As Peter Harrell of Carnegie Endowment for International Peace notes, “trade is a key element of solving global challenges that affect us all, like the green energy transition and the risks of AI and the digital economy.”

To compete and avoid costly mistakes, it’s critical for business owners, consultants, and aspiring trade professionals to learn the language of international commerce. Read on for 25 international trade terms you should know to confidently navigate global markets.

Basic international trade terms

On the most fundamental level, everyone should know these basic terms. They help to shape the foundation of cross-border trade.

• Export – Sending goods or services from your country to another for sale.
• Import – Bringing goods or services into your country from abroad.

• Tariff – A type of tax one country places on goods coming in from other countries. It drives up the price of foreign goods for both foreign businesses and domestic shoppers. According to Michael Ligon of Forbes, tariffs may be used as a “tool to regulate trade, protect domestic industries, and generate revenue.”

• Trade Balance – The difference between a country’s exports and imports. A positive balance means the country has more exports (a trade surplus). A negative one means that they have more imports (a trade deficit). To calculate trade balance, you’d use this equation: Trade Balance = Total Value of Exports – Total Value of Imports.
• Exchange Rate – The value of one country’s currency compared to another. It affects how much it costs to buy and sell across borders.

Shipping and delivery terms

These shipping and delivery terms will help you clarify obligations and make the trade process more transparent for everyone:

1. Incoterms (International Commercial Terms) – Internationally recognized trade rules that outline seller and buyer responsibilities in an export transaction. These rules were created by the International Chamber of Commerce. The following terms are all examples of commonly used Incoterms.
2. EXW (Ex Works) – A situation where the seller makes the goods available at a specified location. The buyer pays all the transport and export costs.
3. FOB (Free on Board) – The point at which the seller no longer owns goods. It’s when ownership is transferred to the buyer. It also determines who is liable when goods are damaged during the shipping process.
4. CIF (Cost, Insurance, and Freight) – When the seller pays for transport and insurance to the destination port. Once the goods are shipped, the buyer becomes responsible for any further costs.
5. CFR (Cost and Freight) – The seller delivers the goods to the vessel at the port of shipment and then pays for transport. They do not pay for insurance. The buyer unloads the goods at the destination port and pays taxes, tariffs, import duties, and any further transportation costs. Risk transfers from seller to buyer as soon as the goods are on board.
6. DDP (Delivered Duty Paid) – A deal where the seller takes on all of the costs associated with the goods (transport, insurance/losses, and customs duties). Once the goods arrive at the agreed-upon destination, the buyer is typically responsible for unloading the goods and transporting them from the port to their warehouse.
7. CPT (Carriage Paid To) – The seller pays for shipping to a named destination (they don’t pay for insurance). The buyer takes on risk once the goods are handed to the carrier.
8. Group C and Group D Terms – Group C means the seller pays for transport but not risk (CIF, CFR). Group D means the seller handles delivery all the way to the destination (DDP).

How much do you know about Incoterms® 2020? Take this quiz to test your knowledge.

Payment and finance terms

Whether you’re an importer or exporter, these finance terms can help reduce risk in any trade transaction:

1. Letter of Credit (LC) – A guarantee from a bank stating that the seller will get paid once all delivery terms are met and the bank receives proof of shipment. Think of it as the buyer saying, “If the seller follows the rules and sends us the appropriate documents, we promise to pay them.” The letter will outline the payment amount and when the payment will be made.
2. Bill of Exchange – A written promise that the buyer will pay a specific amount on a set date. It’s much like an invoice, but for international trade agreements.
3. Open Account –  A sale where the seller ships goods before the buyer pays (usually 30, 60, or 90 days before the payment due date). This type of arrangement is typically reserved for trusted, long-time buyers.
4. Documentary Collection – A payment method where the seller’s bank collects payment from the buyer’s bank once shipping documents are exchanged. The banks don’t verify the validity of the documents, though. This form of payment is ideal for merchandise and commodity exports.
5. Forfaiting – Selling future medium and long-term receivables to a bank or finance company at a discount to boost cash flow.
6. Export Credit Insurance – Insurance that protects sellers if the buyer doesn’t pay or if political issues interfere with the transaction.

Learn more about trade finance terms.

Trade policy and compliance terms

Trade policies and regulations shape how goods cross borders. These terms help to define the rules behind tariffs, agreements, and market access.

