Connecting with Canada through Trade
Posted on September 2, 2020
Canada is one of the US’s largest trading partners and with renewed connections with USMCA, supply chain disruptions and border restrictions, there are more reasons than ever to work closely with our neighbors to the north. Currently, there is a non-essential travel ban in effect through at least September 21, 2020 between Canada and US borders. This restriction may be increased through the end of 2020 due to the global pandemic; however, goods can still be moved across the borders.
In 2019, North Dakota exports to Canada are more than $6 billion, primary sectors include fuel/mineral Oil ($4 billion), machinery and agricultural equipment ($3.5 million) and cereals primarily corn, wheat and buckwheat ($1.5 million), respectively. Canada in-turn exported more than $2 billion into North Dakota in 2019 in machinery ($4.3 million), machinery and repair parts ($4.1 million) and fuel/mineral oil ($2.4 million).
Canadians import more goods from the US than any other country in the world, so it is good business continue cooperation between these borders.
With global uncertainty, and updated free trade agreements in 2020, doing business with Canada has many layers of appeal. USMCA has brought forth opportunities in dairy and wheat to be held to the same standards for grading. Modernization of NAFTA creates improved access to E-commerce, which is picking up with Canadian consumers, especially with the increased de minimis rates on consumer goods crossing the borders. With the global pandemic, having close relationships with our northern neighbors shortens supply chains and has many companies refocusing on goods closer to home.
North Dakota companies could find success in serval Canadian markets with a little time and effort. Canada is the fifth largest market for aerospace technologies, specializing in civil flight simulators, civil aircraft production and civil aircraft engines. With ND having several companies on the forefront of aerospace engineering and products, there are opportunities to explore this booming Canadian industry. Additionally, renewable energy is a top-of-mind sector for Canada as 65% of their electricity generation in 2019 was renewable according to the International Trade Administration.
According to the Conference Board of Canada, Canadians are gaining confidence in spending and more than 400,000 jobs were created in July 2020. Many restrictions have been lifted, but only about half of the jobs lost due to the pandemic have recovered (most of which are in the service industry). Canada is has seen a decrease in seasonal labor, which in-turn could cause increase need for some agricultural and food products from the US. The pork industry, like the US, had a shortage in meat processing, and an overabundance of piglets selling at below cost. As markets are adapting to the global pandemic, countries such as Canada are opening borders for trade, but being mindful of safety, PPE and protective measures to ensure quality of goods. Global trade, as the world is working towards normal, is just moving slightly slower than usual.
With USMCA in effect since July 2020, the details are still playing out on impact for all parties involved. Updates in the USMCA have increased opportunities for dairy farms and ranchers as well as small and medium sized businesses across ND. With more than 80% of NAFTA regulations still intact with USMCA, focus shifts towards the differences in doing business. Modernization of the agreement comes in several forms including security in e-commerce, intellectual property rights and quota adjustments.
In a January 2020 press release North Dakota Agricultural Commissioner Doug Goehring commented upon ratification of the USMCA “With U.S. agriculture facing uncertainty in the global marketplace, the USMCA will provide a much-needed boost to producers and rural communities. The new agreement ensures U.S. farmers, ranchers, and food processors can continue to access and grow exports to two of their most important global markets.” More now, than pre-pandemic; weak points in supply chains and labor have come to light. Taking more cooperative action with Canada will only strengthen ties for the future.
Increased access to Canada’s dairy market which includes including cheeses, eggs and milk, along with wheat are to be held with the same standards as Canadian goods under the USMCA. Historically US exports have been deemed ‘lesser’ or ‘sub-par’ than in-country products. A more even playing field will ensure reliable access to these products across the board.
There is good news for small businesses and consumers regarding increased de minimis rates for cross border goods. De minimis rates are defined as a small amount of money or goods with minimal value. By increasing the minimal value rate there is no additional taxes or duties on purchases below that level. In the past, consumers would pay duties on purchases over $20, but new regulations increase those levels to $150, essentially increasing movement across borders with less expense to the consumer.
With the updated agreement, exporters should be aware of new country of origin paperwork. The customs and border patrol announced understanding and working with the new regulations as we move into 2021, as everyone gets more comfortable. It is, however, still essential to have the correct paperwork in order to make cross border transitions move smoothly.
Supply Chain/Shipping/ De minimis
Shipping and movement of moving goods has become more transparent as the USMCA requires of documentation, paperwork, and online regulation postings from each party involved.
Doing your research as your company exports is one the first time-savers to ensure everything moves smoothly under the new regulations. Both US and Canada have their updated shipment and border clearance policies available online (links in the resources below). Customs and Border Protection emphasizes that making sure that country of origin paperwork is complete as it will aid in reducing border clearance delays. When crossing Canadian borders, it is recommended that extra time be built into shipments, considering new regulations as well as the weather in northern climates can be cause for delay.
With opportunities for expansion into Canada, there are some cultural differences when doing business that may help you build successful relationships for the future. With Canada being so expansive, there are some cultural variations that may be applied generally:
- The overall value of a business deal will be seen more favorable than a personal connection.
- The value and quality of your products will speak highly of your business.
- Canadian business people may be slower to build relationships.
- In general, keep closer to universal topics when initially making connections.
- Be sure to use formal titles when addressing people, always use last names and titles until otherwise told.
- It is not uncommon for some Canadians to be quite animated when speaking, it is even considered rude in some circles to speak with your hands in your pockets. Western Canadians are often more relaxed, but direct in their business dealings.
- When working with Ontarians (those from Ontario), more formal business etiquette is practiced.
- While English is widely used, French is the preferred for much of Eastern Canada; having materials printed in both French and English is recommended.
Recently, the Trump administration has been enforcing a 10% aluminum tariffs and the Canadian government lead by Prime Minister Justin Trudeau has vowed to respond in equal measure. The Canadians make clear that they would work together with the US to support life and jobs as much as possible.
Overall, Canada has many opportunities that can benefit a variety of different sectors in cross-border trade. New rules and regulations will need review for any company doing business under the USMCA, but with increased access to resources trade will move smoothly across borders for the future. Looking towards to future of trade with one of our closest neighbors in Canada there are many opportunities for both ahead.
Here are some useful resources for a deeper look: