Look to the North: The ‘Best Shore’ Solution for Software Quality Assurance and Security Service for the U.S.

Bill Klages, Vice President Influencer & Partner Relations, QA Consultants (Los Angeles); Brett Turner, Senior Partner, QA Consultants (Toronto)

Many U.S. based companies realize the value of onshore or boldly stated Best Shore software Quality Assurance (“QA”) and Security services from Canada. Canada presents no  language barrier,  shares the same continent, provides a favorable exchange rate, offers a stable trade and government environment, and operates seamlessly in the same eastern to pacific time zones. For those who do business in the global community, these simple facts are sometimes unrealized benefits taken for granted. Additionally, there are four key reasons to consider Canada for software QA and security needs: high-quality talent, innovation, cost savings, and ease of doing business.

Talent: Canada’s Skilled Software Engineering & QA Workforce

Canada has a deep mix of computer science talent that has been educated both in Canada and around the world. Various levels of government have invested heavily in research, technology, innovation, and skilled-worker immigration programs for many years. Wages remain constant and employee turnover is in single digits. Compare this to offshore outsourcing where wages are growing 20% a year and employee turnover surpasses 80% in some skill levels and sectors.  The depth of talent and lack of turnover nurtures deeper and more continuous client service. This leads to a cycle of ongoing efficiency gains, greater innovation, less process disruption, and keeps training costs low. The Canadian community of accomplished software engineers and technology professionals is highly skilled, consistent, and committed to excellence. This means better output for clients, lower costs, and fewer headaches. 

Toronto, Montreal, and Vancouver are among the top 15 cities in North America (Toronto is #3) when it comes to leading tech talent. Toronto has been hailed as the new up and coming ‘Silicon Valley’. In fact, Toronto beat out Silicon Valley for the number of jobs created, according to the 2018 CBRE report. The city attracts talent with STEM degrees and over 40,000 new STEM graduates every year. This growth is just the tip of the iceberg. Toronto’s surge in tech opportunities has created a ripple effect with the University of Toronto announcing plans to build a new 14-story innovation center that will devote 250,000 square feet to startup companies. This is just one of the many innovation incubator/accelerators around the city that help push Toronto’s tech scene forward. 

Toronto is home to one of the most diverse populations in North America with over 51% of the city’s population being foreign-born. Especially, with Canada’s Express Entry visa program, it’s easy for software professionals to immigrate and avoid the H1-B visa crackdown and caps jeopardizing talent availability in the U.S.

Every company’s Achilles heel is its ability to attract and retain top talent. Companies rely on having sufficient qualified workers with little geographic friction. Countries like the United States practice restrictive immigration policies that all but force companies to search for outside contractors. The paperwork alone is a burden in itself. “Today, 81 percent of the full-time graduate students at U.S. universities in electrical engineering and 79 percent in computer science are international students,” according to a National Foundation for American Policy analysis.  (Forbes.com 2018/04/02)

With H-1B visa access becoming more restrictive, more companies are finding roadblocks at every turn. Some companies have relocated their entire IT departments overseas, but at what cost? Such an initiative can have massive repercussions internally and externally. Canada doesn’t have caps and limitations on technology resource migration that have strapped the US.  Canada is an obvious choice for migrants and foreign talent who wish to begin or continue a career in North America.

Innovation

Toronto is a rising star in terms of technology and the city can barely keep up with the demand for office space. According to Patrick Fejér of B+H Architects, “10 million square feet of new office space is due to open by 2024, more than was built from 1992 to the present. Toronto has more than 120 construction cranes in the air, compared with 65 in Seattle and 35 in New York.” With all that demand for space, innovative centers/clusters have spread outside of the Greater Toronto Area.

In Oshawa, the Ontario Tech and the Automotive Centre of Excellence (ACE) has become a hub of innovation and further study autonomous and connected vehicles. This dedicated facility focuses on vehicle operating systems, mobility device compatibility testing, model-based testing, cybersecurity, lidar and computer vision, and safety-critical systems. Through government funding and its cornerstone clients, ACE staff, many of whom are PhDs, and Master students are working to develop better and more efficient ways to validate this critical software’s quality and compatibility. By using cutting edge technology, proprietary tools, and project management methodologies, innovative solutions are constantly being deployed in a timely and efficient manner.

Waterloo, home of BlackBerry, has created the Toronto - Waterloo Region Corridor, which calls itself “a global center of talent, growth, innovation, and discovery. Rivalling the best in the world, this 100km stretch is the second largest technology cluster in North America.” Startups and multinational companies from around the world are investing and scaling up. The area claims 15,000 tech companies, 200,000 tech workers, and 5,200 tech startups. 

The Canadian government is also stepping in to help support innovation through the Innovation Superclusters Initiatives, which is investing up to $950 million to support business-led innovation superclusters with the greatest potential to energize the economy and become growth leaders. According to the Canadian government, “This initiative is a first of its kind for Canada, fostering stronger connections—from large anchor firms to start-ups, from post-secondary institutions to research and government partners—and opening the door to new forms of industry partnership. It represents a significant commitment to partnering with industry and supporting the success of leading domestic and global companies that choose to innovate in Canada.”  When it comes to innovation, Canada is a strong contender willing to put in the funding and effort to become a world-recognized leader.  

Cost-Effectiveness

Turnover and rapid wage growth have increased the expense of offshore (Asia) technology delivery services. On top of this, travel budgets, relationship management, and physical, linguistic and cultural differences have proven to ominously increase project output outlays. These hidden charges are not adequately planned for, and even when they are, it is like a home renovation budget, the finished product often requires double the initial estimate.  When considering budgets, IT leaders must look at the entire picture. Inefficiencies in the offshore model can be upwards of 20-30%. On top of that, consider the exchange rates: The Canadian Dollar is at .76 USD today. This roughly translates into a 24% savings for U.S. clients. By working with Canada, software delivery expenditures can be lowered considerably!

Canadian Dollar plus Innovation & Efficiency minus Offshore Issues and Hidden Costs equals Quality, Cycle Time & Budget Savings

 Ease of Doing Business

Location, location, location! Toronto is just an hour plus plane ride away from New York, Boston, Philadelphia and Chicago. The average plane flight from US Western cities is less than 4.5 hours. The flight time to Bengaluru, India is approximately 16 hours! With offshore companies, at best, there are just a few hours of overlapping working hours. In a world where instant communication is vital this type of lag can be debilitating.  In fact, the ability to make use of inter-office unified communication and collaboration tools makes the near-shore advantages of Canada even more prominent.  Compared to cross-border U.S./ Canadian teams, in-person meetings can happen in just one day. Many clients leave home in the morning able to return that evening. This nearness makes all the difference in rapid enterprise software deployment. Proximity builds relationships, increases efficiencies, lowers engagement time, and keeps travel time and expenses to a minimum.

 In summary, the software development cycle entails large budgets and massive responsibilities. Having a partner that is in the same time zone, is highly flexible, is easy to communicate with, and that can respond lightning fast is a major factor in making outsourcing successful. Why look to source outside of North America? Why go to another country when there’s a viable option right next door?  If you are considering building and testing software or outsourcing your IT functions, Canada is a compelling option. You will tap into a world class technical workforce, experience innovative infrastructure and solutions, reduce your costs significantly and experience the ease of doing business with your partners to the North. 

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

A Conversation with Thierry Weissenburger, Consul and Senior Trade Commissioner - Consulate General of Canada in Los Angeles

This month we have the special pleasure of interviewing Thierry Weissenburger, Consul and Senior Trade Commissioner at the Consulate General of Canada in Los Angeles. Thierry recently moved to Southern California to lead the work of a 16-member trade commissioner team based in LA and San Diego responsible for the Southern California, Arizona and Nevada territory. Thierry brings a wealth of experience to our region including past leadership roles for Canada in Northern California, Boston and Ottawa. In our interview, Thierry shares some of his incoming perspectives and profiles the work of the Trade Commissioner service on behalf of Canadian businesses and those interested in investing and expanding into Canada.

1. Welcome to Southern California, Thierry. How well do you know this region already - either personally or professionally?

In fact, I am so glad to be back to California after an interim period of 7 years. I have had indeed the pleasure to serve in the same Senior Trade Commissioner capacity at the Consulate General of Canada in San Francisco between 2007 and 2012. For our family this was clearly an unparalleled experience and for me a very a rewarding part of my career at which time I learned so much. I realize that Southern California has distinct cultural and market differences, so I would not pretend I know the region that well. I am still very much in a discovery mode, which is always the most interesting period when taking up a new posting.

2. As Head of the Canadian Trade Commissioner Service (TCS) in Southern California, Nevada and Arizona, what is the span of work that the TCS team undertakes for the benefit of those who may be less familiar with the department?

To put it simply, our job as Trade Commissioners is to help grow Canada’s economy in direct service and funding support to Canadian businesses and communities. We are connecting international market players to Canadian business, innovation and investment opportunities, using our network of close to 1000 Trade commissioners in 161 cities around the world, our teams being usually embedded in Embassies and Consulates. In the Southwest, our team of 16 trade commissioners operates from Los Angeles and San Diego and provides services to Canadian clients in virtually all sectors.

However, the Southwest market offers specifically more opportunities and generates higher client demand in sectors such as the creative industries, information technology, the bio-pharma industry, cleantech and infrastructure, aerospace and defense as well as the broader innovation and venture area. We are naturally concentrating our efforts towards these themes as we develop our programming, while leveraging numerous partnerships along the way with Canadian provinces, economic development organizations and trade associations in Canada and locally.

We also manage an active investment attraction program whereby we approach fast growing businesses located in our territory to present them with a compelling “Invest in Canada” value proposition, as well as to support their expansion.

Finally, we work as one team with other members of the Consulate, whether the Consul General, our Honorary Consul in Arizona, or our political and immigration colleagues as we share the common objective to grow the economy and prosperity of Canada.

3. In the time you have spent already at the Consulate General of Canada in Los Angeles, what are some of your initial impressions with respect to Canadian – Southern Californian (SoCal) business ties?

I have been in Los Angeles now for approximatively 3 months and have already experienced the visits of several trade delegations in our territory and talked to numerous clients. Needless to say that our clients’ interest is considerable and that the Southwest is a key market for Canada.

Numbers speak for themselves: Two-way trade in goods alone between California/Arizona/Nevada and Canada is more than $40 billion annually, not counting a very healthy trade in services and tourism.

Canada’s investment footprint is massive, although not always very visible, and concentrates in the financial sector, real estate, entertainment, and other services. As important, the SoCal market is a source of inspiration and a place for Canadian businesses to spot early emerging market trends, progressive regulations and business opportunities – this is particularly true in cleantech, mobility, entertainment industries and media, as well life-sciences.

I should add that Canada has a particular card to play in this market where we have so many friends and accomplished fellow Canadians. I cannot remember a place I visited since I arrived without at least a couple of Canadians: California seems to me like the lost province! Many of them share the desire to stay connected with fellow entrepreneurs and communities at home and to help out if provided with the opportunity.

4. Having represented Canada in markets such as Denmark, the Bay Area and Boston how have you seen businesses best utilize the resources of the Canadian Trade Commissioner Service?

While many businesses in Canada see the Trade Commissioner Service as an organization which organizes trade missions and operates at a very transactional level, clients who have been working with us for a long time appreciate our customized and individualized services.

Engaging in a strategic relationship over a long period of time and in multiple markets is probably where we add the most value to clients. This allows us to understand in more depth the needs of a particular client, build necessary commitment and mutual trust, hence supporting more purposefully the client's business growth around the world. This is certainly an approach that we will amplify over the next years, building on successful experiments I had the pleasure to develop with many colleagues, such as the Canadian Technology Accelerator launched in the Bay Area 10 years ago, or more recently, the management of high-impact clients through Key Accounts Managers.

5. At what stage should a business be at before seeking to engage the help of the Trade Commissioner Service team? And when they’ve reached this level, what is the best way for them to connect?

Typically, TCS works with “export-ready” clients. This statement however can be subject to numerous interpretations and variations depending on the sector, the maturity of the industry, the experience of the founder, company growth rate, let alone that a number of our clients actually do not export anything and rather need to access money, talent, inspiration, partnerships or technology available abroad to grow their company. So, there is clearly an element of judgment, placing the client’s best interest in the middle of the equation. Coming to a market too early and unprepared may be too risky and detrimental to the client’s best interests. Likewise, waiting too long until the product is perfect and has been sold in a few places in Canada could be too late either for competitive reasons or because the market actually does not need it.

The TCS has a no-wrong-door policy, meaning that our clients can reach us either in Canada or directly at our missions abroad. However, if new to the service, I’d recommend clients to contact first one of our regional offices and discuss the best course of action for their international business expansion.

6. Without necessarily getting into any sector specifics, what might a Southern California business seeking to expand internationally be surprised to learn about what Canada offers as a market opportunity?

Since you kindly invite me, I’ll give you what I believe are Canada’s key selling points for investment:

Highly skilled talent: Canada is the most educated country in the world with over 55% of Canadians having graduated from post-secondary institutions, among whom are 2.8M graduates in STEM. If specialized skills cannot be found, investors can quickly bring in top international talent through the Global Skills Strategy. For example, through the Global Talent Stream, eligible workers can receive work permits in as little as two weeks.

Global market access: Canada is the only G7 country that offers investors preferential market access to over 1.5 billion consumers in 51 countries. We have signed trade agreements with top trading blocs: we are partners with the US and Mexico in the USMCA (formerly NAFTA) and we signed the Canada Europe Trade Agreement (CETA), and the CPTPP (between 11 countries in the Asia-Pacific region). The latter two regions do not have yet a similar agreement with the US.

Transport infrastructure: Canada is well placed to serve as a central hub for global trade. Our air transport infrastructure is the best in the world and our coastal ports provide direct maritime access to Asia, Europe and South America. The Great Lakes also provide easy access to the U.S. interior. Combined with secure trade corridors and gateways, our infrastructure facilitates continual supply chain and business operations.

Lower costs: Canada has the lowest overall tax rate on new business investment and lowest business costs in advanced manufacturing and corporate services among G7 nations. Our public health care system also clearly confers a cost advantage to businesses established in Canada.

Innovation: Scientific Research and Experimental Development Program (SR&ED) - Canada’s largest R&D tax credit program provides billions in tax credits and incentives to businesses conducting R&D in Canada. The Strategic Innovation Fund bolsters business investments in Canada's most dynamic and innovative sectors by supporting business activities such as R&D projects, Firm expansion, Attraction of large-scale investments, Collaborative R&D and technology demonstration projects. In addition, the new Innovation Superclusters Initiative connects businesses, academic institutions and not-for-profit organizations to generate bold ideas, drive economic growth, attract top talent, advance innovation and transform regional ecosystems.

These core assets and incentives definitively produced an impact: At a time when foreign direct investment (FDI) flows into developed economies dropped 40%, FDI into Canada increased 70% in 2018.

7. The Canadian diaspora is large and multi-faceted in Southern California with social expatriate associations, business networking through MAPLE Business Council, and simply a large number of Canadians living, working and growing businesses here. What kind of benefit does this ‘Canadian mosaic’ in Southern California offer Canadian companies interested in doing business in the region?

As alluded to earlier, this massive and largely untapped Canadian diaspora in Southern California is a terrific asset for Canada if activated. I have seen it working very well with volunteers from the C100 in the Bay Area or in Boston with the CENE, providing mentoring to promising Canadian entrepreneurs from hard learned lessons. In both cases, these activities were symbiotically aligned with the Consulate’s support to Canadian entrepreneurs, adding a credible and high-value advisory service to the existing suite of TCS services, and in many cases making a huge difference in our clients' success in the market and beyond. There is no reason this approach cannot be deployed in Southern California as well.

8. We have a vibrant wellspring of innovation in Southern California with many innovation nodes nurturing start-ups and new ideas. Given your experience connecting Canada with innovation centers in Silicon Valley and Boston, to name a couple, what has struck you so far about the innovation ecosystem here in Southern California?

I confess that my perspective on that is highly conditioned to what I have been exposed to so far. I witnessed remarkable innovative ideas and marvels of engineering in areas as diverse as the space business, high-speed transportation, biotech, and the creative industries. This being said, I have been particularly impressed by the current public and private sector drive towards building smart cities, mobility (people and goods), and overall considering the sustainability of our infrastructures. Several Canadian companies are active in the market offering their solutions, for example, supporting the transition to carbon free transportation. Facing daunting challenges, this is clearly an area where the Greater LA region in particular is investing a lot of resources and ingenuity. As goes the saying, necessity is the mother of invention!

9. From a personal perspective, what are you most looking forward to about living in the Los Angeles region?

Meeting all Canadian Hollywood stars and learning how to surf of course (smile)…and if I still have some time left, discovering the local wineries and the outstanding LA food scene.

Thierry - thank you for sharing your perspectives and for making Los Angeles and Southern California your new home.

Welcome/Bienvenue!

What’s Happening to the US Public Markets? Why US CEOs Should Look North for Capital.

By Delilah Panio, Vice President, US Capital Formation, Toronto Stock Exchange and TSX Venture Exchange

With the disappointing performances of recent IPOs including Uber and Lyft – both share prices have fallen significantly since their debut earlier this year –  and the failed IPO of WeWork, US companies are left wondering if going public is still a viable funding option. 

Once upon a time, the US public markets were open for business for small cap IPOs. Companies such as Microsoft and Apple went public with public offerings less than $100M. Today, the average IPO is around $250M and the number of IPOs are fewer and fewer. In 2018, there were 190 initial public offerings (IPOs) in the United States. While this was an increase from the past few years, it was half the number of twenty years ago, while the Dot Com bubble was forming. 

Despite the introduction of the JOBS Act in 2012 which was meant to reduce regulatory burden and costs and to facilitate capital formation, US companies are staying private longer. The average time from first financing to IPO has increased from 4.8 years in 2005 to 6.6 years in 2019. 

Investors backing these high growth companies – venture capitalists and private equity firms – are choosing to keep their portfolio companies private longer and tapping into more private capital sources for growth. This trend has several consequences that have an impact on the US entrepreneurial ecosystem and overall economy. When a company stays private longer, fewer people end up cashing in on these great American growth stories. If a company goes public earlier, the public has the opportunity to invest in and benefit from the upside as the stock grows. Today it’s often the VCs and PE investors that win. 

