Теги: угода про вільну торгівлю
How to sell organics to Canada

In August, a year has elapsed since the conclusion of the Free Trade Agreement with Canada. Among other things, this offers great opportunities for exporting organic products. 

It is most expedient to export organic processed products to Canada, while paying attention to territorial features, national standards, as well as tariff and non-tariff restrictions.

Canadian organic goods market is the fifth largest in the world. It is outweighed by China and France. And yet, it is also geographically close to the leader in the consumption of organics in the world – the United States. As to the cost volume of the Canadian organic market, it is worth EUR 3 billion. This is an interesting market opportunity. With regard to the volume of consumption, statistics show that people living in these two countries spend most money on organic products per year. For the US market, it is €121 per year, and Canada is slightly less than €83 per person annually.

As of 2017, the sales of organic products in Canada amounted to 4.2 million CAD. Interestingly, organic foods and drinks constitute the bulk of this market – about 90%. In particular, these are fresh vegetables and fruits (40%), beverages (13%), dairy products, eggs (12%), cereals, pasta, bread (9%). Despite the fact that the country is a powerful producer of organic products itself, its output is not enough. As of 2016, for example, 0.2 million tons of organic products were imported for the total of 637 million CAD. This is much more than produced within the country, which means a shortage and a market opportunity for Ukrainian producers. Of course, the Canadian government is trying to motivate domestic production: in 2017, the Canadian provinces of Manitoba and British Columbia launched significant farmer support programs, so the gap between supply and demand will gradually decrease over time. It is now quite a good time, however, to start exporting to this market.

Quite interestingly, Canada has become one of the first countries to track organic exports and imports. In particular, imports are tracked by 65 categories in a specialized system, while exports are represented in 18 categories. If you look at the imports statistics for the TOP-20 positions, organic coffee, bananas, strawberries, green salads, tomatoes and tomato paste, etc. are the most popular organic products.

Useful statistics are provided by the Canada Organic Trade Association (COTA) concerning a typical organic purchaser in Canada in order to direct producers towards their consumers, which can be both male and female (traditional purchases are usually made by both spouses), of a younger age (18-34 years old), a city dweller, with the greatest interest in organic produce among residents of British Columbia or Alberta. However, these provinces are not the most populated, and Quebec and Ontario should not be disregarded. There is also correlation between the level of income, education and activity in the organic market: people with higher earnings, therefore, are more aware of the details of organic products and more willing to pay for them. Also, families with children are more inclined to spend money on organic products, so organic food and goods for children is a very promising niche as well.

Regarding the regulation of the Canadian organic market, it also significantly differs from the Ukrainian and European approaches. Canada has national organic standards. As of today, the industry is guided by Canada Organic Regulations adopted in 2009. More detailed requirements for the manufacture and the list of permitted substances are provided by CAN/CGSB 32.310-2015 standards – Organic Production Systems – General Management Principles and Standards, CAN/CGSB 32.311-2015 – Organic Production Systems – List of Permitted Substances. However, Canada goes today through an active phase of deregulation; in June, a new regulatory act was published which combines more than 10 legislative acts and is called Regulation on Safe Food for Canadians. Likewise, it deals with organic products. A review of the above standards is scheduled for 2020. Therefore, it is important for organic producers to keep abreast, since the situation is changing quite dynamically. Certified organic products sold in Canada must bear the Canada Organic logo.

A separate topic is sanitary and phytosanitary regulations. If you use the “organic” prefix for the product, this does not mean a complete grace as a series of stringent requirements is applied anyway. Interestingly enough, the requirements for a particular food product in Canada can be traced back to the Automated Import Reference System (AIRS), which is something like the well-known European Export Help Desk.

With regard to the harmonization of certain sanitary and phytosanitary regulations and certificates, the wheel has set to motion only concerning chicken meat. For all other categories of quarantinable goods (such as beef, pork, eggs), the problems remain. Accordingly, if the business begins to demonstrate interest in the Canadian market the process will begin to harmonize those certificates between the governing bodies. Also, the ban on import of Ukrainian grain and wheat into Canada continues, because pests were found in the imports of one of the corn suppliers, and a precautionary measure was immediately taken. Therefore, there is a need for additional communication of state authorities to make this ban lifted.

