As an eCommerce business that is shipping to the US from Canada, or shipping to Canada from the US, the North American Free Trade Agreement (NAFTA) is an important consideration. With the renegotiation of NAFTA, a lot has changed and local businesses are worried how this is going to impact them. The new trade deal between US, Canada and Mexico, raised the de minimus thresholds making it easier for low-value packages to be shipped duty/tax-free. So, what does this mean and how does it impact you? Let’s find out.
What is de minimus and what changes have taken place?
The Latin term ‘de minimis’ literally translates into ‘about minimal things’, a negligible amount. Every country has a minimum threshold limit below which it does not charge tax/duty on incoming shipments. The current de minimus rate in Canada is $20 - the lowest in the world and hasn’t been changed since 1985. However, with the new NAFTA, also known as CUSMA, Canada has raised the threshold to $150 for duties and $40 for taxes for all express courier services. This is now applicable to shipments coming in from almost all over the world, not just from the US and Mexico.
So, how does it impact Canadian businesses?
What does this mean for you? Some local businesses feel that this is going to negatively impact their business. The reason is simple. It gives a tax advantage to foreign eCommerce businesses who can now charge a lower rate on more products, while local businesses would still have to add tax on smaller items. This essentially means that there will be an increase in cross-border shipping from the US to Canada. There will be an increase in the competition for local Canadian companies because it will be cheaper for Canadians to access US products.
However, all is not lost. As rightly mentioned by Matthew Boswell, Commissioner of Competition, “If we truly want Canadian markets to thrive in the digital economy, we must develop a culture that embraces competition.” Competition is important, healthy and what keeps your business going. A thriving economy always has competition at its very core. There are several reasons why this new competition due to NAFTA or CUSMA can be great for your business.
“Innovation is the reason why we have eCommerce stores and why you are in business selling products to a customer you haven’t seen, through a shipping company that automates all your logistics.”
1. Drives innovation
All innovation stems from a need to be better, to do better and to outperform others. Competition is a great driver for innovation and helps companies find newer ways of doing the same old tasks. Think of it like this - if there were no innovation, there would be no internet, no eCommerce store, no courier services, and no shipping companies.
Innovation is the reason why we have eCommerce stores and why you are in business selling products to a customer you haven’t seen, through a shipping company that automates all your logistics.
2. Boosts productivity
Competition in an economy not only drives innovation, increases motivation and improves performance, it also boosts productivity. When companies innovate, they essentially help their employees to be more productive by working smarter, rather than harder.
With the new NAFTA, Canadian eCommerce businesses will have to figure out newer ways to do the same thing - to reduce costs, to improve performance and to achieve higher returns. This could even be in terms of finding shipping companies that have innovative ways to reduce costs while shipping to the US.
3. Customer always wins
Everybody wins when there is competition, especially your customers. When you and your competitor are selling the same product, what sets you apart is your customer service. Customers rarely stay with a company for what they are selling.
In a digital world where everything is available everywhere, where an order today turns into a delivery tomorrow, where borders hold no meaning, customer service becomes a clear differentiator. When you are shipping to the US, it is important to work with a shipping company like eShipper that not only has the most competitive rates in the industry, but also has fulfilment centres that can reduce your delivery timelines drastically.
“As an eCommerce business, finding a shipping company that helps you navigate the logistics, is at the forefront of innovation, and gives you a competitive edge can make all the difference”
4. Improves efficiency and learning
Lack of competition means that companies become complacent, pause innovating and stop growing. This ultimately means that customers would find less and less to get excited about, markets would plummet and the economy would spiral downwards.
Competition forces businesses to constantly think, learn, adapt and improve to keep themselves relevant. CUSMA or the new NAFTA will nudge local Canadian businesses to learn new processes, improve efficiency and find out ways to become better than their US counterparts.
5. Increased knowledge of the market
If there were no competition and you were the only one selling a particular product or service, you would never know what you can do to improve your products, your customers and ultimately, your bottom line.
When you depend on your customers to pick you over your competitors, you are constantly on the watch out for the next big thing. Understanding the market and what your customer needs can give you an edge and help you adapt your products or services.
So, is the new NAFTA great for your business?
Absolutely yes! Anything that increases competition, forces you to re-think your strategies and pushes you into an uncomfortable spot, is great for business and the economy. Whether you are shipping from the US to Canada, or shipping from Canada to the US, competition will trigger you to innovate, improve efficiency and boost productivity. The competition that local Canadians face with the new NAFTA or CUSMA is definitely going to be a boon.
As an eCommerce business, finding a shipping company that helps you navigate the logistics, is at the forefront of innovation, and gives you a competitive edge can make all the difference. With eShipper, you get all of that in one package. Get a free quote today!
