NORTH AMERICA FROM CANADA
CETA & CUSMA
How European companies can serve the North
American market from Canada
Funded by the European Union
Introduction
C E T A & C U S M A
Objectives of this guide
This guide is designed to assist European companies, particularly SMEs targeting both Canada and the US, in defining a practical strategy to enter these markets. In the absence of an EU-USA Free Trade Agreement, European companies can first establish and develop in the Canadian market by taking advantage of the CETA FTA. Then as a second step, they can approach the US market from Canada, using a combination of the advantages provided by
the CUSMA FTA and the proximity of the market.
Process for European companies
interested in both the Canadian
and US markets
Ideal locations for European companies operating in Canada from a base in Québec or in
Ontario are the Plattsburgh and Buffalo areas in Upstate New York. Both are located a short
distance from Montréal and Toronto and have many 3PLs offering this type of service to
Canadian exporters. Similar possibilities exist from BC, Alberta and other Canadian provinces, though with fewer economies of scales due to smaller flows.
C E T A & C U S M A
Regarding taxes, there are three key elements to be aware of. First, there is no federal sales tax similar to the VAT or the GST payable upon importation in the USA. Secondly, maintaining some stock in a US distribution center is not considered a ‘’permanent
establishment’’ for tax purposes and does not generally trigger federal fiscal obligations to
the IRS. Lastly, e-commerce vendors must be prepared to the fact that when they become successful and reach a certain threshold, they must collect state tax from their customers and remit them to the individual state of the transaction. The thresholds vary from state to state, but average US$100.000 of annual turnover or 200 orders per year. When the
threshold is reached in a given year, the obligation also applies the following year.
Conclusion
Although this guide is a bit technical, it’s purpose is to highlight the fact that it is relatively
easy for European companies to approach the Canadian and US markets quasi-simultaneously by combining the advantages of CETA, CUSMA and geographic proximity. This can be done within a short time frame and without heavy long-term investments, therefore providing a powerful, flexible and easily implementable solution for success in North America.
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