The benefit of stock option plans to company employees is also impacted when the company stays private longer, as they are not benefitting from vested options along the way to buy homes or pay off debt. The big windfall of the IPO is less likely to happen now. 

 And, these companies are also not benefiting from the corporate governance regime that creates discipline especially on fiscal management. When a company goes public, it is required to have audited financial statements and a board of directors with an audit committee, as well as conduct quarterly reporting… all of which ultimately benefit the company and its growth. 

 North of the border, the Canadian capital markets are tailored to early stage companies seeking growth capital. TMX Group (TSX:X) owns and operates Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), a unique two-tiered marketplace that has a 165+ year history of supporting and incubating small public companies. 

 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 index products. For smaller, early stage growth companies, TSXV is a unique platform that is tailored to companies of this size. TSXV provides financings typically in the $5-$25M range and these issuers have an average market cap of just $26M.

Comparatively, Nasdaq and NYSE today service much larger companies with the average market cap of their listed issuers at $5.7B and $14.4B respectively. This table also shows the difference in the number and average financings, indicating TSX and TSXV’s platform for “public venture capital”. 

So why does this matter to US companies? Because TSX and TSXV have listing requirements and corporate governance that are “right-sized” for growth companies. The opportunity to access public venture capital through the Canadian capital markets is an increasingly viable alternative. 

 Currently, over 100 US companies are listed on TSX or TSXV collectively raising $9B in the last five years. 35 new US listings came to market in this same time period. And six of the 2019 TSX Venture 50, which ranks the top performers on TSXV, are based in the US. 

 Los Angeles-based OjO Electric (TSXV:OJO) recently listed on TSXV, raising CDN$8M to fuel the growth of its electric scooter business. “At OjO, we’re proud to drive the micro-mobility revolution and are changing rideshare for good. We are thrilled to list on TSX Venture Exchange and now have a solid base from which to accelerate our product roadmap and market penetration,” said Max Smith, CEO. 

 For US companies seeking Series B+ growth capital, here are a few things to consider: 

1. Know your funding options. There are many sources of growth capital available to US companies, including angel investors, venture capital, private equity, venture debt, equity crowdfunding, the over-the-counter (OTC) public market, and senior stock exchanges Nasdaq and NYSE. And there is “public venture capital” on TSX and TSXV. Be clear on what you are building and why, and evaluate the pros and cons of each option. Consider these factors: cost of capital (debt versus equity), maintaining control, alignment with the long term vision for the company, time and cost of reporting requirements, and value-add that comes with the capital (contacts, advice, industry expertise).

2. Understand public venture capital. Learn about the uniqueness and opportunity in public venture capital and the potential benefits of using the Canadian public markets to grow your company. Rather than taking on the potentially onerous terms of private equity or venture capital, consider that you can likely maintain greater ownership and operational control by going public on TSXV.

3. Have a reason to go public. Ensure your company would benefit from being public, including: access to capital; acquisition currency; incentive for attracting and retaining top talent through stock options; diversified shareholder base and flattened cap table; and the credibility and profile of being listed on an internationally recognized stock exchange.

4. Focus on long term growth. Once public, the most successful CEOs focus on executing the company’s business plan and less on watching the stock price. It is critical to manage investor expectations by communicating your companies long term strategy and by investing in quality investor relations.

 TSX and TSXV are a unique funding and listing platform for high growth US companies looking to raise Series B+ capital. Companies with early revenue, a strong management team, and a growth strategy to eventually list on a US exchange should consider the Canadian capital markets as an alternative that may be the right fit. 

 For more information, contact Delilah Panio, VP of US Capital Formation, Toronto Stock Exchange, at delilah.panio@tmx.com. 

Section 7702 of the IRS Code - A Little-Known Opportunity for Business Owners, Executives and Key People

Authors: Mark Rooney, CFP®, ChFC, CLU, Founder and Managing Partner and Jamie C. Smith, JD, Managing Partner, The Business Strategies Group of Southern California

·       There are 5.8 million small businesses (less than 100 employees) in the United States alone.

·       Small businesses represent 98% of the private (non-governmental/non-profit) entities in the country.

·       Small businesses employ 42 million people, which is 47.5% of the private sector workforce.

·       63% of the new jobs in America over the past two decades were created by small businesses.

·       51% of business owners are over age 50 and only 16% are under age 35.[1]

Business owners, executives and key employees must juggle many balls and have knowledge in various and diverse areas that do not directly relate to the nature of their business. One common concern is accumulating funds for retirement, particularly in a tax-advantaged manner.

 Company retirement plan such as 401(k), defined contribution, profit-sharing, simplified employee pension (SEP), and more are attractive approaches. A properly constructed and government approved plan can make retirement contributions tax-deductible and allow potential earnings to grow tax deferred. Taxes are levied only when money is distributed from the plan, either in a lump-sum or structured as income.

 While these retirement plans can provide greater accumulation and distribution possibilities than purely “saving or investing“ on your own, the plans must “qualify” for the tax benefits by adhering to important regulations of the IRS, the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA).

 Some of the rules include, but are not limited to…

·       Non-discrimination provisions

·       Vesting (account ownership) requirements

·       Required timing of distributions

·       Access to funds without penalty

·       Flexibility of contributions

·       Administration, reporting and audit requirements

 ·       Investment and savings options

 ·       Employee education

 ·       Expected benchmarking

…and many more.

When properly designed and administered, these “QUALIFIED” plans are considered a tremendous tool to develop retirement income and an important tax preference provided by the government to encourage retirement self-reliance.

The challenge to many owners, executives and highly compensated employees is that the allowable contributions vary by plan type and are limited by regulation.

This commonly creates a scenario where an employee compensated at $60,000 a year can retire on 100% of their pay, while the ownerreceiving $400,000 per year may retire on only 39% of their previous income.

Take the $60,000 earner who works at the company for 30 years and contributes 10% of their income to the company retirement plan. Combine those contributions with moderate earnings in the plan and their annual retirement income from the plan could approximate $2,800 per month. Add that to approximately $2,200 per month from Social Security, and you have $5,000 per month (or $60,000 per year). That is 100%!

The $400,000 per year owner/executive will get roughly $3,000 per month from Social Security and approximately $10,000 per month from their company plan, all variables being equal.  Thus, the higher paid person has $156,000 per year in retirement income. That is only 39%!

This occurs because the amount of money the higher paid person can contribute to the plan is “CAPPED“ by regulation at an average of $20,000 per year. This involves both hard-dollar limitations and caps on the amount that is considered “eligible” income for contributions to the plan.

Table 1: Hypothetical Retirement Income Example (Employee vs. Owner/Executive)

IS THIS FAIR???  According to the regulations that apply to “Qualified Plans” it is! 



ANOTHER (OR ADDITIONAL) APPROACH

Section 7702 of the Internal Revenue Code creates a way to accumulate earnings on a tax-deferred basis and distribute lump sums or structured incomes on a tax-free basis. This creates a highly similar result to a qualified plan, but is not subject to the same requirements, rules and restrictions.

The plan can be highly selective (versus non-discriminatory) and it is virtually uncapped. Many have likened it to an unlimited “Roth“ plan.  Used properly, it can make up the difference between 39% (or whatever your number is) and 100%.

Section 7702 of the IRS code governs how much money can be accumulated inside a life insurance policy without being currently taxed  (tax-deferred).  It also indicates how, properly designed and administered, those accumulated funds can be distributed on a non-taxed, non-reportable basis. Thus, a 7702 plan can provide comparable benefits to a qualified plan in terms of accumulation, distribution and even investment flexibility, but on an entirely selective and uncapped basis. Indeed, virtually none of the “rules“ required in a qualified plan impact a 7702 (sometimes called non-qualified) plan. 

Utilizing 7702 enables a company to provide parity for highly paid employees, executives and owners. Our $400,000 owner mentioned earlier could indeed fund a tax advantaged plan to provide a $400,000 post-retirement income.

BUT WAIT – THERE’S MORE

The asset being used to accumulate and distribute these funds is a permanent form of life insurance. Repurposing cash (the premium) into “cash value“ to create this unique tax status, creates other opportunities for the business and business owner because there is an inherent death benefit provided by the life insurance contract.

 Some of these opportunities are…

·       Contingency capital – the cash value[2] is always accessible and is not restricted by early or late distribution rules

·       The Death Benefit can be used in multiple ways without disrupting the funding or distribution process, including but not limited to…

o   Estate planning – in terms of liquidity and/or equalization

o   Funding “buy/sell“ agreements

o   Key person coverage

o   Succession planning and other forms of exit strategies

o   “Perks“ such as split-dollar protection for key people

o   Family income and educational funding needs

…and more. 

Most of this is accomplished through drafting of agreements by counsel that would codify desired uses for the death benefit, and all of this is controlled by the owner and could be modified as circumstances change.

INTERNATIONAL ISSUES

 Because life insurance contracts are the financial instrument supporting the plans discussed, and the tax ramifications of the contracts are based on IRS code, it is important that the insurance policies be U.S.-based.

 In one sense this is very good, as the U.S. policies are as cost-effective as any that exist in the world. But the underwriting requirements and country-by-country treaties to make them available to non-US citizens/residents vary widely. A handful of insurance companies do have “international underwriting“ programs that will issue U.S. dollar-denominated policies on foreign nationals with a nexus to the U.S. (financial, residential, employment, etc.).  Issues also apply to U.S. citizens working or residing abroad.

 The many variations by country (and even city), make details on this process too complex for this article. Fortunately, one of the easiest countries to work with is Canada. Thus, issues of…

 ·       Canadians working and/or living in the United States

·       Americans working or living in Canada

·       Employees and principals with “other“ citizenship

…present a lesser challenge in obtaining U.S.-based insurance contracts to support the various concepts discussed in this article.

 A thorough understanding of section 7702 and other sections of the IRS code relating to U.S. life insurance contracts can provide often-missed opportunities for business owners, executives and key people, both in the U.S. and, to a large extent, Canada as well.

 Mark Rooney, as an agent, offers fixed insurance products through AXA Network Insurance Agency of California, LLC and through an International Underwriting Program.  As a registered representative of AXA Advisors, LLC (NY, NY 212-214-4600), member FINRA, SIPC, he is not authorized to offer securities products and services outside of the United States.  AXA Advisors, its affiliates, and financial professionals do not provide tax or legal advice.

For further information or clarity on the items discussed in this article, please contact Julie Drogrez Lopez, Financial Consultant, AXA Advisors LLC at (619) 557-8427 or at Julie.DrogrezLopez@Axa-Advisors.com.

[1] All of these statistics are derived from the 2018 Life Insurance Marketing Research Association (LIMRA) Small Business Research Series Project.

[2] Loans and withdrawals reduce the policy's cash value and death benefit, and withdrawals in excess of the policy's basis are taxable. Under current rules, loans are free of income tax as long as the policy remains in effect until the insured's death, at which time the loan(s) will be satisfied from income-tax-free death benefit proceeds, and, if the policy is surrendered, any loan balance will generally be viewed as distributed and taxable.

PPG-148770 (10/19) (Exp. 10/21)

How U.S. Companies Can Enter the Canadian Market

Author: Kent Kufeldt (Partner and National Practice Group Leader for BLG’s Securities and Capital Markets Group)

Canada is an attractive place for businesses interested in establishing a presence in another country. Canada presents a stable economy and a welcoming environment for international investors. In this article, we will discuss the ins and outs of public M&A transactions for any company interested in the Canadian market. From plans of arrangement and takeover bids, to acquiring a minority interest in a company and advising on the Investment Canada Act, find out how you can gain a foothold in Canada.

 Canada’s Open Economy with Few Significant Regulatory Requirements 

As an open economy, Canada has very few limitations on foreign investment.  Throughout the years, Canada has seen investment from all over the world into many sectors of the Canadian economy.  Not surprisingly, investment from the United States is considerable, but we have also seen many M&A transactions originating from Europe and more recently from Asia.  

 There are very few significant regulatory requirements which must be satisfied when conducting a public M&A transaction in Canada.  Our principal foreign investment review legislation is known as the Investment Canada Actand it applies when a non-Canadian purchases a Canadian business.  Over the last number of years, the review thresholds applicable to M&A transactions have been increased so that only high value transactions are subject to review.  In particular, direct investments involving Canadian businesses by investors from WTO member nations are only reviewable where they have an enterprise value in excess of just over $1 billion.  Similarly, where the investment originates from a country with whom Canada has in place a multilateral or bilateral trade agreement, transactions only become reviewable when they involve an enterprise value of slightly over $1.5 billion. 

 There are, however, a few exceptions to these review thresholds.  Lower thresholds apply to acquisitions of cultural businesses such as publishing, film, music and broadcasting.  In addition to the Investment Canada Act, certain industries, such as banking and airlines, have specific foreign ownership restrictions.

 Should a transaction be reviewable, that review typically takes between 45 and 75 days following the announcement of the transaction.  As is the case in the United States, there is also a national security test similar to the US CFIUS process, which can potentially prohibit a transaction that raises national security issues. The national security test is very broad and should always be considered in transactions which have a connection to Canada’s defence industry, sensitive technologies or which involve companies critical to the provision of goods and services to Canadians.

 Typical Types of Public M&A in Canada 

 In Canada the principal form for a public M&A transaction is what is known as a plan of arrangement transaction.  A plan of arrangement is completed under Canadian corporate law statutes and usually involves a negotiated transaction between the purchasing company and the target.  A plan of arrangement requires the approval of the target company’s shareholders on a special majority basis (typically two-thirds approval). In addition, a plan of arrangement must be approved by a Canadian court, which assesses the fairness and reasonableness of the transaction.  A plan of arrangement is the acquisition structure of choice for almost all negotiated transactions because by its nature, it is a flexible form of transaction which can address securities law, tax law and corporate commercial considerations all in the same transaction. It also has the advantage of resulting in the acquisition of 100% of the target company in a single step as long as the transaction receives the approval of two-thirds of those shares voted at a meeting held to consider the transaction.

 Another typical form of public M&A transaction is a takeover bid. Takeover bids are subject to the rules of the Canadian securities regulators and involve an offer made by the purchasing company directly to a target company’s shareholders. Often takeover transactions are negotiated, however takeover bids can also be conducted on a hostile basis with an offer made directly to a target company’s shareholders without the support of the target company or its board of directors.  

 Unlike a plan of arrangement, there is a possibility that a takeover will require a two-step process to arrive at 100% ownership, adding time and cost to a transaction. This is because where less than 90% of a target company’s shareholders accept the offer, a second stage plan of arrangement or amalgamation transaction would be required to purchase the remaining shares.  The possibility of requiring a two-step transaction process to complete an acquisition has resulted in the plan of arrangement structure becoming the dominant form of M&A transaction in Canada.

 Use of Hostile or Unsolicited Acquisitions in Canada 

 Hostile transactions are permissible in Canada and are generally conducted by way of a takeover bid. Recent changes in our Canadian securities laws have required that an unsolicited takeover bid remain open for acceptance for at least 105 days and that before an acquiring company can take up shares tendered to the takeover bid, at least 50% of the target company’s shares must be tendered in acceptance of the offer.  While the 105 days represents a long time to have an offer remain open for acceptance, our Canadian securities regulators have balanced this by severely restricting and monitoring the ability of a target company to conduct defensive tactics which could stop a bid from being considered by its shareholders.  In the event that the transaction turns friendly, the target company has the ability to shorten the deposit period.

 Considerations for Acquiring a Minority Interest in a Canadian Target

 It is common to see investors from outside of Canada undertake minority investments in Canadian businesses prior to undertaking a merger transaction.  Like other jurisdictions, acquisitions of minority interests in public Canadian companies can trigger reporting requirements. Any acquisition of greater than 10% of a public company requires the preparation and filing of an early warning report and insider reports similar to the filings required under US securities laws. In Canada, an acquisition through public market purchases of greater than 20% of a company’s issued and outstanding shares will generally trigger the application of our takeover bids rules and the necessity to make an offer to all shareholders. Therefore, it is very common for parties seeking to obtain a minority interest to limit their purchases to no more than 19.9% of a target company’s shares.

 Once a decision is made to acquire additional shares, a takeover bid or plan of arrangement transaction can be undertaken by the investor.  Depending on the circumstances, special rules may apply to a merger and acquisition transaction conducted by an insider of the Company.  These rules can trigger enhanced governance requirements and independent valuation requirements of the shares of the target company.  

 As the rules regarding minority investments and a subsequent go private transaction can be somewhat complex, it is always recommended that purchasers looking to undertake a minority investment do so in consultation with Canadian legal advice to ensure compliance with the rules during the acquisition and any follow-on M&A transactions.

 Borden Ladner Gervais LLP

As Canada’s largest law firm, BLG is well-organized to assist clients from all over the world who are looking to undertake a public M&A transaction in Canada.   

For more information on how U.S. companies can excel within the Canadian market, refer to Borden Ladner Gervais’ Legally Educated – BLG Video Series for valuable insights on today's major news-making industries.

New RSM Research Explores Cybersecurity Concerns and Vulnerabilities for Middle Market Businesses

The survey revealed that the middle market is confident in cybersecurity protections yet remains among the most vulnerable to attacks. 

Middle market leaders increasingly recognize the heightened risk of cyber threats and data breaches that are continuing to capture headlines, but fail to realize they are prime targets for cyber attacks. That’s according to results from the RSM US Middle Market Business Index (MMBI) Cybersecurity Special Reportreleased from RSM US LLP (“RSM”), in partnership with the U.S. Chamber of Commerce.

The report found that 15 percent of middle market executives indicated that their companies experienced a data breach in the last year, up from 13 percent in 2018 and a significant jump from 5 percent just four years ago. Additionally, more than half (55 percent) of respondents believe that an attempt to illegally access their company’s data or systems is likely in 2019, an increase from 47 percent in 2018. Larger middle market organizations continue to be most at risk for cybercrime, as many have high volumes of valuable data but don’t have the robust security resources of their large-cap peers, making them exceedingly attractive to cybercriminals.

