Every morning, I pick-up my iPhone,
check my emails, then go online for the latest news. One recent
morning, I woke up to an email from Birchbox, a
beauty sample subscription company. The email was informing me that
Birchbox was putting its Canadian operations on hold and would
refund my remaining subscription. The closure was due to the
current US-Canadian exchange rate and high shipping costs. Birchbox
has made the decision to stop servicing its Canadian customers
– a market that Birchbox made a significant investment in
time and money to grow.
That same week I read "71-cent dollar puts softwood back in U.S.
crosshairs" by Barrie McKenna. In summary, the demand
for new houses in the United States has increased the demand for
forest products. This coupled with the premium (about 30%) on the
US dollar means Canadian lumber producers are receiving a
significant margin when selling into the United States. The
increased supply of Canadian lumber and the higher margins Canadian
producers are making has drawn the attention of US lumber producers
at a time when a key trade agreement with the US on the cross
border sales of forest products has expired. The attention and
complaints of US suppliers are expected to have a negative impact
on the renegotiation of the treaty.
At Crowe Mackay, a number of our clients in a variety of
industries are capitalizing on the premium to be made from the
Canadian-US exchange by concentrating on marketing and selling to
US customers. As an accountant, I have three observations to
1. The current US-Canadian
exchange rate is an opportunity for Canadian businesses.
A Canadian company can make a
significant premium just by selling to US customers. If your
business is not currently capitalizing on US sales it should
consider opportunities to do so.
2. While there are opportunities
to sell to US customers, be careful to not concentrate all your
company's efforts for growth in the United States.
At some point the US-Canadian
exchange will swing in the other direction, and as a business you
could have to make the same decision as Birchbox who decided to cut
their Canadian operations as they are no longer profitable. If you
have to make this decision the business needs to be in a position
3. There can be significant tax,
legal and other implications for a business selling products and
services in the United States.
For example, depending on how
products and services are sold into the US, the company could be
required to file foreign reporting forms with the Canada Revenue
Agency (CRA). A Canadian company operating in the US should have
the information its needs to make smart decisions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
While that agreement mandated export measures on Canadian softwood lumber exports destined for the United States, it also protected those lumber exports from the potential imposition of onerous import measures by the U.S.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).