Canada: Selling

Customs Procedures

Import Procedures

Before importing commercial goods into Canada, the importer will need to obtain a Business Number (BN) issued by the Canada Revenue Agency (CRA) for an import/export account.
For imported goods to clear Customs, the following documents are needed: properly completed Canada Customs Invoice or its equivalent; form B3 customs coding form, cargo control document and bill of landing. Certain goods such as food or health-related items may be subject to the requirements of other federal government departments and may need permits, certificates, or inspections.

For information on importing commercial goods into Canada, consult the Canada Border Services Agency's guide to importing.

For further information, consult the Canada Border Services Agency website.

Specific Import Procedures

The eManifest Portal is a secure data transmission option developed by the Canada Border Services Agency (CBSA) that allows the trade community to electronically transmit their pre-arrival information through the Internet.
For more information on eManifest requirements, visit the CBSA website.
The Safe Food for Canadians Regulations (SFCR) set out certain requirements, such as licensing, preventive controls and traceability that apply to most food commodities.
Any import, export or re-export of Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)-listed species has to be authorized through a permitting system. Moreover, firearm and weapon are subject to specific import and export procedures.

Importing Samples

For import, export and re-export of commercial samples the ATA carnet is generally used. It must be written on the product that it is a free sample and that it may not be sold.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

Imported from any country (other than the US and Mexico)
        Up to $20: duty and tax free
        Above $20: duties and taxes apply, excluding the US and Mexico
Imported from the US and Mexico
        Up to $40: duty and tax free
        Above $40 to $150: duty free, but taxes still apply
        Above $150: duties and taxes apply

Average Customs Duty (Excluding Agricultural Products)

The average rate is about 5%.

To know the Customs tariff in Canada, consult the article Customs Tariff produced by the Canada Border Services Agency.

Products Having a Higher Customs Tariff

Some sectors are relatively protected (foodstuffs up to 30%, textiles and articles of clothing up to 18%).

Preferential Rates

Most favored nation status (MFN) is given to all the countries Canada has trade relations with that are signatories to the General agreement on tariffs and trade (GATT). Canada has signed a certain number of Customs agreements, especially Canada-United States-Mexico Agreement (CUSMA). The General preference tariff (GPT), the Commonwealth Caribbean country tariff (CCCT) and the Least developed country tariff (LDCT) are reduced Customs tariffs granted unilaterally to countries chosen by Canada because of their special geopolitical and economic situation. The Australia Tariff and the New Zealand Tariff reflect Canada's particular trading relationship with these Commonwealth countries. For more information, click here.

Customs Classification

The Customs Tariff is based on the World Customs Organization's (WCO) Harmonized Commodity Description and Coding System (HS).

Method of Calculation of Duties

Most Customs duties are calculated Ad Valorem on the FOB value of the goods.

Method of Payment of Customs Duties

Importers generally go through a Customs broker or a Customs clearance agent to carry out Customs formalities, in this instance the payment of Customs dues.

Import Taxes (Excluding Consumer Taxes)

A federal tax with a current rate of 5% called the Goods and Services Tax (GST) will be imposed on most goods imported into Canada. Excise taxes are levied on a limited number of goods imported into Canada, including: certain automobiles, air conditioners for automobiles, gasoline products.
Moreover, excise duties are imposed on spirits, wine, beer and tobacco and cigars and cigarettes produced or manufactured in Canada. Each province or territory also levies provincial taxes, on products sold to consumers, but this tax is not generally applied when the products are imported.

Labeling and Packaging Rules

Packaging

The Consumer Packaging and Labeling Act applies to any person who is a retailer, manufacturer, processor or producer of a product, or a person who is engaged in the business of importing, packing or selling any product.
For consumer products, see the Consumer Packaging and Labeling Regulations.Visit also the Competition Bureau website.

Languages Permitted on Packaging and Labeling

The identity of the product must be shown in both official languages (English and French). The name and address of the supplier may be in either official language.

Unit of Measurement

Metric system

Mark of Origin "Made In"

The Canada Customs Act specifies the requirements as regards designating the country of origin of goods (68 categories of articles) when they are imported into Canada.
Tariff classification, Country of origin, Marking of goods, NAFTA countries, consult the Guide to Importing Commercial Goods.

Labeling Requirements

The following information must appear on the package/label of consumer goods sold in Canada: the product identity declaration, the net quantity declaration, the dealer's name and principal place of business.

In the case of foodstuffs, labeling must show the weight, the nutrition facts, the ingredients and the origin. For all other finished products, where they were made or where they come from must be written on the label. Clothes or finished textile products must have a label saying "made with new materials" and CA must be put on it. For further information, consult the Canada Border Services Agency (CBSA).
See the Guide to Fair Labeling Practices.

