Businesses on both sides of the Canada-U.S. border are facing challenges beyond tariffs. The new compliance requirements and bureaucratic confusion are consuming valuable time and money that businesses can hardly afford to lose.
The federal government emphasizes that Canada has obtained significant exemptions to U.S. tariffs for the majority of products. Prime Minister Mark Carney highlighted that Canada has the most favorable trade deal with the U.S., with 85% of trade being tariff-free, making Canada the country with the lowest tariff rates globally.
However, despite these assurances, some businesses are struggling with compliance under the Canada-U.S.-Mexico Agreement (CUSMA), the trade deal that replaced NAFTA. One such business is Grappling Smarty, a Quebec-based company owned by Patrick Fulop. Fulop’s company sells grappling dummies primarily to U.S. customers, and he has faced challenges with varying and arbitrary tariff applications.
Fulop revealed discrepancies in the tariffs applied by U.S. Customs and Border Protection on his shipments, with different codes leading to significantly different charges for the same product. This inconsistency has led to excessive costs, with Fulop estimating an average of 150% extra charges on his orders.
Shipping his products through UPS, Fulop found the process further complicated by the lack of clarity in determining the correct tariff rates. Trade expert Scott Lincicome from the Cato Institute described the current system as overly complex, with multiple layers of bureaucracy causing confusion for businesses, brokers, and shippers.
The situation has been exacerbated by the introduction of various tariffs by the Trump administration, leading to a maze of rates for different countries and products. The stacking of tariffs and the responsibility of U.S. shipping companies to ensure correct payments have added to the uncertainty and financial burden on businesses.
Trade lawyer Mark Warner has raised concerns about potential non-compliance with CUSMA standards and the risks associated with inaccurate certifications. The prevailing uncertainty and additional costs have hindered trade activities, forcing businesses like Fulop’s Grappling Smarty to seek solutions to mitigate the impact of tariffs and trade complexities.
Despite efforts to comply with CUSMA regulations, businesses like Fulop’s are grappling with the reality that the expected benefits have not materialized as anticipated, leading to increased costs and operational challenges.