In terms of the types of attacks, ransomware has become the most popular breach method for cyber criminals – evolving from a nuisance to a major threat because of its highly targeted nature. RSM found that over one-third of middle market executives (35 percent) know someone that has suffered a ransomware attack, compared to 31 percent in 2018, while 20 percent have suffered an attack themselves, a two percentage point increase from last year. Social engineering has also become prevalent, with 42 percent of executives reporting social engineering attempts on their organizations from outside parties.

However, while executives are taking notice of looming cyberthreats, and the number of reported breaches has tripled over the last five years, the majority (93 percent) are confident in their organization’s security measures, which is likely due to increased investments in cybersecurity tools and initiatives. This growing confidence of middle market leaders conflicts with rising concerns, and research shows that companies need to remain diligent.

“One of the most apparent trends from the report is the confidence middle market leaders have in the effectiveness of their security controls,” said Daimon Geopfert, principal and national leader of security & privacy services with RSM US LLP. “While the headlines may focus on the breaches experienced by large corporations, the glaring reality is that the often-overlooked middle market is a prime target. The jeopardy to this sector is growing, and firms must ensure that security investments, controls and communication align with rising threats.”

Responding to a Rapidly Evolving Regulatory Environment
A growing number of countries and states are beginning to enact cybersecurity legislation to mitigate risk and strengthen data protection. Many middle market companies are required to comply with the European Union’s General Data Protection Regulation (GDPR), and legislation is already emerging in the U.S., led by the California Consumer Protection Act, which is scheduled to take effect in 2020.

These regulations are expected to impact the middle market, yet companies have been slow to develop GDPR-compliant privacy processes. In fact, only 40 percent of respondents are familiar with the requirements of the GDPR law or other privacy regulations.

It is imperative for middle market companies to start building familiarity with existing regulations now, so these policies can serve as a helpful foundation to prepare for what is certain to be an active future for data privacy.

Cyber Insurance: Future-Proofing Security
To combat the repercussions that cybercrime threats like ransomware can have on organizations’ financials and operations, cyber insurance has become an effective and critical solution.

More than half (57 percent) of middle market executives surveyed carry cyber insurance to mitigate risk, a five percentage point increase from 2018. While the usage of cyber insurance is gaining momentum and popularity, many executives do not have a full understanding of their policies and coverage. In fact, the survey reveals that 41 percent of the companies that carry policies are somewhat familiar or not at all familiar with their coverage levels.

“Executing a cyber insurance policy is important to limit exposure, and it’s encouraging that there has been an uptick in implementation among middle market firms,” said Ken Stasiak, consulting principal with RSM US LLP.  “But companies must also remember to periodically evaluate any existing insurance policies to account for evolving and emerging risks.”

As cyber attacks continue to grow in severity, scope and scale, executives must stay aware of potential vulnerabilities and understand the most effective methods to alleviate the risk. The most effective cybersecurity strategies will protect data, identify and address threats, and scale to encompass emerging technology, business expansion and other challenges.

The survey data that informs the index reading was gathered between January 14 and February 1, 2019. To learn more about the middle market and the MMBI, visit the RSM website.

About the RSM US Middle Market Business Index

RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter: January, April, July and October. The survey panel consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.

Built in collaboration with Moody’s Analytics, the MMBI is borne out of the subset of questions in the survey that ask respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.

The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.

The responses to each question are reported as diffusion indexes. The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction. The MMBI Cybersecurity Special Report also includes data from the NetDiligence® 2018 Cyber Claims Study. 

About RSM US LLP
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.

RSM US LLP is the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 41,000 people in 116 countries. For more information, visit rsmus.com, like us on Facebook, follow us on Twitterand/or connect with us on LinkedIn.

Canada’s Growing E-Commerce Market Offers Opportunities – and Challenges -- for California Businesses

Paul Tessy, Senior Vice President, Purolator International

A July 2019 webinar sponsored by Canada Postrevealed a few interesting statistics about the Canadian e-commerce market:  First, that 80 percent of Canadians are online shoppers, and almost 70 percent of those shoppers have made purchases from U.S. retailers.  This represents a market of roughly 30 million consumers.  And second, Canada’s e-commerce market is growing.  A lot.  By 2022, online sales are projected to increase by a whopping  87 percent over 2016 levels.

 As the webinar leader summarized:  “Canadians have money.  They like to shop.  And they plan to shop more.”

 Clearly, there has never been a better time for California businesses to expand e-commerce operations to the Canadian market.  But before a business decides to take that potentially lucrative step, it’s vital to recognize that selling to Canada is different from selling within the U.S., and requires careful planning, especially with regard to logistics and delivery.

 For one thing, a California business will quickly learn that Canadian consumers have expectations for fast, on-time deliveries that are similar to U.S. shoppers.  And that last mile flexibility and efficiency matter as much in Canada as in the United States.

 But meeting those expectations can be tricky.  Shipments from the U.S. must cross an international border, and are subject to customs fees and tariffs that can drive up the cost of a product.  Another unwelcome surprise is that most U.S. transportation providers do not have distribution networks in Canada.  Many U.S. retailers have mistakenly assumed their highly-efficient U.S. logistics strategies could simply be replicated in Canada, only to have their time-sensitive e-commerce shipments arrive days later than expected. 

 A U.S. retailer can meet Canadian consumers’ e-commerce expectations.  The key is to partner with a logistics company that not only has the requisite experience and capabilities in Canada, but is a proven innovator in building solutions that address the realities of e-commerce shipping.

 Purolator International specializes in providing logistics services for shipments moving between the United States and Canada.  This experience affords us unique insight to the needs of U.S. retailers trying to ship e-commerce packages into Canada, the expectations of Canadian consumers, and an understanding of what is possible.  The good news, is that the “what is possible” has kept pace with – and even outpaced -- the “what is expected.”  

 The First Mile

For starters, let’s discuss what we refer to as “the first mile.”  This involves the process involved in picking up a shipment and bringing it to the Canadian border.  We regularly hear from California  businesses, especially those located in southern California, that have been disappointed to learn their shipments would take 4-5 days just to reach the border. Not to clear the border mind you, just to arrive.

 This generally occurs because many transportation companies that own their own fleets are locked in to following rigid schedules.  Shipments are often picked up and brought to a hub where they are sorted and reloaded onto another truck.  Once enroute, the truck will make multiple stops along the way.  

 A better solution is to enlist a company that does not own its own trucks and instead can pick-and-choose from an array of options.  A San Diego retailer, for example, would benefit from having its shipments picked up by a truck moving directly north, rather than a truck that must make stops in Arizona or Nevada.

 Inventory management is another consideration in which a non-asset-based provider can be helpful. A retailer must determine its best course for ensuring proper amounts of inventory are readily available to fulfill Canadian orders.  With an efficient transit plan in place, this may be accomplished from a U.S-based warehouse.  Or, a retailer may wish to store inventory in a Canadian facility, available through its logistics provider.

 Shipment consolidation has become an essential component to an e-commerce logistics solution. Through consolidation, several benefits are possible:

·     Freight and small package shipments can be picked up at the same time, and travel on the same truck to the border.  This important capability saves both time and money.  

·     Smaller shipments are combined, which often means the larger shipment qualifies for a reduced freight rate.

·     Consolidated shipments will clear customs as a single entry.  This avoids having to submit separate Canada Border Services Agency (CBSA) paperwork and documentation for each individual unit.  

 A logistics provider that is able to offer a “best possible” solution, that includes consolidation efficiencies, can usually ensure a shipment’s arrival at the border days faster than a more rigid “best we can do” solution.  

 Customs Efficiency

 Consolidation is one example of how an experienced logistics provider can help facilitate the border clearance process.  There are other ways as well.  For starters, a logistics provider should have a good understanding of CBSA requirements, and be able to ensure that all required documentation is accurate and thorough. This may sound obvious, but incomplete/missing paperwork is a top reason for shipment delays.  

 Duty and tax payment is another important consideration.  All shipments entering Canada are subject to sales taxes and customs fees, and may be liable for permit licenses and other fees.  A California business selling to a Canadian customer will need to determine its best course for collecting those taxes and fees.  While most e-commerce customers expect to be charged a landed, all-in cost at time of purchase, the Canadian government places restrictions on parties authorized to collect taxes and serve as “importer of record.”

 An experienced provider will offer guidance to ensure full compliance, and will also participate in CBSA’s Courier Low-Value Shipment program.  This offers expedited clearance for shipments valued at less than CAN$2,500 entering Canada via an approved courier.  

 The Last – and most important -- Mile

 Once a shipment arrives in Canada, what happens next will make or break the delivery experience. Last mile efficiency is a non-negotiable must-have, even for shipments arriving from the United States.  This begins of course, with a seamless distribution plan that ensures fast, on-time delivery.

 The problem though, is most carriers simply do not have this capability.  Instead, a U.S. carrier will generally transfer shipments to a Canadian carrier.  But, since most Canadian carriers offer only regional service, a network of carriers will have to be assembled to ensure coverage throughout the entire country.

 Purolator International is able to offer seamless service throughout Canada.  This is because Purolator International is the U.S. subsidiary of Purolator Inc., a leading Canadian integrated freight and parcel delivery company.  Through this relationship, we have access to a distribution network that reaches every province and territory.  And with regard to e-commerce deliveries to residences and businesses, we benefit from Purolator Inc.’s affiliation with Canada Post, that country’s national post office.  Afterall, what better entity to ensure access to 100 percent of local addresses than the post office?

 With an experienced, innovative logistics provider on its team, a California business can fully meet the expectations of Canadian online customers.  For those of us in the business of building logistics solutions, it’s never been a more exciting time.  Today it is possible to have shipments arrive in Canada faster, and more efficiently than was previously thought possible.  The key though, is having a solid logistics plan in place, and the right partner on your team.

Seeking Competitive Advantage in Divergent Immigration Systems: An Overview of Canada and U.S. Immigration

Andrew Cumming, Founder and Managing Partner of Toronto-based Cumming & Partners.

In today’s competitive global economy, access to highly skilled employees is critical to business success. For many businesses in North America, attracting and keeping top talent (including foreign workers) is a key component of their business model.

Canada and the United States have separate and increasingly divergent immigration systems. Each country’s immigration policies and platforms have strengths and weaknesses. I will compare and contrast their immigration systems for two distinct purposes: (1) to highlight how a North American business integrated immigration approach can provide a competitive advantage; and (2) to provide a context and useful insight into potential comprehensive U.S. immigration reform. I will first review the U.S. immigration system and then contrast Canada’s immigration system.

U.S. Immigration

There have not been comprehensive changes to the U.S. immigration system for several decades. Although there is a consensus that significant changes are required, the political complexity of addressing legal immigration reform (work visas, green cards) in conjunction with resolving the status of more than 10 million illegal immigrants has proven insurmountable.

U.S. Work Visas

H-1B Work Visas

The H-1B work visa is the cornerstone of the U.S. work visa system. This work visa allows a U.S. business to hire a foreign (professional) worker who has a specialized university degree for a position that requires such a credential. The foreign worker must be paid the prevailing wage, but there is no labor market test required. U.S. Immigration restricts the ability of U.S. companies to hire foreign workers on H-1B visas by placing an annual numerical cap (85,000) on the number of such work visas available each year. Each April 1st, applications are accepted (in 2019 approximately 190,000 applications were filed) and a lottery occurs to determine which foreign workers are chosen.

L-1 (Intra-Company Transfers) Work Visas

Foreign workers who have worked abroad for one year or longer for a company affiliated to a U.S. business can transfer to the United States on an L-1 work visa if they work in an executive, managerial, or specialized knowledge capacity.

TN (NAFTA) Work Visas

Professionals who are Canadian (or Mexican) citizens working in one of the approximately sixty listed professional occupations have access to TN work visas under NAFTA. These TN visas facilitate fast and easy access to the United States (immediate in-person processing upon entry) provided the applicant has the required education and the U.S. position fits into one of the listed occupations. NAFTA work visas are the key for professional worker mobility between Canada and the United States.

O-1 (Outstanding Ability) Work Visas

The O-1 work visa is for any foreign worker who can document outstanding ability in their field within the arts, sports, science or business.

E-1/E-2 Treaty Traders/Treaty Investors

The United States has commerce treaties with more than fifty countries that allow citizens of those countries U.S. work visas if their foreign business is undertaking substantial trade with the United States (E-1 Treaty Trader visas) or substantial investment in the United States (E-2 Treaty Investor visas).

U.S. Permanent Residence (Green Cards)

PERM (Labor Certification)

Employees in the United States who want to sponsor a foreign worker for a Green Card can undertake the Labor Certification process of advertising the position to prove that no U.S. worker (with the requisite credentials) is available. This Labor Certification process, if successful, allows the foreign worker to apply for a Green Card.

Green Card availability is restricted by an annual quota system that applies to both eligibility categories and also nationality. This has resulted, in many circumstances, in significant delays in obtaining Green Cards particularly for citizens of India, and China.

Multinational Executives/Extraordinary Ability

Exempt from the Labor Certification process are executives and managers of multinational companies and individuals who can document their extraordinary ability in the arts, sports, sciences or business.

Contrasting Canadian Work Permit Options

LMIA Work Permits

The Labour Market Impact Assessment (“LMIA”) work permit is Canada’s standard work permit for a foreign worker. In contrast to the H-1B visa, there is no annual numerical cap. However, and also in contrast to the H-1B visa, the LMIA work permit is restricted by a labour market test whereby a Canadian employer must advertise the position and prove there is no Canadian worker (with the appropriate credentials) available.

Intra-Company Transferee/NAFTA Work Permits

The Canadian rules for intra-company transferee work permits closely parallel those of the U.S. L-1 visas. That is also the case for Canadian NAFTA work permits vis-à-vis U.S. TN visas. Unlike the United States, in addition to NAFTA Canada has significant labour mobility provisions in its CETA (Comprehensive Economic and Trade Agreement with Europe) and CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership with 10 Asia-Pacific countries) trade agreements.

Significant Benefit

Canada issues work permits for individuals of outstanding ability (in parallel to the U.S. O-1 visa) under the Significant Benefit category. Significant Benefit work permits are, however, significantly more flexible than O-1 visas as they can be issues not only where the applicant has outstanding ability (like the O-1) but also where the applicant lacks outstanding ability but is still contributing significantly to Canada’s economy or culture. This gives Canadian Immigration significant latitude to broadly issue Significant Benefit Work Permits.

Contrasting Canadian Permanent Residence Options

Canada continues to aggressively focus on economic growth through immigration. Last year, Canada welcomed approximately 300,000 permanent residents and the federal government has stated the goal of admitting 1.1 million new permanent residents between 2019 and 2021.

Express Entry System

This online immigration program facilitates the selection of immigration based on an applicant’s ranking score. Points are given for education, language skills, work experience, and age (youth). Unlike the U.S. Labour Certification process, sponsorship by an employer is not required. The system enables the best and brightest foreign workers to obtain permanent residence in Canada in 6 to 9 months and is focused on attracting young, well-educated professionals. In contrast to the United States, Canada does not restrict permanent residency on a country-specific quota system, so all foreign applicants are on a level playing field regardless of nationality.

Provincial Nominee Programs

Provincial governments in Canada have considerable flexibility to shape their provincial nominee (immigration) programs to respond to specific economic and labour needs. The Canadian federal government has permitted provincial nominee programs to grow to the point where they admit about one-quarter of Canada’s economic immigrants every year. This shift to provincial (regional) input into federal immigration policy has not occurred in the United States.

Utilizing an Integrated North American Platform to Create a Competitive Advantage

The immigration policies and programs of both countries both have strengths and weaknesses. Understanding each country’s immigration policies allows you to recruit talent to North America through either country to maximize access to highly skilled foreign workers and produce a competitive advantage. This can be illustrated through two practical examples.

Example 1: Indian Software Engineer (Recent Stanford Graduate)

Ms. Graduate is an Indian citizen who is graduating at the top of her class in engineering at Stanford. She is being recruited by several top California-based technology companies.

Company A offers her a position on her Optional Practical Training (OPT) work authorization with the assurance they will enter Ms. Graduate in the H-1B visa lottery next April, and if they can obtain an H-1B visa for her (40% chance), then they will undertake a Green Card through Labor Certification (2 to 3 years) and then eventually (in approximately 10 years because of the back-log in Green Cards for Indian nationals) a Green Card will be obtained.

Company B makes a similar offer of support for U.S. immigration assistance but also explains that it has operations in Vancouver, Canada. And if Ms. Graduate is not chosen for an H-1B work visa, it is happy to move Ms. Graduate to Canada on a Canadian work permit and facilitate her Canadian Permanent Residence (1 year), or put her in a temporary position in Vancouver that would facilitate an L-1 (Intra-Company Transfer) work visa back to the United States after one year of work. Ms. Graduate chooses employment with Company B.

Example 2: Renowned Romanian Scientist

Company A is a top Canadian pharmaceutical company based in Toronto with additional offices in Boston. It has identified Mr. Research, a world-class Romanian scientist, as the ideal candidate to head up a new research project. Mr. Research is married, 55 years old, with two children preparing for university. He is brilliant but his English language skills are poor. He will not move to North America without the assurance the move can be permanent for both himself and his family.

Company A is concerned that although they can get Mr. Research a Canadian work permit, he may not qualify for permanent residency through the Express Entry program (poor English) and that other options will take time (and the two children will “age out” at 21 and not get permanent residency with their parents).

So alternatively, Company A recruits Mr. Research to its Boston office on an O-1 (Outstanding Ability) work visa with an undertaking to obtain Green Cards for Mr. Research and his family forthwith (through Extraordinary Ability which is not English language skill dependent). Mr. Research gladly accepts the offer for the Boston office.

Canadian Immigration Policies: Insight to Possible U.S. Immigration Reform?

Canada, not burdened by the illegal immigration issues that confront the United States, has in the past ten years taken significant steps (LMIA work permits, Express Entry Permanent Residency, Provincial Nominee Programs) to modernize its immigration system. These steps provide insight to possible U.S. immigration reform options.

Labor Market Test for Work Visa

The United States currently restricts the number of H-1B visas issued through an annual numerical quota system. That could change to restrictions based on proving labor market needs to hire foreign workers.