1. Free Trade Agreement (FTA) – A deal between two countries that want to trade freely. As part of the agreement, tariffs are usually reduced or removed for certain goods and services. Other trade barriers may be eliminated as well (quotas, subsidies, etc.).
2. Non-Tariff Barrier (NTB) – Anything that makes it harder for two countries to trade with each other. Some of the most common NTBs are quotas, special standards, and licensing rules.
3. Customs Duty – A tax charged for any goods coming into the country. It is expressed as a percentage and is based on the item’s total value.
4. Harmonized System (HS) Code – The Harmonized System (HS) is a global system used to classify goods. This system is managed by the World Customs Organization. These codes have 6 digits, but individual countries may add more to allow for deeper classification.
5. Most-Favored-Nation (MFN) – A World Trade Organization clause stating that countries must treat all of their trading partners equally when it comes to tariffs and trade rules.

Logistics and documentation terms

Trade runs heavily on paperwork. These documents prove ownership, describe goods, and keep shipments moving forward without delays.

1. Bill of Lading (B/L) – This is a legal document that serves as proof that goods were shipped. It also acts as a title document and a shipping contract. Here’s an example of a B/L.
2. Certificate of Origin – A certificate that confirms where a given product was made. It’s used in the U.S., Canada, and Mexico. Although it’s not always required, a Free Trade Agreement (FTA) Certificate of Origin helps to determine whether a product qualifies for tariff benefits (low or no tariffs).
3. Commercial Invoice – The official document issued by the exporter to the buyer. It lists information about the goods, the buyer, the seller, and the shipment. It’s the main document used by the customs authorities in the importing country.
4. Proforma Invoice – A preliminary invoice is very much like a quote; it shows the buyer what a shipment will include and how much it will cost. It is sent to the buyer before the goods are shipped.
5. Packing List – A list of what’s inside each package. It includes quantities, weights, and measurements, and more. It’s used for customs checks and warehouse organization.

Mastering the language of global trade

Knowing the above terms can help you “speak trade” more confidently when negotiating contracts, shipping goods overseas, or reviewing customs documents. The more fluent you are, the smoother your deals and deliveries will be.

To dig deeper, explore more trade glossaries:

• Incoterms® 2020
• International Trade Council Glossary
• American World Trade Chamber of Commerce International Trade Glossary
• World Bank Global Trade Glossary

The post 25 International trade terms you should know appeared first on Trade Ready.

For anyone working in international business, documents are a major part of their everyday work. This becomes especially important when finalizing deals, or when transporting goods across borders.

Documents vary in how they look and how they are presented. The documents generated by business organizations, exporters, importers, carriers, freight forwarders, governments of different countries have different colours, different logos, different layouts, but essentially, for international trade, the required information will be very similar if not the same.

Incorrectly completed documents can result in delays at borders, entry refusal, lost goods, penalties and fines, and non-payment. The following case study highlights the importance of ensuring that documents are managed properly and filled out correctly.

Case Study: Piaggio vs. Bank of Nova Scotia

In 2011, the Ontario Superior Court of Justice considered an application by Piaggio C.S.P.A. (“Piaggio”), an Italian manufacturer of motorcycles and scooters, arising from a dispute in connection with the refusal of payment under three letters of credit. Piaggio had presented three letters of credit (the “LCs”) to the Bank of Nova Scotia (the “Bank”) for payment. The LCs were in connection with goods supplied by Piaggio to a Canadian company on 90-day payment terms.

The Bank had refused to pay funds to Piaggio in accordance with the LCs. The Bank refused on the basis that the draw documents did not conform to the terms of the LCs in a material respect. In particular, it was of the view that the named beneficiary of the LCs did not conform to the draw documents. The Bank also refused to honour one of the LCs on the basis that Piaggio did not provide all of the original amendments to the first LC.

There were material discrepancies between the named beneficiary “PIAGGIO AND C.S.P.A. “APRILIA” or “PIAGGIO AND C.S.P.A. (APRILIA)”, and Piaggio’s legal name as set out in the presentation documents “Piaggio & C.S.P.A.”

Piaggio argued that the discrepancies between the letters of credit and the presentation documentation were minor and that there was no question that Piaggio was the only entity that could possibly be the proper beneficiary under the LCs. There was no legal entity called either “Piaggio & C.S.P.A./APRILIA” or “Piaggio & C.S.P.A. (APRILIA)”,

Although minor discrepancies between the letters of credit and the presentation documents are not fatal, the Ontario Superior Court of Justice determined that the correct name of the beneficiary was fundamental. It was not the Bank’s responsibility to determine the true name of the beneficiary; it was up to the Canadian customer or Piaggio to correct the mistake.

Had Piaggio insisted on amending the letters of credit to reflect its proper legal name, Piaggio would have avoided this problem. On this basis, the Bank was justified in refusing to pay Piaggio under the LCs.

