Attracting International Investment and Enabling Low-Barrier Entrepreneurial
Opportunities in Canada
Written Submission for the 2019 Federal Pre-Budget Consultation
Submitted by: The Direct Sellers Association of Canada
August 3, 2018
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RECOMMENDATIONS:
1. The DSA recommends that the federal government maintain independent
contractor status to ensure earning opportunities for Canadian direct
selling companies and independent sales contractors can continue to
thrive.
2. The DSA recommends that the federal government strive to preserve free
trade and prioritize a resolution to the NAFTA re-negotiations to support
industry growth and supply chain efficiency.
3. The DSA recommends that Canada continue to protect the current de
minimis threshold in its ongoing trade negotiations with the United States.
4. The DSA recommends that Health Canada continues to ensure common
sense regulation for health care products that does not unduly burden
Canadian businesses while allowing loopholes that benefit un-regulated,
international sellers.
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Context
The House of Commons Standing Committee on Finance has asked Canadians to submit their
recommendations on the topic of ensuring Canada’s competitiveness. Growing the economy in the face
of a changing economic landscape requires the embrace of new ways of doing business, novel
approaches in established sectors, and a commitment to taking an honest look at the practices and
policies that enable success or that inhibit progress.
The Direct Sellers Association of Canada (DSA) is the national voice of Canada’s direct selling industry.
Over 1.2 million Canadians earn income from direct selling, and over 83% of industry participants are
women. The DSA represents over forty member companies that support low-barrier entrepreneurial
opportunities for Canadians who seek to learn business skills, enhance their networks and generate
income from flexible business opportunities.
Direct selling in Canada dates back over 100 years and our modern sector and companies have inherited
a business environment that is the envy of the world in terms of its protection of consumers and
industry participants. For many years, the model has paid dividends to Canadian businesses and the
people who benefit from our sector, but recent developments across product categories in our industry
are making it harder for businesses to come here and grow in our country. The DSA is proposing a range
of initiatives that will help our economy grow, by incentivizing new businesses starting in Canada and
foreign businesses expanding to Canada, and supporting low-barrier entrepreneurial opportunities for
women.
Entrepreneurship & Flexible Earning Opportunities – Maintaining Contractor Status
Direct selling provides the opportunity for Canadians to earn income and learn business skills and
creates an entrepreneurial opportunity for financial growth. Those who succeed in a direct selling
business often cite the ability to work flexible hours and to build a work plan that suits their lifestyle.
Unlike many traditional businesses, more than 90% of independent sales consultants (ISCs) choose to
work part-time. Both direct selling companies and ISCs thrive because of this freedom.
To continue the growth of entrepreneurial opportunities in Canada and to provide a competitive
environment for companies considering entering this market, ensuring the ability to hold independent
contractor status is key. The DSA believes it is important to maintain independent contractor status,
which does not create assumption of employment or impose administrative burdens for people and
businesses that operate on in a direct selling model. The DSA urges the government to prevent the
misclassification of employees, but not at the expense of legitimate independent entrepreneurs who are
able to thrive through direct sales.
Canadian direct selling companies will be hurt by any move to change the ISC model and our businesses
will be less competitive as a result. Further, the millions of Canadians who generate income through
direct selling will face a direct financial hit.
Ensuring Free Trade
Free trade has benefitted the direct selling industry since the introduction of the North American Free
Trade Agreement (NAFTA). Our industry is global in nature. It depends on well-integrated manufacturing
processes and supply chains across borders, and shipping finished goods directly to ISCs and consumers.
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Under NAFTA, direct selling companies have grown and more people have been able to make money by
selling innovative and affordable products.
Canada’s strong trade ties are fundamental to the competitiveness of our 40+ member businesses, who
have chosen our country as a good place to do business. An increase in tariffs for businesses will damage
the system of trade that the common market provides and that our sector has contributed to and
become accustomed to. An introduction of new tariffs or introduction of new border taxes will hurt the
entire direct selling industry.
We ask that a concerted effort continues to be made to resolve the current trade dispute with the US as
urgently as possible and that the completion of an updated NAFTA agreement is prioritized.
Furthermore, we ask that any funds collected as a result of countermeasure surtaxes be invested in
programs to support businesses that will be directly impacted, such as many DSA member companies
and direct selling ISCs.
Maintaining Canada’s de minimis threshold
Canada’s direct selling industry has taken a position against increasing our country’s de minimis
threshold. Two important distinctions set this measure apart from other fees levied at our borders, and
they are profoundly important to Canadian businesses like ours.
First, it is important to recognize that not all markets are created equally. When comparing the Canadian
de minimis threshold to that of our neighbours, it has to be underscored that the source of their online
purchases is vastly different. In the U.S., online shoppers have made just 22% of their purchases from
business outside of their own country, while 67% of Canadians have made a cross-border purchase
online.
Second, goods sold to Canadians from foreign retailers, typically U.S.-based online marketers, do not
generate any sales tax revenue for the federal government or the provinces. This revenue is crucial to
supporting services and initiatives that are beneficial to Canadians, and that not only provide value to
our citizens but give us an edge in attracting new businesses to our shores, like publicly funded
healthcare. The U.S. does not have a federal sales tax and it does not collect state or local taxes for
online sales coming from other countries. By allowing American goods to be shipped to Canadian
consumers under an increased threshold, the government will be giving U.S.-based companies a tax
advantage ranging from 5% to 15% across the provinces.
The government has set a goal of ensuring Canadian businesses continue to be competitive while
creating opportunities for our citizens. Allowing an increase in the de minimis threshold would work
against this aim and should not be on the table.
Ensuring Common-Sense Regulation of Healthcare Products
For many direct selling businesses operating in Canada or looking to enter the Canadian marketplace,
natural health and nutritional products are a sector with high actual and potential growth. The direct
selling industry has been particularly successful at developing effective health products and using the
personnel selling model to ensure that consumers are informed when choosing the products that are
right for them.
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However, it is becoming increasingly difficult for products in these categories to be approved for sale by
Health Canada and for health-focused companies to subsequently bring them to market in a cost-
effective manner. Current initiatives under Health Canada’s Self-Care Framework, including ‘plain
language labeling’, are likely to continue to increase the cost of product development, packaging and
marketing for healthcare companies by a significant amount, despite limited evidence of any health and
safety benefit.
This situation favours products that are directly shipped from non-Canadian suppliers to consumers –
products which may contain ingredients that are not approved by Canadian regulators and which can
create a health risk for consumers. Closing this internet-sales loophole should be a safety priority for
Health Canada, but the department is more focused on re-labelling many products that have already
been ruled safe and effective in pre-market review.
The DSA supports the regulation of self-care products, as part of an overall strategy to make it easier for
Canadians to access trusted products that aid in preserving health, because they are reviewed for safety
and efficacy. We believe that it should be easy to find information about these products as well, but the
current proposal could cost the natural health sector up to $1 billion with no clear, direct benefit for
consumers.
We ask that government recognizes that the potential increased costs created by Health Canada
proposals, coupled with their uncertain benefit to Canadians, requires that current implementation
timelines be set aside. This will allow for a re-examination of the entire approach to labeling self-care
products and a review of all available options to promote informed use and a reduction of medication
errors.