WWD Magic Preview: U.S., Canadian Spotlight

Companies deal with cross-border issues.

Producing a Canada Goose Parka

MONTREAL — With 75 percent of its apparel exports going to the U.S., Canadian apparel manufacturers understand the importance of strategic sourcing and supply-chain management.

This story first appeared in the August 9, 2011 issue of WWD.  Subscribe Today.

Canada’s apparel exports to the U.S. were $954.3 million last year out of a total of $1.17 billion, down substantially from the high of $2.9 billion of apparel shipments to the U.S. in 2002.

The recent influx into Canada of leading U.S. retailers has also underscored the growing connection between the two countries and the pressing need to review product safety, labeling, customs and other regulations.

“We’ve become a unified retail marketplace and our main challenge is not where we source from, but the need to ensure the free flow of goods between Canada and the U.S.,” said Bob Kirke, executive director of the Ottawa-based Canadian Apparel Federation.

While much of the discussion in sourcing has to do with where to produce at the lowest cost, all these cost savings evaporate if compliance costs increase exponentially, explained Kirke. Making matters worse, customs compliance issues frequently arise years after goods are imported.

As an example, he noted that Massive Prints, a large California-based screen printer, recently lost an appeal before the Canadian International Trade Tribunal. Massive had imported into Canada large volumes of screen-printed apparel, claiming NAFTA origin. Subsequently, the company could not produce the necessary documentation to support the certificate of origin, because the producer of the blank T-shirts failed to provide information to Canadian customs authorities.

Problems also arise when a U.S. retailer opens stores in Canada only to discover that sourcing rules and safety standards for apparel are different in the two countries.

Target Corp., which is rolling out about 200 stores in Canada in 2013 by taking over some of the leases of Zellers stores from Hudson’s Bay Co., made direct reference to this problem in a letter to U.S. Secretary of Commerce Gary Locke in April. Target called for Canada and the U.S. to harmonize regulatory legislation.

In its letter, Target said “divergent regulations in areas such as standards, testing and customs procedures and documentation ‘thicken’ the border, unnecessarily hampering cross-border trade, hindering investment and increasing costs for manufacturers, retailers and consumers….Similarly, other divergent regulations increase the complexity and cost of compliance, which can undermine their intended effects. By streamlining the cross-border regulatory environment, such cooperation could also enhance compliance and enforcement efforts, resulting in more open trade, safer borders and safer products.”