Small business guide to shipping to Canada
E-commerce businesses are steadily growing year over year and due to changes in consumer purchasing as a result of the global pandemic, e-commerce resulted in 16.4% of all global retail sales. With more individuals shopping online than ever before, small businesses have a unique opportunity to grow their customer base and profits by expanding globally. For U.S. based e-commerce businesses, opening sales to Canada is a great first step into becoming a global business.
Canadians have demonstrated a willingness to shop with U.S. businesses—Costco, Walmart, and Lowe’s count themselves among the country’s top retailers and small businesses have also had success, especially with marketplaces like Etsy.
Entering the Canadian marketplace
Understanding the Canadian market is crucial before expanding offerings north of the border. Canadians have shown an interest in various imported products, including men’s, women’s, children’s apparel, jewelry, toys, and home decor.
After some initial research, there are several necessary steps to take before expanding to Canada. First and foremost, your brand’s digital platform must reflect Canada’s currency and accurate accounting of duties and taxes. Secondly, it’s essential to provide language choices. Québec language laws require any website selling products to Québec residents to include French and English.
Shipping from the U.S. to Canada
Once your online marketplace is compliant with Canadian requirements, you need to understand shipping policies and processes to get your product in customer’s hands across the border. A recent trade agreement between the U.S., Mexico, and Canada reveals one of the larger challenges small businesses can face when operating an e-commerce website exporting to Canada—duties and taxes. Under the revised agreement, Canada raised its de minimis from CAD 20 to CAD 40. This means goods sold for less than CAD 40 are not subject to taxes or duties, which can help generate a more efficient shipping process with less steps.
While the agreement has made shipping to Canada more accessible, a comprehensive understanding of the process is a vital step for U.S. small businesses to take when expanding internationally.
Trade compliance: Shipping any package larger than a 16 oz. envelope from the U.S. to Canada requires accompanying documentation, most commonly either a Commercial Invoice (CI) or Canada Customs Invoice (CCI).
Failure to fill these forms entirely or making mistakes—such as undervaluing the goods in them—can lead to transportation-related delays and unforeseen expenses.
- Commercial invoice: Create a CI online and make sure to include key details like identifying the product and its value. Then, print and attach the copy to the package.
- Canada Customs invoice: This specific invoice is only necessary when shipping items with values exceeding CAD 2,500.
Duties and taxes: Sometimes, the most daunting shipping-related task when fulfilling an order from the U.S. to Canada is navigating tax laws. The Canada Border Services Agency (CBSA) provides an online tool for estimating duties and taxes on parcels from the U.S. to Canada. Additionally, there are three types of taxes you’ll need to know including:
- Goods and services tax (GST): A 5% federal tax on items sold to Canadian customers for domestic consumption.
- Harmonized tax (HST): A combination of GST and provincial taxes used in a handful of provinces (New Brunswick, Newfoundland, Labrador, Nova Scotia, Ontario, and Prince Edward Island).
- Provincial sales tax (PST): Taxes imposed by individual provinces that have not implemented HST, ranging from 6% to 9.975%.
Visibility: Approximately 37% of Canadian online shoppers abandon their carts if an expected delivery date and tracking-related information aren’t clear. This is particularly important for small business shipping to Canada, as their packages could face potential bottlenecks like customs.
To ensure transparency, provide a tracking number that individuals can use via their FedEx Delivery Manager® account. This free service offers a host of options, including:
- Tracking notification providing up-to-date status of deliveries
- Temporary holds—We will hold onto all deliveries to the given address for up to two weeks for free.
- Delivery to secure and convenient pickup locations.
- Delivery directions—like leaving a package in a designated place, such as the back porch or side door.
Facing challenges when shipping from the U.S. to Canada
Generally, shipping products from the U.S. to Canada is straightforward; however, there are some situations that can arise and create unnecessary stress if not thoroughly researched beforehand.
Prohibited and restricted items:Several products are forbidden or require additional documentation when shipping from America to Canada. We maintain a convenient online guide to Canada’s prohibited and restricted items, but some of the restricted goods are:
- Specific plants, flora, and fauna
- All forms of tobacco (cigarettes, cigars, chewing and dipping tobacco, and electronic cigarettes)
- Currency—including antique coins
- Copyrighted works
- Perishable items such as foodstuffs and items requiring refrigeration
Troublesome products: Some products are not expressly forbidden. However, they’re more difficult to ship—the most notable of these items is alcohol, for which Canada has strict regulations around shipping, like they can only come from approved licensed entities.
Returns: Between 15% and 40% of online purchases are returned, making it necessary that small businesses have a strategy in place for customers in Canada shipping returns back to the U.S.
It’s never been easier to ship internationally and specifically to Canada. The rise of e-commerce has made accessing a worldwide customer base more effortless than ever and we’re here to help.
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