With regard to dairy products, the principle of protection of domestic producers is applied, and there is a high import tariff for imported goods. Therefore, the opportunities for Ukrainian producers including organic manufacturers are limited in this segment. On the one hand, it would seem that with such a list of restrictions is not worth trying to supply to this market. Those looking for opportunities, however, will necessarily find them. Although Canada is far, for supplying the processed goods even logistics will not be a financial constraint. Moreover, there are significantly lower requirements for processed goods. Therefore, it is logical to recommend manufacturers of processed organic products to commence sales on this market. The most popular products are juices, confectionery products, dried and frozen vegetables, sauces, ketchup, vegetable oils and snacks.

Life-hacks to successfully negotiate with a Canadian partner

In Canada sellers are fully responsible for the quality of the goods on their shelves. Therefore, Ukrainian companies that work with Canadians have to follow the regulatory and certification requirements closely.

Musthaves for exporters

To get your goods to the supermarket shelves, you have to ensure 101% compliance within the letter of the law. The requirements are quite strict in Canada. Automated Import Reference System (AIRS) may help to learn all regulatory requirements for the food products. You need to enter the product code or name and the website will automatically generate the list of requirements.

If entrepreneurs intend to supply non-food products to Canada they will have to study sector-specific legislation. No single magic portal contains all the information.

Also, there is a number of “voluntary-compulsory” certificates in Canada. In this market, sellers bear full responsibility to end consumers for the goods on their shelves.

Sellers are interested to have not simply good but the best products, which are fully certified and safe.

I, therefore, recommend exporters to start reviewing GFSI certification right away, as it includes the following certificates: BRC global standard for foods safety Issue 6; FSSC22000; SQF code 7th Edition Level 2; IFS Foods Standard Version 6; Global Aquaculture Alliance Seafood BAP Seafood Processing Standard. These are the certificates that will make your goods much more attractive for retail chain representatives. It is hard but necessary.

In addition, large Canadian supermarket chains often require their suppliers to go through a corporate social responsibility (CSO) audit before the supply of goods. Canadians are known to be “moral buyers”. Canadian business prefers the suppliers who do not violate labour, gender or human rights. Nevertheless, few Ukrainian companies can boast of something else within the CSO framework than charity campaigns or formal policies.

Veni, vidi, vici 

As a rule, Canadian companies plan their meetings well in advance and will not meet you at inconvenient time even if you need it urgently and “it will take only five minutes”. No cancellation or force majeure, unless you want to lose your partner’s trust.

Based on my practical experience, it took 5 months to organize a meeting of Ukrainian food manufacturers with a supermarket chain in Canada. The Canadian party’s timetable is booked for months to come.

In 99% of cases, the first meeting is held personally: no Skype or teleconference. If you want a result, you will have to travel to Canada. The meeting itself goes quickly and intensively. You must take product samples with you. Most likely, the importer will ask you of the possibilities to change the products: packing design, labelling, taste line, frequency of supplies.

The first meeting may last 7 to 30 minutes. The first contact is the indicator of interest. If a company manages to catch the interests of Canadians their quality and safety specialists will need to analyse the samples in detail.

After the meeting, there may be two possible case scenarios. Under the negative scenario for the Ukrainian company, it will hear of the Canadians’ decision within a month or a month and a half; a positive outcome will, most likely, be known within about a year.

First scenario: the products have been tested and they are not different from those of the existing supplier. This means there is no sense to continue negotiations. A letter on such a decision will come, as a rule, 1-1.5 months after the meeting. The answer is usually straightforward: “Thank you, but our company decided to extend its contract with the existing supplier”.

Second scenario: the partner liked your products but this is only the beginning of further work. Depending on individual Canadian food importers, the working process with supplying companies takes 2 months to one year between the discussion and negotiation and the first supply of your products to the supermarket or warehouse.

