Amazon Seller Central for Canadians: How to Save on FX Conversions

With the massive US market just across the border, selling on Amazon Seller Central USA is an attractive prospect for many Canadian businesses.

By shipping your products to Amazon’s US warehouses and listing your products on Amazon Seller Central USA, you can defeat the competitive disadvantage of being a Canadian seller in the US market.

Consumers in the US have a very strong level of comfort buying on Amazon.com, backed up by Amazon’s unstinting dedication to its customers (often, at the expense of its marketplace sellers).

While Amazon’s e-commerce conversion rate is a whole lot better than a typical independent website, selling on Amazon’s US marketplace introduces certain complexities for Canadian companies. In addition to logistical issues, one of the most important issues is foreign exchange, as Amazon USA prices are set in US Dollars (USD) and would typically require conversion into Canadian Dollars (CAD) at some point.

How do you, as a Canadian on Amazon Seller Central USA, get the best deal when moving your Amazon USD disbursements into CAD?

Default Option: Amazon’s Currency Converter for Sellers

Amazon typically disburses net revenues weekly, and you need to direct them where to pay. They have an internal Amazon-branded system called “Amazon’s Currency Converter for Sellers” which is apparently powered by HSBC.

This system is very convenient as all you need to do is specify your Canadian bank account information and the system will automatically send you the funds in CAD as a direct credit to your account, without any bank fees.

However, the drawback is that Amazon performs the currency conversion at a rate estimated to be 3.75% above wholesale foreign currency conversion rates. For Amazon sellers operating on thin margins, this is another source of profit leakage.

There are better foreign currency conversion services which will help you keep more of your money.

A Better Way: Open a USD Account in the US

You might think that opening a USD account with your Canadian bank would allow you to avoid the forced currency conversion at Amazon’s rates. You’d be wrong. Amazon’s policy states that “[d]isbursements can only be made in the home currency of the country where the bank account is located.” [link]

So, even if you have a USD account with your Canadian bank, you can’t receive Amazon US Seller Central USD payouts. This is probably because a USD account in Canada isn’t part of the US Federal Reserve Bank’s system for domestic transfers (Fedwire / ACH). You need an account with a US-registered bank to avoid Amazon’s forced currency conversion.

Royal Bank of Canada (RBC) offers just such a solution: a US-domiciled bank account for business customers which will allow you to move funds between your RBC US and RBC Canada accounts seamlessly as well as effect US ACH payments should you have any US expenses to pay. The monthly fee for such an account is $150-$175. Not cheap, but the account does deliver a lot of value and convenience.

For a Canadian-based Amazon US seller with revenues in the USD500k range per year, the annual savings with the RBC solution vs. Amazon’s default are negligible. This is because the better exchange rate offered by RBC is largely offset by its stiff monthly fee. One hand giveth, the other taketh away………. Why is Mr. Thrifty not surprised that Canadian chartered banks prey on SMEs?

Since the potential benefits of the RBC USD account are so sensitive to each seller’s situation, Mr. Thrifty is working on an online tool where you can calculate your potential savings.

[side note: opening a US-based business account will likely introduce US tax and compliance issues, which are beyond the scope of this post.]

Is There an Even Better Way?

Mr. Thrifty thinks so: the OFX Global Currency Account. We do a deep dive into this solution in Part 2 of this series, How to Get the Best FX Rates for Canadian Companies. Sneak preview: this account has no fixed monthly fee and beats RBC on exchange rates.

What About eBay and Other US Marketplaces?

Mr. Thrifty is unfamiliar with other US-based marketplaces like eBay, but the same savings should apply in theory. If any reader has a source of information about how eBay pays out to Canadian sellers, please use the Ask Mr. Thrifty page to send us the link(s) and we’ll update this post accordingly.