Because of Canada’s proximity and cultural similarity to the United States, many U.S. companies incorporate their selling efforts in Canada into a general North American division or strategy. This time-tested approach usually works well. For companies new to the market, a distributor-based approach, Internet marketing, direct sales strategy, or a combination of the above can be an effective market entry or expansion strategy.
Although U.S. firms have experienced success in marketing directly to Canadian manufacturers, in general, odds of success are multiplied if companies work through a manufacturer’s representative or local agent. A robust website is highly suggested.
For U.S. firms marketing services (most often this means construction, engineering, or logistical services), we strongly recommend partnering with at least one Canadian firm. Partnering with a Canadian firm will make your firm more competitive in bidding situations because Canadian government buyers prefer to give major contracts to local firms, or at least to bids with strong local content. Due to Canadian work permit requirements, it will usually be necessary to have a local partner with local employees to carry out a great deal of the actual work.
Canada’s consumer goods market is small (34.6m population). Major U.S. retailers are already present and others have plans to enter or expand their local presence through major investments including Target Corp., Wal-Mart, and the Tanger Outlet Malls. Competitively priced, quality, and unique products have a good chance to gain market share in Canada. Companies should consider selling via the Internet as a low-cost strategy. Contact Stefan Popescu at Stefan.Popescu@trade.gov to receive a free copy of Canada - Selling On-Line to Canadians. U.S. firms often discover that many of their consumer goods sales from their northern U.S. distributors are actually sales made in Canada.
Large industrial equipment is usually purchased directly by end-users. In contrast, smaller equipment and industrial supplies are frequently imported by wholesalers, exclusive distributors, or by manufacturers' sales subsidiaries. U.S. firms have historically appointed manufacturers' agents to call on potential customers to develop the market. Most sales agents expect to work on a two-tier commission basis. Agents receive a lower commission for contract shipments and a higher rate when purchases are made from the local agent's own stocks.
Canada is a huge country, and it is usually prudent to secure a manufacturer’s agent near your potential buyers.
To sell to
Secure an agent in
The aerospace sector
The auto sector
The Canadian government
Alberta oil sands developers
Calgary or Edmonton
Consumer goods are usually purchased directly by Canadian wholesalers, department stores, mail-order houses, chain stores, purchasing cooperatives, and single-line retailers. Many of these groups have their own purchasing agents in the United States, who can be marketed to directly in the United States. Manufacturers’ agents can also play a role in the consumer goods sales.
Locating Partners and Customers
Commercial Service offices in Canada can assist U.S. firms in locating qualified potential partners through customized matchmaking programs such as the International Partner Search and Gold Key Service. The Client Finder service is a database driven, customized e-mail marketing solution for companies interested in identifying and reaching target clients in the Canadian market. Contact a Commercial Service Officer for additional information.
U.S. companies can establish a representative office or branch offices, set up a sole proprietorship or partnership, or incorporate a wholly owned subsidiary or joint venture in Canada. Corporations can be public or private, and incorporated federally or under the laws of a province. Private and public corporations incorporated federally under the Canada Corporations Act may operate nationally or in several provinces, but must still register as an extra-provincial corporation in each province in which it does business. Corporations Canada has a Joint Online Registration System that allows for extra-provincial registration for federal corporations with four provinces, namely Newfoundland and Labrador, Nova Scotia, Saskatchewan and Ontario. Registration fees vary by province, but are minimal. Corporations incorporated in Quebec must adopt a corporate name in French under Section 63 of Quebec's Charter of the French Language. Extra-provincial corporations registered in Quebec must supply a French version of their corporate name. Firms considering establishing operations in Quebec are advised to contact the Office Québécois de la langue Française (Quebec Office of the French Language) that helps companies comply with Quebec's language laws.
According to the Canadian Franchise Association, Canada's franchising sector is comprised of more than 1,000 franchises and over 78,000 individual units, ranging from restaurants to non-food retail establishments, from automotive product retailers to purveyors of business services. The average franchise investment in Canada is between $150,000 and $200,000. In the restaurant sector, 35 percent of all sales are from franchise operations. In the retail sales sector, 45 percent of all sales are from franchise operations. The fastest growing demographic of franchise buyers is women.
Although there are no federal franchise laws, Ontario, Prince Edward Island, and Alberta do have franchise specific-legislation aimed at ensuring small business investors are better able to make informed decisions prior to committing to franchise agreements. Disclosure requirements provide prospective franchisees with information about how sellers plan to approach key contractual issues, such as termination, and afford buyers stronger legal remedies regarding court action. Similar legislation is under consideration in other provinces.
