Tapping Canadian Markets

Selling hockey sticks to Canada may evoke the "carrying coals to Newcastle" irony, but Bending Branches Inc., a Minneapolis-based company that since 1986 has been shipping sticks across the Canadian border, some 300 miles away, attributes nearly half its exports to Canadian markets. "The volume is great," says president Dale Kicker, "although it's become difficult with the value of the dollar floating up and down."

There are more predictable vexations -- government bureaucracy, paperwork, the expense of customs brokerage, and freight costs. But Kicker's 22-employee company is typical of the small U.S. businesses that plunge into the Canadian market intuitively, without getting advice on importing, exporting, or setting up a Canadian branch from federal, state, and provincial agencies or private sources of information.

"Less than a year ago we began focusing more on the Canadian market, but we didn't do any research to support that move," says Peter Winston, chief executive of Integrated Computer Solutions Inc. (ICS), a 70-employee computer consulting firm in Cambridge, Mass. "Canada was simply an extension of the United States in our direct-mail advertising." As orders from Canada came in, ICS figured out how to process them. "We didn't do our research until the last possible second."

Resource: For basic information on exporting to any country, Export Programs: A Business Directory of U.S. Government Resources (Trade Information Center, 800-872-8723) is a free 62-page guide covering foreign markets, financing, and technical assistance available to U.S. businesses.

Government Trade Shows
Some CEOs are uneasy about going into a market unprepared. "We thought about getting into the Canadian market for years," says Charles Feldman, vice-president of Plasti-Card Corp., a 25-employee North Miami-based plastic-products printer. "But we didn't know about the costs of exporting and assumed it wouldn't be worth our while."

Feldman discovered the Canadian market last November, when he attended a Canada First trade seminar in Toronto organized by the U.S. Department of Commerce. He went knowing nothing about customs requirements or other exporting details. He left fully briefed by a parade of U.S. and Canadian officials and business owners.

Resource: Canada First seminars are organized around U.S. industry sectors or regions. The cost for each two-day seminar typically runs from $300 to $395, excluding transportation and lodging. For more information call 202-482-3101 or fax 202-482-3718.

Opening Canadian Branches
As demand for Wood-Mizer Products' portable sawmill grew, the number of customers "justified a presence in Canada," says David Mann, consumer sales manager for the $37-million Indianapolis company. Weeks of frustrating delays shipping parts across the border inspired Wood-Mizer in 1988 to form a Canadian subsidiary, managed by a former customer out of a head office near Toronto, with branches in British Columbia and Nova Scotia, and a bilingual office in Quebec.

Wood-Mizer chose managers who knew the product, were attuned to Canadian sensibilities, and were aware of the differences between Canadian and U.S. labor legislation, rules about transacting business in French as well as English in Quebec, warehousing, currency fluctuations, and goods-and-services-tax (GST) kinds of issues.

Resource: Price Waterhouse's Doing Business in Canada (1991, free, 300 pages, 212-819-5000) describes Canada's general business environment, taxation, and business regulations.

Doing Business in the Province of Quebec (1991, $17, 30 pages, 703-487-4650, fax 703-321-8547) covers language requirements, government procurement, labor and transportation issues, and GST. It's available from the U.S. Department of Commerce's National Technical Information Service.

Currency Exchange
What's the bad news for U.S. exporters to Canada? Currency-exchange rates tend to fluctuate, sometimes wildly. If you've negotiated a Canadian dollar price and the Canadian dollar is worth 10% less than the U.S. dollar, you have some room for profit margin, says Barry Davis, national accounts manager for IAP Inc., an automotive-replacement-parts manufacturer and distributor based in Avenel, N.J. But if you've locked in that price and suddenly the currency-exchange rate drops the Canadian dollar's value to 25% less than the U.S. dollar, Davis continues, it becomes difficult to make a profit.

Plus, Davis finds bank practices less than helpful. His company sometimes has to wait up to a month for checks drawn on Canadian banks to clear. Most bank managers can bypass that waiting period if a U.S. business submits a check for payment drawn on a Canadian bank account that hasn't presented problems over time. If the transaction is between correspondent banks (most Canadian banks have correspondent relationships with U.S. banks), a bank draft can act as a certified check that allows the U.S. bank to withdraw funds directly from the check writer's account in a Canadian bank, thus eliminating the wait entirely. A wire transfer from a Canadian bank to a U.S. bank is even faster.

Tapping Market Niches
Underserved niche markets in Canada embrace U.S. businesses, particularly when they cut through the red tape at the border and deliver on time. "We get our product across the border with the same dispatch as if we were down the street," says Carl Treleaven, chairman of Pharmagraphics Inc., a $15-million Itasca, Ill., company that prints labels for the pharmaceutical industry. Barry O'Brien, national sales manager of 150-employee India-napolis-based Standard Change-Makers Inc., which has been selling change-making devices for vending machines from a Montreal office for 25 years, offers a bit of practical advice: Canadian branches with trucks in the United States can fax invoices ahead to Canadian customs so the trucks clear the border faster when they arrive there.