Exporting to the U.S.—frequently asked questions
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The U.S. is by far Canada’s largest export market and for good reason. Our neighbour has the most vibrant economy in the world along with a familiar business culture, language and culture.
Still, Canadian entrepreneurs often come up against difficult issues when they’re exporting to the U.S., especially at the beginning. Here are some frequently asked questions.
What permits or licences are required before shipping to the U.S.?
The answer to this question depends on what product is being shipped. Some products can be exported to the United States almost as easily as they can be shipped within Canada, while the export process for other products may involve all sorts of red tape.
Generally, products that might damage health (such as pharmaceuticals and foods) or security (such as explosives and radioactive isotopes) are more likely to require permits and other licences than more innocuous products. Similarly, products that are the subject of trade disputes, U.S. protectionist measures or quota systems are likely to be subject to regulatory constraints.
The Canada Border Services Agency offers a Step-by-Step Guide to Exporting Commercial Goods from Canada which provides helpful information for exporters and would-be exporters. A good general overview of exporting is the Canada Business Network's online exporting page. Export Development Canada also offers excellent resources to entrepreneurs interested in exporting to the U.S. You can also find tips and advice on international expansion by downloading BDC’s free eBook How to Succeed in Foreign Markets: A Guide for Entrepreneurs.
How do we guard against Canadian dollar fluctuations?
Many exporters refrain from active management of their foreign exchange, even though they understand that exchange rate fluctuations can affect their earnings. Often, they argue that such currency hedging lies outside their firm's field of expertise.
However, there is a case for managing foreign exchange risks. There are various tools and techniques available for mitigating these risks, including:
- foreign exchange forwards
- currency futures
- currency options
In practice, you will find that Canadian chartered banks and other regulated foreign currency dealers are familiar with the most common strategies for managing foreign exchange risk and are well-equipped to offer both advice and the hedging tools.
There is, of course, a cost to using these tools. But they can help you reduce your exposure to foreign exchange losses. EDC offers advice on managing foreign exchange risk.
How do we get our products across the U.S. border?
To ease your paperwork and other headaches, make sure the product descriptions on delivery slips are consistent. Clearly indicate the product's origin and Canadian content, and correctly register the product based on the NAFTA code number. Fill in the certificate of origin.
In addition, your products must comply with American standards and meet the applicable criteria.
A customs broker can provide you with information on these matters and assist you with the details. You should also consult resources offered to exporters by the Canadian Border Service Agency.
Do I need liability insurance to export to the United States?
Carrying product liability insurance for U.S. exports isn't legally mandatory. In practice, however, American buyers may refuse to purchase your exports unless you obtain such coverage, because it helps protect them from litigation if your product is alleged to be faulty.
On the other hand, product liability insurance can be very costly and hard to get. Therefore, before settling on a final export price, exporters to the U.S. need to determine whether they will need this kind of insurance and, if so, how much it will cost.
You may want to get the advice of a lawyer and/or an insurance professional who are experienced in international trade issues. You could also build a "what-if" model to enable you to take a cold, hard, analytical look at the probability and impact of being successfully sued, versus the cost of carrying insurance.