As soon as the importer confirms its intentions, you will be entered into the internal system and an individual project will be launched with a dedicated manager. Further, step by step, you will be discussing prices, mix, packing, design and batch volumes over the phone or Skype.

In addition, a schedule is mandatorily developed for provision of necessary start-up documents. For instance, a future supplier should submit a third party insurance agreement, a goods insurance agreement, a confirmation of the goods’ compliance with Canadian organic standards. It will take time and financial resources to compile and coordinate those documents. This is a part of the process, however, and one may only get the goods to the supermarket shelves upon successful passage of this phase.

Author: Olga Vergeles, Project Manager, Canada-Ukraine Trade and Investment Support Project (CUTIS)

Source: Delo.ua

Ukrainian Products: Paving the Way to Canadian Supermarkets

The Ukrainian food producers who consider placing their products on the shelves of Canadian supermarkets have a long and thorny way ahead. It is like running a marathon. You gear up, have trainings, and make a step-by-step try: a 10-kilometre distance, then a semi-marathon, and only after that you are prepared to run the whole distance. Provided that you have enough energy, willingness and understand the purpose.

Let us analyze the key stages of the cross-Atlantic marathon and barriers on the way to the Canadian retail chains. To begin with, we will concentrate on the questions “what should you sell?” and “whom to?”

Analyzing the demand for your products and consumer preferences in Canada

Your potential Canadian buyers are numerous (over 35 million) and diverse. Canada is a multicultural country; over 20% of its residents were born outside Canada. Consequently, the customs and preferences of Canadian consumers and partners are dissimilar. I would recommend that you start doing your homework by searching for information using the following resources:

  • Canadian Importer Database, which provides lists of companies importing goods into Canada, with breakdown by product, by city, and by country of origin.
  • Canadian Company Capabilities Directory offers more complete company information. In addition, this tool enables searching by industry. The database includes predominantly Canadian producers, and sometimes distributors.
  • Trade Data Online is another convenient tool to get information on importing goods to Canada, in general and by country.

You may get some information from these resources for free.


Source: Flickr

Studying the demand and the products offered by your competitors is more efficient when you do so on site, that is in Canada, by engaging other people, for example from the Ukrainian diaspora. It is critical that a company may invest into such study. Let us consider some potential market analysis scenarios.

Do-it-yourself market analysis. You, as a producer, go to Canada and – having drafted a plan of visits to certain supermarkets, grocery stores, and points of sale – study the products of a particular group, the prices and the available range. It is an efficient method enabling to understand the proper place and manner of presenting your goods. In addition (a real-world example), if you demonstrate a strong interest and a maximum insistence, you may get contacts of a person active in purchasing for a grocery store or a supermarket suitable for your goods.

Analysis by an agency or an agent. On the one hand, it is a plain vanilla: you contract an agency to conduct the study and, within a specified period, get the report. On the other hand, the agency is not a producer; it will demonstrate its enthusiasm solely within the limits specified in the contract. You cannot exclude that the agent you choose has his own views on the potential of your goods. Among the agents, you may find the representatives of the Ukrainian diaspora living in Canada for years. Often they see the specific nature of the Ukrainian producers, market requirements and demand from the eyes of Canadians. However, I would not recommend you accept a common conception that it is easier to make a deal with a fellow countryman; sometimes it proves unjustified. Your countrymen residing in Canada mind their business interests rather than nationality.

Market analysis by an organization. The main difference between organizations and agencies is that, in addition to studying the demand and providing you with information, organizations may offer you additional services related to the “ongoing promotion” of your company in Canada: participation in exhibitions, educatory touring, etc. Usually, the membership fee they charge is rather moderate; however, you do not get immediate results or “the first aid”. Promoting takes time and requires ‘adoption’ by the Canadian market.

Players of the Canadian food market: who they are and how they work

Supermarkets are the main players; 64% of food products are displayed on their shelves. A supermarket is a full-function and self-service retail market that sells food, with the annual sales of 2 million Canadian Dollars or more.

The 2015 retail sales by Canadian supermarkets and grocery stores are estimated at about 79 million Canadian Dollars.

