The Canadian Business Owner’s Guide to Managing Tariffs

Tariffs can significantly impact the cost of doing business, especially for companies that rely on importing or exporting goods. Understanding how tariffs work, which businesses are affected, and what strategies can help manage these costs is crucial for Canadian business owners.

What is a Tariff?

A tariff is a tax imposed by a government on goods imported into or exported out of a country. Tariffs are designed to protect domestic industries by making foreign goods more expensive, encourage local production, and generate government revenue. However, they can also increase costs for businesses that depend on imported materials or products.

Types of Tariffs

• Import Tariffs: These are taxes placed on goods brought into Canada. For example, if you import electronics from another country, you may be required to pay an import tariff.
• Export Tariffs: Though less common, these are taxes on goods leaving Canada. These are generally applied to certain raw materials or restricted products.
• Specific Tariffs: A fixed fee per unit, such as $100 per ton of steel imported.
• Ad Valorem Tariffs: A percentage of the value of the imported goods, such as 10% of the total product cost.

Which Businesses Are Affected by Tariffs?

Tariffs can affect a wide range of industries, especially those that rely on international trade. Commonly impacted sectors include:

• Manufacturing: Businesses importing raw materials or parts.
• Retail: Companies selling imported goods, such as clothing, electronics, or specialty foods.
• Agriculture: Importers of seeds, fertilizers, or machinery.
• Automotive: Importers of vehicles or automotive parts.
• Technology: Businesses importing devices, components, or software.

Even small businesses that deal with foreign suppliers can feel the impact of tariffs, as increased costs often lead to higher prices for consumers.

How to Find Out If Your Products Are Subject to Tariffs

• Check the Customs Tariff Database: The Canada Border Services Agency (CBSA) offers a customs tariff schedule where you can check tariff rates based on product codes.
• HS Codes: Use the Harmonized System (HS) codes to classify your goods correctly and determine applicable tariffs.
• Consult with a Customs Broker: They can provide expert guidance on how tariffs apply to your specific products.
• Trade Agreements: Review Canada’s trade agreements, like the Canada-United States-Mexico Agreement (CUSMA), which may reduce or eliminate tariffs for certain goods.

Strategies to Manage Tariffs as a Business Owner

• Source Locally: Reducing reliance on imported goods can help avoid tariffs altogether.
• Negotiate with Suppliers: Work with suppliers to share tariff costs or find more affordable sourcing options.
• Modify Your Supply Chain: Explore alternative supply routes or countries with lower tariffs.
• Utilize Free Trade Agreements: Take advantage of agreements that reduce or eliminate tariffs on certain products.
• Apply for Duty Drawbacks: If you import goods but then export them, you may be eligible for a refund on paid tariffs.
• Classify Goods Correctly: Ensuring accurate classification can prevent unnecessary tariff costs.
• Seek Professional Advice: Consulting with customs experts or legal professionals can help identify additional strategies for minimizing tariff impacts.
• Explore International Sourcing Platforms: Consider using global sourcing platforms to find suppliers outside of the US that may offer lower tariffs. Useful platforms include:
  • Alibaba
  • Global Sources
  • Made-in-China
  • IndiaMART
  • MFG
  • TradeIndia
  • Kompass
• Utilize Canadian Sourcing Platforms: For businesses looking to source locally, these Canadian platforms can be invaluable:
  • Canadian Manufacturers & Exporters (CME)
  • Made in Canada Directory
  • ThomasNet Canada
  • Canadian Company Capabilities (CCC)
  • Fabrik
  • B2BeeMatch

Additional Resources for Canadian Business Owners

Canadian business owners can access several key resources to help navigate tariffs and trade challenges:

• Trade Commissioner Service (TCS): Offers market insights, advice, and connections for global trade.
• Export Development Canada (EDC): Provides financial solutions and expert advice for businesses facing global trade risks.
• Canadian Chamber of Commerce: Advocates for business-friendly policies and offers resources to address trade challenges.
• Business Development Bank of Canada (BDC): Offers financing and advisory services for overcoming operational challenges, including tariffs.
• Canada Border Services Agency (CBSA): Provides information on customs, tariffs, and regulations for Canadian importers and exporters.
• Global Affairs Canada: Offers guidance on Canada’s trade agreements and market diversification strategies.
• Canadian Importers Database: Helps identify potential suppliers or buyers and understand trade flows.

Canadian Success Stories: Overcoming Tariff Challenges

Many Canadian businesses have successfully navigated tariff challenges by adapting their strategies and supply chains. Here are a few inspiring examples:

• Canada Goose: Faced with tariffs on imported raw materials, Canada Goose strengthened its local sourcing and increased domestic production. This move not only minimized tariff impacts but also reinforced their ‘Made in Canada’ brand identity.
• B.C. Lumber Companies: During softwood lumber tariff disputes with the U.S., many British Columbia lumber companies diversified their markets by expanding exports to Asia. This shift reduced their reliance on the U.S. market and opened up new business opportunities.
• Peace by Chocolate: This Nova Scotia-based company managed tariff pressures by renegotiating supplier contracts and optimizing their supply chain to control costs. Their resilience helped maintain product affordability.
• Magnet Forensics: In response to tariffs on imported tech components, this company invested in research and development to innovate and find alternative, tariff-free materials.
• Auto Parts Manufacturers: Several Canadian auto parts suppliers diversified their sourcing networks, seeking components from countries with favorable trade agreements to mitigate tariff costs.

These examples show that with strategic planning and adaptability, businesses can overcome tariff challenges and continue to thrive.

How Ontario Business Central Can Help

Understanding and managing tariffs can be complex, but Ontario Business Central is here to support Canadian business owners. Whether you are starting, changing, or canceling an existing business, we are here to provide assistance. Our team is dedicated to offering resources and guidance to help businesses navigate challenges and find opportunities for growth.

We are a proud Canadian company that wishes those affected by these trade wars and tariffs find this quick resource guide helpful and supportive. With over 30 years of experience assisting Canadian entrepreneurs, Ontario Business Central is dedicated to helping your business thrive, even amid challenging trade conditions.

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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.