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.
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.
Best Products you can sell online to Canada are-
- Fashion Apparels
- Plus Size garments
- Speciality Fashion
- Ebooks, online courses
- Pet food and toys
- 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
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.
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).
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.
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.
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.
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-
- A single back-end to monitor and manage all details related to international shipping.
- Comparing shipping rates across shipping providers to save costs
- Create bulk shipping orders
- 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.
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-
- A credit card that can be charged internationally, i.e, a Mastercard or Visa.
- A local bank in your country that supports ACH which stands for automated clearing house which really means your bank can accept electronic transfers
- Your local address
- Your country uses currency supported by Amazon.
- This is not an issue for most English speaking countries or non-English speaking European countries.
- A phone number (you’ll also need your international prefix number)
- 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-
- A credit card to charge any amounts such as pay per click advertising
- Your address
- A bank account number so they can transfer your profits to you
- A phone number so they can call you to verify your account
- Your business info such as your Social Security Number (personal government number) or your corporation numbers or EIN (Employer Identification Number)
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.
The three columns here represent-
- Column1/General: The typical rate of duty from the majority of the world’s countries.
- Special: Special duty rates assigned to specific countries or import scenarios.
- 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.
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/ecommerce-integration.html .
You can try Orderhive for 15 days without any charges or credit card details. Here is the link- https://www.orderhive.com/signup.html
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.