The European Union (EU) is the largest trading bloc in the world and the second-largest global economy. As a major importer and exporter of goods and services, Canadian organizations can benefit from doing business in Europe.
What makes trading with the EU so advantageous for Canadian businesses, and small and medium businesses in particular? If you want to start exporting to or importing from the EU, what does your business need to know?
Canada’s trade agreement with the EU
As a Canadian business considering importing from or exporting to Europe, looking at Canada’s free trade agreement with the European Union should be one of your first steps. The agreement is known as the Comprehensive Economic and Trade Agreement (CETA) and has been in force since 2017. Canada’s trade with the EU is significant, as merchandise exports to the EU amounted to nearly $44.5 billion (CAD) in 2018.
What are the benefits of CETA for your business?
- Approximately 98% of all import duties on goods of EU or Canadian origin are removed
- Simplified customs processes result in the quicker release of your goods
- More European companies can invest in Canada
- Canadians have greater access to EU government procurement
- Easier for Canadian firms to sell services in Europe
- Access to a $1.9 trillion (CAD) annual market
- Fair business practices make foreign markets more transparent and stable
With CETA in place, exporting to or importing from the EU can open up new opportunities for your Canadian business.
Canada-United Kingdom Trade Continuity Agreement
As of April 1, 2021, a new trade agreement between Canada and the U.K. came into force. The U.K. is no longer part of the EU, but it’s still a valuable trade partner with Canada. The trade agreement with Canada essentially replicates CETA, so that Canada can maintain a preferential trading relationship with the U.K.
Tips for Exporting to Europe
When you want to export your goods to Europe, keep the following tips in mind.
Consider your markets
While it’s tempting to consider the EU as one big market for your products, remember that the EU is made up of 27 different countries. The EU also has trade access with several others. All those countries have different cultures and speak a variety of languages. When you’re first exporting to the EU, you may consider starting on a country-by-country basis. It could be easier to focus on a single market at first, then use that country to launch into a neighboring one later on.
Do your research
Of course, researching the market you’re interested in is essential. If there’s one European country in particular you’d like to sell your products in, look at its GDP, growth projections, average household income, demographics, and other relevant economic factors. You should also consider the political situation of the country. Are there certain protected sectors? Will government corruption make it difficult to do business there? You should consider all these factors and more before pushing your goods into a new European market.
Establish a local presence
When exporting goods to the EU from Canada, a local office in a European country may be prudent. In some countries, it’s required. Having an office with at least one local staff member can help you build relationships in that country, especially if that staff member can speak the local language.
To sell your products in Europe, you’ll have to take currency values and fluctuations into account. Not every country in Europe uses the euro, which may factor into your decision when choosing a market. Seek advice on pricing strategies from experts so that currency fluctuations don’t hurt your bottom line.
Tips for Importing from Europe
When you want to bring European goods to Canadian consumers, your business should keep the following tips in mind.
Consider Canada’s biggest imports from Europe
In 2019, the EU accounted for over 13% of Canada’s merchandise imports. By looking at Canada’s imports from Europe, you can determine if consumers in the Canadian market are willing to buy certain European goods. According to Global Affairs Canada, the top five sectors for merchandise imports from Europe in 2018-2019 were:
- Motor vehicles and parts
- Pharmaceutical products
- Mineral fuels and oils
If your business operates in one of these sectors, importing from Europe might be beneficial to you.
Remember to pay GST/HST
Although CETA has eliminated many tariffs between Canada and the EU, your business still must pay Canadian taxes on your imports. You are responsible for GST/HST on any applicable imports into Canada. Remember to factor these taxes into your import plan.
Clarify the country of origin
An important provision of CETA that governs trade between Canada and the EU is the country of origin declaration. For CETA to apply to your imports or exports, the country of origin for your goods or services must be either the EU or Canada.
The origin declaration for CETA doesn’t require a formal certificate of origin, but you must be able to prove the origin of your goods if you want any preferential tariff treatment.
According to CETA, your product “originates” in either the EU or Canada if it:
- Is wholly obtained in the EU or Canada
- Is produced exclusively from materials that originate from the EU or Canada
- Has been produced in EU or Canada according to product specific rules
Your declaration of origin can be on an invoice or other commercial document that describes your goods.
Note that your origin declaration form may ask for your REX (Registered Exporter) number. This number is for exporters based in the EU. As a Canadian business, you don’t have a REX number so you should fill out your Canada Revenue Agency (CRA) number on the declaration form instead.
Assistance with your import-export business
Keeping the rules straight on importing and exporting isn’t always so easy. Border Buddy is a licensed customs broker that can help you streamline this part of your business. Ready to talk about our customs brokerage solutions for your business? Contact us today.