cross-border shipping

A Guide to the Most Common Cross-Border Shipping Challenges and How to Overcome Them

By
Matthew Schore
Trucking
l

Cross-border shipping has never been more relevant. With an increasing number of companies in the U.S. and Canada moving their production to different regions of the world, it’s imperative that businesses can move goods from the producing to consuming countries smoothly, efficiently, and at reasonable costs.

In North America, we’re seeing a trend of businesses moving production from the U.S. and Canada to Mexico or that they’re ‘near-shoring’ and moving production from far-away Asia to closer-to-home Mexico for increased visibility. This still means that manufactured goods need to travel from where they’re produced, in Mexico, to consumers in the U.S. and Canada. Similarly, the U.S. and Mexico are leaning more heavily on Canada for natural gas and oil to fuel, necessitating smooth trade of fuel and other natural products from Canada to the U.S. and Mexico.

Some of the most common issues companies face in cross-border shipping are unexpected tariffs, missing documentation, meeting regulations, and properly classifying goods with the harmonization system codes. This article covers the basics of cross-border shipping, including some of the most common delays and ways to avoid them.

Customs Regulations and Compliance

Customs regulations are complex. Here are some of the ways to ensure compliance with the United States-Mexico-Canada Agreement (USMCA) and other trade agreements.

Under the USMCA, U.S. companies exporting from Mexico are required to file details of all export transportation by sea, air, or land. This relatively new invoicing system from the Government of Mexico is designed to crack down on smuggling and drug trafficking. Similarly, regulated products going into Mexico will need to receive import licenses to allow their importation. These rules include some agricultural products, medical products, and commodities like eggs and wood.  Make sure that when you are planning importation to or exportation from Mexico you follow all their regulations on filing this documentation.

One of the biggest causes of transport delays and logistical issues in cross-border shipping is incorrect documentation. When moving goods across the border, importers need:

  • Commercial Invoice
  • NAFTA Certificate of Origin
  • Importer ID number
  • Bill of Lading or Airway Bill
  • Entry Manifest
  • Entry/Immediate Delivery
  • Harmonized System (HS) Tariff Classification
  • Licenses or Permits (depending on the goods)

Work with your freight broker to ensure that your shipment has all the necessary documentation.

Since rules and regulations change regularly, it can be extremely valuable, saving your business time and money to partner with a knowledgeable freight forwarder to navigate these complex regulations.

Tariff Classification and Duties

Tariffs, duties, and taxes are fees a government levies on goods imported into the country. Customs fees also may be applied. The duty is collected at the time the goods pass through the port of that country.

Trade Agreements Limit Tariffs

Some trade agreements with the U.S. allow for qualifying goods to enter the country duty-free. Trade agreements, including the USCMA, help facilitate trade between these neighboring countries. Under the USMCA, there are very few taxes for goods coming from Mexico into the US. Note that for goods heading to the U.S., if they come from a U.S. territory, they are not subject to duties as that is not considered an import.

Estimating Tariffs Saves Margins

All those additional taxes will add to the final cost of the goods when they are delivered to the retailer, so companies need to have a clear sense of the final cost of the product when quoting the buyer so that their profit margins remain strong.

When it comes to importing goods into a country, it’s vital to accurately classify goods to understand the full expression of duties. Harmonization codes (HS), which are the codes classifying goods by type, enable businesses to look up the tax rate of their goods on trade.gov. It’s important to get the HS correct when calculating costs. To stay informed about customs and tariffs for upcoming shipments, make sure to check the database of tariffs and also ask your shipper for support estimating costs.

In addition to duties, there is the U.S. Customs and Border Protection (CBP) cost, which is calculated from the value of the price paid or payable for the goods. The cost insurance freight (CIF) is the price the shipper pays for the goods, with freight and insurance included, and is not the value they should declare for CBP calculations.

There is also often a merchandise processing fee, which in the U.S. is 0.3464% of the value of the imported goods, not including insurance, duty, or freight charges. In the US, there is also a minimum ($31.67) and a maximum ($614.35) that can be charged for merchandise processing fees.

When planning your shipment, make sure to check the border control website for the country to which you are importing. Speak with your freight forwarder and ask for their advice to ensure you have included all the potential customs costs in your calculations.

Language Barriers and Communication Issues

Even between neighboring countries, language barriers exist. While the U.S. speaks predominately English, Canada speaks English and, in some areas, French, and Mexico speaks Spanish. To make sure that instructions are understood, ask employees or contractors to restate the directive in their own words.

Even when language isn’t an issue, culture differs from region to region, and failure to understand cultural differences can cause communication issues. For instance, Canadians tend to avoid direct conflict, while Americans may be more direct. Differences in gender norms may also come into play.

Currency Exchange and Financial Risks

Another component of importing or exporting goods is foreign exchange rates. Depending on the exchange rate and which direction your goods are moving, the change in currency can lead to higher profits or a bigger loss. For instance, if you’re moving goods from Canada to the U.S. and you’re paying customs fees in Canadian dollars (CAD), then you’re going to have to pay about 30% more in your local currency since it’s about $1.30 CAD to USD$1 at the time of writing this.

Furthermore, fluctuations in exchange rates can impact the cost of goods and international transactions. If a buyer in the U.S. agrees to pay a Canadian supplier USD$1,000, the current exchange rate means the supplier will receive about CAD$1,300. However, if the exchange rate swings significantly between the time the price is confirmed and the goods are delivered/the payment is received, the value of the USD could drop to equal that of the CAD. If that happens, that means that the supplier is only receiving CAD$1,000, which might affect their bottom line.

One of the easiest ways to reduce this risk is to quote the buyer their price in your local currency. That way, the onus is on the buyer to exchange their currency for yours. One caveat is that, in some cases, this agreement could lead to a buyer simply not paying because the value of their currency dropped so low that it’s significantly more expensive for them to pay.

Safety and Security Concerns

Trucks are increasingly being targeted for theft. In 2023, truck thefts in the U.S. and Canada saw a 57% increase year-over-year compared to 2022. While almost any goods can be stolen, the most common are electronics, home goods, food and beverages, building materials, and auto parts.

To help secure your goods, make sure any transportation providers are compliant with safety regulations, including their electronic logging device (ELD), a recording device that will keep track of the route and anything that happens during transit.

Partnering with A.N. Webber: Your Ally in Overcoming Cross-Border Shipping Challenges

Cross-border shipping may seem intimidating, but A.N. Webber can help simplify the process and make importing or exporting a breeze. They have a customized tech stack that offers advanced security and expert support. Their tech stack helps ensure efficiencies in booking transport, tracking trucks, and beyond.

They offer customized solutions to navigate many of these common challenges and provide top-notch service and communication to ensure all your documents are correct, all pickups are timely, and more.  Lean on A.N. Webber’s expertise in cross-border shipping to make your import and export stress-free. They can help book freight, calculate approximate costs, prepare documents, and navigate any issues that arise. Ready to make cross-border shipping pain-free? Request a rate from A.N. Logistics today.

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