The top five Canadian supermarkets by annual sales are: Loblaw Cos. Ltd., Sobeys Inc., Metro Inc., Costco Canada Inc. и Walmart Canada Corp.

When choosing and buying food at supermarkets, a Canadian buyer is guided by the following criteria, in descending order of priority: price, taste/freshness, quality, nutritional value/health benefit, safety.

By offering several brands of grocery stores – depending on the pricing policy – some supermarket chains encourage buyers to make more buys. Thirty-three per cent of Canadian buyers opt for specialized stores according to the principle of lower prices.

Winning in the ethnic buyers sector remains a top priority for chain supermarkets in Canada. For Ukrainian producers it means that representatives of ethnic groups (like Ukrainian or Arab diaspora) may trigger interest to certain food product groups. A proactive analysis will help the producer to identify the most wanted products.

In Canada, a typical distributor interacts with the chains of supermarkets and small grocery stores. Customarily, the distributor operates its warehouses in multiple provinces of Canada, which enable prompt product deliveries to multiple stores all over Canada. Commonly, a distributor is active in the markets of both Canada and the US; this may be useful to expand oversea sales geographically.


Source: Flickr

A distributor may operate a separate chain of small ethnic stores of the same brand. In addition, it may offer products under a private label.

For Ukrainian exporters it is important to know that distributors often show interest to food products matching the tastes of ethnic client groups. They opt for goods with the packaging and formula that remind the consumers about their preferences.

However, you should not narrow your offering excessively.

The partner is not interested in niche goods (e.g., gluten-free snacks) and orients at the goods that are popular among Canadian consumers: from confectionary to species.

An advantage of engaging a distributor is a potentially prompt transaction, which is critical for your entry into the Canadian market. If the goods meet the partner’s price, packaging and labelling requirements, the distributor may deliver them to the supermarket chains within 2 months.

What do the Canadian distributors normally expect from a potential supplier? Firstly, a proposal specifying, among others, the best sellers. Secondly, a list of products, including the product description, packaging options according to the consumers’ requirements and/or preferences, letters of references from serious partners. In addition, the supplier should provide a price list, a potential delivery schedule, and specify whether the products are certified.

Author: Olga Vergeles, Project Manager, Canada-Ukraine Trade and Investment Support Project (CUTIS)

Source: Delo.ua

The nearby market of distant Canada: free trade and its opportunities for Ukrainian exporters

The first day of the last summer month was marked by the long-awaited launch of a free trade agreement between Ukraine and Canada. Finally, upon completion of ratification procedures, the Canada-Ukraine Free Trade Agreement (CUFTA) came into effect.

Let us take a look at the Agreement from a practical standpoint and analyse the following:

  • how to work under the Agreement and properly understand the meaning of staging categories in the tariff schedules of Ukraine and Canada;
  • how to confirm the origin of goods; and
  • what are regulatory requirements to your goods.

Canadian market is diverse and rather heterogeneous. Therefore, interesting facts are provided at the end of this article for you to get oriented when looking for a niche for your goods at Canada’s store shelves.

Staging categories in tariff schedules of Canada and Ukraine

As a rule, Ukrainian manufacturers are interested in two things:

  • whether zero-rate import duty will be applied for exports to Canada;
  • how will import duty change for imports into Ukraine.

If you decided to review the Agreement yourself in order to find answers to those questions, please, note the staging categories in the tariff schedules of Ukraine and Canada.

The Tariff Schedule of Canada contains the goods with the import duty rate other than “0” as of the effective date of the Agreement (only 2% of goods). That is, if your goods are not listed in the Tariff Schedule of Canada this means that a zero import duty is applied to them since 01.08.2017. Therefore, there are only two staging categories in the Tariff Schedule of Canada: “7” and “Е”.

Staging category “7” applies to certain vehicles and means that the import duty will become zero in the eighth year of the Agreement (according to the estimates, in 2024) by getting gradually reduced in eight equal stages starting on 01.08.2017. Let us take, for instance, “Non-amphibious all-terrain vehicles of a weight of less than 227.3 kg, having fewer than six wheels and designed to carry only one passenger” (8703.21.10), for which the base rate of import duty is 6.1% and the staging category is “7”. The order of gradual reduction of import duties is shown in the graph below.

