Preparing to export
Consultation and bespoke research
There is a range of online information for exporters including advice and guidance on how to thoroughly research overseas markets. Visit: https://www.great.gov.uk/ for more information.
Researching the Canadian market
Canada is an extremely large country. Each province has its own cultural practices and preferences with different regulatory structures. Different regions will have different industry clusters and demographics. Therefore regional plans and good local research are essential.
Ideally you should make regular visits to Canada as well as making contact with others in your industry/sector. This will enable you to access the most up-to-date advice and information, and may lead to new insights or at the very least form the foundation for further research.
Visit: https://www.great.gov.uk for information and guidance on how to develop your marketing strategy, competitor and SWOT analyses, and customer/market segmentation. The IOE&IT can also offer help with this. Visit: https://www.export.org.uk/.
You will need to determine whether there is a market for your product or service, if your pricing is competitive, whether you might need to change your product packaging or marketing, and whether to adapt your business model.
The questions listed here should help to focus your thoughts. Your answers to them will highlight areas for further research and also suggest a way forward that is right for your company. You may then want to use this as a basis for developing a formal Canada strategy, although this may not be necessary or appropriate for all companies:
It is unlikely that you will have the answers to all these questions at the outset and these ‘knowledge gaps’ could form the basis for further research and investigation. Some of these questions will require quantitative research in your sector, while others involve more contextual and cultural considerations.
Talking to other people in your industry and regularly visiting Canada will give you access to the most current advice and such experience can often lead to new insights and form the basis for further research.
Following your initial research, you will need to create an export plan, identifying your best route to the market. Guidance on developing an export plan, including marketing strategy, customer segmentation, competitor and SWOT analyses, etc. is available on the https://www.great.gov.uk/advice/create-an-export-plan/how-to-create-an-export-plan/ site, and also on the Institute of Export’s Open to Export site at: https://opentoexport.com/info/export-action-plan/.
One option to test how viable your product or service could be in the Canadian market would be to attend trade shows held in Canada each year. The Department for International Trade (DIT) provides funding for eligible businesses in the form of grants to enable them to attend trade shows overseas via the Tradeshow Access Programme.
The funding helps your business to gather market knowledge, gain experience in attending and getting the most from overseas trade shows, and to receive advice and support from trade experts. Visit: https://www.gov.uk/guidance/tradeshow-access-programme for more information.
To discover future events and trade missions in Canada, visit the DIT Events Portal at: https://www.events.great.gov.uk/ehome/index.php?eventid=200183029&.
For company launches and events held at British High Commission and Consulate locations, contact the Department for International Trade (DIT) in Toronto at: https://www.gov.uk/world/organisations/department-for-international-trade-canada#contact-us.
[Source – DIT, gov.uk]
Setting up a company or office in Canada
It is possible to incorporate your business federally, or through Canada’s provinces or territories. However, as there are tax implications depending on which option you choose, you are advised to speak to local lawyers and accountants as to which option best suits your business.
A list of English-speaking lawyers in Canada is available at: https://www.gov.uk/government/publications/canada-list-of-lawyers, or you can speak to the DIT team in Toronto at: http://www.gov.uk/world/organisations/department-for-international-trade-canada#contact-us for assistance in locating potential lawyers and accountants.
Details about different business structures, and how to register with Canadian provincial and territorial governments, are available at: https://canadabusiness.ca/government/registering-your-business/#toc2. Be aware that if you intend to operate a business in the province of Québec, it will need a French as well as an English version of its name.
If you choose provincial or territorial incorporation you will need to additionally register with the Canada Revenue Agency (CRA) at: https://www.canada.ca/en/services/taxes/business-number.html to obtain a business number.
However, if you choose to incorporate your business with the federal government, you do not need to register with the CRA. You can find out more about federal incorporation at: https://www.canada.ca/en/services/business/federal-corporations.html?Open&src=mm2#ic-sub-menu.
More information about setting up a business in Canada is available on the Canadian Government’s Invest in Canada site at: https://www.international.gc.ca/investors-investisseurs/iic-iac/establish-etablir.aspx?lang=eng.
Because of distance and time zone issues, it may be more effective to successfully develop your business by selling in Canada through local agents, distributors or wholesalers, although you will need to visit the market a number of times to establish a personal relationship with a business partner.
You should research a number of potential agents or distributors before choosing one. Canada is a very large country by land mass, so you should check they are based near to your potential buyers. Look at their local reputation, regional coverage, marketing ability and resources, and beware of agents who are promoting products or services which are the same or similar to yours.
The Department for International Trade (DIT) team in Toronto at: http://www.gov.uk/world/organisations/department-for-international-trade-canada#contact-us can assist you in locating and meeting potential agents and distributors for your products in Canada.
[Source – DIT Trade and Investment guide: Canada, gov.uk, Invest in Canada]
As an alternative to setting up an office in Canada, you may consider direct exports and sales, licensing or franchising for some products and services.
Direct exports and sales
Direct export means supplying your products or services directly to the customer and involves you taking care of the logistics of marketing, selling, sending overseas and getting paid. This could be an option if you are selling online or responding to enquiries from potential Canadian purchasers.
