Whether you’re looking to diversify your product line or leverage cheaper-made merchandise, importing into Canada can be an importing business activity for many Canadian entrepreneurs.
As a prospective entrepreneur or new business owner in Canada, consider the following steps as you navigate through the complexities of international markets.
1. Develop a strategic business plan.
A viable business plan is not only vital to your success but also a tool in measuring your business’ progress. As you start writing your plan, you’ll want to make a number of key business decisions such as:
- Decide if you will be importing into or exporting from Canada
- Identify the risks associated with your import or export activity
- Choose the right name for your business
2. Register your business for import activities.
It is a good idea to be proactive and tend to all your registration and licensing requirements with municipal, provincial and federal governments early in the process. Once you complete these steps, you will have the necessities such as a Business Number (BN), registered business name and a GST/HST account. Your Business Number is your single account number for dealing with the federal government regarding taxes, payroll, import/export and other activities.
Canada Revenue Agency’s Business Registration Online is the one-stop-shop for all of your federal business registration requirements.
- Call 1-800-959-5525; or
- Visit Business Registration Online (BRO)
3. Invest early in trade compliance education.
Starting out with a good understanding of customs regulations and requirements, the use of Incoterms® and the means of payment are key to international trade success. Enrolling in trade compliance education in the early stages of planning will help you gain a better understanding of key trade topics, teach you how to manage trade compliance and utilize free trade agreements to your benefit. The substantial knowledge you receive will aid in completing accurate documentation, understanding logistics and getting a feel for how transactions move through the regulatory process.
4. Identify the type of goods you want to import or export and research their admissibility.
Besides having an accurate description of the goods you plan to import/ export, you also need to find out if these goods are prohibited, restricted or regulated by other government departments. In addition to Canada Border Services Agency, there are over 10 other government departments (OGDs) that are involved in the importation, in-transit movement and exportation of various commodities in and out of Canada. If your goods are regulated they may require special permits, certificates, licenses, special labeling, or a specific type of packaging (i.e. child resistant) depending on the commodity.
Use this search tool by Canada Business to find out what permits and licences your business may need from the federal, provincial and municipal governments.
For imports into Canada, in addition to identifying the good you want to import you will need to:
- Identify the country of origin, manufacturer and export of the goods.
- Determine whether the goods are controlled, regulated or prohibited by the Canada Border Services Agency (CBSA) or any other government department.
- Use this Step-by-Step Guide to Importing from the Canada Border Services Agency (CBSA) to find out if the goods you want to import are prohibited or restricted.
- Canada has a range of goods over which it imposes import controls. These goods are listed in the Import Control List (ICL) of the Export and Import Permits Act.
CBSA has compiled the following list of commonly imported commodities that may require permits, certificates, and/or are subject to other requirements:
5. Determine tariff classification, rate of duties and taxes, value for duty
Once you are sure that the goods can be imported into Canada, you must determine the:
- Tariff classification;
- Applicable tariff treatment;
- Rate of duty; and
- Taxes payable when importing goods.
Every commodity that clears through Customs must have an accurate and correct Harmonized System code (HS code) applied to it. This code identifies the item to Canada Border Services Agency (CBSA), as well as indicates the duty rate payable. Classifying commodities correctly is key with regards to the importer paying the correct amount of duty and avoiding Administrative Monetary Penalty System (AMPS) penalties, or worse, seizure of your goods.
This Step-by-Step Guide to Importing from the Canada Border Services Agency gives details on all of these and an example of how to calculate duties and taxes.
6. Take advantage of free trade agreements (FTAs)
Free trade agreements (FTAs) are agreements made between countries that desire to reduce trade barriers on goods manufactured in their respective countries. FTAs allow for preferential duty treatment to items that qualify from certain countries. They can impact exports by reducing or eliminating duty rates for qualifying goods.
Canada has free trade agreements with the United States, Mexico, Columbia, Chile, Israel, Jordan, Costa Rica, Panama, Peru, Iceland, Liechtenstein, Norway and Switzerland. For more information on the respective Canadian Free Trade Agreements, visit the Trade Negotiations and Agreements section of the Department of Foreign Affairs and International Trade Canada.
