If you own a U.S.-based business that manufactures or distributes nutritional products, health and beauty products, or food and beverages, you are already familiar with the regulations involved in selling and marketing such products in the United States. After achieving success in America, however, you may be ready to broaden your horizons a little. Branching out into other countries may be the answer, but it’s important to take a slow, methodical approach. A great stepping-stone to consider is Canada.
By exporting your products to Canada, you can reach a whole new market with minimal risk. As with exporting products to any country, however, certain regulations and processes must be obeyed and adhered to. Familiarize yourself with them now to ensure the most success with your venture later.
With a 2013 GDP of around $1.518 trillion dollars, it’s easy to see why so many companies are eager to do business in Canada. The United States’ neighbor to the north has one of the most stable, advanced economies in the world. In fact, in 2013, the World Economic Forum ranked Canada’s economy as the most stable in the world for the sixth year in a row.
Compared with many other countries, Canada weathered the global recession remarkably well. In fact, it enjoyed the strongest growth among G7 countries from 2008 to 2010, which was right during the height of the recession. Over the last few decades, Canada has made major moves toward building global trade networks. These activities make it easier for businesses to export to Canada, so now is a great time to do so.
Despite its massive geographic size, Canada isn’t very heavily populated. Indeed, its estimated population for 2013 was around 35.16 million people. The vast majority of Canadians live near the border—which helps the exporting process to some degree, as goods don’t typically need to be shipped very far into the country. Canadians purchase an estimated upwards of $204 billion worth of U.S. goods per year, so it is plain to see that Canadian citizens crave American products and are often even willing to pay a bit of a premium for them.
Canada’s economy keeps growing leaps and bounds, and this is another reason to consider expanding your business into the country. The Canadian economy grew by 3.2 percent in 2011, and it is estimated to have grown by 2.3 percent in 2014. As an added bonus, the Canadian dollar has been growing stronger in recent years. This has helped to make U.S. goods more affordable for Canadians. In turn, it has made it more feasible for U.S. businesses–including small businesses–to start broadening their reach into their northern neighbors.
Another point to keep in mind regarding the benefits of exporting to Canada is the North American Free Trade Agreement, which is commonly referred to as NAFTA. This agreement has made the process of importing and exporting in and out of Canada and other North American countries much easier. The barrier to entry is very low, in other words, so it is well worth it to consider exporting goods to Canada to grow and expand a business here in the United States.
Points to Consider Before Exporting to Canada
As nice as it would be, you can’t just take goods that are labeled for sale in the U.S. and sell them to consumers in Canada. New labels are necessary because regulations regarding the labeling and packaging of goods are different north of the border. If your market research indicates that Canada may be a viable place to market your natural or non-perishable health products, which are otherwise known as NHPs, you should start investigating what needs to be done regarding your products’ labels now.
Exported goods sold in Canada must be labeled in a way that complies with Canada’s Federal Consumer Packaging and Labeling Act. Before investigating the steps you’ll need to take to sell and market Canada NHP goods; then, familiarize yourself with the differences between U.S. labeling and Canadian labeling.
Key takeaways to keep in mind regarding labeling regulations in Canada include:
Bilingual – All labels must be written in both English and French.
Net Quantity Declaration – If the product is a gas or liquid, its quantity must be printed on the label in metric units of volume. If the product is solid, its quantity must be printed on the label in metric units of weight or numerically.
Product Identity Declaration – Somewhere on the label, the product must be described using its common or generic name or function. For example, if you are selling lipstick, the term “lipstick” must be included somewhere on the label for the sake of clarity.
Dealer Name and Principal Place of Business – The label must include information regarding where the product was manufactured or where it was packaged for resale. The manufacturer or distributor’s name must be included. The business address must be printed on the label, too. This information may be in either French or English.
Country of Origin – Somewhere on the label, information regarding the country of origin must be included.
Fruits and Vegetables – Standard container sizes must be used for fruits and vegetables sold in Canada.
Environmentally Friendly Products and Packaging – If your product’s label makes any claims regarding environmental friendliness, they must be deemed accurate by Industry Canada. You can expect to have your label assessed by this government body if you would like to export to Canada.
