International trade law for Canadian companies
At the heart of globalization, international trade law has become an essential element for any company wishing to expand its activities beyond Canada’s borders. Understanding and navigating this vast subject is crucial to the success of any international project for a Canadian company.
1. What is international trade law?
International trade law refers to the set of rules, conventions and treaties that govern commercial transactions between companies in different countries. It aims to ensure that trade is fair, transparent and beneficial to all parties involved.
Fundamental differences from local commercial law
- Scope: Whereas local commercial law applies to transactions within a country, international trade law concerns cross-border exchanges.
- Complexity: International transactions often involve several jurisdictions, each with its own laws and regulations.
- Risks: Risks linked to currency fluctuations, customs barriers or political instability are more prevalent in international trade.
2. Trade agreements and Canada
Canada is party to numerous bilateral and multilateral trade agreements. These agreements facilitate trade between signatory countries by reducing or eliminating tariff and non-tariff barriers.
Case in point: the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union aims to facilitate trade and investment between the two parties. It eliminates most tariffs, giving Canadian companies easier access to the EU market.
Canada’s main trade agreements
- North American Free Trade Agreement (NAFTA ): Former agreement between Canada, the U.S. and Mexico, replaced by the Canada-U.S.-Mexico Agreement (CUMA) in 2020.
- Progressive and Comprehensive Trans-Pacific Partnership (PCTPP): Multilateral agreement to facilitate trade between 11 countries in the Pacific region.
- Bilateral agreements: Canada also has bilateral agreements with a number of countries, including South Korea, Colombia and Peru.
3. International trade challenges for Canadian companies
Doing business internationally is an ambitious undertaking, and comes with its own set of challenges.
Regulatory compliance
Every country has its own regulations. Whether it’s product standards, customs rules or environmental regulations, companies need to be prepared to comply with a wide range of directives.
Case in point: a Canadian company exporting electronic products to the European Union must ensure that these products comply with the RoHS directive, which limits the use of certain hazardous substances.
Logistical difficulties
Shipping goods across borders involves challenges such as choosing the mode of transport, managing shipping documents and clearing customs.
Case in point: a Montreal-based company exporting maple syrup to Japan needs to ensure that its products are correctly labeled, packaged to prevent damage during transport, and accompanied by the right documents to facilitate customs clearance.
Financial risks
Exchange rate fluctuations, extended payment terms and differences in payment habits can all have an impact on a company’s profitability.
Case in point: If the Canadian dollar appreciates against the currency of a partner country, this could make Canadian exports more expensive for buyers in that country, potentially reducing sales.
4. How to prepare for international trade?
The key to success in international trade lies in preparation. This includes thorough research of target markets, understanding local regulations, and putting strategies in place to manage risks.
If you are looking for a lawyer in business and international law, please contact our teams.
