Navigating the Storm: Preparing Canadian SMEs for U.S. Tariffs

nada uh Canada took a more selective approach to this and we're going to do this in waves so we have a taste on what the first wave looks like and what I'm about to show is not all-encompassing if you want to see the all-encompassing list of tariff codes we've got the link on the screen there and I'm sure you can quite easily Google this and find it uh but just the broad buckets of where uh the government of Canada chose to play in retaliation for the first tranch of um tariffs should these come into effect that kind of gave us a sneak peek now that we have some time um for those who may have missed it in the news obviously they've stayed kind of the and put off the imposition of uh the tariffs and arbit alory tariffs until early March so we to give us a bit of breathing space um but that I mean but to be fair we know it's coming we know the threat's here there's worth some time and attention to thinking about how your business may need to adapt with these so knowing that there could be um tariffs coming in from the import side on things we're bringing in from the USA what are these things uh Cecilia next slide

uh first the big one was agriculture uh I mean we've been notoriously protectionist of our agriculture industry even inter provincially for a long time these are the broad buckets of things that kind of got targeted in round one uh just let's take a look there it's not all encompassing obviously there's exceptions and different things and your HS code matters if you're not aware of the HS code of things you're buying from the states uh certainly look that up and be aware of it next

slide consumer goods I mean we a lot of uh things that are consumables things that go into our houses ended up on this list as well uh and it may you know more of a push to try and buy Japanese golf clubs instead of americanmade so and on here as well that may affect my game this summer next Cecilia uh a few more industrial materials uh they kind of came after our industrial sector in a big way last time and miscellaneous kind of personal care items candles you know all these things this I mean they they said it's what $35 billion worth of stuff we import every year we'll have a will have a tariff um and certainly that's uh you know something to pay attention to this is not all- encompassing but these are the broad buckets that got focused on in round one uh just that as declared by the federal government so next slide please so a question that keeps coming up from a lot of our past tap participants particularly those that Focus that have focused mostly on the USA for a long time uh a lot of these exporters is well who actually is responsible for paying this thing who actually has to pay the bill on the process and I just wanted to take a second for those of you who may have this question uh because it's a little more nuanced than just you or me in terms of paying it generally speaking we call this person the Importer of record who the Importer of record is can change by admin can change by jurisdiction it can change by country as they're going around the world um also with the USA but they are typically the ones responsible for paying the Tariff now the Nuance here is you need to know the inco term on your contracts whether you're buying or selling uh so for those and can't get into all the details and all the exceptions here uh our general advice in this space is talk to your customs broker talk to your parcel delivery person talk to all the services you have there just to make sure that your contracts make sense uh we really really frequently see with top companies that they haven't refreshed inco terms uh in a long time so they're using really outdated inot terms a great example is always fob it was a great and good term to use you know kind of back in early 2000s 2005 uh with the every five years that kind of refresh what the inco terms are for these contracts and now fob doesn't mean nearly as much as it used to mean in the context of international trade so what we say is you know like it go back to your Freight forwarders go back to your suppliers and make sure these inco terms make sense to you now uh just I'm going to grab one question from the chat on our way through what about service exporters great if you are what's called a zero8 good so far we have not seen any indication of any indic from either Administration on something to be impaired so if you're selling a service at this point in time it's kind of status quo right it's exactly what you were dealing with previously so I'll leave that one there right if you're in that zero weight good category um which is kind of nice but you never know what could emerge in that space in terms of a trade barrier in the future pay attention that's kind of our guidance there Cecilia next slide uh the other big one that we're seeing affecting a lot of Canadian companies um or could fact a lot of Canadian companies should this come to pass was the diminus DI Minimus requirements or di Minimus exemptions um the idea being each American can import about $800 per day of stuff without having to worry about filing for tariffs or compliance or whatever else uh so if you were buying like you know you're buying a shirt and it's being shipped in from Canada whatever else there was no Duty no ter I shouldn't say shipped in if the country of origin was Canada or the country of origin was China um it really feels like the USA does not love this anymore particular in the consumer goods sector um we have we still have this exemption for the time being for Canadian made Goods um but the threatened tariffs that were proposed by the American Administration would remove this exemption and would cause a tariff burden on these you know small deliveries going back and forth across the border so I will leave that I'll kind of leave this one here right now but something to pay attention to if you're kind of in the in the small shipment space doing it regularly next slide

Cecilia I want to get into a few resources that are available for you um a common and overlooked one we see uh as kenada has rolled out so many free trade agreements in the last little bit uh is you know we've become unaware generally speaking not everyone but unaware of what the customs and Duties are both for you know Goods we import and goods we export so I'd point you to the the Canada tariff finder kind of a joint project between BDC EDC the government of Canada to uh and they do a really good job of trying to stay fresh and up to date on what tariffs apply to which HS codes and which country of origin rules uh and BDC has also created a great resource Hub in terms of um you know things available to you to help support you and help you navigate in this space uh we're also launching our own resource Hub uh in the coming days here so pay attention to our uh pay attention to our newsletter and you'll get a feel for that as well where we're going to try and concentrates you know the Ever Changing field of information that we're seeing next slide

so what does this mean uh a lot of folks have kind of come back to us and said well how should I affect like what should I do with my business what should I be looking at and our general answer is well we can't tell you that that's not for us to say um but we're happy to work with you on this and help be to help work through the process and specifically for folks that are doing business with you know uh doing business with the USA and continue to uh see the USA as a priority for their future growth or for their future supply chain uh we're doing a special version the trade accelerator program uh starting next Tuesday I believe we still have a couple spots open for this one as well uh where all the content is geared towards exporting to the states um so if you're interested in that send an email to WTC atb.com uh maybe mention it to the chat and Chris it to Carissa and Carlos my colleagues uh and they might be able to connect you with some more information about how to apply for this program next

slide um broadly speaking we've always been champions of Market divers ification and you know as a hedge against situations like this uh putting all your eggs in one basket I think is the analogy that gets used quite frequently in the media when talk about Canada US trade um so you know we've got a few ideas for this our Global growth series is ongoing we frequently talk about uh different markets and bringing experts who are super familiar with different markets around the world to help you you know find different opportunities should you feel that that's important for your business uh and some of our partners like export development Canada routinely publish economic and trade insights on these things for free so if you're interested in staying in monitoring these and staying up to date as you think about the longer term strategy of your business absolutely and if you're feeling some short-term pain and you want to figure out where your things can go else in the world that's not the USA um you know trade map I I know so it it works tradem Maps is a great resource for you know actually mapping the flow of goods around the world saying who's buying what and where and how much and is there an opportunity for your for your thing to go there as well uh it's very visual it's very well laid out you don't need to be a data scientist um and hopefully you can just take a look at that on the way through uh next

