There may never have been a better time to take your business beyond borders and tap into new international markets. Is your business ready to start exporting? Check out the 7 characteristics of successful exporters below and see where you stand.

With the recent signing of new trade deals such as USMCA (sometimes referred to as NAFTA 2.0) and the CPTPP, there are strong indications that the future is rife with opportunities for growth.

After a protracted period of trade turbulence, a collective sigh of relief followed the recent signing of USMCA, the United States-Mexico-Canada Agreement, with businesses already getting ready to the seize the opportunities.

The CPTPP, a new free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam has been ratified and will, once it enters into force, be one of the largest free trade agreements in the world.

Trade diversification is a key element of Canada’s future prosperity and the Government of Canada is putting considerable resources and support behind the push to get more Canadian businesses to internationalize.

As a small-business-friendly government, we’re working hard to make it easier for Canadians to do business here at home and abroad. The world wants to buy Canadian goods and services, and the USMCA supports opportunities for small and medium-sized businesses to access the North American market. By supporting small businesses in their efforts to export, we’re helping strengthen the economy and grow the middle class.

– The Honourable Mary Ng, Minister of Small Business and Export Promotion

7 characteristics of successful exporters

1. Their products and/or services are successful domestically
2. They have a solid domestic business plan with proven effectiveness
3. They have specific advantages over the competition
4. Their products and/or services are unique in one or more ways
5. Their products and/or services are competitively priced
6. They are willing to invest resources of time, people and capital without return for a period of time. Entry into new markets may require two or three years of effort before showing a profit
7. They are sensitive to and aware of the cultural differences of doing business in other countries

If an organization does not have a solid domestic business plan, is struggling in its existing markets, is producing and selling an ordinary product that is readily available, and has limited financial, human and production resources, it is not in a good position to begin exporting.

Want to learn more about how to make smarter decisions by assessing your organizational readiness for new international trade initiatives? Check out the FITTskills Feasibility of International Trade online course!

Take advantage of support and resources

If going global is in your plans, be sure to make full use of the considerable support, services and resources available. A good place to start is export development agencies and trade commissioners but also consider checking into industry associations.  Service providers such as training organizations, customs brokers and freight forwarders can also provide invaluable assistance.

While there is wealth of resources and services at the ready, a fundamental part of successfully launching a new international venture involves comprehensive research, planning and preparation.

Is your business trade ready?

Before launching into a new international trade venture, it’s important to assess your current situation on several fronts. The extent of your assessment will depend upon whether your business has operated internationally in previous ventures. Those who are completely new to being importers or exporters will need to perform a much more in-depth analysis than those who already have some experience in international trade.

Human Resources

A case in point: An organization appointed the next senior manager in line for a promotion to handle the company’s entry into international trade ventures without assessing the person’s skills and abilities in international trade. As this individual was just the most senior person ready to be promoted, rather than the right person for the job, the project was mishandled and entry into the foreign market was delayed by a year. The company finally did an internal and external search and found an appropriate candidate for the position. This delay meant the company fell behind its competitors in market share.

Organizations may have human and managerial resources adequate for its domestic needs, but can they support business operations that may be on the other side of the world? Of importance are:

• A management team capable of developing a comprehensive export plan
• A management team committed to pursuing export markets and willing to dedicate time, personnel and funds to its export program
• Adequate personnel to meet increased demand or the capacity to hire/ contract staff to meet needs
• Trained marketing staff, or the ability to hire qualified people, with experience in buying or selling products or services abroad (an alternative is to use intermediaries with the required expertise, such as agents, distributors or trading organizations)

Financial Resources

A case in point: A Canadian manufacturing company specializing in customized automation for the auto industry has 20 employees and annual sales of CAD 2.5 million. The company attempted to export to Mexico with limited financial resources, expecting government programs to contribute further resources. This assumption was not based on solid research about the programs or the criteria for accessing them.

