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1 2 IN THIS ISSUE 3 4 DRIVER SHORTAGE; Navigating the challenges of the U.S. driver shortage SHIPPING FREIGHT: Things to remember when shipping from the US to Canada THE PANAMA CANAL: The pandemic has changed freight patterns through the canal CARGO INSURANCE: Protecting your freight value to and from destinations
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HOWFUEL SURCHARGES IMPACT SHIPPING No matter what type of shipping option you use, there’s one fact everyone learns pretty quickly – fuel surcharges can add up in a hurry. Fuel surcharges are tacked on to shipments by carriers to balance the fluctuating costs of fuel. This can become a problem for shippers because it takes time and attention to fully understand them. WH Y D O F U E L S U R C H A R G E S E X I S T I N T H E F I R S T P L A C E ? Fuel makes up a large share of the cost of transporting goods by truck. Since the cost of fuel changes almost by the hour, and contracts are locked in months or years in advance, a fuel surcharge is a way for carriers to account for variations in fuel prices.
Having slowed production to cut losses in 2020, many oil-rich nations are still determining whether to increase supplies to balance prices or let the market take its natural course in light of the events in Ukraine. As a result, fuel surcharges will most likely remain volatile throughout 2022 as shippers and carriers deal with uncertainty abroad. WH E N D I D F U E L S U R C H A R G E S B E G I N ? They began in 1973 because of the Arab oil embargo. At that time, the Department of Energy began tallying a National Retail Diesel Average, which was meant to help compensate carriers that were being impacted by the dramatic fuel price fluctuations caused by the crisis. Once prices steadied, these surcharges were removed. However, they returned in the late ‘90s when diesel prices rose sharply. They’ve CONT. PG2
R E C E N T I MPA C T O F E V E N T S I N U K R A I N E In early 2022, supply chain congestion had already led to year-over-year rises in costs at the pump. However, the invasion of Ukraine by Russia in February 2022 led to a significant spike in fuel surcharges across the U.S. and around the globe. For context, the national average price for diesel was $3.846 on Jan. 31, 2022. By March 7, that price had risen by more than a dollar to $4.849 per gallon. At first, the increase doesn’t make much sense for the American market. At the time of the invasion, the U.S. was a small-time buyer of Russian oil. However, the oil market is, in fact, a global market. And that is where the challenges arise for Americans. In the grand scheme of things, Russia has been a large player in the global oil and fuel market. Europe, for example, purchased 60% of Russia’s oil exports in 2021. China also purchased 20% of Russia’s oil exports that year.
The sudden shift in relations between Russia and the West quickly led to a flurry of international buyers looking to other markets to purchase oil, including Saudi Arabia and even Venezuela. With more buyers moving from Russia to other nations, tightened supply is met with rising costs. However, many of the major oil-producing nations and members of the Organization of the Petroleum Exporting Countries (OPEC) are still reeling from the dramatic drop in demand that occurred during the first year of the pandemic in 2020. Each carrier has its own formula for calculating surcharges. They're normally added to the total freight charge on either a per-mile or percentage basis.
FROM PG1 been a factor in overall shipping costs ever since.
information from fuel stations throughout the United States and creates a national average. T H E B O T T OM L I N E Fuel surcharges are a valuable tool for carriers to protect themselves against fuel price increases over the life of a contract. At the same time, they’re also a factor that can greatly impact overall shipping costs. Knowing how they work is essential in fully understanding your cost of operations. P to P
These methods replace the 15% flat fee set up by the Department of Energy in the ‘70s. That flat fee was based on the total linehaul charge and caused massive overpaying by shippers of high-value goods. It was later abandoned. Today, these are often based on an average mile per gallon and the national average price of diesel. Many carriers determine their fuel surcharge according to the National Average Diesel Fuel Index, published weekly by the Energy Information Administration. This index collects retail pricing
H OW A R E T H E Y D E T E RM I N E D ?
Each carrier has its own
formula for calculating surcharges. They’re normally added to the total freight charge on either a per-mile or percentage basis.
SHIPPING FREIGHT FROMTHE U.S. TOCANADA The United States and Canada share the longest international border (at 5,525 miles) and the strongest bilateral trade relationship (with nearly $2 billion exchanged every day) of any two countries in the world. In fact, the U.S. is by far the dominant point of origin for goods imported into Canada, with China a distant second.
