It was after having his first child nearly a decade ago that Greg Zwarich decided to make the switch from running an independent music label and vinyl record manufacturer to distributing eco-friendly baby products. Today, Mr. Zwarich imports baby bottles, lunch totes, backpacks and other products from four companies in the United States.
The shift not only meant setting up a new company, YYZ Distribution Inc. based in Markham, Ont., but also mastering the ins and outs of importing products he thought other parents in Canada wanted to buy.
“My entire business revolves around me being able to get products from these U.S. companies and import them,” says Mr. Zwarich, whose company is the exclusive Canadian distributor for brands such as Zoli, Comotomo, Sugarbooger and Rhoost.
The Canadian Federation of Independent Business (CFIB) released a survey in May of 2017 showing that 71 per cent of its 4,400 members who responded were importers of goods, services or both, while 32 per cent were exporters. Of those importers, more than 9 out of 10 brought in goods from the U.S.
Importing is clearly the lifeblood of many Canadian small businesses, but the process can be complex, especially for those just getting started. After companies have determined whether there is a demand for a product in Canada, they must make sure it is legal to use and sell here, including whether it meets government health and safety regulations.
From there, business owners need to prepare the proper labels for imported products sold in Canada – they must be in both English and French – and navigate the paperwork as well as the duties and taxes that need be paid on products they bring in.
The Business Development Bank of Canada urges entrepreneurs to consider where and how they will sell the product (given the different taxes in each jurisdiction), the product classification (it may differ between countries; for example, deodorant is considered a cosmetic in some countries and a drug in others), as well as labelling and safety requirements.
Small business owners should also be prepared to cope with shipping delays and changing regulations. An example is the tariffs on steel and aluminum imposed last year by both the U.S. and then Canada, which have been driving up the costs of goods on both sides of the border.
CFIB president Dan Kelly says small business owners should consider whether to import goods on their own or hire a customs broker, which can help ease the process. These brokers often work directly with the Canada Border Services Agency (CBSA) to prepare and submit documentation and payments of duties and taxes.
Entrepreneurs who try to import on their own sometimes “find themselves with surprises,” Mr. Kelly says, including duties they weren’t expecting to pay. The CFIB points to a number of resources available to help small business owners, such as the CBSA guide to importing and the Importers Network.
Mr. Zwarich handled importing himself in his first year running YYZ Distribution – he crossed the border and picked up the goods. He started using a customs broker once his business began to grow, and a freight company brought the goods to his warehouse in Canada.
“A good broker will help you with clearing the goods through customs ... and paying the proper amount of duty,” Mr. Zwarich says, adding that mistakes can be costly and time-consuming and can hold up the products for days or weeks. “They make sure all of my shipments are processed in a timely manner and correctly.”
Mark Furukawa, owner of Dr. Disc, a Hamilton record and CD store specializing in imports and hard-to-find titles, does his own “self-clearance” of items from outside Canada.
His products are shipped from around the world to a UPS store in Buffalo, and he crosses the border about once a month to pick them up. He’s able to do it himself given the small volume of items, which allows him to save on brokerage and cross-border fees. Picking up the items is also often quicker than having them shipped to Canada.
“If any smaller business requires imported goods that are fairly easily transportable, then self-clearance would be of great benefit to them and would save tens of thousands of dollars a year,” says Mr. Furukawa.
The process can be complex, he says. He must enter a classification number for each item he’s taking across, for example.
“Everything has to be broken down by country of origin and by the composition of items,” he says, which can include specifics such as whether a T-shirt is made of cotton or rayon. “It’s a tough learning curve. Like any government form it’s complex to figure out at first.” But he adds that customs officials are often friendly and able to help business owners through the process.
“It’s a little bit of labour, but once you finesse it, it’s really quite a money saver and can really push your profit margins," says Mr. Furukawa. "Every little bit counts these days.”