The Canadian Marketing Association and the Direct Marketing News are two leading sources of information about direct marketing in Canada. Tapping into this market can be as easy as placing an advertisement in a magazine or on the Internet. In general, Canadian audiences are targeted using the same techniques used in the United States.
The Canadian legal system imposes few restrictions on joint ventures or licensing. Some joint ventures require approval from the Government of Canada under the Investment Canada Act; but, for the vast majority of new ventures, foreign investors need only notify the Canadian government of their investment. Approval is based on the "net benefit" of the venture to Canada. The "net benefit" criteria include whether the non-Canadian company adheres to Canadian standards of corporate governance (including, for example, commitments to transparency and disclosure, independent members of the board of directors, independent audit committees and equitable treatment of shareholders), and to Canadian laws and practices. The examination will also cover how and the extent to which the non-Canadian is owned or controlled by a state. The "net benefit" will also evaluate the level of Canadian participation; the positive impact on productivity; technological development; product innovation; industrial efficiency; and product variety in Canada. Canada has no regulatory scheme governing licensing arrangements. Foreign licensors also do not require registration or public disclosure.
In December 2011 Canada added provincial procurement and ten federal crown corporations to the WTO Government Procurement Agreement. This will open new markets for U.S. suppliers. The Canadian federal government spends approximately $20 billion a year on goods and services. Procurement in Ontario alone is estimated to be $15 to $20 billion annually, approximately equal to all federal procurement spending.
Public Works and Government Services Canada (PWGSC) is the government's largest purchasing organization, averaging 60,000 transactions and purchases over $14 billion in goods and services annually. While PWGSC buys goods for most departments of the federal government, the departments buy most services themselves.
Chapter Ten of the North American Free Trade Agreement (NAFTA) provides national treatment in Canada for U.S. companies on Canadian federal government procurement contracts above the following thresholds:
In addition to NAFTA, the WTO Government Procurement Agreement applies to most federal government departments. This multilateral agreement aims to secure greater international competition for government procurement. The Agreement applies to the procurement of goods and services valued at CDN $221,300 or more, and construction requirements valued at CDN$8.5 million or more. For more information visit: http://www.tbs-sct.gc.ca/atip-aiprp/tpa-pcp/tpa-pcp09-eng.asp. PWGSC is responsible for ensuring conformity with Canada's trade obligations under the NAFTA and the WTO Government Procurement Agreement.
PWGSC may incorporate terms and conditions contained in the Standard Acquisition Clauses and Conditions Manual by reference into procurement documents. Business Access Canada is an inter-departmental initiative to improve supplier and buyer awareness and simplify access to federal government purchasing information.
The Canadian government's official Internet-based electronic tendering service MERX gives subscribers access to more than 1,500 open tenders from the federal government, provincial governments, and many municipalities, school boards, universities, and hospitals that are subject to Canada's trade agreements. Approximately 150 new tenders are posted daily.
The MERX system provides U.S. suppliers with easy access and excellent opportunities to sell a wide range of products and services to Canada's public sector. The Basic Subscriber package is free of charge providing U.S. companies with access to Federal Government procurement opportunities. From there, it is possible to search, view and download tender documents at no charge. This package also includes a free delivery of Opportunity Matching results, and one free Opportunity Matching Profile that automatically searches for opportunities of interest based on a company's criteria. In order to access opportunities, other than federal government opportunities, users must subscribe to one of the fee-based packages.
In addition, the Supplier Registration Information (SRI) service is used by federal government buyers to identify potential suppliers for purchases not subject to any of the trade agreements (for which they use MERX).
The Canadian federal government's fiscal year is from April 1 to March 31.
Provincial and local procurements generally do not offer national treatment opportunities to U.S. companies as they are excluded from Chapter Ten of NAFTA. However, provincial and local government entities such as Ontario may still hold opportunities for U.S. goods and services.
The Commercial Service in Canada has launched a new initiative in 2012 that is designed to assist qualified U.S. firms target and win federal, provincial and municipal government procurement contracts in Canada. GlobalBizOps will serve particularly U.S. SMEs in a variety of sectors. Commercial Service Canada will act as a clearinghouse for information about government procurement opportunities, registering U.S. companies in Canada to be able to bid on contracts, providing guidance on bidding and or partnering with Canadian firms, and understanding the process and requirements in bidding as prime or sub-prime contractors.
