Import/Export Startup Guide · Ontario
How to Start an Import/Export Business in Ontario
The complete step-by-step guide to starting an import/export business in Ontario. Covers incorporation, CBSA registration, customs brokers, HS tariff classification, CUSMA, HST on imports, zero-rated exports, foreign currency accounting, T1135 reporting and trade-specific tax planning. Written by a licensed Ontario CPA.
Step 1: Incorporate Your Import/Export Business
Every import/export business in Ontario should incorporate as the first step. International trade carries unique liability risks: cargo damage claims, supplier disputes across jurisdictions, customs penalties, product liability for imported goods and foreign currency contract exposure. A corporation shields your personal assets from all of these.
For importers specifically, incorporation is functionally required. CBSA issues import/export accounts to corporations, most foreign suppliers require a Canadian corporate entity before extending trade credit and banks require incorporation for letters of credit, trade finance and foreign exchange facilities. US Customs and Border Protection (CBP) requires a corporate entity for importer of record registration.
The tax advantage is equally compelling. A CCPC pays 12.2% on the first $500,000 of active business income. Import/export businesses with high gross margins on branded products, electronics, specialty foods or consumer goods routinely generate net income that benefits significantly from the SBD deferral. At $200,000 net income with $120,000 retained, the annual deferral is approximately $19,266. Over five years, that is $96,330 reinvested in inventory, supplier deposits and market expansion instead of paid to CRA.
| Factor | Sole Proprietorship | Corporation (CCPC) |
|---|---|---|
| Liability protection | None. Personal assets at risk from cargo claims, supplier disputes and product liability on imported goods. | Separate legal entity. Personal assets protected. |
| Tax rate on net income | 20% to 53.53% Ontario personal rates | 12.2% on first $500,000 active business income |
| Tax deferral at $200,000 net income | $0 | $19,266 per year |
| CBSA import account | Can register as sole prop | Corporate registration preferred. Required for RM (Release on Minimum Documentation) privileges. |
| Trade finance and letters of credit | Not available to sole proprietors at most banks | Corporate trade finance facilities available. Required for large international orders. |
| US CBP importer of record | Difficult for sole props | Standard corporate registration accepted by CBP |
| Incorporation cost through Gondaliya CPA | N/A | $35 federal or $335 Ontario (all-inclusive) |
Incorporate Your Import/Export Business for $35
Federal incorporation includes government fee, NUANS, Articles, minute book and CRA registration.
Step 2: Register with CBSA for Importing
Before importing any commercial goods into Canada, your corporation must be registered with the Canada Border Services Agency (CBSA). This involves obtaining a Business Number (BN) with an import/export (RM) account.
| Registration | What It Is | Cost | Timeline |
|---|---|---|---|
| CRA Business Number (BN15) | Your 15-digit business identifier. The first 9 digits are your BN. The RM suffix identifies your import/export account. | Free (included with incorporation through Gondaliya CPA) | 1 to 3 business days |
| CBSA Import/Export Account (RM) | Allows your corporation to import commercial goods into Canada and to be identified as the importer of record on customs documentation. | Free | 1 to 5 business days after BN is issued |
| CBSA Release on Minimum Documentation (RMD) | Allows goods to be released from CBSA before full accounting is completed. Required for high-volume importers. Your customs broker applies on your behalf. | $25,000 security deposit or surety bond (waived if using a licensed customs broker) | 2 to 4 weeks |
| Customs broker appointment | A licensed customs broker handles CBSA accounting, HS tariff classification, duty calculation and goods release on your behalf. Not legally required but practically essential for all but the smallest importers. | $50 to $150 per customs entry (varies by broker and volume) | Immediate once broker agreement is signed |
You Need a Customs Broker: While CBSA does not legally require importers to use a licensed customs broker, the complexity of HS tariff classification, duty rate determination, CUSMA rules-of-origin documentation, anti-dumping and countervailing duties and CBSA accounting timelines makes self-clearing impractical for most businesses. A single HS code error on a $200,000 shipment can result in $6,000 to $30,000 in overpaid duties. A good customs broker pays for themselves on the first shipment.
