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Cross Border e-commerce

Cross Border e-commerce- Selling to Canada and USA

Cross-border e-commerce is going to become the next growth driver for the e-commerce industry. While the market is more than a trillion dollars in size, it comes with its own set of challenges.

Online fraud, non-payment, language barriers, multi-currency, international shipping overheads are just to name a few.

However, despite these challenges, the ever increasing volume of international b2c shipments is promising.

As we speak, leading marketplaces such as Amazon, are already on it to facilitate international selling within existing markets and expanding into newer markets such as China. 

This is why it becomes important for sellers to contemplate cross-border e-commerce selling, as this is one area where e-commerce is likely to grow.

The NAFTA trio

The NAFTA trio

In this post, we will try to look into the prerequisites, compliances, and tax structures in order to conduct cross-border e-commerce selling primarily in USA and Canada.

If you are an online seller based in the USA and selling to Canada or Vice Versa, this post is likely to be useful for you.  

Trade between Canada and USA goes long back in the history but in the recent past, NAFTA has primarily shaped it. Online sellers need to know the basics of NAFTA before they begin selling online.

Let’s begin with the product portfolio.

Selling to Canada-Your product portfolio

American Sellers are particularly interested selling in Canada and Mexico. Being NAFTA countries, trade barriers and duties are fewer.

NAFTA trade volume goes beyond 20 trillions. The US contributes 18 trillion into that alone.

Canada is a giant consumer of small items, produced in the US. Canadians mostly search for apparels, electronics, and books online.

The apparel market can be further segmented into various categories.

Top product category selling online

Top selling product categories in Canada

Best Products you can sell online to Canada are-

  • Fashion Apparels
  • Plus Size garments
  • Speciality Fashion
  • Ebooks, online courses
  • Pet food and toys
  • Electronics
  • Protein Supplements

Electronic products in Canada are significantly expensive than the US and importing it from a direct seller from the US is cost-effective for Canadians.

Listing the product-

You can list the product on your own e-commerce website or chose a leading e-commerce marketplace in Canada.

Some of the leading marketplaces in Canada are

  1. Amazon.ca
  2. Ebay.ca
  3. Etsy.ca
  4. Bestbuy.ca
  5. Newegg.ca  

The NAFTA Compliance

Origin of the product

Only goods produced in NAFTA countries are free of duties. NAFTA felicitates trade between USA, Canada, and Mexico.

Certificate of Origin. If you are fulfilling the order yourself you can download and fill the form yourself or seek help from your shipping company.

Certificate of Origin. If you are fulfilling the order yourself you can download and fill the form yourself or seek help from your shipping company.

Hence, if you are selling cross border to Canada, you are most likely to sell something that is ‘Made in USA’.

Products produced outside NAFTA countries have to pay duties, making them more expensive as they arrive at the destination.

As stated in the NAFTA, the seller is supposed to provide a certificate of origin to the importer, which, in this case–is going to be the buyer sitting in Canada.

Therefore, your customer is supposed to have the certificate of origin in their hands before the product is shipped. 

This is necessary because a Harmonized Tax is often collected from the buyer as the goods arrive at their doorsteps in Canada.

Tax Structures in Canada-

There are three types of taxes in Canada. The primary being the GST (Goods and Services Tax) and the PST (Provincial Sales Tax).

Tax types in Canada

Tax types in Canada

A number of provinces in Canada collect Harmonized Tax instead of the GST.  

The provinces of Nova Scotia, New Brunswick, Prince Edward Island, New foundland and Labrador, and Ontario have opted to “harmonize” their provincial sales tax with the general sales tax.

This combined rate is called the “harmonized tax,” and represents the sum of the 5 percent federal GST plus the appropriate provincial tax.

A number of Provinces that do not collect the harmonized Tax, instead go for the Provincial sales Tax or the PST.

Here is the complete list of GST, HST, and PST levied by Canadian Provinces.

