February 2020
What Should You Know About Exporting to North America?
If you are a US-based company considering exporting your products to the international market, there are options available to you that make the process simpler and more accessible than ever before.
With the rise of e-Commerce and other online businesses, potential customers (and profit) don’t have to come from the people walking past your storefront every day. You are able to reach a whole new market of potential customers, which can, in turn, increase your profit margins and company exposure.
But what if you’re unsure where to start? Exporting can seem daunting when you’re just starting out, and it’s important to assess your company’s readiness to pursue it as a possible sales channel. For this reason, it may seem less overwhelming to start exporting within North America instead of jumping straight into the international trade market.
If you do want to start exporting within North America, there are some things you should know beforehand. Below we will discuss a few of them.
EXPOSURE AND PROFIT
The difference between domestic production and exporting your products throughout North America comes down to a simple number: the increase in exposure and profit for your business. With the recent US-Mexico-Canada-Agreement (USMCA) and its predecessor NAFTA, you are able to put your products in front of consumers across all three domestic markets. You are not limited to domestic trade only, which means more eyes on your products and presumably, more profit for you.
ENTRANCE TO GLOBAL EXPORTING MARKET
One of the goals of both the NAFTA and USMCA is to allow for North America to better compete with the international markets - especially the likes of China and Japan. By establishing an agreement that allows for free trade within the United States, Mexico, and Canada, the larger the positive impact has on the global economy. What does this mean for you as a manufacturer? Simply put, it gives you a way to test out the waters of exportation while still remaining close to home. It also means that you can work on perfecting and streamlining production before entering your products into the global market.
USmca: WHAT IT IS AND HOW IT AFFECTS YOU
Drafted in 2018, the USMCA is essentially an update to the North American Free Trade Agreement (NAFTA) originally signed in 1994. The agreement has specific provisions that affect trade in North America. Depending on what products your company produces, you are likely to be affected in different ways. The overall goal of the agreement is to strengthen manufacturing, production, and exportation within North America. As a consequence, North American jobs and production would see an increase, while the reliance on international imports would decrease.
PROVISIONS
There are several key provisions under the USMCA that can affect manufacturers. The first - and most notable - applies to the automobile industry. Under the USMCA, the Rules of Origin provision was raised from 62.5% from NAFTA to 75%. The Rules of Origin refers to the economic value of a product given its country of origin. For example, under the agreement, 75% of a vehicle’s parts must be produced within the country of origin in order to have tariff-free access within the three countries.
Similarly, the Dairy provision specifically gives dairy farmers greater access to the Canadian dairy market. Another important provision exists to promote a higher minimum wage for labor workers, particularly in the automotive production industry.
All of these provisions aim to promote and incentivize manufacturers, importers and exporters to grow and maintain their efforts within North America. Eventually, this translates to greater competition with China, Japan, South Korea, and other influential international markets.
DON’T GO IT ALONE
Implementing an effective exporting strategy might seem overwhelming at first, but with all the resources available, you don’t have to do it alone. There are options to help simplify the process. Freight forwarding allows the process of getting goods from one destination to another to be managed without your constant oversight. If paperwork, insurance, and compliances issues are not in your wheelhouse, Customs Brokers can handle all of that for you, so that you can focus on growing your business and creating quality products.
HAVE MORE QUESTIONS?
We understand that the exporting process might seem overwhelming, but we want you to know that you can absolutely have success with the right help. By knowing some of the challenges that you might face and partnering with a freight forwarder and or Customs Broker, you might be surprised at how simple exporting your products can be.
Have more questions or want to speak with an experienced team that offers reliable and world-class logistics, warehousing and brokerage solutions? Contact us today and start your journey into a potential global expansion of your company’s exposure and profit.