Step 3: Understand HS Tariff Classification and CUSMA
| Concept | What It Means for Importers | Dollar Impact |
|---|---|---|
| HS Tariff Classification | Every imported product is classified under a 10-digit Harmonized System (HS) code. The code determines the duty rate. Incorrect classification is the most common and most expensive customs error. | A wrong HS code on $500,000 in annual imports can cost $15,000 to $75,000 in overpaid duties |
| CUSMA (Canada-United-States-Mexico Agreement) | Goods qualifying under CUSMA originate in Canada, the US or Mexico and receive preferential (often 0%) duty rates. Requires a Certificate of Origin or certification of origin statement. | A $300,000 auto parts shipment from the US at 0% CUSMA vs. 6.1% MFN rate = $18,300 duty savings per shipment |
| CPTPP (Pacific trade agreement) | Preferential duty rates for goods originating in CPTPP member countries (Japan, Australia, Vietnam, Malaysia, Singapore, New Zealand and others). | Varies by product. Electronics, textiles and food products from CPTPP countries often qualify for reduced or zero duty. |
| Anti-dumping and countervailing duties (SIMA) | Additional duties imposed on specific products from specific countries where the Canadian International Trade Tribunal has determined dumping or subsidisation. Steel, aluminium, certain textiles and food products are common targets. | Anti-dumping duties can add 30% to 200% on top of the standard duty rate. Check CBSA SIMA measures before sourcing. |
| Country of origin marking | Most imported goods must be marked with the country of origin in English and French before entering Canada. Non-compliance results in CBSA detention, re-marking costs or re-export. | CBSA detention costs $200 to $500+ per day in storage fees at the port of entry |
CUSMA Certificates of Origin Must Be Maintained: To claim preferential CUSMA duty rates, you must maintain a valid Certificate of Origin or certification statement for every qualifying shipment. If CBSA audits your imports and you cannot produce the certificate, CBSA retroactively applies the non-preferential (MFN) duty rate to every shipment for up to four years. On $1,000,000 in annual US imports, the retroactive duty exposure can exceed $60,000. Keep certificates organized by shipment and supplier.
Step 4: Understand HST on Imports and Zero-Rated Exports
| Transaction | HST Treatment | ITC Claimable? | Key Rule |
|---|---|---|---|
| Importing goods into Ontario | 13% HST collected by CBSA at the border on the value for duty (transaction value + duty + excise) | Yes, full ITC claimable on your GST/HST return | Import HST and customs duties must be recorded in SEPARATE accounts. Import HST = recoverable ITC. Customs duty = cost of goods (not recoverable). |
| Importing goods into a non-HST province | 5% GST collected by CBSA | Yes, full ITC claimable | Place-of-supply rules determine whether GST or HST applies based on the province of delivery |
| Exporting goods from Canada | Zero-rated (0% HST) | Full ITCs claimable on all Canadian inputs (inventory, shipping, overhead) | You charge 0% HST to international customers but recover ITCs on all domestic business expenses. Exporters are frequently in a net HST refund position. |
| Domestic resale of imported goods | 13% HST charged to Ontario customers | Yes, on your purchases (the import HST already claimed above) | Standard HST on domestic sales. Ensure POS or invoicing system charges correct HST by province of delivery. |
| Drop-shipping (goods shipped directly from foreign supplier to Canadian customer) | Complex. Depends on who is the importer of record. | Depends on structure | If you are the importer of record, you pay import HST to CBSA and charge HST to the customer. If the foreign supplier ships directly without you as importer, different rules apply. Get CPA advice before structuring drop-ship operations. |
CRA Registration Included Free with Every $35 Incorporation
We register your Business Number, HST, RM import/export account, Payroll and Corporate Tax accounts.
The #1 Bookkeeping Error for Ontario Importers: Recording CBSA border charges as a single expense line without separating import HST from customs duties. Import HST (13% in Ontario) is fully recoverable as an ITC on your GST/HST return. Customs duties are NOT recoverable and must be added to inventory cost. This single error costs Ontario importers thousands per year in unclaimed ITCs. We configure separate CBSA accounts in QBO or Xero for every import client on day one.