Participants in this program will have access to quarterly webinars that focus on selling to the Government of Canada, and will obtain access to key contracts. Please consult the CS Canada website for additional information and details: http://export.gov/canada
The majority of sales to Canadian companies are handled through relatively short marketing channels; and in many cases, products move directly from manufacturer to end-user. This is particularly true for industrial products. Ninety percent or more of prospective customers for industrial products are located in or near two or three major cities. Canada's consumer goods market, on the other hand, is more widely dispersed than its industrial market. From a regional perspective, the country may be divided geographically into six distinct markets, plus the territories.
Canadian buyers expect reasonable payment terms, sophisticated or cutting edge technologies, in time delivery and competitive pricing and quality. After-sales service and support, and training are also very important to Canadian enterprises. Most conventions that apply in business culture in the United States apply in Canada. This includes setting up meetings in advance, being prepared, arriving on time and wearing appropriate business attire. However, even though we share a common language and border, it is important to treat Canada as a unique market. U.S. companies, particularly small and medium sized firms, must demonstrate credibility and a long-term commitment to the market. Making frequent reference to well-known and established clients, as well as identifying positive economic or environmental implications for Canada during sales presentations will resonate strongly with Canadian counterparts. Identifying the sustainable aspects of a product is also a crucial selling point in Canada. This can include the use of recycled materials, organic content, sustainable production techniques and use of local production. When doing business in Canada, having an understanding of the country’s culture, history and geography will be helpful for developing relationships.
In 2009, Canada ranked as the sixteenth country in the world for highest Internet usage with 26.96 million users. In 2010, this number grew to 27.8 million users and represented 81.7 percent of the Canadian population. According to Statistics Canada, more than half of connected Canadian households use more than one type of device to go online. In addition, approximately three-quarters of the population reported access to high-speed Internet in 2010.
Canadian consumers rely increasingly on the Internet to place orders online. For the past decade, Internet consumer sales have risen at a far higher rate than traditional retail sales. Most Canadian retail firms have adopted new wireless technologies and Internet based systems in order to improve B2B and business-to-consumer relations. Manufacturing firms and government organizations are also increasingly likely to use the Internet for purchases, especially for small routine orders.
Canada's e-commerce infrastructure is highly developed and closely integrated with that of the United States. Broadband Internet access is offered throughout Canada using much of the same equipment as in the United States. Information flows freely across the border, and without difficulty. U.S. companies do not need to set up a separate website. Many U.S. companies have integrated Canadian transactions into their current websites. Others have links, and maintain a .ca domain separate from their .com site. U.S. companies selling to Canadian business and consumers over the Internet should have procedures in place to meet Canadian customs requirements.
U.S. companies will need to comply with Canada's federal data privacy laws, including the Privacy Act and the Personal Information Protection and Electronic Documents Act (PIPEDA), as well as provincial privacy laws. Canada's Personal Information Protection and Electronic Documents Act (PIPEDA) requires persons or firms that collect personal information during the course of commercial activities to inform the subject of all possible uses of the data and to obtain consent for its use.
A crucial (and often neglected) factor in promoting manufacturing products (as well as technical services) in Canada is developing and maintaining a sales-oriented corporate website. This website needs to succinctly identify your firm’s products and services; their comparative advantages over competitors; technical specifications; examples or testimonials of your firm’s clients; and contact information for sales and service. And, once you have brought clients to this contact point (whether it be phone or e-mail), it is crucial that someone promptly respond to the inquiry. (It is remarkable how many companies invest thousands in advertising to attract potential clients to their websites, while neglecting these basics.) Beyond these basic steps, we recommend that firms can broaden their visibility and sales through participation in American pavilions at major Canadian trade shows, and through participation in Commerce Department trade missions to Canada. Visit www.export.gov/canada for a list of missions and events.
We recommend that small and mid-sized U.S. consumer goods firms entering the Canadian market focus on developing a strong web presence. Traditional mass market Canadian advertising (newspapers, TV, and radio) is very costly, even by U.S. standards. Given Canada’s relatively small and saturated consumer market, the upside from mass market advertising is usually not worth the price.
According to the Canadian Newspaper Association, there are currently more than 90 daily newspapers in Canada, of which approximately 90 percent are published in English and the remainder in French. Canada's leading daily national newspapers are:
Television and Radio
Leading stations include:
Canada’s remaining independent stations are mostly community-oriented specialty stations. Radio advertising is largely local.
