Canada and the United States share a 5525-mile long border, making their relationship one of the closest and most extensive in the world. The two countries currently share the world’s largest and most comprehensive trading relationship, reaching more than $2 billion per day in goods and services, which has grown dramatically since the North American Free Trade Agreement (NAFTA) was enacted in 1994. In 2013, Canada was the top purchaser of United States exports, spending a total of $300.3 billion. As roughly 90% of the population lives within 160 miles of the border and, because of the close proximity and language integration, Canadians are very familiar with American brands.
What makes Canada different?
Although Canada and the United States have similarities, consumer purchasing varies greatly, based on Canadian government limitations for imported goods. For businesses considering the Canadian marketplace, they must first be fully aware of the various regulations and processes that the Canadian government requires for products to be imported into the country. To remain compliant and build credibility in the eyes of the Canadian consumer, a business should stay abreast of the newest policies and standards relating to their product category.
Before shipping products
Before entering the Canadian marketplace with a nutraceutical or cosmeceutical product, it is recommended that businesses identify the landscape in which the company already exists. Here are some questions that need to be asked before taking the first step:
- What is your product? This will help to determine the specific regulations and processes that the company must undergo as they enter the Canadian marketplace.
- Where is the product currently being stored in the United States? This will affect the cost associated with shipping your product to Canada. The closer your US distribution centre is to Canada, the less expensive shipping will be. However, the business should still budget for taxes and customs fees.
- Where do you sell your product? Retail, online or both? If the product is sold at retail, companies may be inclined to ship larger quantities of products and multiple SKUs into Canada. If the product is sold online, taxes and shipping fees for direct-to-consumer shipping should be factored into the overall product price and/or shipping fees.
- How much product are you planning to import? Depending on predicted sales volumes in Canada, the company may warehouse inventory there. Typically, larger sales volumes in Canada justify dedicated inventory in situ. Having a storage facility in Canada may help to defer shipment costs that are associated with each purchase. However, if the company is importing relatively small volumes into Canada, housing product in the United States may be the most cost-effective solution, as consumers incur the bulk of the added shipping costs for individual orders.
Timing the launch
Once the company decides to start selling products in Canada, a step-by-step plan must be developed to efficiently execute the launch. If the company wants their products to be available for purchase during a specific time of year, event or holiday, they must factor into the strategy the time it takes to get the paperwork completed so that products can be sold by the desired date. This strategy must be finalised prior to accessing the Canadian marketplace.
Regulations: Before a company is able to ship and sell natural health products in Canada, they must file the necessary regulatory forms with Health Canada, the federal department responsible for helping Canadians to maintain and improve their health. The business should be aware that product approval takes a specific amount of time, and therefore must be completed in its entirety to meet the needs of the product campaign.
Health products: For commercial importations of Natural Health Products, the business must secure a product license, otherwise known as a Natural Product Number, for each product they plan to sell. Site licenses are also required for each manufacturer, packager, labeller and importer of the natural health product. The application process can take anywhere from 10 days to 8 months, depending on the complexity of the product.
Applicants are required to disclose detailed information about the product including medicinal ingredients, source, dose, potency, non-medicinal ingredients and recommended uses. Health Canada will issue an eight-digit Natural Product Number (NPN) or Homeopathic Medicine Number (DIN-HM), once they have assessed the product and determined that it is safe, effective and of high quality. With a Natural Product Number it is guaranteed that Health Canada has reviewed and approved the product, making it available for Canadian consumers to legally purchase. In the case that the application is refused, applicants have 30 days to request that the Minister of Health reconsider the application. Factoring in these potential time delays is particularly important as a business transitions into the Canadian market.
Cosmetics: Under the Food and Drugs Act, cosmetics are defined as any substance or mixture of substances manufactured, sold or represented for use in cleansing, improving or altering the complexion, skin, hair or teeth, and includes deodorants and perfumes. A Cosmetic Notification Form (CNF) is required to sell cosmetics and provides the following specific information to Health Canada:
- address and contact information of the manufacturer(s), importer(s), distributor(s) and formulator(s)
- function of the cosmetic
- form of the cosmetic (for example, cream and gel)
- ingredients of the cosmetic
- concentration of each ingredient.
Manufacturers and importers of cosmetic products are required to notify Health Canada within 10 days after they begin selling in the country. If they do not do so, the product may be removed from sale or even denied entry into the country. If any information on the CNF changes, it must be amended and resubmitted. Changes may include
- modification of the cosmetic formulation
- change of product name
- discontinuation of sale
- new company name, address or contact information.
There is no fee to submit the Cosmetic Notification Form and it does not validate approval for sale or compliance with legislative requirements by Health Canada. Manufacturers and importers are responsible for ensuring that the cosmetics being sold comply with the Food and Drugs Act and its Cosmetic Regulations.
Labelling Requirements: Canadian consumers have become increasingly health conscious and have requested that all ingredients used in natural health products be clear and easy to understand. Labelling guidelines regulated by Health Canada were created to help consumers make more informed decisions about what they purchase. Product labels must specify the recommended use or purpose, otherwise known as the health claim, as well as dosage information, medicinal and non-medicinal ingredients, and any cautions, warnings, contraindications or known adverse reactions associated with the product.
The application to approve the inner and outer labels must be submitted in a printed version alongside the application for a Natural Product Number. The outer label is what is on or affixed to the outside of the package, whereas the inner label is what is on or affixed to an immediate container, the one that has direct contact with the product. Any leaflets or tags that come with the product are also considered labels and must adhere to outer labelling requirements that can be found on HealthCanada.com.
Customs: The Canada Border Services Agency (CBSA) oversees and enforces the Customs Act, which ensures the collection of duties, controls the movement of people and goods in and out of Canada. CBSA also protects Canada’s industry from real or potential injury caused by the actual or contemplated import of dumped or subsidized goods and by other forms of unfair competition. The Customs Act is not a taxing statute, but provides legislative authority to administer and enforce the collection of duties and taxes that are imposed under separate taxing legislation.
As mentioned above, certain products require permits, certificates, and/or inspection that must be completed prior to shipping them across the border. The business must also determine whether or not the goods are subject to the 5% Goods and Services Tax (GST), which is payable on most goods at the time of importation. Some goods may be tax exempt and in this case the business is required to include the tax exemption code on the import documents.
Using a Qualified Vendor
Partnering with a qualified vendor to help with Canadian distribution is critical, as their knowledge and expertise helps guide businesses through each step of the process. This helps mitigate problems and/or additional costs that may accrue at the border from government agencies overseeing these processes. If the vendor has Health Canada approved licenses, then they can legally sell the product without the business having to obtain the licenses themselves. If the vendor also has a site license to import the inventory into Canada, the business selling the product does not need to have its own facility in Canada. Ideally, the vendor has their own trucks to pick up the product in the US and deliver it to their Canadian facility. Many qualified vendors can also assist with customs clearance and brokerage at the border. Additionally, the vendor will be able to provide tracking information on customer orders, as well as shorter delivery times as the product will already be warehoused in Canada.
Businesses looking to sell natural health products in Canada need to familiarise themselves with these regulations to successfully grow their Canadian consumer base. Partnering with a qualified vendor that understands the regulatory processes and can guide businesses throughout the process will ensure a smooth transition while expanding internationally to new consumers.