Why Is Shipping From Canada To Us So Expensive?

Shipping items from Canada to the United States can be surprisingly expensive compared to domestic shipping rates within each country. There are several key factors that contribute to the higher costs of cross-border shipping between Canada and the US:

• Geography – The large distance packages must travel between the two countries adds to the base shipping costs.
• Regulations and customs – Crossing the international border requires clearing customs checks and inspections, adding time and paperwork expenses.
• Fuel costs – International shipping relies more on air transport which has higher fuel surcharges.
• Exchange rates – Fluctuating currency exchange rates can drive up international shipping fees.
• Insurance – Extra insurance fees are often required for international packages.
• Taxes – Services taxes and duties often apply to items shipped internationally.

This article will explore these factors in-depth to explain exactly why it’s so expensive to ship items from Canada to the United States.

Geography

The large geographical distance between major Canadian and US cities is a key factor that increases the costs of shipping goods between the two countries. According to Purolator International, some shipments from the US to Canada can be tricky to deliver due to the long distance. Major Canadian population centers like Toronto, Montreal, and Vancouver are located hundreds or thousands of miles away from major US hubs like New York, Chicago, and Los Angeles.

The average distance traveled for air freight shipments within Canada is around 2,300 km (1,400 miles), with each shipment weighing about 3 tonnes, according to Statistics Canada. For truck and rail shipments, which make up the majority of freight transport between the US and Canada, the distances can be even greater. This means increased fuel costs and more time in transit. The greater the distance, the more expensive it generally is to ship goods between major cities in Canada and the US.

Regulations and Customs

Shipping goods across the Canada-US border involves navigating customs regulations and paperwork on both sides. Some key requirements add complexity:

On the Canadian side, shipments valued over CAD$2,500 require a formal customs entry and need to be processed by a licensed customs broker. The necessary documents include the Canada Customs Invoice providing product details, values and origin.

For US import clearance, shipments over US$2,500 also require formal customs entry and a customs broker. The importer needs to file documents like the commercial invoice, bill of lading, and certificate of origin.

Completing the paperwork and procedures correctly takes expertise and diligence. Any errors can cause shipment delays and extra fees at the border.

These regulations are designed to control prohibited or restricted goods, ensure proper duties/taxes are paid, and prevent illegal transshipments. But complying adds paperwork burdens for Canada-US shipments.

Fuel Costs

Fuel prices have a significant impact on overall shipping costs from Canada to the US. Freight carriers like CN Rail add fuel surcharges to account for fluctuating fuel prices. These surcharges are on top of the base shipping rate and can vary widely based on oil and diesel prices.

Fuel typically costs less in Canada than the US. As of 2022, average gasoline prices were around 30 cents cheaper per liter in Canada. This price difference impacts shipping costs across the border. When fuel prices rise, carriers pass on the increased costs through fuel surcharges.

Fuel surcharges are calculated based on the average On-Highway Diesel Fuel Price reported weekly by the U.S. Energy Information Administration. So when diesel prices go up in the US, fuel surcharges on Canada to US shipments also increase.

Exchange Rates

Fluctuations in the exchange rate between the Canadian dollar (CAD) and the US dollar (USD) is a major factor affecting shipping costs from Canada to the US. The CAD has historically traded at a discount to the USD, meaning it takes more CAD to buy one USD. According to Pound Sterling Live, the current exchange rate is around 1 CAD = 0.74 USD. This means it takes approximately 1.35 CAD to buy one USD.

When the CAD weakens relative to the USD, it costs more for Canadian exporters and shippers to convert their CAD revenues into USD to pay for US-denominated expenses. For example, according to Forbes Advisor, if the exchange rate moves from 1 CAD = 0.80 USD to 1 CAD = 0.70 USD, it now costs CAD 0.14 more per dollar, increasing shipping costs for Canadian exporters.

The CAD/USD exchange rate frequently fluctuates in response to economic factors, changing the calculus of Canada-US shipping costs. Monitoring services like The Globe and Mail provide up-to-date exchange rates to help Canadian shippers price and plan accordingly.