slide uh so finally we have some I just want to make you guys aware of the supports we have at World Trade Center Toronto um we are standing up we're currently in the process of standing up a Consulting Services Program to help support you know folks in the category uh at a reasonable price point to help work on a few different elements one is assessing your export Readiness two is market research we know that's a very challenging field where folks often have limited time resource or visibility to conduct this another part is export plan development you know what we always say there's kind of two ways to work on export plan development one is do this yourself as a group uh with our trade accelerator program but if you don't have time or bandwidth or Cycles uh to do that we're also happy to work with you one-on-one on a Consulting basis to get this done uh and also the can export Grant uh guidance we do some advisory in this space as well to help support you apply for the very competitive can export grants and again if you're curious about any one of these offerings please reach out to us at WTC bot.com thank you next slide cool so at this point I'm going to throw back to Cecilia and I'll be around for your questions I believe at the end of the session and uh Eaton David thank you for your patience I appreciate you guys uh sitting tight while you will I drone on and on about all of this I'll leave it there thank you Cecilia excellent thanks so much John and yeah this is essentially this slide just reminder everybody obviously but also we're going to move right into our today's speakers and presentations for any questions that you have um in related to what John was just saying uh we'll definitely we'll be going back to them especially in the Q&A and I know Chris and Carlos are also answering things within the Q&A as well um but yeah just uh General reminders as we get into our speakers ask your questions in the Q&A box use the chat for General discussion any additional questions right WTC as JJ has reiterated and then yes the recording and slides will be sent in our follow-up email So for anybody I know that's a big question absolutely you will be receiving these in a follow-up as well as any of the links we've discussed right so they're going to be in the slides but also for any of the um programs or where to apply things like that we'll be sending those in the follow-up email as a link okay moving right along I would like to introduce you to today's speakers we have aan dii from D law and David L from tronconi Sagara and Associates LLP um they will be speaking to us today um and we are going to go our first Speaker today is aan dii so I'm going to hand it over to you thanks so much Cecilia um it's great to be here and um it's um I I think John put the word kinetic and very I think the word kinetics to describe the current situation regarding crossb trade with the US is very uh apt it's a very apt um description of what's going on um and it's continuing continuingly uh evolving um as you'll notice the first couple of slides of of my presentation um I I thank John for doing an overview uh the overview that he did because the first couple of slides of my presentation which were created late last week I believe already um out of date uh in many regards um but um let's continue I hope to um discuss you know what it means for the your business uh what the trade tariffs mean for your business in the short term um maybe a perspective how to analyze it um and some certain short term uh briefly discussion short-term um approaches that you can take to addressing uh the tariffs and and then um the bulk of the presentation will be on a medium-term solution which is which is really um industrializing possibly industrializing us facility expanding your business to the US and I'll go through a number of um issues that come up there including carry on carrying on business directly or through a US subsidiary uh capitalizing your us business repatriating funds back to Canada briefly transfer pricing um and uh it's always important when you're setting up your us business as well to consider an eventual sale or liquidity event next slide

Cecilia um so here's one of my out ofd slides um we know that this has been uh the tariffs have been delayed uh for at least a month at least 30 days um we'll see where it comes within 30 days um but I it's more important than not um to be prepared um and and and to prepare for what's coming because we might be in the exact same situation you know in 30 days or 60 days from now next slide please so in the short term the way you know tariffs will impact um you know each individual's um each of your businesses differently um based on a number of factors um including whether it's a B2B or b2c business um whether the product can be sourced elsewhere in the US the elasticity of demand for the product um and uh and your your ability to sell um or you know you know to to to expand your customer supplier base to uh you know within the Canadian market and or to other International markets um uh in terms of cost uh you know just to reiterate what John was saying he's absolutely right that um you know absent anything else the uh the Importer in the US will pay the cost of the Tariff um but practically um it will really depend on your inco terms or International commercial terms so for example whether it's DDP or delivery Duty paid or free on board um will have will affect whether the seller or the buyer um is liable to pick up the tab in respect of the uh in respect of the tariffs um in terms of you know and I want to I want to focus on this for a moment in in terms of immediate practical steps um number one which John mentioned was uh to to uh review customer contracts and working relationships um and number uh sorry number one is to review customer contracts and working relationships number two is to keep open lines of communication with your customers and suppliers um and that I think is particularly key um because at the end of the day you're likely going to work through this if especially if you're a B2B business you have you know long-term agreements or long long-standing relationships with your customers in the US and you're going to want to work through this with them directly and number three um is you know to the extent possible urge your us stakeholders um to reach out to their representatives congressmen Governors and to express their you know anger and frustration as it relates to the uncertainty of their business um the disruptions to you know their supply chain uh and and their customer base um with respect to um you know reviewing contracts it's important to look at the contracts in particular um whether uh they're inclusive or exclusive exclusive of you know tax duties and and tariffs um whether there are automatic adjustments um price price adjustment Clause that may be triggered as a result of the tariffs and again you're the inco terms that uh that John had mentioned

um as well as you go forward and negotiate uh you you negotiate and enter into new contracts I think this is these terms are going to be top of mind uh as well um uh uh when you uh uh when you enter into these uh new contracts I and then in terms of terminating contracts I which is you know not not not the route you want to go initially very likely uh but in terms of terminating contracts you know number one you have to look at you know whether the the contract is governed by Canadian onario or US law um whether uh whe either party uh is is entitled to terminate the contract and under uh which terms um and whether there's a contractual um termination or or notice period that has to be given um within the contract um I would know that you know legal action is probably going to be your last resort here uh and the first step again is to keep open lines of communication but know you know what your contracts say um and know uh your uh The Leverage you may have have in a negotiating position with your customers um next slide

please okay so moving on to you know business expansion to the US I mean that might be you know in the medium or long term one thing as a one solution as a response to um to the imposition of tariffs but there you know a host of other reasons to expand to the us including growing your customer Place access to Talent uh you certain depending on the industry certain customers uh will want to work specifically with you know us suppliers um or products that are uh products that are produced in the US uh and uh branding and networking by by virtue of having a US facility um and uh and or a US subsidiary and uh generally a culture of innovation in the US next slide please so when expanding to the US there a number of legal aspects I have some of these on the screen um that to consider with respect to your us business expansion one of them is you know might be very industry specific like regulatory considerations uh the other ones would be you know legal business formation uh whether it's appropriate to incorporate a US subsidiary you know often is uh immigration law and obtaining Visas so once you've Incorporated your us subsid you want to apply for your L1 Visa uh intercompany contracts uh between your Canadian and and and US companies and uh the tax considerations which will be the bulk of the focus on of my the remainder of my presentation um given my background as as a Canadian tax lawyer next slide

please so going through this I want to highlight um a number of mistakes um and hopefully that will uh allow people to focus and allow me to emphasize you know certain pitfalls that that I regularly see um when uh when people start um you know industrializing us facility uh start doing business in the US and the first mistake uh really

is uh is failing to ask your tax accountant or tax lawyer whether you have a a tax you know an obligation to pay tax in the US or a filing obligation to pay in the US and so um the first part of this will'll we'll go over that in brief next slide please Cecilia

so carrying on business directly in the US so there are number of taxes that you you can uh be liable to to in the US for example federal and state income tax transfer taxes such as sales tax payer withholding tax and in order determine whether you have a tax liability it's really a two-part St test the first is whether um you have what we call ECI or effectively connected income with the US Trader business and the second um is even if you have ECI you can be exempt from us tax um uh federally and in Most states some states don't sign on to the treaty but in most States um if you don't uh if if you don't carry on business through a permanent establishment um so in with respect to ECR the first part of the test um the question really is whether you have you know business activity uh that's considerable continuous and regular for example you know selling products into the US where um title you know title changes hands you know in in the US or performing Services physically in the US and examples um the most common example of a permanent establishment is really a branch or a fixed place of business uh where um uh through which the business is carried on for example an office or a uh or a factory uh there are different types of deemed what we call permanent permanent establishments for example you can have it you can have it through an agency or other deeming rules under the treaty um that could give rise to a permanent establishment but the most common one you'll see is is if you have an office or or a factory down there next slide please um now let's chat briefly about you know Us corporate tax rates um Us corporate tax rate has a federal tax us has a federal tax of 21% depending on the state you may have varying rates of state tax you know five six or 7% um or or or zero um and uh and Branch profits tax which statutorily is 30% but under the treaty it's eliminated um under eliminated on the first $500,000 of profits and and and reduceed to 5% thereafter I noticed someone in the chat uh chat so the tax rates are in uh are in flux um and uh and uh in and I I I expect that the tax rate may change uh Donald Trump uh the Trump Administration promised to or or or stated that they would reduce the the the federal tax rate um so that um uh you know that uh that's inflect in terms of us tax returns whether you have a permanent establishment or not I.E whether you have a tax liability federally and in Most states or not you're still going to have to file um uh us tax forms and there are penalties for failure to file um lastly if you're carrying on business directly Canada should give you a foreign tax credit uh for us tax paay next slide please

