The United States is the richest nation on Earth, with a population of approximately 320 million and a quarter share of the global economy. It is also Canada’s largest trade partner, with U.S customers buying roughly three quarters of our exports.
Hundreds of Canadian businesses are already engaged in trade with the U.S., and opportunities for new exporters are numerous, varied and lucrative.
The U.S. is and will remain our number one export destination, but there has been a lot of talk about our trade relationship with our southerly neighbour in the news lately, due mainly to the 45th American president, Donald Trump:
More information on Trump and Canada can be found here.
Regardless of what Trump does, the U.S. will remain a whale of a market for Canadian exporters, and its opportunities will be a draw for first-time and experienced exporters alike.
For novice exporters in particular, the U.S. is a great place to get started if you’ve never sold internationally before. We speak the same language, have similar laws and cultural values, and shipping to Detroit is a lot less complicated and expensive than shipping to Shanghai. For these reasons, the U.S. is a perfect first stop on your exporting journey.
92 per cent of respondents who took part in CanadianManufacturing.com’s Export Insights 2018 report said the U.S. was the first market they entered.
A Collective of Smaller Markets
Export Development Canada has identified three unique advantages to doing business in the U.S.:
The U.S. is a vast country, covering 9.8 million square kilometres of area and multiple time zones, so geographically speaking, there is no one single U.S. market. Various geographic regions are separated by different economic realities, unique cultures, ethnic demographics, income diversity and attitudes towards brands and products. These distinctions fragment further along state lines, and each of the fifty states has their own set of laws and regulations that dictate how commerce is conducted.
To do business in a specific state or even a specific region, extensive research in that area is needed. Approaching the U.S. market as a monolith and making assumptions is a mistake. Don’t assume an approach which works in Austin, Texas can work in New York City. Approach each region, state, city and community as unique entities, and pay them the attention and care they demand.
Here is a rundown of the commercial characteristics of the various U.S. regional markets, as defined by EDC:
You will find a comprehensive fact sheet for 35 of the most lucrative states for Canadian exporters here.
Key Opportunity Sectors in the U.S.
The biggest risk to exporters is non-payment:
More information on getting paid can be found in section 5.3.
EDC can help you navigate the risks inherent in exporting to the U.S. and help you formulate strategies to break into the various regional markets:
The North American Free Trade Agreement (NAFTA) came into effect on January 1, 1994, creating the largest free trade region in the world at that time between Canada, the U.S. and Mexico.
In 2015, total trilateral merchandise trade, as measured by the total of each country’s imports from its other two NAFTA partners, amounted to over US$1.0 trillion – more than a threefold increase since 1993. In the same year, NAFTA partners represented 28 per cent of the world’s GDP with less than 7 per cent of the world’s population. Since implementation, the North American economy, the combined GDP for Canada, the U.S. and Mexico, has reached roughly $25 trillion.
Canadian exports to the U.S. grew at an annualized rate of almost 4.6 per cent between 1993 and 2015, and the total merchandise trade between the two countries more than doubled in the same period, reaching CA$881 billion in 2015.
Our trade with Mexico increased 8-fold over the same period, reaching $37.8 billion in 2015.
Almost 80 per cent of our exports were bound for NAFTA partners in 2015.
Our government says this productivity can be linked to lower tariffs, more predictable rules and a reduction in technical barriers to trade; allowing not only for more exports, but more specialization among firms involved in international trade with NAFTA partners.
Details on the grueling three-way negotiations between the Canadian, U.S. and Mexican governments to overhaul the trade deal can be found here.
CanadianManufacturing.com has covered the NAFTA talks since the beginning, and it will continue to do so until the final decisions come down the pipe.
U.S. customs regulations are complex, but shipping across the border can be uncomplicated if you are well prepared.
Details on handling customs on the Canadian side can be found in section 2.1.
One important thing to remember when shipping into a country as geographically large as the U.S. is to account for wild variations in climate. If you are sending a truck shipment from Toronto in the middle of February to Florida, your packaging needs to be equipped to handle both the cold Canadian winter and the hot, humid climate of the American Southeast.
All travelers, including Canadians, must carry a passport or other appropriate documentation when travelling to the US.
The NEXUS program speeds up border clearance for low-risk, pre-approved travellers into Canada and the U.S. If you travel to the U.S. often or expect to start doing so, having a NEXUS card is very helpful.
NEXUS memberships are for five years, after which time it must be renewed. Each five-year membership requires a $50 processing fee.
Prospective members must go through an application process and attend an interview. When renewing your card, if your information has remained largely unchanged it’s likely you’ll be able to avoid a second interview.
Traveling by air
A Canadian passport or a NEXUS card are appropriate forms of documentation when traveling by air.
Traveling by land
A passport, a NEXUS card, an enhanced driver’s licence or a Certificate of Indian Status are appropriate forms of ID when traveling by land.
Traveling by water
When travelling by boat, you will need a passport, a NEXUS card, enhanced driver’s licence or a Certificate of Indian Status.
When traveling to the U.S. for business you need authorization to do so, and to provide documentation that states the purpose of your entry and indicates that you aren’t going to remain in the U.S. indefinitely.
Temporary Entry provisions under NAFTA make it easier to enter the U.S. for business, but they don’t supersede existing immigration regulations. Details on the categories of business people that can enter the U.S. temporarily under NAFTA and other U.S. visa information can be found here.
Information on legal challenges faced by firms that export into the U.S. can be found here.
NAICS Codes: What You Need to Know
The North American Industry Classification System (NAICS) was developed to replace the old Standard Industrial Classification System (SIC)*, and in response to NAFTA, as a means of easily comparing data from industries and businesses across Canada, Mexico and the U.S.
NAICS is a hierarchical system that sorts businesses numerically by their methods of production. NAICS divides economic activity into 20 sectors, followed by subsectors, industry groups, industries and industries specific to the Canadian economy. If the Canadian industry field is not applicable, it is represented as a 0 in the NAICS code.
NAICS codes can be two to six digits in length.
Here is a breakdown of a six-digit code:
The more digits in a code, the more specific the classification is.
NAICS codes can help you locate other businesses.
The Canadian Company Capabilities database allows you to search for Canadian businesses in specific geographic regions that match an NAICS code. This database also has a breakdown of all the code classifications.
The American database Hoovers offers a similar service on an international scale.
Regardless of the directory you are using, NAICS codes can help you search for businesses with specificity. The uniformity of codes between NAFTA nations makes it particularly easy to find potential leads and partnerships in the U.S. and Mexico, if you are considering importing or exporting.
NAICS Codes can also be used for more in-depth market research, whether it’s for a general industry, your competitors or potential trading partners.
The following databases use NAICS codes to help simplify complex searches:
It’s important to note that companies are not legally assigned NAICS codes, and they can be represented by several different codes depending on their activities. This means that the same company can be assigned different codes in different databases.
* SIC is now mostly obsolete, but you may still see SIC codes while researching. The U.S. Securities and Exchange Commission still uses SIC codes, for example. If you find a four digit code that doesn’t comply with NAICS, it’s most likely a SIC code.
A breakdown of the primary classifications by business and industry for the NAICS system can be found here.