Sales Tax Information
It’s important to have a decent understanding of how sales taxes work in Canada before attempting to export products there. These are among the most important Canada regulations to keep in mind for companies that want to sell nutritional products, health and beauty products, and food and beverages to consumers in Canada because they affect the cost at which Canadians can buy them. While your products may be affordable in general, they may become less so once sales taxes are applied. Many companies adjust their prices to ensure that their products are affordable enough for Canadian consumers.
There are two levels of sales taxes in most parts of Canada. The federal sales tax, which is known as the Goods and Services Tax, or GST, equals 5 percent. Also, many provinces have their own sales taxes, and the rate varies from one province to the next. These are known as Provincial Sales Taxes, or PST. Some provinces use what is known as a Harmonized Sales Tax, which combines federal and provincial sales taxes into a single number for simplicity.
Please note that the invoices you provide when exporting your products into Canada must clearly identify who is responsible for paying sales taxes and custom duties on the shipment. If you opt to use a customs broker, you won’t have to worry about figuring this out.
Tips for Exporting Products to Canada
Thanks to NAFTA, it’s easier than ever to export products to Canada. Still, special considerations apply for certain types of goods. The most challenging products to export into the country include firearms, textiles, agricultural goods, steel, and clothing. Natural/non-prescription health products, or NHPs, may be a little more challenging as well. This is another reason why it often pays to work with a customs broker.
To successfully export products into Canada, many permits, licenses, and other documents typically need to be acquired from both the U.S. and Canadian government. Different product types have different documentation requirements. As the exporter, it is your responsibility to obtain and present the appropriate documentation when shipping products into Canada.
A basic overview of the parties and processes that are involved when exporting products into Canada includes:
Exporter – As the exporter, you must provide the necessary documentation.
Carrier – The carrier, or company that transports your goods into Canada, is required to provide a cargo control document, or CCD. This is often referred to as a waybill. The carrier must report to the Canadian Border Services Agency, or CBSA, and they are required to prepare the bill of lading and other shipping documents.
Importer or Importer of Record – The recipient of your exported goods is referred to as the importer or importer of record. They are responsible for paying all taxes and duties that are owed to the CBSA. They must also maintain records of all export and import activities for six years.
CBSA – The CBSA is ultimately who approves goods for release into Canada.
Customs Broker – Customs brokers who are officially licensed by the Canadian government are authorized to act on behalf of exporters. They take all the steps that are needed to ensure the clearance of goods through the CBSA. This includes obtaining, preparing, presenting and transmitting customs release data and documents as needed. They also provide shipment accounting information to the CBSA, which includes calculating and paying applicable duties and taxes. They also arrange for the local delivery of exported goods on your behalf.
Understanding Licenses and Permits for Exporting Canada NHPs and Other Goods
There’s no doubt about it: figuring out the permits and licenses you’ll need to export and sell your products in Canada is confusing. The Canada Business Network is a great place to start your research. The agency maintains a website that allows you to search for applicable permits and licenses. After completing a simple form, the results include permits and licenses that are most likely to be required for exporting items to Canada. However, please note that this search function is only meant as a first step. Additional confirmation and research are necessary to ensure that items aren’t delayed or even turned away at the border.
In the earliest stages of planning to export Canada NHP and similar products, consider getting in touch with the CBSA. They can take the particulars of your situation into account and let you know what needs to be done to successfully export your products into the country. They can sometimes even give you an advanced written ruling regarding the taxes and tariffs that will apply to your products. In this way, you will know well ahead of time what to expect when you actually ship and export your products into Canada for the first time.
Benefits of Hiring an International Sales Company
Small businesses often try to take the most cost-effective approach to exporting to Canada possible. This makes sense from a financial standpoint, of course, but it often backfires. Even with NAFTA, exporting certain goods–particularly health and beauty products, nutritional products, foods, beverages, and natural/non-prescription health products–can be complex.
As tempted as you may be to try handling everything yourself, consider the risks involved. You are likely to invest considerable amounts of time and money into getting your products ready for export into Canada. If something goes awry at the border, you stand to lose a lot of money. The importer on the other end will be expecting your goods, and you could throw the whole process for a loop if you don’t take steps to confirm that all of the necessary licenses, permits, tariffs, taxes, and other specifics have been properly managed.
Like many small business owners, you may not have the time or resources needed to prepare your products for export into Canada. Hiring an International Sales Company is a great solution.