If you live in Canada, you need to choose Foreign or U.S. possession for your state of residence.
The purpose of the question is to find out which state can charge you income tax, and whether you are a current resident of that state. Since you currently live in Canada, the program will be able to verify that you were only a part-year resident of South Carolina.
When you get to your current mailing address, you will have another opportunity to tell the program that you are living in a foreign country, so it won't ask you about your state and zip code. There is a fair amount of redundancy built into the program to help check the consistency of your answers to help you avoid mistakes.
