So You Want to Export: Where do You Begin?
To begin exporting goods from Canada, you’ll need to add an import/export number to your regular business number. Please visit our Legal Requirements—Starting section for information on how to open a business in BC and how to add an import/export number.
You might also be required to obtain permits or licences, or follow specific government regulations, to export certain products. See Canada Border Services Agency’s Step by Step Guide for Exporting to determine what regulations you need to be aware of.
Are You Ready to Export?
An important question to ask is “Are we ready to export?” It’s not simply enough to want to sell your products internationally; you should also be prepared for this new business venture.
While export businesses differ, they all share certain characteristics, including a committed management team, production capacity, and financial capacity.
Just like your domestic business, your export business will require a comprehensive plan to help you identify the steps to selling internationally. A business plan will help you understand the legal requirements for getting your product into a new market, identify the costs associated with exporting, and develop an overall strategy for this new endeavour.
The Department of Foreign Affairs and International Trade (DFAIT) publishes a Step-by-Step Guide to Exporting and a Step-by-Step Guide to Exporting to the United States. Along with export plan templates, these guides allow you to:
- Assess your company’s export readiness
- Build an export plan
- Research and select your target market
- Create an export marketing plan
- Determine the best methods of delivering your product or service to your target market
- Develop a sound financial plan
- Understand the key legal aspects of international trade
Do Your Homework to Find Your Markets
Market research is an essential step in the export process. With close to 200 countries in the world to export to, you want to make sure that you’re targeting the right ones.
Through market research, you can determine which countries hold potential for your product, who your competitors are in that marketplace, and what the trends are for your product in that market.
Screening Potential Markets
- Obtain export statistics. Search the Statistics Canada website to see where Canadian exports are currently going.
- Identify potential markets. Of the countries you have identified, which hold the most potential? Are the markets growing there? Remember to not just look at the largest markets; look at the smaller secondary markets that might have fewer competitors.
- Target the most promising ones. Of the markets you have identified, choose three to five that you feel hold the most promise, and begin further research.
Assessing Your Target Markets
- Examine product trends. Look for information on your product as well as related products. The Department of Foreign Affairs and International Trade (DFAIT) has free market research reports for various countries in different industry sectors. You can also look to Canadian industry associations that are related to your business. Even if you’re not a member, they might have research reports available to you.
- Research the competition. You need to know who your competitors are. This includes both foreign competitors and domestic. Google is a great resource, as are the reports published by DFAIT.
- Analyze the market. Research any factors that may affect the marketing and use of your product. For example, does your product name have a different meaning in the local language, or do you need to change your sizing to suit the local market?
- Identify barriers. You also need to know if there are any significant export barriers or import barriers. The most common export barriers are export controls for certain products. To check to see if there are any export controls for your products, check with the DFAIT’s Export and Import Controls Division. Import barriers could include significant import duties or import regulations for your product. You will need to check with the foreign country’s customs agency to determine what these may be. You can also check with DFAIT’s office abroad.
- Choose a market. Once you have conducted market research, you should determine which market is most suitable. For a small business that is just starting exporting, we recommend that you target at most two markets at a time.
Finding Qualified Buyers
Once you’ve identified the markets that you’re going to target, you’ll need to find the buyers for your product in that market. There are various strategies you might want to consider:
- Search online. Use Google, Kompass, or Alibaba.
- Attend trade shows. For a list of trade shows, refer to biztradeshows.com.
- Contact industry associations. When researching your targeted export market, look for any relevant industry associations as they will often publish a list of their member companies or be able to provide one to you.
- Use the Department of Foreign Affairs and International Trade (DFAIT) Trade Commissioners Service. For companies that are export-ready and have a commercialized product, the Trade Commissioners Service has offices in Canada, as well as over 150 offices internationally.
Taking Care of Logistics
Once you’ve made a sale, you’ll have to ship your product to your international customer. Because of the complexity of moving products out of the country, exporters will often get assistance from freight forwarders (companies that arrange the shipment of goods from one country to another). You can find a freight forwarder by visiting the Canadian International Freight Forwarders Association’s website.
Export Documentation: It’s All in the Details
Canada Border Services Agency (CBSA), the customs agency in the foreign country to which you’re exporting, and even the buyer, all might require you to complete documentation to comply with import regulations.
The CBSA offers free seminars on exporting commercial goods from Canada. We recommend that you attend one of these seminars to understand what your responsibilities are.
If you’re exporting for the first time, we also recommend that you work closely with your freight forwarder to make sure your documentation is all in order.
Pricing it Right
There are various methods for you to determine the pricing of your product. The most common include:
- Cost based. In this method you calculate all of the costs associated with manufacturing your product and exporting your products. Using this method, you can determine if exporting is a financially viable option for your company. Some important costs to consider are:
- Fees for market research
- Production costs
- Export documentation
- Freight and insurance
- Import duties
- Wholesaler mark-up
- Importer/distributor mark-up
- Retail mark-up
- Travel expenses
- Translation costs
- Product adaptation costs
- Commissions or other costs associated with foreign representatives
- Market demand. Here, you’ll research the market to find out what consumers are willing or able to pay. If you determine that your current selling price is too high for the new export market, there might be ways for you to modify your product to bring its cost down.
- Competitor pricing. If there are a lot of competitors in the new market, you might be forced to match your competitors’ pricing to compete effectively.
It’s important to clarify with your buyer the terms of sale that outline the obligations, risks, and costs of the buyer and the seller.
Incoterms are the most commonly agreed upon terms of sale in international business. Please visit the International Chamber of Commerce website for a full description of incoterms.
Methods of Payment
You’ll want to make sure that you get paid in full and on time. How you manage this will depend on how trustworthy your buyer is. The basic methods of payment, listed in order of least risky to most risky for the exporter, are:
- Cash in advance. Your company receives payment for the goods, usually by wire transfer or sometimes by cheque, or even credit card, in advance of the shipment. Once you receive the money, you arrange to ship the product to the buyer.
- Documentary Letters of Credit (LCs). These are usually a good compromise for both the buyer and the seller, and are the most common payment method in international business. LCs work by relying on banks to receive and check shipping documents and guarantee payment. For more information on LCs, contact your business bank.
- Open account. If the buyer is well established, very trustworthy, and has been thoroughly checked for credit worthiness, you might consider simply billing the buyer who will pay you at a later date.
In Canada, there are programs and associations that support and promote exporting by offering financial assistance. For more information on the programs available read the How to Finance Your Growing Export Business article.
For more information on how to export goods from Canada, visit TRADESTART.ca