so here's mistake number two and mistake number two that I I see time and time and time again is using an inappropriate or incorrect uh you know corporate structure uh or corporate entity uh when expanding to the US and the biggest mistake I see here um is really the use of llc's um um while llc's it's possible to use them in in tax efficient manners depending on you know very specific tax situation ation or very specific business situations um it you have to be very careful with llc's because they're hybrid vehicles they're treated as Partnerships from us perspective and and corporations from a Canadian perspective and can therefore give rise to you know to double tax and I've fixed a lot of um structures uh that were um uh that uh that were subject to this flaw if um if you can move to the next slide thank you Cecilia

so I'm not going to go over the corporate tax rates again but you know just to add rather than having Branch tax if you're carrying on a business directly you know repatriation of profits are subject to uh dividend withholding tax um assuming a dividend is paid and um where the Canadian parent owns at least you know 10% of the US subsidiary uh that the dividend rate withholding taxes reduced from 30% uh to 5% under the treaty um it it having a US Corporation won't of course absolve you from filing us tax forms you'll have you'll be required to file uh a Us corporate tax return as well as a form t134 in Canada I mentioned you know in terms of warning I mentioned um the issues with hybridity and llc's so the the double tax situation but also you know there there are other problems that that I come across less frequently but I do come across for example us persons uh us persons uh sorry can Canadian individuals incorporating us subsidiaries or or us corporations directly um and that's you know that that gives rise to a number of inefficiencies in including with respect to the repatriation of profits back to Canada um potentially us estate tax and uh can can create significant issues with reorganizing the company uh due due to penal us inversion rules um which which are very complicated set of rules but in effect deem the uh the Canadian the Canadian parent to which the US uh Corporation is is transferred to be treated as a US Corporation is subject to us tax next slide

please so here's a mistake that comes up fairly often and and and and and really it's important to speak to your lawyers about this um failing to document fund flows and interc Company arrangements and you'll see with respect to um whether it's transfer pricing or or whether it's funding your us subsidiary um or repatriating profits from us subsidiary in terms of uh debt or Equity uh it's really important to make sure that um that the that it's properly documented which because otherwise it can affect the characterization uh of of um of the fund flows next slide please so in terms of capitalizing a US Corporation so there are a number of advantages for example um to to to capitalizing it with uh debt over uh Equity to the extent possible um for example a tax fee repatriation of the principal um you know without the imposition of withholding tax on dividends um um um there's generally no transfer pricing provided that the US subsidiary is a controlled what we call the controlled foreign affiliate and Carries On an active business um but but if there's excessive amount of of debt capitalization versus Equity the US can recharacterize that um and and treat it as equity and therefore uh and therefore repayments up could be recharacterized uh as dividends uh the key here is to ensure that um the fund flows are properly uh are properly documented so that we don't we don't have these type of recharacterization next slide

please so in terms of repatriating funds back to Canada I touched on this briefly but dividends um dividends will generally be subject in most situations to a 5% withholding tax under the treaty assuming the Canadian uh corporate parent owns 10% or more of the uh of the shares of the US subsidiary um and and it's possible to make returns of capital um you know tax-free returns of capital as well U but but you won't be able to um where the US company has earnings and profits as it'll be deemed to be a dividend um lastly Upstream loans are also possible uh to be made uh but it could it's possible that Upstream loans uh will give rise to a uh will be recharacterized from us perspective as a constructive dividend if they're not properly you know documented in certain in certain factual situations um and if they're not um and and and from a Canadian perspective may be included at income uh unless the uh the the unless it's subject unless certain exceptions apply for example it's repaid within two years um or uh the the US subsidiary has sufficient profits next slide please so I I'll spend really 30 seconds on transfer pricing um and the the key takeaway for from a transfer pricing perspective is really to to understand is really to engage a transfer pricing experts when you're selling goods between your Canadian and and us um uh facilities um you want to make sure that you're not dinged in any way either by the CRA or by the IRS and the and there's a number of transfering transfer pricing methodology methodologies and the appropriate one will really depend on the nature of your business for example is there you know a comparable um you know is is there a comparable in the market um or is um or or is the price really based on you know a markup on uh the the input uh the input costs to create the product uh next slide

please so um I I realized I just have a couple of uh minutes left um it's important when setting up your us business um in order to to think about a scenario and and it's often not top of mind because people aren't thinking about selling when they first start incorporating but to think about a scenario uh when you would exit the exit the business and I I'll I'll I'll focus in the next slide please Cecilia I I'll look at you know three mistakes that people make and the first one is is you know the characterization whether you do an asset or share sale really matters so for example if you do an asset sale and and repatriates profits back to Canada ultimately when it's paid up the chain it'll be subject to Dividend rate tax um you know a share sale would be much more advantageous generally um whether you sh sell the usco or us subco um you know us subco will you can get capital gains treatment if you're if the Canadian parent is a ccpc um uh but but but also a familiar a structure that many of you might be familiar with is um is a Family Trust structure so you may have a Canadian operating company um where you hold the preferred shares and you Frozen uh in favor of a Family Trust um uh which holds the growth of the common shares and the idea there is to Lifetime is to to multiply the lifetime capital gains exemption and and if you have a US subsidiary uh of of your Canadian operating company it may taint the the qsb if it's large enough it may taint the qualified small business Corporation status of the Canadian Corporation shares thereby uh eliminating your or or or effectively eliminating your ability to claim the lifetime capital gains exemption on a sale so in some situations it may be more appropriate for example to have a sister company as the US um uh as a US operating uh company like a a us a US Corporation to be a sister to the Canadian uh operating company as opposed to a subsidiary um but the key thing there is when you're setting it up initially it is extremely important to get proper uh structuring advice um so uh so so in the event of a sale you can maximize um your lifetime capital gains exemption um and you know and and repatriate profits back to Canada ultimately up the chain in a tax efficient manner um so Cecilia next slide please so with that that concludes my presentation uh open to uh any questions that the audience may have um or uh or or otherwise yeah I turn it over to you cilia perfect yeah so let's um we're going to get into some any of these Q&A questions that we have that have been coming in so let's see where we can start here so I'm going to start with uh a question that we have here and we'll answer it live so with regards to the inter company Arrangement would you be able to elaborate more on how to properly document inter compan loan so that the characterization is correct and not tax adverse sure so there there are a number of considerations there so number one is you have to speak to a US tax professional as to the reasonability of the debt equity ratio so um where you have you know a 7 5 25 is a common uh debt equity ratio but it really depends on the the fact specific nature of of your business how profitable the US company is and effectively you know uh how much debt you would able to be in effect be able to test this how much debt you would able be able in effect to get from a third party and so the the question first is the debt equity ratio and and then number two um is you know there there were two recent cases that came out in the past year or two if I recall correctly in the US um where the characteriz the the the loans weren't properly documented and for that and a number of other reasons but you know the court harped you know really harped on that um they were recharacterized as equity and I think the key here is to make sure that you have uh basically it can be a promiser note or it can be a grid note uh but or it can be a loan facility uh but it it it the documentation should evidence the fact that you have a loan going back and forth yeah even if I could chime in there too yeah it has to look and act like that right so you have to have stated terms of interest rate you have to have um you know what Happ it's got to look like two different parties are executing the note so you um you know the IRS does not believe in interest free loans and so you know you have to pretend like you know it's it's a transfer pricing issue anytime you have transactions between two companies what's the interest rate you're going to charge what can the US subsidiary company what kind of debt can they service if you if you choose a 15% interest rate if they can't service the debt regularly then that's really Equity so there's there's a lot of different facts and circumstances that go into it it's not necessarily a bright line test per se um but uh you have to look at all those different factors thanks very much yeah I believe if I my if I recall my knowledge of this this on the US correctly there's something between like 13 or 14 factors um that the US tax professionals will will look at uh in in determining whether it is debt or Equity so David is absolutely right um in that

