Distribution
Note: For more detail regarding distribution, please refer to related discussion in the “TFO Canada Exporting to Canada Guide” and to additional information provided in our Market Information Papers.
The method by which you will move your product to market depends largely on the target market (distance, climate, regulations, etc.), type of product (for example, fresh flowers need to be shipped to market under the fastest, yet highly controlled, conditions possible), who your buyer is (Importer, Agent or other) and how much of the logistics and distribution responsibilities of getting your product to the end-user they will control and manage (LCBO, the world’s largest single purchaser of alcoholic beverages, for example, often takes full ownership of the export product in the country of origin, sometimes from the loading dock of the supplying factory). The entire process of moving your product will entail varying degrees of handling, brokering and middlemen.
Buyers, agents and logistic service providers are all central players in the distribution process. Buyers include wholesalers, distributors, brokers, mail-order firms, retailers (department and chain stores, single-line retailers), purchasing cooperatives, and industrial users who may buy directly from the exporter and local agents. (TFO Canada’s Market Information Paper on “Retail and Grocery Stores” provides more detail on retail buyers.)
Agents sell imports on a commission basis, accepting orders from buyers according to agreements with exporters. The main advantage of agents is their knowledge of the market and their physical location in or near the target market. In addition, they may provide production order guarantees to allow suppliers to plan for labour and materials. They are also more aware of the potential problems that could arise in meeting buyer requirements for sizes and quality among others, and might be willing to assist suppliers with hints on adapting the product or providing labels to assist in penetrating the market. After-sales support can often be provided. In the case of industrial goods, for example, the agent’s ability to offer service and spare parts is vital.
Throughout the process of moving your product to market, logistics service providers – principle players being freight forwarders and customs brokers – will be available to provide you varying degrees of assistance for a fee. To put these important services into context, we now focus our discussion on the vital role of export logistics in moving your product to market.
Export Logistics
Export Logistics is the effective movement of materials and information from their source to the point of consumption. Decisions regarding this movement of goods can be among the most important you will make, and itis essential that all aspects of your logistics are studied, understood and addressed as part of your larger foreign market strategy in advance of actively pursuing new clients in any market. Once you have received your first order, you will adjust your logistics plan as needed and determine to what extent you will need to recruit professional services such as freight forwarding to assist you in following through with delivery of goods in the best manner possible.
Most non-tariff barriers to trade appear along your products’ route to market. Such issues as documentation, certification, inspection, customs clearance, packaging and labelling, environmental regulations, storage and others come into play as the product moves out of your factory and towards its destination. In the increasingly complex business of international trade, you need to find the most direct route through all of these barriers. Developing an accurate and effective logistics plan tailored to the specific market you are considering provides you with a fuller understanding of how to deal with these barriers and enter that market most effectively.
Attention to logistics in advance of market entry can also help you gain a competitive advantage in procuring new clients. For example, let’s say a buyer needs to place an order and is making a selection from a number of competing suppliers. There is minimal variance with regard to key factors such as quality and price but one supplier stands out because they have presented a logistics plan which details exactly (and, perhaps, favourably) how the product will be delivered to them. Such planning could prove the deciding factor in gaining this particular order.
After you have a received an order for your product, you must follow through with your plan (or adapt it accordingly); delivering the product to exact specification, in good condition and in correct quantity, on time, and to the right place. This is not only for the obvious reason of achieving immediate client satisfaction and repeat orders but also for the purpose of maintaining your competitive edge and achieving long-term success in the market. Some of the basic initial considerations include:
Will you need export permits?
What sort of export declaration must you make?
How will you ship the product (road, rail, air, sea)?
Who will cover insurance?
Do you have to warehouse it somewhere?
What are your planned terms of trade (INCO terms)?
Gather as much of this information as possible from other exporters, logistics service providers (freight forwarders, customs brokers, etc. – see more below), Trade Promotion Organizations (TPO), Chambers of Commerce, Industry Associations and your foreign trade representative abroad. Also, be sure to seek feedback and advice from your customer or (potential customers) as you proceed with your planning. Their presence in the market and experience with logistics (at least locally) and product delivery puts them in a favourable position to be of assistance to you.
Enlisting the support of logistics service providers such as freight forwarders and customs brokers to help move your goods to market can prove invaluable in achieving success. They can navigate all the complexities for you, allowing you to stay focussed on fulfilling your production and product obligations and on other non-logistic concerns (maintaining business relations, for example).
Freight Forwarders
Freight forwarding services are commonly retained as part of a more typical distribution system. Right from the start, as you create your export plan they can provide you valuable advice regarding export costs such as freight, port, documentation and insurance charges which you will use in your export costing and eventually in formulating a price quotation. Their service fees are also legitimate export-related costs that are part of your costing and final price.
