Drop Shipping in Canada
Dropship Canada
Wholesale Drop Shipping Canada
Last Updated: 7 April 2008

Now with Customized Search, including selected resources for Canadian resellers, plus additional U.S., U.K. and Australian content. See above, under "Quick Reference :: Sourcing & Search".

INTRODUCTION

Simply put, drop shipping is a stockless retail business model in which you:

1. promote and sell product to your customer at retail cost;
2. contact the product manufacturer or distributor with whom you have a wholesale account, order the product at your wholesale rate, and provide your customer's address; and
3. have the manufacturer or distributor ship the product directly to your customer, with your return address on the label.

You don't have to stock any inventory, mess around with packaging, or hassle with shipping. Your gross profit, quite simply, is the difference between the retail and wholesale costs.

Finding the information you need to set up your business, however, is sometimes not so simple. Product sourcing can be problematic, given the number of middlemen and bogus operations out there. And then there's the matter of a business number or Tax ID, taxes, brokerage fees, dealing with backorders and product returns, and a host of other issues you'll need to know about and handle expeditiously.

Let's say you're in Toronto, you have an online business that sells products for personal use, and you rely on a U.S. supplier who drop ships items made in the U.S. to your customer, say, in northen Alberta. With respect to duty:

Your goods qualify for the U.S. duty-free rate under NAFTA if the following applies:

• the goods are for your personal use; and
• they are marked as made in the United States or Canada or not marked or labeled to indicate they were made anywhere other than in the United States or Canada.

If you would like more information on goods eligible under NAFTA, refer to Memorandum D11-4-13, Rules of Origin for Casual Goods Regulations, which is available on the CBSA's Web site at www.cbsa.gc.ca under "Publications," or you can call BIS at one of the telephone numbers listed in the section called "Additional information."
How goods qualify under NAFTA
Accessed: 7 April 2008

Now, the goods are not for your personal use, in this instance, but for your customer's personal use. They are considered "casual" as opposed to "commercial" purchases, because your customer isn't buying one or two power tools, for example, not a pallet of 50. In technical terms, your customer is the "importer", not you - you've simply facilitated the acquisition of product - and the customer isn't responsible for any import-related paperwork. Duty does not apply under NATFA, but sales tax does. The relevant facts can be found in Importing Non-Commercial Goods by Mail:

Duties
We calculate any duties owing based on the value of the goods in Canadian funds. The duty rates vary according to the type of goods you are importing and the country they came from or were made in. Depending on the goods or their value, some other taxes may apply, such as excise duty or excise tax on luxury items like jewellery.

Under the North American Free Trade Agreement (NAFTA), duties on various goods imported from the United States and Mexico have been eliminated. The NAFTA rates apply when the goods you are importing are made in the United States or Mexico.

Goods and services tax (GST)
You have to pay GST on most goods you import into Canada. This is to make sure the imported goods are taxed in the same way as those sold or provided in Canada. We calculate GST on the mail item’s dutypaid value. This is the total value converted to Canadian funds, plus any duties that apply.

Harmonized sales tax (HST)
The Government of Canada has entered into agreements with certain provinces to collect HST at a rate of 14%. If you live in a participating province, you will have to pay HST instead of GST. We calculate HST the same way as GST. The tax you pay is based on the mail item’s duty-paid value.

You do not have to pay the provincial part of the HST (i.e. 8%) on books at the time you import them. However, you will have to pay the remaining tax (i.e. 6%) if the publisher has not already collected it from you.

Provincial sales tax (PST) and tobacco tax
We collect PST on behalf of the provinces of Ontario and Saskatchewan, and both PST and provincial tobacco taxes on behalf of the provinces of British Columbia, Manitoba and Quebec. We collect tobacco taxes on behalf of Alberta.

In British Columbia, Ontario and Saskatchewan, PST is collected on the province’s taxable base on most noncommercial goods. Examples of goods that are PST-exempt in Ontario and Saskatchewan include books, children’s clothing and children’s footwear. In Ontario, examples of PST-exempt goods include books, children’s clothing and footwear valued under $30.

On behalf of Manitoba, we collect PST on all imported non-commercial goods except footwear, clothing and books. In Quebec, only books are PST-exempt.

PST and tobacco tax rates vary from province to province. To obtain a listing of the rates currently in place, please refer to Appendix A of Memorandum D2-3-6, Non-commercial Provincial Tax Collection Programs.
Accessed: 7 April 2008

If, on the other hand, you are bringing product into Canada for commercial purposes, such that you intend to stock and ship that product to your Canadian customers, then you are the importer. In that case, read SME Centre: A Step-by-Step Guide to Importing.