At its core, the USMCA seeks to restructure protections and build incentives – making production in North America more profitable and efficient. To that end, it provides several streamlining benefits over NAFTA – among them a single-window process, which allows the use of one dataset to ship goods across borders of all three countries. Per the Office of the United States Trade Representative, the USMCA is a “mutually beneficial win for North American workers, farmers, ranchers, and businesses.” C U S T OMS C L E A R A N C E Whether utilizing less-than-truckload, truckload, or flatbed, shipping from the U.S. to Canada requires a few extra steps compared with shipping domestically within the “Lower 48.” All commercial shippers seeking to import goods into Canada must observe customs regulations. This includes the mandatory use of a customs broker. A customs broker is responsible for clearing goods into another country while navigating customs protocols. While many businesses that frequently ship to Canada have existing broker relationships in place, Averitt streamlines the process even further with an expert team of in-house customs brokers. Both a Bill of Lading (BOL) and Canadian Commercial Invoice (CCI) are also required. The CCI tells customs your shipment details and outlines the responsible parties. Your customs broker will review the BOL and CCI before shipping to ensure all relevant information is accounted for. In addition to other standard considerations, like a packing list and proper payment documentation (such as a letter of credit), you’ll also need a
Certificate of Origin when shipping into Canada. This certificate is used for the primary purpose of helping the U.S., Canada, and Mexico determine whether goods entering their respective countries qualify for preferential tariff treatment. While a familiar fixture under NAFTA, the Certificate of Origin has also seen changes under the USMCA. All three countries were required to use a uniform document in the past. Under the USMCA, there is no must-have format. If the proper data points are addressed, the requirement is fulfilled. Also, under NAFTA, the importer wasn’t allowed to fill out this document. Under the USMCA, the producer, exporter or importer can complete the certificate. This is certainly not an exhaustive list of Canadian Customs considerations, and other certificates, permits, or licenses may be needed depending on the goods you’re shipping. This is where it helps to work with a company that knows the ins and outs of cross-border freight. Averitt’s international network provides shippers with full LTL and truckload coverage of Canada’s 10 provinces and three territories. So, if you have questions, don’t hesitate to contact your Averitt representative. G E T T I N G F R OM P O I N T A T O P O I N T B The U.S. Department of Transportation has no say over what happens in Canada. Instead, Canada’s own regulatory agencies and ministries dictate how American carriers are allowed to operate. This includes which commercial drivers are allowed access. American drivers and other CONT. PG6
A key reason for that strong relationship is the relative ease of transporting goods from one country to another via truck, which is supported by more than 120 land ports of entry lining the border. For any U.S. company looking to sell its products to our neighbor to the north, it’s important to understand several aspects of the sometimes- complex supply chains involved. T H E U SMC A The United States-Mexico-Canada Agreement (USMCA), originally signed on Nov. 30, 2018, became fully effective on July 1, 2020. Drafted as a replacement for the North American Free Trade Agreement (NAFTA), the USMCA was designed to create more balanced, reciprocal trade while growing the North American economy. While the USMCA retains a similar structure to NAFTA (leading to the nickname “NAFTA 2.0”), there have been some changes – most notably regarding rules of origin (ROO) requirements, labor enforcement, and revised de minimis levels (or low- value thresholds). These and other changes were made to bring the trilateral trade agreement in line with the times. (Remember that NAFTA became law in 1994 – long before the internet changed the face of commerce worldwide.)
