Opportunity Zone Funds - An Exciting New Tax Incentive Investment Program

By Garth Stevens and Marc Schultz*

The Tax Cuts and Jobs Act passed in 2017 created as a new federal income tax incentive program, the opportunity zone program, located in Section 1400Z-1 and Section 1400Z-2 of the Internal Revenue Code of 1986.  In just the past few weeks, the U.S. Department of the Treasury and the IRS issued much anticipated guidance on many important aspects of the opportunity zone program, which has now moved investors’ and other business stakeholders’ interest in opportunity funds into high gear.

The opportunity zone program is designed to encourage private capital investment in qualified “opportunity zones,” which are designated census tracts throughout the United States that qualify as low-income communities.  Opportunity zones have now been designated in almost all states, including California.  Various parts of Los Angeles, Orange and Riverside Counties and much of greater San Diego incorporate designated opportunity zones (among many other parts of the state).

What is an Opportunity Fund?
The opportunity zone program provides investors with significant tax benefits for investing in opportunity zones, provided that such investments are made through qualified opportunity funds, which serve as intermediaries between the investors and the particular opportunity zone investments.

An opportunity fund is an investment vehicle that has been organized as either a corporation or a partnership (typically formed as a limited partnership or a multi-member limited liability company), has undergone (or will timely undergo) the requisite certification process, and holds at least 90% of its assets in qualified “opportunity zone property” (as further discussed below).  Certification is a self-certification process whereby the opportunity fund attaches IRS Form 8996 to its federal income tax return for the tax year in which the fund first elects to be an opportunity fund and to its federal income tax return for each subsequent tax year.  An opportunity fund may be formed to invest in a single project, such as a real estate development or in a qualified entity.  However, the opportunity fund may also be formed to invest in multiple different investments.

As noted above, an opportunity fund is required to hold at least 90% of its assets in “opportunity zone property” (described below).  An opportunity fund holds opportunity zone property either by directly holding “opportunity zone business property” or by holding stock (treated as equity) or partnership interests in a domestic corporation or partnership, where such stock or partnership interest is issued to the opportunity fund after Dec. 31, 2017, in exchange for cash, as long as such entity is a qualified “opportunity zone business” (described below) on certain testing dates.

In general (and subject to certain other qualifications not mentioned here), an “opportunity zone business” is an entity engaged in a trade or business in which substantially all (at least 70%) of its tangible property owned or leased is opportunity zone business property, and where such entity derives at least 50% of its gross income from the active conduct of a trade or business in an opportunity zone.  “Opportunity zone business property” is tangible property used in a trade or business of the opportunity zone business or opportunity fund (as the case may be) that was acquired by the opportunity zone business or opportunity fund (as the case may be) by purchase from an unrelated person after Dec. 31, 2017 and that meets other certain requirements.

Tax Benefits to Opportunity Fund Investors
The opportunity zone program provides three principal benefits to taxpayers who invest in opportunity funds.  The first principal benefit is that a taxpayer (by making an election) may defer any taxable capital gain (short term or long term) arising from a prior sale transaction (e.g., a sale of a company or business, or a division thereof, real property or other assets), where the purchaser in such transaction was an unrelated person, by investing all or a portion of such taxable capital gain in an opportunity fund within 180 days after the date of the sale.  The amount of the taxable capital gain that is deferred by the taxpayer is equal to the amount that the taxpayer invests in the opportunity fund.

The deferred gain (i.e., the amount the taxpayer invests in the opportunity fund) is required to be included in the taxpayer’s income for tax purposes upon the earlier of (a) the date that the taxpayer sells or exchanges his interest in the opportunity fund or on which the opportunity fund liquidates, or (b) Dec. 31, 2026.  However, the second principal benefit of the opportunity zone program is that if the taxpayer holds his investment in the opportunity fund for at least five years prior to the date on which the taxpayer is required to include the deferred gain that the taxpayer invested in the opportunity fund in his income for tax purposes (as noted in the prior sentence), the amount of the deferred gain to be included in the taxpayer’s income will be effectively reduced by 10%; and if the taxpayer holds his investment in the opportunity fund for at least seven years prior to the date on which the taxpayer is required to include the deferred gain that the taxpayer invested in the opportunity fund in his income for tax purposes, the amount of the deferred gain to be included in the taxpayer’s income will be effectively reduced by an additional 5%.

In short, not only can an opportunity fund investor defer paying federal income tax on capital gain from a sale transaction for potentially many years, the amount of capital gain subject to tax, once due, can be reduced by up to 15%.  Such gain, when finally taxed, will likely be subject to the investor’s income tax rate in effect at the time such tax is required to be paid.  Therefore, when considering an investment in an opportunity fund, thought should be given as to the potential risk of income tax rates rising between the time of making such an investment and the end of the deferral period when the investor is required to pay tax on the original deferred gain.

The third principal benefit of the opportunity zone program is where the taxpayer holds an interest in the opportunity fund for at least 10 years.  In such a case, the taxpayer may make an election to increase the tax basis of his investment in the opportunity fund to the investment’s fair market value on the date of a sale of such interest, thereby eliminating any taxable gain on the appreciation of the taxpayer’s investment in the opportunity fund.  This is where much of the excitement in the opportunity zone program has been generated because this benefit permits the taxpayer to continue to obtain tax-free appreciation on his opportunity fund investment as long as the taxpayer disposes of such investment on or before December 31, 2047.

Because the above-noted tax benefits are U.S. federal income tax benefits, they should be available to all eligible taxpayers who are subject to U.S. federal income tax and generate capital gains sourced in the U.S., including Canadians who have taxable capital gain from the sale of a company, business, real property or other capital assets in the U.S.  (Canadians, as well as other non-U.S. persons should nevertheless consult with their own tax advisors as to how these tax benefits and other aspects of the opportunity zone program may be treated under the tax laws for their own jurisdiction).

Conclusion

The opportunity zone program is an exciting new tax incentive program that aims to promote capital investment in economically disadvantaged communities in the U.S. by offering substantial federal income tax benefits to opportunity fund investors.  This article touches only on a few key aspects of the opportunity zone program.  The program is subject to many other pertinent details, rules and limitations, as well as continuing development by the U.S. Department of the Treasury and the IRS of further regulations and related guidance.  As such, this article should not be construed as a complete discussion of the opportunity zone program.  Persons interested in learning more about the program can contact the authors through the email addresses noted below.
 
Garth D. Stevens (gstevens@swlaw.com) is a corporate and securities partner at Snell & Wilmer L.L.P. and a member of the board of directors of MAPLE Business Council.  Marc L. Schultz (mschultz@swalw.com) is a federal tax partner at Snell & Wilmer L.L.P.   Both are actively involved in opportunity zone fund formation.

10 Legal Considerations for Marketing & Selling Products in Canada

LuAnne Morrow, Counsel and Trademark Agent - Borden Ladner Gervais LLP.

 
Despite the talk of trade disputes and the apparent political divide between Canada and the United States the two countries continue to be closely connected in many ways, including with respect to consumers and consumer products.  Building your brand and product in the United States in many cases means that you have also built a reputation among Canadians due to the frequent travel of Canadians to the United States and the American media presence in Canada. This creates an ideal opportunity for many companies to launch their products and brands in Canada. While there are many similarities between the countries with respect to marketing and selling to consumers and consumer products there are also many differences. The following are some key issues to consider when launching your product in Canada:

1. Register your Trademarks and Copyrights

Trademark registration is jurisdictional in nature so the trademark registration you have secured in the United States or other countries does not mean your trademark is protected in Canada. A trademark agent can conduct clearance searches and advise if the trademark you are considering or already use in the United States is available for use and registration in Canada. A trademark lawyer can also provide strategic advice with respect to choosing an effective trademark for Canadian consumers. The system for registration in Canada is similar to that in the Unites States but can take much longer so it is advisable to consider trademark registration as part of your launch plan well in advance to selling products in Canada.
 
If your product has a unique package design or design elements, or is computer software or other work protectable by copyright, registering the copyright in Canada is an inexpensive means for further protecting your product and brand.
 
Registered trademarks and copyrighted works can be recorded with Canada Customs to reduce infringement, piracy and counterfeit products. Registered trademarks also offer benefits in Quebec where a registered mark is not required to appear in French on packaging.

2. Secure <. Ca > Domains

Although not required many companies choose to use Canadian country code domain names for e-commerce websites aimed at Canadians. It can also be a helpful tool to manage e-commerce directed at different countries. Canadian presence is required to secure such domain registrations and there are options for how to manage such registrations if your company does not have a Canadian store or office.
 
3. Decide if you will Market and Sell to Consumers in Quebec

The province of Quebec has requirements with respect to the use of the French language when marketing and selling to consumers in Quebec. Making a decision early in your planning process as to whether you plan to sell products in Quebec will inform many other steps you take along the way, such as building your website, terms and conditions for e-commerce, packaging, signage on store fronts, contests and trademarks.

4. Prepare Labels and Packaging to Meet Canadian Requirements

Canadian labelling and packaging requirements are different in several respects from those in the United States. The most significant difference is the requirement for bilingual labelling throughout Canada. In addition the system of measurement is different and will require changes to packages to reflect the metric system. There are also numerous specific requirements for particular classes of products. For example: food products may require inspections or certification both provincially and federally. Use of certifications for organic products must comply with Canadian requirements and nutritional labelling is dramatically different in Canada than the United States. Cosmetics must follow strict guidelines for ingredient lists and alcoholic beverages and cannabis products must meet both federal and provincial requirements and in each province those may differ. All labels must include bilingual ingredient lists and in some cases instructions must also be in both languages and comply with legislation respecting product claims. Companies often engage consults to assist in preparing new packaging and labels, however the consultant should also liaise with legal counsel to ensure the packaging and labelling legal requirements are met.

5. Review Advertisements for Compliance

The principles of ensuring that advertisements are not misleading to consumers are similar in Canada and the United States as are the guidelines for endorsements by influencers or celebrities. However, there are some unique issues in Canada including restrictions in Quebec with respect to advertising to children and restrictions on advertising certain other products such as pharmaceuticals, cannabis, tobacco and alcohol. A campaign that is compliant in the United States may not necessarily be so in Canada. Your advertising agency and legal counsel should work together to review marketing and advertising materials for compliance.

6. Prepare your Website for Canadian Consumers

There are three key issues to consider when making your website and e-commerce sales directed to Canadians:  terms and conditions that comply with Canadian consumer protection legislation, a Canadian specific privacy policy, and if you intend to market to consumers in Quebec portions of your website content may need to be in French. Consumer protection legislation exists in all of the provinces in Canada and can impact many elements related to e-commerce and use of websites such as return policies, limitation of liability, and transparency as to changes to the terms and conditions. You may want to consider gating the site to filter Canadian consumers to a separate website or simply integrating Canadian requirements into your content and current terms and conditions.

7. Consider Electronic Promotional Campaigns

Canada’s Anti-Spam legislation (CASL) is far more comprehensive and onerous for companies than the current laws in the United States with respect to spam. Even if your company doesn’t have an office or location in Canada the law still applies to electronic promotions sent to Canadians. These requirements include opt in consent, the ability to unsubscribe from receiving messages and the need to remove names from lists within 10 days of receiving the request, as well as requirements for content and privacy considerations. The fines for failing to comply with CASL are significant and can be in the million dollar range, however compliance is not complex and can be integrated into your current electronic campaigns.

8. Have Contest Rules Reviewed for Compliance

As part of your launch you may want to consider contests, promotions or giveaways. Contests, giveaways and sweepstakes are required to follow specific requirements set out in the Canadian Criminal Code and Competition Act. In Quebec there are additional requirements with respect to contests open to residents of Quebec that including registering with the government authority and posting a bond. If you want to include Canadians in contests that you are running the rules for the contest must meet the Canadian criteria and be communicated in a specific way. Promotional coupons, gift cards and loyalty cards are all subject to provincial consumer legislation and should be reviewed for compliance.