Canadian web users are similar to those in the other English-speaking countries, especially the United States. The most popular sites in Canada are the major international sites, such as Google, Yahoo! and MSN. Facebook, Twitter and LinkedIn are the dominant social networking sites in Canada.
End-user prices of U.S. products and services to Canadian customers, in Canadian dollars, are substantially affected by the exchange rate changes between the U.S. dollar and the Canadian dollar. The value of the U.S. dollar hovers near parity in relation to the Canadian dollar. Canadian buyers are price-sensitive, particularly in the wake of the 2009 global financial crisis. U.S. companies should research competitors’ prices, and be prepared to negotiate on price to win contracts. U.S. firms should also have price lists illustrating Canadian prices.
Canadian customers, whether corporate or individual, demand high-quality sales service and after-sale customer support. Corporate clients often expect the U.S. seller to have an agent or distributor whom they can contact immediately should any problems arise. Like their counterparts in the United States, Canadian customers expect fast service and emergency replacement if required. A U.S. company entering Canada should evaluate its system of after-sale service and support in the U.S. market, and replicate that network as closely as possible in the Canadian market. Many U.S. companies have found that establishing a toll-free telephone number that services both Canada and the United States is extremely useful in maintaining contact with customers. If possible, sales and service should be handled within Canada. It can be expensive and time-consuming to handle product returns, exchanges, and warranty repairs cross-border due to the customs documentation required.
Canada remains on the U.S. government’s special 301 priority watch list due to concerns over its protection of intellectual property rights, although IPR legislation has been introduced in the Canadian Parliament. U.S. copyright or patent protection does not automatically provide equivalent protection in Canada. Your company’s intellectual property must be registered and enforced in Canada, under local laws. Companies should seek guidance and advice from local attorneys or intellectual property specialists.
Several general principles are important for effective management of intellectual property (“IP”) rights in Canada. First, it is important to have an overall strategy to protect your IP. Second, IP is protected differently in Canada than in the United States. Third, rights must be registered and enforced in Canada, under local laws. Your U.S. trademark and patent registrations will not protect you in Canada. There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the entire world. Protection against unauthorized use in a particular country depends, basically, on the national laws of that country. However, most countries do offer copyright protection to foreign works under certain conditions, and these conditions have been greatly simplified by international copyright treaties and conventions.
Registration of patents and trademarks is on a first-in-time, first-in-right basis, so you should consider applying for trademark and patent protection even before selling your products or services in the Canadian market. It is vital that companies understand that intellectual property is primarily a private right and that the U.S. Government generally cannot enforce rights for private individuals in Canada. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants who are experts in Canadian law. The U.S. Commercial Service can provide a list of local lawyers upon request.
While the U.S. Government stands ready to assist, there is little we can do if the rights holders have not taken these fundamental steps necessary to securing and enforcing their IP in a timely fashion. Moreover, in many countries, rights holders who delay enforcing their rights on a mistaken belief that the U.S. Government can provide a political resolution to a legal problem may find that their rights have been eroded or abrogated due to legal doctrines such as statutes of limitations, laches, estoppel, or unreasonable delay in prosecuting a law suit. In no instance should U.S. Government advice be seen as a substitute for the obligation of a rights holder to promptly pursue its case.
U.S. exporters should conduct due diligence on potential partners. Negotiate from the position of your partner and give your partner clear incentives to honor the contract. A good partner is an important ally in protecting IP rights. Consider carefully, however, whether to permit your partner to register your IP rights on your behalf. Doing so may create a risk that your partner will list itself as the IP owner and fail to transfer the rights should the partnership end. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Canada require constant attention. Work with legal counsel familiar with Canadian laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.
Small and medium-size companies must understand the importance of working together with trade associations and organizations to support efforts to protect IP and stop counterfeiting. There are a number of these organizations, Canadian or U.S.-based, including the following:
A wealth of information on protecting IP is freely available to U.S. rights holders. Some excellent resources for companies regarding intellectual property include the following:
Although Canadian businesses have a strong reputation for business ethics, before signing a major contract or entering into a long-term partnership agreement, U.S. exporters should conduct adequate due diligence. The Commercial Service offers an International Company Profile (ICP) service, which conducts routine background checks on Canadian companies that include a Dun & Bradstreet report.
Canada’s major cities boast an array of high quality professional services firms, catering to both large and small international companies. Prices for services vary greatly, and are often higher than those found in the United States. U.S. companies can refer to Commercial Service Canada’s website for a list of Canadian Business Service Providers specializing in serving U.S. firms.
Leading professional associations in Canada include: