1. Enter Canada Canada Canada – A Growing Opportunity for Canada – A Growing Opportunity for Natural Food Presented by Ron Ubels, CDS Customs Services Ltd.

2. Seminar Topics  Why Canada? The Canadian Opportunity  The Changing Face of Importing – Regulatory Compliance  Understanding and Managing the Opportunity of Trade  Opening Up the Canadian Market – The Non-Resident Importer Program  Opening Up the Canadian Market – Considerations Canada First – A Growing Export Opportunity for Natural Products

3. Netherlands-Canada Trade  If CETA is implemented in 2017 –over 90.9% of tariffs will be eliminated on agri-products upon entry into force (91.7% after 7 years) - competitive edge (exception: products under tariff quota: dairy, chicken, turkey, eggs)  CETA will allow for more than 17,000 new tonnes of EU cheese to enter the Canadian market.  Netherlands exports of Agri-Food and Seafood to Canada increased by 7.01% (value) between 2014-2015  Estimated 25,000 importers in food sector. 96% micro or small  More and more Canadian companies are looking for imported food and beverage products based on an increased focus on healthy, safe and clean food and beverages  More importers are looking to products in Europe in anticipation of the implementation of the CETA Agreement and related tariff savings Why Canada? The Canadian Opportunity

4. Market Factors  Approximate market of 36 million people  Immigration accounts for more than 50% of the population (approx. 1,100,000 Canadians are of Dutch descent)  More and more Canadians are concerned about personal health, youth, healthy and clean eating. Consumer demand for “free from” or “reduced” products as well as organic and natural products, and simplified ingredient list.  Canada has an aging population – according to Euromonitor by 2020, 18.1% of Canadians will be over 65 years of age which would be up 2.5% from 2014.  Similar lifestyle, common culture and language as the U.S. Canada follows the same trends generally as the U.S.  90% of the people live within 100 miles of the U.S. Canadian border  Retail spending per capita in Canada equal to that of the U.S.  More Canadians focused on skin care and anti-aging products

5. 2013 Report  Organic Market is worth 3.5 billion per year  66% of British Columbians buy organic groceries weekly  1 Billion per year in Ontario as Canada’s largest consumer market  Over 250 billion dollars in sales of organic fibre, supplements, personal care products  Value of Canadian Organic Market has grown over 3x since 2006

6. The Changing Face of Importing Regulatory Compliance CANADA

7. The Changing Face of Importing Regulatory/Compliance “  In addition to Canadian Border Service Agency Requirements Natural Products are required to meet Other Government Department Requirements  Example:  Nutritional Products: 73% of Canadians regularly take natural health products Canada requires dietary supplement products to be licensed before entering Canada by the Natural Health Product Directorate (NHPD) Application review times are based on the amount of information known to NHPD about the product. The more information the shorter the review time.  Organic Products: The Canadian Food Inspection Agency (CFIA) regulates organic products by giving accreditation to certification bodies which then certify product as organic  Regulations are constantly changing and it is important to be aware and comply to stay competitive

8. The Changing Face of Importing Regulatory/Compliance Safe Food for Canadians Act What is the Safe Food for Canadians Act?  The Government of Canada introduced the Safe Food for Canadians Act to modernize, simplify and strengthen rules for food commodities imported into Canada  The legislation provides clear and consistent rules for food commodity importers so that consumers can be confident that all food on grocery shelves is safe, regardless of its origin.  It combines four existing food commodity laws (Fish Inspection Act, Canada Agriculture Products Act, the Meat Inspection Act and the food provisions of the Canadian Packaging and Labelling Act) The CFIA Inspection Modernization program  The Inspection Modernization program is a component of the Safe Food for Canada Act that is designed to further strengthen food safety

9. The Changing Face of Importing Regulatory/Compliance Canada Canada “ Safe Food for Canadians Act – Inspection Modernization Based on Risk Management  Currently importers of meat, fish, dairy and eggs are regulated. The regulation will cover all other food commodities  Importers will need to be licensed and would need to develop and use preventative control plans scalable to the size and complexity of their operations  CFIA will oversee based on the level of risk of imported goods.  More inspections for high risk or non-compliant goods  The CFIA will issue Corrective Action Requests for critical food safety non-compliance  Non-Resident Importers will be allowed to hold a CFIA license  Coming into force various dates – processed food and commodities – license 2017/PCP 2018

