If you’re a small-business owner who exports or imports goods to or from the U.S., you may have wondered: Whatever happened to the North American Free Trade Agreement?
NAFTA, after all, was supposed to remove trade barriers between the two counties. And for big many businesses, it may well be doing that.
But in a series of interviews with eight Canadian and four American small-business owners, the Canadian Federation of Independent Business (CFIB) concluded that many are finding it costly and frustrating doing business on either side of the 49th parallel.
Megan Halprin, CFO of Vancouver-based Snowflake Trading Corp. Ltd., is one of the business owners surveyed for the CFIB’s Border Barriers study.
“It is virtually getting to be impossible to do business trans-border with our product,” Halprin said.
The study was a followup to a 2008 survey of 6,000 CFIB members, 25% of whom export to the U.S. and 50% of whom import from the U.S.
Corinne Pohlmann, CFIB’s vice-president of national affairs, said governments often don’t consider the impacts of regulations on small business when drafting agreements like NAFTA.
Some of the bureaucratic requirements businesses still face verge on the absurd.
One American equipment installer, for example, is required under Ontario law to buy a special brand of workboot that is identical to the ones he uses in the U.S., except for a Canadian safety certification label, before he can come into Ontario to install his equipment.
Halprin said the red tape and additional fees she faces selling some products into the U.S. have become so onerous that she has had to say no to some customers wanting to place small orders.
Snowflake has four retail outlets in Canada. The company sells clothing accessories and outerwear. It also has an import-export business.
Snowflake makes fur jackets and accessories – scarves, hats, earmuffs, etc. – and sells them through its own four retail outlets, as well as to other retailers in Canada and the U.S.
The company buys the furs at auction, has its garments made in China, then shipped to Canada.
When the company imports the finished product from China, it pays import duties and the HST.
When those same items are exported to the U.S., the company is ostensibly allowed to claim a refund on the duties and HST. In reality, Halprin’s company has to forego the refunds because the bureaucracy to claim them is simply too time consuming.
In addition, it is paying more and more to U.S. Fish and Wildlife Services for inspections. In the past, the agency would only do spot checks on imports.
About two years ago, the agency began inspecting every single shipment, no matter how small, and now charges more than $200 for each inspection.
Sometimes customers will receive a shipment then ask for a few more items to be sent – “repeats,” Halprin calls them. But she has to turn those orders down.
“If you’re sending a $5,000 or $10,000 or $15,000 order to a customer, you can spend an extra $250 in administration fees and you can build that into the price,” Halprin said.
“What if the customer says, ‘I’m doing so well with that one style of scarf, I want to order six more’? Now they’re ordering $300 worth of scarves. How can you pay $250 for a $300 order? You can’t.”
Tony Barrazuol, owner of Eclipse Awards, used to have problems exporting product to the U.S. too, until about three years ago, when he got a NAFTA certificate.
“That helps and that’s something we didn’t know about for years,” he said.
Barrazuol’s company makes recognition awards made of glass, crystal and wood. About 75% of his business is in the U.S.
His shipments sometimes got held up at the border for inspection, until he worked through a customs broker to get a NAFTA certificate, which itemizes everything an exporter ships across the border with a NAFTA code.
“That cleared up a lot of issues,” he said. “It’s been smooth sailing since.”
Sometimes it’s not costs but the lack of clear information that is a problem, and it’s a problem on both sides of the border.
One Canadian business owner surveyed said it can take three days just to get a live human being on the phone at Canada Border Services Agency.
Pohlmann said there are some positive signs that Ottawa and Washington are aware of some of the problems with cross-border trade and are in discussion on a new shared security perimeter that she hopes will address some of CFIB’s concerns.
CFIB will be lobbying the federal government to ensure it has some of the roadblocks to small business in mind when it sits down with the U.S. government to draft any new regulations.
A big improvement would simply be providing better contact information and customer service for business that must navigate several layers of bureaucracy on either side of the border, Pohlmann said.
“It’s about improving the customer service – being able to have a place people can go and get helpful service and guidance,” she said. “It’s about making sure that when you build trade facilitation programs in the future you don’t only think about the very high volume guys, you also think about the other types of businesses out there that are regular shippers.”