5 questions to answer before selling a foreign product in Canada
You’re on vacation in another country and you come across a fantastic product you’ve never seen before. You could be looking at a great business opportunity. But how can you know for sure?
“Just because something does really well in India or Europe doesn’t mean it will translate to the Canadian market,” says Joy Nott, President of the Canadian Association of Importers and Exporters, a non-profit organization. “You have to know there is demand and a viable market before you import a 40-foot container of something.”
Here are five questions you need to think about before selling a foreign product in Canada.
1. Where and how are you going to sell?
The first thing you’ll want to do is answer a series of questions:
- Which provinces will you sell in?
- Will you sell to other businesses or directly to consumers?
- Will you keep your inventory in Canada so you can ship faster (but take on the storage costs)?
- Will you keep inventory with the foreign manufacturer and import individual units as they’re ordered?
Your plans will have a big impact on the taxes, customs and duties you’ll have to pay.
Nott strongly recommends bringing in an accountant or trade lawyer to help you work through these decisions. You’ll then need to register for the appropriate taxes in each province and apply for an “RM extension” to your business number, which designates you as an importer/exporter.
2. What is your product tariff classification?
Just because another country classifies a product one way doesn't mean Canada will do the same, especially when food or pharmaceuticals are involved. For example, deodorant is considered a cosmetic in the U.S., but a drug in Canada, meaning it needs a drug identification number (DIN) to be sold in this country.
The Canadian Border Services Agency (CBSA) determines the proper tariff classification of a good and can provide advance rulings to ensure the classification you use is correct. While the process is usually pretty simple, in some cases CBSA will need to do tests on the product (e.g., to determine its chemical composition) before providing a ruling.
Consider asking a customs broker or international trade consultant for an opinion on product classification.
3. What are your labelling and safety requirements?
You can’t just put a foreign product on Canadian shelves as is. Labels need to be in both English and French. Measurements must be converted to metric. Food labels must include specific nutritional information. And a consumer product might need to indicate whether it meets Canadian energy-efficiency requirements.
Some products can’t be legally sold in Canada—a baby stroller that doesn’t meet safety standards, for example, or food that contains more salt than allowed by Health Canada.
“It can be really surprising to hear something that’s okay to sell in Detroit might not be acceptable to sell in Windsor,” Nott says. “Don’t assume that every product is automatically eligible to be sold here in Canada.”
4. How will you manage returns and repairs?
If the product breaks or is defective, where do your customers send it? Nott suggests contracting a warehouse that can receive and store products your customers want to return, as well as a local company that can help you repair or dispose of broken items.
5. What will happen for end-of-life disposal?
Importers are responsible for ensuring the safe disposal of the products they bring into Canada. If you’re importing pharmaceuticals or high-tech products containing toxic material, you can’t just drop those off at the landfill. If you do, you could face fines or more severe enforcement actions. Before importing, you need a plan detailing exactly where and how you’ll dispose of any specialized products.
Nott says it’s a good idea to get professional assistance if you’re looking to launch a foreign product in Canada—especially given the huge financial risk if your product isn’t granted access.
“Don’t think you can do all this on your own,” she says. “If you don’t engage a trade lawyer or customs broker, you might spend a lot of time and money only to find you have goods you can’t bring into the marketplace—and that would be a very expensive lesson to learn.”