One could easily underestimate the challenges involved in moving packages and freight over the U.S.-Canada border. There are, for the most part, few geographic or language barriers to overcome. And proximity creates the illusion of easy access. But shipping to and from Canada is just like dealing with any other sovereign nation, complete with its own set of rules and red tape. On this episode, we learn about the fine points of serving the Canadian market from Frank Jacketti, Director of U.S. Districts with Purolator International. He discusses Canadian Customs procedures, last-mile logistics and the requirements of the new United States-Mexico-Canada Agreement. Turns out there’s a lot to learn about managing supply chains in the world’s second largest country. Hosted by Bob Bowman, managing editor of SupplyChainBrain.
A Conversation With Frank Jacketti
Bob Bowman- 0:00
This episode of the SupplyChainBrain podcast is supported by Purolator International, a leading provider of integrated freight, package, and logistics solutions in and between Canada and the United States. Be sure and stick around after the discussion for a look at the company and what it offers to global businesses; but now, on to the podcast.
Bob Bowman – 00:33
A reminder to US shippers, Canada is, as it turns out, a separate country. Hi everybody, I’m Bob Bowman, Managing Editor at SupplyChainBrain, and this is a SupplyChainBrain podcast.
Bob Bowman – 1:00
It’s easy, I suppose, to underestimate the logistics of crossing the border between the US and Canada. There are no geographic barriers after all, language for the most part isn’t an issue, and proximity provides the illusion of easy access. But shipping to and from Canada is just like dealing with any other sovereign nation, with all of the procedural red tape and logistical considerations that accompany it. What’s more, Canada has its own unique set of concerns, including the challenge of serving the world’s second largest country in terms of physical size. All the more reason why companies need to educate themselves about managing their Canadian supply chains. On the program today, I speak with Frank Jacketti, Director of US Districts with Purolator International. He fills us in on the fine points of serving the Canadian market, including the state of last mile logistics and the requirements of the new US-Mexico-Canada trade agreement. So here is my conversation with Frank Jacketti.
Bob Bowman – 2:11
Frank Cecchetti! Welcome to the show.
Frank Jacketti – 2:14
Hello, Bob, it’s good to be here.
Bob Bowman – 2:15
I want to talk about the issue of shipping in Canada, especially parcels and the like. And I want to start by asking you what you believe to be some common misperceptions or misconceptions that people have about that exercise.
Frank Jacketti – 2:27
It’s funny, it’s really common that companies put Canada and Vulcan into their domestic operations- now, we’re talking about US companies. The Canadian border is a real thing, and clearing customs is often more complicated when going into Canada than going to other locations globally. Having a partner that can really understand that piece and understand that Canada is a very complex country to enter into, but once you know those rules and regulations, and the how to’s of those complexities, it can really help improve your strategies going into Canada.
Bob Bowman – 3:01
What kind of changes have you seen in this regard with the formation of the US-Mexico-Canada agreement replacing NAFTA? Has that caused any changes in the things we need to know about?
Frank Jacketti – 3:12
So far, for the most part, it’s been related to a few sectors of industry and related to tariff changes, keeping a close watch on where the US and other governments internationally are going for, because tariffs are a way to protect businesses within the whole market. So understanding where those changes are on both sides of the border has been really key. So we’ve seen it in certain economic sectors in the US, and it has caused exports to be mitigated because of increased tariffs. So when in this case, Canadian consumers are buying US product, it’s more expensive because of Canadian tariffs being applied to that specific product. But for the most part, it’s been fairly stable, you just see it in a few different industries.
Bob Bowman – 3:57
Yeah, a lot of it seems to be cosmetic in nature, mostly with regard to the physical nature of shipping, but I guess it’s still good to have a heads up to understand that there is a new agreement in place. What are some opportunities that companies can avail themselves of to improve their Canadian supply chains, to speed up ground services in the light, to overcome some of the potential obstacles that might exist that arise from a misunderstanding or a lack of full understanding of what it takes to ship in Canada? What are some of those opportunities for improvement?