regards excellent and so I think so we have another question here so it says um and it's kind of a follow so do we work with Canadian law firms or US law firms to explore this further was there maybe it's just kind of a suggestion what's the best practice Yeah so I in my view really the best P practice here um is to uh speak with uh professionals that theal cross border um because in in in in my experience most of the US um most of the US practitioners and I think you know DAV could speak to this better than maybe maybe better than I can but uh the US practitioners that don't deal crossborder are very us-centric um Cana Canadian uh crossb considerations are a small portion of what they deal with on a regular basis um and and so when you're uh when you're engaging with all of these considerations it's really best to have someone on the Canadian side but also in the US side that regularly deals uh with Canadians because they're going to be more uh attentive and and more sensitive to all the Canadian crossb tax considerations excellent all right we have uh I'm looking at the time we'll give maybe a couple more questions here that we can answer before we move on so do we expect there to be more bamerican restrictions Andor policy stances coming down the line that affects our ability to sell into the US is incorporating the US a strategy that we should be exploring for the near term so sorry go ahead no I wasn't I probably wasn't touch on that a little bit in my presentation as well but um often times the bamerican restrictions right now are really more limited to dealing with State local governments or the or if you're dealing with the the federal government you know they have a mandate where they need to be dealing with us companies um there isn't necessarily so much of a restriction on you know um Enterprises in the US that are conducting business the way they want obviously the tariffs will impact some of that um if those go into effect um and we can talk a little bit more about ways reasons other reasons why you might want to incorporate in the US uh in the term uh coming up in my presentation yeah thank you David the only um the only thing that I I think I think that that was absolutely correct the only thing I want to add um to what David said was h i so I I come from a family business myself so my father and my my brother run a family business and they have it you know it's it's a Canadian business uh they have a small us facility um and so I I know firsthand how difficult it is to industrialize ize a a facility in a foreign country um and so you know when we say shortterm what does that really mean because sometimes you know it can take uh years uh you know to to to find all the connections and and all the people that you need um and all the equipment you need in order to run the same operation that you do uh up here as you do down there so for example you know let's say you have a machine shop right so one of your machines break right so up here you have you know a guy to deal with that but down there um you may not or or you may not have um you know the same you know person dealing with your tooling um or you may not have the same person dealing with your electrical right to refit the the facility to to to to the appropriate electrical trans standards um it it's um you know what we're covering is is really one piece of or what I covered in my presentation is really just one you know one piece of some legal aspects and tax aspects of of expanding cross border uh but um it's difficult to say that this should be a shortterm uh uh play for you I think there there may be certain advantages short-term for example um branding uh showing your uh us customers that you you know that you're very quite intent on on manufacturing or or or industrializing a US facility uh but uh but actually playing that out is um uh in my experience having dealt with it both within my own family and for for a number of clients for many clients um that uh it's often um there there are a lot of roadblocks or a lot of hurdles um and uh and and and and you should be aware of that going forward excellent okay so a few more questions here I'm gonna ask there seems to be this one so this one is I think a kind of a quick one to answer to so do you expect the tariffs to Impact Services and digital products so IE software platform

sales uh this is a you know this is a very kinetic area so um very unlikely that that the tariffs will look will affect you Services uh we'll see uh we have to see but you know the one thing that this Trump Administration has shown is that nothing's off the table and uh and uh and and there's just a tremendous amount of uncertainty as to what he may do um it's tremendous amount of uncertainty if I may add to this just from like a trade barrier perspective uh often zeroe Goods like software things like this it's not necessarily just a tariff like that could be the effect like that's I haven't seen too many of those that type of action happen I've certainly seen you know sales tax or different things like that be imposed and different types of agreements matter there but often they fight in this space with regulation you know you fight with privacy you fight with where data lives you fight with what tools you're allowed to use and it's worth paying attention you know again highly kinetic there's a lot of information flowing in the states in this right now like a recent example of a bill being tabled is talking about uh what types of like large language model folks are allowed to host locally on their servers nothing's passed but it's worth monitoring in that space as far as I as far as I'm aware I don't believe anything's passed in that space But just a comment it's not necessary tariffs that are barriers could be taxes and whatnot but it's often uh a regul a regulation play to protect you know to be protectionist in that space great thanks J and I think we have time for one more here so I had a couple come in so this one is a little bit uh we have our solution so the company in particular asking our solution has a hardware as well as software component if we provide it as a service and without the hardware Ever Changing ownership to the customer well that it is it considered as a service and thus not taxed so is it only considered as a service I suppose at this point or just not taxed and that's not taxed

you want me yeah I I take it I take it that's from uh a uh bro uh duties perspective yes I think so yeah so if they provide the service without the hardware Ever Changing ownership to the customer is that considered a service and thus not taxed and if you want we can always uh take that question off and I'll send it to you guys after

think we may need to do that no problem even know specifically the answer to that question I I'm happy to take that offline and and take a look a closer look at it afterwards absolutely perfect okay so then let's do this one what is the recommended process for a Canadian to gain a work visa to work boots on the ground for a US Corporation

that's gonna be part of my uh okay part first slide about getting your team of advisors together I think you you definitely need to speak an immigration attorney are you're going to have uh a lot of different um advisors that you'll need you'll need to do it properly in terms of uh immigration like uh Eden had a very good slide earlier on with the different levels layers that that go along with um potentially doing business in the US and I think one of those right there was immigration so an immigration attorney we had to advise on that whether it be some some type of Vestor type Visa um really would be depending on what the roles I think of the individuals that are coming down from Canada to work in the US would would would um would be would be doing leather here too absolutely perfect and so with that we're going to move actually right into David's presentation so that is perfect um and any of the questions so we do have some other questions in the chat as well well um we can we're going to move back uh when we get into our next Q&A portion and then once we finish with uh dav's presentation and Q&A we then will open it up to full Q&A as well so definitely we'll be coming back to some of these and as I mentioned any additionals can definitely be asked at the WTC bot.com so thank you aen so much uh for presenting and as a reminder to everyone I know we've everybody's been doing an excellent job with this love to remind uh one recording slides going to be sent in a follow-up email chat for General discussion and your questions in the Q&A box so one thank you so much everybody for doing that we really appreciate it and moving right along so David I'm going to pass it over to you thanks Cecilia and thanks again for having me today uh we trun Cary sigar and Associates is a full service accounting firm uh right outside of Buffalo and um we're members of the World Trade Center Buffalo so we're happy to be able to work with our part Partners up in Toronto um to to provide this presentation today so Cecilia if you want to move through a couple of the first slides um you can move past there go back one if you don't mind there you go so so my presentation today unfortunately there's going to be a little bit of overlap with the presentation that Eden just gave so I'm going to try to uh maybe focus on some some different items and gloss over a couple on the slides as well but you know as we've talked so far there's a lot of different reasons why you might want to expand in the US um I'm sure many of you on the on the presentation today are already selling into the US in some fashion I think a lot of times when we talk to companies that are looking to expand to the US which is almost solely what I do uh we find that you know again you've been selling into the US for a number of years in one fashion or another um and so um not entirely unfamiliar with with doing business in the US and so you're there's three different ways to do that one would be testing the waters operating as a branch through the US which is partially what we're going to focus on today uh e did a great job with uh going through creating a us-based subsidiary entity again um you know if if you have a customer that's a bi American or you want to have a brick and mortar location it could be banking I've had number of clients do it for for various reasons they need to fa facilitate payments uh so that the US subsidiary company can can take many different forms in terms of what the actual um physical presence is in the US uh but there are definitely different different reasons why uh a Canadian business such as yours may want to expand the us or create a US subsidiary entity um and and that can be pretty easy I know we mentioned already a little bit about LC's and how easy they are to form again we don't want to necessarily have those in terms of a taxation system because of double taxation uh but but you can form a US company fairly fairly cost eff ly um in the US and um but again I think the bottom two items here are really key um actually before I get to those you know acquiring us space business again I know Eden touched on a little bit as well I got a link in here to to a separate webinar that um that one of my colleagues um gave um last year um that'll be available on the slides as well uh about an acquisition so we could probably talk about that for another whole half an hour on its own so you know one of the takeaways want to uh leave today really are the the bottom two um bullet points on this slide developing your business export plan again so depending on your business right I'm sure the the business owners on this call are you know very diverse right some some are in the in the tech area and there's not a lot of physical presence others are selling Goods others may be selling goods and there's a service component to it you know so having that that plan who's going to go who's going to the US what does the physical presence look like what are the needs we have for invoicing what are the needs that we have for various aspects of the business the flow of people the flow of goods the flow of funds what are all those going to look like and so while we you know I'm I'm sure you know um everybody's thinking about this more right now with the proposed tariffs and whatnot like it's been uh like a few of the other presenters have mentioned this is a little bit more of a long-term play rather than something that um would be just reactionary that you would you would do and then six months asde maybe that you wouldn't um especially if you're forming us subsidiary and that's why I'll talk about testing the waters in a moment and then getting that local professional advice again just having your advisors right here you know I could give you some great us tax playing strategies but if it's gonna taint your ccpc status in Canada or uh be averse from you from a Canadian tax perspective then it's really just kind of you know biting off your uh nose to spite your face so you know as we're through the slides we're just going to realize some of this the devil is in the details and we just need to to figure out what the what those details are and how those will affect your your business I you know like I said I assist many different Canadian businesses with expanding to the US and well some of those the format is very much the same there's always something there's always a wrinkle there's always something specific about their business that we have to plan for and accommodate and so that's what we're usually looking to do move to the next slide please

