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There are three basic types of import/export businesses. Starting out, it’s a good idea to pursue the one that interests you most.
Let’s say a company in Canada wants to export machinery. That’s where an export management company (EMC) can help.
An EMC handles all of the details for the company to ship goods overseas. This could include hiring distributors, creating marketing materials and preparing shipping logistics.
An export trading company (ETC) finds out what foreign buyers want and then locates domestic companies that can export the goods.
Import/export merchants buy merchandise from a manufacturer — foreign or domestic — then resell that merchandise around the world. There’s heavier risk involved in being a free agent — but with fewer middlemen, the potential for higher profits as well.
How to set up a business entity in Canada
You can start your own import/export business with little upfront costs.
At a minimum, you need a phone and a reliable Internet connection. You’ll also want to invest in business cards, a website and a fax machine. And it doesn’t hurt to hire somebody for your branding, including a unique business logo.
In reality though you’ll need a lot more than this to get going. A lot of companies that enter the import/export business in India are already operating elsewhere, so crucial skills and resources include:
Once you’ve decided on the type of import/export business you want to run and calculated your startup costs, it’s time to narrow your market focus.
By niching down, you can focus your attention on a market you can serve best. Think about:
Take your time to dig deep with your research. The extra time you spend finding profitable niches will pay off in the long run.
Your target customer will be someone who wants to trade globally. They’ll either want to sell goods overseas or buy goods from international sources.
Beyond that, you can choose any type of customer you wish. Maybe you’ll cater to companies that sell Canada’s No. 6 export, plastic goods. Or wood. Or paper goods.
If you can identify a need, you can target a group of companies as customers.
According to worldstopexports.com, Canada’s top 10 exports in 2018 included:
According to worldstopexports.com, Canada’s top 10 imports in 2018 included:
To register your import/export business, you need to fill out the US Department of State’s SNAP-R company registration.
After you submit your information, the Department of State will send you an email about how to get a company identification number (CIN). A CIN is used for tax purposes and for registering with the US Department of Commerce.
Typically, the US Customs and Border Protection (CBP) doesn’t require a license to import goods to or export goods from the United States. However, other government agencies or departments or local governments may require them.
If you’re exporting goods, you can find out which licenses may be required by asking your local port of entry.
Refer to the Canadian Border Services Agency for specific questions regarding:
Before you can begin importing goods into Canada, you’ll need to obtain a business number from the Canada Revenue Agency. It’s free, and you can typically get one in minutes.
Canada requires a bit more work than other countries do, including tariff classification numbers for each item you import.
Become familiar with trade incentive programs, and contact a professional to learn more about registration, tariffs and restrictions that could affect your business.
Forming an LLC has specific benefits for importing and exporting, so we’ll discuss it detail. However, the US has four business structures to choose from depending on your needs, use the finder.com business structure guide to figure out which is best for your import/export business.
You don’t have to incorporate in the United States in order to start an import/export business.
However, incorporating or creating an LLC can provide key benefits, including:
Benefit | Description |
---|---|
Separation of personal and business assets. | Creating a corporation or a limited liability company (LLC) can help you protect your personal assets. For example, you’ll have less personal liability for business debts. |
Expense deduction. | Through a corporation or LLC, you can deduct business expenses before income is forwarded to you. |
Enhanced credibility. | Clients often prefer working with incorporated businesses, seeing them as more legitimate. |
Import/export business typically charge based on commission or retainer.
With a commission structure, you’re paid a percentage of any trade deal you close — usually around 10%. For example, if you sell a manufacturer’s smartphone for $300, you’ll make a $30 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.
On a retainer model, your client pays you a monthly fee to be on call when they need your services.
To find the right amount for your retainer, consider your costs — these may include labor, supplies and overhead.
Beyond a commission or retainer structure, you can simply buy goods and sell them. In this case, your revenue will come from the profit you make from selling merchandise.
A rule of thumb is to pick a commission model if you think a product will be easy to sell. If you think a product will be difficult to sell, however, price your business based on a retainer.
The thinking is based on this: If you’ll sell a lot of product, you want to be paid based on performance. On the other hand, if you believe sales will be slow, using a retainer model could ensure that you’ll be paid even in the downtime.
