A special information feature presented by EDC.
Exporting to the United States
The United States, with a population of 312 million people and a 20 per cent share of the
global economy, is the world’s biggest and richest market. It is also Canada’s largest trading
partner, with hundreds of Canadian exporters doing a huge volume of business with U.S.
companies, consumers and governments – far more than with any other single nation.
Doing business in the United States can provide the usual benefits
“In fact,” says Brakel, “Canadian business is now so well integrated
of exporting, such as more sales, better market diversification and into the U.S. market that the traditional model of direct exports
improved competitiveness. But as Jayson Myers, President and CEO
from Canada to the United States is no longer the only one in use.
of the Canadian Manufacturers & Exporters (CME) association
Increasingly, we’re seeing that Canadian and U.S. companies are
points out, it also has unique advantages for Canadian firms. now building products together and shipping them around North
“It’s our closest market geographically, and its familiarity makes it a America and the world.”
place where Canadian exporters can feel very comfortable. It’s also
Even more promising, the U.S. recovery appears to be broadan easy market to enter – if you have a good product and/or provide
based, with almost all sectors having something to offer. The
good service, companies and consumers there will be happy to do
forest products industry, which was hit hard in Canada by the
business with you.”
U.S. construction slowdown after 2008, is one example of a sector
Hendrik Brakel, of EDC’s Economics and Political Intelligence
poised for growth: about 980,000 housing starts are projected for
Centre, concurs. “It’s an enormously dynamic market, where
the United States in 2013, a 25 per cent increase over 2012. This is
Canadian companies can find plenty of
being reflected in a rising demand for wood
opportunities to integrate themselves into
products and lumber, which is great news for
U.S.-based global supply chains. It has “ The U.S. market is coming back in
Canadian exporters in the sector.
leading-edge technologies, it’s home to
So the outlook is getting rosier, but what
terms of stronger growth in both consumer
huge multinationals and, while it’s intensely
about the risks? One hazard, says the CME’s
and industrial demand, and that’s very
competitive, it can also be very lucrative.”
Myers, is that the U.S. market can appear
good news for Canadian exporters.”
Still, given the United States’ economic
deceptively familiar to novice Canadian
difficulties since 2008, is this a good time for
exporters. “If you do business in the United
Jayson Myers
Canadian businesses to consider entering
States, one of the big risks is assuming that
President and CEO
the U.S. market? Brakel certainly thinks
U.S. customers will behave exactly like
Canadian Manufacturers & Exporters
so. “At EDC, we see the United States as
Canadian customers, and then treating them
going into recovery mode, with much more
the same way. Instead, you have to look at
rapid growth to be expected in 2014. Consumers are doing better
potential U.S. buyers on their own terms, and understand what they
and house prices have been rising steadily. Corporate profits are at
want. It’s really a matter of good market research.”
an all-time high and U.S. corporations are sitting on $3.4 trillion in
When doing this research, it’s vital to remember that the U.S.
cash and cash equivalents. As investment spending by U.S. business market is isn’t a monolithic entity. Instead, it’s a mosaic of regional
starts to accelerate, growth will pick up and there will be increasing
markets, each with its own economic characteristics and key
opportunities for Canadian exporters.”
industrial and service sectors. A product or service that’s attractive
These opportunities can extend beyond the U.S. market.
in the northeast may be less alluring to potential customers in the
Because the United States is at the nexus of world trade, a good southwest, and vice versa. When you’re looking for opportunities,
deal of what we export there is re-exported elsewhere. Many
consequently, it’s important to find out which regions offer you
European companies, for example, have business presences the best chances of success. By doing so, you’ll lower your risk of a
in the United States. As a result, Canadian companies may be
failed market entry.
able to connect with European firms by dealing with the latter’s
You can also run into other problems, such as logistics difficulties
U.S. agents and subsidiaries, rather than shipping goods directly caused by delays at the border; increasing regulatory complexity,
across the Atlantic.
which can impose restrictions on the sale of Canadian products in the
United States; and litigation risk, which affects areas such as product
How can Canadian exporters – either new to the United States, or
and business liability. Then there’s the all-too-familiar problem of the already present but hoping to introduce new products there – make
currency exchange rate, which creates cash management problems the most of this recovery? Looking to innovation is one good strategy,
– although EDC’s Foreign Exchange Facility Guarantee can help you
in Myers’ opinion. “It’s always a good idea to get into a new market as
here, by making your cash flow more predictable.
