How to Start an Import Business in Canada: A Step-by-Step Guide
Are you interested in importing goods into Canada and selling them online or in your store? Importing can be a lucrative way to expand your product range, reach new customers, and lower your costs. However, importing also comes with some challenges and risks that you need to be aware of before you start. In this article, we will explain how to start an import business in Canada in six easy steps.
Step 1: Register your business and get an import-export account
If you don’t already have a business, you will need to start one before you can begin importing into Canada. You can choose from different types of business structures, such as sole proprietorship, partnership, corporation, or cooperative. Each one has its own advantages and disadvantages, so you should consult a lawyer or an accountant to help you decide which one is best for you.
Once you have registered your business, you will need to get a business number from the Canada Revenue Agency (CRA) for an import-export account. This is a free account that allows you to report and pay the duties and taxes on the goods you import or export. You can apply for an import-export account online, by phone, or by mail. For more information, please refer to the Business number registration page.
Step 2: Identify the goods you want to import and their country of origin
The next step is to research the products you want to import and find out where they come from. This is important because different rules and regulations apply to different types of goods and different countries of origin. You should also gather as much information as possible about the products, such as their description, composition, specifications, and samples. This will help you classify them correctly and determine the duties and taxes that apply to them.
Step 3: Check if the goods are subject to any permits, restrictions, or regulations
Some goods are subject to special permits, restrictions, or regulations when they are imported into Canada. For example, some goods may be prohibited or controlled for health, safety, environmental, or security reasons. Some goods may also require inspection or certification by the Canadian Food Inspection Agency (CFIA), Health Canada, or other authorities. You are responsible for ensuring that the goods you import comply with all the applicable laws and regulations. To find out if the goods you want to import are subject to any import requirements, you can use the Automated Import Reference System (AIRS) tool.
Step 4: Find a reliable supplier and negotiate the terms of trade
Once you have identified the products you want to import and their import requirements, you need to find a reliable supplier who can provide them. You can search for suppliers online, through trade directories, trade shows, trade missions, or referrals from other businesses. You should do some due diligence on the suppliers you are considering, such as checking their reputation, quality, delivery time, and customer service.
When you have found a suitable supplier, you need to negotiate the terms of trade with them. This includes the price, quantity, quality, payment method, delivery method, insurance, warranty, and dispute resolution. You should also agree on the Incoterms (International Commercial Terms), which define the responsibilities and risks of both parties in an international trade transaction. For example, FOB (Free On Board) means that the seller is responsible for delivering the goods to the port of shipment and clearing them for export, while the buyer is responsible for arranging the transportation and insurance from there. You should also sign a written contract with your supplier that outlines all the terms of trade clearly.
Step 5: Arrange the transportation and insurance of your goods
The next step is to arrange the transportation and insurance of your goods from the supplier’s location to your destination in Canada. You can choose from different modes of transportation, such as air, sea, rail, or road. Each mode has its own advantages and disadvantages in terms of cost,speed, reliability, and environmental impact. You should compare different options and choose the one that best suits your needs and budget.
You should also arrange adequate insurance coverage for your goods during transit. This will protect you from any loss or damage that may occur due to accidents, thefts, natural disasters, or other unforeseen events. You should check with your supplier what kind of insurance they provide and what kind of insurance you need to purchase separately.
Step 6: Report and pay the duties and taxes on your goods
The final step is to report and pay the duties and taxes on your goods when they arrive in Canada. You can do this yourself or hire a licensed customs broker to do it on your behalf. A customs broker is a professional who can help you prepare and submit the required documents, calculate and pay the duties and taxes, clear your goods through customs, and deal with any issues that may arise. You can find a list of licensed customs brokers on the Canada Border Services Agency (CBSA) website.
To report and pay the duties and taxes on your goods, you will need to provide the following information:
- The tariff classification number of your goods, which determines the rate of duty that applies to them. You can find the tariff classification number of your goods using the Canadian Customs Tariff or the AIRS tool.
- The value for duty of your goods, which is the amount you paid or will pay for them in Canadian dollars. You can convert the currency using the Bank of Canada exchange rate or the rate specified in your contract. You may also need to adjust the value for duty by adding or deducting certain costs, such as transportation, insurance, commissions, royalties, or discounts.
- The origin of your goods, which determines if they are eligible for any preferential tariff treatment under a free trade agreement or other arrangement. You may need to provide a proof of origin, such as a certificate of origin or a declaration of origin, to claim a lower or zero rate of duty.
- The destination of your goods, which determines if they are subject to any provincial or territorial taxes, such as the harmonized sales tax (HST), the provincial sales tax (PST), or the Quebec sales tax (QST).
