Shipping Goods direct to Canada versus via the USA
For years, the well-trodden path for many foreign companies looking to tap into the Canadian market involved a simple equation: conquer the behemoth that is the United States, and let your US operations handle the comparatively smaller Canadian market. It made sense. The US, with its massive consumer base and established infrastructure, often served as the natural entry point and distribution hub for North America. Think of it like how the United Kingdom, prior to Brexit, often acted as a primary distribution point for US companies targeting the European Union. With established logistics and cultural familiarity, it was logical to import goods into your largest regional market and then leverage that base to reach neighboring countries.
However, just as Brexit dramatically altered the landscape for goods flowing into the EU via the UK, a similar shift is underway in North America. Relying solely on your US affiliate to serve Canada is becoming less straightforward and potentially more costly. A confluence of factors is challenging this long-standing practice, forcing foreign businesses to re-evaluate their Canadian market entry strategy.
One significant headwind is the evolving import regulations within the United States. As the US sharpens its focus on trade and security, the ease with which goods can transit through the country is diminishing. This increased scrutiny can lead to delays, added complexities, and ultimately higher costs for goods destined for Canada.
Furthermore, the once reliable mechanism of duty drawback on goods re-exported from the US to Canada is facing potential headwinds. Duty drawback allows companies to recover duties paid on imported goods that are subsequently exported. If this process becomes more cumbersome or less accessible, the financial advantage of routing goods through the US will erode significantly.
Adding to these challenges is a tangible "thickening of the border" between the US and Canada. While the border has always had security measures, recent trends suggest increased inspections and more stringent enforcement, leading to potential delays and uncertainties for shipments crossing north.
Perhaps the most immediate concern is the looming threat of retaliatory tariffs. Should trade tensions between the US and other nations escalate, goods of certain origins transiting through the US could become subject to additional duties when entering Canada. This unpredictable element adds a layer of risk that businesses can ill afford.
So, what's the alternative? The good news is that foreign companies have a viable and increasingly attractive option: shipping directly to Canada. By establishing themselves as a non-resident importer (NRI), foreign businesses can take control of their Canadian supply chain and potentially realize significant benefits.
Becoming an NRI allows you to import goods directly into Canada, manage your own inventory, and distribute them across the country. This direct approach bypasses the complexities and potential costs associated with routing shipments through the US. Companies like Jet Worldwide Canada specialize in assisting foreign businesses with this transition, offering services such as receiving, storing, and distributing goods across the Canadian landscape. Their expertise can be invaluable in navigating Canadian customs regulations and establishing an efficient domestic supply chain.
Regarding shipping direct to Canada versus via the USA:
Shipping via the USA could lead to:
- Higher regulatory burden to the USA and likely"reciprocal tariffs"on EU imports(there are discussions about the duty drawback processes becoming more difficult).
- Retaliatory tariffs and added regulatory burdensUSA shipments toCanada
- Loss ofEuropean - Canada Free trade/ CETA benefits. (Your goods may qualify as European origin and this preferential duty free import).
For declared value for duty to Canada:
- Using the final Canadian customer's price is generally safer for compliance.Canadian customs has stepped up enforcement of transaction values between related entities.
Canadian Non-Resident Importer / NRI
- Consider the Non-Resident Importer (NRI) program for Canada. It simplifies the import process and allows foreign companies to act as the importer of record. There are record-keeping and bond requirements to consider but this is a great resource.
Accompanying PDF: Shipping Guide To Canada
An important aspect of importing directly to Canada is understanding valuation for duty. Canadian customs authorities require a declared value for all imported goods to calculate applicable duties and taxes. While various valuation methods exist, the most advantageous approach for foreign companies often involves using the price to the final customer in Canada. This method typically results in the lowest possible value for duty, minimizing import costs.
The era of simply piggybacking on US infrastructure for Canadian market access is fading. Just as Brexit compelled businesses to rethink their European distribution strategies, a sort of "North American realignment" – let's call it "Continental Shift" – is pushing companies to adopt more direct and Canada-centric approaches. By embracing the NRI model and partnering with experienced logistics providers, foreign businesses can navigate this evolving landscape, build a strong presence in the Canadian market, and avoid the pitfalls of relying solely on their southern neighbour. T
he time to chart a direct course to Canada is now.
As your dedicated partner in Canadian logistics, Jet offers a comprehensive suite of services designed to streamline your "much lower than USA volumes" direct-to-Canada shipping strategy.