9. Consider Translating Materials into French and other Languages

In Quebec the translation of some materials into French may be mandatory and bilingual labelling requirements are Canada wide. However, from a marketing perspective you may also consider translating promotional materials to French to reach a wider audience in other provinces such as Ontario, and New Brunswick where French is widely spoken or to other languages to market to the very diverse Canadian population.

10. Review your Privacy Practices for Compliance

If your product will be sold through an e-commerce platform, or you will be collecting personal information through your website (including by the use of cookies and other tracking tools), or by other means your privacy policies and procedures must comply with Canadian law. You may wish to consider a policy just for Canadian consumers or integrating Canadian requirements into existing policies.

While the various differences and requirements may appear overwhelming legal counsel with expertise in consumer issues, packaging and labelling and advertising laws in Canada can guide you and work closely with other consultants and your distributor or retail partners to ensure a smooth and successful product launch in Canada.

LuAnne Morrow is Counsel and trademark agent at Borden Ladner Gervais LLP. Her practice focuses on trademark prosecution, strategy and licensing, advertising and consumer issues and she specializes in assisting companies to launch brands, products and companies in Canada. LuAnne is recognized in the 2019 (and since 2010) edition of Best Lawyers in Canada (Advertising and Marketing Law and Intellectual Property Law), the 2018 edition of Managing Intellectual Property's IP Stars (Intellectual Property) and in the 2018 edition (and since 2010) of World Trademark Review's WTR 1000 - The World's Leading Trademark Professionals (Prosecution and Strategy).

Gearing Up for U.S. Tax Reform

Mo Ahmad, Founder & CEO Westmark Tax

It’s hard to believe we are already in the 4th quarter of the calendar year 2018, with the year-end right around the corner.  As the year-end approaches, most of us start planning for the winter months and the holidays.   It’s also a good time to catch up on personal paperwork and gear up for year-end tax planning in preparation of the 2018 U.S. tax filing season (starting in early 2019). 

Taxes may not be the first thing on the top of your year-end to-do list; however, given that the implementation of the “Tax Cuts and Jobs Act of 2017” (TCJA) is right around the corner, it’s a good time to see what you can do now to be prepared and positioned for expected results and no surprises.   

Perhaps you’ve read all about the TCJA in the press.  If you are still unclear about TCJA changes or how it will impact you, here is a brief recap of the more prominent changes impacting individuals.

1) Decrease in federal individual income tax rates 

The individual federal income tax rates were decreased with the top marginal rate moving from 39.6% to 37% starting in 2018.  To bolster the good news, the seven tax brackets (or bands) were widened so that more of your taxable income will fall within the lower tax bands resulting in lower taxes for a large majority of us (there are some exceptions for individuals in the higher tax brackets).
 
For payroll withholding on supplemental wages (e.g. bonus, stock options, restricted share units) a new rate of 22% on $1 million or less of wages and 37% for over $1 million.
 
2) Increase in the Standard Deduction for 2018
 
The Standard Deduction was increased to:
- $12,000 for single filers (including married filing separate)
- $18,000 for heads of household
- $24,000 for joint filers
(compared to $6,500, $9,550, and $13,000 respectively under 2017 law)
 
To provide some background, an individual or married couple can deduct against taxable income the higher of Itemized Deductions or the Standard Deduction.  
 
Taxpayers can now take advantage of the higher Standard Deduction versus having to itemize their deductions.  Thus, tax filing becomes simplified as less individuals will have to itemize their deductions.  A word of caution, states may still require you to itemize your deductions.
 
The new Standard Deduction amounts almost doubled; however, the benefit may be offset by the loss of personal exemptions under the TCJA.
 
3) Expanded Child Tax Credit
 
The child tax credit expanded from $1,000 to $2,000, while increasing the phaseout from $110,000 in current law to $400,000 for married couples. The first $1,400 is refundable.  If a dependent child does not have a social security number, but has an Individual Tax Identification Number (ITIN) then, a $500 nonrefundable tax credit may be available.  Other dependents, other than dependent children, may also qualify for the $500 nonrefundable tax credit.

4) New 20% Qualified Business Income Deduction

If you own a sole proprietorship, partnership, or S corporation—known to the IRS as a "pass through" business, you'll see your top tax rate drop to 29.6% for qualified business income attributable to the new 20% Qualified Business Income Deduction. As a "pass through" business, the profits (or losses) pass through to you as the business owner and is reported as personal income. The new tax law excludes some professional services income when certain taxable income thresholds have been exceeded. Professional services can include health, law, consulting, athletics, or financial services fields where the essential asset is the reputation or skill set of one or more of its employees or owners. Professional services businesses involved in investment management, and the trading of stocks, bonds, and other securities for clients are also excluded. How to maximize the 20% deduction is tricky so best addressed by your professional tax advisor who is knowledgeable in how the deduction works.

5)  C Corporation changes: Drop in federal corporate tax rates to 21%, new limit on net operating loss carryforward, and more options for accounting method.

If you currently own a pass though, or plan to set up new business in the U.S., you may want to consider a C corporation given the drop in federal corporate tax rates to a flat 21%.

But watch out for the limits on net operating losses, also a new provision for C corporations.  When operating cost exceeds revenue on a business tax return, it creates a net operating loss (NOL). The new tax law allows businesses to carry those losses forward indefinitely and use them to offset 80% of their taxable income in a future tax-reporting period. While you can carry these losses forward indefinitely, they cannot be carried back and applied to a prior tax period.

Many small business owners of C corporation that are not personal service corporations prefer the more straightforward cash method of accounting, where you only account for income when the money is received. Thanks to the federal tax overhaul, these businesses with up to $25 million (previous limit was $5 million) in revenue may now stick with cash method of accounting.

6) Full and immediate expensing of short-lived capital investments

For those taxpayers owning a business, there are now provisions for larger and more write-offs. Any qualified personal property you purchase for your business, such as a car, computer, or office space, is now fully deductible for a property acquired or placed in service after September 27, 2017 and before January 1, 2023. For equipment not subject to 100% first year expensing, first year write-offs are increased from $500,000 to $1 million and now includes equipment such as heating systems and home alarms.

7) Elimination of Personal Exemptions 

That’s right, you can no longer deduct yourself, spouse or dependents (although, some states allow for personal exemptions).  This new provision may have no impact to you if you were in Alternative Minimum Tax (AMT) in 2017 or prior years.  Basically, this elimination does not impact you as AMT does not allow for personal exemptions in the first place.

Another mitigating factor that may lessen the impact of the loss personal exemptions is the increase in the child tax credit, and more individuals can now take advantage of the credit due to the increase in phaseout threshold.

8) Changes to Itemized Deductions including mortgage deductions, state and local tax deduction limitation, elimination of miscellaneous itemized deductions.
These changes are significant and will impact taxpayers in especially high tax states and in states who have high property taxes.

• The mortgage interest deduction is now limited to the first $750,000 in mortgage loan indebtedness (new loans as of December 15, 2017).  

• Home equity loan interest no longer deductible

• State and local tax deduction is limited to a combined $10,000 for income, sales, and property taxes. Note taxes paid or accrued in carrying on a trade or business are not limited.

• Miscellaneous Itemized Deductions are no longer deductible.

 
9) TCJA changes effective 2019

Alimony is no longer deductible to the payor and not taxable to the recipient (for divorce or separation agreement in effect after Dec 31, 2018).

Mandate of share responsibility payment is reduced to zero effectively nullifying the Affordable Care Act tax penalty.
 
Recommended Steps and Actions

• A tax projection can be prepared to assess all TCJA changes that may be applicable.If you are impacted by the many changes in itemized deductions, it’s generally the case taxable income will go up but the lower tax rates may soften the impact. Moreover, the changes to the 2018 payroll tax withholding tables and the lower 22% tax withholding rate on bonuses and other one-time payments can cause underpayments in tax withholding resulting in potential underpayment penalties and interest.

To reiterate, if you have 2018 state income taxes and property taxes that exceed the maximum tax deduction of $10,000, will this change cause an increase to your federal tax liabilities given that the individual income tax rates are lower in 2018?  A projection of your 2018 tax liabilities will allow you to plan for 2018 tax balances due (or refunds) and assess whether estimated taxes need to be paid in or payroll tax withholding increased in the last quarter of 2018 to minimize underpayment penalties and interest. 

• You may want to consider timing your itemized deductions such as timing charitable contributions.

For example, if a married couple achieves the maximum $10,000 deduction for state and local taxes (state income taxes and property taxes) and mortgage interest of $10,000, it may be wise to stagger charitable contributions between two years. If the taxpayer wishes to donate $10,000 a year to charitable organizations, it would be beneficial for them to pay $20,000 in one year and $0 in the next. Their deduction for the year they made the $20,000 contribution would be $40,000 and the other year they would take the $24,000 standard deduction. If they instead made $10,000 in contributions each year, they would get $30,000 in total deductions for both years. By staggering their contributions, they will have a net gain of $4,000 in deductions over the two years (i.e. $64,000 vs. $60,000 over a two-year period).

• If you own a pass-through entity, review eligibility and tax benefit from the Qualified Business Income (QBI) deduction.There may be steps to implement before year-end to maximize the benefit for 2018 and future years as the combination of taxable income, the type of business, and wages can impact eligibility and the calculation of the deduction.The Qualified Business Income Deduction planning should be done prior to the 2018 year-end.

An item to note, taxpayers with international aspects can be affected by other changes in the tax law not mentioned above including disallowance of qualified moving expense deduction and disallowance of foreign property taxes on personal use properties.

Not all TCJA tax law provisions were addressed in this article as it is a highlight of some of the more prominent changes affecting taxpayers.  This, coupled with the complexities of new tax law should be reviewed by your tax advisor so planning can be implemented.  

Westmark Tax is dedicated to following the impact of the TCJA on your business and your personal tax situation. Feel free to contact Westmark Tax at www.westmarktax.com or (604) 637-9775 with any tax questions.

Is the Stock Market Too Concentrated?

Matt Carvalho, CFA, CFP®, Chief Investment Officer, Cardinal Point Wealth Management

It probably doesn’t come as a surprise that Amazon, Netflix, Microsoft, Apple, Alphabet and Facebook have been some of the best performing stocks in the first half of this year. But what may be surprising is that those six stocks made up 98% of the S&P 500 Index returns for the first half of 2018 according to a recent CNBC article1!

Many headlines over the last year have pointed out just how large these tech giants have grown For the first time since 20002, the tech sector now represents 25% of the S&P 500. When viewed another way, the market capitalization -the amount investors have deemed the companies are worth- of the top (largest) five companies is approximately equal to the bottom (smallest) 282 companies in the S&P 500, as illustrated by the amazing pie chart below created by Michael Batnick of Ritholtz Wealth Management3.

Weight of Top 5 Companies in S&P 500 Versus Bottom 282 Companies

In other words, the bottom 56% of the S&P 500 has the same market capitalization as the top 1%.  That’s a lot of companies. Those 282 listed include many household names such as Chipotle, Kohl’s, Clorox and H&R Block, all of which are multibillion-dollar firms on their own. Which begs the question, is it typical for a handful of the largest companies to dominate an index?

It turns out that historically it’s not uncommon for the largest companies to represent an enormous percentage of the index. Today the largest 10 companies represent a little over 20% of the large cap space  That’s right about the average we’ve seen over the last few decades, and significantly lower than it was in the 1960s, according to a recent study by Travis Fairchild at O’Shaughnessy Asset Management4. This study also found that on average, about 6-7 of the top 10 names  fall out of the top 10 within the following decade, suggesting that many of the current top ten companies will be replaced in the next ten years.

This phenomenon isn’t limited to just the U.S. According to Benjamin Felix of PWL Capital, through July 13th of this year, 75% of the S&P/TSX return came from just 10 of its 246 stocks, led by Suncor Energy, Toronto-Dominion Bank and Shopify5. This may lead you to ask, is there anything I should be doing as an investor to take advantage of this?