Finally, if you’re confident in your ability to sell products you acquire, you don’t have to negotiate a payment structure with manufacturers. All you’ll have to negotiate is how much you’ll buy product for and then find a way to profit from the merchandise.
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Laws and legal documents when transferring large sums of money into Canada
You need to send and receive goods from other countries, so you’ll need to arrange shipping details.
First, contact a freight forwarder — a company that helps you transport goods safely and efficiently. They will help you handle the logistics of completing shipping documents, finding cargo space and securing cargo insurance.
Find a freight forwarder by looking in state-specific business directories.
After you’ve hired a freight forwarder, read our shipping guides to learn how to ship merchandise.
Needless to say, your success hinges on whether you can ship goods safely and efficiently. If you’re exporting goods, for example, you’re responsible for ensuring they leave your local port and arrive at the correct destination on time.
You’ll also need to account for anything else that could go wrong, such as damage to the cargo. Staying organized and partnering with a reputable freight forwarder will help you ship goods without a hitch.
It’s a good idea to thoroughly research a market before entering into this business, though even that may not be enough.
Consider hiring experts who understand the tastes and cultures of your specific markets. You’ll need to sell products that resonate in countries you’re unfamiliar with.
Customs rules aren’t uniform throughout the world. Instead, you’ll encounter a mass of different regulations while transporting goods. To avoid drowning in a swamp of border regulations, hire experts in customs law and trade compliance.
The import/export business is for people who love building relationships in other countries. But it also requires an organized mind that can handle logistics.
If you have those qualities, take the plunge into creating a thriving import/export business.
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Hi… trading business in Canada.. With buying goods from US or Europe and selling them in to the Middle East market.. Is my incoming cash to my account is taxable?
Hi Ofred.
Thanks for getting in touch! If you are selling in a country/location that has taxes involved, generally, you would follow the country’s business rules and if that includes tax payment then you would need to pay tax.
Hope this helps!
Best,
Nikki
I want strat export bussiness the tiles and morbels,,,how to search a customers in Canada
Hi Prasanna,
Thank you for reaching out to Finder.
Though we could not provide you a list of getting your target customer for your products, the page we are on offers guides on how to narrow your market. You may do further research on companies that sell your products locally and get their products globally. These companies should be able to help you in expanding your network and start your import/export business in Canada. Hope this helps!
Cheers,
Reggie
I wish to start export of pre-owned cars and used/second hand auto parts to west africa. how can i get authentic information on cheap/reliable sellers of these products. Are there any rules guiding trades in used cars and used auto parts.
thank you, most kindly
Hi Igwebike,
Thanks for getting in touch with finder. I hope all is well with you. :)
It’s nice to hear about your business idea. The purpose of this article is to provide an overview of what it takes to start an import and export business in the US. If you need reliable information of where to buy your products, you would need to directly look into the industry you are concerned with. You can start using the Internet, newspaper, yellow pages, and other sources. You may also get in touch with businesses and start a partnership with them. There are a lot of things you can do to find the information you need.
When it comes to the rules, you would need to register your business and do other paperwork. Depending on where you want to operate your business, you would need to get in touch with the proper authority and get a checklist of the things you need to start your business and keep it running.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
I want to import vending machines manufacturer in the US to CDA. What is the best way to research this type of importing business I want to do?
Are there avenues where I can get in touch with a mentor who does this type of import?
Hi Macam,
Thanks for getting in touch with finder. I hope all is well with you. :)
One of the ways you can research this type of importing business is to get in touch with your supplier or the manufacturer of vending machines. Ask around whether they have already done this type of business and see if you can learn from them.
Next is to get in touch with the US and Canadian exporting agency. They might be able to refer you to other people who know the ropes when it comes to exporting goods to CA. Moreover, you will also learn the legal aspects of your business from these departments.
You may also want to research using the Internet, local and national yellow pages, journals, books, and other resources. By doing so, you might find a mentor who will teach you how to be successful in this business.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
I want to export shirts in canada how i ill start
Hi Awdwesh,
Thanks for leaving a question on finder.
We have outlined everything you need to know before starting your export business in the article above. If you need further help, please send us a message anytime, :)
Cheers,
Joel