With the dust now settling on the new Canada-United States-Mexico trade agreement, it’s a good time for Canadian exporters, who were sitting on the sidelines during the negotiations, to consider breaking into the U.S. market for the first time.
The U.S. economy is healthy and consumer demand is strong, so prospects for export sales are good. But, as with any new market, proper preparation for entry is critical. In this blog, I’ll outline some of the key issues for Canadian companies to consider before exporting to the U.S. and provide resources to help your company once you decide to move ahead.
The U.S. market is attractive to Canadian exporters for several obvious reasons:
- It’s a very large market with affluent consumers, particularly in the big cities.
- We share a common language and similar cultures and tastes.
- Shipping costs are less than those to other regions such as Europe and Asia.
None of this guarantees export success, particularly for smaller Canadian companies going head-to-head with much larger U.S. or global competitors. Finding the right niche is important, and it’s crucial to keep expansion manageable. Start small, focus on a region, or even a city, and get it right before considering a broader market.
But first and foremost, do your research: Is there a demand for your product? How competitive is your market segment? Who are your competitors? What’s your competitive advantage?
Next, look at the rules and regulations governing exports to the U.S. from Canada and make sure you comply. Look at possible routes into the market, perhaps an American partner to distribute or sell your product, or an online store or distribution centre to ship your product directly from Canada or from a U.S.-based warehouse.
And finally, check to see if your business is eligible for government grants or programs to help you develop an export market. All these steps have worked well for Canadian companies in the past and one or more of them could help you, too.
How to identify opportunities
Now that I’ve set the scene, let’s look at where to get the information you need and how to use it.
There are plenty of free resources available online to help kick off your market research. One that I’m very excited about is EDC’s recently launched Export Help Hub. Each year, EDC Export Advisors like myself answer questions from hundreds of Canadian companies looking to fo business in the U.S. The Export Help Hub has pulled all of their questions together onto one site, where you can access this trusted intelligence for free—to hone your export strategy, make better decisions, and take action, starting right now.
Trade Data Online is a very useful tool that provides customizable trade statistics by product, country, or U.S. state. You can even use it to see U.S. imports of a specific product from countries around the world. If you want to learn about a certain region or city in the U.S., American Fact Finder by the U.S. Census Bureau is an excellent tool for viewing demographic and economic information by location.
For industry-specific data, try contacting your local industry association in case they have any market intelligence they could share. Furthermore, industry associations based in the United States may publish market reports or statistics on their websites. If you are a company in the agri-food sector, Agriculture and Agri-Food Canada’s U.S. market reports are a great free resource to leverage.
A more hands-on approach is to join a trade mission to the U.S. or attend a trade show or industry convention to not only gather market intelligence, but also network and identify potential partners and opportunities.
Before you attend a trade show, you might want to read EDC’s white paper Trade Shows and You for tips on how to identify potential shows in your industry and how to make the most of your trade show investment.
Now let’s look at the rules and regulations for export to the U.S. from Canada. There are many valuable resources available. To start, you should read EDC’s Guide to Doing Business in the United States, which is designed to help Canadian companies learn about the U.S. market and how they can do business there. Chapter 4 on Trade Compliance gives an overview of customs requirements, product standards, and travel regulations.
Taxes are another challenging topic to navigate when selling to the US, since the requirements vary from state to state. The best thing to do is check with your accountant for guidance on any tax implications of your sales to the US. As a starting point, the BDO Canada website offers a wealth of information about U.S. taxes, which vary from state to state. To access the website of each state’s tax authority for information on income and sales taxes, visit the Multistate Tax Commission site.
So, there you have it. An overview of how to start your exporter journey to the U.S. For those companies that follow the right path and conduct thorough due diligence, the opportunities are boundless.