Organizations will likely have the financial capacity needed to operate abroad if they have (or can acquire):

• The financial resources to support marketing products in overseas markets
• A strong, dependable cash flow
• The financial strength to compete with foreign products and services in terms of quality and price
• Enough cash, savings, and access to financing (such as increased operating lines of credit or term loans for capital expenditures) to support production and marketing for at least two years without making much profit
• Adequate knowledge of export payment mechanisms, such as letters of credit and open accounts

Production Resources/Capacity

One sure way to fail internationally is to secure a large contract and then be unable to fill it. Organizations can avoid this difficulty by:

• Ensuring suppliers can provide the raw materials and components needed to meet commitments
• Ensuring there is enough spare capacity, or that it can be created quickly, to meet unexpected large foreign demand
• Being prepared to modify and manufacture different versions of products and services. Either to meet the cultural, regulatory and/or certification standards of a foreign market

Logistics Resources

Being able to fulfill an order or a contract is only half the job—buyers still have to receive goods or services on time and in the expected condition. Organizations should ensure:

• They have, or can acquire, an adequate knowledge of how products or services should be shipped or delivered abroad
• Their staff is, or can be, trained in export logistics
• Their staff is, or can be, trained to troubleshoot problems quickly and efficiently

Holding quarterly or monthly meetings with foreign-trade experienced guest speakers can help organizations focus their efforts and generate excitement over new international initiatives. Having outside experts train and educate employees also demonstrates organizations are moving in the right direction and develops employee confidence.

Use Change Readiness Tools

While many organizations choose to engage third-party experts to help them prepare for new international ventures, there are change readiness tools that are available. Both paper-based and online, these are useful guides that are available, often free, through regional, national and international organizations. To find out more, contact your local and national business centres and associations such as the Canadian Trade Commissioner Service (TCS) or the United States Small Business Administration (SBA).

The post 7 characteristics of successful exporters appeared first on Trade Ready.

Trade is a people business

The business of international trade and global commerce is very much a business of people and partnerships. Few are masters of every aspect of trade or global business, even among experts or experienced veterans of the international business scene.

If we consider an international trade deal by way of illustration, there are many variations of these transactions, and even in the most straightforward structure, several “cast members” are required to make the production a success.

The actors

Exporter

Is an exporter a driven and internationally oriented business person, with entrepreneurial qualities, the heart of a deal maker and the soul of an explorer? The exporter’s interest in international trade may be purely profit or opportunity driven, yet many have a certain attraction to extending business activities (increasingly at the start-up stage of business) into the global marketplace.

The exporter’s primary concern, with apologies to Jerry Maguire, may be summarized as “SHOW ME THE MONEY!”

Importer

The importer is very comfortable operating in the familiar domestic environment. They may identify an opportunity to bring an innovative new product to the home market and could imagine a contribution being made to raising the standard of living at home by importing the latest new technologies or luxury items.

The importer is an acquirer and is focused on successfully sourcing and safely receiving that shipment, to be turned around at a profit on the home market or perhaps as a re-export. Both characters may have a dual role, particularly under a screenplay influenced by integrative trade.

Financier

This character finances the trade transaction, through a range of product and service offerings. The financier may require the participation of other financiers—bankers, export credit agencies, non-bank providers of trade finance—to be able to support the transaction adequately.

This character will earn revenue by granting access to monies (generally on a short-term basis, but possibly well into the five-to-seven-year medium term) required by either or both the importer and exporter.

Transporter

This actor is an expert at moving goods across the globe: he knows the most secure and optimal routes and is fully versed in the various components of freight costing and the regulations related to transport. The transporter and the exporter work very closely together to produce documentation that correctly describes the goods, ensures that they meet the standards of the importing market and clearly identifies and allows transfer of ownership and risk. 

Broker

The customs broker is often the first point of contact for the goods on arrival at destination. The broker may provide temporary accommodations to store the goods pending customs clearance and is an expert on the requirements related to the final import of goods into the receiving country after the transporter has completed his task.

The broker may collect any taxes and duties due.

Agent

This actor is skilled in the mechanics of commerce, is well-connected in the home market and most commonly represents the exporter in the country of destination. The actor assists in the sales process and, depending on the script, remains active as the local representative of the exporter in the destination market.