Step 5: Foreign Property Reporting and Transfer Pricing
| Requirement | When It Applies | Penalty for Non-Filing |
|---|---|---|
| T1135 (Foreign Income Verification Statement) | Required when your corporation (or its shareholders) holds specified foreign property with a total cost exceeding $100,000 at any time during the year. Includes foreign bank accounts, supplier deposits, real estate, shares of non-resident corporations. | $25 per day, max $2,500 per year. Up to $25,000 for knowingly non-filing. Plus 5% of unreported foreign income. |
| T1134 (Foreign Affiliate Information Return) | Required if your corporation has a foreign affiliate (owns 10%+ of shares in a non-resident corporation). | $25 per day, max $2,500 (up to $12,000 if 24+ months late) |
| Transfer pricing (Section 247) | Required when your corporation has transactions with non-resident related parties (parent company, subsidiary, affiliated entities). Prices must be at arm's length with contemporaneous documentation. | 10% of the transfer pricing adjustment amount. No cap. Can be millions for large intercompany flows. |
| Foreign tax credits | Tax paid to a foreign government on income earned abroad can be credited against Canadian tax on the same income to prevent double taxation. Claimed on Schedule 21 (T2). | Not a penalty, but failure to claim = double taxation. Lost credits are not refundable retroactively beyond the normal reassessment period. |
T1135 Is the Most Overlooked Filing for Import/Export Businesses: Many Ontario importers maintain supplier deposit accounts, inventory advance payments, letters of credit deposits and bank accounts in China, India, the US, Mexico, Europe or Southeast Asia. If the total cost of these foreign property holdings exceeds $100,000 at any point during the year, the T1135 must be filed. CRA has increased T1135 enforcement through international information-sharing agreements and third-party financial data from FATCA and CRS. We review T1135 requirements for every import/export client annually.
Step 6: Get Import/Export Insurance
| Insurance Type | Why Import/Export Businesses Need It | Typical Annual Cost |
|---|---|---|
| Marine cargo insurance | Covers goods in transit by ocean, air and land from origin to destination. Shipping carrier liability is limited to approximately $500 per package by international convention. Without cargo insurance, a $200,000 container loss is your loss. | 0.3% to 1.5% of cargo value per shipment (or annual policy based on volume) |
| Commercial general liability (CGL) | Covers bodily injury and property damage claims from imported products or business operations. | $1,500 to $5,000 |
| Product liability | Covers claims from defective or non-compliant imported products. Essential for consumer goods, food, electronics and children's products. | $1,500 to $8,000 (depends on product type and volume) |
| Credit insurance (trade receivables) | Covers non-payment by international customers. Protects against buyer insolvency, political risk and foreign currency inconvertibility. | 0.3% to 1.5% of insured receivables |
| Customs bond (CBSA) | Security required by CBSA for certain import activities. Your customs broker may arrange this as part of their service. | $200 to $1,000 per year depending on import volume |
Step 7: Understand Import/Export Tax Rules
| Tax Rule | What It Means for Importers/Exporters | Dollar Impact |
|---|---|---|
| Foreign currency transactions | Revenue, expenses and inventory purchases in foreign currencies must be converted to CAD at the exchange rate on the transaction date (or a reasonable average rate for the period). Foreign exchange gains and losses are taxable or deductible. | A $500,000 USD inventory purchase with 3% CAD depreciation = $15,000 forex loss (deductible) |
| Inventory valuation for importers | Imported inventory cost includes purchase price + freight + customs duties + insurance in transit. HST is NOT included in inventory cost (it is recovered as an ITC). Value at year-end at the lower of cost or net realisable value. | Excluding duties from inventory cost understates COGS and overstates taxable income |
| CCA on warehouse and logistics equipment | Warehouse racking (Class 8, 20%), forklifts (Class 10, 30%), packing machinery (Class 43 or 53 if M&P), computer hardware (Class 50, 55%), logistics software (Class 12, 100%). | $100,000 in warehouse equipment generates $20,000 to $50,000 in first-year CCA depending on class |
| Customs duty drawback | If you import goods into Canada, pay duty, and then re-export the goods (or finished products made from imported materials), you can apply for a drawback of the customs duties paid. Must apply within four years. | Full refund of duties paid on re-exported goods. A manufacturer importing $400,000 in materials and exporting finished goods recovers $12,000 to $60,000 in duties. |
