Importing goods or raw materials is no small task. But you can succeed as long as you are well prepared. Here’s what you should know before importing food, raw materials or finished goods.
1. Seek advice right from the start
According to Normand D’Arcy, Senior Manager at National Bank International Services, some import businesses wait too long before involving their financial institution in the process. “As soon as they realize that there will be international components to their supply chain, an entrepreneur should call their bank right away.”
“There is a lot of uncertainty in the import industry. There are commercial conflicts and tensions between countries. There are tariff barriers that are starting to pop up here and there. But with the help of expert advisors, entrepreneurs can easily face the growing complexity of international transactions,” he explains.
The Canada Border Services Agency (CBSA) recommends you obtain as much information as possible on the goods that will be imported. This information will be important when it comes time to establish the tariff classification of the imported goods. The importer will then obtain a tariff classification number that will establish the applicable duty rate for their goods.
2. Analyze your contract
Normand D’Arcy believes that carrying out a complete and detailed analysis of the import contract is one of the first things you should do. “You need to understand what the preferred method of payment will be,” he says. “Often, businesses have to pay their supplier by letter of credit. This is the preferred payment method in China and Asia, where most sources of supply are found. Canadian businesses know little about this method of payment.”
You must also determine the currency in which the supplier will be paid. “It is rarely in Canadian dollars,” he continues. “You therefore need to protect yourself by managing the risks involved in currency exchange fluctuations. The methods of payment will be adapted to the client’s needs and according to the nature of what is being imported.”
If a business intends to import goods on a regular basis, plans to source from several countries or has a variable transaction volume, they may be advised to use the services of a licensed customs broker. This person will primarily take care of customs clearance for imported goods, paying any fees due, obtaining, preparing and delivering necessary documents or data, and responding to any concerns from the CBSA.
3. Get to know your import partner
“Ensuring the reliability of your suppliers is another determining factor in the import process,” adds the international commerce specialist.
“There are so many suppliers that come and go very quickly. Because suppliers are often on the other side of the world, you must ensure that you know them well and that you contact their references. Good suppliers will not object to providing a list of their clients, to whom you can ask questions. Federal and provincial organizations—Export Québec and the CBSA, among others—offer services for this.”
4. Protect yourself
According to Normand D’Arcy, a large number of businesses pay their supplier before ensuring the quality of the product or service received. “I tell my clients: Before paying, make sure you have a strict minimum of quality. Often, in their first transactions, some clients move too quickly. Their enthusiasm is too great, especially when there are good opportunities. In this era of immediacy in which we want to do everything quickly, you have to make sure you get what you pay for.”
“Large businesses usually develop good reflexes to protect themselves,” he adds. “They will request guarantees, securities, etc. Small businesses, where people wear many different hats, sometimes cut corners due to a shortage of resources. Still, they can protect themselves just the same. A bank guarantee could work for them. If the goods do not reflect what was promised, you could be reimbursed by your supplier. There are many methods and tools available to minimize risks, but you need to be aware of this early on. If you move too quickly, you’ll get caught in a transactional straitjacket.”
5. Assess the magnitude of the task
Depending on what you are importing, the magnitude of the job will not be the same, says Normand D’Arcy. “There may be controls or permits required by the Canadian government,” he explains. “A relatively serious entrepreneur will work with a customs broker in this regard. With all of the filters, clients and expertise available at National Bank, we are able to see very quickly whether or not there will be problems with the transaction.”
Some goods have more restrictions on importation, such as food. “There are health standards and sometimes quotas to respect, permits to obtain. The same goes for anything that is custom-made, including machinery from Germany or Italy. In this case, we will help the import business protect itself. Even if they are importing finished goods, such as shoes, which is less complicated, we will still point the importer towards hiring an independent firm responsible for verifying the quality of the product before it leaves by container.”
6. Knock on several doors
According to the Canada Border Services Agency, different types of goods are subject to conditions set by other federal ministries and organizations, and may require licences, certificates or inspections.
In short, more than one ministry may have a role to play, depending on the requirements and regulations for importing certain goods. It is therefore highly recommended that you communicate with all those who may have a role to play in your importing business.
“Commercial trade has limitless possibilities, but the way that it is accomplished is more and more complicated and changes very quickly,” says Normand D’Arcy. “Yes, things move along more quickly, but everything is more complex. Entrepreneurs think that, with technology and the countless tools at our disposal, doing business on an international level is easier than before. Yet this is not always the case, since there is more and more to take into consideration.”
Today, importing processes are much quicker than before, but not necessarily simpler. You need to do your homework and work with the right people. Your expert advisors will help you thoroughly plan your international transactions so you can avoid any pitfalls.
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