A Primer on International Shipping to Mexico and Canada
Mexico and Canada are the first- and second-largest trading partners with the United States, totaling $614.5 billion and $612.1 billion1&2 in goods trading in 2019, respectively. Simply put – cross-border trading to the north or south is good business. However, you can't effectively export your products to these countries without familiarizing yourself with the ins-and-outs of international shipping first.
Put on a sombrero and throw some Canadian bacon on the pan for this dive into the essentials of cross-border shipping.
Meet the United States-Mexico-Canada Agreement.
The U.S. has 20 free trade agreements (FTAs) with countries all over the world. These agreements set the requirements, duties, taxes and other rules for importing and exporting goods. Generally, FTAs help businesses outside of a country compete with local companies and make the road to exporting less bumpy. As of July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement (NAFTA)3 as the standard for cross-border shipping between the three respective countries. Here are key elements of the agreement businesses need to know for shipping their cross-border shipping operations:
- Tariffs – Countries in an FTA commit to lowered or even no tariffs over time. The Department of Commerce offers an FTA Tariff Tool to help businesses determine tariff rates (if any) for importing and exporting products to Mexico, Canada and any other U.S. FTA partner.
- Rules of origin – Because companies source materials from all over the world, the rules of origin determine if your products are from the U.S. Meeting these criteria allows businesses to ship goods qualifying for preferential treatment.
- De minimis thresholds – Products less than pre-determined value limits are duty and/or tax-free.
- When exporting to Canada, de minimis is up to $31.71 for tax-free shipments. Products up to $118.90 will not be charged duties.
- When exporting to Mexico, de minimus is up to $50 for tax-free shipments and up to $117 for duty-free shipping.
- Business protections – USMCA helps protect intellectual property (IP), trade secrets, copyrights and trademarks.
- Environmental obligations – The USMCA lists protections to prohibit harmful environmental acts affecting air quality, water quality, wildlife and forestry.
The USMCA encourages trade between the three countries by lowering taxes and making it a little easier to move items across borders. However, each country has commodity restrictions that the USMCA does not control. Exporters in the U.S. should know Mexico's and Canada's respective prohibited goods before booking a shipment. Also, check with carriers as they may have additional restrictions.
Prepare key documentation for international shipping.
Shipping from the U.S. to Canada or Mexico brings great new opportunities, but shipments won't get far without the right documentation. Here's a rundown of what you'll need when exporting to these countries:
Exporting to Mexico – You'll need to register with the Official Register of Importers, provide a Mexican Import Request document, certificate of origin, commercial invoice (in Spanish), bill of lading (BOL), packing list, shipper export declaration (when shipment value is $2,500 or more), documentation guaranteeing payment of additional duties for undervalued goods and product safety documentation when applicable. You may also be required to have two copies of your commercial invoice.
Exporting to Canada – The big documents are the Canada Customs Invoice, certificate of origin and BOL, but other documentation may be required depending on the shipment. The importer or customs broker will need to submit customs coding form B3 at the border, so plan accordingly.
Have the certification of origin ready for preferential tariff treatment.
Instead of an importer facing full tariffs, goods can qualify for preferential tariff treatment as long as a certification of origin is completed. An official certificate of origin document is not required. However, you will need to document nine details on the commercial invoice or other required documentation of your shipment to meet the USMCA rules of origins. These are:
- Identifying the exporter – This includes the name, address and contact information
- Identifying the producer – This includes the name, address and contact information
- Identifying the importer – This includes the name, address and contact information
- Identifying the "certifier" – The certifier can be any of the three parties listed above and owns the process validating origins.
- Description of goods
- Harmonized system code (HS) – This is essentially the classification of goods (found using the FTA Tariff Tool).
- Origin criteria – This establishes that goods are mostly made of parts from the U.S.
- Blanket period – This is a period up to 12 months when you may be shipping the same materials.
- Signature, date and binding statement – Certifiers need to close the certificate of origins with this statement:
"I certify that the goods described in this document qualify as originating, and the information contained in this document is true and accurate. I assume responsibility for proving such representations, and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification."
Goods deemed as low value ($2,500 or less) do not require all of this information. But, it will still need a statement validating that the goods qualify for preferential treatment under USMCA rules. Here's the statement:
"I hereby certify that the good covered by this shipment qualifies as an originating good for the purposes of preferential tariff treatment under USMCA."
Get labeling right for international shipping
Shipment labeling requires a little extra work since you're now dealing with different languages and regulations.
Canada's labeling – Labels must be in English and French to accommodate their native languages. Shippers need to include product names, function, units (in volume for liquids and weight for solids), numerical county and where the items were manufactured or produced.
Mexico's labeling – Labels should be in Spanish and conform to the Normas Oficiales Mexicanas (NOMs), which list labeling requirements. Full label requirements depend on the items but may include contact information for the manufacturer or producer of the goods, name of the exporter, product names, warnings as applicable and handling instructions.
Stay on top of international shipping logistics.
So many little intricacies for these shipments can cause big headaches and financial burdens on the business if they're not addressed early in your process. Keep these things in mind when building international freight or parcel processes.
- Currency conversion – Don't forget to properly price your items for the peso and Canadian dollar to make sure you're achieving the right profit margins.
- Return policies – Be sure to build a thorough return policy for our neighboring countries. Address how customers can return items, who pays for returns, guarantees, warranties and all other important information to create transparency on how your business handles international returns.
- Country regulations – Make sure your products pass Mexico's NOM requirements and the Canada Consumer Product Safety Act as well as any other quality or safety requirements before shipping to these countries.
- Duties and taxes – Make sure you, the carrier and importer understand who covers the duties and taxes when crossing the border and releasing items. This is usually the importer or customs broker, but that may not always be the case.
- Plan for longer deliveries – In addition to long distances, items may not be released until the duties are paid. Talk to your carrier, customs broker and importer about how to reduce holdups.
Consider travel buddies to help with cross-border shipping.
As you can see, the logistics considerations when shipping to Canada and Mexico are considerable. Getting cross-border shipping right takes a lot of time, patience and practice. But, business moves too fast to stay on top of all the details for every shipment. To manage, shippers often rely on customs brokers that specialize in international shipping requirements. Third-party logistics (3PL) companies like Worldwide Express can be a real asset. We not only have a network of customs brokers, our team also helps shippers with paperwork and finding the right carrier. From the SpeedShip® transportation management system (TMS), you can see all the available ground and air transportation options to meet your timeline and budget.
But why take our word for it? When you're ready to stamp your shipper passport and explore opportunities in other countries, get a quote in SpeedShip to see for yourself!
1 Mexico; The Office of the United States Trade Representative (USTR)
2 Canada; USTR
3 United States-Mexico-Canada Trade Fact Sheet Modernizing NAFTA into a 21st Century Trade Agreement; USTR