Freight forwarders can be very effective partners in getting your product to market. They have detailed knowledge of distribution systems around the world and are able to both plan and navigate the best delivery for you. They are familiar with import rules and regulations in foreign countries, best practices in shipping (including best methods for specific goods to specific destinations), country of origin export regulations and other requirements and international trade documentation. In addition, since freight forwarding companies position staff at key points of transit, they can attend to unforeseen matters that arise which need immediate attention (for example, rectifying incomplete or incorrect documentation).
Additional assets that can be put to use for you include:
Arranging shipments by land, sea and air;
Full procedural and documentation services (customs and port clearance, etc.);
Arranging insurance and processing claims;
Consolidation of smaller shipments;
Provision of cost-effective rates due to large volumes handled;
Additional services such as packaging, crating, marking, storing;
Immediate tracing of cargo worldwide;
Before enlisting the services of a freight forwarder, you should take time enough to select the one most appropriate for your needs. Things to consider include compatibility in areas primarily associated with the type of product, the size of your shipment and the market destination. Things to look for include:
area of specialization (e.g. if you products is food, you will want a company that is experienced in handling food);
warehousing and storage facilities;
size of operation;
reputation and history (reliability);
experience in specific markets.
You can source this information from other exporters and importers (freight forwarders handle two-way trade), Chambers of Commerce, associations, and TPOs.
A useful tool for finding freight forwarders in your area or internationally is the Membership Directory of the International Association of Freight Forwarders Associations.
Note: For the Canadian market, a listing of freight forwarders in Canada (as well as more information on the freight forwarding industry) can be found at the Canadian International Freight Forwarder’s Association website – http://www.ciffa.com/
Customs Brokers
(From material provided by Nancy-Lee Glover, Glover Customs Brokers Inc.)
Services Provided
Customs Clearance – Regardless of the method of shipping or whether arrangements must be made pre-border, at-border or after border, customs brokers act as the middleman between importers, carriers, warehouses and customs. Customs Brokers do the daily mediating between the needs of the various business partners – suppliers, importers, carriers and warehouses and the needs of government. The broker’s primary responsibility is to work with clients to support compliance with customs rules and regulations in the most efficient, cost effective way possible.
As information reporting requirements become more complex and client concerns with the speed and efficiency of supply chain flows become more demanding, brokers have become increasingly involved in all aspects of client operations. They work with the clients’ business partners – suppliers, carriers, freight forwarders and others to ensure that the technology and procedures are in place to meet both business and regulatory demands.
Some of the myriad services provided include:
Tracing and monitoring an incoming shipment
Communicating with the carrier or freight forwarder to co-ordinate port of clearance locate the warehouse where the
goods will be made available.
Providing documentation when needed:
For example, ocean bills of lading or documents obtained from a bank when a letter of credit is involved.
The carrier may require payment before documents are made available.
Delivery of the shipment to the consignee’s dock or shipped to a third party after cleared by customs
Special Clearances of samples (e.g. goods for trade shows), trial orders, temporary imports and after-hours releases.
Services specifically for the exporter include:
Export Invoices
Certificates of Origin
Chamber of Commerce or Consular Certification
Export Permits and Entry Forms
Assistance with or arrangement of Letters of Credit
Brokers can also provide advice on international trends, statistical trade profiles, and changing trade policies around the globe. They can help set up and manage state-of-the-art information management systems linked into the global network of electronic commerce.
They are also playing an increasing role in growing international issues of Compliance and Security. In Canada, for example, the Broker’s integrative expertise is especially important as the government has implemented a compliance regime. In terms of security, importers and exporters must now contend with the increasing threat of terrorism in the supply chain. Customs Brokers are being called upon by regulators and private traders alike to assist in addressing these concerns.
Overview of Customs Brokers Industry in Canada
There are 234 firms across the Canada Operating 624 Offices and employing over 5000 persons. These firms represent 80-85% of Canadian importers and exporters (of the remainder, some are large enough to have their own in house agents for customs matters and some smaller importers represent themselves in person to Customs). They handle millions of transactions annually resulting in billions of dollars of Duty and Tax collected annually by the Government.
For more information on customs brokering in Canada, including a list of brokers, please visit the website of the Canadian Society of Customs Brokers (www.cscb.ca) More information, including another inventory of brokers, listed by province, can be found at the website of the Canadian Border Services Agency (www.cbsa-asfc.gc.ca)
A Brief on Transportation in Canada
Because of its size, Canada has had to develop an impressive marine, air and surface transportation system, including extensive networks of paved highways and railways. The national airport system is composed of a network of international, national, regional, local, small, remote and arctic airports. The marine system consists of over two dozen major ports, and includes the vital St. Lawrence Seaway connecting the Atlantic Ocean with the vast inland markets of North America. Imports may come through one of Canada’s major sea ports, although they may also land in a US port and be transported overland into Canada. The leading ports are Vancouver on the West Coast, Montréal, Toronto and Thunder Bay on the St. Lawrence Seaway, and Halifax (Nova Scotia) and Saint John (New Brunswick) on the East Coast.