Does the idea of purchasing goods from overseas seem daunting? Complicated? Is the cost of manufacturing locally hurting your bottom line? More and more companies are looking overseas for solutions to reduce costs and increase profits. The need to stay competitive in a global marketplace has made outsourcing a viable option for small to medium size businesses.
The Department of Foreign Affairs and International Trade (DFAIT) Canada is always negotiating new trade deals worldwide. Trade Agreements, combined with the strength of the Canadian dollar, have created an ideal environment for companies looking to import goods to Canada.
Here are a few suggestions to minimize aggravation, maximize returns, and educate you on the process of importing goods from abroad.
1. Before You Import
As the Importer of Record (IOR), you are responsible for bearing all of the costs relating to the goods you are bringing into Canada. As part of your due diligence, you need to know the industry standards for the market you are selling to and the government departments that regulate the type of goods you want to sell in Canada to ensure compliance.
To safeguard health and public safety, some commodities are regulated by various government departments:
- The Canadian Food Inspection Agency (CFIA) regulates food, animals, and plants.
- Health Canada regulates drugs for human and veterinary use, medical devices, natural health products, xenografts, biologics, blood, tissue, organs, drug clinical trial, radiopharmaceuticals and active pharmaceutical ingredients.
- Health Canada's Product Safety Division monitors consumer goods like toys, lighters, chemicals, cosmetics, and infant products/furniture.
- Transport Canada looks after all things related to all modes of transportation including road, air, rail, and marine.
In addition to the government specific regulatory requirements, certain products require extra certification to be imported into Canada. Electrical devices must comply with industry standards and be certified by recognized laboratories like the Canadian Standards Association (CSA) or Underwriters Laboratories Inc (UL) to be sold in Canada. Goods must be marked with the country of manufacture in accordance with CBSA guidelines. CBSA D Memorandum D11-3-1 contains complete marking information for imported goods. The link for this D Memorandum can be found on the CBSA website:
2. Appoint Professionals On Your Team
Consult with your Licensed Customs Broker about the goods you are considering importing. Find out the duty rates for the goods you might like to import, and if any trade agreements are in place that might reduce the cost of duty for your company. Some commodities are subject to anti-dumping duties under the Special Import Measures Act (SIMA) or require quota for entry into Canada. If the goods are subject to quota or SIMA, the duty owing can sometimes be over 200%. Duty that high would make the goods unprofitable to import.
Customs brokers spend many years learning Customs regulations and how to interpret the Harmonized Customs Tariff. Setting up a meeting with a Tariff Consultant is a great way to interview a potential service provider and can provide valuable insight on the import requirements for your business. Getting advice from a Trade Advisor will give you a competitive advantage, but don't expect to get professional advice for free. Consider it an investment in trade compliance - the cost of a consultation appointment with a Professional Customs Broker will often cost you less than a penalty with CBSA under the Administrative Monetary Penalty System (AMPS) - so do your homework first!
A good accountant can help you make sound business decisions and put together a budget. A solid business plan and the right legal advice can minimize your risks in dealing with companies overseas. Companies that manufacture in other countries do not always recognize copy rights or intellectual property; sometimes, confidentiality agreements can offer protection if the products you are looking to have made are based on proprietary information. Do your research and if necessary, seek Independent Legal Advise (ILA).
You can go through the Embassy or Consulates to find reputable factories that can manufacture your goods. Although buying in bulk reduces costs per unit, it is recommended prior to a big order is placed for your goods, that you request samples to ensure quality control and that the goods meet your specifications. If the products are unsatisfactory, it will reduce your losses and give you the opportunity to have the factory make the necessary adjustments or find another supplier. Source out your suppliers carefully; if possible, check out the factory and meet the people you will be doing business with.
3. Before Your Goods Are Shipped
Now that your research is completed, and you want to move forward and order the goods, get the financial part worked out. A lot of suppliers will accept a letter of credit, some require a 50% deposit and the balance on delivery. Not all suppliers handle orders in the same fashion; you will need to confirm the terms of sale with your vendor and how you plan to pay for the goods with your banker. Some companies will offer cash discounts if goods are paid for within a certain amount of time to encourage a quick turnover of receivables.
Find out what the Incoterms® are with the seller. Incoterms® are the language of international shipping. Your supplier's Incoterms® will clarify what you are responsible for in terms of shipping and help iron out how much your landed costs will be.
It can be advantageous to make your own freight arrangements from Canada. Freight forwarders in Canada have partnerships and agency agreements with other freight forwarders worldwide. They can help you navigate the world of international shipping and have the right relationships to negotiate favourable pricing to transport your goods.
A lot of suppliers overseas use wood packing products to ship goods. It is used for bracing or securing a load while in transit to Canada so not to get damaged in transit. Wood packing can include crates, pallets, drums, dunnage and skids. You should be aware of the wood packing regulations if the goods you are ordering have the potential to be packed with non-conforming or non-manufactured wood packaging.
In accordance with the CFIA Plant Protection Act, wood packing from overseas requires heat treatment to CFIA's specifications, fumigation with certification to CFIA standards, or the wood packing treated in compliance with International Plant Protection Convention (IPPC) standards. Freight that is shipped with non-compliant wood packing can be denied entry into Canada and be required to be exported back to the country of origin at the importer's expense. The comprehensive Wood Packing directive can be found at:
When in doubt, verify with CFIA that the requirements for import into Canada have been met.