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THE PANAMACANAL’S IMPACT ONPANDEMIC-STRETCHEDSUPPLY CHAINS
Previously, the largest Panamax ships allowed through the locks had a capacity of only 4,500 TEUs. As recently as 2016, ACP predicted a shift to East Coast ports, anticipating that these much larger box ships would significantly reduce the per-unit costs of containers shipped from Asia. This would make the East Coast more competitive with the ports of Los Angeles and Long Beach, where the cargo’s journey must be completed by truck or rail. As the numbers show, these predictions have come to pass – aided in part by mounting congestion and delays at West Coast ports. G R OWT H L E A D S T O C H A L L E N G E S Traffic through East Coast gateways has grown enormously since the expansion. This year alone, the Port of Savannah saw a 20% surge in container volumes. Import volumes at New York and New Jersey are already at levels that weren’t expected until 2025. As a result, the specter of West Coast congestion has made its way East as well. In response to these challenges, the Georgia Ports Authority has accelerated the construction of more container storage capacity in Savannah – approving over $34 million to development and expansion. That said, the bottlenecks in the east still pale in comparison with the West Coast. In the first part of November 2021, the number of vessels anchored in San Pedro Bay awaiting spots in Los Angeles and Long Beach climbed above 80. A large part of this issue has nothing to do with the ports themselves – the combination of a backed-up rail network and shortage of trucks to meet the available local truck driver jobs means cargo can’t be moved from the docks. It’s reported that in Los Angeles alone, there are as many as 16 containers waiting for each available truck. In addition to more shippers looking to ports along the East and Gulf coasts, inland ports are also seeing growth as businesses eye opportunities to minimize supply chain delays. Inland Port Greer and the Appalachian Regional Port, for example, allow
The newly expanded Panama Canal was opened on June 26, 2016. Three years later, we addressed the impact that the Panama Canal expansion had made on supply chains to that point. But as we all know, things changed dramatically after 2019. So, we wanted to take this opportunity to examine the effect the expansion is having on a global trade system grappling with several significant supply chain disruptions. A N U N E X P E C T E D B O O S T 2021 saw unprecedented supply chain challenges due in large part to the COVID-19 pandemic. Disruptions caused container rates to rise significantly at the same time production slowed due to a range of factors – among them, a shortage of raw materials. So, it’s a bit surprising to note that in fiscal 2021 – between Oct. 1, 2020, and Sept. 30, 2021 – the canal experienced record traffic. According to the Panama Canal Authority (ACP), more than half a billion tons of goods were transported through the canal in the past year – the most ever in a 12-month period. In all, 516.7 million tons of goods moved through the canal – an increase of 8.7% over fiscal 2020, and 10% over fiscal 2019. What’s more, Ricaurte Vásquez Morales, director of the ACP, expects even greater volume next year. He estimates that as much as 535 million tons of goods will move through the Panama Canal in 2022. A S H I F T E A S T The second busiest trade route using the Panama Canal in fiscal 2021 was the East Coast of the United States (trailing only the East Coast of Asia). This aligns with expectations following the Panama Canal expansion. The new, larger locks allow the passage of much larger neo-Panamax container ships, each with a capacity of up to 15,000 twenty-feet-equivalent units. (TEUs).
shippers farther inland to move cargo via rail between major ports along the coast. This makes it possible to bypass many of the delays that can sometimes occur when trying to secure drayage capacity along the coast. T H I N K I N G O F S H I F T I N G E A S T ? At a time when supply chains are stretched thin, it’s important to have a resource you can trust. For over 50 years, Averitt has been helping companies in the East and beyond manage their transportation and logistics needs. We work with shippers to navigate the sometimes-challenging trade landscape – providing expertise and service that smooth the process and maximize profitability. Considering rerouting your cargo from the West Coast to the East or Gulf coasts via the Panama Canal? Contact the Averitt International team to learn how we can help! P to P
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CARGO INSURANCE: THE BENEFITSOUTWEIGH THE RISKS
