Jun 27: 5 Ways that Canadian Importing and Exporting Businesses can Save Money
Importing and exporting companies aren’t necessarily at the mercy of tariffs and customs fees. There are plenty of other ways to help you save money through the rough waters of international trade.
A look into Canada’s Imports and Exports
In 2017, the United States sent goods to Canada to the tune of US$282.5 billion, which was up from 2016 by 5.9%.
Considering the numbers were much lower 10 years prior, it seems that Canada decided to speak with its southern neighbour a bit more.
You may wonder what it is that Canada is bringing in, and the answer may surprise you.
- Vehicles: US$74.3 billion (17.2% of total imports)
- Machinery including Computers: US$63.3 billion (14.6%)
- Electrical Machinery, Equipment: US$42.8 billion (9.9%)
- Mineral Fuels including Oil: US$29.7 billion (6.9%)
- Plastics, Plastic Articles: US$16 billion (3.7%)
- Mineral fuels including oil: US$84.6 billion (20.1% of total exports)
- Vehicles: US$62.3 billion (14.8%)
- Machinery including Computers: US$32.4 billion (7.7%)
- Gems, Precious Metals: US$18.6 billion (4.4%)
- Wood/Lumber: US$14.1 billion (3.3%)
- United States: US$319.6 billion (76% of total Canadian exports)
- China: US$18.2 billion (4.3%)
- United Kingdom: US$13.6 billion (3.2%)
- Japan: US$9.1 billion (2.2%)
- Mexico: US$6 billion (1.4%)
The US Trade War Is Effecting Canadian Importers and Exporters in a Negative Way
With the current steel and aluminum import tariffs, Ontario and Quebec are feeling the impact the worst of all the Canadian provinces.
The Huffington Post reported that last year these two provinces were responsible for $13.3 billion in exports to the US in steel and aluminum alone.
Some businesses may already be feeling the pain from the turmoil and with no end in sight, things can only get worse for Canadians.
Local small businesses that rely on US suppliers and customers will soon be caught in the middle of the impending trade war.
What does that mean for import/export businesses?
This means that small businesses in Canada have to find any way they can to save on expenses caused by the trade war.
Small businesses need a way to shield themselves from the financial impact of the present and future tariffs.
With 76% of all Canadian exports going to the US, any tariffs placed on this trade relationship would have devastating effects on the Canadian economy. In the above mentioned steel and aluminum tariffs, the cost to the Canadian economy per year could reach US$3.2 billion.
If we analyze a couple of different aspects of importing and exporting companies, there will be plenty of instances where costs can be cut or current processes can be improved.
How can import/export businesses save money?
1. SHIPPING AND FULFILLMENT
Use the correct HS Code:
The Harmonized Commodity Description and Coding System, or HS Code is the international standard for tariff nomenclature. It identifies the tariffs paid for each type of good or service traded between countries. It is regulated by an independent body, the World Customs Organization (WCO).
While it seems simple enough, countless companies use the wrong HS Code and end up paying more on tariffs than they need to.
HS Codes can be very complicated. They are 6–10 digits long, divided into 21 sections, and then divided again into 97 chapters.
If you’re in Canada, you can go to Canada Post to find the right HS Codes for your company.
It’s definitely not the most exciting part of any business, but non-compliance with sovereign nations’ regulations could land any company in a lot of trouble not just legally, but also economically.
The most obvious way to ensure compliance is to retain compliance services. However regardless, anyone involved in the import and export industry must have a clear understanding of the international trade rules in their respective sector. A good place to start would be checking out a general guide to international trade rules.
The most obvious way to reduce expenditures is by negotiating better pricing with vendors and suppliers. The less you pay, the more you save.
Make sure that you maintain an open line of communication with all members of your supply chain:
In order to do this efficiently and to build a lasting rapport, you should make sure that you understand the industry jargon, and that you have researched your suppliers’ actual costs.
Understanding the language used will make you seem more knowledgeable and your contacts will respect you more. If you know what your suppliers are paying, you will be able to negotiate with a thorough understanding of just how much wiggle room you have.
Pitch your suppliers with a mutually beneficial agreement:
If you can offer a way for your suppliers to earn more money with you, you will be able to create a mutually beneficial relationship with them. The easiest way to do this is to spend more. They have supplies, and their objective is to sell as much as they can. If you’re able to purchase more from them, then you can leverage this into volume discounts.
If the supplier really won’t budge on pricing, you can always negotiate decreased down payments, increased length of warranty or delayed payments.
Communicate with multiple suppliers:
Talking to different suppliers in your industry will give you two advantages —
i) You will better understand the average market expenses. If you understand your market’s economics and you check your suppliers’ costs you will be able to negotiate lighter costs on your own company.
ii) Having options is always beneficial. You can enter any supplier negotiation with more confidence, knowing that you have other options to explore.
Ultimately, having an understanding of your suppliers’ markets will put you in a better bargaining position. Suppliers will see you as desirable and respectable, and your knowledge will help you streamline your processes and contract negotiations.
3. CUSTOMER POLICY AND GUIDELINES
This one is simple: Set your shipping guidelines based on shipping rates around the world.
Don’t wait until after you have shipped out your product to find out what the cost will be. Research the rates ahead of time and save yourself the headache!
Diversify your shipping channels:
Research different companies for all of your products. This way you can offer real-time shipping rates. With this knowledge, you can also charge flat rate shipping. Although, this method should really only be used if you’re fairly consistent with products that you’re shipping, and the amounts.
Use a fulfillment warehouse:
Outsourcing shipping fulfillment is not for everyone but it is definitely something to consider for smaller companies. Due to the volume and frequency of shipping performed by fulfillment warehouses, they can offer two advantages.
i) Cheaper Shipping Rates
ii) Shorter Shipping Times
Be mindful though. There can be additional fees associated with fulfillment warehouses. These are known as ‘pick and pack fees’.
Make sure you understand all of the aspects and options involved in shipping before you set your shipping guidelines and policies.
4. IMPROVE QUALITY CONTROL
Each country tends to have their own laws surrounding the issue of packaging labels.
So by labeling packages correctly you are not only being compliant, but you can also streamline the time that your packages will be held by customs.
It can be something as simple as helping customs identify the contents of your shipment by labeling it in their language.
Reduce Returns and Chargebacks:
Chargebacks occur when a customer calls their bank and asks for their money back after making the purchase.
The Bank will always favour the customer at first and refund the funds.
To get the money back from your customer you will have to file a dispute. It can take anywhere from 2–4 months to settle the dispute.
The best way to deal with this is to reduce the number of chargebacks against your company.
5. PAYMENTS PROCESSING AND BILLING DEPARTMENT
You might be asking yourself how you can just reduce the fees on your payment processing. You can’t just ask the bank for a reduced money transfer rate.
What you can do is look into different fintech companies to help you with foreign currency exchange to make international payments.
A perfect example is Curexe.
If you need to send Euros to Spain, or any other neighbouring country, Curexe has you covered!
Normally, especially as a small business — it can be a pain to have to transfer through a bank. Even if you decide to pair up with a foreign exchange company, the fees will be exorbitant.
With Curexe, you get charged a maximum of a 1.00% fee, and they will go as low as 0.3% for larger transactions.
Curexe also helps by showing you which days of the month to transfer in order to save money.
International trade companies are constantly subject to the whims of government regulation. Tariffs can be a pain, but that doesn’t mean you have to bite the financial bullet. I hope this helps you save money while you operate your import/export business.