How to Sell on Amazon.ca and Import Products into Canada

Guess what Amazon FBA sellers – if you’re selling via FBA on Amazon.com, Amazon by default does not list your products in the second largest state in the USA. That’s right- your products are not eligible to be purchased by over 35 million consumers. This state is of course none other than Canada.

OK, Canada being the 51st state is about as cliched of a Canada joke as you can get. But in all seriousness, Canada is a big country that’s closer to most Americans than Miami or Anchorage is AND you’re not selling to these customers if you’re simply selling your products on Amazon.com.

If you feel like you’ve tapped out all of your maximum potential on Amazon.com, Amazon.ca is a relatively painless way to increase your sales by an extra 10-20%.

Why should you sell on Amazon.ca?

• 10-20% boost of sales
• Much less competition than Amazon.com
• Build up your listings and reviews now while competition is weak
• Allows you to ship products from Canada to Canadians from non-Amazon sources
• Easier Sales Tax

Canada has about 10% of the population of the US so simply by this math you can expect about a 10% sales boost for any one product by selling in Canada. However, for almost all products on Amazon.ca, the competition is much MUCH less than Amazon.com so a 10-20% boost is more reasonable. From my experience, Canada has been behind the Amazon wave by a couple of years, so the popularity of Amazon.ca among Canadians is increasing quickly.

As Amazon.ca becomes more popular with Canadians, competition will continue to increase. For this reason alone, I think if you have goals of one day expanding to Canada now is the time to do it to solidify your reviews and rankings in Canada and get a first-mover advantage.

One of the greatest benefits by using Amazon.ca FBA for my company has been the fact that it allows us to ship to Canadians from Canada for non-Amazon.ca sales, i.e. through our website and eBay. If you’ve ever had a pissed off Canadian customer complaining about brokerage charges and/or long delivery times, those concerns are squashed by shipping from Canada.

Canada also has a much easier sales tax process than in the U.S. What? Sales tax?! I realize that many Amazon.com FBA sellers don’t ever think about sales tax as there’s still some nexus debate about what is taxable or not. In Canada, when it comes to federal sales tax (RE: GST and HST) there’s much less ambiguity: by the rule of the law, you have to collect GST/HST. I’ll go into more detail on GST/HST below.

Who Shouldn’t Sell on Amazon.ca?

Selling in Canada is relatively easy but it does add one more complexity to your business. You’re now dealing with multiple currencies, multiple tax jurisdictions, multiple market places, etc. The fruit is hanging, but it’s not the lowest hanging fruit. If you’re only selling on Amazon.com right now, here’s other priorities I would list ahead of selling on Amazon.ca:

• Sell on your own website
• Launching PPC campaigns, specifically Adwords and Bing Ads
• Setup your email list and do consistent email marketing
• Sell on other market places such as eBay and Etsy

That list isn’t exhaustive, but it gives you an idea that there are easier things to do to grow your sales by 10%-20% than by selling on Amazon.ca. For my company though, I feel like we’d eaten all of the other low hanging fruit and selling on Amazon.ca was a natural expansion area for us.

Popular Misconceptions About Americans Doing Business in Canada

• You will have to pay Canadian income tax
• Product regulations are different and more complex than in the United States
• You will need to setup a Canadian Bank Account
• Americans can work in Canada without a visa
• Canada is the largest Park in Montana

Any income you make in Canada will likely be exempt via tax treaty (and the reverse is true for Canadians doing business in the U.S.) assuming you have no permanent establishment in Canada. Again, you will be subject to sales tax but this should be your only tax liability.

If anyone has ever considered selling in Europe, you know regulations regarding product safety, labeling, etc. is a lot different, and potentially more complex, than in the United States. Except for obvious products that are fraught with problems across borders (i.e. children’s products, food products, inherently dangerous products, etc.) and some very fringe exceptions most products you’ll be able to import into Canada with no changes.

To sell on Amazon.ca, you can continue to use your American bank account and Amazon will simply convert the funds into US Dollars, albeit with a terrible exchange rate (Amazon will take about a 3.5% commission). There’s no need to setup a Canadian bank account.

As an American, you cannot come to Canada to work without a Visa. There’s certain activities you can perform in Canada for business, like visiting an accountant, visiting a client, etc. In other words, you can sell your goods on Amazon.ca and essentially pay good Canadian employees to ship your products but you can’t open up your own warehouse and start shipping products yourself without getting the proper work visa.

And finally, a lot of Americans believe Canada is a national park located within the northern part of the United States. It’s actually not! Canada is a real autonomous country formed in 1867 with its very own Prime Minister (sort of like a President).

Things to be Aware Of

• Exchange rate is volatile
• Canadian duty rates are often higher than the U.S. (Americans are spoiled with very low duty rates)
• No Amazon partnered Carriers going to Canada
• You need a Business Number to import anything ‘formally’ into Canada
• If sending UPS/FedEx etc. to Canada, make sure you send them DDP (Delivered Duty Paid) otherwise Amazon will reject the shipment
• Canada has Federal Sales tax (GST)

You can more or less charge the price you charge on Amazon.com, converted to Canadian dollars of course. In fact, you might even be able to charge more. However, the exchange rate is volatile. For example, in 2011 the Canadian dollar was actually worth more than an American dollar but in June of 2016 1 Canadian dollar is worth about $0.78. You want to keep an eye on the exchange rate, if not monthly, then at least quarterly.  We adjust our prices many times throughout the year to reflect changes in the exchange rate.