First off you should note that well diversified portfolios likely hold all the names mentioned in this piece; Amazon, Apple, TD, etc. are some of the largest holdings for most North American investors. But investing a portfolio solely in those largest companies has two pitfalls - undue concentration of risk and missed opportunities in other areas of the market.

The first pitfall of investing solely in individual names - even some of those red-hot tech stocks, came home to roost at the end of July. Both Facebook and Twitter reported earnings which fell short of market expectations. On July 26th, the day after their quarterly earnings announcement, Facebook fell by a whopping 19%, erasing $120 Billion USD in value! This amount is greater than the entire value of large companies like GE, Nike or Starbucks. A day later, following Twitter’s earnings announcement, that stock also fell 19%. Twitter had been one of the best performing stocks over the previous year prior to that announcement.

While these companies are included in most major stock market indexes, the performance of any individual company is going to be relatively small in comparison to the entire index - for example the S&P 500 was basically flat on July 26th, even with Facebook falling dramatically. But if you owned them individually - they would likely represent a far greater percentage of your overall assets.

Another major downside of only holding those largest of companies is missing out on large potential gains elsewhere. Small companies outperformed their large cap counterparts in the U.S. and Canada significantly over the second quarter of this year. And academic research shows that historically small companies have outperformed their large counterparts over decades6. Yet for the average investor, it’s difficult to not want to go all in on the large gains you’ve recently seen on familiar companies you likely interact with every day.

If outperforming were as easy as picking the recent winners and calling it a day, active fund managers would have a far better track record than they currently do. Yet, the record of both U.S. and Canadian active stock managers is poor, supporting the idea that it’s extremely difficult to outsmart the market and predict in advance who the winners of tomorrow will be.

Like the Apples or TDs of today, or the IBMs or Blackberrys of the past, a few large high-flying companies will often garner the headlines. Yet the key to reaching your financial goals is not the fool’s errand of trying to guess what the wonder company of tomorrow will be, but in keeping a well-diversified portfolio that will own all the companies that may provide that growth.

Matt Carvalho, CFA, CFP® oversees Cardinal Point’s Canadian and U.S. investment management strategy and process. His former role was Vice President, Portfolio Strategy for a $17 billion dollar Turnkey Asset Management Provider or TAMP. While in this role, Matt served with Dr. Harry Markowitz (Nobel Prize winner in economics) and Dr. Meir Statman (expert in behavioral finance) on a six person investment committee offering advice to the TAMP.

Cardinal Point is an independent Canada-U.S. cross-border wealth management organization. Our advisors operate under the fiduciary standard and provide solutions to high-net worth families, individuals, and related institutions. As a respected thought leader, Cardinal Point has been featured and asked to comment on Canada-U.S. planning subjects in over twenty-five publications and videos, including the Wall Street Journal and Globe and Mail.

To learn more, please visit cardinalpointwealth.com or contact us.
 
1Just three stocks are responsible for most of the market’s gain this year, CNBC, Jul 10, 2018
https://www.cnbc.com/2018/07/10/amazon-netflix-and-microsoft-hold-most-of-the-markets-gain-in-2018.html
2S&P 500 Hits Tech-Heavy Milestone Last Seen With Dot-Com Bubble, Bloomberg, Feb 28, 2018
https://www.bloomberg.com/news/articles/2018-02-28/s-p-500-hits-tech-heavy-milestone-last-seen-amid-dot-com-bubble
3@michaelbatnick tweet, July 18, 2018
https://twitter.com/michaelbatnick/status/1019680856837849090/photo/1
4@tbfairchild tweet, Jun 6, 2018
https://twitter.com/tbfairchild/status/1004375185179529217
5@benjaminwfelix tweet, July 13, 2018
https://twitter.com/benjaminwfelix/status/1017869943226937345/photo/1
6 Common risk factors in the returns on stocks and bond, Journal of Financial Economics 1993

Delivering LA and Southern California to the Global Market - How Does Your Business Plan Fit?

Cynthia Coulter, Senior Consultant, ColLAborate

Southern California (SoCal) has a huge business presence globally. It is one of the most vibrant business environments in the world.  Los Angeles is the third largest municipal economy in the world. Tokyo is the largest and New York is second. LAX is the 4th busiest airport in the world and the Port of LA ranks as the busiest port in the western hemisphere. This growth of SoCal’s economy brings with it opportunities for businesses from around the world to participate in the building of infrastructure and providing services throughout SoCal. It is an opportunity to gain market share in this culturally diverse region.
 
 Los Angeles will host for the third time the summer Olympics in 2028.  While this event alone is not a defining factor for growth, it does provide the opportunity to showcase and encourage the international business community to do business in SoCal.
 
Unprecedented growth is occurring in infrastructure sectors that need to be improved or built. New subway and transportation systems are being constructed to connect all communities in SoCal. The Ports of LA and Long Beach are becoming world class centers for logistics and trade, while instituting sustainable energy and environmental practices to keep our waterways clean.

Real estate development continues to add more housing and commercial space to keep pace with the neighborhoods where integrating work and home office space becomes more and more attractive.
 
As always timing and positioning are everything. Businesses wanting to enter this market have to understand the dynamics of doing business here.
 
Business development, strategic planning, lobbying and public affairs, marketing, and sales have to be integrated. Coordinating these corporate activities is a process for successful growth.
 
Business development strategies must strengthen longer term values of a company. It is imperative that business leaders in this market share their vision and goals with stakeholders. Through strategic planning, marketing and communications, and lobbying and public affairs efforts--business leadership coming into the market will be building their brand and awareness of their business intentions and goals among stakeholders. Gaining a voice in this competitive and highly energized community requires planning and commitment to the marketplace.
 
It is a fact, and part of human nature that people love to deal with important people! Being active in organizations that fulfill your business objectives, and where you can interact with prospective clients and other business leaders, goes a long way to being included and accepted as an active, interested participant in the market.
 
Businesses entering or expanding in this market need to build their presence to increase sales. Attaining these goals may require them to make the decision to bid for contracts with local governments. These bids are large lucrative contracts that include the ports, transportation systems, infrastructure improvements, real estate development, energy delivery systemsand other largescale improvement projects. Effective lobbying and advocacy can afford a corporation lasting competitive advantage. Lobbying efforts are critically important in SoCal. Few activities an executive may engage in carry the potential business impact of a lobbying and communications efforts that reflect the corporate objectives and plans for this specific market. It is the well informed business executive who understands that in today’s climate to win there has to be an integrated business development plan to include strategic planning and lobbying.
 
Successful business development is dependent on the implementation of strategies building long term value for a company from the point of view of customers (including government organizations and departments) and stakeholders (community organizations, other businesses and business organizations).
 
It is not easy for international businesses to understand the business and regulatory climate in California. It is complicated. It is based in history that is not always apparent to outsiders.
 
Professionals who have experience in doing business in California and specifically in LA and SoCal have to have experience and understanding of the global markets. Companies coming here want to know that they are getting guidance, advocacy and business advice that is in line with their business growth objectives. More than ever, the old adage of, “think locally; act globally,” applies.
 
ColLAborate has its roots in lobbying and public affairs and is known for advocacy, community outreach, entitlement processing, and business to business projects. Since 2000, the partners have worked on some of the most important projects in LA.
 
Kate Hennigan Ohanesian is founding partner at ColLAborate. Prior to founding the firm, Kate spent more than 12 years serving the City of Los Angeles in various roles, most recently as Economic Development and Legislative Director for Councilmember Paul Koretz. Kate previously served as Senior Policy Director in the Office of Economic and Business Policy for former LA Mayor, Antonio Villaraigosa, where she was responsible for the Hollywood Film and entertainment community.
 
Cynthia Coulter is a senior consultant to the company who advises on business development opportunities for the firm and brings significant international C-suite experience with a career in international marketing and corporate communications. She is Canadian born, and longtime LA resident who was an executive with California based Fortune 500 companies to successful start-ups. Recently, she worked extensively in the renewable energy/clean tech and sustainability sectors developing successful business opportunities between North America and China.

For more information on ColLAborate, please visit their website, www.collaborate-la.com or contact Cynthia Coulter (cynthia@collaborate-la.com) or Kate Hennigan (kate@collaborate-la.com).

The Riverside County Office of Foreign Trade - An Active Partner to Businesses and Investors

The Riverside County Office of Foreign Trade is an active partner with the multitude of businesses and investors who work in this booming and sprawling Inland Southern California county, and the Office’s many programs this year illustrate the wide array of services and support exporters and investors receive.

Agriculture

From grapefruits to garlic, Riverside County farmers have diverse and robust export businesses that send products to more than 50 countries around the globe including Canada, China and Ghana, among many others. Many of those farmers and the businesses that want to work with them gathered for a day of programs and exhibits on trade, technology and more earlier this year.

The Riverside County Economic Development Agency’s Office of Foreign Trade focused the Ag Expo on high-tech tools of the trade like drones and cutting-edge equipment in the picturesque Coachella Valley. The event drew hundreds of people from across the country eager to showcase their agriculture products and connect with the growers in the room.

Those growers remain strong in spite of the many challenges facing agriculturalists, with the total gross value of agricultural commodities topping $1.2 billion in 2017, according to the recently released annual report by the Riverside County Agricultural Commissioner’s Office.

Trade Agreements

Riverside County businesses concerned about the effects of tariffs and trade negotiations on their businesses had an opportunity in August to share their thoughts with Bryan O’Byrne, chief of international affairs and trade policy at the U.S Small Business Administration.

Mr. O’Byrne listened as a farmer, a manufacturer and others shared their concerns about tariffs and the ongoing NAFTA renegotiations. Mr. O’Byrne is able to carry those perspectives back to the negotiating table. The event was hosted by the Office of Foreign Trade in Riverside.

The discussion provided the latest updates on trade policy topics and enabled businesses to provide direct feedback to a senior SBA representative on what would be beneficial to their business as they seek to start or grow their exports.

The roundtable was featured in an article in The Desert Sun:
https://www.desertsun.com/story/money/2018/08/14/sba-business-people-impacted-tariffs-we-feel-your-pain/949910002/

The article noted the Commerce Department’s statistics on this region’s impressive export growth: “In 2016, goods from the Riverside-San Bernardino-Ontario area had an export value of $10 billion, according to data compiled by the U.S. Department of Commerce. Trade in the region grew 144 percent between 2006 and 2016. … Mexico, Canada, and China – in that order – rounded out the Riverside area’s top export markets.”
 
GoGlobal Export Accelerator Program
In an effort to work with Southern California businesses looking to begin exporting or expanding their exports, the Riverside County Office of Foreign Trade will host an exclusive one-day accelerator program September 12. The GoGlobal Export Accelerator Program will have guest speakers discussing different markets, innovation, business growth through E-commerce and cryptocurrency trade.

This exclusive event will help manufacturers, growers and others who are in need of guidance in the international market realm. With only 20 spots available, businesses will receive focused and highly skilled guidance on how to invest and export from experienced professionals. The event will be located at the Riverside County Business Center, from 8 am to 5 pm. Interested businesses must apply to attend:
https://www.rivcoeda.org/oft/CalendarofEvents/News/TabId/1605/ArtMID/2867/ArticleID/19/Riverside-County-College-of-Foreign-Trades-GO-GLOBAL.aspx

SoCal Business Connect Summit
The Office of Foreign Trade’s annual and highly popular event known as the Procurement, Trade & Manufacturing Summit has been renamed the SoCal Business Connect Summit and scheduled for November 7 at the Riverside Convention Center. Last year’s summit drew attendees from across the state and beyond with more than 900 matchmaking appointments held with major buyers and vendors.

Multiple breakout sessions on everything from international trade to cybersecurity to procuring government contracts filled a jam-packed agenda. Anyone interested in attending, sponsoring or participating in the matchmaking can learn more here:
https://www.rivcoeda.org/oft/CalendarofEvents/News/TabId/1605/ArtMID/2867/ArticleID/18/4th-Annual-SoCal-Business-Connect-Summit.aspx

Los Angeles Chamber Event

EDA Deputy Director Leslie Trainor, as well as Economic Development Manager Michelle DeArmond, represented Riverside County in a private briefing with 40 members of the L.A. Area Chamber’s Diplomatic and Commercial Officers Group.

