The global marketplace offers a potential way to ramp up your small business, reach more customers, and procure goods at lower prices. Both importing and exporting can help your small business broaden its scope and improve its bottom line. While tapping into the global marketplace offers innumerable benefits, it also presents some challenges you must be aware of before taking your business international. The Canadian government has established strict protocol you must follow when importing and exporting goods in and out of Canada.
Importing goods allows you to scour the global marketplace, not just local or domestic vendors, to find the best products for your target market at the best prices. The first challenge to running a successful import business involves ensuring you conduct market research beforehand. Importing products that don’t have strong demand is fraught with risk, as the goods may languish on store shelves. The global marketplace is massive, and it can be overwhelming when you’re searching out suppliers. It is wise to be methodical in your search and have a plan. One option is to contact industry associations for assistance. I.E. Canada is a nonprofit organization representing importers and exporters in the country. It works with businesses of all sizes, and joining the group connects you with over 4,000 members with whom you can trade ideas and strategies. The organization provides its members with valuable information on global markets, keeps them apprised of changes in the laws, and advocates on their behalf. Perhaps most important, you want to make certain your importing activities follow the proper government procedures. These include obtaining an import/export number, understanding the regulations that apply to your specific business, and calculating the relevant duties. The Small Business Canada website can guide you regarding the specifics of navigating the government’s red tape.
While importing helps you obtain more products and at better prices for your local customers, exporting helps expand your customer base. When you export goods into other countries, you gain access to those markets and all the potential customers who live there. To get approved as an exporter in Canada, you first have to identify the goods you wish to export and the countries to which you’d like to send them. Certain products, such as black bear claws, are prohibited completely, while others carry special permit requirements. If you plan to export to any country on the Area Control List, you need an Individual Export Permit. The Canada Border Services Agency can help you determine what you need to export goods safely and legally.
Collecting Payments and Paying Taxes
Before setting up an export transaction, you must set guidelines about how you’ll be paid. The safest method is to require cash in advance. This eliminates the possibility of nonpayment, as the goods don’t leave your hands until you receive payment. Since this method transfers all the risk to the foreign buyer, it can be difficult to convince them to go along with such a plan. Setting up a letter of credit through the international banking division of your respective banks offers a fair compromise. Once you satisfy the terms of the export agreement, the bank releases the customer’s payment to you. Goods imported to Canada are subject to the federal Goods and Services Tax. This rate is calculated at 5% of the duty-paid value of the shipment and is collected at the point of entry. For certain categories of goods and in certain provinces, the GST and the provincial sales tax combine to form a Harmonized Sales Tax. Most exported goods from Canada are not taxed, provided they meet specific requirements: the goods cannot be excisable goods, such as beer and tobacco, and the exporter must ship the goods within a reasonable time of receiving them. If the requisite conditions are not met, the exporter must charge the GST/HST to the customer. Accessing the global market can help you grow your small business. Understanding how the government regulates imports and exports is the first step to expanding your business through global commerce.