North American Export Opportunities - Doing Business in the United States

Doing Business in the United States

Many exporters find this market an excellent opportunity for learning about the export business. As we share the same language and a similar culture, breaking into this market may be much easier for some companies than taking on cultural and language differences as well.

The United States is the world's largest and richest national market. Our laws and customs are similar. Today with the Free Trade Agreement and the North American Free Trade Agreement, we have access to the best trade opportunities in the world. The FTA/NAFTA provides Canadian goods exporters with a cost advantage over offshore competition equal to the U.S. tariffs that these competitors have to pay.

Political and Cultural Distinctions

The U.S. market differs in structure from Canada, with four levels of government (Federal, state, county, municipal). Entrepreneurship is strong, with a greater separation between private and public sectors. With a portion of the American government being elected every two years, Canadian exporters should be very aware of the American political issues and their impact on specific economic initiatives and general openness to dealing with Canadians.

The U.S. market is very competitive; these customers are used to lots of options, excellent quality assurance, convenient access and rapid response times. Executives are often quick to reach decisions and may be ready to "make a deal" sooner than Canadians expect.

U.S. Marketing and Communications Tips

Ontario companies may find it of strategic benefit to have a U.S. telephone number with a remote call forwarding feature to your office in Ontario or an 800 or 888 number.

These services can project the image of a local presence in the market without the cost of a local office. There are also services available that provide a complete range of business support services at reasonable cost such as mini-offices, a local business identity, corporate representatives, (for the Certificate of Authority) warehousing and shipping.

The competition for attention in the U.S. market is intense. Advertising and public relations can help promote Ontario products in the United States through trade and consumer magazines and other media. Care must be taken to select media that reach the required target market and that the product is presented as being as easy to buy as a U.S. product.

Meeting the Standards

Standards are playing an increasing role in regulating trade in all industry sectors. You must meet merchandise standards and codes in all states of the United States and in the European Community (EC). In the EC, for example, the Commission of the European Communities issues directives for specific merchandise groups, outlining minimum requirements that must be met before goods can circulate freely throughout the European Community. You need to identify what directives affect your goods and what standards must be met. The Standards Council of Canada can provide relevant information.

Tax Implications

Canadian firms should be aware of the U.S. tax implications of doing business in the United States. Generally, if you are exporting and do not have any physical presence in the United States, you would not be subject to U.S. income tax. Also, be aware that Canada and the United States have a federal tax treaty that basically gives credit for taxes paid in the other country on taxes owing in the country of residence.

If a Canadian exporter is deemed to have a "U.S. establishment," the firm will be liable for U.S. federal corporate income tax. Exporters need to be aware that the definition of establishment could cover a warehouse or distribution centre if there are employees.

If you are invoicing from a U.S. address, you will need a Certificate of Authority (or be subject to a substantial fine) that names your local corporate representative. Such a representative is a legal point of contact, not necessarily a marketing rep. You need to verify such requirements with the nearest Canadian Consulate. The Canada-United States tax treaty provides firms with many advantages and you should get some advice from a U.S. tax specialist.