Patricia Elliott, Consul & Senior Trade Commissioner with the Consulate General of Canada in Los Angeles, was the event’s emcee. Elliott (far right in the photograph) serves as vice chair of the L.A. Area Chamber’s Diplomatic and Commercial Officers Group.

Representatives from the Economic Development Offices of the counties of Ventura, Orange, Los Angeles and Riverside participated in this private briefing to discuss economic development by foreign investment and future trade opportunities. The Diplomatic and Commercial Officers group centers its work around infrastructure where members and trade offices are able to develop their own strategies and programs when it comes to trade.

Vietnamese Delegation from Ninh Binh Province visits Riverside County  

Riverside County Board Chairman Chuck Washington and Riverside County Executive Officer George Johnson joined the Office of Foreign Trade for a diplomatic roundtable discussion in June with a delegation from Ninh Binh Province in Vietnam. The delegation representing the Vietnamese Chamber of Commerce, as well as public and private entities in Ninh Binh Province, met with the Riverside County to discuss potential trade opportunities between our two governments. 

For more information about the Riverside County Office of Foreign Trade, we invite you to follow us on Facebook and Twitter @GoRivcoOFT and on our Web site: rivcoeda.org/oft

TSX Venture Exchange: An Alternative Financing Option for SoCal Growth Companies

Delilah Panio, VP Capital Formation (Southern California), TMX Group

SoCal growth companies looking for funding should consider all capital raising options. While many entrepreneurs tend to only consider the traditional route of angel investors to venture capitalists to being acquired, there are other options that may be a better fit for the company’s long term growth strategy.
 
With the introduction of equity crowdfunding and Initial Coin Offerings (ICOs), there are now more financing options than ever, including the public markets. However, in the United States going public means being quoted on the unregulated over-the-counter markets on one end of the spectrum, or completing a large IPO on one of the country’s main exchanges on the other end.
 
The Canadian capital markets are unique in that TMX Group owns and operates a two-tiered marketplace serving companies from early stage pre-revenue companies on TSX Venture Exchange (TSXV) to multi-billion dollar established businesses on Toronto Stock Exchange (TSX). The idea of going public “early” may not be intuitive to most U.S. companies, but it is an important option worth considering.
 
TSX is the senior market for larger, more stable companies with a track record. The average financings on TSX fall in the $25-$100M range and have an average market cap of $2.0B. These companies benefit from increased analyst coverage and being eligible for our index products.
 
For smaller, early stage growth companies, TSX Venture is a unique platform that is tailored to companies of this size. TSX Venture provides financings typically in the $5-$25M range and TSX Venture issuers have an average market cap of $31M.
 
Recent U.S. Tech Listings
 
In the last year, several California technology companies have listed and raised growth capital on TSXV.

• Boardwalktech Software (TSXV:BWLK) offers patented digital ledger technology supporting blockchain applications; Based in Cupertino, CA; Raised $10M on its TSX Venture listing in June 2018.

• Nubeva Technologies (TSXV:NBVA) is engaged in developing and selling software related to blockchain technology and cybersecurity; Based in San Jose, CA; Raised $10M on its TSX Venture listing in March 2018.   
• Universal mCloud (TSXV:MCLD) is building the next generation IoT platform for asset and smart energy management; Based in San Francisco, CA; Has raised $6M since listing on TSX Venture in October 2017.

For the 2018 Technology & Innovation Mid Year Review, click here.
 

Going Public Considerations

1. Reason: Does your company have a reason to be public?

Advantages of being a public company include:

• Access to capital for multiple rounds of financings.
• Acquisition currency (i.e. public stock) to acquire competitors, technology etc.
• Diversified shareholder base from a few shareholders with potentially onerous terms to a flat cap table of common shareholders.
• Public shares can be used as a recruitment incentive to attract quality talent.
• Being listed on an internationally regulated stock exchange can provide credibility and exposure, particularly important if working with Fortune 500 clients.

2. Ready: Are you and your company ready to go and be public?

• Management Team: Your management team should be interested and ready to go public, and include a CFO with public company experience.
• Board of Directors: Your company will need a formal board of directors that understands its legal and fiduciary responsibilities as public company directors.
• Audited Financials: Two years of audited financial statements will be required.
• Internal Controls: Your company will need to establish the required financial controls and reporting infrastructure to be public.
• Time for Investor Relations: A significant amount of your CEO’s time will be spent on communicating with current and potential investors.
• Transparency: Your company’s financial information will be public to everyone including competitors, and you and your team need to prepare for that.

3. Requirements: Does your company meet exchange listing requirements?
 

As a junior regulated market, TSXV uniquely lists pre-revenue companies. Listing requirements are based on financial fundamentals including working capital, revenue and net tangible assets, unlike the U.S. markets which base listing eligibility on share price, market cap and shareholder equity. See the Guide to Listing for more details: www.tsx.com/ebooks/en/2018-guide-to-listing/

4. Reality: Can Canadian investment bankers get investor support (retail and institutional) for your type and size of company in current market conditions?
 

In today’s market, Canadian bankers are looking for companies raising growth versus development capital. This means that the company has developed a commercially viable product, has early customers or interest, and now needs growth capital for customer acquisition and expansion. Typically, companies raising at least $10M are of interest.

 Why Consider a Listing on TSX Venture Exchange?

1. A Source of Growth Capital

Last year, TSX and TSXV issuers raised over $55B, making Canada the 4th largest market in the world for financings… which is impressive considering the size of the Canadian population! Approximately 40% of TSX daily trading originates from outside of Canada (a majority of that coming from U.S. sources), providing access to international investors.
 
As an alternative to private venture capital, a TSXV listing can provide the benefit of raising small, subsequent rounds of capital. TSXV companies raised $6B in 2017, with an average financing of $4M. These are small public companies… and we like to refer to this market as “public venture capital”, as companies are accessing rounds of capital similar to the typical VC route of Series A, B, and C rounds.
 

2. Tailored to Small Public Companies

With a 165-year history of financing exploration companies, the Canadian public markets have evolved to support small cap public companies. From the securities commissions, the exchanges, and analysts to the retail and institutional investors… everyone in the Canadian ecosystem understands and embraces small public companies. This is not the case in the U.S. TSXV companies benefit from right-sized corporate governance and reduced time and costs to listing. Listing vehicles like the Capital Pool Company (CPC) program allow growth companies to access the public markets without the high costs and risk of a large initial public offering (IPO).
 

3. No Longer Just a Resource Exchange

While TSX has historically been known as a natural resource market - given our 165 years financing mining and energy companies - today our stock list is quite diverse. In fact our mining issuers currently account for just 10% of the market cap of all issuers, with other sectors surpassing them.
 
For the past five years, the number one source of new listings has been tech and life sciences companies (including cannabis). Last year, there were 138 new technology/life sciences listings… and all of the issuers in these sectors raised over $29B.

4. A Platform for Long Term Growth

The key benefit of this two-tiered market is the potential for early stage growth companies to list on TSXV, raise several rounds of capital, and when ready, graduate to TSX. In the past 20 years, over 650 companies graduated from the junior board to the senior board, and almost 40% of current TSX-listed technology companies started on TSXV.

TSX is also a true stepping stone to the U.S. markets. Once a TSX issuer is large enough and relevant enough, it can look to interlist on a U.S. stock exchange. If your end goal is to be listed on Nasdaq, TSXV and TSX are a viable path to get there.

For the growth company that is looking to build a long-term sustainable business that requires ongoing access to capital, TSXV is an important financing option to consider.

For more information, contact Delilah Panio, VP Capital Formation (Southern California), Toronto Stock Exchange and TSX Venture Exchange at delilah.panio@tmx.com

Financial Infrastructure is Key for Crypto Company Success

Scott Schimberg CPA CMA Partner - Armanino, LLP

As cryptocurrencies gain traction toward mainstream adoption and acceptance, companies in the crypto ecosystem must balance an influx of revenue and fast growth with the challenges of building a financial infrastructure capable of supporting their changing needs.

 
Whether they’re a cryptocurrency exchange, a company funded through an initial coin offering (ICO), a platform or technology provider―or any combination of those categories―firms need processes and tools to help them address technological, marketplace and regulatory uncertainty amid rapidly changing token and company valuations.  
 
Without proven monetization strategies, crypto companies are developing their technology and commercialization plans dynamically while the marketplace and regulatory climate evolve. Like other high-growth startups, most are understandably more concerned with proving their concept, attracting investors and rushing to gain market acceptance than with investing in back-office financial tools. The return on investment of engineering talent, for instance, may be more readily apparent than the ROI of financial systems.
 
But neglecting financial infrastructure can lead to management and compliance challenges as a firm grows and plans for its near- and long-term future. Companies with more effective financial tools and controls outperform competitors that are unable to overcome their technical debt, develop the appropriate financial and compliance processes, or scale efficiently.
 
A key to establishing a strong financial infrastructure is adopting a cloud-based ERP platform that provides clarity about your operations while enhancing your compliance and governance framework. Core ERP financial tools improve company performance by providing deeper insights into financial and operational results, and centralizing information to enable faster and more accurate decision making.
 
Key Questions to Answer
 
With widespread uncertainty underscoring the crypto ecosystem, building core financial tools improves your ability to meet change head-on, scale effectively and plan for future growth.  As market and regulatory pressures change the landscape on a near-daily basis, you have to be able to answer some fundamental questions, including:

• Are you operating profitably?
• How much revenue do you have? And how and when do you recognize it?
• Which financial and non-financial metrics are critical for understanding your results?
• Can you account for equity accurately?
• Can you report financial and performance data to investors and regulators?
• Is the data feeding your financial systems timely and accurate?
• Are you managing your cash efficiently?
• Do you have an effective separation of duties?
• Do you have an effective internal controls framework to reduce the risk of fraud and material misstatement of your financial results?

 
This challenge is complicated by the fact that the accounting rules for cryptocurrencies are vague at best. There aren’t defined standards for cryptocurrency valuation or accounting, or for paying employees in tokens. There are no clear SEC or IRS guidelines, other than the well-understood concept that fraud is illegal.
 
Beyond that, there's still very little direction on how crypto companies should define revenue for financial reporting or taxation purposes, report it or recognize it. Without this information, it’s difficult at best to communicate results with employees or investors.
 
Building a Platform for Growth
 
To answer these key questions (and address the underlying challenges they represent), companies must develop a financial and compliance infrastructure that meets their current needs while accommodating future growth and increased regulation.
 
Starting from the basics of developing an idea and setting up a corporate entity, to issuing equity and managing cash, to reporting results to investors and regulators, a firm’s reporting requirements will become more complex as it scales. Cloud-based ERP tools can support a company at each stage of its growth by improving its ability to understand its financial performance and take advantage of emerging opportunities.
 
For growing companies, cloud ERP solutions offer a number of advantages over costly, complex on-premise implementations, beginning with increased flexibility. Instead of assuming all of a company’s transactions and processes will be housed within the ERP―or forcing companies to adapt processes to meet the ERP’s requirements―today’s cloud-based ERP platforms allow greater flexibility by integrating with other financial or operational tools your company is using.
 
This best-of-breed cloud architecture allows you to invest in a platform offering the most effective performance for your company today, while preserving your ability to expand and upgrade as your company grows and its compliance needs evolve.
 
These tools also offer user interfaces and terminology that are easier to understand than their on-premise predecessors. This reduces the amount of time needed for training and implementation―allowing for a stronger focus on your company’s core mission and performance.
 
Beyond technology, a strong financial infrastructure also means having the right people. Companies that aren’t ready to add in-house accounting staff can consider outsourcing some financial reporting, management and accounting support.
 