so Asen mentioned already so we're talking about federal taxes and about your Canadian business doing business in the US we're talking about effectively connected income and the tax treaty provides some relief on that under the permanent establishment article of the US Canada tax treaty next slide please so PE fix place of business uh the agency bullet which uh mentioned as well providing services the US Canada tax tree because we have such a good trading relationship is very robust so it does talk about many different things so providing Services 183 days in in a 12- Monon period tracking that sometimes can be a little bit different I'm not going to get to the details today but there's you know there's there's ramifications for individuals that are coming here that are also 183 days based some of that is inherently tied to uh whether the business is operating as a permanent establishment so there's a lot of different considerations there as well there's actually a specific um article I don't know if I have this on the next slide or not um regarding um um construction sites so if you're you know in a business and you're acting as a subcontractor or something like that you're going to a construction site on off and on for a period of time um if that if that construction progress project is not lasting for more than 12 months from beginning to end from the first time you go out there actually I do have it in the first slide there the first bullet point um then there's also relief there under the tax tree uh next next slide so a number of different items here the big one usually is inventory inventory in of itself does not create a uh Perman establishment under the tax treaty although we'll talk about the state implications of that which are different uh coming up in other slides so oftentimes again it's a fix place of business that connection um if you really have to get into the inte gritty of it uh when you're sending people here like that sometimes it comes down to what what they're doing what they can't what they are or aren't doing um but generally speaking it's that fixed place of business next

slide so what do we do so as Ed mentioned in his slides generally speaking if you're selling into the US um you are operating a US Trader business under a statutory law curatory laws having that effectively connected income with the us but we can defeat that with the treaty so typically what we recommend is um that your business gets a US tax number files uh an annual tax return that's a we call treaty based tax return taking a position of the US Canada tax treaty saying hey IRS I'm selling to the US this is what I'm doing under the tax treaty you can't tax me and so that's that gets a statute limitations going um with the IRS which is three years so they could couldn't go back if they ever wanted to dispute that um and uh there was a tax case which I don't know if I refer to in here a number of years more recently where a company a company um was It was kind of in doubt whether they had PE or not they they didn't file any tax return uh the IRS came after them and said well we really think you have a PE and so the IRS ended up assessing uh tax based on just the revenues of that company and did not account for any expenses of the business and that went to up all the way up to the tax Court and the IRS won because that company had never filed anything so at least so this is kind of like a placeholder like I said we call kind of BTS and suspenders approach um to to protect your business from a federal standpoint if you do not have a uh a permanent establishment in your business next

slide so if you do have a permanent establishment you'll operate as a branch in the US so You' be subject to Us corporate taxes as he mentioned 21% right now um and then you would only pay uh you only compute the the the profitability of that Branch activity so I always I always think of it as a division of the business so you're division of the business that's operating in the US where the revenues where the expenses we may be able to allocate some overhead expenses to that as well um and then that would be subject to uh Us corporate taxes and as even mentioned I I don't if I on the slides after this uh there's a branch profits tax and some other considerations as well any of the taxes paid in the US would be eligible for a foreign tax credit in Canada so it would not be a double tax situation next

slide so just again some more things to think about um about as your business expands in the US should you create a us you know business entity um and how it be structured and a lot of the things that Eden ready went went over in his presentation and then again the Canadian employees being subject to us income tax we see that quite a bit right because the question Eden posed before was well you know you know who is going to look after these things in the US and typically in these situations if it's a a business we have a physical presence there is going to be a probably a deployment of some Personnel from the U from Canada um to oversee uh implementation or formation of that new office and so we're going to be deploying people to the us and we to think about okay well you know are they going to are they going to be on the US payroll because if if they're not then the Canadian company may be considered to be doing business in the US or there's two different entities here so there's a lot of different things we need to think about um and and really talk through it's not definitely not one one siiz foots all next

slide so um I'm glad we have time for this too the the state local part aspect of this uh probably cannot be understated um I know it's come up a little bit the discussion about s and others and other

areas the uh we often say that dealing in the US is dealing low 51 different countries and that's because the um state governments and the federal government are not harmonized here like they are for you in Canada with Federal and provincial and so there's actually a a good segment of our we have a whole department here at our firm that deals just just with State local issues even for us companies so this is going to affect your Med business as well so while we have that great US Canada tax treaty uh to cover a lot of different uh items it all the states are not required to follow the treaty and and many do not um so you know there are there are things like um sales tax we have to talk think about it's possible uh that your your um company could be liable for some income tax in the US as well gross receipts taxes and potentially operating payroll if you um if you're having more of a physical presence here next slide please so we're talking about we talked about permanent establishment with regards to federal taxes um when we talk about state taxes we're talking about Nexus not the Nexus that used to cross the bridge but a closer connection to uh the state and and a link to the state and so over the years the historical Nexus has always been physical presence um but the states have started to get a little wise to that and looking for sources of new Revenue so they've start actually started to move away from physical presence even though it is still creating Nexus to this economic presence and Factor presence uh and this we're going to talk about for both corporate income taxes and also sales tax um which can affect many remote sellers even if you never intend to have a physical presence here in the US at all next slide so talking about sales tax specifically there's been a big shift uh in that as the side talks about uh back in 2018 there was a uh a court case with um Wayfair the online retailer in the state of South Dakota and South Dakota said well Wayfair you're you don't have a physical presence in our state at Brick and Mortar but you're doing a significant amount of business here we're going to pass a law that says if you exceed a certain dollar of sales or number of transactions in our state we're going to consider you to be effectively doing business in our state and we're going to require you to collect sales tax and so this went all the way up to the Supreme Court and my colleagu is here you know was kind of crazy because you don't really see his sales tax guys monitoring uh US Supreme Court uh rulings and and that type of thing um but but it really did go all the way up to the highest court in land here and and the courts sided with South Dakota and so um what happened was all the states then started to pass their own laws so again not not the same law not the same rules but basically some level of sales uh dollars into the state into their state again with being destination um and then also a number of transactions so the most common is $100,000 of sales um or 200 transactions a lot of the states have gotten away from the transactions item next slide