You will also need to provide a commercial invoice that contains all the relevant information about your transaction, such as the seller’s name and address, the buyer’s name and address, the description and quantity of the goods, the price and currency of the goods, the terms of trade, and any other charges or discounts. You may also need to provide other documents, such as a bill of lading, a packing list, a permit, a certificate, or a declaration, depending on the type and origin of your goods.
You can report and pay the duties and taxes on your goods electronically using the CBSA’s Single Window Initiative (SWI) or Integrated Import Declaration (IID) systems. Alternatively, you can report and pay them manually using Form B3-3 Canada Customs Coding Form. You can find more information on how to report and pay the duties and taxes on your goods on the CBSA’s website.
After you have reported and paid the duties and taxes on your goods, you will receive a release notice from the CBSA that confirms that your goods are cleared for entry into Canada. You can then arrange to pick up your goods from the port of arrival or have them delivered to your location.
Congratulations! You have successfully imported your goods into Canada. However, your responsibilities do not end here. You should also keep all the records and documents related to your import transaction for at least six years in case you need to make any corrections or adjustments, such as re-determining the classification, value, or origin of your goods. You should also monitor any changes in the laws and regulations that affect your import business and comply with them accordingly.
The State of Canada’s Import Business in 2020
Canada is one of the world’s largest trading nations, with a total merchandise trade activity of $1,086 billion in 2020, according to Statistics Canada. However, the COVID-19 pandemic had a significant impact on Canada’s import business, as well as its exports. In this blog post, we will look at some of the key statistics and trends of Canada’s imports in 2020, and how they compare to previous years.
Canada’s Merchandise Imports by Value and Share
According to the World Bank, Canada’s merchandise imports were valued at $405 billion in 2020, down by 10.4% from $561 billion in 2019. This was the largest annual decline since the global financial crisis of 2009, when imports dropped by 16.8%. Canada’s merchandise imports as a percentage of GDP also decreased from 30.99% in 2019 to 28.98% in 2020.
The top five import categories for Canada in 2020 were:
- Vehicles and parts: $64.2 billion (15.8% of total imports)
- Machinery and equipment: $60.5 billion (14.9% of total imports)
- Electrical machinery and equipment: $35.6 billion (8.8% of total imports)
- Mineral fuels and oils: $26.7 billion (6.6% of total imports)
- Pharmaceuticals: $19.5 billion (4.8% of total imports)
These five categories accounted for more than half of Canada’s total merchandise imports in 2020.
Canada’s Merchandise Imports by Trading Partner
The United States remained Canada’s largest source of merchandise imports in 2020, with a value of $214.7 billion, or 53% of the total. However, this was a decrease of 13.2% from 2019, when imports from the US were valued at $247.3 billion, or 55.4% of the total.
The second largest source of merchandise imports for Canada in 2020 was China, with a value of $54.7 billion, or 13.5% of the total. This was an increase of 1.3% from 2019, when imports from China were valued at $54 billion, or 12% of the total.
The other top sources of merchandise imports for Canada in 2020 were:
- Mexico: $18.6 billion (4.6% of total imports)
- Germany: $14 billion (3.5% of total imports)
- Japan: $10.8 billion (2.7% of total imports)
The Impact of COVID-19 on Canada’s Import Business
The COVID-19 pandemic had a profound effect on Canada’s import business in 2020, as lockdowns, travel restrictions, and supply chain disruptions affected both domestic and international trade activity.
According to Statistics Canada, the lowest point for Canada’s merchandise imports was in April 2020, when they fell by 24.1% to $32.7 billion, the lowest level since January 2011. The most affected sectors were vehicles and parts (-76%), mineral fuels and oils (-55%), and machinery and equipment (-25%).
However, Canada’s merchandise imports recovered quickly in the following months, as industries reopened and demand for goods increased. By October 2020, import levels had surpassed the pre-pandemic levels in February 2020.
Some sectors even saw an increase in imports in 2020 compared to 2019, such as pharmaceuticals (+16%), electrical machinery and equipment (+5%), and plastics (+3%). These sectors benefited from the increased demand for medical supplies, personal protective equipment, and consumer electronics during the pandemic.
Canada’s import business faced unprecedented challenges in 2020 due to the COVID-19 pandemic, but also showed resilience and adaptability in response to changing market conditions and consumer preferences.
As the world recovers from the pandemic and trade relations normalize, Canada’s import business will continue to play a vital role in the country’s economy and global integration.
References:
http://www.bankofcanada.ca/wp-content/uploads/2015/07/mpr-2015-07-15.pdf
http://www.bankofcanada.ca/wp-content/uploads/2010/11/inflation_control_target.pdf
https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-platinum.pdf
https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-gold.pdf
https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-nickel.pdf
https://www.statcan.gc.ca/en/subjects-start/international_trade
https://wits.worldbank.org/CountryProfile/en/CAN
https://www.importglobals.com/statistical/canada-Import-data
http://www.inspection.gc.ca/airs
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