International companies have multiple market-entry channels to succeed in the Canadian market, and several options are available for establishing a distribution structure. Companies may choose to sell directly as a non-resident importer – an effective strategy, especially if they have an established client base or use in-country third-party warehousing. Others may set up a Canadian office or facility, such as a branch office, a subsidiary, or a sole proprietorship. Other market-entry mechanisms are also used in partnerships, such as acquisitions and investments, joint ventures, licensing agreements, and sales to various levels of government through procurement programs.
Successful market entry often combines multiple models, adapting the approach as market presence grows. The key is selecting a model that aligns with your company’s capabilities, meets Canadian market requirements, and balances consumer expectations.
Securing a distributorship is the most common way for foreign companies to start selling in Canada. As per Dentons:
Distribution arrangements are a commonly used vehicle for the importation and sale of a broad variety of goods and services in Canada and can offer many benefits to domestic and foreign manufacturers, suppliers, distributors and retailers, particularly where a local partner with knowledge of local laws, markets and industry customs and conditions is engaged.
This will entail an agreement drafted by both the supplier and the potential Canadian representative partner. Fulcrum Law defines a distribution agreement as:
… a legal contract between a supplier and a distributor that outlines the terms and conditions of the distribution of goods or services. This agreement typically includes provisions related to pricing, payment terms, delivery schedules, marketing and advertising, intellectual property rights, and termination.
Parties to a distribution or agency agreement are free to establish the terms of their relationship by contract. Several standard contractual provisions will need consideration, such as whether it will be an exclusive or nonexclusive arrangement, whether the distributor will be permitted to handle competing products or required to meet a certain annual quota and subsequent consequences if this is not met, and the method of compensation for the distributor.
Supplier and distribution agreements should include identifying parties, product, territory and market, duties, obligation, confidentiality, terms, pricing and promotion, and resolution and contract of termination.
Businesses entering into a distribution agreement in Canada must comply with key legal and regulatory requirements, which can include:
- Suppliers and distributors share responsibilities under the Canada Consumer Product Safety Act (CCPSA), derived from federal and provincial laws that cover warranty and safety standards, ensuring consumer protection and product liability.
- The Competition Bureau of Canada (governed by the Competition Act) oversees specific regulatory requirements, including rules regarding price, exclusive deals, tied selling, and “abuse of dominance.”
- Non-resident suppliers may be subject to Canadian income and sales taxes, depending on their business presence and tax treaties. Registration may be required if sales exceed CA$30,000 annually.
Specific industries are regulated by federal or provincial law. Contract law is a complex topic, and we recommend securing the services of an expert for review and oversight.
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