please so you know it's not uniform um and so you know once you get over $100,000 of sales into a state and I I say it's the best practice that's something that any business is selling into the US should be able to track is the destination of the product or there if they're giving if they're providing a service potentially uh where the benefit of that of that service is received so probably the customer location um sometimes it gets a little tricky with regards software licenses and things like that um but again they all have their own rules uh not uniform regarding to when you are are required to collect sales tax uh register and collect and so um you know it's it's kind of been the Wild West in that regard as well a lot of the states just passed this these thresholds and they said oh well if you have sales of a certain of a certain level you have to register and collect but a lot of times in the situations in the US uh we don't have the GST HST system uh for our consumer our sales tax all the taxes paid by the end user so a lot of times if you're selling if you're within uh a supply chain you may just be selling to a distributor or manufacturer for resale or for consumption and Manufacturing those are exempt sales so the states have kind of backed off some of that because they were getting a lot of tax returns that just reported uh exempt sales they were just getting inated with with sales tax returns um and then they started going after online marketplaces like Amazon Walmart eBay Etsy whatnot uh they kind of figured out well you know if you're selling on any of those platforms it's a lot easier for me as a state to go to Amazon and say well you need to collect it on your behalf rather than going to a small business and trying to get compel them to collect um one of the things I don't think is on um a further side you you just really have to watch out if you're using Amazon FBA um then the am Amazon FBA uh model they um they move your they you send them the inventory they move your inventory all over the the us having inventory in the Amazon warehouses that is that you own uh creates an Nexus for you um so that can that can really trap uh companies just give them a lot more compliance burden so something to consider um and again as the last bull Point talks about here each state has its own rules and regulations regarding taxability of goods and services um so what's taxable in one state may not be taxable in in another there are many many different sales tax jurisdictions and oftentimes even if you're selling for resale or um your sale is exempt you have to you have to collect certificate you have to you have to be able to prove the burden of proof is on you is to why you didn't have to charge the tax so oftentimes practically speaking if if you're over a threshold in the state all your sales are exempt uh you may or may not choose to register um in that state but at bare minimum you should be collecting those certificates from your customer explaining why you didn't charge sales tax next slide

please so again income tax uh again physical presence still rules the day uh but states have gotten license again they' they've started to uh employ these economic very much like the Wayfair usually it's a certain dollar of sales into the state there's about a dozen or so now that um that that try to Levy an income tax based upon um just sales and not not physical presence next next

slide um so it started out with this 50,000 50,000 or 50,000 um but then that some of these states have have replaced that as well so often times your remote sellers AR going to have the property payroll um and the sales thresholds have have changed uh that's kind of more this one here is kind of more of a uniform um standard one next

slide so I have Cent Many clients like this that are tripping on Nexus in States for various reasons uh they may send employees down to do installation they may send employees they may subcontract for installation that also can create Nexus so often times we're filing a federal treaty based tax return for them in a state um or I'm sorry with the IRS and then we file some some state tax returns so that's not uncommon um so one of one of the other things that we may it sometimes we can rely on is this this interstate law that's from 1950s public La 6272 basically it says that if I'm in New York state and I send to Pennsylvania Ohio you know any other state like that and all I'm doing is sending sales people so again we're you know the the laws are more related towards uh you know your your old old school duror salesperson that type of thing or you know where you're actually physically going and soliciting sales so if I'm all I'm doing is going into the into the um state to solicit for sales you know I don't have to then um file in um this is for income tax I would have to file an income tax return in those bordering states if that's all I'm doing now if that person who's also the salesperson is going and doing is picking up um damaged goods and things like that there it's pretty easy to trip to this up um but sometimes we can rely on this as well to um eliminate an income tax uh obligation uh one of the keys there again is this is a very Antiquated law so it only considers tangible personal property so if you're we've run into situations where you're selling software that doesn't really apply to you um as well or one of the other issues as well at the last like last bullet point mentions some states are pretty nasty about this California is definitely one of them they will not extend Public Law A6 272 to a a foreign company so if you're over their sales threshold which I believe now is up to $6 like $85,000 or so um we would file a corporate tax return and um for you in California so generally the way that the states tax is they start based on your federal tax return and so you would say well I file a federal tax return it's zero with the IRS well California says not good enough they say well pretend you didn't you know so pretend you didn't have that protection of the tax treaty so we would take your company's um results for the year translate all the US Dollars um and apply us tax rules and so we come up with a well what if we did file a federal tax return and they California requires a worldwide Bas us other states have other uh some do ad just a based on the as if us branch and then we say okay well what what percentage of your sales are to California customers compared to all your all your sales so it it can get diluted um but you may end up with a with a California corporate income tax liability when it's all a sudden done and and California particular is not shy about um going after companies um about them I could probably spend the less the rest of our time talking about that so on to the next

slide I think I talked about you know some of these traps again uh not subject to um minimum taxes so in California California is not maybe a great example if if you're able to to get protection 86 272 the state may still leverage a franchise tax sometimes it's a few hundred for the privilege of doing business in their state again you still have to file tax returns to to afford yourself of these um protections um and then there are there are some as well here so a few of these states and the commercial activity tax in Ohio has gotten a little more taxpayer friendly recently um Ohio Texas and Washington do not have corporate income taxes uh Ohio and Washington have gross receipts taxes so instead of you know looking at the profitability of your company and and going through that exercise like I mentioned um they um they want a small percentage of every dollar of sales into their estate so that's expense to you that one one you can't pass on to your customer I mean you could in the pricing but it's not being collected from the customer um in Washington the the threshold is particularly low $100,000 of sales into the state so it doesn't take much to trip that up Texas uh their threshold is 500,000 of sales in their state they just have a really weird formula it's a margins tax so looks at different bunch of different factors um and um then you compute the tax based on Texas sales uh compared to all compared to worldwide sales so again it's the last bll Point mentions these liabilities are they can add up over years especially if you had interested penalties or you don't file because um the statute limitations never runs on any of this um unless you file so if a state came after you you know and oftentimes I'll get asked to that well you know how are they going to know usually it's you know they're going to be auditing your customer right they're going to say okay well here's XYZ company from Canada you know it's a big transaction I don't I don't see that they file here you know that's generally how uh one thing leads to another next slide

please you know other state and local issues again these are part and part times with doing business you know having a physical location more in the US other things to consider um grocery seeds taxes like we mentioned you know payroll taxes the systems are a little bit different uh non-income based taxes taxes on real personal property so you know state governments here they get their pound of Flesh one way or the other um some more so in the corporate income tax some will say oh we don't have corporate income tax but they do have other taxes um you know whether it be a real property personal property like they do in the South often uh taxes and fees imposed by local governments and then again that's why it's really important to have advisors uh local advisors and this is the same advice I give to any of my us-based clients that are looking to do business in Canada or any other country uh you really have to have the local uh knowhow um regarding some of these things uh to make sure that you're you're clear on what the requirements are before you start um investing uh into a foreign subsidiary next slide

please that's all I have uh for for today's presentation I'm sure we have many more questions excellent thank you so much David and yes we have had some questions come in so yeah let's get us started right into it uh first one would we trigger PE if the sale is for access to a software platform and the license is sold for a year at a time we don't have any us employees but do have someone working on our team through an employer of