Emphasis on Highly Educated, Young Professional Workers

Canada developed its Express Entry program for permanent residency to compete with Australia and other countries who have modernized their immigration systems to attract the best and brightest young professional workers. Applicants do not require an offer from a Canadian employer (or a Labor Certification type process). The United States may follow with a points-based system for Green Cards to compete for this global talent.

Reduced Family-Based Immigration

Canada (and other countries) have reduced family-based immigration to emphasize points (merit)-based and economic- based immigration. This decision is based on the greater economic benefit of emphasizing professional workers over family-based immigration, and that may be a significant driver for comprehensive U.S. immigration reform.

Conclusion

Sophisticated immigration planning and the use of an integrated U.S./Canada approach for North American companies can provide a competitive advantage for sourcing and retaining highly-skilled foreign workers. Further, the immigration reforms that have occurred in Canada offer valuable insight into comprehensive immigration reform options for the U.S.

To learn more, please visit Cumming & Partners online at canada-usa.com or contact their Toronto office at (800) 523-2581.

Andrew Cumming, Founder and Managing Partner, acumming@canada-usa.com

Magda Kapitany, Director Business Development, mkapitany@canada-usa.com

A Tale of Two Currencies: The Greenback and the Loonie - Hedging currency risk in volatile markets

Pictured: Rob Bollé (left), Regional Manager, AFEX Los Angeles, and Kyler Koebel (right), Regional Manager, AFEX Vancouver

THE SPECIAL RELATIONSHIP

The US and Canada have long enjoyed a strong trading relationship. The United States is Canada’s largest trading partner: daily volume of the USD/CAD pair is approximately $275 billion US (about 5% of the $5.3 trillion daily foreign exchange market volume). This is certainly nothing to sneeze at!

The bilateral trade between the United States and Canada covers a spectrum of products and services, including raw materials and commodities (steel, aluminium, oil and natural gas from Canada), finished and semi-finished products (electronics, computers and biotech), as well as intellectual property, including talent and film and television production. 

With such interconnectedness, volatility in the USD/CAD exchange rate affects both economies and businesses on both sides of the border. Getting a handle on market dynamics and mitigating currency risk is an important part of the day-to-day. The following discussion will outline some causes of the recent USD/CAD volatility, and strategies and approaches to better manage FX exposure. 

 EXCHANGE RATE VOLATILITY

Before firming a bit in July, the Canadian dollar had been trading close to its lowest levels against the U.S. dollar in almost a decade. While it traded in the high 1.20s (USD/CAD) for the last quarter of 2017, strengthening further in January of 2018, it struggled since, touching 1.36 in January 2019 despite positive economic data. 

In May of 2018, U.S. President Trump announced tariffs on Canadian steel and aluminium imports and in June Canada responded with tariffs of its own on U.S. imports. The negotiating tactic may have had the desired effect, weakening the CAD while the United States-Mexico-Canada Agreement was being hammered out. 

The Canadian dollar continued its slide through the end of the 2018, losing more than 10% against the U.S. Dollar. Despite the tariffs having been lifted, and the USMCA on its way to ratification, the weakness persisted until July 2019 when Canada announced stronger-than-expected economic data.

Nonetheless, the Bank of Canada’s 10 July update underscored the uncertainty, pointing toward recovery and a firmer footing for the loonie, but with measured caution. The US economy appears to be slowing, and the trading environment is still volatile.

Source: NETDANIA

A DELICATE BALANCE 

The balance of trade, geopolitical events, commodities pricing, and interest rate differentials are major drivers in currency movement. 

This USD/CAD movement has some positives. Canada is a net exporter: the weaker loonie makes pricing of Canadian goods more competitive in the global markets (though the China-U.S. uncertainty weighs heavily). 

Canadian investment in the United States has appreciated with a stronger greenback, particularly in the Southern California region. And U.S. film and TV production is booming in Canada due to a softer loonie and generous tax breaks 

With a softer currency, though, Canadian importers are faced with higher pricing for the goods they purchase, and Canadian consumer spending has been sluggish. Higher oil prices have not yet translated into gains for the loonie, making the economy even more reliant on exports for growth. The Bank of Canada bank has kept interest rates unchanged, while the US Federal Reserve recently cut interest rates to keep the booming economy from overheating. 

The closeness of the Canada-U.S. relationship means that U.S. actions like the escalating trade war between United States and China, also affects the Canadian economy. 

What does it all mean, then? Guaranteed uncertainty ahead. 

MANAGING CURRENCY RISK IN VOLATILE MARKETS

While no one can predict the future, it’s wise to explore ways to protect your margins and hedge currency risk in a volatile market. Options range from rate orders to forward contracts, that fix an exchange rate for a given period, to options structures that allow you to take advantage of market movements in your favour. 

The first steps, though, are determining your strategic objectives and your exposures. Here are some questions you should consider: 

•             Do you have a budgeted rate for your FX that you would like to achieve?

•             How frequently are you sending or receiving foreign funds?

•             How long is a typical sales cycle, from order to delivery and payment?

•             Are you able to reprice your goods due to FX market movement? 

•             Would your business benefit from knowing your costs upfront?

Speak with a trusted and experienced FX professional for advice on planning and on market dynamics. They can offer guidance on tools and approaches that help you meet your goals. 

HEDGING TOOLS

As noted above, different tactics exist that help you manage risk. Which tools, and how you use them, depend largely on your business goals. Following are descriptions of some hedging tools and how they work. 

Spot Transaction

The simplest FX transaction is the spot payment. If you have a single payment due within the next few days, you purchase the foreign currency at the prevailing market rate for same-day, next day or two-day delivery. 

Rates change constantly—the global foreign exchange market trades 24/6. The rates you see on line are typically “interbank” rates (what the largest banks charge each other), and often delayed. Most commercial providers will charge a “spread” over the interbank rate that will vary depending on the size and frequency of your payments.

Confirm the rate and the delivery (and any additional fees you or your beneficiary will be charged) with your provider. 

Rate Order or Market Order

If you have a target rate at which you’d like to buy your currency, you can place a Rate Order that will fill when the target rate is reached. While the usual term for a rate order is two weeks, the order can stay in the market any length of time—even a couple of hours in a fast-moving market. Your provider can advise you on a suitable target and term and notify you when the rate is reached. 

LOCKING RATES WITH A FORWARD CONTRACT:

Canadian exporter 

Noel owns a Canadian auto parts manufacturer and contracts to sell custom parts to an Irvine-based automotive dealer, who wants to pay him in U.S. dollars. 

The USD Is strong when they agree terms, so Noel prices the contract at US$400,000. He buys a six month forward contract to lock in the rate on the incoming USD.

US$400,000 * USD/CAD 1.36 = CAN$540,000

By the time the invoice is due, the CAD has strengthened by 8% against the U.S. dollar (USD/CAD 1.24). If Noel had not locked in the rate, he would have received only CAN$496,000, a loss of CAN$44,000.

Forward Contract

A forward contract allows you to lock the exchange rate for a fixed period (up to 24 months with many major currency pairs), typically with only a small deposit so you don’t tie up cash flow. Any premium over spot rates will be determined by the interest rate differential between the currency you are buying and the currency you are selling. 

A forward contract is not designed to generate profits, but to protect them: you know the exact rate you will need to pay when the invoice is due, which makes planning easier. You are committed to purchase the currency at the locked-in rate when the contract ends, though, wherever the spot market is at the time. 

There are two standard types of forward contract. A fixed forward has a specific end date, and a flexible forward can be drawn down at any time over the term. 

For example: If you have an invoice due in three months, a fixed forward is probably the better choice. If you have several payments due over the course of the next three months, you would choose a flexible forward.

LEVERAGING CURRENCY WEAKNESS: 

Filming in Vancouver

David is a Los Angeles-based independent producer/director who has secured funding to make a feature from his award-winning short film. He plans to shoot in Vancouver, registering the project in the United States and Canada as a separate entity.

His above-the-line costs are minimal—no marquee names—and he budgets the film at US $1.1 million, raising funds from American investors while his Canadian co-producer secures Canadian investors. He plans a 2-week shoot on locations in and around Vancouver. 

Hiring crew on the ground in Vancouver qualifies him for local and national labour tax credits. As he’s expecting $CAN200,000 in tax credits, he borrows $US100,000 in finishing funds from a US film financier, knowing it will take several months to receive the tax refund

David’s Canadian co-producers’ investors are funding 35% of the budget, and David converts a large part of his U.S. funding into Canadian as the exchange rate is favourable. This acts as a natural hedge because he knows he is going to spend these funds in Canada. 

He will convert additional funds from the United States to Canada as he needs them. 

After scouting locations, hiring extras and crew, the film is ready to roll.

Currency Options

A currency option is a specialized structured instrument that protects you on the downside, yet allows you to take advantage of any upside if the market moves in your favour. This is a key difference from a forward contract, where the rate is the rate and you are committed no matter which way the market goes. 

There are many different structures: some require a premium and others do not. Costs can vary and depending on the structure, pricing could even improve on the going spot rate. An options specialist can advise on the best structure for your business. (Currency options are licensed products; not all FX providers are able to offer them.)

WHAT THE FUTURE HOLDS

For businesses, market movement in either direction can affect profit margins and make planning difficult. Given the strength of the United States economy over the past 18 months, and President Trump’s willingness to use tariffs as a blunt weapon in trade talks (consequences to the US economy and other trading partners be damned, there will be ripple effects with many trading partners. If the U.S. dollar strength continues (much to the President’s displeasure), imports are more attractive to U.S. buyers while U.S. exports are expensive. Buyers of U.S. goods could well seek out different sources for similar products. 

As the U.S. is a net importer, a decline in exports or retaliatory tariffs on imports could contribute to the deficit (which reached a ten-year high in the first half of 2019), affecting the economy’s momentum. This could also have repercussions on Canada and Mexico, so everyone is watching closely. 

Canadian exporters, on the other hand, could take advantage of the weaker loonie. Importers are not so fortunate, as pricing has increased, making hedging a necessity for protecting profits. There is some optimism about the loonie finding a stronger footing in the next few months as oil prices have risen again, but there is no certainty.

The state of the USMCA has also caused some jitters: Mexico has already ratified the Agreement, and Prime Minister Trudeau introduced legislation in June to start the ratification process in Canada. The U.S. Congress has not yet set a date for a vote. 

As Canada faces Federal elections in October 2019, and the United States in November2020, volatility is a given, at least for the near future, no matter how you slice it. 

PLANNING AHEAD: Don’t go it alone 

As we get into the doldrums of August, it’s a good time to consult a foreign exchange professional who can give you an objective analysis of your exposures and recommend tools and approaches to help you manage currency risk. 

Beyond your bank’s foreign exchange desk, there are foreign exchange specialist companies whose services range from moving money efficiently from point A to point B, to providing market insight and advising on hedging and risk management. Think about what’s most important to you and how you like to work as you explore your options. 

Advantages of working with a specialist can include more proactive service and richer strategic support, and more transparency on rates. Some specialists even offer multi-currency holding accounts free of the fees most banks charge. These allow you to send, receive and hold different currencies in a single account. You can hold the funds for future payments, saving on double conversions. or convert the currency when it makes business sense.

Do take the time to understand the pricing structure and the capabilities on offer. And make sure the specialist Is fully licensed and has depth and experience in the market. Some banks and specialists work through intermediaries and partners, which can delay payments and add to the cost.

Don’t discount chemistry. Find a partner who offers transparency, the level of service you need, a full portfolio of solutions that help you meet your objectives, and whom you can trust as an advisor and a resource in navigating the complexities of the FX markets.

In any event, a trusted provider and a sound strategy will give you peace of mind in uncertain times. 

About AFEX

AFEX pioneered personalized foreign exchange solutions, providing a tailored approach since 1979. With offices across the United States and Canada, Asia-Pacific and Europe, we are a trusted business partner to 35,000 individual and commercial clients around the world, in a wide range of businesses. We are licensed and regulated in every jurisdiction where we operate.

Our unmatched payments infrastructure and state-of-the art payments technologies are the foundation for our customizable, cost-effective, and flexible global payments and risk management solutions. We help take the complexity out of foreign exchange so you can focus on your business. 

To learn more, please visit afex.com or request a call back for a free, no-obligation risk consultation with one of our industry experts.

Robert Bolle, (818) 728-3266 rbolle@afex.com

Kyler Koebel, (604) 638-0228 ext. 1403 kkoebel@afex.com

Getting to Know Silicon Beach

Silicon Beach is more than volleyball, surfing, and enjoying the world famous Southern California surf and sand. A growing number of tech investors believe that “there is really something going on in LA.” The LA-based tech scene is exploding with startups and investors that now call it home. All this activity has captured the attention of top VC funds that now invest in LA. One of the early investors in LA, Upfront Ventures, now invests over 40 percent of its dollars into companies based in the greater LA area. The LA region even has its own hashtag – #LongLA – to capture the investment potential of the maturing startup ecosystem.

And nowhere is the chorus for #LongLA louder than in “Silicon Beach.” The coastal LA tech community has given rise to a number of high-profile companies with billion dollar valuations or exits that include The Dollar Shave Club, The Honest Company, Kite, Ring, Snap, and ZipRecruiter. In less than a decade, the rise of these companies has propelled Silicon Beach into the spotlight as the most visible community in the growing Southern California tech ecosystem.

While Canadians may know Silicon Valley is the biggest global producer of high growth tech startups, fewer may have heard of “Silicon Beach,” and most don’t know how to navigate opportunities here. Silicon Beach loosely refers to the coastal tech community that has flourished over the past decade around the cities and LA neighborhoods of Santa Monica, Venice, Marina del Rey, and Playa del Rey. In this post, I provide some data on the region, the industry sectors and companies that thrive in the startup community here, and highlight resources that can help your company start living its California dream.

What can you find in Silicon Beach?

Silicon Beach has become well known for consumer facing technology startups ranging from transportation apps, like the e-scooter sharing company Bird, to beauty e-commerce products, like Jessica Alba’s The Honest Company. However, the data reflect a more nuanced and diverse startup landscape. The Boston Consulting Group (BCG) in partnership with the Alliance for Southern California Innovation sought to make the Southern California tech ecosystem more navigable by mapping the region’s density of startups, investors, and talent across the region. The information presented in this post is largely derived from that data.

Silicon Beach has had 92 companies founded over a three-year period, more than any other community in Southern California. The community has 380 individual investors that are concentrated in angel, early seed, and seed round levels. Notable early stage Silicon Beach VC investors include Upfront, Wavemaker, Anthem, CrossCut, Science, March, Embark, and more recently M13 to name just a few. The region is also home to 46,000 tech workers.

Top 6 Industry Sectors for Silicon Beach Startups

1. Internet & Mobile

2. Information Technology

3. Media and Entertainment

4. Marketing, Design, and Publishing

5. Professional Services

6. Fashion & Lifestyle

Internet & Mobile
Internet and mobile is the largest industry for startups in Silicon Beach, comprising 20 percent of all companies. These include companies that provide e-commerce, apps, augmented reality, messaging, and developer tools and platforms. Silicon Beach companies operating in this industry include Snap, the Dollar Shave Company, and ZipRecruiter. Securing a nascent customer base in Silicon Beach communities like Santa Monica and Venice, with their high tourist and pop culture appeal, can help companies build brand awareness and drive market adoption.

Information Technology
The second largest industry represented by Silicon Beach startups is in information technology (IT), accounting for 15 percent of startups in the area. This industry cluster includes startups doing analytics, artificial intelligence (AI), IT, big data, cloud computing, blockchain, software, information services, cyber security, customer relation management (CRM), 3D tech, fintech, cloud data services, and business intelligence. These include companies like Securonix, Tala, TaskUs, which provide cybersecurity detection, financial services, and backend customer service support respectively. Startups in IT leverage Southern California’s deep talent pool. SoCal produces more STEM graduates and more tech PhDs than anywhere else in the country.

Media and Entertainment
The media and entertainment industry, the third largest in the area, comprises nine percent of startup companies. This sector includes digital entertainment and media, content, broadcasting, audio, music, film, and e-sports. The startups in this space are aided by the rapid convergence of tech and entertainment and LA’s dominance in entertainment, with the five major movie studios located in nearby Hollywood and Burbank. Gaming has become one of the fastest growing sub-sectors in the entertainment sector and includes startups like Super League Gaming, which is a publicly traded company; Dream Team; and Edgecast, which was acquired by Verizon.

Marketing, Design, and Publishing
The fourth largest industry represented by Silicon Beach startups is marketing, design, and publishing, which also represent nine percent of startup companies. This sector includes startups in advertising, ad platforms, ad targeting, digital and brand marketing. Silicon Beach companies in the industry include Leaf Group, GumGum, and Rubicon Project.

Professional Services
Accounting for five percent of companies in Silicon Beach, the fifth largest industry is professional services. This sector encompasses financial, consulting, business development, banking, real estate, human resources, asset management, and credit companies. These include Silicon Beach companies such as banking startup Aspiration, human resource professional service company Bambee, Commercial Real Estate Exchange, Inc. (CREXi), and automotive pricing and information company TrueCar.

Fashion & Lifestyle
The sixth largest industry represented by Silicon Beach startups is fashion and lifestyle companies, which comprise four percent of startup companies. Although this industry falls outside the top five industry sectors, the fashion and lifestyle category is too quintessential to SoCal to ignore. Silicon Beach startups in this sector include companies such as BeautyCounter, actress Gwyneth Paltrow’s fashion company Goop, and online booking company ResortPass.

Notable Sectors Outside the Top 6 Industries
Equally illuminating is to note what sectors did not show up in the top 6 industry categories for startups. Healthcare and biotech, which are among the top 5 industry sectors for startups across all of Southern California, did not feature in the top six industries in Silicon Beach. Similarly, some Silicon Beach startups in transportation and hardware that have garnered widespread attention for large fund raises, exits, and general market disruption, are also outside the top industry sectors for Silicon Beach. Nonetheless, there are some notable companies in these smaller sectors that have had considerable success, such as Kite Pharma, Bird, and Ring.

