I’ve been working with Canadian companies for several years and I love learning about their businesses and also why they are looking to expand. There are the typical reasons – the desire for a “Made in USA” label or contract requirement, currency rates, and the ability to gain access to a market ten times larger than their own. But have you ever though about border crossing costs?
Some companies are starting to look at their U.S.-based suppliers and what percentage of sales is going back into the U.S. market. Once companies start to analyze these percentages, they then start to look at border crossing costs. For example, I am currently working with a Southern Ontario company that purchases most of its raw materials from our west coast and thirty percent of its sales go back to the U.S. Another company is sourcing ninety-eight percent of its raw materials from the U.S. and has sixty percent U.S. sales.
There are several layers of border crossing costs to consider. There is the cost of physically moving the goods over the border twice. Then there is the cost of customs paperwork and fees associated with shipping and potential time delays. This becomes critical when it is a food product or other perishable items.
So what is the total cost of moving these raw materials across the border to be manufactured in Canada to then be sold and shipped into the U.S.? Can these costs be reduced by opening a small manufacturing facility in the U.S.? Can the shelf life of a perishable product be maximized by making it in the U.S.? If the answer is yes, it makes sense for Canadian manufacturers to consider a facility in Buffalo Niagara where they can easily manage their U.S. facility and share key resources. All while saving time and money.
By Carolyn Powell, BNE Business Development Manager