The Court noted that even if the misnamed beneficiary was due to a minor discrepancy, the Bank would still have been justified in refusing to pay the first LC. This is because Piaggio failed to produce all of the original amendments relating thereto or, in lieu thereof, to provide the Bank with an affidavit deposing that the original LC amendment could not be found and had not been sold, assigned or transferred together with a comprehensive indemnity and a bond.

Lesson: Letters of credit should be carefully reviewed prior to acceptance, and any conditions negotiated in advance. Errors on the face of the letters of credit should not be accepted. Beneficiaries of letters of credit are cautioned to review their existing letters of credit for any errors, and at the time of presentation to ensure that the letters of credit and presenting documentation match.

In the event of loss of the original letter of credit, it may be possible in some cases to draw on the letter of credit by presenting the bank with a copy of the letter of credit, an affidavit relating to its loss, together with an indemnity and bond.

It should be noted that “Aprilia” was the brand name of one of the scooters manufactured by Piaggio.

Based on Piaggio vs. Bank of Nova Scotia, 2011 ONSC 2567

What to check to ensure full compliance in your trade documents

Once the necessary documents for exporting or importing goods and services have been determined, it is necessary to make sure they are filled out correctly and that all the documents have the same information. The case study illustrates the consequences of not having the same information in all of the documents. The following are guidelines for document compliance:

• Input all required information (e.g. all boxes, all fields), determine what to leave blank or enter for non-applicable fields or boxes
• Make sure documents are completed in the required language
• Always use legal names of all stakeholders
• Use additional pages as provided, do not add own pages
• Confirm that contact information is current, i.e. individual names, addresses and phone numbers are up to date
• Check for and use only allowed abbreviations, e.g. in-house jargon or terms may cause confusion
• Clearly spell out date in full if format is not specified. For instance, use September 04, 2016 instead of 09/04/16
• Use properly registered names for carriers and numbers for ships, box car numbers, container numbers, and vehicle numbers
• All references to the goods being transported should be identical across all transport and commercial documents (i.e. the description, the number of packages, the types of containers, the weights or volume and markings), and should add up to the same amounts, e.g. the packing lists of all the containers in a shipment must total what is on the waybill or bill of lading.
• Make sure monetary values are stated in the correct currency
• Make sure dates for departure and delivery are the same across all documents, e.g. different forms may use different formats
• Make sure all numbers related to carriage are correct and the same across all documents
• Clearly describe the locations of shipment origin and delivery and use the same description across all the documents

The post Learn from Piaggio why it’s so important to double-check your trade documents appeared first on Trade Ready.

After years of skepticism about their security, value, and staying power, it seems that cryptocurrencies like Bitcoin are ready to take on the world markets. There’s serious speculation that central banks will begin to hold cryptocurrencies in 2018. Investment firms such as Goldman Sachs have released information to clients about investing in Bitcoin, and CBOE Holdings has begun to sell Bitcoin futures.

This means the time has come for those in international business to look at how Bitcoin and other cryptocurrencies will affect global finance.

Cryptocurrencies are now predicted to disrupt the way people do business, and those buying and selling across borders stand to benefit.

The basics of cryptocurrency

Put simply, cryptocurrency is a digital financial exchange for goods and services, but cryptocurrencies like Bitcoin are so much more complex.

Bitcoin can be purchased as a basic money exchange and then used as currency. Every time money is exchanged through Bitcoin or a similar cryptocurrency, that transaction is recorded in a detailed public ledger. The ledger forms a long chain of verified transactions in chronological ordered. These ledgers are referred to as blockchains, and the blockchains are a big part of what excites people about the possibilities opened up by cryptocurrencies.

The benefits of cryptocurrency for international trade

For those buying and selling goods and services across borders, cryptocurrency offers a host of benefits. Some of the cryptocurrency and blockchain technology are poised to disrupt trade finance include:

• A lack of exchange rate. If you’re dealing with many international suppliers and buyers in a variety of countries, you have to deal with a myriad of exchange rates. If everyone is using Bitcoin, however, you’re all dealing in the same currency with the same value, without the constant hassle of monetary exchange.
• Fast money movement. Cryptocurrency transactions are near instantaneous. The transfer itself posts immediately, and it takes only about 10 minutes for payments to be validated in the blockchain.
• Secured payments. The money you receive when you take a Bitcoin payment is also secure. Users need to have the money available upfront, so there’s no chance of payments bouncing or credit transactions being canceled.
• Lower taxes and fees. Because cryptocurrency is a peer-to-peer monetary system, there are no taxes that govern them, and transaction fees are almost nonexistent.
• Detailed records. The blockchains created from cryptocurrency transactions create clear, secure records that can be tracked and verified. There’s talk of tying contracts and shipments to transactions within the blockchain to make business and logistics easier to track. With blockchain technology backed by cryptocurrency, processes could become more efficient, easier, and transparent. In fact, companies are so interested in the possibilities of blockchain technology that Danish shipper Maersk has partneredwith IBM to pilot a blockchain shipment-tracking system.