Canadian duty rates also tend to be higher than in the U.S., about 25-50% higher. This is more the byproduct of the United States having low duty rates than Canada necessarily having high duty rates. Also, when you import into Canada, if you’re shipping from the United States to Canada (opposed to direct from China to Canada) the duties you paid for your goods going into the U.S. are essentially lost (and no, your Chinese made goods are not subject to NAFTA free trade- they’re still Chinese). You can technically claim your U.S. duties back from U.S. Customs, but the paperwork with your customs broker will cost about $500-1000.

Also, with Amazon, there are no partnered carriers for shipping your goods from the U.S. to Canada, so you’re going to pay whatever discount you can negotiate with UPS/FedEx/LTL.

As I’ll go into more detail below, you will need what Canada calls a Business Number to formally import into Canada. Again, there’re ways around this with UPS or FedEx, but long term you will need a Business Number.  It’s easy to file for though.

When you’re shipping to Amazon.ca FBA you must make sure that all duties and taxes are paid prior to arriving at Amazon.ca. With UPS and FedEx you can ship via “DDP” (Delivered Duty Paid) which will basically have these charges passed on to you and keep Amazon from rejecting your shipment.

Sales Tax and GST/HST

Canada has a federal sales tax. This is called GST/HST. Compared to the U.S. it is extremely simple. Each province sets it’s GST/HST rate, there’s only 13 provinces/territories, and you remit everything on one form. The exception for Amazon.ca sellers is the province of British Columbia which has a provincial tax and which has similar ambiguity to sales tax in the U.S.

In my opinion, you cannot and should not skip out paying GST/HST in Canada. For starters, technically anything you ship into Canada needs a business number (there’re ways to get around it with UPS/FedEx which I address below) so there will be a record of anything you bring into the country. With Amazon.com FBA the individual states really have no idea where your goods are. So this means, at some point, a Canadian Revenue Agency agent is going to see you shipping a lot of goods into Canada and never filing a GST return. You will likely at some point get a call from this agent.

Steps to Take to Get Started Selling on Amazon.ca

OK so I’ve convinced you that you should start selling on Amazon.ca. Here’s the steps I would take to get started.

1. Send a small shipment to Canada – get your feet wet; Work it up to Pallets.
2. List your products on Amazon.ca.
3. Turn on Sponsored Ads for Canada!
4. Monitor the exchange rate every month.
5. Register for GST if your sales get substantial- Canada has a record of everything you’re bringing into the country and assume you will eventually get a telephone call from CRA if you don’t.

Send a Small Shipment to Canada

As you probably did when you first started with Amazon.com FBA, you probably sent in a box or two of goods to test out FBA, and not a full 20′ container. The same goes for Amazon.ca. Send a box or two via UPS or FedEx to get your feet wet. The procedure is almost identical as sending to Amazon.com.

You will need to send your goods via UPS or FedEx or another service that allows you to be billed for any duties and taxes, also called DDP. If you send via a service like USPS, Amazon will be asked to pay taxes when your product arrives and they will reject your shipment.

List Your Products on Amazon.ca

When you sell your products on Amazon.ca you will need a new Amazon.ca professional account and you will also need to reupload your products to Amazon.ca (i.e. your inventory doesn’t transfer over).  However, you manage your Amazon.ca from within one Seller Central account. There’s also a few other settings like shipping that you need to setup for Amazon.ca but the whole process should only take a few minutes.

Turn on Sponsored Ads

The first thing you should do once you get your inventory to FBA is start using Sponsored Products if you’re using them for Amazon.com. You will pay dramatically less than what you pay for Amazon.com (see our stats below – we’re paying just 0.2% ACoS!)

Monitor the Exchange Rate Every Month

When you price your products in Canada, you’re likely simply converting from U.S. dollars to Canadian dollars and maybe adding a bit of a cushion. That’s all great and dandy, but you don’t want to price your products assuming $1 Canadian Dollar is equal to $0.90 US Dollar and five months later find out $1 Canadian Dollar is only worth $0.75 Canadian. Long story short, keep an eye on the exchange rate.

Setting Up a Canadian Business Number

Technically any time you import goods into Canada, you need a business number. If you’re sending goods up to Amazon.ca FBA via UPS or FedEx as a trial, you can likely avoid this requirement for your first couple of shipments. If you’re sending anything that requires a customs broker to clear (i.e. you’re sending an LTL shipment) you will definitely need a Business Number. A business number is simply a number that you can use to collect/remit GST/HST and to import goods into Canada. It’s similar to the U.S. EIN.

Registering for a Business Number in Canada is quite easy. You simply need to complete a form RC1. As of this writing (June 2016), this form needs to be either faxed or mailed in (there’s no option for non-residents to do it online). Once you fill it in, you’ll be issued a Business Number within 10 days. The form is self-explanatory and should take no more than 5-10 minutes (when it asks for social insurance number, simply leave this blank). When it asks for your estimated taxable sales in Canada it’s wise to enter something below $100,000 as otherwise you will be required to prepay half of your estimated GST (The Canadian Revenue Agency will determine in your second year if you need to prepay a percentage of your GST/HST).  One final note, if you’re registering as a corporation, submit a copy of your Articles of Incorporation with the form.

Conclusion

Hopefully this article has outlined my arguments for why you should be selling on Amazon.ca (as well as who shouldn’t be) and also how to get up and rolling. Since late 2015, Amazon.ca has been a significant driver of growth for my company and I think it can do the same for a lot of other companies seeking 10-20% sales growth.

Have you had any experience selling on Amazon.ca or other Amazon market places? Do you have any questions about selling on Amazon.ca? If so, comment below.