Frank Jacketti – 4:26
Certainly looking at the vendors that are out there that specialize the service is really key. Expecting efficiencies is something that we want our customers to push us towards. It used to be where four days into Canada was acceptable, and now the market is demanding much closer, tighter tolerances in times in transit, to the point where if somebody orders something online, that person may be tracking that a few hours afterwards just to see that progress. So not just in time in transit, but in technology; Making sure we bridge that gap for the information available to our customer and our customers’ customers has really become key. And then matching that with best in class transit times is really critical. So customers are becoming more demanding, and it’s not just in a typical B2B space that we’re accustomed to, but now we’re seeing customers on the B2C side, really tasking companies like Purolator and other companies to get quicker transit times.
Bob Bowman – 5:29
What kind of experience can they expect to have at the border these days? My understanding is, and a lot of people just assume, that over the years, US Customs and Canadian customs have reached some kind of agreement between them that expedites the movement of packages in both directions. Is that not the case? I mean, are there some bureaucratic considerations that you need to keep into account when you’re moving from one customs agency to the next as you cross the border?
Frank Jacketti – 5:53
Absolutely, because customs is a complex entry going into Canada or the US, or any other country worldwide. There’s governmental agencies that are called other governmental departments that have a stake in the customs clearance process. So that’s what we’re seeing now, and in particular, going northbound from the USA into Canada, the Canadian Food Inspection Agency- we have found a slowdown in our clearances because of the additional clearance that they’re required to do for certain product types, in this case, food products. Navigating through that has really been important that we connect with the CFDA and have our brokerage division do those entries in a way that fits that entire process has really been critical in a way to expedite that customs clearance process.
Bob Bowman – 6:43
Why is it important to register as an NRI, a non-resident importer? What benefits does that bring?
Frank Jacketti – 6:49
To describe that in a simple way, when a US company is an NRI, you’re behaving as the importer and exporter. So as a non-resident importer, of course, a US shipper would be the exporter of the goods. And then as the importer, you’re responsible for the duties and taxes payable to the host country, in this case, Canada, but that simplifies the process. There’s a lot of Canadian business entities that require their US partner to be an NRI if they don’t have residency in Canada, which it could be an expensive proposition to put up a Canadian Division. So for those companies that decide not to have residency in Canada, it’s a real efficient way to sell into the Canadian market, and it’s one that the Canadian market demands oftentimes that they will only do business with an NRI company because it does, indeed, simplify the whole export process.
Bob Bowman – 7:49
We often hear about the advantages of duty drawback, but a lot of times it seems to be connected more with trading partners that are much more distant than Canada, across an ocean, for instance, but I take it that with Canada, there are substantial duty drawback opportunities there as well. Tell me about how that works.
Frank Jacketti – 8:05
Indeed, duty drawback is really a critical component for companies to consider, because oftentimes, money’s left on the table by not applying for duty drawback and foregoing the monies available for return product. So we’re talking about duty drawback- it’s when there’s a shipment into Canada, and it’s returned back to the US. There has to be an official declaration that the product has been returned. Once that’s done, the shipping entity or whoever was listed as the importer of record, can get that duty back. And a process that you would be looking for is one that is automated through Credits Canada. And that could be a real great source of income that large companies bypass in the future because they didn’t consider the importance of a duty drawback program.
Bob Bowman – 8:54
NAFTA, of course, mandated certain local content requirements in order to qualify for preferential treatment under NAFTA, and I’m assuming that the US-Mexico-Canada agreement does the same, if not even toughens up on those content requirements a little bit. How should importers and exporters approach the whole subject of demonstrating that their products have the sufficient local content to qualify for preferential treatment under the trade agreement?
Frank Jacketti – 9:18
The recommendation we give is really use the resources that are available to you- the US government supplies NAFTA consultation, there’s a NAFTA division that specifically handles questions from commerce along the lines of NAFTA consideration. We know the complexities that goes with manufactured goods and there’s a lot of different components that come from different areas. But at some point, depending on the work done within a NAFTA qualifying country, that could become a US product. So getting guidance from the NAFTA agency is really critical along those lines to ensure that there’s no issues downstream when exporting those goods.