Specific Regulations

The Canadian government has issued a set of guiding principles governing the use of environmental labeling and advertising, which may be obtained by contacting Industry Canada. For food products, consult the Canadian Food Inspection Agency's Guide to Food Labeling and Advertising.

The Competition Bureau is responsible for administering and applying the Competition Act, the Consumer Packaging and Labeling Act (non-food), the Textile Labeling Act and the Precious Metals Marking Act. Canadian legislation is quite complex; consult these websites for further information.

Distribution Network

E-commerce

Internet access

With an 88.5% internet penetration rate, Canada continues to be among the most connected countries in the world. According to comScore, Canadians spend more hours online than anyone else in the world (36.7 per month), seeking out an average of 3,238 unique web pages per month. The majority of Canadians still use a desktop or laptop computer to access the Internet (67%), but those between 18 and 34 are less likely to do so (54%) and often prefer to connect through a smartphone (41%). Data by comScore confirms that the use of smartphones in Canada continues to grow, with a penetration rate of 81% in 2017 (+6% over the previous year). Moreover, 9% of Canadians report having 10 or more Internet-connected devices in their household. Email continues to be the number one online activity for Canadians, with 92% citing it as a frequent reason for accessing the web. Other popular internet activities include banking (68%), social media (59%) and reading the news or current events (55%). The most popular web search engines in Canada are Google (67.5%), Yahoo (21%) and Bing (9.6%).

E-commerce market

For the past decade, e-commerce sales have grown at a far higher rate than traditional retail sales. Total Canadian e-Commerce revenue in 2017 reached US$ 20.16 billion, and is expected to grow to US$ 28.7 billion by 2021. Major online retailers in Canada include Walmart, Amazon, Dell, Sears, Staples, Costco and Best Buy. Although Canadians prefer to support Canadian businesses, a significant proportion of the nation’s e-Commerce spending goes to non-Canadian websites: 67% of online purchases Canadians made in 2016 were from other countries. One-third of the total spending is in the United States and the rest in Asia (primarily China) and Europe.  Canadians cite lower prices and better selection as principal reasons for shopping outside the country. Regarding the B2B e-Commerce market, virtually all Canadian small business owners report making online purchases.

Social media

In 2017, there were approximately 22.7 million social network users in Canada. Advertising expenditures on social media were estimated to have reached nearly CA$ 835 million by the end of 2017. Given the increasing access to and dominant presence of younger consumers on social media sites, digital ads have more consistently targeted social media rather than the traditional online news and information portals or information sources: currently, an estimate 36% of digital ads are placed on social media, 18% on entertainment sites, and 12% on portals. The remaining ads are placed on news and information sites and directories, among others. As of the third quarter of 2017, the most popular social networks were YouTube and Facebook, with a 74% penetration rate (in 2016 the number of Facebook users in Canada was calculated at 18.2 million). YouTube had about 16.8 million users, followed by Facebook Messenger (11.3 million), Instagram and Twitter (7.7 and 7 million respectively). Among the general population, most time spent accessing different social platforms was via smartphones, followed by desktops and tablets. Social media usage among women is growing steadily across all networks, and growth among Canadian men is slower by comparison. Women prefer using visual social networks more, with Instagram and Pinterest showing the biggest growth. LinkedIn growth among Canadian males is almost double the usage of women.

Direct Selling

Evolution of the Sector

According to the World Federation of Direct Selling Associations (WFDSA), direct selling retail sales in 2016 increased 5.8% and accounted for USD 1,917 million. 1,283,000 independent representatives are involved in direct selling.

Direct selling, in a way, has existed in Canada since 1882 with Carsleys' launch of the first direct sales catalog (the company disappeared in 1977). The current direct selling sector in Canada is fragmented, with New Avon having a 16% value share in 2017 followed by Amway. Other relevant companies include Arbonne, Cutco/Vector Marketing, Mary Kay, Nu Skin, Pampered Chef, PartyLite, Scentsy, Steeped Tea and Unicity. Main products sold include beauty and personal care items, homewares, and home furnishing, although farm operators also use direct selling to grow their business. Though dominated by female representatives, companies view Millennials as both customers and the next generation of direct sellers.

Commercial Intermediaries

Trading Companies

 

• Type of Organization

In Canada, most hypermarkets centralize their purchasing at their headquarters which are concentrated especially in Toronto, Montreal and Vancouver. Some specialized sectors have got together and formed their own purchasing groups in order to obtain better prices.

• Main Actors

The leading actors in the food sector are: Sobey's, Loblaw and Métro. In hardware, DIY and decoration we have Rona and Home Hardware.

