Target Logistics (TLG)

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WHEN EXPORTING, CANADA REMAINS GRAY AREA FOR U.S. COMPANIES

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BOSTON, JUNE 15: Despite having the largest trade volume with the U.S. of any nation, despite having the longest undefended border in the world, and despite an almost 200-year history of friendship and mutual political, social and economic interests, Canada remains a "gray" area to many U.S. companies.

"To many American corporations seeking to sell their products in Canada, particularly less sophisticated middle and smaller sized companies, Canada neither is fish nor fowl. Sales and marketing executives can't figure out whether Canada is a domestic or international market for their goods," says Craig Meador, director of Canadian operations for Target Logistic Services, a transportation company with a 35-year history of serving the logistics needs of U.S. and Canadian corporations.

Of course, Canada is an independent nation of almost 30 million people. That nation's ties to the U.S. are so close, Americans can be forgiven if they believe our neighbor to the north is an extension of the U.S. To some extent, this picture of Canada has some validity. Ninety percent of Canadians live within 110 miles of the U.S. border. British Columbia is closer in spirit to the Pacific Northwest than it is to the province of Quebec. The city of Calgary has much more in common with Houston than Halifax.

The anomaly that is Canada is reflected in the transportation of goods between the two countries. Canada enjoys a favorable balance of trade with the U.S. thanks to an enormous amount of diverse commodities that flow from Canada into the U.S. Canada's substantial deposits of oil, zinc, nickel, copper, gold and other minerals are supplemented by huge swaths of timber, among the largest in the world. These commodities are enormously valuable today in our global economy. The U.S. cannot get enough of these raw materials. The materials underneath Canada's soil and its forests are shipped to the U.S. by rail and truck. Air plays no role in moving these bulk products.

With manufactured items, a different picture emerges. As Target's Meador, headquartered in Boston because of its proximity to Canada, points out, "with bulk commodities, traffic is almost 100 percent inbound into the U.S. With manufactured products, the situation is almost completely reversed." Meador notes that most of this U.S.-Canadian traffic moves by truck with air playing a smaller yet important role.

The Target Canadian specialist claims that many American companies, even the largest and most sophisticated, have difficulty in complying with the thicket of rules and regulations required to export their merchandise to Canada. Target offers a great deal of expertise in cutting through the maze of Canadian customs regulations. Explains Meador, "I spend a good deal of time personally explaining to U.S. export managers how to satisfy Canadian customs law. For example, what is non-resident importer (NRI) status and how does a U.S. company establish itself as an NRI? How and when should goods and services (GST) taxes be collected and paid to Revenue Canada? Depending upon the volume of business in Canada, should U.S. exporters establish distribution warehouses north of the border or should they ship from American distribution facilities? If Canadian facilities are established, where should they be located? In major cities like Vancouver in the west or Toronto in the east, or perhaps in a central Canadian province?"

Often, Meador will accompany sales & marketing teams to offer potential Target customers his specialized knowledge of the Canadian market and its logistics requirements to aid in their cross border efforts. This is a service which few U.S. freight forwarders offer and one that has been successful in generating Canadian-bound business for Target.

"There's a good deal of fine print in Canadian government regulations that companies like Target who know the market, can ferret out to the customer's advantage," stated Meador. He pointed to a stringent requirement truckers must adhere to in order to be given the ability to perform PARS clearances. American carriers also can be be allowed to perform PARS clearances. However, many U.S. trucking firms elect not to handle them. They end up transloading cargo to other carriers which causes excess handling charges and delays. Target avoids these delays and additional costs by giving its freight to Canadian truckers whenever feasible.

Perhaps the newest "hot button" issue in logistics is direct distribution of merchandise. Direct distribution begins with the readying of merchandise for distribution at the point of manufacture, now most commonly located in Asia. The Asian producer packages the manufactured goods, ready for immediate distribution once they arrive in North America. Instead of being shipped to a central warehouse once landed in the U.S., the merchandise immediately is sent to regional distribution centers or even direct to retail stores. The huge American retailer, Wal-Mart, recently instituted a program of direct distribution to its stores for many thousands of individual items--claiming substantial savings in inventory and warehouse costs.

"In essence, goods go directly from an ocean or air container directly into distribution" stated Meador. For even greater efficiency, he noted, one container can carry goods for both U.S. and Canada. Meador emphasized that Target can handle the entire distribution cycle for the customer; from pick-up in Asia, ocean or air transportation across the Pacific and final distribution throughout North America. "We provide invaluable guidance to our customers on how, when and where their goods should be moved," declared Meador.

"We have the trained, experienced people plus the technical resources to provide a complete logistics package to the shipper," he stated.

Meador pointed to current handling of shipments in Canada for the Huffy Corporation, as an example of a complete logistics package for a customer. Huffy perhaps is best known for bicycles, but the venerable company also makes and distributes golf accessories. Target distributes Huffy golf accessories on a time definite weekly basis to sporting goods stores throughout Canada that are Huffy customers.

Meador reports that Target moves the Huffy merchandise at lower cost, with shorter transit time, plus a higher degree of customer service and follow-up than its previous vendors. "Huffy is very pleased with our work," said the Target manager. "You could say we're shooting par for them."

Target Logistic Services is growing its cross border operations fueled by increasing trade between Canada and the U.S. Expanded trade has been spurred by the NAFTA trade agreement and rising incomes on both sides of the border. "We have moved beyond just transporting cargo from Point A in the U.S. to Point B in Canada," said Meador. "In addition to our freight forwarding, Target offers valuable logistics advice and guidance for shippers either seeking to enter the Canadian market for the first time or those who wish to expand existing sales north of the border," he concluded.



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