mind that incidents at sea happen a lot more frequently than the prime-time news is able to cover. While every accident that occurs at sea may not lead to direct losses on your cargo, there is one big reason you should consider coverage. And that is called General Average. U N D E R S TA N D I N G G E N E R A L AV E R A G E If a fire, natural disaster, or even a mechanical breakdown causes widespread financial losses during transit, ocean carriers can declare General Average. When declared, this rule dictates that all shippers with cargo on the ship are required to share financial responsibility for any damages or losses. Even if your cargo was not damaged during a fire, you would still bear part of the financial burden. Failing to pay the resulting fee would prevent you from receiving your cargo. It could also result in you being barred from moving international cargo in the future, which would be a critical supply chain disruption for any business. You might be surprised to learn that general average isn’t a rare occurrence. In fact, it happens numerous times every year. Sometimes the events that led up to the declaration that make the evening news. Others just fly under the radar. Recently, the Evergreen ship Ever Forward was grounded for a month in the Chesapeake Bay. After three weeks, due to the expenses incurred to refloat the vessel, Evergreen declared General Average. After 36 days, the Ever Forward was finally refloated on April 17. C O V E R A G E O P T I O N S T O C O N S I D E R There are varying levels of protection when it comes to cargo insurance coverage. In terms of ocean cargo insurance, here are three options to consider that provide protection from General Average declarations: H OW O F T E N D O E S G E N E R A L AV E R A G E O C C U R ? • “All-Risk”: This is the strongest protection a plan can provide. Perhaps the best benefit to “All-Risk” cargo insurance coverage is that you don’t have to prove liability. All damages and losses are covered. • For large claims, though, a surveyor may be sent out to verify the value of goods and damages. However, there are standard exceptions, including for improper packing or rejection of goods by customs. Another benefit to this plan is that it provides first-dollar coverage without a deductible. • Free of Particular Average (FPA): This is a good option for certain commodities, such as waste
materials and scrap metal. FPA doesn’t provide coverage for partial losses. It will cover losses for listed perils, such as sinking, collision, fire, and General Average. • With Average (WA): This is an extension to FPA coverage that provides protection from weather events. For example, shippers can add protections via WA, including theft and pilferage. O P E N C O V E R A G E V S . S I N G L E S H I PME N T I N S U R A N C E Aside from the protection options, you will also need to decide whether to purchase open cargo insurance or single shipment insurance. Your choice will depend on how often you import or export products or materials. If you move only a few shipments per year, it makes sense to choose single shipment insurance. For frequent international shippers, open cargo insurance can make the process a bit easier. This plan will provide a specified time frame of protection on all your international shipment moves. And like buying in bulk, it can save you money in the long run. S I MP L I F Y Y O U R L I F E B Y B U N D L I N G S E R V I C E S & I N S U R A N C E You know how those commercials tell you that bundling your home, auto, and life insurance can make all your paperwork and bills easier to manage? The same goes for your international shipments and cargo insurance coverage! Serving over 100 countries, Averitt provides end-to- end forwarding solutions that are protected all the way from the shipper’s dock to your dock. We even offer in-house customs clearance. Additionally, we strive to help protect our customers’ cargo because we know that the benefits outweigh the risks. Our team can help you secure the best plans through our U.S.-based marine cargo insurance partners. Our coverage provides protection for imports and exports moving via ocean and air. If you need just customs brokerage, we can assist you and provide insurance coverage as well. Even better, you can count on great customer service in the event you file a claim since our partner agents are in the U.S. Our team can help you manage and simplify your international shipping needs. With a dedicated team of international shipping experts, we’ll have your back through the good times and the challenging times! P to P
On March 1, 2022, the Felicity Ace sank in the Atlantic Ocean. Traveling from Germany to the U.S., the ship was carrying thousands of luxury cars from Volkswagen, including Porsches, Lamborghinis, and Bentleys. According to Reuters, without international cargo insurance coverage, the financial losses could equal upward of $155 million. Fortunately, Volkswagen’s losses will be saved by the company’s cargo insurance coverage. Insurance may not be the most exciting topic on shippers’ minds these days. However, its intrinsic value should always be top of mind. WH AT I S C A R G O I N S U R A N C E ? Cargo insurance is not designed just to protect shippers when disaster strikes. Like homeowner’s insurance, this type of protection helps you recover financial losses when your cargo or freight is either damaged or lost. In most cases, it is up to the shipper to ensure that it has insured its cargo. It can be tempting to cut costs by avoiding coverage of international cargo. However, there are many risks that you should consider when booking your next ocean or air shipment. Here are two direct risks to consider: • The initial financial losses on your damaged or lost goods • The additional costs incurred by replacing your cargo WH AT A R E T H E R I S K S O F N O T B E I N G I N S U R E D ? These are just a couple of the potential financial risks you could run into without coverage. And keep in
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THE TRUCKDRIVER SHORTAGE: MOVING FORWARD