record I presumably that person is is working in the US yeah if there's a if they want to follow up to let us know um it looks like don't have any us employees but someone on the team as an employer of record okay it that part of that may come down to whether what the roles and responsibilities are of the U of that us employee uh I know Eden talked about the agency there's a couple different you know if it's somebody that's just cting software perhaps no um you definitely would either way I think want to be filing at a bare minimum that treaty position uh we did probably just have to get into more about the rules and responsibilities of that person so it looks like the the messaged a person is in the US but not working in sales yeah so we'd have to kind of get into maybe what what uh what that person is the employer record really is more so for purposes of ease of um processing payr loan whatnot um so it it really come down to some maybe some of the facts and circumstances uh that's that's waiting into the into the gray of potentially a PE um but again we'd have to we'd have to walk through some of the details on that sure yeah and so you know what for um any additional contacts for this please send us uh at the WTC bot.com and we can maybe uh answer a little bit more in detail for sure excellent so next um what is the best best way to minimize actual Duty tariff costs when transferring product from the Canadian company to its us subsidiary assuming that the US subsidiary becomes the Importer of

record I can speak to experience on this one but not as an expert on this one uh what we usually end up saying is talk to uh talk talk to the Specialists on this one talk to crossb tax planning folks and get an opinion on transfer pricing rules for this one um doing it yourself you certainly run the risk of having someone take a look and say uhuh that's that's not that's not going to fly uh we don't agree with your own personal opinion uh so certainly professionals who can draft an opinion in the space matter um you know we work with snbs all the time we know folks are you know are constantly making the choice between do I get a profession do I pay for a professional to consult on this thing do I not you know that's a leadership decision that's a consultant decision I strongly recommend for transfer pricing rules uh that you take a hard look um and if we think back to 2016 I just like I remember almost overnight after the election uh if nothing else the American Border was doing their homework a lot better and checking for follow-up documentation on things there things they can do to make your life miserable Beyond uh you know a tariff or Beyond a transfer pricing ruling they can also just slow down you know and create friction on how you serve your customers um if they don't kind of like what you're doing or they have you flagged for whatever reason so I you know my my lived experience there is is yeah get an opinion uh now your personal circumstance may be different just to add briefly to what John said absolutely I absolutely agree in terms of engaging a transfer pricing expert um uh uh with respect to the transfer pricing issues so goods sold between the US and Canada um the way the tariffs uh were proposed I mean which are currently being put on hold is if I recall correctly they there's no rebate for let's say you you manufacture a product here um and then you send it to the US you know for for treating and then you send it back to Canada and you send it back to us you send it back to Canada and it's back to the US and you sell it right so it might cross the border number of times uh and there was no um they basically said we're not going to give re every time you cross the border you're gonna have to pay a tariff uh which is you know absurd in in in various respects and basically destroys you know inter uh you know integrated Supply chains um but one of the things that you might want to think of there is how do you cross the border less um if you are you know in terms of you know in terms of your supply chain like can you if you manufacture a part here H can you can you find a treatment facility here right and so you only cross the border you know once in terms of selling to the US and then between and that 25% tariff uh can be borne in some way between you know the ultimate you know the ultimate consumer um you know or maybe partly by the Canadian US companies I mean that that that's a that that that I mean that that's a point of subject to negotiation but that's the only thing I would add to what uh John aptly pointed out with respect to engaging in transfer pricing specialist and I'm not a by no means a customs duties expert either my understanding was that there was not a specific exemption solely based on the fact that I'm sending this to us subsidiary right it has to follow it's more so what what is the product I'm sending over and um otherwise everybody just be setting up us subsidiaries to sell their product um I could be I could be off Bas on that but I think you were you nailed it as soon as it hit the Border it was getting you know you were paying um to cross it so I don't think the subsidiary provided any protection in that context right right excellent and we have a question so um particularly for David one of your slides talking about the property as minimum of 50k so if there's a rental property in New York state does any of this apply to that and so this might be more specific so uh I'm making a profit but technically not trading anything at the border so in that minimum of 50k if a rental property in New York state does this apply to it yeah so that that slide was more in the context of remote selling and that actually was a little bit and or or I guess or with a with with the Wayfair so if you had a physical location that you were renting or either be real property or tangible property um you like you very likely have a permanent establishment if you're running that through a uh foreign company and you definitely have uh State Nexus in New York state yeah the sourcing of like real property is is very plain it's it's where the property is located okay excellent most straightforward question of the whole presentation a lot of I think there's a lot of complex questions that are definitely people are top of mind I think so in terms of specific to David I think those are the questions in particular there is one more um and now I I'm unsure but essentially I'll read the question David you let me know if you're able to answer this at this time because essentially saying you know it's early days but is are you able to provide views on how this might affect the benefits of Delaware registered companies don't know if that's something that you have insight into so let me know and other otherwise we can always uh have an additional context in another

email um I think as I think we talked about I don't think there's if you have a US subsidiary company it doesn't sound like you're going to get any uh Customs benefit from that okay perfect yeah my again I'm going to second that my my understanding is if the if the thing is crossing the border that's where you're getting nailed regardless of where where you're you know you have subsidiaries um the other tax benefits related to your business operations and repatriating profit that's a whole different context and so far we hav changes there I've had I've had a few clients that that manufacture in Canada they have that almost solely sell in the US they have been contingency planning since the fall once since the election basically about what would happen if tariffs were because that would you know drastically impact their business and their part of their contingency plan is would be to move their manufacturing operations to the US avoid the tariffs yeah and so now I'm gonna open up from here and again as a reminder everybody's been doing this so amazing uh recordings and slides sent in a follow-up email so you'll be receiving all of these for any of the especially your questions that have been answered for sure um and I'm going to open this up into a more General conversation uh and Q&A so we've had a bunch of questions that have come in especially uh prior to um so I'm going to go through a few of those things especially they're like more um tariff related so starting with this one right off the bat uh how do tariffs impact hiring in the US uh and startups who wish to expand to the US so is there I I think kind of General discussion on that what that would be

I mean broad strokes and again I'm going to be not an accountant not a lawyer and get this 100% incorrect but the principle on the Tariff is the good hitting the border right the the physical thing crossing over the border so how does that affect your Market access if you have a physical thing it changes your pricing structure if you're bringing it in from the USA to help you know make your thing that's going to you know Drive prices and if it goes back to the USA uh across the border or you build it here and set it across the border it drives prices how does it affect hiring that falls into a separate bucket about trade so I'll leave that uh you know kind of a different context and maybe the subject of a different webinar hiring kind of in this highly kinetic environment and managing that space so that that's my kind of nonprofessional opinion on there you know eat and David maybe there's something else that you guys have to say on the matter um re really not from a professional perspective as as a tax lawyer um the one thing I'll note and this kind of goes back to me taking you know International TR trade economics in my MBA uh when I did it back in the day as well uh is is really you know to uh tariffs go back I mean this is really an economics question as it relates to hiring in the US and and and so you know tariffs go goes back to an Era of mercantilism um where you know it's primarily um very protective like you know my country first policy uh which has been effectively to be wrong um and uh inefficient um in in advantage of uh and and and and so over the last 100 years we've moved much more to a comparative advantage um economic model where uh which supports which is supported by free trade um in terms of um you know how it affects from an economic perspective likely will in the media term I mean I I think you're looking at you know more STL you know wins or that's what people are saying um and uh and because it increases the price of goods for consumers uh really um and uh it could benefit you know certain producers um in in the in the countries that are imposing the tariffs um over the medium to long term but I I I will say that you know Supply chains are enormously integrated between the US and Canada and so you know move moving away from that you know the the reason us companies come here to buy certain Goods is because Canada has a comparative advantage in producing those goods right we put produce them at a more uh cost effective or more efficient manner than they can in the US um and that's the reason they you know that's the reason they come here and and and going back to what I was saying earlier given the integration of the supply chains between uh you know products going back and forth maybe multiple uh times before it reaches the consumer for example in the US um it's it's um it's not like you kind of threw a wrench into things you kind of threw a firebomb uh you know into things imposing tariffs every time they go back and forth uh but generally you know tariffs will raise the longer medium long term they're going to raise the cost on the the the cost of the goods to the consumer uh and and it it'll have winners and losers uh in terms of uh uh for producers um but the net cost of consumers outweighs the advantage to producers long

