For many Canadian small and medium-sized enterprises (SMEs) that want to start exporting, the United States is the obvious first market choice. With a population of more than 300 million and our shared common language and similar culture, the massive market south of the border holds much appeal and is within easy reach for most Canadian businesses.
However, the sheer size of this opportunity can be overwhelming for Canadian SMEs that don't know where to begin when it comes to formulating an export plan. Here are five things to keep in mind to get you started.
1. Choose a region.
A common mistake many SMEs make is thinking about the U.S. as one large homogeneous market. At EDC, we recommend thinking about the U.S. as a series of regional markets, each with their own distinct set of sectors, opportunities and customers. Research the region that makes the most sense for your company to enter, based on sector or industry and the customers you would like to reach.
Taking a regional approach to the U.S. can also help your company be more competitive on fulfillment and shipping costs. For example, many Canadian businesses with customers in the U.S. ship all their products from Canada or through one induction point in the U.S., like Buffalo, and let FedEx or the United States Postal Service take it from there, fulfilling orders one at a time. This leads to a range of shipping costs for customers in different parts of the country, depending on the final destination.
However, if you have customers in different parts of the U.S., a more creative and competitive solution is to ship multiple units to specific states to fulfill orders in that region. This allows you to keep your shipping rate localized in that state or regional postal zone.
2. Determine your market-entry strategy.
Canadian companies new to the U.S. market should think of exporting as a journey, rather than an endpoint. Once you've determined the region or state you want to enter, your market-entry strategy will be determined by the size and nature of the opportunity.
You may have only one or just a few American customers at the beginning of your journey. In that case, your market-entry strategy will likely be direct exporting from Canada, shipping directly to your customers. As your journey continues and U.S. business grows, you may reach a point where it makes sense to have on-the-ground representation through a reliable agent or distributor who can help you reach more customers. As your customer base grows and demands more, you may need to localize your supply in the U.S. and set up a manufacturing facility or affiliate company there.
3. Protect your intellectual property first.
Before you enter the U.S. market, make sure you protect any intellectual property (IP) that contributes to the value of your products or services by registering it with the appropriate American IP offices. This includes patents, trademarks, industrial designs and copyrights. It is best to get help from IP professionals when doing this.
Registering your IP first is important for two reasons. First, your intellectual property is one of the most important and useful tools you can use to stand out among competitors in a new market. Second, going through the process of registering your IP rights before you enter the market can help you avoid a lot of headaches and expense by ensuring your company doesn't infringe on the intellectual property rights of others.
4. Know your trade compliance and immigration requirements.
Trade compliance is the process by which goods enter a country in conformity with its import laws and regulations. In the United States, the U.S. Bureau of Customs and Border Protection (CBP) is responsible for checking all incoming cargo to make sure the products meet all requirements.
A key thing to understand is the NAFTA Rules of Origin that govern your products or services. The NAFTA Rules of Origin have been used for the past 24 years to determine whether an exported product receives preferential tariff treatment when moving between Canada, the U.S. and Mexico. The rules will be adapted to meet new requirements laid out under the recently negotiated Canada-United States--Mexico Agreement (CUSMA).
Similarly, if you're a service company and want to send personnel into the United States to work with clients, you will have to deal with U.S. immigration laws. These are very strict and are often open to interpretation, so you should obtain qualified legal advice to ensure you don't violate them. If you do, even accidentally, your personnel could be barred from entering the country for several years.
5. Get help from local experts.
There are many sources of market information and on-the-ground assistance that can help you find U.S. buyers for your products or services.
First and foremost, the Canadian Trade Commissioner Service (TCS) has more than 100 trade commissioners across 20 consulates covering every region of the U.S. Trade commissioners can help with everything from alerting you to trade show opportunities in your sector and region, to finding reliable agents and distributors and customer matchmaking opportunities.
Likewise, EDC's Market Entry Advisors can connect you to experts who can help you navigate the U.S. business environment, obtain up-to-date market intelligence on the United States and start building networks in your U.S. market of interest.
With these tips in mind, you can start formulating your U.S. export plan today by accessing EDC's guide to Doing Business In The United States.