Investing in cloud-based ERP and enlisting support from financial management and reporting professionals are foundational steps that can improve your company’s operating efficiency, financialperformanceand credibility with investors, regulators and customers. This strong foundation will help you successfully weather the inevitable changes ahead.

Learn more about cloud solutions and how they can impact cryptocurrency companies with Armanino.

Scott Schimberg

Scott graduated from San Jose State University in 1991. He became a Certified Management Accountant in 1995 and obtained his CPA certificate in 2002. Scott is a member of the Institute of Management Accountants (IMA). He has held various positions with the Amador Valley Chapter, including President. Scott has a mixture of industry experience and has held positions as Assistant Controller, Controller and VP of Finance. He also has more than 13 years of consulting experience, where he has focused on implementing ERP systems.

Connecting with Canadian e-commerce - Where to Go as Domestic Markets Slow

Jamie MacDonald - Director of International Sales for Canada Post

While e-commerce in the U.S. reaches a stage of maturity and online sales stabilize, Canada is expected to see consistently higher e-commerce growth – especially this year and into 2019.1. Canadians shop more online, they increasingly turn to their neighbor to the south. Last year, 67 percent of our e-commerce shoppers bought from U.S. merchants. That’s 23 percent more than in 2016. How often do they shop? Six times each, on average. And, according to Canada Post’s 2018 Canadian Online Shopper Study, 65 percent of Canadian e-commerce shoppers are planning on buying just as much, if not more, in 2018.
 
If you haven’t yet had the opportunity to plan your strategy for connecting with Canadian e-commerce shoppers, stay awhile. We have the insights. Read on to discover everything you need to know about cross-border growth.
 
Canadian e-commerce gathers speed
Every year, more Canadians shop online, and they shop more frequently. From Vancouver in the west to Moncton in the east, our enthusiasm shows no signs of slowing. As the market evolves, frequent shoppers become loyal hyper shoppers – many of them millennials. By 2021, online sales are expected to hit over CDN $94.15 billion, while the average online spend will probably grow more than 50 percent by next year.
 
Using 2017 data from 2,300 Canada Post e-commerce customers, we’ve identified the growth hotspots. E-commerce sales in west coast Victoria BC led the field with an increase of 37 percent. Sales to Ontarian shoppers in Kitchener, Londonand Windsor all climbed by more than 30 percent.
 
Plus, Canadians are the biggest cross-border online shoppers in the Americas. According to a 2016 Paypal Ipsos study, 59 percent of those surveyed shopped both at home and abroad in the previous 12 months.2
 
Selling to Canadians is the smart way to grow a resilient business
Here are just a few of the reasons why it makes sense to expand internationally by selling into an economically stable and trusted market:

It’s easier to build relationships with consumers who know your brands

Not only are Canadians familiar with American brands – through advertising and bricks-and-mortar shopping trips across the border, but they actively follow your brands. This makes it easier for U.S. merchants to build relationships and generate buzz, even before opening a store north of the border. 
 
 So why are Canadianssuch international online shoppers?

• Better availability (35%)
• An appealing offer (34%)
• Better conditions, like service or price (25%)
• A broader range of products (21%)
• Better quality products (10%) 3

Canadian customers live close together and are easy to reach
Although Canada is one of the largest countries in the world, most of us live in dense concentrations within 100 miles of the border. As the country’s national postal service, we are one of Canada’s most trusted heritage brands – and the only carrier delivering to all 15.7 million households and business addresses throughout the country. We also have shopper data to share, by category and geography.


Canadian and American shopper profiles are similar

This means you can not only tap into an additional source of revenue, but also take advantage of economies of scale. For example, you’ll have access to English speakers who are high adopters of internet and mobile – and also buy everyday products in significant numbers.
 
Acquiring Canadian customers
In the past few years, Canada Post has commissioned ethnographic, neuroscientific and generational research to dig deep into how people connect, interact and act on marketing messages at all of life’s stages. These studies reveal the effectiveness of direct mail in driving action and spotlight the intimacy of ritual, the impact of physicality and the power of data-driven relevance. They also spotlight the effectiveness of an integrated, properly sequenced campaign, using mail to prime other media. Direct mail is a compelling way to make email and other digital communications better recognized and received. Canada Post’s Smartmail Marketing™ solutions take all these considerations into account. It’s the scientific way to connect with Canadian consumers on their path to purchase:

• 64% of recipients will visit a website in response to a piece of direct mail
• 43% of recipients ordered a product online because they received a direct mail piece

 
The power of the home address
So, how do you find Canadian consumers who behave like your best customers at home? How do you reach those people who shop in the category you’re selling?  The Canadian postal code is a powerful thing. It’s our version of the zip code, containing significantly rich data on groups of about 20 households – providing you with the insight you need to acquire customers. Postal code data helps you target new customers in Canada with confidence, so you know you’re getting to the right people.
 
Respectful, intelligent targeting
This Statistics Canada Census data, along with other rich information sources,helps us characterize the type of customer who lives in an area within a neighborhood. And, although we have more privacy restrictions in Canada, they don’t apply to postal codes. So, you can use respectful, intelligent targeting to connect groups of like-minded people with the brands they’ll love.
 
Birds of a feather
To find look-alikes, you can select and test postal codes that intuitively align with the characteristics of your best customers – using your current data to identify the lifestyle similarities you want to find and pursue. By applying precise data that reflects the Canadian marketplace, you can create a portfolio of marketing solutions that perfectly align with the needs of Canadian shoppers.
 
To find out more about how to grow your business by marketing to Canadian online shoppers, connect with Jamie MacDonald at jamie.macdonald@canadapost.ca or learn more at canadapost.ca/gonorth.  We look forward to seeing you at our presentation during MAPLE’s Fall Events (September 5-6).

1 eMarketer’s Retail and E-Commerce Sales Report, published in December 2017
2 https://www.paypalobjects.com/digitalassets/c/website/marketing/global/shared/global/media-resources/documents/passport-citation.pdf

3  Google and TSN’s Consumer Barometer report

A Solid Logistics Strategy Brings Canada Closer to Your Customers

John Costanzo is the President of Purolator International

A few years ago, the manager of a Southern California manufacturing company contacted one of Purolator International’s regional offices regarding the manufacturer’s recent expansion into Canada.  Things were going very well, the manager explained.  The company had lined up an impressive number of Canadian retailers to carry its products, and sales were quite robust.  The problem though — and the reason for the call to Purolator— was that shipments seemed to be taking longer than necessary to arrive in Canada.  Was it possible for Purolator to find a way to cut the transit time, and make the overall process of shipping to Canada more efficient?
 
Faster, more efficient service is a common goal of all businesses that ship to Canada, and this need for speed has been exacerbated in recent years, with the surge in e-commerce shipments heading to Canada.  Canadian customers share the same delivery expectations as their U.S. counterparts — shipments should arrive within 2-3 days, on-time, and at little or no cost to the customer. 
 
But with an international border to cross, longer distances to travel, and an unknown distribution network to conquer, how could this be done?
 
In fact, tremendous advances have been madeincross border logistics such that U.S. businesses can now reach the Canadian market faster and with more flexibility than ever before.  Much of this innovation has been fueled by technology, and some, by looking at things in a new way.
 
My company, Purolator International, is a leading provider of logistics services for shipments moving between the United States and Canada.  Since this is our area of expertise, we’ve not only had a front row seat to the exciting changes taking place, but we’ve been behind several of them.  I’m happy to share a few experience-based tips that can help ensure your shipments enter Canada as quickly and efficiently as possible.
 

1. With the right provider, you can shave days from your Canadian transit time.  For many years, “standard” service from California to Canada included a stopover at a distribution center — often located several hundred miles off-course.  After being held at the distribution center, the shipment would be loaded onto an LTL carrier and make multiple stops before finally reaching the border.  That’s all changed.
 

• Today it is possible to have shipments move direct to the border, with no distribution center layover, and no stops along the way.  This is because LTL linehauls now operate regularly in California, with direct service to Canada.

• Route optimization is another tool that helps ensure shipments travel on the most expeditious route.  This is a technology-based tool that maps out the shortest route possible, taking into account factors like infrastructure delays and weather issues.

• Consolidation can help reduce freight costs and expedite the border clearance process.  By combining several smaller shipments into one larger shipment, a business can qualify for reduced freight charges and, since a consolidated shipment can clear customs as a single unit, the process also helps facilitate the border clearance process.
 
Taking advantage of these options depends in large part on your logistics provider.  A provider that owns its own fleet of trucks, for example, is generally locked into using their own vehicles, and customers’ shipments must fit into a pre-determined, inflexible schedule.  But if you use a logistics provider that does not own its own assets, but instead has relationships with many different carriers from which it selects the best option for each customer, you will have a lot more flexibility.

2. Make sure you can reach your customers.  It’s also important to understand some important nuances about the Canadian market.  The population of Canada is almost 37 million people, compared with California’s population of 39.5 million.  But, Canada is the second largest country in the world, in terms of geographic area.  Imagine if the population of California occupied the entirety of the United States, with room to spare.  That’s essentially the situation in Canada. 

A U.S. business must do its homework, and make sure its transportation provider has the capacity to guarantee delivery to all parts of Canada.  Many parts of the country are remote, for example, and not accessible via traditional distribution networks.  Most carriers do not offer service throughout Canada, which often means a shipment will have to be transferred from one regional carriertoanother, and then to a courier for last mile service.  There’s a lot of opportunity for shipments to get lost or damaged when that happens, so make certain you’re entrusting your customers’ shipments to a truly experienced provider that can guarantee delivery to all of Canada.

3. Prioritize customs efficiency.  Did you know missing or incomplete paperwork and inaccurate tariff classifications are top reasons for border clearance delays?   These seem like such obvious “to do’s,” but the fact is many shippers underestimate the scope and complexity of the customs process.

For example, almost 50 different U.S. agencies have some degree of authority over the import/export process.  In the United States, these agencies, called Partner Government Agencies (PGAs) range from the Food and Drug Administration which oversees imports ofpharmaceuticals, to the Fish and Wildlife Administration, which regulates wood products, among other things.  Depending on a shipment’s contents, the PGA will usually require a shipper to provide additional documentation and receive a permit.  In some instances, multiple PGAs have jurisdiction, and a shipper must comply with information requests from each agency.   But if a shipper is unaware of this step in the customs clearance process, it will mean delays.
 
This is exactly what happened to one of our customers, a manufacturer of musical instruments.  The company’s guitars included different species of wood, which fell under the scope of the international CITES treaty, which is administered by the Fish and Wildlife Service.  The customer’s shipments were routinely being held at the border, accruing fines and wasting time.  Fortunately, we were able to intervene and get this situation sorted out, but this customs issue had been a real bottleneck in this customer’s Canadian shipping strategy.
 
Most businesses choose to enlist a customs broker to handle documentation and customs filings on their behalf, which can be an enormous help.  An experienced 3rd party will know precisely which forms and documents need to be submitted to U.S. Customs and Border Protection (CBP) and/or to Canada Border Services Agency (CBSA), and will also assist in ensuring that the proper tariff classification code is assigned to a shipment.
 
4. Register as a Non-Resident Importer.  The Canadian government does not allow U.S. businesses to collect Canadian sales tax or act as an importer of record in clearing goods into Canada.  This means a business faces the highly inconvenient and unwelcome dilemma of having to collect taxes from Canadian customers at time of delivery.  Further, it is possible the Canadian customer will have to become personally involved in the customs process, by retrieving the shipment from a local customs office.  Neither or these situations are helpful to a U.S. business trying to build its brand in the Canadian market.

Fortunately, the Canadian government addresses this problem through its Non-Resident Importer (NRI) program.  Businesses are allowed to register with CBSA as an NRI which essentially eliminates these two obstacles: 
•Taxes can be collected attime of payment
•NRIs can clear goods through customs. 
 
Having NRI status essentially levels the playing field for U.S. businesses by removing barriers, and allowing them to provide the same types of seamless transactions as Canadian businesses. 
 