It should be noted also that the first year of the Agreement is 01.08.2017 through 31.12.2017. That is, the second year and the next phase of import duty liberalization will start already on 01.01.2018 (and last through 31.12.2018).

The goods in staging category “Е” in the tariff schedules of both states are excluded from the scope of the Agreement. This means that the free trade regime does not apply to those goods and the import duty will continue to be applied at the MFN rate (relevant rates of import duties may be found in Canada’s Customs Tariff).

In the case of Canada, Category “Е” includes the goods subject to Canada’s global tariff quotas. These are mainly certain grain crops and meat and dairy products. The idea of the tariff quota is that a zero or a very low import duty rate is applied within a tariff quota. When the quota is exhausted, however, a higher duty rate is applied (MFN rate in accordance with the Agreement).

It should be noted that Canada’s tariff quotas are international and applied to all countries of the world rather than Ukraine only. Canada reserved the right to set tariff quotas when it became a member-state of the World Trade Organization (WTO). Those quotas are available for all exporters from all countries that are WTO members. Depending on the goods, the tariff quotas are administered on the basis of either of the following principles:

  • “first-in-first-served” (the control of compliance with this principle is exercised by Canada Border Services Agency, CBSA);
  • through a preliminary distribution of tariff quotas by Global Affairs Canada based on applications.

In both cases, the tariff quota is received by an importer in Canada. The list of tariff quota holders may be found on the website of Global Affairs Canada. Following this link, for example, you may see the lists of companies that received a tariff quota for cheese in 2017.

The Tariff Schedule of Ukraine contains a much larger number of staging categories. In particular, this is due to the fact that Ukraine succeeded in claiming the asymmetric nature of the Agreement. Therefore, Ukraine will liberalize import duties for about 80% of the goods of Canadian origin on 1 August already (while Canada will ensure free access to the market for 98% of Ukrainian goods).

That is why, zero-rate import duty will apply to the goods under staging category “0” in Ukraine’s Tariff Schedule as soon as the Agreement comes into force. The plan for the goods under staging categories “1”, “3”, “5” and “7” is shown in the table below.

For the goods under Staging Categories “5А”, “5B”, “5С”, “7А” and “7В”, the import duty rate will be liberalized only in part. As an example, let us take: 1517 90 91 00 – Fixed vegetable oils, fluid, mixed; Base Rate – 15%, Staging category: 5В. The import duty rate will be liberalized as follows (as we can see, the rate will only drop by 4.5% in 6 years):

Staging category “Е” (exclusion from the scope of the Agreement) in the Tariff Schedule of Ukraine applies to sugar.

Rules of origin

Similarly to any other free trade treaty, CUFTA contains provisions on definition of origin of goods. For instance, the rules of origin determine, which Ukrainian goods are granted preferential access to the Canadian market within the CUFTA framework, and which are not (and vice versa).

In compliance with the Agreement, goods are recognized as originating from Ukraine if they are:

  1. fully manufactured in Ukraine;
  2. manufactured exclusively from the materials originating from Ukraine;
  3. processed in Ukraine to a sufficient extent.

Definitely, the most complex are the rules of sufficient production that

  • require changing the tariff classification, or
  • impose requirements to the relation of the cost of foreign materials to the transaction cost, or
  • impose a requirement to the relation of the cost of foreign materials to the goods price on the Ex Works terms.

Therefore, exporters should review in detail the rules of origin contained in Chapter 3 and Annex 3-А to the Agreement.

The document confirming the origin of goods is the Declaration of Origin (a template is contained in Annex 3-В to the Agreement). That is, exporters themselves provide information on the origin in the invoice or any other document containing the goods description.

Thus, for the confirmation of the goods origin, Ukrainian exporters do not need any certificates/marks of customs authorities, which reduces the cost and time for customs clearance of goods.

Where to find regulatory requirements to your goods?

Canada is a developed country that sets rather strict requirements to the safety and quality of goods. For those requirements not to become non-tariff barriers for export, it is worth studying them in detail. There is a number of useful resources for that purpose.