The drawbacks of cryptocurrencies

Of course, there are drawbacks to cryptocurrency that have slowed its adoption. First and foremost, the future of cryptocurrencies remains uncertain. While a single Bitcoin is now more valuable than an ounce of gold, economist and financial heads warn that cryptocurrency is another trend that will result in a burst bubble. From a daily user standpoint, there are problems with cryptocurrency as well. Bitcoin isn’t legal in all countries, and therefore can’t be used everywhere. And because users must have the cash on hand to make purchases, buying on credit — which businesses often do — isn’t yet a possibility.

The future of Bitcoin in international trade

While many are debating the future of Bitcoin as a tech bubble versus a viable long-term currency, it’s likely at least some of the technology created by Bitcoin is here to stay. From quick transfers to the thorough records created by blockchains, businesses and institutions are looking at how they can use cryptocurrency and related technologies to make doing business easier and cheaper.

Regardless of how the future pans out for cryptocurrencies, it’s clear that savvy business owners should be exploring cryptocurrency and blockchain technologies to see how they could benefit and make a move to capitalize on the technology.

The post How Bitcoin could shake up international trade appeared first on Trade Ready.

Operating a business will always involve some level of risk. When operating a business venture on an international scale, the risks typically become higher in number and more complex in nature.

Conducting proper due diligence is always a good first layer of protection against some of those risks, but is often not enough on its own. International businesses need to focus on mitigating some of the more prevalent risks inherent in conducting business abroad.

Protecting your paycheck internationally is a whole different ballgame

In my experience, one of the highest risks encountered by international entrepreneurs is the risk of non-payment.

What if I ship my product over to the buyer but never get paid? In a domestic scenario, for instance, where both companies are located in Ontario, Canada, the process would be fairly straightforward.

Typically, the unpaid seller will send a formal demand letter asking for the monies owed. If the payment still isn’t made, you would then start a lawsuit in the Ontario Superior Court to attempt to obtain a judgment in your favour, which would allow you to legally collect the monies owed to you by seizing the assets of the buyer.

But what happens if the seller is a Canadian business and the buyer is halfway across the world in China, for example? How do international businesses protect against the risk of non-payment when the transaction and/or the parties are located in different areas around the globe?

Always start with an ironclad contract

In a previous blog, I highlighted the importance of both an arbitration clause and a governing law clause in an international contract as a means to protect your business abroad.

To recap, if a dispute arises between a Canadian seller and a buyer in China, the courts will look to the contract to determine the right course of action. The contract is king.

The governing law clause will dictate which laws will apply to the matter, whether they are Canadian, Chinese, or from another third party altogether.

The arbitration clause will outline the agreed upon process for dispute resolution between the parties. Although these clauses provide certainty in terms of process and help avoid costly disputes, the specific risk of non-payment highlighted in the example above can be mitigated even further. This is done through a widely used instrument of international payment called the Letter of Credit.

The LOC could be the best tool in your arsenal

The Letter of Credit, also commonly known as the LOC, is considered to be one of the most secure instruments to reduce the risk of non-payment in international transactions, and is widely used by international businesses in their daily operations.

As an example, in the scenario above where a Canadian seller of widgets is shipping goods to a buyer in China, the Chinese buyer would request the LOC from their bank, and that bank then undertakes to pay the Canadian seller upon presentation of certain documents to the bank.

The LOC is like an insurance policy for the seller, in the sense that it guarantees payment to the seller when the proper documents are presented.

The seller is guaranteed payment one way or another, regardless of other events like bankruptcy or civil strife in the buyer’s country that could otherwise make it difficult to transfer payment from buyer to seller.

If the buyer is unable to make the payment, the bank will cover the outstanding amount.

Get your documents in order

It is important to keep in mind that the issuing bank will only release the funds to the seller when it presents certain documents, including:

• a certificate of origin;
• an inspection certificate;
• a bill of lading;
• an insurance certificate;
• a commercial invoice;
• and a packing list

As long as the seller provides the necessary documents and they are compliant, the bank releases the funds to the seller. Therefore, the LOC is one of the best tools for exporters or sellers to use to reduce the risk of non-payment in international transactions.