Resources

There are a number of resources to help your company grow in Silicon Beach. This mature innovation ecosystem has a number of co-working spaces if you are looking for a place to land in Silicon Beach, such as Blankspaces, Cross Campus, and WeWork. The area is also home to a number of incubators and accelerators that can provide access to funding, mentorship, and more. These include Amplify, Expert DOJO, MuckerLab, the Preccellerator, and Science. There are also a number of service providers who specialize in supporting startups, including legal, finance, and talent recruiting companies.

Assistance Navigating Southern California Innovation Landscape

Silicon Beach is but one of 14 innovation nodes that stretch from Santa Barbara down to San Diego. Southern California’s sheer size, which spans over 50,000 square miles and includes over 20 million residents, can make it difficult to navigate and uncover the resources your company needs to grow. If you need help as you explore the possibility of bringing and growing your scaling startup to Southern California please reach out to MAPLE Business Council or to the Alliance for Southern California Innovation for guidance.

Your California startup dreams await you …

Eric Eide
Director Ecosystem Development, Alliance for Southern California Innovation and MAPLE Business Council Advisory Board Member

Canada’s Presence in San Diego County Reflections from Frédéric Fournier Head of Office, Consulate of Canada in San Diego

Frédéric Fournier, Head of Office, Consulate of Canada in San Diego

Can you tell us when you arrived in San Diego to lead Canada’s presence? What were some of the impressions of the market and of its relationship to Canada before you came?

I arrived in San Diego in August 2015. Before I arrived, what I knew of San Diego was the presence of intense research capabilities. I also knew that San Diego is home to a large portion of the US Navy fleet, with several military bases. Because the city is right on the border with Mexico, my expectation was that Canada would likely to be a “third wheel” between that important Mexico-US relationship. While an important export destination for the region, not a lot of people know about it – being so far north.


Now having been working in San Diego for the past four years, how would you describe Canada’s presence in the market today?

Canada’s presence in San Diego starts with a highly effective Consulate, which has a large team of four staff members. That being said, the Government of Canada is not investing in a diplomatic mission in San Diego solely for its value as a market. Of course, we work with Canadian clients looking to do business in the region. But the main reason behind our presence here is the highly innovative ecosystem. The Consulate works and partners with the various local players, so Canadian early-stage companies can learn from them and reach commercialization faster through coaching and mentoring. The Consulate mainly works in the life science, defense and ICT sectors, always on the lookout for those large companies willing to partner with or co-develop Canadian technologies further.


Would you share a couple of examples where you have witnessed a high level of collaboration between Canada and the U.S. in San Diego and what is the implication/opportunity that others can learn from this?

The San Diego ecosystem has grown and rebuilt itself on innovation—so we mainly have this to work with locally. Our own internal analysis tells us this is where our greatest impact as a Consulate can be. The knowledge of how best to approach international markets is strong here. Local experts provide excellent value to small firms, helping to launch them towards global markets and eventually sales.

So to me, the greatest examples of collaboration relate to the special innovative ecosystem San Diego has, and how Canadian early-stage companies can learn from it. I strongly believe a company that is successful in its R&D stage today, is part of the pipeline to tomorrow’s commercialized technologies. When done properly, commercialization inevitably leads to pure trade success. Facilitating connections with those who can make it happen for our Canadian clients, that is our focus. Three main examples of collaboration come to mind.

Southern California Pharma Association (BIOCOM) partnered with the Consulate on our signature program “Building Relationships - Entrepreneurs & Dealmakers” (BREAD). The BREAD program offers pharma-focused Canadian biotech companies 5 months of customized advisory services, which concludes with a three (3) day in-market business program in San Diego. Such program is built around BIOCOM’s Partnering Conference, a key event during which our Canadian clients can truly use their improved strategic approach to partnering by meeting relevant strategic partners in person. BIOCOM’s assistance in bringing Canadians to their international partnering event is instrumental, as it helps us generate increased number of meetings with Global Pharma and Investors

Two years ago, the Consulate launched the idea of having a dedicated oceantech accelerator program for Canadian companies. With the help of a local consultant, a formal group of local experts was put together to coach and mentor five Canadian oceantech companies. The model was for the members of the SAGE (Special Advisory Group of Experts) to perform in-region and virtual incubation/acceleration for three months, preparing for a strategic B2B program at BlueTech Week. SAGE members were so dedicated to their task that all Canadian participants saw great success coming out of their participation, thanks to the highly valuable advice and connections provided.

Another example I have is our LEAP Program. Three years ago, the Consulate developed the program which is basically meant to Leverage San Diego ecosystem, Educate our Canadian startups, Accelerate their technology, and Promote Canadian expertise here in San Diego. The beauty of the program is that all of this is done by sending local experts to Canada. Because San Diego’s business ecosystem is highly innovative, we put in place the LEAP program in order to connect local resources to top Canadian early-stage clients identified in Canada. The coaching and mentoring offered in that program is meant to dig deep and be tough on company strategies. Tough but constructive comments are always based on a local reality Canadian clients will have to face at some point. The experts we partnered with actually travelled to Canada for a week, in order to have those strategic advisory meetings. They studied each of the 30 companies we introduced to them inside out. They showed a lot of dedication to coaching and helping them, in the name of good collaboration with the Consulate.


Looking back over the past four years, what examples can you point to as particular noteworthy with respect to Canada in San Diego?

Canada turned 150 years old in 2017. This was a great year for us in terms of promotion and raising awareness. The Government of Canada had a full-on promotional campaign that was rolled out all around the world. This truly helped us locally to make Canada a little more visible, and remind people everywhere of the valuable relationship we have with the US.

I could not NOT mention the NAFTA renegotiations as a key element of my four years in San Diego. All Consulates in the US had a clear mandate to advocate for a successful negotiation of NAFTA, meeting with political figures and various companies who would have been affected if a new deal could not be struck. With Mexico being so close and with San Diego being so well-integrated with sister city Tijuana, I must admit that it can be difficult for Canada to get attention in the region. While those were challenging times, the NAFTA advocacy campaign we were brought into really helped to raise Canada’s profile locally. Our contacts really seemed to care more about our perspective, asking more questions, wanting to understand our culture and values better. NAFTA negotiations certainly brought more attention onto Canada in San Diego, which was a great benefit to the overall relationship with San Diego.

It was such a great news for us (and the millions of jobs depending on the agreement) when the signing of the renewed agreement was announced. With the steel & aluminum tariffs having been removed, we’re now moving forward towards ratification of the USMCA.

On the military side, I would also note the ship visits we had from Canadian vessels. We had a frigate invited to participate in San Diego Fleet Week in 2016, and HMCS Yellowknife and Saskatoon participate twice in RIMPAC – which is the largest international maritime warfare exercise. Canada being committed to defending all of North America’s security, it only makes sense that we are deeply involved in RIMPAC. Those ships we contributed were Kingston-class coastal defense vessels. They are meant to be patrol ships, designed to perform minesweeping and coastal patrol work. Every time we had such visitors in San Diego, the Consulate took advantage of their presence to host networking events for its local contacts. Such a unique venue is always well appreciated by our guests.

By the way, did you know that HMCS stands for “Her Majesty’s Canadian Ship”? Every ship in the fleet of the Royal Canadian Navy has its name starting with “HMCS”.

Another key moment for the Consulate was the San Diego Mayor’s visit to Vancouver in June 2017, which we helped coordinate. Collaborating on this trade mission with the Mayor’s office and the World Trade Center truly brought the organizations closer together, and helped to better understand their priorities and objectives. But beyond this trade mission, I would say that the overall relationship developed with the Mayor’s office is a success story for the Consulate. Not only did Mayor Faulconer travel to Vancouver, he also generously agreed to meet and work with several visiting Canadian mayors (specifically the Mayors of Vancouver and Edmonton, and Alberta’s Minister of Industry, on their visits here). Mayor Faulconer always made time for Canada and I am truly thankful for his openness. You can tell that he just “gets it”. He gets it that Canada is a key trading partner for the region, and always will be.


Speaking of the Mayor, what has been the impact of Mayor Faulconer’s visit to Vancouver in 2017 and do you see ongoing ties between the cities?

I think the main impact of that mission has been better awareness. San Diego and Vancouver are two similar cities in size, with beautiful environments and landscapes, innovative business ecosystems, and a more liberal culture. It is interesting to note that this trip was Mayor Faulconer’s first international travel outside of Mexico. Canada was not selected lightly. The importance of the relationship but yet the limited interactions between the two regions weighted heavily in the selection of Vancouver as a destination. The Mayor being such an important public figure locally, his agreeing to jointly report on his trip during a press-conference with our Consul General really put a spotlight on Canada. I believe this press conference was a turning point, helping San Diegans and residents of Baja California realize how important Canada is for the region, and what it has to offer.

Our relationship with the Port of San Diego also took off during that mission. The Port is now a key partner for Canada, just like the Mexican city of Ensenada in the oceantech sector.

If you were to ask the Mayor or the San Diego World Trade Center about tangible results for San Diego, they would certainly tell you about Canadian pharma company Phoenix MD, who announced the expansion of its research team into San Diego after the mission.


Why should San Diegans and the overall business community “care about” Canada, especially with the region’s proximity to another great market - Mexico?

The U.S.-Canada trade relationship is a model for the world. It is growing, it is balanced, it is fair and it supports growth, innovation and good-paying jobs in both countries. Millions of good, middle-class jobs on both sides of the border depend on our partnership. In the United States alone, nearly 9 million jobs are linked to Canadian trade and investment. Many people don’t know but simply put, Canada is the United States #1 customer. Indeed, Canada buys more goods from the U.S. than China, Japan and the UK combined. Every day nearly US$2 billion worth of goods and services crosses the Canada-U.S. border.

As I mentioned before, Canada`s importance for the local economy is not well known here. On any given year, Canada is always amongst the top destinations for San Diego exports. Locally, there are over 50 Canadian-owned companies in SD county, directly employing over 5000 people. We have companies in the IT sector with hundreds of employees. We have companies involved in clean technologies, life science, banking, insurance, retail, you name it! As you can see, Canada`s footprint in San Diego is strong!

By the way, did you know that Circle K is Canadian-owned?

Beyond trade, the United States is Canada's most important ally and defense partner. Defense and security relations between our two countries are longstanding, well-entrenched, and highly successful. This relationship is forged by shared geography, common values and interests, deep historical connections, and highly integrated economies. From joint training exercises (such as the RIMPAC I mentioned earlier) to personnel exchanges, strategic policy discussions, and operational cooperation, our countries share a broad-based, dynamic, and mutually beneficial approach to defense. Canada and the U.S. share a deep and enduring relationship as NORAD partners, NATO Allies, and North American neighbors.

The close defense relationship between our two nations provides us both with greater security in North America, and contributes to peace and stability in the world in increasingly complex and uncertain times.


Would you tell us how the Canadian Consulate team is organized in San Diego? What services do you provide and with respect to business - which sectors do you focus on?

I’ve answered that question so many times over the last four years… First, I must say that this office is a satellite office of the Consulate General of Canada in Los Angeles. LA provides consular and visa services, we don’t. The Consulate of Canada in San Diego is a trade office only, an office which was originally open to enhance Canada’s presence within the innovative and research-intensive ecosystem San Diego has to offer. So in a nutshell, we work with our Canadian clients to help them be better connected to San Diego. We help them find the appropriate partner to further develop their technologies.

While our mandate is to help any Canadian client reaching out to us, our sectors of focus are ICT, life science, defense, and ocean technologies. Those sectors are hot locally and offer numerous business/partnership opportunities for Canada – because our companies have excellent technologies to share!

The Consulate is lucky to have two of the best sector officers in the entire Trade Commissioner Service network. Both have an industry background and can speak (and understand) the same “technical language” the companies speak. When it comes to understanding the business strategy, such experience is invaluable.

To answer your question regarding services, one of the core services of the TCS is to assist Canadian clients with assessing the potential of international markets. Mario and Cheryl have been with us for over 12 years, living and working in San Diego for over 20, so they truly know what the local ecosystem is about. Their knowledge and network of contacts is of great value to any client looking to partner with a local company. When clients active in other sectors reach out to us (mainly customer products, cleantech), our trade commissioner assistant takes the lead on serving them. So whether it is to connect them to local buyers, explaining what San Diego is about or to assist them in further developing a new technology, Canadian clients rate our services quite high, with a satisfaction rate of 97%, much higher than the average in the US. That, I am very proud of. If clients are happy, I am happy.

Another service of the TCS that is of great value to the clients is preparation for international markets. Obviously, Canadian companies can get assistance in Canada prior to exporting, but we as a consulate can contribute to that learning curve by assessing their technology offering from a local needs perspective, even before they get here. Canadian companies have to have something unique and well-articulated before considering San Diego. Local competition is fierce and I see our mandate as preparing our own clients for such competition – making sure they are ready. Otherwise, they may not make it in the long run.


What should Canadian businesses know about San Diego that they might not?

San Diego is much more than a vacation destination, much more than a surfer town. It is obviously all those things, yes, but it is also a world-famous research hub. One thing that most Canadian may know but do not necessarily realize, is that this market is really hard to penetrate. You better be ready to explain in what way you are unique, and know how to demonstrate your advantage over competition. Otherwise, such competition will eat you alive. That is why we are trying to bring that knowledge to our clients, so they can adjust, pivot their business strategy or realign their technology in order to be as attractive as possible when they get here.


There is a lot to be excited about with respect to the tech/start-up communities in San Diego. Have Canadian firms had a role in the growth of the innovation/entrepreneurship landscape in the region?

You are right when you say that there is a lot to be excited about with respect to San Diego. San Diego IS innovation!

I mentioned earlier how I see Canada being in a position to learn from the regional ecosystem – that is a fact. That being said, Canada also has excellent innovation and disruptive technologies. It is in San Diego’s interest to take the time to sit down with us and find out about those new ideas Canada has to offer. Locally, innovation stakeholders must realize they should collaborate with us, the Consulate, to their own benefit. To create such excitement locally about Canada is also part of our mandate at the Consulate.

Over the years, this region developed key partnerships with Canada, from which it greatly benefited.

About 10 years ago, an important partnership provided the basis for discussions that led to the formation of a $120 Million "Canada-California Strategic Innovation Partnership in Cancer Stem Cells." Dream teams of 40 top Canada-California researchers were built cross-border to solve the issues surrounding patients with leukemia. As a result of establishing and maintaining such longstanding relationships between Canada and California, companies and organizations on both sides have grown.

More recently, we saw EvoNexus proudly announcing the creation of a new fintech accelerator program, partnering with Royal Bank of Canada on this project worth hundreds of thousands of dollars, which will help local startups grow.

So yes, Canada can also contribute positively to the innovation ecosystem, and not only benefit from it.


We understand that you and your family will soon be moving to Brussels to take on your next mission for Canada. At a personal level, what will you miss most about San Diego and what do you see as the opportunity for Canada and San Diego in the next 4-5 years?

Yes, our next life chapter will take place in Europe. After four years of learning how the Science, Technology & Innovation business line should be managed from our internal government perspective, I will continue on the same path. I have accepted the position of STI Advisor at Canada’s Mission to the EU. When I work with the EU developing joint-research funding programs, my time in SD will certainly serve me well in better understanding the challenges Canadian companies face when they are looking to take advantage of such partnerships.

As for San Diego, what is NOT to be missed?? The sunshine, the perfect climate? I will obviously miss it. The cool California vibe? I will miss it. My highly dedicated team? I will certainly miss them. They were at the center of the successes this office generated during the past four years. It may work like that in other places, but I will also miss the highly collaborative business environment we have in San Diego. A level of openness and collaboration which, I must admit, surprised me from the very beginning. But you get used to it and end up taking it for granted. It is organizations like you, MAPLE Business Council, that contribute to maintaining such high level of collaboration alive.

It was certainly a pleasure to be part of this vibrant ecosystem. I was quickly included and I want to thank everyone who let me be a part of it.

Merci beaucoup et au revoir!

Transformational Leaders: The Intentional Disruptors

Deborah Harnett Kennedy, Southern California Partner, Unstoppable Conversations

Transformational leaders are not born nor are they merely lucky. They are leaders who have developed themselves and their skills to innovate, disrupt, and ultimately mobilize others to realize an inspired future for their organization.

Define a Purpose

In today’s landscape, constant disruptions—changing consumer expectations, rapidly evolving technology, uncertain political climate, to name a few—are just another day on the job. For leaders who aim for their companies to go beyond the status quo, they must do more than respond to and manage disruptions. Instead of reacting to or trying to predict these disruptions, transformational leaders intentionally disrupt. This disruption begins with creating a future for the organization that goes beyond any future that could be predicted for that organization. A purpose that will take an organization, industry, or even the world, into uncharted territory.

The ability to define this kind of purpose—what we at Unstoppable Conversations call a Noble Cause—is where transformational leadership begins. To understand and create one’s purpose, a transformational leader asks questions such as:

•           What is the remarkable future my leadership is in service of? 

•           What is the remarkable future my company is out to fulfill? 

•           What future would most certainly not happen without a disruption of the status quo?

The answers define one’s leadership purpose.

When IBM CEO Ginni Rometty took the stage at the 2019 ConsumerElectronics Show, she made IBM’s purpose clear, “To prepare society for the technologies of the future” As CEO, Rometty, who stepped into IBM’s top job in 2012 has said, she is “obsessed with what’s next and is continuously looking ahead to the next big thing.”

It’s a large pivot for the 100 year old company but one that Rometty, is confident will pay off. According to the company, cloud and security revenue was up 20 percent in 2018. The increased trust in their cloud and security services led to a 4 percent total revenue increase from 2017, or $20 billion.

Transformational leaders like IBM CEO Ginni Rometty do not simply seek out easy wins for short-term gains. Instead, they conceive and take a stand for new, long-term possibilities. They invent and commit to futures free from conventions in order to achieve unprecedented results. Like Rometty, helming a company founded over 100 years ago, transformational leaders are willing to reinvent their organization, “continuously looking ahead to the next big thing.” Leaders spark transformation by exploring with their organization that which is inspiring, exciting, and challenging. They encourage new thinking which lets go of the everyday notions of “the way it is” or “the way it should be” or “the way it’s always been done.”

Stay True to Their Purpose: Authenticity 

A purpose does not guarantee success. A transformational leader must still navigate all forms of challenges, interruptions, and obstacles: the quarterly results may not reach projections; the naysayers will raise their voices.

