Why Do Business in Canada?
The Growth of Ecommerce
The Canadian Market:
A recent study conducted by stats Canada, reported that roughly 80% of Canadians support e-commerce business by shopping online regularly. The e-commerce industry continues to grow due to a number of factors. Consumer expectations evolving, internet access increasing, continued government restrictions and finally, continuously improving supply chain network development. As this industry growth continues, both U.S. and Canadian based companies can grow their business in the Canada market. Partnering with a company that can help ease the process of shipping to Canada effectively, is essential for success.
Canadian Consumers and Their Cross-Border Shipping Expectations:
Free Shipping & Landed Costs:
When shopping online, it is becoming more common that Canadians expect free shipping for their purchases. Additionally, they assume the entire landed cost of the product will be included at the time of purchase, and given in Canadian dollars. The landed cost of a good is made up of all of the door-to-door costs, which include:
- Shipping & handling
- Duties
- Taxes
- Foreign Exchange conversion
The customer assumes that the above costs have already been calculated and are included in the price they are charged at the purchasing stage. However, e-commerce platforms often fail to provide the entire cost of a shipment at the time of purchase. Consequently, additional costs are added when the item is delivered to the customers doorstep. When this occurs, customers become irritated and it damages the business-customer relationship. As a result repeated business is less likely in the future.
Customs calculations:
The process of shipping to Canada can be intimidating to U.S. based companies. Rules and regulations are constantly changing and can be difficult to keep up with. In addition, the calculations for cross-border shipping are often complicated. Listed below are examples of common calculations done at customs:
- Taxes & duties
- Tariff classification
- Additional Canadian taxes
- Currency conversions for
Failure to properly calculate any of the above factors, generally leads to undesirable consequences. For example, shipment delays, increased inspection, penalties and fines are all possible outcomes of improper documentation. These obstacles, due to lack of knowledge, can often discourage U.S. companies from expanding into Canada.
Trade Agreements Factors to Promote Cross-Border Trade:
Goods imported into Canada from the US and Mexico with a value:
- between CAD$0-$40 are exempt from all duties and tax
- between CAD$40.01-$150 are exempt from duty, but are subject to taxation
The recent increase to the de minimis value provides an incentive for U.S. companies to sell to the Canadian market. This increase allows American companies to import a greater amount at one time and avoid the previously associated taxes and duties at customs.
De minimis changes to the proof of origin requirements now allows companies to import goods in a more cost-effective way. The requirements state that a good no longer needs to originate in one of the USMCA regions but rather be imported from the US or Mexico.
Proof of Origin Changes:
- To qualify for duty free status amounts below $150 CAD de minimis thresholds, the goods do not need to originate, but rather be imported from the US or Mexico
- If not produced in the US or Mexico, goods must have entered the commerce of either country prior to being imported into Canada to be eligible for CUSMA de minimis relief.
How to ship to Canada with ease:
Partner with a knowledgeable customs broker:
Protect your business against penalties, border delays, and customs audits by partnering with a knowledgeable customs brokerage team. Specifically one that will work closely with your business to ensure that all the associated costs of importing goods into Canada are calculated properly and include the correct documentation. For instance, partnering with a team who can issue accurate tariff classifications for your products is essential to provide proper landed costing and ensure a smooth border clearance. These accurate calculations help maintain strong relationships with customers by including the prices they expect to see at the time of purchase. For example, including the entire landed costs of a good on the online platform, in Canadian dollars.
Frontier's multi-service solutions:
Frontier’s solution can help U.S. Companies throughout the entire process of shipping to Canada with our collaborative services. We have the capacity to: bundle goods into one shipment, clear customs in one truckload, and use our vast network throughout Canada to deliver products directly to the final customer.
Our induction into Canada involves consolidating goods into one shipment and clearing customs as one truckload. This strategy avoids hubs and eliminates the need for package cross-docking which makes the entire process faster. Additionally, our customs brokerage service works collaboratively with vehicles delivering overnight to Canada. These integrated teams make the U.S.- Canadian border transparent and clearing customs simple. Once in Canada we contain a delivery network with the ability to reach over 800,000 postal codes. This vast reach throughout Canada allows you to sell anywhere throughout the expansive country.
Partnering with a well-informed customs broker and logistics company will help U.S. companies build a brand in the Canadian market and increase their sales.