CHPTA Data Analyst Bob Smith has just finished pulling together the latest product import data from the Government of Canada along with a couple of editorials related to the trade data including how “business forecasting is about judgement not data” and how “global trade is changing” which you can read below.
The Import Trade Data report is presented in its simplest form. Values & Unit Cost/Volumes for the years 2018 to 2022. Data for all categories covered (several hardware, housewares and office products) are contained in one excel workbook with functions to allow you to drill-down to specific products. Data includes top 5 country of origin and the total imports to Canada. Raw data is not included but is available on request.
To access this report along with other reports, CHPTA members can download from the CHPTA Resource Library on the CHPTA website. If you have not previously requested the password to access the resource library or have forgotten it, please contact Michael Jorgenson at mjorgenson@chpta.ca.
Business Forecasting is About Judgment not Data
Judgement based on experience and conversations with customers, and contacts.
Retail Sales Data: March 2023
Retail sales decreased 1.4% to $65.3 billion in March. Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, increased 0.3% in March.
In volume terms, retail sales decreased 1.0% in March.
A survey of companies suggested a sale increased 0.2% in April. Stats Canada
Data rarely provides a clear picture of the past or the future.
Forecasts
The current business environment is complex and evolving. The frequency and impact have been increasing since 2018 (COVID, lockdowns, supply chain, diversification, employees, inflation, environment issues, Russia, China). The effects of each event on your products and business are unique.
The math in forecasting tools is ineffective in the absence of discernible patterns, nor are we unable to calculate the effects of a single overlapping event. See Fig. 1 Ball Point Pens, Volumes below
In England in 1736 it became an offence to defraud by charging money for predictions. The punishment was three months’ imprisonment with hard labour!
Fig. 1 Ball Point Pens, Volumes, Dozens
The above predicted volumes are all unrealistic. The trend line indicates an increase in 2023, which is improbable given the downward trend from 2018 to 2021. The more complex Exponential Soothing calculation at the bottom with additional variables predicts an unrealistic 50% decline and an impossible negative import figure for China. Since 2018, unit costs remain consistent. The raw data is good. So, the question is why did someone ordered a ton of ballpoint pens in a falling market in 2022. The answer is not in the data
Good forecasts can seem almost magical, while bad forecasts may be dangerous.
Forecasts are contradictory. They assume that the market is changing but their calculations assume that changes will continue into the future. In many cases, judgmental forecasting is the only option, such as when there is a complete lack of historical data or during completely new and unique market conditions.
After all the data has been collected and analyzed, oracles have been contacted and customers hopes and desires recorded it arrives at the senior executive’s desk. The wise forecast consumer is not a naive bystander, but rather an active participant and, above all, a critical observer.
While there is relevant, important information, there is also data that should be ignored.
Global Trade is Changing
In 2022, the World Customs Organization (WCO) added additional categories for products that are ecologically friendly. The modifications are small but profound.
The objective was not to isolate environmentally friendly products but to identify products that are not environmentally friendly. Countries are now free to impose duties and restrictions on older products deemed harmful to the environment due to their use or disposal.
The crucial word here is disposal. Consider the Ontario “Blue Box” revisions.
“The European Union is ushering in a new era of international trade that could help rein in climate change. Lawmakers for the group of 27 countries adopted rules for taxing imports based on the amount of carbon dioxide that companies emit making those goods. Experts say it’s the first time a major economy has married climate and trade policy, and that it could lead other countries to do the same.
Authorities won’t start collecting the tax for another few years, but the idea already seems to be catching on. In the United States, where climate change is often polarizing, Democrats and Republicans in Congress have begun talking seriously about what a similar policy in the U.S. might look like. National Public Radio (NPR) May 2023
The tracking and application of duties is done using the Harmonized Trade Schedule (HTS) or HS codes. International trade uses the Harmonized Trade Schedule (HTS), also referred to as HS codes, as its mechanism for monitoring and enforcing duties. Governments could not manage the enormous volume of cross-border transactions without these codes.
The World trade and development organizations have all lined-up to facilitate these changes.
- General Agreement on Tariffs and Trade (GATT) exception: If there are restriction/ penalties on domestic production or consumption.
- World Trade Organization (WTO): protection and preservation of the environment are fundamental goals. WTO’s original goal was to promote free trade.
- Organization for Economic Co-operation and Development (OECD): developed policy at the intersection of trade and environment.
Trade Agreement
Most Trade Agreement, quotas, restrictions and duties are tied to a product and its components’ HS codes. If HS codes change, so do the agreements and regulations.
See below for action items.
Tariff Engineering:
Companies that claim to fully automate the transition may just be plugging in the data from the correlation table and running your inventory against it.
Brainpower is vital here. Customs brokers who specialize in classification pore over definitions on a regular basis. They’re able to compare the details of your product to the specific parameters of each code to determine which are both fully accurate and most favourable for your business.
Look for Compliance Impacts
After assigning new HTS codes, determine eligibility under Free Trade Agreements or other compliance-related programs. Troubleshoot or adjust as needed.
When your HTS codes change, your other compliance scenarios may change, too. The trickle effects can become increasingly complex with impacts in categories like dangerous goods, antidumping, and other government agency requirements.
For example, most Free Trade Agreement (FTA) eligibility is tied to a product and its components’ HTS codes.
Another example: If you’ve been on the hook for Section 301 tariffs (US) on goods from China, some of your products may have new codes that are no longer on the lists. Get more value out of your audit by identifying product design adjustments that could reduce tariff exposure. Small changes can create major savings.
You may have multiple opportunities for tariff engineering, depending on your line of business.
This is a strategy we’ve encouraged before, for its own sake and during times of transition, like now.
Essentially, the practice involves the modification of new or existing products to pay the lowest possible duty rate. It almost sounds like it should be illegal, but it’s not—it’s proactive.
The brokers who work on tariff engineering are part strategic masterminds and part mad scientists. They review scores of details to find opportunities, and they can save you an extraordinary amount of money. For example, a legitimate addition of textile to the sole of a pair of sneakers could cut the duty rate from nearly 40% to less than 10%.
As you move into the final stages of your transition, set up frameworks to compile strong trade data. With the addition of brand-new HTS codes, many companies may be able to take analysis further.
For example, a smartphone company can see how many phones are imported. After the new HTS kick in, the company will be able to see the number of smartphones versus feature phones (aka dumb phones) imported by country and other variables.
Your questions and comments are always appreciated at rsmith@chpta.ca.