Bob Bowman – 9:58
Now 80% of Canada’s population resides in urban centers, but there is a substantial number of people who live in remote outlying rural areas that can be extremely hard to reach. Can you talk about what are some of the challenges there and how those can be overcome?
Frank Jacketti – 10:13
So Canada, as you know, is the second largest country in the world and few companies have invested in the network to service Canada coast to coast. What we’ve seen is more regionalized pockets of shipping companies servicing localized markets, so finding the right supplier to service all of Canada is critical.
Bob Bowman – 10:34
What do companies need to know about the possibility of maintaining inventory? This would be US companies shipping to Canada, maintaining inventory in Canada, balancing the considerations and the complications of cost versus the need to be near and adjust in time basis to their destinations. Give us some guidance on that question of what are some of the challenges of maintaining inventory in Canada?
Frank Jacketti – 10:56
Sure, when you think about North America as a whole, 90% of inventory or consumption in North America is going to be in the United States, many companies have understood the cost of carrying inventory within Canada has been quite expensive to their bottom line. So a lot of our clients actually have closed facilities in Canada and centered their inventory out of one strategic resource in the US, and that has been very cost effective. And that helped them avoid the duplicity of inventory carrying costs, facility costs, and just overall cost of obsolescence of the inventory.
Bob Bowman – 11:37
Now, we do have Canada Post to consider, tell me what are some of the pluses and minuses of using Canada Post.
Frank Jacketti – 11:44
By law, Canada Post is mandated to reach every Canadian consumer. So every Canadian postal code is covered by Canada Post. So their network reach is amazing, even surpasses Purolator in terms of delivering to consumers in certain geographic areas. So having that partner that can deliver to every consumer has really been key. Canadian consumers, on average, live within three kilometers of their closest post office, and that’s really critical when looking at return solutions and other solutions rather than delivered to home. More and more consumers are opting for delivered to post office solution that even makes delivery more convenient for that individual.
Bob Bowman – 12:27
Now in the age of e-commerce, of course, the importance of Last Mile services becomes greater than ever before. What is the state of Last Mile in Canada? I assume that it’s probably pretty sophisticated at this point, is it?
Frank Jackett – 12:38
It is, so finding that key Last Mile provider that meets the customer expectations is critical. Within Canada, there’s things similar to the US, White Glove delivery, weekend deliveries, evening deliveries, ensuring that the product arrives at the right time, at the right place in the right condition, has really become critical. And I would say over the past five years. With the e-commerce revolution, customers are asking for all those services at a lower price point than ever before. So making sure that you have the right network that’s running at optimum efficiencies has really become critical.
Bob Bowman – 13:17
I just want to circle back to what you were talking about the beginning of our conversation, the realization that shipping to Canada is in fact an international move, it’s not just another state of the United States, and companies need to reflect that in the organization of their logistics departments. Therefore, I assume that would mean they would have a domestic logistics department, they would have an international one. And yet it could be difficult for coordinating those two, especially when you’re talking about shipping to Canada. Is that a challenge for companies today? And do you have tips as to how companies can achieve that internal coordination between domestic and international when it comes to shipping to Canada?
Frank Jacketti- 13:49
Absolutely. It really could be a daunting task to take on, but there’s help. Most companies offer free consultation in working with the complexities of clearing the border. The first step really is to seek out that consultation rather than develop an international compliance department. A good first step is to talk to their free resources, trade embassies, the United States has sophisticated channels of helping commerce that can offer free consultation to those companies looking forward and then, making the right move, and eventually, if their business grows enough, having an export compliance department can really help eliminate any issues at the border.
Bob Bowman – 14:37
Frank, tell me a little bit about Purolator International and its expertise in Canada, a little bit about the history of the company and how it came to become a major player in that area.