10. The Changing Face of Importing Regulatory/Compliance Based on Risk Management  Currently importers of meat, fish, dairy and eggs are regulated. The regulation will cover all other food commodities  Importers will need to be licensed and would need to develop and use preventative control plans scalable to the size and complexity of their operations  CFIA will oversee based on the level of risk of imported goods.  More inspections for high risk or non-compliant goods  The CFIA will issue Corrective Action Requests for critical food safety non-compliance  Non-Resident Importers will be allowed to hold a CFIA license  Coming into force various dates – processed food and commodities – license 2017/PCP 2018

11. Understanding and Managing the Opportunity of Trade CANADA

12. Free Trade Agreements  NAFTA – North American Free Trade Agreement No duty for qualified goods with a valid certificate  GPT – General Preferential Tariff Agreement January 2015 – 72 countries removed from the GPT (including China)  CETA – Comprehensive Economic and Trade Agreement – Canada-EU Free Trade Estimate completion 2016 – Implementation 2017 Referendum in Britain  TPP – Trans Pacific Partnership How will that impact? Exports to Canada Understanding and Managing the Opportunity of Trade

13. Understanding and Managing the Opportunity of Free Trade Free Trade Agreements - CETA  CETA – Comprehensive Economic and Trade Agreement – Canada-EU Free Trade (estimated completion 2016/Implementation 2017)  CETA will remove over 90.9% of tariffs on agri-products upon entry into force (91.7% after 7 years)  Nearly all processed food products will see elimination of Canadian import duties resulting in a considerable gain in the Canadian market for EU countries (ie: wines/ spirits, beverages, confectionery, cereal based products, fruit/vegetable preparations)  The Netherlands will benefit from tariff elimination on key agricultural products such as tubers and bulbs (up to 6%), vegetable seeds (up to 5.5% and cocoa powder (up to 6%)  CETA will allow for more than 17,000 new tonnes of EU cheese to enter Canada  Canada will eliminate it tariff on milk protein concentrates  Canada will eliminate all tariffs on fisheries product  TRQ’s will not be eliminated on sensitive products but Canada will eliminate duties on existing WTO quotas for dairy, eggs and poultry upon entry into force

14. Understanding and Managing the Opportunity of Free Trade Managing Oportunites - Keep Aware of other Proposed Changes Example:  the Government of Canada recently announced its intention to eliminate customs duties on imports of certain food manufacturing ingredients, excluding supply- managed (TRQ) products. This represents an important opportunity for importers of food manufacturing ingredients into Canada to ensure they benefit from tariff elimination.  The government’s proposal will eliminate tariffs by changing the current MFN rates of customs duty on certain items to rates of “Free”, without a requirement that these items meet free trade rules of origin. Beneficiaries include manufacturers who purchase inputs falling into the following categories: (i) certain vegetable inputs; (ii) certain animal or vegetable fats and oils (and their cleavage products) and prepared edible fats; (iii) certain prepared foodstuffs (only those used in the manufacture of food products or beverages), beverages, spirits and vinegar and (iv) certain products of the chemical or allied industries. To put potential savings and cost advantages into perspective, the MFN rates of duty currently applied to imports of agri-food items falling into these categories range from 2 to 17 percent.  NOTE: customs duty elimination is tied to tariff classification

15. The Importance of Accurate Harmonized System Code (Tariff Classification) The HS code is a 10 digit code: the first six (6) digits of the HS code are universal - remaining four (4) digits re unique to the country (Canada) The importance of an accurate tariff classification for your products is critical to the import process. It is used to: Determine appropriate duty rates Negotiate trade agreements Maintain trade statistics Identify goods that pose a risk to the health, safety/security of Canada Determining the correct classification is important to determining qualification under free trade Determining the correct classification determine what other government department requirements are, what documents are required and whether there are restrictions on the import of your product Advance rulings provide certainty as to how goods are to be classified and facilitate the documentation requirements for clearing goods at the border. Understanding and Managing the Opportunity of Free Trade