term excellent I think that also um we had a question earlier that said you know uh should companies still spend time on diversifying supply chain away from the US even if the tariffs are on hold for 30 days so you know at this point the tariffs obviously are on hold but is this something that you might suggest that companies start looking into to at this point in

time yeah I think that's ultimately a business decision um for the particular company um and it's very industry specific and very company specific and and where you have connections and where and and where it's possible to uh to expand like in certain industries it may be you know near impossible uh or there are not really any you know C you know customers basically you know outside the US or any customers you know it's it's it's difficult to say if you're a supplier to Boeing all of a sudden you know you're going to switch gears and start selling to uh Bombardier overnight right like it it it doesn't work like that and it doesn't work that fast that said I I think companies should definitely be open to it um and definitely start exploring and start speaking um you know you know in terms of uh you know Finding customers outside the US and and and understanding uh and and having alternatives for uh you know an integrated supply chain may possibly out of the US uh if I may just jump in very quickly there I I think the answer sort of depends on on how how well you sleep at night uh if you uh if you're okay with knowing now um how Canada is planning to retaliate uh and if you see any categories of of goods and services that you depend on for your supply chain on that

list do you think you're going to be continue to be uh competitive if um if the tariffs now come into play and so in general I think it's a good idea to to always have options and not be locked down to single supplier relationships uh but it really is um as U as aan said it's a business decision um and it's also one of of comfort if if uh if I might put it that way yeah at a minimum like minimum the thing I would say to pretty much every business here is understand your exposure you're not going to get it perfectly maybe understanding it but like do the math take a look at it it shouldn't take that that long on the way through to get it done uh depending on the complexity of what you're doing but I know if this is mostly leaders in the audience here you know you can go through your a few steps forward and back on your supply chain and figure out how exposed you are at a minimum

yeah excellent thank you guys so much and we are at 1:31 uh so the obviously webinar wise for timing um we're going to stay on for a little bit longer I think in terms of questions any of the questions that have been brought up that we have weren't able to answer um like I said please do send follow-up emails to us at WTC bot.com um and also um we'll try to you know send responses to you as soon as we can absolutely and hopefully most of the questions that you've asked today have been able to be answered um next things uh to kind of end us off one I want to say a huge thank you to our presenters a chen as well as David uh for coming on uh And discussing these things with us uh much appreciation as well as to uh John and John juel and John Warren from the World Trade Center uh for kind of starting us off with the understanding of what these tariffs are and what they mean for you as a business um I will I'll get to our kind of our upcoming slides here so uh one as I mentioned at the beginning we are doing a uh us uh tariff survey so we really want to hear from you and the impact that these tariffs are going to have on your business or what your understanding of that impact is at this moment in time um as we know again with the pause for 30 days what is that going to mean um and it also kind of gives you time to think about this and prepare so uh the survey link uh you is a q our code on the survey but we also uh will post it in the chat again for you for anybody who wants to answer that um we definitely encourage and recommend we want to hear your feedback so that uh like mentioned right we're doing follow-up emails and we are also going to be hosting more webinars like this uh in different topics and areas of uh especially us exporting specifically um so that is going to be upcoming for the global growth series for everybody who is interested interested we definitely want uh to encourage you to come back for these uh presentations we do also uh on the topic L having a conversation with other Founders like yourselves who are dealing with the same kind of complications and what you are planning to do or what you know what maybe is a strategy that another company such as yourself is thinking of we have our uh Global growth the global leap which is looking at lessons from Founders so we have Charles plant and uh who is worked on the Narwhal project as well as Joseph fun from laa who are going to be talking about their experiences with exporting and specifically all of the founders in that Fireside are have had experience into the us so you can definitely ask those kinds of questions you know about their experience um maybe what they're doing what are their plans so that is going to be on February 13th which is next Thursday um and Carlos will post that event in the chat so that you can check that out and register for it um it is limited seating so if that is of interest to you and you'd like to continue that conversation with again uh successful Founders in that area um who have you know been through these things and concerns that you probably have definitely a great time to look into it the other thing that we mentioned especially in uh John's presentation is our to uh that is going to be on February 11th and that is specifically looking at at the exporting into the US so again especially for companies with that on top of mind that is something that we are going to be doing uh so definitely you can either reach out to us or you can apply uh we did put the link in the chat and we will absolutely be sending it in our follow-up email so you will have access to that um and any of the links again that we've been sharing or talking about right that's going to be accessible in the slides as well as in our follow-up email and uh this is uh just from the slide from the Fireside again you'll be able to see that in the chat um what the agenda is for the day of for this Fireside on February 13th and lastly as mentioned I know we've talked about this throughout this entire presentation and webinar um we want to answer your questions we want to help and assist in whatever way we can so one um you can uh message us at WTC atb.com as well as filling out our info session form to get a one-on-one support and talk to us about you know anything uh one any programs that we're doing in the World Trade Center um how we can help and what we can do for you uh and then also as communitech one of our principal partners for the global growth as I mentioned they work with Founders directly so that is the way to email them and receive support for them and I would say very specifically too for tech companies um communitech has those kinds of answers for you um and so any other um one I want to kind of open it up to our presenters as we're kind of finishing up we had obviously we're over for 5 minutes but if there's any last comments that we want to talk about or say um as we're finishing up for this webinar um I'll just open the floor to anybody even if it's you know General thanks or

anything y if no one else is gonna go I'm G to make a a Shameless plug here I want to hear from you guys uh we have a short survey takes less than 5 minutes to fill out and it's about how you're feeling about tariffs uh broadly speaking and how you think they're going to impact your business this helps us inform and Advocate and share and helps us inform future programming that could be of value to you uh so if you don't say it now uh you're not going to get a chance so please please please uh take a few minutes and fill that out for us hopefully we can provide something valuable to you in the future thank you H I would like to thank everyone who uh joined us for this webinar this afternoon uh the um we I recognize that this is for those of you who have trade exposure to the US this is a stressful and difficult time um and I can promise you that at the World Trade Center um I'm working with a team of trade professionals led by John next to me here um and we're working really hard to build up resources relevant programs beyond what we normally do uh to make sure that we can uh we can help out and so uh so please uh check in regularly you'll get followup emails with a lot of content from us uh and we're working on on putting more resources um and other things together including uh the next webinar in this series which I think we'll do in a week from now so thanks again and and um and um yeah we're we're here to support you uh and um and to to help out as much as we can I'd just like to say thank you very much to Cecilia and John um uh from it was aure to speak to the group from uh from my perspective I hope the group found it informative um we we talked about you know short-term and long-term longer term Solutions uh to what's uh an immediate trade problem but um you know just harping on one of the short-term Solutions if you have us stakeholders you know get them to speak you know get them to complain to to their representatives uh there's you know there are a lot of people on this call and there's power and numbers in doing that for every you know um uh for every one of you on the on the Canadian side and every one of your employees on the Canadian side they they likely have there there's likely a counterpart in the US and someone uh uh and and and and and with who has a representative that they can bug about uh either in Congress uh or or put pressure on the states or put pressure on you know Congress ferally so um that that's the one thing uh that that I would like to harp on but in any case thank you again to cecilian John it was a pleasure uh it was a pleasure presting yeah same here thanks thank you uh to you both for for having me today and again I can't just stress uh not only um you working out your plan talking with your advisers uh on both sides of the Border but also taking advantage of all these great resources that are are being offered um you know usually if you're going to expand in the US or or engage in in those types of activities uh you got to come to it with a plan uh both short-term and long term and so um the best way to do that is to you know gather as much much information so you're informed uh go into WID eyes wide open and um are able to make uh you know strategic uh decisions based on uh both the advice and information you're getting [Music]