Further information on selling directly overseas can be found at: https://www.great.gov.uk/advice/define-route-to-market/sell-overseas-directly/.
You also have the option to use local representation, for example by using an agent, distributor or wholesaler.
To help you to identify local representatives in Canada, contact a specialist trade adviser at the Department for International Trade (DIT) at: https://www.gov.uk/overseas-customers-export-opportunities.
Online purchasing is popular in Canada especially with consumers, and Canadian companies and government departments are also increasingly likely to purchase small orders over the internet.
The Department for International Trade (DIT) can help you export your goods to Canada through the E-Exporting Programme. Find out more at: https://www.gov.uk/guidance/e-exporting.
DIT has also negotiated listings at better-than-commercial rates. See online marketplaces in Canada at: https://www.great.gov.uk/selling-online-overseas/.
You should be aware that you must not charge value added tax (VAT) for online sales to Canada, but will need to fill out a customs declaration when you ship the products, and keep proof of export.
Licensing or franchising
A cheap way to enter the market is to license a product or service to be sold in Canada, as there are no set-up costs apart from the cost of a legal agreement.
However, you should undertake due diligence on licensees to ensure your Intellectual Property (IP) rights are fully protected. For further information about licensing IP, visit: https://www.gov.uk/guidance/licensing-intellectual-property.
There is no federal legislation on licensing in Canada, but the provinces of Alberta, British Colombia, Manitoba, New Brunswick, Ontario and Prince Edward Island do have provincial legislation. Details are available at: https://www.cfa.ca/our-services/advocacy/franchise-legislation/.
For information on franchising in Canada, visit the Canadian Franchise Association (CFA) site at: https://www.cfa.ca/ and the international section of the British Franchise Association website at: http://www.thebfa.org/international.
[Source – DIT Trade and Investment guide: Canada, gov.uk, CFA]
If you are selling to consumers (rather than businesses) you must comply with Canada’s consumer protection laws, which guarantee consumer rights when buying goods and services.
However, consumer rights across Canada can vary, as legislation is set at federal, provincial and also territorial level. You should therefore check with the federal government, as well as relevant provinces or territories to ensure you are complying with appropriate Canadian consumer protection legislation. Visit the Canadian Office of Consumer Affairs (OCA) at: http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02965.html for details of consumer protection legislation.
Professional indemnity insurance
You may require professional indemnity insurance if you provide a service and need to protect yourself against negligence claims from clients or third parties in Canada. See: https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/business-insurance/liability-insurance/professional-indemnity-insurance/ for further information, or alternatively contact the DIT team in Toronto at: http://www.gov.uk/world/organisations/department-for-international-trade-canada#contact-us for contacts of local insurers or specialist brokers.
[Source – DIT Trade and Investment guide: Canada, gov.uk]
Getting finance to fulfil an export contract
Globally, Canada ranks 12th out of 190 economies for Ease of Getting Credit, in the World Bank’s ‘Doing Business’ report 2019. See: http://www.doingbusiness.org/en/data/exploreeconomies/canada.
For UK companies that wish to sell products and services to Canada, there are schemes available to simplify the growth of your business and to fulfil an export contract. Contact your bank or financial adviser for more information about any current schemes. Alternatively, the DIT team in Toronto at: https://www.gov.uk/world/organisations/department-for-international-trade-canada#contact-us can help you find a financial adviser in Canada.
Your contract should specify the terms for payment, and use secure terms of payment in Canada through a letter of credit, cash, or partial payment in advance.
Be aware that you should only use open account payment terms (delivery of goods or services before payment) once you have an established trading relationship. See the Institute of Export’s guide to payment terms, at: https://www.export.org.uk/page/Methods_of_Payment for advice and further information.
Canadian customers may require credit terms to buy your products and services, so payment conditions should be factored into your prices – for B2B transactions these can range from immediate payments on receipt of goods (maybe with a negotiated small discount) to a negotiated 60-day payment.
UKEF helps UK companies to get paid by insuring against buyer default.
You may have difficulty accessing foreign exchange. Be confident you will get paid for your export contract. Speak to one of UKEF’s export finance advisers at: https://www.gov.uk/government/publications/find-an-export-finance-manager for free and impartial advice on your insurance options, or contact one of UKEF’s approved export insurance brokers at: https://www.gov.uk/government/publications/uk-export-finance-insurance-list-of-approved-brokers/export-insurance-approved-brokers.
Currency risks when exporting to Canada
In order to fix your price, it is essential to fix your exchange rate. Before signing any contract you need to consider whether the best option for you is to agree terms in Pounds Sterling (GBP) or Canadian Dollars (CAD). It may also be advisable to seek expert financial advice on exchange rates (FX).
Transferring money from Canada
Capital can be moved in and out of Canada without any restrictions, although currency transfers of CAD 10,000 or more need to be reported to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) at: http://www.fintrac-canafe.gc.ca/fintrac-canafe/1-eng.asp.
[Source – DIT Trade and Investment guide: Canada, gov.uk, UKEF]
comments powered by Disqus