| Withholding tax on payments to non-residents | Payments to non-resident service providers (commissions, royalties, management fees, consulting) may be subject to 25% Canadian withholding tax, reduced by tax treaty. | $50,000 commission to a US agent: 15% treaty rate = $7,500 withheld and remitted to CRA. Failure to withhold = your corporation owes the tax plus penalties. |
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Step 8: Set Up Import/Export Bookkeeping
| System | What to Set Up | Why |
|---|---|---|
| Cloud accounting software | QuickBooks Online or Xero. Configure multi-currency, chart of accounts for trade (import HST recoverable, customs duties as COGS, freight-in, foreign exchange gains/losses, export revenue by market). | Multi-currency is essential. QBO and Xero both support foreign currency invoicing, automatic exchange rate conversion and forex gain/loss calculation. |
| CBSA account separation | Create separate GL accounts for: import HST payable to CBSA (recoverable ITC), customs duties (inventory cost), CBSA brokerage fees (expense) and anti-dumping duties (if applicable). | Prevents the #1 importer bookkeeping error: mixing import HST and customs duties in one account. |
| Inventory tracking | Track inventory by landed cost: purchase price + freight + duty + insurance. QBO Advanced or a dedicated inventory system for high-volume importers. | Accurate landed cost determines COGS, gross margin by product and year-end inventory valuation for T2 filing. |
| Bank account | Dedicated business chequing account. Consider a USD account for US trade to reduce forex conversion fees on every transaction. | CRA compares deposits to revenue. A USD account simplifies US trade and reduces bank conversion charges of 1.5% to 2.5% per transaction. |
| Receipt and document management | Store commercial invoices, CBSA B3 forms, Certificates of Origin, bills of lading, packing lists and customs broker statements digitally. QBO attachments or a dedicated document system. | CBSA can audit your imports for up to four years. Every customs entry must have supporting documentation. Missing a Certificate of Origin means retroactive non-preferential duties. |
Import/Export Bookkeeping from $100/month
QBO or Xero multi-currency setup, CBSA account separation, HST filing, payroll and your annual T2 filed FREE.
Step 9: Budget Your Import/Export Startup Costs
| Expense Category | Small Importer (home-based) | Mid-Size (warehouse) | Large (distribution centre) |
|---|---|---|---|
| Incorporation and CRA registration | $35 | $35 | $35 |
| Warehouse lease deposit | $0 (home-based) | $15,000 | $50,000 |
| Initial inventory purchase | $10,000 | $50,000 | $250,000 |
| Customs duties on first shipment | $500 | $3,000 | $15,000 |
| Freight and shipping (first order) | $2,000 | $8,000 | $30,000 |
| Marine cargo insurance | $500 | $2,000 | $8,000 |
| CGL and product liability insurance | $2,000 | $5,000 | $12,000 |
| Customs broker fees (year one) | $1,000 | $5,000 | $20,000 |
| Working capital (3 months operating + supplier deposits) | $15,000 | $60,000 | $200,000 |
| Website, marketing and trade show | $3,000 | $10,000 | $30,000 |
| Total estimated startup cost | $34,035 | $158,035 | $615,035 |
10 Mistakes New Ontario Import/Export Businesses Make
| # | Mistake | Consequence |
|---|---|---|
| 1 | Not incorporating before importing | Personal liability for product claims, supplier disputes and customs penalties. No SBD deferral. No trade finance access. |
| 2 | Not registering for HST before the first import | Cannot claim ITCs on import HST paid to CBSA. On $200,000 in imports, that is $26,000 in unrecoverable HST. |
| 3 | Mixing import HST and customs duties in one bookkeeping account | Thousands per year in unclaimed ITCs. The #1 bookkeeping error for Ontario importers. |
| 4 | Wrong HS tariff classification | Overpaid duties of $15,000 to $75,000 per year on $500,000 in imports. Or underpaid duties triggering CBSA reassessment with penalties. |
| 5 | Missing CUSMA Certificates of Origin | CBSA retroactively applies non-preferential duty rates for up to four years. On $1,000,000 in US imports, exposure exceeds $60,000. |
| 6 | Not filing T1135 for foreign property over $100,000 | $2,500 per year penalty. Plus 5% of unreported foreign income. CRA cross-references with FATCA and CRS data. |
| 7 | No marine cargo insurance | Carrier liability capped at $500 per package by international convention. A $200,000 container loss without insurance is a $200,000 loss. |
| 8 | Ignoring withholding tax on payments to non-resident agents | Corporation liable for 25% withholding tax (reduced by treaty) plus penalties on non-resident commissions, royalties and management fees. |
| 9 | No customs broker for the first year | HS classification errors, missed preferential duty rates, CBSA accounting delays, goods detained at the border and retroactive duty assessments. |
| 10 | No bookkeeping or multi-currency accounting from day one | Forex gains/losses untracked, COGS inaccurate, import HST unclaimed, T2 filed late with penalties. |
Avoid Every Mistake on This List. Start With a CPA.