References

• Canada Border Services Agency
  • Directory of Canada Border Services Agency (CBSA) Offices
  • Registering your business
    • The Business Number (BN)
    • How do you get a BN import/export account?
    • When do you use your BN import/export account?
  • Importing Goods into Canada
  • MEMORANDUM D11-3-1, Marking of Imported Goods
• Livingston International
  • Your Guide to Understanding Canadian Import Requirements
  • Shipping to the United States: Guide for Canadian Exporters and U.S. Importers
  • Shipping to Canada: Canadian Forms
• Canada Revenue Agency
  • Guide for Canadian Small Businesses (Last Updated: 2007-04-16)
  • Imported Goods
  • Drop-shipment rules
    • Goods subsequently exported
    • Drop-shipments to [GST/HST] registered persons
    • Drop-shipments to [GST/HST] unregistered persons
  • 3.3.1 Drop-Shipments (February 2001; Last Modified: 2002-08-06)
    • Drop-shipments
    • General rules for taxable supplies made in Canada
      • Non-resident registration and residence status
    • General rule for drop-shipments
    • Drop-shipments to registered persons
      • Drop-shipment certificates
    • Self-assessment by a recipient of drop-shipped tangible personal property
      • Imposition of tax on imported taxable supply
    • Drop-shipped property subsequently exported
    • Property retained by registered suppliers
      • Property sold to non-resident and leased back in Canada
    • Transfer of property to a carrier or warehouse
      • Transfer of property to bailee by a non-resident
    • Flow-through mechanism of ITCs or rebates
    • Non-resident rebate respecting installation services
    • Appendix A — DROP-SHIPMENT CERTIFICATE (under subsection 179(2) of the Excise Tax Act)
    • Appendix B — Form GST189, General Application for Rebate of Goods and Services Tax (GST)/Harmonized Sales Tax (HST)

We frequently search for specific information about wholesale drop shipping in Canada — legal requirements, taxes and tariffs, trade rules and regulations, drop ship fulfillment services, etc. — and we know how difficult it is to locate truly useful online resources pursuant to drop shipping in the Canadian reality.

This section of our site examines directories and guides for identifying legitimate wholesale drop ship sources and service solutions. We present detailed reviews of selected options with which we have first-hand experience. Every directory, guide, or service solution we present is vetted — if something proves problematic, we tell you about it. And If you have any comments or questions about the material or recommendations we make on this site, please feel free to contact us.

We've added a customized search function for "Wholesale Drop Shipping Canada" (see top of every page), loaded with selected sites providing legal, how-to, local, provincial and international information of importance to resellers in Canada, plus additional resources for the U.S., U.K. and Australia. In-depth content is provided for Canadians in a series of pages that address (1) drop shipping tips and strategies in Canada, (2) legal issues faced by Canadians who want to sell product online or through eBay.ca, and (3) locating Canadian wholesale drop ship suppliers.

The wholesale drop ship directory or service solution that works best for you will depend on the market you wish to target. Many Canadian entrepreneurs prefer to market to the United States, for instance, because this strategy enables them to avoid cross-border hassles and brokerage fees.

Some resellers prefer to work only with Canadian suppliers and target only the Canadian market, but, until recently, few options were available to them. Canadian businesses are not generally geared toward wholesale drop ship arrangements with independent resellers; many market directly to retail stores. An increasing number of businesses now have wholesale drop ship programs in place, however, and more are becoming available all the time. Sometimes the best approach is to contact a local manufacturer or distributor and negotiate a wholesale drop ship arrangement directly.

Business restrictions are lessening too, these days. Some service solutions don't require business references or credentials — you're a "reseller" — it's your responsibility to meet the local, provincial and federal requirements for your business. The service provider simply requires that you keep your account in good order. See Doba™, for example, one of the primary all-in-one solutions we recommend for Canadians who want to market to the United States in an effort to eliminate cross-border duty and return hassles. Doba™ is an eBay Certified Service Provided - the only product sourcing model of its kind.

See also Drop Ship Strategies for Canadians, Drop Ship Legalities in Canada, and Chinavasion — Wholesale Drop Shipping from China (which includes important Canadian, U.S., and U.K. links).

	Dealing with High-Cost Shipping on Low-Priced Products by Clark Winegar, Doba's Director of Retention You've probably noticed several items on Doba that cost more to ship than they cost to buy. Batteries are a perfect example. With an MSRP of $1.48, shipping cost of $7.49, and a drop ship fee of $2.00. Who in his right mind would try to sell a set of four AA batteries from a Doba supplier? In this article, we explore the high cost of shipping low-priced items and reveal various ways you can include these items in your business model to improve sales and even make a profit selling them. Why are the shipping costs so high? Why is the shipping cost so astronomically high? The answer lies in how the product is shipped. At Doba, we require all our suppliers to provide us with tracking numbers for all shipments that can be tracked online. For drop shipping we feel this is essential. Since our members never see or touch the majority of the products they sell, we have to be able to provide them with the added visibility of online tracking. This means that all of our suppliers ship UPS, FedEx, or DHL (mostly UPS and FedEx). These are premium shipping services that not only allow you to track packages online, but also insure the packages and have certain minimum shipping fees regardless of size and weight. You could ship the products for a lower cost yourself, but if you were to use the same premium shipping services, you would end up paying about the same (in many cases even more) than what our suppliers charge for shipping. Getting creative Do high shipping costs prohibit you from selling these low-priced products? Certainly not. You just have to sell them a little differently. The following list describes your options... [Read More]