5. Duty Paid or Unpaid?  Every business that ships to Canada agrees to certain “shipping terms” with its transportation provider as a way to establish each party’s responsibilities in the transaction.  Among the many topics addressed:

•  Which party is responsible for paying border fees and tariffs?
•  Which party will actasimporter of record?
•  Where will exact point of delivery take place?
•  Which party will have responsibility for unloading the shipment?
 
To ensure there is no uncertainty, a set of 11 universally-recognized shipping terms — known as “Incoterms” -- establish each party’s responsibility in the shipping transaction.  Of the 11 Incoterms, only one — “Delivered Duty Paid” — designates border clearance responsibility to the seller.  This allows the seller to ensure that shipments arrive in Canada with all taxes and duties pre-paid.  Shipments traveling via any other Incoterm will arrive at the border with taxes and fees to be paid by the buyer.
 
There are reasons why a business may want its shipments to arrive in Canada with duties unpaid.  But for most retailers — especially e-commerce businesses that ship directly to consumers — having to collect dutiesattime of delivery would be highly inconvenient.  Choosing the right shipping term can have a consequential effect on your business, yet this is something many businesses know very little about.
 
Many, many factors come into play in successfully shipping to the Canadian market.  These five “tips” though, should be at the top of your list as you think about ways to better serve existingcustomers, or plan to expand your Canadian reach.  There’s never been a more lucrative time to be involved in cross border trade or, thanks to better logistics capabilities, an easier time to ensure guaranteed, on-time deliveries into Canada.
 
Oh, and the California manufacturer who reached out for help in reaching the Canadian market faster?  We were able to offer a logistics solution that shaves 2-3 days from its transit time.  It’s all about understanding theCanadianmarket, and having the tools in place to succeed.

California Dreaming: Real Benefits for Canada

Canadian companies that may have cast their dreams of California aside because the state is too far and too competitive ought to go try out—especially since it has recently become the world’s fifth largest economy and is brimming with opportunities.
 
The state’s economy is so large that the Canadian Trade Commissioner Service (TCS) treats the northern part of the state and the southern part as two separate markets, explains Krista Eisan, a trade commissioner based in Los Angeles who covers the clean technologies sector.
 
Southern California is well-known as the entertainment capital of the world with a multitude of roles for Canadians there and in related fields such as digital media. The region also boasts many robust industries, namely environmental technology, life sciences--includingbio-technology and medical devices and research, manufacturing—particularly for apparel. For companies looking for an “agent”, the TCS is ready to help.
 
“Take a really good look at the opportunities here--it’s a humungous market for many things that Canadians do well, and Canadians have a good reputation here,” Eisan says. “California is not always top of mind-especially for those companies in Eastern Canada, but really, it should be.”
 
New data released by the United States government in May 2018 indicates California’s gross domestic product (GDP) went up by US$127 billion from 2016 to 2017, surpassing US$2.7 trillion. That puts the state ahead of the United Kingdom to become the world’s fifth largest economy. The state has a population of nearly 40 million. Canada sells more to Californiaalone, than to all of China.
 
The TCS can provide market intelligence and insight into specifics opportunities in the region, make introductions and help Canadian companies connect with the right contacts, and help with various other aspects of entering the market and finding success. Sometimes that can mean just making sure Canada is top of mind, Eisan says. She adds that her colleague Mohammad Kondri, who focuses on life sciences recently brought representatives from the California-based Amgen Inc.—one of the world’s largest biotechnology companies—to Atlantic Canada to see what Canadian companies have to offer.
 
The TCS has four offices in California including the Canadian Consulate General in Los Angeles--where 11 of 60 employees focus on trade—as well as the Consulate in San Diego in the south; and the Consulates General in San Francisco and in Palo Alto in the north. The northern region is a well-known telecommunications hub, and home to the famous Silicon Valley, while the middle region is largely agricultural.
 
“This is one of the most advanced markets in the world. It’s a very advanced, fast-moving, competitive market and there’s a high-level expectation for high quality. Companies wanting to do business here have to recognize that they will face stiff competition You have to be able to demonstrate that you have a proven product or technology,” Eisan cautions, adding that’s where the TCS and its network of contact-including provincial offices in the region—can really make a difference.
 
“In areas like cleantech Cali is one of the most progressive places in the world, a lot of disruptive clean technologies come from this market and there’s a big appetite for environmental technologies,” she says. Canada’s largest foreign competitors in Southern California are Mexico and Asian countries including China.However she adds that Canada has an advantage in several areas, including cleantech. There are many affinities with Canadian business partners-especially along the west coast, up to Vancouver, she says.
 
Southern California is home to more than 500 Canadian companies, and has a large Canadian ex-pat community, she says, adding opportunities keep growing. For example, Southern California needs to import water, and that is creating new opportunities in infrastructure and water technologies industries, Eisan adds.
 
Her advice:  “Visit the market.Come see us, talk to us (the TCS)—it’s really not that far away, even if you’re from the east coast.”
 
View additional CanadExport magazine articles pertaining to California including: California beckons women in technology and  Canada’s digital talent a hit in Hollywood:

Part of Global Affairs Canada, the Canadian Trade Commissioner Service (TCS) helps Canadian companies export to international markets. The TCS is on-the-ground in more than 160 cities in Canada and worldwide gaining market intelligence and insight and uncovering opportunities for Canadian businesses. The TCS covers the full spectrum of international trade activities for companies looking to export, invest abroad, attract investment, develop innovation, forge partnerships or pursue research and development opportunities. This article was first published in CanadExport, the official magazine of the TCS.

Footnote
The TCS will also work with SoCal companies interested in expanding their operations to Canada. More information on Canada’s strengths and incentives for investment is found at: http://www.investcanada.ca/

Limitless Long Beach

Limitless Long Beach

In a recent New York Times article, Long Beach Mayor Robert Garcia said of his City, “the downtown is being reborn and recreated.”  Indeed, Long Beach has undergone an impressive revitalization in recent years, transforming its historic downtown into a desirable urban environment on the water and building upon its rich tradition in aerospace, manufacturing, and shipping.  People often associate Long Beach with its Port, and for good reason – it is one of busiest in the United States moving more than $100 billion in goods in 2017 and creating 1 in 8 jobs in the City.  Yet, Long Beach’s strong Port is only part of what makes the City a great business destination. 
 
Long Beach has close to a half a million residents and is the seventh-largest city in California, with a population exceeding that of many other well-known American cities, such as Cincinnati, Minneapolis, and New Orleans.  The City has a highly diverse population, a temperate climate, quality state and community colleges, a vibrant downtown and a wide variety of neighborhoods. Together, these features help make Long Beach one of the most livable communities in the country.  The City is also undergoing an economic development renaissance and real estate boom.
 
Today Long Beach is one of Southern California’s best business destinations – and a growing number of investors and business leaders are jumping on the many opportunities it has to offer.  The City’s location, access to infrastructure and markets, real estate opportunities, and talent are all drawing considerable interest and excitement.
 
What makes Long Beach an attractive business destination?

• Business Friendly: One of the most business-oriented cities in the U.S.

• Large Market: Population of 470,000+ on the California Coast

• Prime Location: Ideally situated between L.A. and Orange Counties, with direct access to the nation’s largest port complex

• Expansive Opportunity: Numerous development sites available

• Faster Processing: Streamlined pre-development and entitlement process

• Innovation and responsiveness in service delivery

Infrastructure
Long Beach is a transportation hub with unparalleled access to local and global markets. The City is located between Los Angles and Orange Counties (and their combined 13 million residents), close to three airports, the twin ports of Long Beach and L.A., multiple freeways, and rail lines. The Port of Long Beach is also nearing the end of a set of 10-year, $4.5 billion capital improvement projects that will make it more technologically advanced, capable of handling even larger and more efficient cargo ships.  The City also has its own full-service commercial airport, which has become a traveler-friendly alternative to other busy Southern California airports. Los Angeles' rail transit system, the Metro Blue Line, has numerous stops within Long Beach and throughout the region, including downtown L.A., and has a $1.2 million makeover planned for 2019 that will further decrease transit times.
 
To put it quite simply, as Long Beach Economic Development Director, John Keisler has said, Long Beach is about “building stuff and moving stuff.” He adds, “Transportation and manufacturing have always been huge for us.”
 
Long Beach’s Real Estate Boom
Long Beach has nearly three-dozen development projects, valued around $3.5 billion, underway or in the pipeline.  Projects range in scope from the construction of the Long Beach Civic Center that will include a new City Hall, Port of Long Beach Headquarters, and park; to the 35-story Shoreline Gateway residential tower; to the $15 million overhaul of the historic luxury liner the Queen Mary and adjacent entertainment complex on the Long Beach waterfront. All told, the City is set to add an additional 3000 residential units.
 
Today, there are a number of sites that have yet to be developed or repurposed, which include Boeing’s 87-acre site where C-17 airplanes were built.Next to the airport there is another 1.8 million square feet of vacant hangar space. The City is working to reposition and reuse the site, which may include rezoning to prepare it for the factories of the future.
 
Emerging Technology Cluster
An emerging cluster is forming centered on aerospace, commercial space launch providers, and ocean and water technologies (“blue tech”) at and around the twin ports of Long Beach and L.A. and their respective neighborhoods.  While American ports as a whole have lagged behind other international ports in creating and attracting companies, the San Pedro Port complex may now be catching up with its complimentary innovation clusters:

• In 2017 Virgin Orbit, founded by Sir Richard Branson and Virgin Galactic, launched a new commercial space company that offers low-cost launch services for small satellites.

• In 2017, the Institute for Innovation and Entrepreneurship at the California State University, Long Beach, was founded to foster startup businesses in the City.

Along the LA Waterfront on the other side of the San Pedro Bay a number of recent announcements demonstrate the region’s growing strength in “blue tech” and aerospace:

• SpaceX will manufacture and assemble the company’s new Big Falcon Rocket at the Port of Los Angeles at an 18-acre site where ships were built for World War I.

• AltaSea, a 35-acre Innovation Campus at the Port of Los Angeles, will work to advance the region’s economy through water and ocean related business, science, and educational activities.

• Boeing’s Echo Voyager submarine, which will be used to inspect underwater infrastructure, create 3D underwater maps, and take water samples, will be housed at the AltaSea at the Port of Los Angeles.

Long Beach is Limitless!
With its world-class transportation infrastructure, vibrant real estate opportunities, and burgeoning technology ecosystem, Long Beach has a host of opportunities to offer a wide range of business interests.

Eric Eide is a strategic advisor to MAPLE Business Council and principal of TradeWorks Global.

Reflections on Building a Career at Canada's National Flag Carrier

Anna Innis is National Manager, Passenger Sales USA at Air Canada.

I Want to Start with the Elephant in the Room. I am not Canadian.

This feels a lot like a confession.

Next month marks 23 years that I have worked for a Canadian company. Next month also marks 23 years as an Air Canada employee and therefore, an Ambassador of our neighbors to The North.  But ties to Canada began, for me, long before I “flew the flag” for its country’s Flag Ship Carrier. It began in the 1940's.

Landing in Canada

My Dad was 14 years young when he boarded a ship to Canada from Greece.  His parents were dead.  His older siblings would all remain in Greece. And he, an Immigrant, was on his way to becoming Canadian. He soon called Windsor his home, working as a bus boy at a Chinese restaurant called The Condor with other Greek Immigrants. He later married my Mom and I would be born in Michigan. He died when I was only 8 years old and I know that those years were some of the best years of his life. The last trip he took before he died was to St. John’s, Newfoundland. My entire family went to the Muskegon, Michigan airport to see him off. So, maybe Canada was already calling me too.

Answering the phones

At 25 years old, I left a high-profile PR job with a division of General Motors in the Midwest and hit the road for warmer skies. I drove to Tampa, Florida with no job, where skies were shiny and bright. I took a job as a reservations agent for Air Canada in Tampa and a 23-year relationship began defining so much of my adulthood.