Free consultation. We set up your import/export corporation, CRA accounts, CBSA separation and multi-currency bookkeeping from day one.
Launch Checklist for Ontario Import/Export Businesses
- Corporation incorporated and Certificate of Incorporation received
- CRA Business Number registered (HST, RM import/export, Payroll, Corporate Tax)
- CBSA import/export account (RM) active
- Licensed customs broker engaged and broker agreement signed
- HS tariff codes confirmed for all imported products
- CUSMA Certificates of Origin obtained from US and Mexican suppliers (if applicable)
- Marine cargo insurance policy or per-shipment coverage in place
- CGL and product liability insurance in place
- Business bank account opened (consider USD account for US trade)
- QBO or Xero configured with multi-currency and separate CBSA accounts (import HST, customs duties, brokerage)
- Inventory tracking system configured with landed cost calculation
- T1135 foreign property threshold reviewed with CPA
- Payroll system configured (if hiring warehouse or logistics staff)
- Document management system active for commercial invoices, B3 forms, Certificates of Origin and bills of lading
Frequently Asked Questions: Starting an Import/Export Business in Ontario
How much does it cost to start an import/export business in Ontario?
A small home-based importer can start with $30,000 to $50,000 including incorporation, initial inventory, freight, insurance and working capital. A mid-size operation with a warehouse costs $150,000 to $250,000. Large distribution operations exceed $500,000. Incorporation through Gondaliya CPA is $35 federal or $335 Ontario. Incorporate Now →
Do I need to incorporate to import goods into Canada?
Not legally required, but practically essential. CBSA issues import accounts to sole props but most banks, trade finance providers, foreign suppliers and US CBP require a corporate entity. Incorporation provides liability protection, the 12.2% SBD rate and access to trade finance. Federal incorporation costs $35.
How does HST work on imported goods?
CBSA collects 13% HST (Ontario) on the value for duty at the border. This import HST is fully recoverable as an ITC on your GST/HST return. Customs duties are NOT recoverable and are added to inventory cost. Keep these in separate bookkeeping accounts. Import/Export Tax Services →
Is HST charged on exports from Canada?
No. Exports are zero-rated (0% HST). You charge 0% to international customers but claim full ITCs on all Canadian business expenses. Export-focused businesses are frequently in a net HST refund position each quarter.
What is a CUSMA Certificate of Origin?
A document certifying that goods originate in Canada, the US or Mexico, qualifying for preferential (often 0%) duty rates under CUSMA. Without it, CBSA applies non-preferential MFN duty rates. Missing certificates can trigger retroactive duty assessments for up to four years. Request certificates from every US and Mexican supplier.
What is T1135 and does my import/export business need to file it?
T1135 is required when your corporation holds specified foreign property with a total cost exceeding $100,000 at any time during the year. This includes foreign bank accounts, supplier deposits, inventory advance payments and real estate. Non-filing penalties start at $2,500 per year. CRA cross-references with FATCA and CRS data from foreign governments.
Do I need a customs broker?
Not legally required, but strongly recommended for any importer. A licensed customs broker handles HS tariff classification, duty calculation, CUSMA documentation, CBSA accounting and goods release. A single HS code error on a $200,000 shipment can cost $6,000 to $30,000 in overpaid duties. The broker fee of $50 to $150 per entry is insignificant by comparison.
Do I need cargo insurance?
Yes. Shipping carrier liability is limited to approximately $500 per package by international convention (Hague-Visby Rules for ocean, Montreal Convention for air). Without marine cargo insurance, a $200,000 container lost at sea is your loss. Cargo insurance costs 0.3% to 1.5% of cargo value per shipment.
How much does import/export bookkeeping cost?
Professional import/export bookkeeping including multi-currency, CBSA account separation, HST filing, inventory tracking and bank reconciliation starts at $100 per month through Gondaliya CPA. Every engagement includes QBO or Xero setup and your annual T2 filed FREE. 60-Day Fees-Matching Policy applies. Know Your Exact Fee →
What is customs duty drawback?
If you import goods into Canada, pay duty, and then re-export the goods or finished products made from those imported materials, you can apply for a refund (drawback) of the customs duties paid. Must apply within four years of the original importation. Manufacturers who import raw materials and export finished goods should review drawback eligibility annually.
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