If you’re a people person and love interacting with Canada, an import/export business could be for you.
Do you have connections in Quebec? Have you lived in Montreal? Maybe you simply love the spirit of Canada.
In the import/export industry, you can use your individual competitive advantages to serve as a matchmaker for companies in Canada — matching product manufacturers with markets that want and need to purchase the goods they produce.
If businesses in Canada want to export their goods, you help them find buyers. And if they’re looking for specific merchandise, you help them find sellers.
With dedication and this guide, you can become a part of the estimated $575 billion in goods and services traded between the US and Canada.
Types of import/export businesses
There are three basic types of import/export businesses. Starting out, it’s a good idea to pursue the one that interests you most.
Export management company
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.
Export trading company
An export trading company (ETC) finds out what foreign buyers want and then locates domestic companies that can export the goods.
Import/export merchant (or free agent)
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.
Narrowing your market
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:
- Customers you want to serve.
- Areas of the world you’ll target.
- Types of goods you’ll offer.
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.
- Machines, engines and pumps
- Gems and precious metals
- Electronic equipment
- Aircraft and spacecraft
Registering your business
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.
Import and export licenses
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.
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.
Incorporating and forming an LLC
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:
|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.|
Charging for your services
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.
An alternative model
Which business model should you choose?
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.
International billing and payments
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.
Compare international money transfer options for import and export to Canada
Shipping the goods
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.
Risks and how to avoid them
Unpredictable shipping logistics
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.
Not knowing enough about markets
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.
Running into problems at the border
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.
Frequently asked questions
Which type of import/export business should I choose?
There’s no “best” type of import/export business — each can be profitable, if managed properly. Pick the one that interests you most, and then research it thoroughly before starting a business around it.
What other factors should I consider when choosing a niche?
Think about your work history and where your expertise lies. For example, if you’ve worked for the electronics industry for years, consider starting an import/export business in that niche. You’ll have a head start on understanding the market, and you’ll be able to speak knowledgeably with potential customers.
Are there services that will help me incorporate or start an LLC?
Yes. Reputable services include LegalZoom, Incorporate and Rocket Lawyer.