Tax structures within separate provinces in Canada. Source- Purolator International

Tax structures within separate provinces in Canada. Source- Purolator International

Here is a Canadian Duty Calculator for you to arrive at an approximate price for your shipment. Note that these prices are excluded of the shipping charges that you would pay to the shipping company.

A Canadian Duty Calculator

A Canadian Duty Calculator

The charges levied by the shipping company may also include charges for the paperwork with the border authorities.

Choosing a Shipping Company to ship to Canada

Amazon has partnered with UPS to deliver international packages to Canada. If you are doing the fulfillment by your own, you can choose a cheaper shipping company of your choice.

By far, USPS provides the cheapest shipping rates.

The CN 22 form for clearance and ledger

The CN 22 form for clearance and ledger

However, you need a Customs Declaration form, CN22 before you ship the package.

The CN22 seeks your approval on the nature of the good(s) being shipped. It also asks for the HS Tariff, the value of the goods being shipped, and weight of the good.

Details of sender and receivers are also mandatory.

USPS rates are the cheapest and very affordable. And in addition to that, you can definitely look into some hacks & tricks to squeeze the maximum out for your bucks.


Cross-border selling always comes with a number of challenges when it comes to shipping management. It is because sellers are often selling to different countries at once. Some of the major challenges include-

  1. A single back-end to monitor and manage all details related to international shipping.
  2. Comparing shipping rates across shipping providers to save costs
  3. Create bulk shipping orders
  4. Create shipping labels

Al these can be managed by an efficient multi-channel order and shipping management software such as Orderhive. Orderhive’s features for international shipping management are essential for every seller, selling international.

Orderhive Shipping

A screenshot of shipped orders from one of our users selling international. Users get to choose between a number of carriers that offers the best price w.r.t the shipping destination.

Check out Orderhive’s shipping management module for free.

 

Selling to USA:

The US is one of the largest e-commerce retail destination in the world making it an obvious market for Canadian sellers to make quick profits.

A significant number of Canadian Sellers are already selling on Amazon.com and making substantial profits.

However, before you start selling in the US a number of details are required from a non-US citizen.

If you are selling on Amazon, you would require-

  1. A credit card that can be charged internationally, i.e, a Mastercard or Visa.
  2. A local bank in your country that supports ACH which stands for automated clearing house which really means your bank can accept electronic transfers
  3. Your local address
  4. Your country uses currency supported by Amazon.
  5. This is not an issue for most English speaking countries or non-English speaking European countries.
  6. A phone number (you’ll also need your international prefix number)
  7. A US EIN number. You don’t have to be a corporation and have any type of legal status in the US to get this number. You simply fill out online form 10-BEN on the IRS.gov website (Internal Revenue Service which is the US government tax collection agency)

Most of the times, Canadian Sellers sell in collaboration with a local vendor based in the US with citizenship. This also applies to selling through Amazon.com and using one of their warehouses to stock products (Using FBA).

In such cases, the requirements are fewer-

  1. A credit card to charge any amounts such as pay per click advertising
  2. Your address
  3. A bank account number so they can transfer your profits to you
  4. A phone number so they can call you to verify your account
  5. Your business info such as your Social Security Number (personal government number) or your corporation numbers or EIN (Employer Identification Number)

Source-http://markscottadams.com

Apart from Amazon, you can list on other marketplaces such as Newegg, Sears, Etsy and a number of other stores.

Checking the eligibility of the product you want to sell-

Before you think of picking an item to sell in the United States, you must go through the Harmonized Tariff Schedule.

The HTS gives a clear account of import duties levied on products entering the US.

Against every product falling into a category, you can find three tiers of duties listed for the HTS.

HTS Categories and respective duties

HTS Categories and respective duties

The three columns here represent-

  1. Column1/General: The typical rate of duty from the majority of the world’s countries.
  2. Special: Special duty rates assigned to specific countries or import scenarios.
  3. Column 2: The special rate of duty assigned to trade restricted countries. Cuba, North Korea, etc.