In the face of such challenges, transformational leaders hold strong to their commitment to fulfill their purpose. Holding to their commitment over time and against all obstacles creates a sense of authenticity which creates credibility and trust. It is this authenticity and trust which then moves or inspires people into alignment and action to create the desired future for the organization.

The key to being authentic and building that trust is consistency: acting consistently with who one says they are and what one says they are committed to. This is all the more vital in times of transformation. Change can be threatening for people. Employees will often comment that the new direction is not clear or that the executive team must know more than they are saying. According to a 2017 Gallup report, only 22% of U.S. employees strongly agree that their company's leaders have a clear direction for their organization. And only 13% strongly agree that their organization's leadership communicates effectively. A large part of effective communication is listening. It is well known that most people resist change, actively or otherwise. A transformational leader does not resent or ignore this resistance. Rather, they are willing to listen openly to why people may not want this change, getting to the root of the resistance. 

Inspire Commitment from Others

Defying those numbers above, a transformational leader ensures employees know who they are following, why, and where they are being led. This is the reason for a clearly-defined and consistently communicated purpose.

Transformational leaders achieve intentional disruption through their ability to articulate a new future and to inspire others to commit themselves to that vision. The actions taken by the people who make up the organization build momentum and give a transformation initiative life. Gaining trust and commitment is not something that can be assumed, demanded or forced. People must be able to see themselves contributing in some way to the defined purpose. They will not be able to see ways to contribute without the who, what, when, where and how. To achieve this, transformational leaders must know how to vividly share their vision. 

Often, leaders focus on the short-term. This can fail to take into consideration the needs of all the parties involved to realize their common, defined purpose. Instead, the focus falls on strategy and execution rather than on the people who must mobilize to make this future a reality—what they are thinking and how they are feeling when they are being asked to embrace and help drive change. Without taking into consideration all the concerns of all players involved, this lack of holistic consideration can and will derail even the best strategy.

Focus on Integrity 

Fulfilling new possibilities demands that leaders hold themselves and their people to account and deliver on their promises. They keep commitments in the foreground until fulfilled. They focus attention on consistency and effectiveness of systems, processes, practices, and procedures, ensuring they are in sync with the vision and values of the organization as well as with their purpose.

 In other words, they consistently have their attention on workability— what Werner Erhard, Michael Jensen, and Steve Zaffron call Integrity.  (See Erhard, Jensen, and Zaffron, Course Materials for:‘Being a Leader and the Effective Exercise of Leadership: An Ontological/Phenomenological Model’ [October 3, 2016]. By this, we don’t mean the common, morality-based, meaning of integrity, but rather the utilitarian definition. That is, Integrity is seen as “free from flaws” and “the state of being whole and undivided.” 

To understand this particular meaning, consider the wheel of a bicycle. What does it look like when a bicycle wheel has integrity? Well, the wheel has all its spokes; the frame is intact with no warping or dents; and the tire has its full tread and is inflated with the appropriate amount of air. In other words, the wheel is structurally and functionally sound. In this state of integrity, it operates as designed to fulfill its intended function.

Transformational leaders must require of themselves and their people a corresponding condition of Integrity in order to achieve an organization's stated purpose. This means the ability to do what one says they are going to do and by when one says they are going to do it. And, because challenges, obstacles, and interruptions are commonplace, this also includes the ability to communicate quickly when one has not done as promised. 

Transformational leaders do not waver from their purpose and the purpose of their organization. They stay the course despite the demands on their time and attention, and the frequent need to make quick decisions and move into action swiftly. They are able to inspire commitment from their people by considering the wholeness of their people’s reactions and feelings to the real and sometimes difficult work required to achieve that purpose. True transformational leaders are the light keepers of the organization's future. Their commitment allows them to stand, unwavering, for the fulfilment of a bold future that otherwise would never happen.

Attracting Canadians with a Killer Catalog

Jamie MacDonald, Director International Sales, Canada Post

87% of Canadian cross-border shoppers have bought from U.S. retailers (1) and by 2022 it is forecasted that Canadians will spend C$83 billion on online shopping.(2) It could be time to set your sights north of the border. Selling to Canadians makes good business sense because Canada is an economically stable and trusted market. Canadians love American products and they are easy to reach (learn more about the Canadian market from our July 2018 article). Add a catalog to your marketing mix and Canadians simply cannot resist – 7 out of 10 Canadians read the advertising mail they receive. Here are tips from a seasoned cataloger on how to create excitement and drive sales by bringing your brand to the printed page.    

George Christidis is Vice President, Key Accounts at St. Joseph Communications (SJC), a recognized leader in the North American commercial print sector. The company works with ambitious brands to tell their most defining stories – producing and distributing over 200 million catalogs and magazines, plus one billion flyers a year.

Brand storytellers  

In an omni-channel marketing environment, successful brands engage their customers through emotional connections and seamless experiences that produce consistent, actionable content across multiple platforms and devices. 

At SJC, there’s nothing traditional about catalogs. 

These days, brand storytelling is big, and it’s reflected in the new age of catalogs, magalogs, look books and gift guides that this leading media company creates for North America’s biggest brands. A look inside the SJC portfolio reveals names like Walmart, General Electric and Grey Goose. 

9 tips from a seasoned cataloger 

1.   Involve stakeholders from the start 

George tells us, “To anyone thinking about creating a catalog, I always say to gather people with interest or input right from the get-go. It’s the only way to ensure that everyone’s point of view is reflected in the catalog storyline. A way of getting everyone thinking ahead about how they will leverage the catalog and its content when it’s distributed.” Depending on the complexity of your catalog, this means consulting stakeholders about 4-6 months before a catalog will be in the hands of the consumer.

Think ahead 

Round up product developers, trenddirectors, buyers, marketers, creatives, digital teams, merchandisers and in-store experts to get them thinking about what they’ll need to see in the catalog when it comes out. And, where you lack the internal expertise, fill the gaps with online research and third-party knowledge. Allocating time and effort at this stage will give you the information you need to capture all your visual content efficiently and cost-effectively – at the point you’re in full production mode. SJC’s unique approach – create once, publish everywhere (C.O.P.E) – ensures brand-consistent content across all platforms, as well as creating time and cost efficiencies.

2.    Define your objectives 

Agreeing on goals and objectives means that everyone is focused on catalog outcomes. Are you:

·      Acquiring new customers?

·      Driving shoppers online or in-store?

·      Cultivating loyalty?

·      Increasing wallet share?

3.   Determine the demographic 

The catalog experience has changed, so it’s very important to consider the demographic you’re targeting. Who’s going to be engaging with this catalog? Boomers will not view it the same way as millennials. In the past, catalogs contained multiple items, because merchants sold directly from the page. Now it’s possible to find products in other ways – online, through social media, in-store. 

Solutions on the page 

How-to advice and tips play out well. George tells us, “Millennials don’t have the patience to wade through mounds of content. They’re time-strapped, and they like solution-oriented information. They’d prefer to see a room set that pairs a table with a lamp, pillows with a sofa, flooring with a rug. It’s a show-me-how-and-I-will-do-it approach.” 

Image courtesy of St. Joseph Communications 

 4.   Tune into what’s trending 

By thinking ahead, you’ll be able to develop catalog layouts that give maximum exposure to the top-selling products and collections that buyers have purchased in large volumes because they’ve anticipated trends. Once you know your hero pieces, you’ll be able to plan where to place your feature items and which spreads will benefit from associated video content, what approach you’re going to take on social media or how your in-store signage needs to look.

 Image courtesy of St. Joseph Communications 
  

5.   Breathe the brand 

The success of your catalog depends on the strength of your brand. Customers should recognize it immediately. Catalogs are a great place to communicate strong brand identity – away from the digital clutter. 

 This goes beyond being faithful to corporate colour palettes. The overall look and tone has to be representative of your brand personas, your values and the lifestyles of the shoppers you’re targeting. 

Forward facing 

Now you can overlay the trends you’ve identified. Again, that doesn’t just mean colour trends (although colour accuracy is critical when making purchases from a paper-based medium).  You’ll also need to make sure patterns, logos, fonts, design and layout all reflect the upcoming season’s styles. This catalog needs to be right on trend when it hits the market.

6.   Create channel-specific content 

While the visual content of your catalog is being captured, assemble a team of writers and editors. George recommends creating a pool of information – bullet points will do as a start – relating to product specifications, features and benefits. From there you can write channel-specific content based on the best practices for each medium. While you might use only 3 bullets on the printed page, to create interest, you’d be able to expand that content online (say 10 bullets) to amplify the information. 

7.    Develop key spreads 

Current best practice is to design in spreads rather than pages. By using a large image that crosses pages, you’re extending the story. Giving readers a reason to linger. Cover shots are often the big sellers, and your catalog can end up either way in the mailbox. Your front and back covers need to grab equal attention.

Glanceable design 

Not just for digital, this creative approach is relevant on the page too. Nowadays, you’re more likely to see 4 items on a spread, rather than 12 products that are surrounded by dense copy. George points out that old-school thinking went something like this, “The more I can put on a page, the more I can sell.” Nowadays, people expect to be engaged within the first three seconds of eyeing the spread. The less there is on a page, the better, because shoppers will notice and dwell on it for longer. George adds, “The goal is to inspire and have them visit online or in-store. If you lose them on the page, you’ve lost them elsewhere.” 

8.   Learn from social media 

Think about the most current digital channels – spaces like Instagram and Facebook. Influencers rule these environments – real people advising their peers. St. Joseph Communications encourages clients to incorporate the same philosophy into the printed page. Become a trusted advisor rather than a product promoter.

9. Be lifestyle-sensitive 

Today’s customer isn’t as price sensitive as previous generations of catalog shoppers. Instead, the question will be, “Does this fit with my lifestyle?” Focus on creating an inspirational setting that resonates with the aspirational goals of your audience. If someone can place their lifestyle somewhere on that page, they’ll identify with your brand. According to George, only then does price come into play.

To get started with your catalog and capture your share of Canadians shoppers, contact Jamie MacDonald at jamie.macdonald@canadapost.ca or learn more at www.canadapost.ca/gonorth.

[1] 2018 Canadian Online Shopper Study, CPC 18-200, April 2018

(2) eMarketer, December 2018

The World's Best are Making the Move to New Brunswick

Jean-Paul Robicheau, Vice President of Investment Attraction, Opportunities NB

TD Bank Group, one of Canada’s largest international banks, announced in April 2018 the creation of a nearshore finance operations centre that will employ over 1,000 people in the Canadian province of New Brunswick. The world’s most successful companies are taking advantage of the nearshore value proposition offered by New Brunswick. In fact, most of Canada’s major banks now have strategic nearshore shared services centres in New Brunswick servicing their national and international footprints.

Advantageously located on Canada’s beautiful East Coast, the province easily enables international companies to support their global footprint and service clients across North America and Eurasia in the same business day. Combine that advantage with low costs of doing business and everything is in place to be successful operating from New Brunswick.

KPMG has consistently recognized New Brunswick cities among the lowest cost jurisdictions overall in North America. When total operating costs such as lease, labour, utilities, and taxes are considered, New Brunswick is the lowest cost option on either side of the border. 

Saint John, New Brunswick, Canada

Now is the Time to Make Your Move 

Across sectors, international businesses are taking note of New Brunswick. From IT and Cybersecurity to Financial Services and Fintech to Advanced Manufacturing and Digital Health, the province’s location, infrastructure, research capacity, and wealth of skilled talent are attracting a critical mass of world-class companies. 

The province’s strategic nearshore value proposition has attracted many top American and international companies including Salesforce.com, IBM, HCL Technologies, Xerox, Hinduja Global Solutions, ExxonMobil, FedEx, and UPS. 

July 2018 saw Tech Mahindra, one of India’s largest IT companies, select New Brunswick as the location for its strategic nearshore operation. “The inauguration of our centre in New Brunswick marks a new milestone for Tech Mahindra’s international footprint and underlines the strong spirit of co-operation with the local authorities,” said company president Ritesh Idnani. “This is an exciting growth hub globally and offers enormous opportunity for not just Tech Mahindra, as one of the leading companies in business process services, but also the community at large.”

Our Homegrown Companies Attract International Players

Both IBM and Salesforce have acquired New Brunswick-based technology companies in recent years. Salesforce purchased leading social media monitoring company Radian6; only a few months later IBM announced its acquisition of cybersecurity company Q1 Labs, helping set the stage for the province becoming Canada’s leader in cybersecurity. 

More recently, Tech Mahindra’s parent company, Mahindra & Mahindra, became a strategic partner of New Brunswick-based Resson, a predictive analytics company using drone imagery, machine learning, and big data to help crop growers make better agricultural decisions and increase productivity.

We Know Cybersecurity is Top-of-Mind for Every Business
New Brunswick was quick to recognize the value presented by the cybersecurity sector and Opportunities NB (ONB), the province’s lead economic development group, has focused its efforts — via its CyberNB division — on attracting leading cybersecurity companies, supporting local cybersecurity startups, and creating a robust talent pipeline. 

ONB has assembled a talented team of investment attraction professionals — most of whom came from the private sector. When companies work with ONB, they’re working with business people. They understand what keeps decision-makers up at night. And top-of-mind for every company in the world now is cybersecurity. 

With CyberNB, New Brunswick became the first Canadian province to launch a comprehensive cybersecurity strategy. It is designed to strengthen and expand upon a world-class industry cluster led by IBM — whose global cybersecurity practice reports to its New Brunswick office — and leverage the incredible work being done at the University of New Brunswick (UNB) in Fredericton, the province’s capital city.  

The past twelve months alone have seen more tremendous growth in the sector with both Canadian Nuclear Laboratories and Siemens announcing new national cybersecurity operations in Fredericton. To keep up with the growth, ground has broken on the latest addition to the city's Knowledge Park - Cyber Park, a $37 million facility specially designed to meet the needs of the province's still growing cybersecurity cluster. Cyber Park will be constructed with a high level of security and resilience, to support cybersecurity operations for critical infrastructure protection. 

Additionally, UNB is home to the Canadian Institute for Cybersecurity (CIC) who’s mandate is to build industry-leading cybersecurity technology, train highly skilled professionals, and provide leading-edge research. The CIC counts Siemens, TD Bank, and Canadian telecom giant Bell Canada among its notable partner firms. 

Finally, the recently created $4 million Critical Infrastructure – Security Operations Centre (CI-SOC) collaboration project is unique in establishing a high level of cooperation between ecosystem partners from New Brunswick and beyond. It enables interconnected participating SOCs of top global players to collaborate in gathering, coordinating, and consuming cybersecurity intelligence, and producing high quality-threat intelligence for coordinating responses. 

Artist rendering of CyberPark – Opening Fall 2020

New Brunswick Understands the Importance of Immigration 
New Brunswick recognizes the critical importance of companies accessing great local and international talent. To tackle that challenge, ONB created a Workforce Strategy Team to support clients’ workforce development and talent recruitment efforts. ONB is one of the only economic development groups in North America to offer this unique value-added service.

New immigration rules in the United States have created challenges for many U.S.-based businesses, as well as international companies operating within the country. New Brunswick’s immigration strategy is specifically designed to address these challenges and help companies looking to locate in the province not only access the local talent they need but relocate existing employees to New Brunswick quickly and efficiently. 

New Brunswick’s immigration approach is an employer-driven approach to attracting and retaining top international talent from around the globe. The ONB team has lead several global firms through this process, ensuring they are able to hit the ground running in Canada. International players like IBM, Tech Mahindra, and HCL, as well as smaller firms like Silicon Valley’s RevJet, have all relocated several employees and their families to New Brunswick over the past few years. 

Companies of any size can turn to ONB Workforce Strategists for support on several immigration-related needs, including:

1. Specific immigration solutions for current staff looking to make the move to New Brunswick.

2. Finding the best international talent to further expand their team.

3. Retaining international students on a permanent basis.

4. Helping newcomers connect with multicultural associations and find housing.

Incredible Quality of Life 
With an average job tenure that's double the U.S. average, you'll benefit from a stable and committed workforce in New Brunswick. The province’s workforce enjoys an affordable quality of life; they aren’t constantly on the lookout for the next higher paying job due to their sky-high monthly expenses. 

Enjoying a desirable work-life balance is easy on Canada’s East Coast. Multiple New Brunswick communities have been ranked among the best places in the world to live. Your employees can be 10 minutes from work and 10 minutes from hiking, biking, the Atlantic Ocean, and some of Canada’s mightiest rivers. The province has three gorgeous coastlines: The Bay of Fundy (featuring the world’s highest tides), the Bay of Chaleur, and the Northumberland Straight. The beautiful seaside community of St. Andrews, was recently named the top Canadian destination by USA Today.

New Brunswickers have welcomed newcomers from around the globe with open arms and celebrate the diversity these people bring to our province. Cultural markets across New Brunswick showcase local offerings as well as food and beverages from around the world. Most cities have multicultural festivals in the summer and a host of multicultural associations offer settlement services to help your employees with the transition to life in Canada. 

Now is the time to make New Brunswick your next location for business growth. For more information on the province visit www.onbcanada.ca or contact Jean-Paul Robicheau, Vice-President of Investment Attraction, Opportunities NB at jeanpaul.robicheau@onbcanada.ca.

LIMITLESS Long Beach - Creating an Environment for Businesses to Thrive

By Sergio M. Ramirez, Deputy Director of Economic & Property Development in Long Beach

For decades, large businesses have chosen to locate in Long Beach to capitalize on an exciting large city with a dynamic community, convenient transportation infrastructure, business friendly governance, and urban beach lifestyle. As the second most populous city in Los Angeles County, Long Beach has also created and preserved an enviable stock of historic buildings retaining an authentic sense of place.
 
Home to approximately 480,000 people, the multiple award-winning and innovative City of Long Beach offers all the world-class amenities of a large metropolitan city while maintaining a strong sense of individual and diverse neighborhoods nestled together along the California coast. Long Beach is home to the Queen Mary, Aquarium of the Pacific, several museums and theaters, a highly-rated school district, Long Beach Airport, the Port of Long Beach, as well as many award-winning City departments.  The City also has a highly-respected university (Cal State University, Long Beach) and city college, two historic ranchos, five hospitals, five golf courses, 171 parks, miles of beaches, marinas, and bike paths.
 