Insurance

Shipping insurance is necessary when transporting goods across the border to protect against loss or damage. Insurance rates are based on the declared value of the shipment. According to Ship and Insure, insurance rates for shipments from Canada to the US start at a minimum of $1.50, with additional charges per $100 of declared value https://shipandinsure.com/rates.aspx. For example, Stallion Express states shipments valued at $100 would cost $1-3 to insure, while higher value shipments have higher insurance fees https://stallionexpress.ca/blog/shipping-insurance/.

Major carriers like USPS, FedEx and UPS also charge insurance fees based on shipment value. Fees are typically 1-2% of the total declared value. Insurance costs get added to the base shipping rates, increasing overall costs to ship to the US. Proper insurance is essential when shipping high value goods or fragile items across the border.

Taxes

Goods shipped from Canada to the US are subject to various taxes and duties that contribute to the high shipping costs. According to the Canada Border Services Agency, any item mailed to Canada may be subject to the Goods and Services Tax (GST) and/or duty, unless specifically exempted (CBSA). The GST is a 5% tax applied to most goods imported into Canada.

In addition, when shipping from Canada to the US, import taxes will be applied. Import duties and taxes are determined based on the Harmonized Tariff Schedule (HTS), which categorizes goods and sets the rates (Impack). For example, the general duty rate for most products imported from Canada to the US is around 6.5% of the value. There are also merchandise processing fees and harbor maintenance fees that add to the costs.

Taxes and import duties can significantly increase the shipping costs from Canada to the US. Proper classification of goods and calculating estimated duties and taxes in advance is important to account for these expenses.

Options

When shipping from Canada to the US, there are a few main options for shipping providers and services to choose from. Each has its own advantages and disadvantages when it comes to cost, speed, and reliability.

The main ground shipping options include:

• USPS (United States Postal Service) – Offers standard shipping services as well as Priority Mail Express for expedited delivery. USPS tends to be one of the most affordable options but can be slower.
• UPS (United Parcel Service) – Offers a range of delivery speeds from standard ground to express. Costs more than USPS but is faster.
• FedEx – Similar to UPS, provides both standard and expedited shipping services. Slightly more expensive but very reliable.

For faster delivery, air shipping is an option:

• FedEx International Priority – Expedited door-to-door air shipping that delivers in 1-3 business days.
• UPS Worldwide Express – Express door-to-door delivery by air in 1-3 business days.
• DHL Express – Offers time-definite delivery of documents and packages by air.

Businesses should compare the different shipping providers and services based on their needs for speed, reliability and cost. For non-urgent shipments, USPS ground or standard UPS/FedEx may make the most sense cost-wise. For time-sensitive packages, paying a premium for express air shipping will ensure fast delivery.

COVID Impact

The COVID-19 pandemic has severely disrupted global supply chains and increased shipping costs from Canada to the US. According to Freightos, the cost to ship a 40-foot container from China to the west coast of the US reached over $20,000 in 2021, a 500% increase compared to pre-pandemic rates. Several factors related to the pandemic have driven up shipping costs:

• Factory and port shutdowns in China led to a shortage of containers and cargo space on ships.
• Border restrictions and COVID outbreaks caused labor shortages at ports and warehouses, creating backlogs.
• The surge in e-commerce as consumers shifted to online shopping increased demand for shipping.
• Travel restrictions reduced capacity on passenger airlines, traditionally used for high-value express shipments.

While shipping between Canada and the US relies less on Asia-North America routes, it has still been impacted. According to the US Bureau of Transportation Statistics, total trade between the US and Canada dropped over 15% in 2020. Supply chain experts predict elevated shipping costs due to pandemic disruptions to continue through 2022 and potentially into 2023.

Conclusion

In summary, there are many reasons why shipping costs from Canada to the US can be expensive. A few of the key factors include:

• Geography – The large distance between countries increases fuel and labor costs.
• Regulations – Customs procedures add time and paperwork expenses.
• Fuel Costs – Transporting goods long distances requires a lot of fuel.
• Exchange Rates – Currency fluctuations between CAD and USD impact costs.
• Insurance – Cross-border shipping needs special insurance consideration.
• Taxes – Duties and taxes boost the final price tag.

While cross-border shipping will likely remain pricey due to these constraints, understanding the key factors can help shippers find ways to mitigate costs through logistics optimizations, exchange rate planning, negotiating discounts, and using duty/tax relief programs. With strategic preparation, businesses can develop efficient Canada to US shipping solutions.