The years to follow brought me to places around the world, where I felt proud to travel with the Maple Leaf on my bag. It set me apart. I felt safer, accepted and remained quietly behind the force field of the Maple Leaf Brand, as I journeyed.

In recent years, most of my relationships and joys came from time in Toronto & Montreal. It always felt like home. The moment I stepped into the 787 Dreamliner Los Angeles to Toronto, I could relax. Breathe. Think. Jumping on the UpExpress and, only in minutes, contacting close friends and sharing food and stories at some of my favorite restaurants became my solace. But in recent years I came home to Cali.

Finding my place in the world

Throughout my career with Air Canada, I moved in and out of California three times. I couldn’t stay away.  In the last two years, I made a conscious decision to really engage in the Los Angeles community and take it as my home. Working for Air Canada opened so many doors for me. I’ve met heads of states, traveled the world, given training in Portuguese, built a team, had numerous mentors, and collaborated with people from around the world. But one thing I never did over 23 years, was deciding to call a place home and own my city.

For years, people didn’t know where I lived.  I didn’t want anyone at headquarters in Montreal to think I couldn’t take on any assignment or do anything.  Just last week a client from Rhode Island called me and asked why I wasn’t at a reception since I lived in NYC. We had a laugh when I told her I live in California.

Working outside Home Country means that you are beyond time zones and geography. And, there’s a fine line of being everywhere and finding balance. Many colleagues didn’t realize our entire team was Home Office based, thus creating different challenges to create engagement and staying on point. But that is exactly why I have stayed. My career outside home country is like swimming in water instead of sitting in a cubicle. I have had the freedom to make it what and how I wanted. And my Air Canada family trusted me to do so.

When I was asked to write a piece on what it is like working for a Canadian company in the US, I come back to the same place where I started. Air Canada has been a family that raised me with Canadian values, setting me apart in a land of 400 million strong, where I now sit on The Board of Directors for CAST, Coalition to Abolish Slavery & Trafficking, led by a strong Canadian Woman CEO and oversee one of the most diverse teams in the country for Air Canada. And, there has never been a more relevant time, in my lifetime, where I have been more proud to be associated with a Canadian company, and a country, that welcomes immigrants & diversity. So, 23 years, 6 cities and one divorce later, I’m just getting started. Wherever that takes me.

Anna Innis is National Manager, Passenger Sales - USA at Air Canada. MAPLE is proud to count Anna, her team, and Air Canada as part of our cross-border community.
 

The Arc of a Border - An Expatriate's Relationship with the Canadian-U.S. Border

The Arc of a Border - An Expatriate's Relationship with the Canadian-U.S. Border

We think of borders as being fixed by geography. Something that we can point to on a map. Something we experience when we cross it. Most Canadians live in proximity to the U.S. border and part of Canada’s identity is defined by this border. But for an expatriate living away from one’s home country, a border can be more elastic than fixed. Over time, the proximity to the border is measured less by physical distance and more by personal attention, relevance and interest. And so while a physical border in times of peace is rarely redrawn, for an expat, the border can actually stretch near and far over the years. For me, it has been in the shape of an arc – sometimes feeling very close and sometimes existing far away - regardless of the actual distance.
 
I now look at the longest undefended border in the world that Canada and the United States share having lived equal years on either side of it. It makes for an interesting perspective on what a border, this border, represents. Growing up in Southwestern Ontario, the border was multi-faceted. Despite being easy to cross, it meant protection for a smaller culture that could be easily overwhelmed by its much larger neighbour. But equally it could feel like an unwanted impediment to importing more of what makes the bigger culture exciting. 
 
Professionally speaking, early on in my marketing career, the border spelled opportunity. As the first non-executive to be promoted from the Canadian subsidiary to the world headquarters in my company, crossing the border to live in the United States meant expanding my horizons, adding zeros to budgets, testing my abilities, and playing in the big leagues. I will never forget looking out of my office window high above Minneapolis one afternoon and seeing an American flag waving in the breeze and at that precise moment, feeling like I had really made a significant change in my life. I was actually living and working in the United States. And it was exhilarating!
 
Early on the border was a kind of life preserver – a safe harbour that I could return to and cross should the new home not be what my wife and I desired. In time; however, the border gradually became a mental wall, as we assimilated into the U.S., secured our green cards and started our family. Watching hockey was increasingly being replaced by enjoying basketball, and college basketball at that, and trips home were less pressing. Over time, celebrating Canadian Thanksgiving in October was less the main Thanksgiving we celebrated as the culturally more significant American celebration took root. Living outside the United States in Hong Kong and Singapore made this particular border all the more distant even though my family’s passports still proudly said “Canada”.
 
When the border became physically closer again upon returning to the United States from living in Asia, the mental distance did not. Successive regional moves within the U.S. brought new experiences along my career arc and Canada gradually became more distant and a smaller share of my identity.
 
But when we moved to Dallas, our little growing family began to seek out some of our Canadian roots. We joined a Canadian family network and began to socialize with others who shared our identity. And with a life goal of living in Southern California, that day finally came when I seized the opportunity to join a start-up based in SoCal. The physical distance between ‘home’ and ‘home and native land’ grew even further. So too did the mental distance. The elasticity of my border relationship had stretched wide.
 
But it was after nearly a decade of living the dream in Southern California that my Canadian roots came back to me all on their own. Not that they had ever left, but for many years, they were not how I primarily identified myself. A chance meeting with a Canadian networker in Orange County brought me in contact with fellow Canadian expatriate executives who were about to create an organization to connect Canadians together socially and for business value. What took root first was what comes easiest of course…hockey games, Canadian Thanksgiving and Canada Day celebrations.
 
At the same time, our daughters were growing old enough to be able to appreciate more of our Canadian roots. Fulfilling the stereotype, their parents brought them to their first NHL game.  I like to think the instant attraction for a12 year old and a 9 year old came somewhere from within their Canadian DNA, as the appeal was instant and those early games sparked a newfound enjoyment of Canada’s game.
 
As a marketer, I am trained to think about positioning, differentiation, and unique voices for brands, be they for consumers or businesses. Now well into my second decade of living in the U.S., I experienced an organic renaissance of my Canadian identity. It was no longer something to overlook instead it increasingly came back to me as a vibrant part of my identity. And it did not mean that I had to be any less part of the U.S. especially after my wife and I became U.S. citizens joining our daughters who were both born in the U.S. It was a complement to our newly minted citizenship in our adopted country that has given us so much to appreciate and be thankful for.
 
So now, Canada was no longer exclusively in therear view mirror but an important facet of my current persona and a growing part of my future. An opportunity to co-found a business network with a friend and fellow expat expressly to build a business bridge between Southern California and Canada bilaterally became a defining moment for me. Now the border was a focus. Helping businesses of all sizes and in all sectors to cross that border in both directions for business benefit. Foreign direct investment. Trade. Entrepreneurship. Innovation. Collaboration.
 
And so now in the third year of growing a sticky and meaningful cross-border organization with a mission to connect Southern California and Canada, the border has become a destination. Something to celebrate. A focal point.
 
In 2017, I began to live more of my life in the United States than in Canada. I feel truly blessed to benefit from two amazing, dynamic, and complementary cultures. Neighbours. Partners. Allies. Friends. Both with some blemishes but also full of shining stars and brilliant maple leaves.
 
My border relationship continues to be elastic and my border arc is still moving. I anticipate to some extent it will continue to do so.  From once defining an imagined horizon of new opportunities, representing a safe harbour, defining where I’ve been, a relevant differentiator, and now a defining opportunity. My border relationship has been unpredictable, uniquely mine, and something very special to treasure.

Stephen Armstrong is the principal of a marketing consultancy firm, The 360 Marketer, which provides strategic and tactical marketing and communications strategy support for businesses across sectors. Stephen is the co-founder of MAPLE Business Council.

Québec Canada - The Accent is on Opportunity

Québec Canada - The Accent is on Opportunity

There is a large and dynamic Canadian market waiting for Southern California businesses to discover. Québec, a province of over 8 million people with an annual GDP of over $300 billion, may be better known among the Northeastern U.S. states it borders than here in Southern California. And for that reason, MAPLE Business Council has developed a turnkey three-day fact-finding mission to share some of Québec’s leading centers of excellence and innovation.  It will be a chance to explore new export, investment, and innovation collaboration opportunities.
 
Getting one’s arms around a market can be challenging. Sometimes the breadth of a regional economy is not clear beyond one’s own sector focus. And increasingly in this age where technology blurs the edges between sectors (just consider the automotive and tech sectors as an example), there can be exciting connections to explore between industries. The MAPLE delegation model is structured to sample a variety of markets to view the economic landscape laterally.  As such, our upcoming mission will have a window on artificial intelligence, cleantech, aerospace, electric & intelligent vehicles, home building, nutraceuticals & functional foods, optics & photonics, innovation incubation and more. Québec is a world leader in many of these sectors. Montréal is one of three cities in the world where a complete plane can be designed and built. Elément AI is at the vanguard of artificial intelligence business solutions to name just a couple.
 
Visiting new markets can be valuable not only for understanding what a region’s centers of excellence and innovation are generating as goods and services, but also for their methods of innovation. For example, Québec has had considerable success accelerating its global competitiveness through an industry cluster model that engages an ecosystem of business, government, unions, research, and higher education to propel technology advancements forward. At work in sectors such as aerospace, electric and intelligent vehicles and cleantech, these clusters align and engage key industry stakeholders. MAPLE will be visiting with these clusters to learn more about their work.
 
Delegations can suggest new horizons for businesses but market navigators can show how to penetrate these markets. We are working with leading navigators of the Québec market to make it easier for companies interested in marketing, investing and collaborating with Québec, to engage this market. With our trip focused on Québec’s largest markets of Montréal and Québec City, we will be visiting with Montréal International and Québec International who are both well equipped to help a Southern California business find their way. In addition, MAPLE member organization, Borden Ladner Gervais LLP, Canada’s largest law firm, will be briefing our delegates on how to do business in Québec.  Our trip would not be complete without a meeting with the U.S. Commercial Office in Montréal and Québec City to understand the services available to help U.S. businesses successfully export.
 
Delegations may connect visitor to host but the outlook need not be unidirectional. As ambassadors of Southern California to Canada, MAPLE missions also provide a window on the Southern California market. At our networking reception in Montréal, we will be taking the opportunity to share what is new and noteworthy for Québec businesses to know about in key markets such as Irvine in Orange County, and Long Beach in Los Angeles County. The bridge of opportunity is always one that can be crossed in both directions.
 
As the 10th largest trading partner of the United States, Québec represents an exciting new business horizon for Southern California to understand better and we look forward to sharing it with our delegates. We invite you to join us for ’72 Hours in Québec’ on June 13-15. For more information, please contact me at charles@maplesocal.com or visit the MAPLE website. The accent is on welcome. Bienvenue!

Charles Gauthier is a former 26-year diplomat with the Québec government where he held posts in New York City, Los Angeles and Mumbai, India. He now leads business development for Float 4 - a Québec-based multidisciplinary studio that integrates digital experiences in physical spaces to amplify their identity. Founded in 2008, Float4 produces immersive and interactive installations internationally for companies. Charles is also the Business Ambassador to Québec for MAPLE Business Council.

Bridging British Columbia & Southern California

Bridging British Columbia & Southern California
 

While there has justifiably been a lot of focus on opportunities pertaining to emerging countries in Asia and Latin America, we can often forget about the significance of the trade relationship between Canada and the US, which is the second largest bilateral trade relationship in the world. The US is the largest economy in the world and its most populated state, is also home to the 6th largest economy of the world with an annual GDP exceeding $2.5 trillion.

With a population of close to 40 million, California has had a long-standing relationship with Canada and BC.  Within California, Southern California with a population base of over 22 million brings in combination with BC a total combined population of almost 27 million connected within the same time zone only 2.5 hours away by plane.  Many BC residents know Southern California from childhood trips to Disneyland while many Southern Californians know BC through Alaska cruises or ski trips to Whistler. In fact, today the annual number of air passengers traveling between Vancouver and Southern California exceeds 1 million passengers a year, almost 200,000 more than that between Vancouver and Mainland China.  Vancouver has 124 flights a week in the summer to Southern California more than twice that for Toronto.  The extent of travel demand and air capacity really speaks to the depth of the trade, travel, and migratory relationships between the two regions.