Government

This actor is always on stage, collecting taxes, regulating the interaction of the rest of the cast, negotiating with other governments and the various actors’ guilds, and providing financing or guarantees in support of the financier’s transactions. This role is broad and varies on each stage and with every deal.

Supporting Cast

There is a group of additional actors, such as the inspector, who verifies shipments and issues certificates attesting to their nature and condition, and the lawyer, whose presence is generally under-emphasized, and numerous others, depending on the exact nature of the production.

A major supporting actor is technology: this member of the cast is reshaping nearly every aspect of international trade and global business in ways that revise practices that are hundreds of years old—shifting business processes, documentation and even trade transaction decisions from the “real world” to the virtual world.

The post Lights, Camera, Action: It takes a cast of characters to complete a trade transaction appeared first on Trade Ready.

However, while his furniture was admired at the European trade shows in which he exhibited, he had not been able to make any sales in Germany because he could not find the right agent in that country.

The Canadian Embassy had recommended a very qualified agent in Munich, but the agent eventually sheepishly confessed that he had always had trouble selling in the wealthy northern regions of Germany because his accent easily identified him as originating from the south—a subtle but very real barrier to breaking into that market.

I could not believe that in today’s modern world, such old-fashioned regional prejudices could possibly create barriers to international trade.

But on checking further, I found that a foreign product could in fact be ‘tainted’ in one region if it is represented by someone from another. A southern German agent describing a product to a potential buyer in northern Germany could, for example, ‘colour’ it in a way that would result in an unconsciously negative reaction.

Could local stereotypes and biases be affecting your foreign trade negotiations?

Wondering if this was prevalent in other countries, I posed the question to personal contacts in Italy, the UK, France, Brazil and Argentina, and I discovered a similar situation. At first my respondents would not admit that a local representative’s cultural background could affect the success of a foreign product in their market.

However, they eventually (albeit reluctantly) admitted that the image portrayed by a messenger (in this case a local agent) is still an important component to initial acceptance of a foreign product in their country or region.

For example, someone from Turin will have a hard time doing business in Naples because a Piedmontese accent (plus the ‘known fact’ that northern Italians look down on southern Italians) would immediately affect any discussion about a product, regardless of its origin. Similarly, a Sicilian wanting to do business in Milan would run into unspoken but real social barriers simply because of deep-seated historical and cultural prejudices, thus directly affecting any topic of conversation.

In the UK, although the fruity and upper-class British accents of TV and radio announcers have been neutralized over the years, someone with a hint of a Churchillian accent will produce subconsciously negative reactions in other regions. A strong Yorkshire accent will be labeled incorrectly in London as ‘working class’, and of course, Scottish and Irish accents will evoke equally instant territorial reactions.

These automatic preconceptions will colour whatever the speaker is saying, even if it refers to a product or topic that has nothing to do with the UK.

Therefore, the messenger may affect acceptance of a product he represents unknowingly, simply by opening his mouth.

I found similar regional reactions in France, particularly if one speaks with a Parisian accent in Marseilles or vice versa. In Brazil, people from Rio de Janeiro (Cariocas) are known to be very relaxed, fun-loving individuals, and Paulistas (people from Sao Paulo) are reputed to be tireless workers who run that nation’s economic locomotive. As a result, both groups react critically toward the other.

While these reactions usually manifest in a light-hearted way, they are still based upon preconceived stereotypical generalizations about residents of the opposite state. As a result, the product being discussed will take second place to the first impression that the messenger creates.

The situation is similar in Argentina where anyone with a Buenos Aires accent is immediately labeled a ‘porteño’ (port dweller), and is disliked in the rest of the country (and even in the rest of Spanish-speaking South America).

[Tweet “Local prejudices are prevalent in every country.”]

In Canada, a French-Canadian accent will often raise hackles in an Anglo-Canadian’s mind, and in the US, Texans and Oklahomans know that they may not be taken seriously at first in New York or LA.

These deep-seated and seldom-admitted preconceptions can easily affect the entry of a foreign product into a new market.

Unlike import quotas, foreign exchange fluctuations, official embargoes, customs policies and transportation challenges, which are easily identified, these discriminatory regional-reactions can colour otherwise intelligent discussions about a product’s values, and serve as an invisible barrier to many exporters.