7. Determine if you will be using the services of a customs broker.
A customs brokers can help you:
- Obtain documentation that has been prepared for the shipment/contract
- Review the prepared documentation for completeness and compliance with customs regulations
- Prepare and submit a declaration to Customs on your behalf at the port of arrival
Aside from submitting a declaration on your behalf, customs brokers can also help your company reduce costs, improve efficiency, and mitigate risks related to cross-border trade. Most companies who import goods into Canada find that it is far too expensive and time consuming to travel to the facility or port of arrival where their goods are held awaiting clearance, prepare a formal declaration for Canada Border Services Agency, pay the charges due and then anticipate delivery of their product. It can be worth the investment up-front, to at least consult with a customs broker in the planning stages, so that you can have a clear understanding of your risks and proper tariff classifications.
8. Plan the transportation (shipping) of your goods overseas.
At this stage you will need to determine how involved you want to be in the process of getting the goods from source to destination and if you will be using the services of a freight forwarder. A professional freight forwarder is a critical link in the supply chain, and can assist your company in determining all costs included in a sales contract.
Next, you will need to identify the mode of transportation that will be used (highway, marine, rail, air, postal or courier service). This will lead you into selecting the method of shipping and communicating with the transportation company on cross-border requirements.
9. Identify your terms of sale.
With the expansion of global trade it has never been easier to find sources for goods worldwide and then sell directly to your clients. That being said, before you embark on this journey, you will need to know the rules of international commerce otherwise known as Incoterms® . It is important to identify your terms of sale as they clarify your shipping responsibilities and iron out your landed costs.
To learn more about Incoterms®, visit the Incoterms® Rules for a short description of the 11 rules from the Incoterms® 2010 edition.
10. Evaluate the right payment program for your business.
There are several options for obtaining release of your goods. You may prepare the release and accounting documents yourself or you may hire a licensed customs broker to do so on your behalf. It is important to note that these companies or individuals are not government employees and importers must pay a fee for their services.
There are basically three different payment methods available:
- Direct security – this is where you would have your own bond and security posted with Customs, but this may not be a viable option if you are a new company. When this is in place, you would pay Customs on the last business day of the month for amounts owing on your statement. If payment is late, penalties would apply and possible suspension of deferred payment privileges.
- Goods and services tax (GST) direct – Once you are a GST Registrant, you can opt to pay Customs on the last day of the month, but without posting a bond and obtaining your own security. This does not cover duty, only GST. The same conditions apply as above for late payment.
- Use of a customs broker’s bond – Customs brokers already have bonds in place with Canada Customs, but would charge a fee for use of their bond. You may need to post a deposit or meet other criteria for this to happen. If you think this is the right option for you, speak to a customs broker to find out their requirements.
For more details on this topic visit the following links on the CBSA website:
- Memorandum D17-1-4: Release of Commercial Goods
- Memorandum D17-1-5 Registration, Accounting and Payment for Commercial Goods
- Memorandum D17-1-8 Release Prior to Payment Privilege
11. Align your trade compliance practices with your business objectives.
The key to managing the customs compliance of your business is to be informed. Whether you have a custom broker that handles your compliance or you take care of them yourself, it is good practice to be aware of how customs regulations apply specifically to your business. While an experienced custom broker can review your business activity for best practices, assuming that they will is often an oversight by importers. It is important to designate a person within your organization to monitor Customs activity and deal with your customs broker when needed.
It is in an importer’s best interest to regularly review their Customs process, stay up to date with changing regulations and prepare to withstand a Customs audit. Make sure your internal procedures, documents, tariff classification, free trade agreements, valuation and origins are in compliance with Customs requirements. Additionally, understanding the links between your internal operations, accounting and Customs procedures can help address any shortcomings. Part of a winning formula is to ensure that your business plan includes a strategy for monitoring compliance over time.
As you prepare to import your product to Canada, we hope this information will help you plan for a successful start to your entrepreneurship journey.
Get Sound Advice and Current Training:
Pacific Customs Brokers provides advice and trade compliance seminars and webinars to entrepreneurs interested in importing. To schedule a one-to-one trade advisory consultation with our Trade Advisor contact us at firstname.lastname@example.org. For a complete list of upcoming sessions visit the Trade Compliance Education and Development section of our website.