Wholesalers

 

• Type of Organization

Wholesalers are called "distributors" in Canada. These companies play essentially the same role, i.e. sales, warehousing, distribution, marketing, promotion of food, DIY and pharmaceutical products or others. Some distributors are small and play a regional or provincial role. Given the population of about 33 million, spread over 10 million km2, 10 provinces and 3 territories, small regional distributors must often diversify their offer to meet demand and make a profit.

• Main Actors

The list is very long. To quote but a few:
Fresh produce: Quebec Produce Growers Association
Grocers : Atlantic Grocery Ltd
Garden tools: Garant
Textiles: Canadian Textiles Industry

Useful Resources

Canadian Wholesale Directory

Using a Commercial Agent

The Advantages

A commercial agent in Canada will generally represent one or several companies. Paying on commission is an effective and inexpensive way for an SME to be represented in a region or a province.
There are other advantages; we can highlight especially: delivering goods "Just in time", billing in Canadian dollars, the proximity of a very large market in the United States.

Where to Be Vigilant

The agent should be chosen for his motivation to represent the company, the quality of his customer network and his skills. The company behind him must however provide the training, the technical support, and all the necessary materials for good representation, i.e. samples, prices, promotional tools, etc. As Canada is a huge country, it is usually prudent to secure a manufacturer’s agent near your potential buyers.

Elements of Motivation

Over and above his commission, the agent needs to feel he is supported; so the company must ensure good back-up and supervision.

The Average Amount of Commission

Commission is based on the sales turn-over in the area covered by the agent. It varies according to the sector of activity, for example in fashion, the rate of commission is from 12 to 15%. In the food sector it is from 5% to 10%. Most sales agents expect to work on a two-tier commission basis. Agents receive a lower commission for contract shipments and a higher rate when purchases are made from the local agent's own stocks.

Breach of Contract

A breach of contract may contain different clauses which are drawn up during negotiations and can vary. However, in certain industries, associations have been created to protect agents, and thus pre-established contracts have been produced.

Finding a Commercial Agent

The Canadian Trade Commissioner Service
Alibaba

Setting Up a Commercial Unit

The Advantages

There are several possibilities for a foreign company which wishes to open a subsidiary or a branch in Canada. Resorting to specialized consulting firms can be easy, not very expensive and can gain time.

Where to Be Vigilant

Long term planning should be considered as far as is possible and targeting all of the North American market.

Different Possible Forms of Settlement

 

• A Representative Office

Some business centers are specialized in facilitating start-up by offering domiciliation, warehousing, order taking, invoicing services etc. Trading Houses also offer representation, import, distribution and marketing services.

• A Branch Office

A firm forming a company abroad may decide to open a branch office because of certain tax advantages linked to this legal structure. Before a foreign company can open a branch office, it must obtain a commercial permit or register in the province where it intends to do business.

• A Company

A foreign company can set up in Canada by creating a separate legal entity or a subsidiary under Canadian federal law or a provincial law governing companies. A subsidiary is treated in the same way as a branch office. It must have a commercial permit or be registered in the province where it does business.

Franchising

Evolution of the Sector

Canada has the second-largest franchise industry in the world, headed only by the United States. Franchising is responsible for 5% of Canada’s Gross Domestic Product (GDP). The Canadian franchise industry generates approximately $96 billion every year. According to the Canadian Franchise Association (CFA), in 2018, 520 new franchises opened across the country, for a total of 75,765 franchise units (latest data available). The franchise sectors with the largest five-year growth were Home-Maid/Cleaning Services (129%), Real Estate (111%), Educational Products and Services (91%), Accounting/Tax Services (60%), Health & Fitness/Nutrition (35%), and Quick Service Res­taurants (34%). Fees can range from less than $5,000 to more than $75,000.  Individual investments can range from less than $10,000 to more than $1,000,000.

Although there are no federal franchise laws, six provinces (Alberta, British Columbia, Manitoba, New Brunswick, Ontario, and Prince Edward Island) have franchise-specific legislation to enable small business investors to make informed decisions prior to committing to franchise agreements. Disclosure requirements provide prospective franchisees with information about how sellers plan to approach key contractual issues such as termination, and afford buyers legal remedies regarding court action. Similar legislation is under consideration in other provinces.

Some Big Franchises

St-Hubert ( in French), grills
Remax, real estate
Jean Coutu, pharmacies
Mazda Canada, cars

For Further Information

Canada Franchise Opportunities
Canadian Franchise Association
Be the Boss
Quebec franchise

Finding Assistance

Export Trading Companies

Alpha Logistics
Fedex