Add to that the pandemic, which has created massive shipping backlogs throughout the supply chain, and you have carriers scrambling to play catch-up. The result is an overwhelming demand for both trucks and drivers, and an inevitable capacity shortage. Virtually every business that relies on physical products has begun to feel the pain in one way or another. possible solution: lowering the minimum truck driving age nationwide. Although 49 states allow individuals to get their CDL and begin driving trucks at the age of 18, federal regulations prevent those drivers from crossing state lines until they turn 21. That restriction prevents a sizable population of job seekers from even considering interstate trucking as a career. By the time they turn 21, many of these potential recruits have found work in other industries. WH AT ’ S B E I N G D O N E A B O U T I T ? There’s been a long-standing debate about one For decades, groups such as the ATA have lobbied Congress to lower the minimum age to 18. And tucked into the $1 trillion infrastructure bill signed by Joe Biden on Nov. 15th, there’s a provision that moves these groups one step closer to their goal. The DRIVE Safe Act includes a three-year pilot program that would allow 3,000 18-year-old CDL holders a chance to participate in a rigorous training and apprenticeship course designed to help them master interstate driving. The apprentice drivers would be required to drive 240 hours under the direct supervision of a more experienced driver in a truck equipped with safety features like automatic brake systems and a 65-mile-per-hour speed governor. After completing this training, they’ll be free to drive cross- state routes. Supporters believe the pilot program will show that with proper training and safety technology, younger drivers can be as safe as older CDL drivers with more
Anyone who follows transportation news is already well aware that America is facing a shortage of commercial truck drivers. According to estimates from the American Trucking Associations, the United States currently needs more than 80,000 additional truck drivers – a number that could swell beyond 160,000 by 2030. Given that roughly 70% of all freight in America is transported by truck, those are obviously troubling numbers. But that’s not to say all hope is lost. Steps are being taken – both by government and private businesses – that seek to address this shortage before it becomes a full-blown crisis. H OW D I D WE G E T H E R E ? While some people may think that the shortage of truck drivers is purely the result of the COVID-19 pandemic, the truth is that the issue has been developing for years. There have been many contributing factors, and the pandemic certainly aggravated the situation. But there’s one overriding issue that’s impossible to ignore: the problem of retiring drivers. The average age of an over-the-road driver is 48 years – and current drivers are retiring faster than new ones are signing on. Over time, this has steadily lowered the number of drivers who are available to haul freight. Combined with steady demand increases as industries struggle to recover from the impacts of COVID-19, the situation has only worsened in recent years. H OW I S I T I MPA C T I N G S H I P P E R S ? Over time, the driver shortage has a ripple effect. The lack of available drivers can lead to shipping delays and shortages at stores. These supply chain disruptions create scarcity, which puts upward pressure on prices. Lead times become extended and profit margins shrink.
experience. If the program is deemed a success, more rollouts will follow. Obviously, a pilot program for 3,000 people isn’t going to solve the driver shortage on its own. That’s why many private companies are finding their own ways of attracting and retaining more newcomers and veterans of the industry – in the form of wage increases, signing bonuses, and more. But competitive pay is only the beginning. MO R E R E A S O N S F O R H O P E Moving forward, we must all look for new solutions when devising ways to overcome the driver shortage. Tactics like lowering the federal minimum driving age are a step in that direction. The same is true with better incentive packages and driver benefits. Another potential opportunity stems from the fact that the industry is currently missing out on nearly half of the potential workforce population; women comprise over 47% of the nation’s workforce but account for only 6% of commercial truck drivers. As the industry works to overcome a “male only” perception, we must make it clear that women are both welcome and needed behind the wheel. There’s no single answer. Building and maintaining CONT. PG6
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SHORTAGE FROM PG5 a driver pool with the depth to handle ever-growing supply chain demands will require a mix of approaches. But as long as carriers think creatively and strategically – harnessing untapped workforces and offering competitive pay with comprehensive benefits packages – there’s every reason to believe that we can reverse this trend. F I N A L LY, WH AT C A N Y O U D O ? Not only are drivers critical to the success of carriers, but they are also absolutely vital to the success of nearly every business there is. While carriers can take internal steps to improve life on the road, it’s also imperative that shippers take further steps to open their arms when drivers make pickups and deliveries. These are just a few of the minimal actions that shippers can take to help uplift the driving profession: • Provide Water and Snacks: Due to parking challenges, it tends to be more difficult for truck drivers to stop at a convenience store for something as simple as a bag of chips or a bottle of water. Handing out treat bags, snacks and drinks is a great way to improve the day of a truck driver! • Allow Access to Restrooms: Make sure that your truck drivers feel welcome at your business. Let them know that they can use your restroom before heading out. • Say “Thank You”: You’d be surprised by how much common courtesy can go in the world. Let your truck drivers know that they are a valued part of your team by simply saying thank you. P to P