For instance, Canada Food Inspection Agency ensures compliance with all regulatory acts dealing with foodstuffs, animals, and plants imported to Canada. There is a very convenient resource on the Agency’s website that allows generating the requirements for import to Canada using the code (or even the name) of goods. The system is called Automated Import Reference System (AIRS) and is somewhat similar to the European Export Helpdesk resource.

For manufacturers of consumer goods, medicines, foodstuffs, medical equipment, health products, the website of Health Canada will be of use.

Manufacturers of washing machines, dish washers, freezers, electric ovens, and refrigerators should review the details of EnerGuide certification requirements on the website of Natural Resources Canada.

If you are a manufacturer of textile, it is worth visiting the website of Canadian Competition Bureau to learn, for instance, about the textile marking requirements.

In fact, there are specific marking rules applied in Canada.

Labels on the packing must be in Canada’s two official languages: French and English, and both texts must occupy the same area.

Therefore, we recommend reviewing the provisions of Consumer Packaging and Labelling Act.

One should be very careful with statements concerning the goods. For instance, under Canadian rules the skin antiaging agent may only prevent signs of aging rather than reducing wrinkles. The same refers to foodstuffs where statements concerning the goods may be of three types only:

  • general impact on health,
  • functional impact on health,
  • reduction of disease exposure.

For each type of statements, individual rules are applied. For instance, if you position your goods as “natural” you have to make sure they do not contain any additional vitamins, minerals, nutrients, artificial flavours or food supplements, and no elements were excluded (except water) or significantly modified, while the physical, chemical or biological condition of the goods remains unchanged.

Usually, your Canadian partner would tell you about all regulatory requirements to the goods and how to prove compliance with them because it will be the Canadian importer who will be liable in case of incompliance. Therefore, when developing a bilingual label remember that the final word of the design approval rests with your partner.

Concerning the search for partners, Canadian Importer Database is an extremely useful resource that contains lists of companies that import their goods to Canada with a breakdown by products, cities and countries of origin.

Canada: Facts and Opportunities

Finally, some words about Canada and Canadians. Canada is the second largest country in the world. However, about four fifth of its population live in the area 150 km away from the US border.

More than 6 million Canadian citizens are those who immigrated from other countries; they represent about 20.6% of the country’ entire population (35.9 million people in total).

In Canada, there are 1.3 million Ukrainians; Ukrainian community is one of the largest in Canada. Originally, Ukrainians immigrated to the prairie provinces (Manitoba and Saskatchewan) but lately have been also discovering Ontario and Quebec.

Canada’s multiculturalism opens broad opportunities for business on condition of detailed market analyses aimed to detect target consumers. For example, cosmetic manufacturers export skin bleachers to British Columbia because of many people of South Asian descent living there.

Due to the increase of the Muslim community, demand for Halal products is steadily growing. Interestingly, more than 95% of Canada’s Muslim population live in cities.

According to the latest research of Business Development Bank of Canada Canadian consumers prefer:

  • Internet search before purchasing the goods (they carefully study other buyers’ reviews and feedback);
  • health lifestyle (as estimated, almost 31% of Canadian consumers are ready to pay more for healthy goods);
  • individual approach; and
  • good quality at lower price.

Also, about 6 of 10 Canadians consider themselves to be “ethical consumers” and are willing to spend their money for the goods produced under certain ethical standards. For instance, Canadians are ready to pay more for the goods that are not connected with the use of children’s labour.

Canadian market of organic goods is the fifth largest in the world and 56% of Canadians buy organic products every week.

Thus, Canadian market is closer than it may seem in the beginning, and the Free Trade Agreement does bring many opportunities for Ukrainian exporters considering significant and immediate cancellation of import duties and a large Ukrainian diaspora in Canada that may become a bridge to Canadian consumers, distributors, agents, retail operators, etc.

So don’t be afraid to capture new markets even though they are located far.

Author: Oleksandra Brovko, CUTIS Senior Trade and Investment policy expert

Source: European Pravda