages that we are going to enjoy as a result of our choice of water transport. They include low cost, larger capacity to transport goods, and safety of the goods. However, some of the disadvantages that we may face are the effects of bad weather, difficulty in monitoring the exact location of goods, and customs and excise restrictions. Moreover, the challenge of having to do a lot of paperwork may arise.

Since the goods to be transported are fragile, a special way of packaging them has been developed. The post office insurance does not cover poorly packaged goods. As soon as they realize that goods on transit have been poorly packaged, they are not willing to cover that. In the past, glassware packing was done, but currently, it has been avoided by dividing the packing process into two stages. It involves an inner and outer packet.

The inner packaging involves stuffing the insides of the open glass using clean paper. The next thing is to look for fragile areas and wrap them so that they can flush with other parts. The whole glass is then wrapped in padding material. The next stage is the outer packaging. We will look for boxes that allow three inches or more of packaging material. Any packing can be used to stuff around the glass. The boxes chosen will be firm to avoid goods being crushed. Finally, the boxes will be labeled to reduce the chance of losing our merchandise.

Breakdown of the Cost

Freight charges- $10,000

Customs clearance- $5,000

Insurance fee- $2,500

Warehousing- $1,500

The total cost of transporting the goods will be $19,000. There are no tariffs imposed on glassware in Canada (Canada Border Services Agency, 2013). This presents the advantage for lowering the cost of our goods.

Customs and Regulations

Despite the free trade area and the good trade relations between the United States and Canada, one should not assume that exporting goods there is a simple process. Canada is still a foreign country. Anyone exporting and the United States, in particular, have the same obligations to any other foreign country. In the same way, Canada still exerts some regulations on goods from the US.

However, there are some exceptions. When exporting to Canada, there is no requirement of filing electronic export information through the Automated Export System. This is the result of the Canada Border Protection Agency and the fact that the two countries have a very strong electronic data sharing system. Goods exported to Canada and subjected to an expanded license issued by the US agency are not subjected to this exception. Other goods governed by this rule are government goods. Then, some goods are merely transiting Canada. These have to be filed electronically. Since our goods do not fall under any of these categories, the exception applies.

Owing to our good relations with Canada, there are no special restrictions other than customary commercial documents. No packing list is required. However, a NAFTA certificate of origin is needed. Despite the country’s strategic location, goods have to be counterchecked with the US denial list. The lists include Denied person list, Entity list, and OFAC’s Specially Designated list.

Regulatory Requirements of the Importing Country

Every country has a regulatory framework that governs the import of goods and services on its territory. Canada is not an exception. The regulations are meant to check on several factors. These include valuation of goods, keeping of the records, adherence to trade agreements, the origin of the product, and establishing that substantial information has been provided. In Canada, the regulatory requirements are as follows:

Customs Documentation and Clearance

These are the documents that the customs authority requires for accurate and complete identification of the goods which are to be imported. The shipment must be accompanied by an accounting package.

The accounting package contains several documents:

1. The cargo control document (two copies)

2. The invoice (two copies)

3. Completed Form 3B in two copies – This is the coding form for Canadian customs

4. Other documents, e.g. health certificates, import permits among others

5. Form A – This is the certificate of origin

The cargo control document is used to inform the relevant authority, which is Canada Border Services Agency (CBSA), about the shipment. A copy is sent to the owner of the goods to confirm the arrival of the shipment. The customs invoice is the document used in the determination of taxes and duties. The customs invoice should show the seller, the buyer, the price payable, country of origin, and details about the goods. According to the regulations of Canada, the following information must be provided in Form 3B: name of the importer and account number, goods description, country of origin, shipment date, value for duty, tariff treatment, and duty and taxes owed. The certificate of origin is used to support the tariff claimed.

The importer of record is the person who makes the payment for all taxes and duties. This person has to ensure that all information is provided and is accurate. In case of missing or inaccurate information, the regulations dictate that a fine should be paid by the importer of record. The regulations do not acknowledge a customs broker, although they do not prohibit them. Even in their presence, the burden of the fine is still borne by the importer of record.

The Canadian rules and regulations dictate that the importer is responsible for all record keeping. This includes accounting, releasing, reporting, and paying for goods imported for six years after the goods have been imported. The law does not allow customs brokers to keep the records. Regarding electronic records, they are only acceptable so long as the supporting source documents are available. Documentation should always be kept in paper format. However, microfilming permission can be obtained from the CBSA. Electronic documentation is becoming commonplace in Canada.

Release of Goods

The border agency processes most of the shipments at the border. This could be a rail border, highway border, airport, or seaport. The carrier usually reports the arrival of a shipment. Documents can be presented either in hard or soft copy. When the taxes and duties are paid, that is the only time when the goods can be released. Goods can be released before the duty is paid only when the shipment is reported electronically; an approved amount of security is posted, and shipment is accounted for within 5 days if the requirements of other governmental organizations have been met.

Duty Relief and Dispute Resolutions

The CBSA has put in place several programs to reduce, eliminate, or defer duties. Memorandum D7 outlines the programs allowing for deferral of duties on goods manufactured and then exported. There are also rules regarding the refund of duties in cases of defective goods or goods returned. Temporary imports are sometimes allowed to go duty-free. Review of tariffs, duties or any other decision made by the CBSA can be done so long as the period of 90 days has not elapsed.

Marketing of the Product

When the ship arrives in Canada, marketing will be done through the direct method. Direct marketing will enable us to communicate directly with the customers. The advertising techniques will include but not be limited to interactive consumer websites, catalog distribution, targeted television commercials, and newspaper advertisements. With these four methods of direct marketing, there is a very high possibility that we will be able to engage a significant proportion of the Canadian population. The focus will be put mostly on online advertisements and television commercials. A big proportion of Canadians use the Internet daily. Considering their standards of living, the assumption is that the majority own a television set (Roberts, Clifton, Ferguson, Kampen, & Langlois, 2005).

Direct marketing is appealing since the results can be measured directly. This will help us avoid wastage in case we realize that a particular method is not working. With direct marketing, we can concentrate on a specific product. For example, it is possible to focus a television commercial on coffee cups. Moreover, direct marketing will enable us to test new markets. Compared to indirect marketing, direct marketing is cost-effective. It is also very flexible since it utilizes several channels. This type of marketing can therefore take advantage of new technologies (“Direct marketing”, n. d.). In direct marketing, a business transaction can take place anywhere, including the comfort of a customer’s home.

The major shortcoming of direct marketing is customer privacy intrusion, which customers may not appreciate. Many consumers are increasingly demanding to end the unsolicited contact from companies. The use of direct marketing may lead to an increase in public cynicism and apathy. Compared to other methods of advertising, the initial cost of direct marketing is rather high. However, despite these shortcomings, direct marketing should not be judged crudely against other types of marketing. The merits outweigh the flaws.