that offer differing levels of home time. 90 percent of our regional over-the-road drivers are home by noon on Saturdays and average 55+ hours at home each week. Local drivers and many of our dedicated fleet drivers are home daily. At the same time, we are always seeking ways to increase home time by optimizing our routing and even testing out innovative approaches that meet the needs of our customers without sacrificing service standards. B E T T E R P R O T E C T I O N O N T H E R O A D In terms of technology, safety, and comfort, Averitt’s fleet delivers the highest standards within the industry. Averitt drivers are on the road with the comfort of knowing that their trucks and trailers are equipped with mutiple safety features. From lane-departure protection to side guard assist systems, today’s technology and safety features help protect our drivers and the public. A C C E S S T O AME N I T I E S A N D B E T T E R S U P P O R T When it comes to keeping a small part of traditional home life on the road, Averitt’s service centers offer several amenities. Throughout the Averitt network, our service centers offer drivers quick access to safe parking, showers, laundry machines, and even gyms and medical clinics. At the same time, Averitt employs associates who are dedicated to working closely with drivers to ensure they have everything they need to work comfortably. Our Driver Support Specialists are located on-site within our service centers to provide face-to-face assistance to drivers. And within our corporate headquarters, we maintain an entire Driver Service Team that continuously checks in and communicates with drivers throughout our network. P to P
At Averitt, our motto is: Our Driving Force Is People. Every day, we strive to create and empower a workforce of drivers whoare proud of their job and the impact they have on their communities. Our team has many initiatives and programs in place to help grow and strengthen our driving force. In addition to offering leading pay, great benefits, and professional growth opportunities, here are just a few of the steps Averitt takes to create a work environment that attracts and retains drivers. One unique approach to opening the doors to a driving career is Averitt’s Dock-to-Driver Program. Associates who have joined Averitt on the dock or in the warehouse can participate in the company’s CDL-A training program. The program pairs participants with local driver trainers who help teach students the skills to earn their CDL-A license, which is reimbursed by Averitt. Drivers in Averitt’s Dock-to-Driver program also train behind the wheel at Averitt’s Driver Development Centers before they finish the program. Additionally, for industry veterans who have not been in the driver’s seat for a while, Averitt offers behind- the-wheel training that can last between one and three weeks. MO R E F L E X I B L E O P T I O N S F O R H OME T I ME One of the biggest challenges for drivers is the fact that home time can be very hit or miss with many carriers. At Averitt, drivers are provided several options D R I V E R T R A I N I N G P R O G R AMS & I N I T I AT I V E S WHAT AVERITT ISDOING ABOUT THE SHORTAGE...
U.S. TO CANADA FROM PG2 foreign nationals working for U.S.-based carriers are allowed into Canada provided they have the proper documentation and don’t have a criminal record. Also, firearms are closely regulated in Canada and must be declared when entering the country. Handguns are prohibited – and that includes guns that are properly registered in the U.S. If a driver fails to declare a firearm, it could result in the forfeiture of the weapon and criminal penalties. This is another case where Averitt’s deep international experience comes into play. In addition to having the necessary security and customs certifications needed to move freight smoothly in and out of Canada – including Free and Secure Trade
(FAST), Customs Trade Partnership Against Terrorism (C-TPAT), Partners in Prevention (PIP), and Customs Self-Assessment – Averitt eliminates any potential concerns about driver access by utilizing Canadian drivers for our cross-border shipments. D I S T R I B U T I O N & WA R E H O U S I N G The meteoric rise of e-commerce has made rapid distribution and fulfillment more important than ever – a fact that’s as true across our northern border as it is domestically. In this case, location is key. And Averitt’s North America distribution network is second to none. Our facilities are strategically positioned to offer increased speed-to-consumers in key markets. We also offer
access to many warehouses throughout Canada. This allows shippers to position inventory for quick delivery without the costs of operating an ndependent warehouse. G O W I T H E X P E R I E N C E A smooth border crossing depends on several factors that can become confusing for those new to the process. Above all, accurate information is crucial when shipping to Canada. Averitt has the experience, technology, and know-how to guide your freight from pickup, through customs, and on to delivery. P to P
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