The City of Long Beach is an ideally-positioned city in Southern California. It is accessible by four major freeways and the Metro Blue Line delivers commuters to the heart of downtown Long Beach. This accessibility makes Long Beach a vital hub in the emerging tech corridor in Southern California.  In addition, national air travel is available through the Long Beach Airport which is a mere 8-mile drive from Downtown Long Beach, with Los Angeles International Airport only 24 miles away.  The Long Beach Airport has been named as one of US Conde Naste Traveler Top Ten US Airports in 2016 and 2017.
 
Long Beach continues to evolve as one of the most thriving and walkable places to live and work in America.  There are over 73 development projects under construction, or in pre-development that are changing the City.  “There is a City emerging from within the City.”  Leading the list of new projects, is the new Civic Center to be completed in June 2019.  The project will integrate new buildings for City Hall, Port headquarters, a new 92,500 sq. ft. main library, and new park.  Furthermore, there are now nearly 5,000 new homes under development, with more than 800 of those homes designated as Affordable Housing, for low income veterans, seniors, and families.  These improvements add to the tourism and shopping landscape that Long Beach is known for.
 
Business-Friendly
 
The City of Long Beach continuously promotes a business-friendly environment through events and targeted advertising.  With 154 new businesses making the decision to call Long Beach home since 2017, it’s safe to say our business environment is thriving.  The Digital Cities Survey is part of the Center for Digital Government’s Digital Communities program. Open to all U.S. cities, the Digital Cities survey examines each city’s/county’s overall technology plans, as well as their programs, and recognizes leading cities using technology to enhance government transparency and security, foster citizen engagement, and improve services for citizens. For the eighth consecutive year, the City of Long Beach has been named a Top 10 Digital City.  One of the projects that exemplifies this is the City’s move to a state-of-the-art Civic Center with a new foundational technological infrastructure. The City plans to introduce a modern Enterprise Resource Planning (ERP) system, digitize paper-driven workflows through the City’s electronic document management system (EDMS), and invest in cybersecurity.
 
To become ever more accessible to new businesses, the City of Long Beach utilizes an online business portal, BizPort. The site serves as a digital ombudsman to help entrepreneurs easily navigate the steps to start, manage, and grow a business.  Big data has transformed the world’s way of doing business. With that in mind, the City of Long Beach partnered with global smart-mapping leader, Esri, in early 2017 to launch a comprehensive data hub called DataLB. As a public engagement tool, DataLB makes the city’s geospatial analytics data available online to the public.
 
From “Class A” offices to innovative co-working spaces, offices across downtown Long Beach are becoming places that reflect the diversity of the workforce and its creative capital. These office spaces—open, colorful—include amenities like libraries, outdoor hangout areas, collaboration tables, and art pieces to inspire employees.  The City has a multitude of available office spaces ready for new businesses, as well as several projects in the pipeline for 2019 and beyond.
 
Housing Development
 
The City of Long Beach has competitive and excellent home values that will continue to bring additional benefit to homeowners as time goes on.  Long Beach residents prefer to work in Long Beach, with the city having the highest proportion of local workers at 24.2% compared to the next city, Los Angeles, which is at 15.1%. The city’s rental rate is 58.6 percent, which points to the city’s higher appeal to millennials, as studies have shown that they tend to prefer renting over homeownership. Rental prices in Long Beach are also reasonable. According to data provided by Apartmentlist, median rents for 1-bedroom apartments are $1,350 and 2-bedroom apartments are $1,740. 
 
The Mayor of Long Beach, Robert Garcia, set a goal of building 5,000 new residential units over the next 10 years, and the city is rapidly reaching that goal and to-date is surpassing this goal.  More than 5,000 residential units have either been completed or have been approved for construction going forward.  One of the projects eagerly anticipated is Shoreline Gateway – Phase II. The project derived its name and design from the merging of two historic Ranchos, the terminus of Shoreline Drive, and its position as the east gateway into Downtown Long Beach. The design was carefully crafted within the context of the site and curated with community objectives, fulfilling the vision and importance of this iconic intersection of Long Beach – offering the last unobstructed views of the Pacific Ocean in Downtown. At 35-stories, this is the tallest residential tower in the City and will offer unparalleled 360-degree views of Long Beach, Catalina Island, Orange County and Downtown Los Angeles.  
 
The project brings in 315 residential units, and 6,500 available sq. ft. for retail. Shoreline Gateway – Phase II is the first LEED-ND (Neighborhood Design) project in the City of Long Beach.  Offering all the qualities of a sustainable living environment, fresh air intake, low-VOC materials, recycled content and myriad elements to enhance the living experience. 
 
Talent
 
Long Beach’s ability to attract talent regionally is a compelling confluence of several factors.  Beyond its desirable oceanside location which affords employees and residents the beach lifestyle resonant of Southern California, the city is also an urban metropolis with a myriad of amenities.  Additionally, all indicators seem to point to the City of Long Beach being a city with a strong economy, low unemployment and vacancy rates. 
 
California is known to house technology giants: Apple, Google, Facebook and Snapchat, to name a few.  With the new “Silicon Beach” just 25 miles to the North, Long Beach is positioned to be the nexus of this technology corridor.  Beyond the appeal of living in the mild climate of Southern California, Long Beach is fortunate to have proximity to many highly-ranked education programs at all education levels.  There are several centers of higher education that offer degrees in computer science and engineering in Southern California, some that are located within a 30-mile radius of Long Beach.  Long Beach Unified also has 90 K-12 schools.  At high schools such as Long Beach Polytechnic high school and the Sato Academy of Math and Science STEM courses are provided.
 
Three of the top 25 graduate computer science programs in the nations, according to US News & World Report, are also located within a 30-mile radius of the City of Long Beach (Cal Tech #11, UCLA 13, USC#20).  Additionally, the City hosts its own California State University, which Niche.com ranked in 2019 the #8 Top Public Universities in California.
 
Sustainability
 
Sustainability has been a hallmark of the city’s urban development.  Keeping up with the times and ahead of the trend, pedestrian activity in the Downtown neighborhood has been encouraged by the addition of diagonal “scramble” crosswalks and installing creative pedestrian improvements. Bike Long Beach has made Long Beach, without a doubt, one of the nation’s bike friendliest cities. In fact, in 2018 Bicycling magazine listed Long Beach at #27 among 285 cities analyzed as “Best Bike City” in the United States.  In 2017, the City implemented a Bike Share program which now includes 400 bikes and 60 bike stations throughout the city.  
 
Long Beach has launched several energy projects aimed towards promoting sustainability.  The City’s Convention and Entertainment Center installed a 750-kWh solar panel array, one of the largest of its kind on a public facility in the West Coast, that generates over 1 million kWh hours of pollution-free electricity on an annual basis. Expanded use of solar powered products including: the installation of solar powered pay stations at three parking lots in the Downtown area, six solar trees installed at the Airport expected to create 15,000 kWh annually, and a pilot solar trash bin project. Long Beach has worked with Southern California Edison to retrofit 17,000 of its 23,000 streetlights to LED with the remainder to be completed by the end of the year. As a result, the City achieved more than 3 million kWh hours in municipal energy savings in 2017.   
 
Green Port
 
The Port of Long Beach is committed to improving the environment, as demonstrated by its 20-year record of environmental protection programs. The Green Port Policy is an aggressive, comprehensive and coordinated approach to reduce the negative impacts of Port operations. The Green Port Policy, which the Board adopted in January 2005, serves as a guide for decision making and established a framework for environmentally friendly Port operations.The Port of Long Beach is the 2nd busiest U.S. port, processing over 6.1 million containers with $20 billion in national, sales, personal income and corporate income taxes.  The port also supports 300,000 regional jobs and is the gateway for 40% of nation’s imports.
 
Now more than ever, Long Beach is ready to take its place as a leading City in the Country, as a leader in innovation, technology, and real estate development. The City’s combination of a vibrant downtown, business friendly environment, and access to global markets, makes Long Beach a compelling City to explore for new investment.  The economic opportunities in Long Beach are indeed “LIMITLESS.”
 

MAPLE Business Community

By Stephen Armstrong, Co-Founder and President, MAPLE Business Council®

It is a very special experience launching an organization. As many of our readers know well, led by a mission and driven by a passion to connect that mission with a target audience, it is a heady and all-consuming ride.

Launching a non-profit is no less exhilarating especially when it is one that connects communities you care deeply about. The exciting thing is that the very process of connecting communities together gives birth to a new community itself. MAPLE Business Council® (MAPLE) is all about community. In fact, MAPLE Business Community may be a more apt name for what we do. Our success in helping businesses in Canada and in Southern California depends on nurturing a community of experts who can thin borders, overcome challenges, answer questions and define winning strategies.
 
While 2019 is well underway – I would like to share a quick recap of what our community accomplished in 2018.  It was another milestone-year for MAPLE. We turned three years old in May. We held our 49th and 50th events (those close to us know why '49' was an important number given our mission!). We welcomed new members throughout the year including iconic and leading brands in a variety of sectors including Avison Young, Canada Post, Fasken, and TMX Group (TSX, TSX Venture Exchange). We deepened our ties with renewing members and have grown to a community with over 15 sectors represented. 
 
A community by its very definition is about multiple stakeholders working collaboratively together. Our MAPLE community extends well beyond our membership to include a growing network of followers/readers of our online cross-border content and to a growing group of strategic partners.
 
In 2018, we were honored to renew our partnership with World Trade Center Los Angeles and welcomed a new partnership with World Trade Center Vancouver. And we are proud to be a new Canadian market partner with the City of Long Beach, California. Interestingly, our work to date with all of these organizations already shares a common Canadian touch point – the Vancouver, B.C. market.  
 
In 2018, we “brought LA to Vancouver” on two occasions for presentations by World Trade Center Los Angeles President, Stephen Cheung, and by the GM Americas, Christian Spaltenstein, of Woodland Hills-based, Associated Foreign Exchange (AFEX). 
 
We are now looking forward to sharing Vancouver with a civic and corporate delegation representing Long Beach next week as we build closer ties between two West Coast neighbors. Representing Long Beach will be District 1 Councilwoman Lena Gonzalez, the City’s Economic Development Office, the Port of Long Beach, California State University Long Beach’s Institute for Innovation and Entrepreneurship, and leading businesses. We are honored to facilitate an opportunity for Long Beach to share its story as part of the SelectUSA InvesTech Summit and related receptions.
 
MAPLE is really about setting the table for meaningful conversations to happen. For investment, trade and entrepreneurship. The capabilities, experience, expertise, resources, vision is in the room represented by our members, partners and guests. Our role is to facilitate the connection between business executives to find the answers and insights to propel their business forward whether it is a Southern California business considering Canada or a Canadian business looking south or between businesses in either region.
 
So in a year when the strength of our national ties were tested with rhetoric and policy, at our events in Canada and across Southern California, we witnessed an unwavering commitment by business leaders to continue working together, protecting valued supply chains, leveraging the opportunities to serve each other’s markets and working with trusted partners. The Canada - U.S. relationship can never be taken for granted and MAPLE provides opportunities for businesses, institutions, and cities to recognize the value of our longstanding cross-border partnership.
 
Our work continues as we approach our fourth anniversary in a few months. We are excited to play a small role in a tremendously important investment, trade and entrepreneurship relationship that Canada and Southern California share together. A relationship that deserves the focus that a sticky executive-level business network offers by bringing ideas and people together through events, visits to markets, and content curation. 
 
2019 has already brought some exciting new opportunities. We are showcasing our members’ voices with our new MAPLE Conversations video series, celebrating our new MAPLE® Canadian trademark, connecting Vancouver and Long Beach with our upcoming delegation trip, and we are excited to welcome Canada’s new Consul General in Los Angeles, Consul General Zaib Shaikh. 
 
It is a privilege to serve this community and help amplify the voices of our members and partners. Your voices are shaping the contours of the Canadian – Southern Californian investment, trade and entrepreneurship communities.  Thank you for your support and we look forward to an outstanding 2019 together.

An Interview with the Consul General of Canada in Los Angeles - Zaib Shaikh

Consul General Zaib Shaikh

Canada has a new Consul General in Los Angeles to lead its promotion of trade and investment in the region – Zaib Shaikh. 
 
Well known to Canadians from his work in film and television, including the CBC comedy series Little Mosque on the Prairie, Consul General Shaikh served from 2014 until his appointment in 2018 as the Film Commissioner and Director of Entertainment Industries for the City of Toronto. In that role, he oversaw and supported the growth of the city’s screen, music, live festival, sporting event and tourism sectors, helping to double the value of film production in Canada’s largest city, which surpassed $2 billion in 2016.‎
 
He is married to Kirstine Stewart, a media & tech executive who is now a member of the Executive Committee of the World Economic Forum, its Head of Shaping the Future of Media, Entertainment and Information.
 
Welcome to Southern California CG Shaikh. We are delighted to welcome you and Kirstine to your new home. 
Thanks very much, it’s exciting to be here. I started my position right away, even before my things arrived, and Kirstine started a new job on another continent at the same time – so we’re not quite settled in yet!
 
Can you share with us how you learned of your appointment?
Everything kind of happened at once for both of us. I was in discussions for a while, as these kinds of things take time. Then Kirstine and I both got confirmation of our new jobs on the same day, actually. First, Kirstine heard about the WEF role and it was, ‘Guess we’re moving to Geneva.’ We were in our kitchen in Toronto deciding what to make for dinner, still absorbing her news, and I answered a phone call from Ambassador [David] MacNaughton to hear him offer me the CG position. Most definitely a day we won’t be forgetting soon.
  
What are you most looking forward to about your appointment as Canada’s senior representative in Southern California, Arizona and Nevada?
I’m looking forward to digging into all aspects of the job, which is already underway at a hectic pace – we recently had a crisis response simulation for our team to be able to support Canadian citizens here in case of emergency, and I was traveling in Arizona this past week, speaking about our economic and defense partnership. Before that, I was meeting with as many of the over 250 Canadian companies showcasing at CES in Nevada as I could. Beyond all that, I look forward to working with businesses in all sectors to leverage the already great relationships Canada has here in the US especially Southern California, Arizona and Nevada. 
 
With your experience in front of and behind the camera in the entertainment industry, what is your assessment of how well Canada and Southern California currently work together in this industry?
Like so many areas of the Canada-SoCal relationship, we’re succeeding together. Hollywood film and TV production in Canada hit record numbers last year. Our studios are staying near full capacity, in many cases already at capacity and expanding. Thanks to streaming and “peak TV,” there are more opportunities for Canadian content and stories to be seen by American audiences. Canadian talent is, as always, behind some of the critically acclaimed films and series this year again – look at Stephan James, who stars in If Beale Street Could Talk and Sandra Oh in Killing Eve as just two quick examples of the great diverse Canadian talent. And that's just the beginning because the real excitement is in the  partnerships and creativity possible whether in film, TV, music, really any medium. 
 
What cross-border entertainment industry opportunities are you most interested in exploring further as Consul General?  
Beyond the collaboration I just spoke about, there’s also the VR/AR [virtual reality, augmented reality] universe, an area where Canada is already so strong and where there is obviously great interest from the industry based here. And the merger of those two with AI [artificial intelligence]. I’m also interested in the live-sports/event/music convergence. There’s still some untapped business opportunities for Canada there.
 
Beyond the strong ties between Canada and Southern California in the entertainment industry, what do you view as some of the other key strengths of our relationship?
It goes so far beyond entertainment. We have 525 Canadian companies operating in greater Los Angeles. 27,000 people here work for Canadian companies, not to mention the tens of thousands more whose jobs depend on trade and investment with Canada. So the linkages are already there. 
 
Canada is not only the second largest market for California exports, the country is also one of the largest sources of foreign direct investment. What do you see as some of the economic development opportunities in trade and investment?
Our trade and investment team at the Consulate are uncovering opportunities all the time.  We have sector specialists in the life sciences, tech, advanced engineering, clean energy and infrastructure and the creative industries sector. In the short time I’ve been here, I’ve already seen exciting progress in the IT sector. The team has a great history of hitting its goals and big, thanks to them and my CG predecessors, but of course, we can always strive for more across the board given the era we are in as 2020 approaches. As they say out there, what a time to be alive! 
 
What kind of relationship do you want to have with the Southern California business community? 
It's about building upon what are already close, business-to-business relationships, and facilitating more for greater positive impact.  Being from the media and entertainment industries, I've experienced the power of person to person collaboration so I want to make sure I connect as much as I can on that level for the good of the Canada-SoCal family and partnership. There’s a lot of benefit to be had if it doesn’t focus on being simply transactional from one organization or business to another. 
 
What should Southern California executives know about doing business with Canada that they might not be aware of?
For starters, the strength and diversity of the Canadian workforce. Canada is in the midst of the biggest increase in welcoming immigrants in more than a century. Two-thirds of foreign-born Canadian adults have a post-secondary degree – that’s the highest of all the OECD countries. We’ve become the destination for the most skilled workers in the world, which is another reason why our diversity is a true asset. From there, I’d say we have very dynamic cities on a lot of levels including, of course, economically. A lot of people were surprised to see Calgary actually ahead of Toronto and Vancouver on the list of the world’s most livable cities – and all three in the top 10. And lastly, I’d mention our stable incentive infrastructure across the country for attracting, keeping and enhancing business.
 
As part of what is widely held to be the largest diaspora of Canadians in the world, what message would you like to share with the Canadian expat community here in Southern California?
We're here to help and support you. Our consular team is world-class. Individually and collectively, they have steered Canadians through every sort of crisis in every corner of the world. So if you need help, call us. And even when you don’t need urgent, crisis-response assistance, know that we’re all in this together. 
 
On a personal level, have you spent much time in Southern California and what do you most look forward to doing when you settle here?
I have family here, so I’ve visited frequently both personally and through work opportunities. I’m looking forward to catching up with family and friends and taking time to embrace the legendary SoCal lifestyle‎ more fully. 
 
Thank you, Consul General, for speaking with us. MAPLE Business Council looks forward to working together with you and your team to advance the interests between Canada and Southern California.