As is well known, these regions have the first and third largest film and TV production centers in North America and with the continued growth in production in BC, most major Hollywood TVand film personalities have at one time, filmed in BC.  Further synergies between the regions lie in the commonality of industry sectors such as: agri-foods, tourism, life sciences, clean technology, aerospace, information technology, and of course, the creative industry.  Companies such as Sony Pictures Imageworks, Lionsgate Productions, Disney, Encore Hollywood, Ledcor, Onni group, and many others have established offices in both locations. 

A further common trait between BC and Southern California is the depth of their relationships with Asia, as both jurisdictions are extremely well positioned as gateways from their respective countries to Asia.  As a common catalyst, both locations have a sizeable demographic of local Asian diaspora built up over many generations of immigration and trade flows.

As BC Ambassador for Maple Business Council, I am looking forward to welcoming back to Vancouver the principals of MAPLE Business Council, Robert Kelleand Stephen Armstrong, as they make a return visit on April 16th. This trip follows on their initial visit to our region during the BC Tech Summit in 2017.  This year, they will be joined by Mr. Stephen Cheung, President of the World Trade Centre - Los Angeles, who will be our keynote speaker at our reception hosted by PWC, and generously supported by the Vancouver Hotel Destination Association, Air Canada, and Snell & Wilmer LLP.

For more information on the ties between British Columbia and Southern California and opportunities to support MAPLE in the province, please contact Jason Tse at jason@maplesocal.com.

Enforcement of Intellectual Property Rights at the U.S. Border

Enforcement of Intellectual Property Rights at the U.S. Border

Intellectual property rights in the United States – in the form of patents, copyrights, and trademarks - provide protection to a company when its technology is used by others without permission.   The most common way to enforce these rights is through a court action for infringement.  However, intellectual property owners should also be aware of an additional avenue in the United States that provides a powerful mechanism for enforcing their rights – the United States International Trade Commission.

Based in Washington DC, the International Trade Commission (ITC) is an administrative agency tasked with enforcing U.S. trade laws.  Within the arena of intellectual property, the ITC receives complaints regarding infringing products that are entering the United States, and has the ability to issue import bans that block these infringing products at the U.S. border.  The ITC can also block the sale or distribution of infringing products that have already been imported.  However, the ITC cannot be used to recover monetary damages.  The ITC is available to owners of U.S. patents, copyrights, and trademarks, and has also been used to assert claims of false advertising and unfair competition.  The ITC’s rules require completion of its investigations in an expedited manner.  As a result, the ITC typically issues decisions about 16 months from the start of an investigation, a timeline that is faster than many U.S. court proceedings.  
           
To obtain an import ban, a company needs to show (1) infringement by goods being imported into the United States; and (2) an industry in the United States that is using and investing in the intellectual property that is being infringed.  This second “industry” requirement is unique to the ITC.  It requires proof of authorized products that use the intellectual property and proof of U.S. investments.  After the ITC issues an import ban, it is enforced by U.S. Customs and Border Protection, who monitors ports of entry for the infringing products.    

The ITC has become an increasingly popular avenue for enforcing intellectual property rights.  Over the past five years, more than 240 such investigations have been filed at the ITC, with the vast majority involving claims of patent infringement. In those investigations, five have included Canadian companies enforcing their rights in the U.S.  In addition, over twenty Canadian companies have been the target of ITC investigations during this same time frame.  
           
Because of the speed of the ITC and its ability to issue import bans, companies who have invested in U.S. intellectual property rights should consider the ITC when developing an enforcement strategy.

Ms. Sheila Swaroop is a partner at the Irvine, CA office of Knobbe Martens Olson & Bear, LLP. She can be reached at sheila.swaroop@knobbe.com. For more information on Knobbe Martens, please visit www.knobbe.com.
        

Top Five Investment Management Tips for Canadians Living in the U.S.

Top Five Investment Management Tips for Canadians Living in the US
 

A move across the Canada/US border can have significant financial implications.  Many executives and professionals who make this move receive tax and legal guidance but are often left to navigate investment and financial matters for themselves.  Below are some helpful tips and advice to make sure you are aware of some very important factors. 

Canadian Currency – May take currency hits when moving investment assets across the border.  Canadian dollar assets when moved to most US brokers will often result in currency conversion to US dollars.  Work with a cross-border investment specialist who offers portfolio services in Canadian and US dollars.

Consolidate Assets – Having assets at multiple institutions often results in investment portfolios that lack a cohesive investment management strategy, resulting in portfolios that are out of balance.  Working with a dually-licensed financial advisor to manage investments on both sides of the Canada/US border can help to ensure investments are properly diversified and balanced to reach your investment objectives.

Get a Financial Plan – With scattered assets there often is a gap in planning and people don’t know where they are at with their financial goals.  Engaging a cross-border specialist to develop a plan encompassing all your financial assets is a solid start.  As part of this process engaging cross-border legal advisors to ensure wills and power of attorney documents are in place and are valid in both jurisdictions.  People with cross-border realities have situations that are complicated and need expert advice to get on track.

Canadian and US Retirement Accounts – With special exemptions, Canadian advisors can manage RRSP’s for Canadian clients residing in the US – tax filings are required by the IRS for RRSPs.  Some US states, including California, do not recognize the Canada/US retirement account tax treaty and the RRSPs are subject to tax on realized gains and income earned.  Take advantage of contributing to IRAs and 401k plans.  Work with an advisor who is dual licensed and understands retirement plans and their tax treatment on both sides of the border.

Canadian non-registered investment accounts – Due to US securities legislation these accounts cannot be held by Canadians residing in the US unless held with a US registered brokerage firm.  These accounts must be managed by a US licensed advisor like Raymond James (USA) Ltd.  Investment structure is important for Canadians living and working in the US.  If there is the desire to move back to Canada “someday” it would be wise to hold investments that are portable over the Canada/US border. 

For more information visit www.phwealthadvisory.com
Bernardine Perreira Financial Advisor
Perreira Hurly Wealth Advisory
647-776-2974

Financial Advisor, Raymond James (USA) Ltd.
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Borders in Flux: How the NAFTA Debate Could Reshape US-Canada Immigration

Borders in Flux: How the NAFTA Debate Could Reshape US-Canada Immigration

The ongoing talks over NAFTA continue to be a fixture of political news. With the Trump administration determined to overhaul decades of US trade policy, political leaders and diplomats remain at odds over what a reformed NAFTA deal should look like – or whether the agreement will even persist at all. With the trade pact potentially under threat, Canadian Prime Minister Justin Trudeau has even embarked on a US speaking tour aimed at making the case for why NAFTA can benefit both Canada and the US. 
 
Much of the NAFTA news coverage has focused on potential impacts to key industries like agriculture and manufacturing. Yet in addition to trade, the NAFTA dispute carries major implications for another hot-button issue: immigration. A major restructuring – let alone a full dissolution – would cause significant fallout for employment-based immigration between Canada and the US, including a program called the TN visa.
 
Created by NAFTA in 1994, the TN gives skilled professionals from Mexico and Canada a temporary pathway toward living and working in the United States. Workers from a wide range of industries can benefit from the program, including attorneys, accountants, programmers and more. Because it enables quick, low-cost movement of labor with the possibility of indefinite renewal, the TN has long been a popular option for US firms seeking to hire Canadians. In contrast, other US employment visas like the H1-B are more competitive, have stricter time limits, and require more investment on the part of the employer.
 
Yet with NAFTA facing significant changes, the TN’s future looks increasingly unclear. If President Trump terminates the deal, TN holders could become unemployed at a moment’s notice, having lost the right to work in the States. Not surprisingly, some Canadian TN holders have already started returning to Canada, seeking a greater degree of security. The confusion could also deter American companies from hiring Canadians in the first place, says Canadian immigration attorney Ilene Solomon.
 
“The uncertainty is definitely having a cooling effect on the cross-border mobility that we’re used to,” Solomon says.
 
In fact, the Trump administration’s stiffer immigration stance has already made the current TN process less predictable for applicants, with border entryhaving become more challenging. “We’re seeing a much higher level of scrutiny,” says Paul Altmann, an immigration lawyer with our firm, D’Alessio Law Group. “Border officers have gotten much stricter about the kinds of documents they’ll accept, particularly with the TN.”
 
The potential impacts to labor mobility also flow in the other direction. Canada currently offers a NAFTA Work Permit that serves as a counterpart to the TN, letting Mexican and American nationals enter the country to work. Many Canadian industries rely on the permit to bring in US specialists, a valuable resource given America’s large population and talent pool.
 
Without a pathway geared toward US nationals, however, these candidates would instead follow the same process as potential temporary workers from other countries, forcing them to compete with a much larger applicant pool. This could then reduce their odds of approval, making it harder for Canadian companies to hire such workers. 
 
For these reasons, a removal of the NAFTA permit would represent a substantial loss for Canada, particularly in sectors like tech. Experts have argued the permit’s demise could particularly hurt certain Canadian employers who need to quickly bring over IT workers from the US, including those in tech-heavy cities like Vancouver and Toronto.
 
It’s not all doom and gloom though. Even if NAFTA doesn’t survive the current talks, cross-border employment could still take place quickly and smoothly. The US and Canada would simply need to negotiate new visas that offer the same provisions, just outside of a trade-based framework. In the meantime, both countries could extend a grace period to existing visa holders whose permits were nullified by NAFTA’s demise. Given the longstanding ties between the two countries, it seems politicians from both sides of the border would have incentives to find a solution.
 
All bets are off, however, especially with President Trump intent on reducing immigration across the board. Given the administration’s aggressive stance on both immigration and trade, as well as its push toward “Buy American, Hire American” policies, the future of US-Canadian border mobility remains very much in flux.
 
D’Alessio Law Group is a global law firm serving technology, entertainment, and corporate clients worldwide. With specialties in immigration and corporate practice, D’Alessio Law Group cuts through legal complexities so clients can thrive and succeed. The firm is headquartered in Los Angeles, with additional offices in Toronto, San Jose, London and Miami. To learn more, visit www.dalessiolawgroup.com or call (310) 909-3934.
 
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What is Your Cybersecurity Resolution?

What is Your Cybersecurity Resolution?

Executives of organizations at all levels should be focusing on and implementing effective CYBERSECURITY changes. One key concept executives could focus on related to their cybersecurity resolution should be related to Business Email Compromise (BEC).

BEC is a form of phishing attack where a cyber-criminal impersonates an executive, and attempts to get an employee, customer, or vendor to transfer funds or sensitive information to the phisher (Wennington, 2016). With global losses from BEC scams set to exceed US $9 BILLION in 2018, it is time to take action and make these changes. (Micro, Trend, 2017).
According to the FBI, there are 5 major kinds of BEC:

• The Bogus Invoice Scheme- Attackers pretend to be the suppliers requesting fund transfers for payments to an account owned by fraudsters. 
• CEO Fraud- Attackers pose as the company CEO or another executive and send an email to employees in finance, requesting them to transfer money to the account they control.
• Account Compromise- An executive or employee’s email account is hacked and used to request invoice payments to vendors listed in their email contacts.
• Attorney Impersonation- Attackers pretend to be a lawyer or someone from the law firm supposedly in charge of crucial and confidential matters.  
• Data Theft – Employees under HR and bookkeeping are targeted to obtain personally identifiable information (PII) or tax statements (Micro, Trend, 2017).

Steps to take to protect your organization from BEC scams:

• Call the individual who has sent you the request for money transfer
• Implement multi-factor authentication
• Run regular domain name spoof tests
• Ensure that your entire organization has undergone cybersecurity education courses
• Use a secure encryption communication service that follows the NIST framework when sending and receiving information

For more information, please visit www.xahive.com.