Three ways to tackle the invisible barriers to global business

1. Exporters need to go back to basics. In spite of the world’s love affair with virtual but impersonal methods of communication, exporters need to stop relying on cell phones, tablets, Skype and Face Time and start considering the importance of old-fashioned, face-to-face relationships to overcome regional biases.

For example, appointing an agent in Germany, and then accompanying him on his initial visit to potential clients, will give a “Canadian face” to the Canadian product. The future client will identify the product as Canadian, rather than partly southern or northern German.

If several regular trips to Germany are too costly or time-consuming, perhaps one trip could do the trick. During an exporter’s visit to a target country to choose and appoint an agent, an invitation to potential buyers to attend a group presentation of the product AND the new agent would go a long way toward dispelling any possible regional identity, while creating a real Canadian image.

2. Another approach used by exporters is to work closely with a Canadian Trade Commissioner in the target country to identify and locate an appropriate agent. On his appointment, the exporter would finance the cost of a brief conference at the Canadian Consulate or Embassy. The product would officially be presented and promoted in one of Canada’s official trade offices, and the new agent would be introduced at the same time.

An invitation from the Canadian Consulate or Embassy to local business executives to attend a business event is very difficult to ignore and can also enhance the exporter’s products in the potential buyer’s eyes.

Of course, exporters may worry about the cost of increased travel, particularly at a time of budget cuts. However, the initial investment of a personal visit to a foreign market, ensuring that the Canadian product is seen as purely ‘Canadian’, is well worth the effort.

This approach will not necessarily guarantee easier penetration into a new market, but establishing personal relationships will always trump impersonal electronic messaging. Taking this approach will help launch the new agent while simultaneously dispelling any incorrect image connected to the product.

3. A logical way of recognizing and circumventing possible prejudices about an exported product in a new market is for the exporter to hire staff in Canada that is from the target country. Canada boasts of many immigrants with business experience from a wide range of countries. Having someone on staff who knows the culture, the language and the regional biases of the target market will very often solve some of these subtle barriers to international trade, even before they appear or are recognized.

Let’s discuss some of the other invisible discriminatory attitudes that have coloured your international business experiences. Have these affected your business?

The post Let’s discuss the invisible discriminatory attitudes that create barriers to international trade appeared first on Trade Ready.

These issues can have a dramatic impact on the costs of importing a product and can even make a supply deal unprofitable. If regulations are not adhered to, companies might find their goods seized by customs or be subject to fines.

Managing global export compliance regulations

Most countries have some form of export control. For example, about forty countries are signatory members of the Wassenaar Arrangement, which was established in 1996 to establish controls over sales of arms and dual-use products and technologies.

The control lists covered by the Wassenaar Arrangement cover a wide range of goods and technologies, including protective clothing, materials used in aircraft construction, metal alloys, many chemical compounds, submersible vehicles, robots designed for underwater use, telecommunications equipment, satellite components and many forms of software.

In order to export any of the controlled products or technologies, certain procedures must be followed.

The importing company will often have to assist the exporter to obtain an export license from its government, usually by providing an import certificate or other documentation.

Where an export license is required, both the importing and exporting companies should take the time that will be required to obtain it into consideration when planning delivery schedules. The importing company must also include clauses in its agreements to require the exporter to obtain all required licenses.

Want to learn more about how to keep your customers, clients and suppliers happy by transporting goods in a timely manner and in compliance with all regulatory requirements? Check out the FITTskills Global Value Chain online course.

Handling exchange control licenses

Most countries also have some form of foreign exchange control. This means that exporters must provide proof that they will be paid by the importer before they will be permitted to export valuable products.

Conversion of received payment from importers into local currency will often require a license.

Importers should check whether this is necessary because otherwise, delays might result while the exporter waits for payment.

Some countries require payment to be made by specific means, such as a letter of credit. Some governments also impose strict payment regulations on all foreign trade contracts in order to ensure payment.