16. The Non-Resident Importer Program Opening Up the Canadian Market

17. Consider the difference between buying goods domestically vs cross-border: - Your customer does not know their delivered price at time of purchase - Your customer has to take extra steps in the middle of the delivery process to receive their shipment (ie: carriers, customs, brokers, clearance, delays). - Your customer’s delivered price is inflated and may change each time.  How would this impact your domestic market if your customers have to deal with the same hurdles and challenges? - Increased customer service calls? - Reduced sales? Why would it be any different for Canadian sales? ! Developing Your Strategy for Market Success

18. What is a Non-Resident Importer “ Crossing the Border can be easier than ever for your customer ” What is a Non-Resident Importer? A Non-Resident Importer (NRI) is a company that does not have a physical presence in Canada but imports into Canada under their company name. The NRI essentially becomes both the exporter as well as the importer into Canada. As the exporter and importer you would include all fees to the customer’s door, including duties and taxes, into your price. More and more foreign companies are establishing themselves as Non-Resident Importers in order to improve their customer service and increase their market share.

19. The NRI Advantage Why become a Non-Resident Importer?  Simplifies Pricing – you create price certainty for your Canadian customer by including in your selling price transportation costs, customs clearance fees and duties and taxes.  Eases the Trade Process for your Customer – they don’t have to be involved in the import process which makes doing business as easy as purchasing from a Canadian company  Increases Your Competitive Advantage – by consolidating shipments you can clear them in you name as one clearance and reduce the cost of shipping creating significant savings for your Canadian customers.  Improves Shipment Control – as the exporter and NRI you control the shipping process door-to-door. Customs delays are minimized.  Expands Your Market Reach into Canada - improved customer service and improved competitiveness ensures you are more competitive.  It provides complete control over sales, pricing and profits

20. The Non-Resident Importer Program Getting Started Work with an knowledgeable Canadian Customs Service provider to:  Ensure you are compliant as an exporter to Canada.  Ensure you are taking advantage of NAFTA benefits wherever possible  Develop your delivered price (including duty, taxes, transportation and brokerage)  Gain an understanding how Canadian taxes work  Assist you with simplifying your documentation  Establish your account as a Non-Resident Importer

21. Considering Warehouse & Distribution in Canada The basic function of any Distribution strategy is to get product to market at the lowest possible cost, while providing the highest level of customer service  Consider warehousing in Canada  Set Up as a Non-Resident Importer  Small Parcel Consolidation  LCL/FCL Consolidation  Consider Import of Foreign Product Direct  Reduce clearances  Close proximity to customer.

22. Considerations Opening Up the Canadian Market

23. Simplifying the import process of a sale for your customer can play a significant role in your ability to penetrate the Canadian market. 1.Be aware of changes that impact international trade – compliance, sourcing and trade advantages 2.Take the time to ensure you compliant as an exporter to Canada by understanding regulatory requirements for your product- reduce the risk. 3.Take advantage of trade agreements - preferential tariff when legally possible - lower the delivered price of your product. 4.Reduce your documentation requirements by customizing your export program - simplify your shipping requirements 5.Consider the Management of transportation and the customs clearance process as a key part of your business strategy to grow your market presence - maintain control to the customer’s door 6.Consider the Advantages of the Non-Resident Importer Program – remove the border – maximize your market penetration 7.Review Consolidated Shipping Options to reduce your cost to market – reduce shipping costs and potential delays 8.Consider Cross-Border Warehousing and Distribution – quicker turn around to customer 9.Consider Direct-to-Market Programs – reduce transportation costs, eliminate duplicate duty, take advantage of lower duty rates, speed time to market 10.Establish a Returns Management Program – customize a program based on your product and needs while complying with regulatory issues What are the top 10 things to do to make you compliant and profitable?

24. Contact Information: Ron Ubels CDS Customs Services Ltd. Phone: 604.207.5326 Email: ron@cdsltd.caron@cdsltd.ca Canada Canada – A Growing Opportunity for Natural Products