Apart from this, your shipping partner would charge some commission to get the paperwork done.

Taxes in the United States-

A significant number of Canadian Sellers sell in collaboration with a local agent in the US or go for a US-based marketplace.

In such cases, local tax rates are levied on each sale with respect to the state in which the goods have been sold.

tax rates 2018

Combined State & Local tax rates for 2018

Shipping to the USA:

As usual, if your product is made within any of the NAFTA countries, you will not incur import duties at the border for the product.

If your product is manufactured within NAFTA countries, a NAFTA certificate of origin is required for every product shipped into the US.

As far as cheapest shipping rates are concerned, USPS leads all the way in Canada as well. USPS would source the shipments from Canada post and gets them delivered in the US.

International selling for Omni-Channel Sellers can be overwhelming-

When it comes to international shipping within an Omnichannel selling model, things can get extremely complicated.

Shipped packages often spend a substantial amount of time with the customs. This long wait can be frustrating for both customers and sellers.

In addition to that, recurring sales in Cross-border e-commerce can only be driven by trust. This is why customer experience with checkout and shipping must be flawless.

You can provide a satisfactory experience once you have the ability to track the movement of all the shipments and keep updated on the inventory part.

An effective inventory and shipping management software such as Orderhive can efficiently get it done for you.

Orderhive integrates with leading marketplaces and shippers to keep you updated on your inventory, purchase, delivery, drop shipping and various other needs. Check out integrations provided by Orderhive-https://www.orderhive.com/integrations.html .

A glimpse of Orderhive integrations

A glimpse of Orderhive integrations

You can try Orderhive for 15 days without any charges or credit card details. Here is the link-https://beta.orderhive.com/signup

Cross-Border e-commerce is growing fast and Sellers across the world over are diving in. Amazon and other leading marketplaces are also gearing up to ease the selling process. And they are doing it by managing the gamut of paperwork, leveraging on customer success and various other processes that currently act as barriers.

You may soon expect international e-commerce to become as easy and hassle-freee as the domestic one. However, when that happens, sellers with automated inventory and shipping management would have the edge and advantage.

—————————————————————————————————

We have covered international e-commerce between NAFTA countries in this post. In my next post, I will take up cross-border e-commerce between US and China.

Part 2- How to sell online to China-Cross Border E-Commerce

Arup Dey

Arup Dey

Arup works as Content Marketing Manager for Orderhive. Apart from running Orderhive's digital strategy, Arup likes to write deep and incisive articles on topics across a wide spectrum.

14 Comments

  1. Liliya Posted June 4, 2017 at 7:50 pm | Permalink

    Hello, my name is Lily. I have a couple questions if you permit.
    1) According to HTS, if I cannot find the good we are willing to sell online to Canadian domestic market, what does it mean? We would sell car deadener produced in the US.
    2) It is unclear, if we, as non-residents, register LP in Ontario, but sell online and by mail, do we actually have to register our business in every single province? Or is this waived due to online subject?

    Thank you!
    Lily

  2. admin Posted June 5, 2017 at 6:22 am | Permalink

    Hi Lily! Thanks for stopping by.
    I will try to answer the second one first. If you want to register being a non-resident, most probably you would have to go for a partnership model. In that case, your existing Canadian partner can help you out with things.
    If you register your business under your own name in Canada, you can go for a sole proprietorship licence.
    Canadian Provinces have something called extra provincial registration. For example, BC, Alberta, and Saskatchewan have an extra provincial agreement called NWPTA– according to which you can start selling in any one of these and then expand to the next two without much hassle.
    As far as Ontario is concerned, it has a special agreement with Qubec similar to the NWPTA. That means you can incorporate in ON and sell in QC without any extra provincial certificate for QC. So, the idea is to focus on these Province clusters and then incorporate for maximum outreach.
    About the HTS code, i am assuming that your deadeners are sheets and not spray paint deadeners. In that case, i am not sure but it should come under 9902.25.54 (Floor coverings and mats of vulcanized rubber ).