Export quotas

Export quotas are restrictions imposed by a government on the amount or number of goods or services that can be exported annually. The purpose is to ensure that domestic prices of this good or service do not increase because of exports. Importing companies must make sure there are no foreign government quotas that could make their purchase agreement unsustainable.

Export documentation

Standard export transactions require that the exporter provide standard documentation to accompany shipments of goods. They typically include:

• Commercial invoice
• Bill of Lading or transport document
• Export declaration
• Packing list
• Insurance documentation
• Certificate of origin

Documentary requirements can vary significantly, as a result of both the specifics of a transaction or shipment, and as a result of the arrangements related to payment and financing, which may be based on the tendering of documents by the exporter, depending on the agreed mechanism of settlement.

What are some other international export compliance measures you’ve encountered during your international business endeavors? Share your experience!

The post The importance of managing your international export compliance appeared first on Trade Ready.

The basic and most common forms of settlement of international trade transactions are open account (where payment on delivery is the most common), documentary collections, documentary letters of credit and payment in advance.

There are numerous features, variations and options related to these payment types which make them very flexible, adaptable and enduring as business solutions.

It should be noted explicitly that certain payment options or types of payment transactions have a variety of features or characteristics, which can be incorporated in a given transaction, or not. A documentary credit, may be payable at sight (immediately) or on a term basis (at maturity, at an agreed date in future).

The use of certain features changes the nature of the transaction. However, the payment is still effected through a documentary credit in the end.

The FITTskills International Trade Finance training course considers each instrument type/variation in turn, in the following order:

Open account and payment in advance

These are the two extreme options, providing maximum security to one party and exposing the other party to the greatest risk.

Payments on an open-account basis are basically transfers of funds to the account of the exporter. Historically, open-account payments have been used in trade between very stable and secure markets such as the United States and Canada, or in intra-EU trade, and in cases where the trading relationship is established and trusted.

At the opposite extreme, payment in advance presents the highest risk to the importer, given that the exporter could easily receive the funds and not carry through with the promised shipment.

Documentary collection

These are somewhat secure, but generally used in established trading relationships involving reasonably stable and secure markets.

Documentary collections are types of transactions where banks act as intermediaries between the importer (buyer) and exporter (seller), in effect, agreeing to facilitate payment to the exporter only once a set of shipping documents has been prepared and presented to an intermediary bank.

These documents typically include documents of title to the cargo, representing ownership of the goods as well as demonstrating that the goods have been shipped.

Documentary credits

These offer the most balanced security for both parties. Documentary letters of credit (abbreviated as DLC, D/C or L/C) are trade finance instruments issued by a bank on behalf of an importer, promising payment to an exporter, provided that all the terms and conditions specified in the letter of credit are fully complied with by the exporter.

CAUTION: 60-70% of documents presented by exporters under Documentary Credits are in some way non-compliant with the terms of the Letter of Credit (L/C).

In those instances, the protection to the exporter is minimal, as the importer can refuse the shipment, or take advantage of the discrepancies to demand a substantial discount on the shipment. Some banks exercise judgment and will not identify “trivial” discrepancies, while others take a very literal approach to the examination of documents.

Confirmed documentary credits

These provide additional security to the exporter, while preserving security for the importer. The basic documentary letter of credit is a straightforward instrument which represents a payment promise by the issuing bank in favour of the exporter or beneficiary against the presentation of fully compliant documents.

Documentary letters of credit offer numerous powerful and valuable features that address certain aspects of trade finance. A major one of these features is referred to as a confirmation of a documentary letter of credit. A confirmed documentary credit (contrast the basic, unconfirmed letter of credit described above), is one in which an additional, separate and independent payment undertaking is added to that of the issuing bank by another financial institution—the confirming bank—to provide further security to the exporter.

Confirmation is added at the request of the issuing bank, on behalf of the exporter.

If an exporter is considering exporting to a high-risk market, and is not reassured by a straightforward documentary credit, the option to confirm that letter of credit may provide the added comfort that will enable the exporter to proceed with the transaction.

Major features and characteristics of various payment options are discussed in greater detail throughout the FITTskills International Trade Finance course.

The post In how many ways can you get paid during international trade transactions? appeared first on Trade Ready.