Southern California Office Markets Offer Diverse Choices for Expanding Businesses

Arlyn Stoik, Principal, Avison Young

After more than 24 years in commercial real estate, we have never been more excited by the multiple, diverse options for expanding businesses in Southern California. Many of us have heard about Southern California’s booming economy. When we focus on commercial real estate, however, we get a much clearer picture of the industries, properties, regional markets, and undiscovered opportunities that underlie the region’s prosperity and promise. It is a region ideally suited to a broad range of users with a diversity of real estate needs.
 
Commercial real estate touches every industry and all of our professional lives, whether we are business executives, professionals, entrepreneurs or corporate employees, our work environments are critical tools for achieving business objectives, attracting top talent, and managing costs that can be significant.
 
Canadian companies with a presence in the Southern California region can reap all the benefits of one of the globe’s top economies and one of the largest manufacturing centers in the U.S.  With its international seaports, its leadership in startups, aerospace, entertainment and technology, its growing bioscience hub, topflight universities, and its diverse, highly skilled workforce, Southern California continues to attract growing, forward-looking companies.
 
Avison Young understands the unique cross-border nuances of the commercial real estate industry. With our Canadian roots, we are perfectly aligned to assist Canadian companies moving into the U.S. or alternatively heading north of the border. Here, we briefly introduce the key regions that comprise the Southern California marketplace and the factors affecting the real estate market.
 
Los Angeles
 
LA County is a region that thrives on entrepreneurship, creativity, and innovation.  Its vibrant, broad-based economy with its 5.1 percent unemployment rate is on track to continue the healthy trends that have prevailed in 2018. It offers increasingly high employment from media, science, technology, engineering, and math (STEM) professions that strengthen commercial real estate fundamentals. Avison Young expects steady office leasing activity to continue for media, entertainment, and especially tech companies in biotech industries. As an illustration of the growing biotech industry, neighboring Ventura County-based Amgen is partnering with LA County on the creation of a “BioLA” hub that will attract emerging biotechs and startups and make LA the next major biotech hub.
 
Along with strong demand from healthcare andbiotech related industries, LA office market conditions reflect a current decrease in the vacancy rate, at 14 percent in Q3 2018 with an average asking rental rate at $3.14 per square foot. This is still considerably less as compared to other markets such as San Francisco and New York.
 
Inland Empire
 
The Inland Empire (IE), a metropolitan area east of the LA metropolitan area in western Riverside County and southwestern San Bernardino County, is seeing increased construction, with most of the demand for new office product coming from medical tenants as the IE experiences major population growth; hospitals, clinics and medical office buildings represent a promising real estate market. Avison Young expects new construction to continue, reflecting the IE’s rapidly declining office vacancy rate of 9 percent in Q3 2018, down from 10 percent in Q2, a 10 percent decrease in three months.
 
A good amount of office demand accompanies the increasing growth of the booming logistics/industrial market and companies seek space for their warehousing, manufacturing and distribution needs. This sector is fueled by the region’s dense population as well as its proximity to the fast-growing Ports of Los Angeles and Long Beach. The IE offers logistics tenants room for growth and lower warehousing and labor costs compared to the other Southern California regions. Transportation and warehousing are largely responsible for the IE’s strong unemployment rate that continues to shrink—4.1 percent in Q3 2018, down from 4.9 percent a year ago.
 
Orange County
 
Orange County, the sixth-largest county in the nation in terms of population, offers a skilled and well educated labor force of 1.6 million, some of the best weather in the U.S., a central location in Southern California that attracts employees from Los Angeles, San Diego, Riverside, and San Bernardino counties, and a business-friendly environment. The county’s ideal geography, high quality of life and growing population continue to drive this thriving hub of financial services, information technology, logistics and health care.  Its unemployment rate, 2.8 percent as of September 2018, is well below California and national averages.
 
Although rents continue to rise (averaging $2.74 per square foot in Q3 2018), the OC office market is experiencing an increase invacancy at 11.5 percent in Q3 2018, up from 10.6 percent in the previous quarter. Avison Young attributes the rise in vacancy to construction momentum, with more than 2 million square feet of office space completed over the past 12 months. The largest office project under construction is Flight at Tustin Legacy, with its first phase of nine buildings totaling 390,000 square feet, and The Quad at Discovery Business Center in Irvine Spectrum that added 364,000 square feet, of which 64 percent was pre-committed.  We predict that office vacancy will rise further only because the OC market will need absorb the recent uptick in new inventory of creative, tenant-friendly spaces in amenity-rich locations.
 
San Diego
 
San Diego has a proactive “Business Expansion, Attraction and Retention (BEAR) team designed to foster the retention and creation of jobs and investment in the city and ensure an attractive business climate for existing businesses and those interested in relocating to San Diego. With its large San Diego Naval Base and nearby Camp Pendleton Marine Corps Base, the San Diego office market benefits from strong demand for space from life sciences, mid-sized and start-up tech companies, health care, and sectors that work closely with the U.S. military, reflected in its low unemployment rate (3.2 percent as of September 2018, down from 3.7 percent a year ago).
 
The San Diego County office market remains competitive with top tech cities by developing attractive spaces and fostering a highly educated workforce. Demand is growing for creative and collaborative space, and the average asking rental rate is $2.83 per square foot. The highest rents ($3.35 per square foot) are in the Central Coast submarket, driven by strong demand from the life-science sector, which is among the most prominent in the U.S.  The vacancy rate in San Diego has increased slightly to 10.8 percent in Q3 2018, up from 10.7 percent in the previous quarter, but record employment gains have helped San Diego’s office market sustain competitive vacancy levels. With 10 investment-grade office projects under construction in the third quarter, including life-science projects, the San Diego office market will add 1.2 million square feet of new inventory in 2019.
 
Southern California Beckons
 
Avison Young’s analyses of these prosperous, future-looking markets reveal that, for Canadian companies looking to stake their claims in Southern California, there is no lack of golden opportunities in the Golden State.
 
Sound real estate advice from a trusted advisor is key to developing the deliberate, thoughtful real estate strategy that is the vitally important foundation for the success of your business. Avison Young’s international network, founded in Canada and with offices throughout both countries and a growing list of other key foreign markets, is particularly well aligned to assist Canadian companies in the U.S. 
 
Arlyn Stoik, one of Avison Young’s longest serving shareholders/principals, has more than 24 years of experience representing both owners and occupiers of commercial real estate and spanning all aspects of the industry, including land, development, leasing and sale of commercial properties. He has worked on some of the largest and most complex commercial real estate transactions in Western Canada and  Southern California. Continually recognized as one of Avison Young’s top producers globally, Arlyn has achieved the company’s Circle of Excellence Award several years running.

The Taxation of US Corporations in Canada and the impact of The Canada-US Tax Treaty on Corporate Residency Status

Todd Trowbridge, Partner - Corporate Tax, Trowbridge Tax

A frequent question that often arises in our discussions with US companies who want to expand into Canada is how our country goes about taxing foreign corporations. 
 
Residency Status
 
The process typically begins with determining whether the particular corporation is considered to be resident in Canada for tax purposes.  A corporation may be considered resident in Canada without being a Canadian corporation. A corporation that is resident in Canada for tax purposes is subject to tax in Canada on its worldwide income. 
 
Since residency is not specifically defined in the Income Tax Act (ITA), tax residency is determined using common-law principles and certain deeming rules within the ITA.  A corporation may be deemed resident in Canada in certain cases, such as where the corporation was incorporated in Canada.  Further, a foreign corporation will be considered resident in Canada if its central management and controlis exercised in Canada or if it is legally continued into Canada. 
 
Impact of Tax Treaty on Residency Status
 
It is possible that a particular corporation will be considered resident in both Canada and the US.  Fortunately, Canada has a tax treaty with the US that will override the ITA where applicable. The corporation must first be viewed asresident in the US for purposes of the treaty in order to gain access to its benefits. Generally, a corporation will be seen as resident for purposes of the treaty where the corporation is liable to tax in the US.  Further, the corporation must also satisfy the rules contained in the Limitation on Benefits provision contained in Article XXIX A within the treaty in order to be eligible for treaty benefits.
 
Contained within the residence article of the Canada-US tax treaty is a set of rules (generally referred to as the “Tie Breaker Rules”) that are applied to settle instances of dual residency. The overall objective of the tax treaty is to eliminate the possibility of a corporation being exposed to full income taxation in both countries on the same income. The “Tie Breaker Rules” are intended to ensure that a particular corporation is only considered resident in one country.
 
Under the first tiebreaker rule in the Canada-US tax treaty, if the particular corporation was created under the laws in force in one country but not under the laws in force of the other country, it will be only be considered resident in the country in which the corporation was created.  Otherwise, residency will be determined by the competent authorities (i.e. the country’s taxation authority) of the two countries.  Where a corporation is seen as a resident of another country under a tax treaty, it will be deemed to be a non-resident of Canada under the ITA.
 
Given the uncertainty involved in having the tax authorities determine the residency status of a corporation under the second rule, it would be ideal to understand what constitutes residency in each country and, where possible through proper planning, avoid the scenario of being seen as a resident of both countries.[1]
 
Care should be taken when using hybrid entities (i.e., an entity that is viewed as one type of entity in one country and another type in the other country) incross border scenarios such as US LLC’s which are treated as flow through entities in the US but corporations in Canada. The Canada Revenue Agency takes the position that hybrid LLC’s are generally not eligible for treaty benefits since an LLC is not liable to tax in the US.  As a result, if central mind and management of an LLC is exercised in Canada (such as where the LLC is owned by a Canadian resident person or entity and managed from Canada), it may be seen as a resident of Canada for tax purposes and subject to worldwide taxation in Canada. 
 
Taxation of Non-Resident Corporations in Canada
 
If it is determined that the corporation is not a resident of Canada for tax purposes, it will only be subject to tax in Canada to the extent that it carries on business in Canada or disposes of taxable Canadian property in which case it must file a tax return in Canada.  Carrying on business in Canada is not specifically defined in the ITA.  Whether a non-resident corporation carries on business in Canada is a question of fact and is determined based on common-law principles. 
 
A US corporation may also be deemed to be carrying on business in Canada under the ITA if it solicits orders or offers anything for sale in Canada through an employee or agent (regardless of where the contract or transaction is completed) or if it produces, grows, mines, creates, manufactures, fabricates, improves, packs, preserves or constructs, in whole or in part, anything in Canada.
 
Where benefits under the Canada-US tax treaty are available, a US corporation will generally be exempt from Canadian income tax on its business profits earned in Canada, unless it carries on business through a factual or deemed permanent establishment in Canada. The term “permanent establishment” is defined in Article V of the treaty as a fixed place of business through which the business is carried on but also contains specific inclusions, exclusions and deeming provisions that will impact whether a company has a permanent establishment.
 
In the absence of tax treaty benefits, a corporation that is seen to be carrying on business in Canada will be subject to Canadian tax on its business profits earned in Canada.  However, there is a ‘look through’ rule within the residency article of the treaty which grants treaty benefits to an LLC or hybrid entity that carries on business in Canada by looking through the LLC toit’s members.  If those members would otherwise qualify for treaty benefits, relief under the treaty may still be available in limited circumstances.
 
Branch Profits Tax
 
A branch profits tax of 25% may also apply (subject to possible reduction and exemption under the tax treaty). In simple terms, the branch tax is calculated based onafter tax profits that are not reinvested in Canada.  The branch tax is intended to replicate the withholding tax that would otherwise be applicable on dividends if the US corporation were to instead operate its business through a separate corporation in Canada. 
 
Regulation 105 Withholding on Services Rendered in Canada
 
A US company rendering services in Canada is subject to a 15% tax withholding on their invoices under Regulation 105 of The Income Tax Act (and an additional 9% under Quebec tax law if services are rendered in Quebec).  The Canadian customer isrequired withhold and remit the tax to the Canada Revenue Agency (CRA) as well as  file Form T4A-NR to report this tax withholding.  The withholding is not a final tax but rather a tax instalment against a potential tax liability in Canada. 

Where a US company will not have a PE in Canada in respect of their services, it may be possible to obtain a Regulation 105 waiver (in respect of the 15% tax withholding) in advance of providing their services in Canada in order to eliminate the cash flow impact of this tax withholding.  Otherwise, the tax withheld will either be applied against the final Canadian tax balance owing for the year or refunded upon filing a tax return in Canada with a claim for treaty exemption.
 
US Tax Implications of Paying Tax in Canada
 
Both the Canada-US Income Tax Convention (i.e., the “Treaty”) and the US foreign tax credit system should help California corporations - or other US based corporations - mitigate the impact of any potential tax paid in Canada as a result of a requirement to report taxable income in Canada.  As mentioned previously, the Treaty limits Canada’s ability to subject a US corporation to taxation where the level of activity does not rise above certain thresholds as provided under the “Permanent Establishment” rules.   It also provides for reduced tax rates on certain income streams that are subject to withholding tax.
 
However, even if a US corporation does exceed the thresholds and is subject to Canadian tax, the US federal foreign tax credit system provides that such Canadian tax is generally available as a credit against US tax – subject to the foreign sourced (Canadian) income amount, the category of income and the amount of US tax deemed to be assessed on the income.  Effectively, the system provides for a US corporation to effectively pay the “higher” of the two rates (Canadian orUS) on the Canadian sourced income after application of the foreign tax credit.  With the recently passed Trump tax reform legislation and the US tax rates sitting at historical lows, in most cases this may result in the Canadian income being subject to the now slightly higher Canadian corporate tax rates.  Any excess foreign tax credit is carried forward to be used in future years.  Note that California generally does not allow a similar foreign tax credit on its California corporate returns.
 
As always, proper planning will ensure that a US corporation does not pay unnecessary tax in either country and that interest and penalties are avoided.  On that note, working with a tax adviser that is well versed incross border tax issues is highly recommended.
 
[1] It should be noted however that some countries, may not allow the treaty to override their domestic residency rules; at the same, in such cases if the company is resident of another country under the treaty rules, they typically could still claim the exemptions from (foreign) taxation that are provided by that treaty.

The Blurring of Residential Spaces and Traditional Offices Creates Exciting New Design Opportunities

What will the office of the future look like? It’s an oft-asked question these days as the workplace continues to evolve, moving from the era of the cubicle to the open office and now settling quite comfortably on a landscape with a more residential look and feel.
 
“Office space today is being used differently, with an emphasis on making the environment more inviting and comfortable for users,” explains Ami Kvas, Director Product Management, Casegoods and Custom Solutions, Teknion. “Biophilia – bringing elements of nature, daylight and natural materials indoors – is a component of this movement. The craft and use of wood exhibited by our new collection of Punt furnishings introduces a warm, inviting and relaxing tone to the workplace, along with an elegance and comfort of home.”
 
The trend toward residential/commercial office landscapes was front and center at NeoCon this past June in Chicago, and at Orgatec in Cologne during October. More and more designers and manufacturers are creating new workplace furnishings that address the blurring of residential spaces and traditional offices. Just prior to NeoCon, Teknion announced the new partnership with distinguished Spanish furniture company Punt Mobles. More than just a distribution agreement, Teknion will be manufacturing four popular Punt wood product lines in North America.
 
Teknion is, as expected, excited about the possibilities this partnership presents. And so is Punt.
 
“We recognize Teknion as the ideal partner, and fully capable of producing our signature wood products centered around Art and Design,” said Mariano Soria, CEO, Punt Mobles. “Teknion shares with us the same high level of care required to execute Punt’s design details and level of skilled craftsmanship.”
 
Teknion’s Kvas elaborates: “The Punt furnishings will be crafted at our high-end Teknion Solutions facility in Calgary, Alberta, providing clients with shorter lead times and a North American shipping address,” she says. “Rich in design culture, Punt embraces a new kind of sophistication in the quality and combination of materials used, along with precise styling in its contemporary furniture. Our level of attention and skill align perfectly with the values of Punt.”

Furnishings from the new Teknion Punt Collection for North America are offered as a boutique collection appropriate for private offices and meeting spaces, where a warm, residential and sophisticated ambience is desired. This classic mid-century offering comprises the Literatura Open Shelf System, Mava Wood Guest Chair, Mitis Table and Stockholm Credenza. These beautiful pieces can be showcased alongside Teknion standard product as signature designer elements to personalize, complement or transition any workspace.
 
Literatura Open Shelf System
Literatura is an open bookcase featuring a small, distinctive storage unit on casters ideal for displaying works of art, music, photos, souvenirs and what-nots. Literatura integrates with all kinds of architecture and interior design works. This “light, balanced collection of cubby holes” can also be used as a room partition. Literatura is designed by Vicent Martinez.
 
Mava Wood Guest Chair
Mava is an elegant wooden armchair with a solid oak or walnut wood frame. Its light appearance makes it the perfect guest chair by bringing a unique element of warmth to smaller spaces. Mava is inspired by the image of original wooden clothes-pegs from the early 20th century. Its legs are similarly slotted to hold the backrest, which has a wide, open form that seems to fly in the wind like a piece of cloth. Stephanie Jasny is the designer behind Mava.

Mitis Table
Mitis, from the Latin word for lightweight, is a collection of rectangular wood tables. Mitis is available with an optional glass top that offers a natural, essential and consistent expression. Mitis offers a solid appearance and exquisite detail both in the tabletop and trestle-like grooved legs. Tables are available in three heights and widths to accommodate both private offices and large meeting rooms. This table collection was designed by Marios Ruiz.
 
Stockholm Credenza
Also designed by Mario Ruiz, Stockholm conveys a new kind of sophistication with its combination of wood and metal materials. For a lighter appearance there is a metal base. Or, Stockholm can be mounted to the wall. The credenza doors and drawers are without handles, showcasing the beauty and natural appearance of the wood grain as it flows across the storage fronts. Stockholm is finished with an elegant anodized aluminum top, which features precise styling and balanced radii.
 
“We have long employed some of the best Red Seal Certified journeymen cabinet makers and craftsmen in the industry,” concludes Kvas. “Finding the balance of using state-of-the-art equipment while never sacrificing the human component of care and attention to detail has been key to producing custom and production products with the highest-level quality and craft. It’s a challenge that we welcome, and a great opportunity to contribute to the trend of more residential look and feel in the modern workplace.”