  3. Judy Posted August 1, 2017 at 5:30 pm | Permalink

    Hi Arup,
    Thank you for the article great information. You mention Best Products you can sell online to Canada however what are the best products to see from Canada online to USA.

    Thanks
    Judy

  4. Emmitt Posted September 12, 2017 at 3:28 pm | Permalink

    Hi,
    We are a US based company with a SAAS (Software as a Service) model. We create a web site for our clients and they pay us monthly for that customized web site. If we service international clients, and they pay via PayPal, do you know if there are any additional international tax concerns that we need to deal with? We already pay standard US small business taxes. Thank you.

    • admin admin Posted October 28, 2017 at 7:19 am | Permalink

      Hi Emmitt,
      Taxation on SaaS varies according to the State you live in. I do not know the exact taxation figures but let me just list out the states that charge and do not charge sales tax on SaaS.

      States that charge sales tax on SaaS-
      Arizona
      Connecticut
      Hawaii
      Indiana
      Massachusetts
      Minnesota
      New Mexico
      New York
      Ohio
      Pennsylvania
      South Carolina
      South Dakota
      Tennessee
      Texas
      Utah
      Washington
      Washington, D.C.
      West Virginia

      States that do not charge sales tax on SaaS-
      Alabama
      Arkansas
      California
      Colorado
      Florida
      Georgia
      Idaho
      Illinois
      Iowa
      Kansas
      Kentucky
      Louisiana
      Maine
      Maryland
      Michigan
      Mississippi
      Missouri
      Nebraska
      Nevada
      New Jersey
      North Carolina
      North Dakota
      Oklahoma
      Rhode Island
      Vermont
      Virginia
      Wisconsin
      Wyoming
      Also note that Alaska, Delaware, Montana, New Hampshire, and Oregon have no sales tax at all.

  5. prosoccerrebounder Posted January 4, 2018 at 4:15 am | Permalink

    Nice answer back in return of this matter with firm arguments and telling all regarding that.

  6. Bernd Posted January 15, 2018 at 3:33 pm | Permalink

    I am missing info about Returns handling, especially the customs requirements: administation, duty refund oprion for returned goods, requirements for duty-free importation of returns

    • admin admin Posted January 16, 2018 at 5:12 am | Permalink

      Hi Bernd,
      Noted. We will include these details in this post itself or write a new post altogether very soon.

  7. Perry Wilcinski Posted April 24, 2018 at 2:10 am | Permalink

    Thanks for the article post.Really looking forward to read more. Keep writing.

  8. Diana Posted May 2, 2018 at 5:41 am | Permalink

    Hi , if I’m selling from Usa , California branded clothing from our us stores to Canada websites,( but the branded clothing are made in China most of them) what I need to declare ? I’ll pay duties taxes depends of how much those products cost providing the receipt or how it works?

    • admin admin Posted May 2, 2018 at 5:55 am | Permalink

      The amount of tax will depend on the amount listed on the invoice that you give to the customer. The rate of tax will depend on the state you are selling in.
      As far as duties are concerned, a lot of the items are duty-free. Make sure to check the harmonization code though.
      Thanks!

  9. Kam Posted May 9, 2018 at 10:01 pm | Permalink

    Hi Arup great article. While sale of goods is discussed here, do the same rules apply to sale of services from Canada to the US (so no tangible good is sold)? In the age of the internet I can offer professional consulting services from Canada to US clients. How are services treated in terms of trade/tax requirements? Do you have any resources you can recommend where I can learn more about this?Thanks!

    • admin admin Posted May 11, 2018 at 7:30 am | Permalink

      Intangible services are not taxed. However, if you have a permanent establishment in the US, you are liable to pay the taxes according to the state you operate. Permanent establishment means an office, a satellite branch of your business, or a warehouse or anything tangible.
      The taxation for intangible services over the internet is a hot topic among politicians. Expect new rules and taxes soon.

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