Frank Jacketti – 14:45
Well, Purolator has itself within Canada and been incorporated since 1960, and then around 1998 we re-incorporated in the US, and since then, we have seen double digit growth throughout the course of our history. In large part, that had to do with Canadian companies that needed a resource in the US, oftentimes when distribution centers retracted in Canada, and they needed to move that product from the US, they needed a supplier who could do that and the way they were accustomed to. So that really has been the growth of Purolator- started with one office with a few individuals in the US, and now I’m happy to say that we have 30 branch offices in the US. And again, I don’t see any end in sight with that double digit growth because of the way we operate with our strategic partners, with Canada Post Purolator, then a host of a variety of transportation partners. Purolator really is the most efficient way to get product to, from, and within Canada,
Bob Bowman – 15:47
How has your service offering expanded or improved over the years that Purolator has been in existence? What kinds of new services, additional services have you come to offer the marketplace?
Frank Jacketti – 15:56
So our core product has been, always, our courier product, which is the largest delivery network within Canada that’s Purolator, both Express and Ground. But as the market evolved, and e-commerce came around, Purolator needed to expand that offering. And that’s where we develop PuroPost, it was a strategic venture with our parent company CanadaPost, to develop the best of both worlds for forwarding product into Canada, and the optimum Last Mile experience for the Canadian consumer. And that’s when we came up with PuroPost. And then other clients were asking us for the fastest means to get product delivery, and this was more on the business to business side, and that’s where we launched our expedited forwarding department. We can ship everything globally on an expedited basis, whether it’s hand delivered to somebody across the globe, or an expedited part that has to get delivered for a manufacturing process that’s down. Purolator could handle that piece and deliver, again, at the right place at the right time in the right condition.
Bob Bowman – 17:06
We talked earlier about Last Mile, but Purolator, by the very definition of what it does, is essentially a Last Mile provider from the word go, isn’t it? I mean, you do deliver all the way to the door.
Frank Jacketti – 17:16
Absolutely. Yeah, in fact, we cover 98% of delivery points within Canada, which again, no other US company can say that. A lot of companies use our network to deliver that last mile. So we pride ourselves in ensuring that we eliminate pass-offs, because anytime there’s a pass-off to another agent, that is complexities within your supply chain, and that’s where problems arise.
Bob Bowman – 17:43
So difficult to predict what’s going to happen in the future in terms of customer demand, regulation demand, the state of trade between the US and Canada, but what do you think the future holds? What do you think is the most exciting thing out there in the future with regard to Purolator and what it expects to be offering the marketplace in the coming months and years?
Frank Jacketti – 17:59
First and foremost, we are the premier Canadian brand. And our US team is a team really of Canadian commerce experts. One of the biggest trade relationships in the world is between US and Canada, and we have the resources, locally, for US consumers to help US companies not just get into Canada, but compete with Canada with some premier organizations. That’s what’s really exciting to me- making sure that commerce, that we’re there not just to ship product across borders, but help our customers excel, and ultimately ship more product, that’s the first point. And then expanding globally is something that you’ll see Purolator do, it’ll be on an inbound basis where we’re the leader in offering solutions from say, Asia and the EU, perhaps Australia inbound into Canada, and then we’ll take it from there. But just that alone is really exciting how owning Canada, both from an inbound and outbound perspective, is really critical to who Purolateris going to be now and in the future.
Bob Bowman – 19:10
Frank Jacketti, I want to thank you so much for joining us, telling us a little bit about the ins and outs and the real experience of shipping to and from Canada, and also telling us a little bit about Purolator International as well. Thank you very much for being with us today.
Frank Jacketti – 19:23
Bob, it was a pleasure. It was an honor. Thank you very much.
Bob Bowman – 19:34
That was my conversation with Frank Jacketti of Purolator International, talking about the challenges of shipping to, from, and within Canada. Our thanks to Purolator for sponsoring this episode. We’re online at www.supplychainbrain.com. Repost a new episode of this podcast for streaming or downloading every Friday. You can also read my Think Tank blog, watch thousands of videos, and access all of our other content, including the digital edition of our magazine. Look for us on Facebook and LinkedIn and follow us on Twitter at @SCbrain. You can also download or subscribe to the podcast on iTunes. Got any comments suggestions on this or any episode? Email me at Bowman@supplychainbrain.com. See you next time.
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