Canadian businesses heading south of the border

Rob Pochert, executive director of the Bellingham/Whatcom EDC, said Whatcom County offers many positives to Canadian companies looking to relocate or open a cross-border facility, including lower employee costs and fewer taxes.

   Canadian businesses have long been a part of Whatcom County’s economy. Depending on their industry, some find it advantageous to operate in the United States because of lower costs. Canadian employees in understaffed U.S. occupations can also expand their employment options looking for work down south. The first stop, however, is the border and the know-how to cross it is necessary.
   What is so appealing south of the border?
   According to Rob Pochert, executive director of the Bellingham/Whatcom EDC, Canadian companies can typically save money on labor costs by coming to the U.S., because union costs in Canada drive up wage rates.
   They can also avoid paying duties on materials crossing the border, a reason so many Canadian businesses in the wood-products industry have moved south, he said. The U.S. is also Canada’s largest trading partner, so Canadian companies selling products to U.S. markets can also benefit by producing their goods here and avoiding the burden and cost of exporting products across the border.
   Also, Pochert said, if a Canadian company sets up a subsidiary in the U.S. they can avoid paying taxes in Canada, which are generally higher.
   The EDC works with non-retail businesses, some of them Canadian, looking to relocate or expand their business into this area. As of late, Pochert said, 100 percent of the out-of-area businesses coming to his organization for assistance are from Canada.
   “There are a lot of people in Whatcom County that do not realize how significant the economic impact from Canada is,” said Pochert. He can’t give an exact figure for the amount of Canadian businesses in the county, because they typically form just like an American company, making public business records look identical, but he can say with some confidence there are more than 100.
   Pochert said some of the most popular industries of Canadian interest taking up roots in Whatcom County are in the wood-products and food-processing industries.
   Because the EDC recognizes Canada’s contribution to the local economy, Pochert said they “ had to learn to speak Canadian”; while many laws in Canada are similar to those in the U.S., they have different names, causing confusion with Canadian business owners trying to comply with U.S. regulations.

Getting over the line
   “Immigration is a big mystery to folks,” said Scott Railton, an immigration attorney at Chang and Boos in Bellingham. Immigration, which for business owners doesn’t usually mean becoming a citizen, is the first stop for Canadians thinking about putting a venture in the U.S., he said. Railton said it is wise to explore immigration options with an attorney first, because in most situations successful immigration either allows or prevents all other business plans. It is uncommon for any business venture to enter the U.S. if the owners or management can’t get access to it, he said.
   To get through the process of smoothly setting up a business in the U.S., Railton said it is a good idea to have a team of experts on hand, including a tax specialist and a company formation consultant.
   Developing an immigration strategy for Canadian businesses and their employees in the U.S depends on several factors and what visa qualifications they have, said Railton. He said his firm gives clients interested in immigration a comprehensive questionnaire that asks about their background, goals and intentions.
   Depending on their intentions, Canadian company owners can further qualify for certain visas by proving experience in a field, the ability to make an investment, and the ability to generate jobs, he said.

Business below the Peace Arch
   Cedarprime, located in Sumas, went through this process about three years ago when they shut down a plant in Fort Langley, British Columbia, and moved to Sumas. Like many others in the wood-product industry, Cedarprime chose to come over the border to avoid paying a softwood lumber duty on their product, said Carlos Rodrigues, manager at the Sumas facility. The company gets its raw materials from its parent company, International Forest Products Limited in Canada, ships them over the border and turns them into siding at their Sumas plant, he said. The company still pays a duty on the raw materials, but saves money by avoiding the duty imposed on their finished product, which is taxed more because it has a greater value, according to Rodrigues.
   The lower cost of labor is also a reason companies move to the U.S. According to Rodrigues, worker’s wages in his industry are lower in the U.S. While the benefits package offered by Cedarprime is more expensive in the U.S. than its Canadian counterparts, overall the cost of labor is slightly lower in the U.S., he said.
   Although it took them a few months to get over the border and set up operations in the U.S., Rodrigues said the immigration process for the company, and the 10 Canadian employees who came over with it, went smoothly. The company now has about 95 local workers and six remaining Canadian employees.
   Canadian companies typically won’t bring many Canadian workers with them, because it is often viewed as too much trouble to get the necessary visas, said Pochert. According to Rodrigues, the six workers at Cedarprime are in upper management and maintenance and operations, skilled positions that better qualify them for a visa.
   Working in the U.S. doesn’t have any advantages for Canadian workers, said Rodrigues, who, like all his Canadian employees, commutes from British Columbia; he pays taxes in the U.S. and then reconciles them in Canada, getting taxed the same as if he made the money in Canada.

Filling in the labor gap
   It is not known exactly how many Canadian employees, like those at Cedarprime, are employed in Whatcom County. A 2004 study by the Whatcom Council of Governments, said, however, that on any given week- day, 563 automobiles driven by British Columbians cross the border to go to work. In most industries, because of immigration laws, there are only small numbers of Canadian employees in management, training and skilled labor, said Railton.
   While the trend is true for most industries, healthcare is an anomaly. One of the largest employers of Canadians in the county is St. Joseph Hospital in Bellingham. In addition to the shortage of healthcare workers in the U.S., smaller hospitals in British Columbia are also closing, concentrating healthcare around Vancouver, said Pochert. The result is more interest in jobs in Whatcom County for Canadians living south of Vancouver.
   St. Joseph Hospital employs approximately 45 Canadian workers, most of them registered nurses, and a few medical technicians, according to Linda Estes, an employment specialist at the hospital. She said some Canadians in the healthcare field find it easier to commute to Bellingham than to Vancouver.
   Foreign workers in healthcare, where a shortage of employees exists, can fill jobs in the U.S. as allowed by the North American Free Trade Agreement, said Estes.
   Hiring practices are not any different, according to Estes; Canadian employees must get verified to work in the U.S. and qualify for a visa, she said. Canadian nurses must also pass a state of Washington licensing exam.

Looking forward
   According to Railton, immigration laws beginning to come through the U.S. Congress will be tougher in the future.
   He said a huge lure for Canadian business to invest in the U.S. is the business owner’s ability to freely cross the border to inspect the company, and tougher immigration laws could hinder this ability.
   The impact of upcoming immigration legislation remains to be seen, but if border security becomes too complicated for Canadians to invest and work here, there will be significant economic damage to the United States, said Pochert.


Related Stories