new products and services are being developed for it. If you can get in
The single most important risk, however, is that of nonat ground level, with innovations of your own, it will be easier for your
payment. If one of your customers goes bankrupt and can’t pay
company to take full advantage of the U.S. economic resurgence.”
you, the financial consequences for your company can range
You also have to decide whether to sell your products directly to
from mildly painful to outright catastrophic. Fortunately, you can
U.S. customers, possibly through agents or distributors, or whether
almost completely eliminate this risk by using EDC’s receivables
working with business partners is a better approach. For many
insurance, which covers up to 90 per
Canadian companies, partnerships may be
cent of your losses if a customer doesn’t
the best strategy because of the vast size and
pay. “The fact is,” says Myers, “that U.S. “ If you can succeed in the United
intense competiveness of the U.S. market.
States, you can succeed anywhere.
companies can go bankrupt and seek
Working with a larger Canadian company
creditor protection fairly easily. As a
that has footholds in the United States can be
That definitely helps you improve your
result, EDC’s receivables insurance can be
a very effective way to enter the U.S. market,
competitiveness worldwide.”
a very important contributor to success in
or you can partner with a U.S. company that
Hendrik Brakel
the U.S. market.”
operates in your market of interest.
Economist, Economics and Political
While it’s important to be realistic
Leveraging your business relationships
Intelligence Centre
about these risks, they should in no way
to become part of an industrial supply chain
Export Development Canada
overshadow the huge potential of doing
and procurement system is another good
business in the United States. “Even in the
strategy. “However, adds Myers, “in a supply
worst of the recession,” says Myers, “many Canadian companies
chain relationship, you need to think in terms not just of your U.S.
not only held their own there, but actually increased their market
customers’ requirements, but also in terms of what their customers
share. A lot of them did this by finding ways to provide their
need. If you want to sell products to GE in the United States, for
U.S. customers with higher-value solutions, such as new areas of
example, you need to know how GE will use them in larger products
customer service. This helped them grow their businesses even as
that it sells around the world.”
the overall U.S. market shrank.”
The bottom line? Focus on specific U.S. markets where you have
Myer is also seeing substantial new Canadian investment going strengths, and research your potential customers carefully. Look for
into the United States. This is an upside of Canada’s high dollar, partners whose capabilities dovetail with yours and integrate yourself
which is making it cheaper to acquire bargain-priced industrial
into Canada-U.S. supply chains. Be realistic about the risks, but don’t
assets from failing U.S. companies, and then turn these businesses let them intimidate you. After several difficult years, the U.S. market
around. This investment-friendly situation can help Canadian
is coming back, and 2014 will be a very good time to join it. For more
companies expand their operations in the United States as the U.S.
information about exporting to the U.S. market, download EDC’s
economy recovers.
guide to Doing Business in the United States at edc.ca/USbusiness.
HoneyBar’s Sweet Success
Snack bars from HoneyBar Products
International grace grocery shelves across
the United States and Canada. “The big
reason for our success,” says Wayne Spalding,
the company’s owner and president, “is
that our honeybars are clean. The trend
toward healthy food products is continuing,
and we don’t put in additives. All we use is
nuts, seeds, dried fruit and honey, which is
our only binder and sweetener. It’s also a
natural preservative.”
Spalding purchased HoneyBar in 1995,
when its bars were still produced by hand
and only sold locally. Today, the Ottawabased snack food producer sells millions of
bars a year and is automating its operations
to keep up with rising demand. Spalding is
also looking into expanding into the Chinese
market, where the appetite for an increasingly
varied and healthy diet is rising with incomes.
In addition, the company is eyeing the U.K.,
where its products are certified by the British
Retail Consortium, a globally recognized
stamp of approval for food safety.
While there’s no shortage of challenges
in the global food market, Spalding credits
EDC with eliminating a big one: nonpayment by a foreign buyer. “EDC does our
credit insurance for us,” he says, “and that’s
been a blessing.”
TIPS
› T
he U.S. market consists of many
regional markets. Identify those
with the best opportunities and
focus your efforts there.
› C
onsider partnering with
U.S. firms whose capabilities
complement yours, or with
Canadian firms already operating
in the United States.
› I ntegrate your company into the
supply chains and procurement
systems of U.S. businesses.
› U
nderstand not only the needs of
your U.S. customers, but also the
needs of their customers, both in
the United States and overseas.
› U
se EDC financial solutions
to minimize hazards such as
non-payment and currency
exchange risks.