The seller is assured to receive payment for the goods shipped provided they meet the conditions listed in the LOC in terms of presenting the required documentation to the bank, thus mitigating one of the biggest risks to exporters in global trade. Don’t trade without it!

Have you ever been faced with issues of non-payment? How did you resolve the issue and move forward?

The post The one thing that will guarantee you get paid in international business deals appeared first on Trade Ready.

All parties in all commercial transactions should be aware of the potential for fraud. In some cases those parties you negotiate with may not even be aware of the liability they pose.

Fraud—intentionally deceiving another party—is a criminal offense under common law and a civil violation under civil law. While companies claim transparency, or on the surface may seem safe, failing to fully investigate the party you are contracting with is an invitation for fraud.

Article 3.8 of the UNIDROIT Principles of International Contracts states,

“A party may avoid the contract when it has been led to conclude the contract by the other party’s fraudulent representation, including language or practices, or a party may avoid the contract when it has been led to conclude nondisclosure of circumstances which, according to reasonable commercial standards of fair dealing, the latter party should have disclosed.”

While most often considered a matter of criminal offence, during the 22 October 2007 UN General Assembly meeting, the Commission Secretariat noted their increasing attention to the area of commercial fraud, which is considered to be one of the present day’s greatest threats.

They stated that:

Commercial fraud often has an international character, and the activity poses an obstacle to international trade, which has a negative effect on the stability of national economies.

Even with a decade of highly publicized scandals such as Enron in the U.S. and Deutsche Morgan Grenfell in England, and the increased efforts to regulate and control it, fraud continues to be a major issue for countries all over the world. The increasing complexity of fraudulent conduct that entrepreneurs must guard against includes the following activities:

Non-Delivery, Thefts, Piracy, False Reporting, Falsifying Documents, Investment of Commodity Fraud, Deceptive Marketing or Advertising, Supression of Regulatory Breaches

Be vigilant in your due diligence in international contracts

Due diligence is the thorough investigation or audit of all matters relevant (e.g., financial records) to an agreement between potential contracting parties. Due diligence before and during negotiations is the best way to limit the financial loss, reputation diminishment, civil tort (law suit brought for a wrong other than a breach of contract) or litigation and in some instances bankruptcy that can result from fraud.

Unless an uncovered risk is so substantial as to be a deal breaker, negotiations are a way to work through the issues towards a successful contract.

As with other areas of negotiations, due diligence can be an increased challenge in international contracts because of language barriers, corporate business cultures, disparity of national rules, and distance.

Regardless, every effort must be made by both parties to research all aspects of your potential partner as thoroughly as possible.

Some examples of areas of research on your potential partner’s company include:

• Financial arrangements such as loans or indemnities
• Market potential, competitive position or future performance indicators
• Labour, human resources or union agreements (or lack thereof) and workforce capability
• Cultural or language barriers and associated management or integration costs
• Quality control, government regulations and environmental issues such as hazardous material disposal or clean up
• Information technology, including system integration, security and upgrades, as well as hardware and production or manufacturing equipment

It is also important to research the laws of the nations governing international contracts to understand how your company can best protect or proceed with litigation to recover or prosecute for damages as a result of fraud.

Remedies to Fraud in International Contracts

New scams are emerging every day, and in addition to due diligence, you can guard your company or investments from fraudulent international contracts in the following ways:

1. Acquire expertise
If this is not your area of expertise, obtain advice from consultants or lawyers who specialize in both international trade contracts and the market you are trading in. Invest in accounting and marketing expertise when investigating bottom lines and market potential.

2. Employ letters of credit and secure payments methods
While guidelines on payment terms and methods are relative to the business relationship (for example, established trust between two businesses may result in a longer payment term), each party should still take every precaution to create secure and clearly stated terms.

Letters of credit have banks guarantee sellers payment or partial payment on behalf of buyers according to rigidly defined terms.

While they do not eliminate the risk of fraud, and are often used by fraudsters to provide a false sense of security to inexperienced traders, letters of credit, used with appropriate supporting advice, can be helpful in mitigating the risk of fraud.

3. Place requirement clauses in contracts
Negotiating requirements into contracts, such as product samples or analysis, insurance, currency, certification, and compliance or regulatory documentation is an effective measure to ensure you are dealing with legitimate parties.

4. Be aware of current trends
There are a number of organizations and consumer advocacy groups such as National Anti-Fraud Network and the U.S. Federal Bureau of Investigation who post the latest fraud schemes and safeguard suggestions.

5. Limit technical and physical security access
Limit both physical and virtual access of contracting parties to sensitive areas.

Due diligence is the best way to uncover any potential risks and avoid costly and time consuming litigation in an international incident.

Have you followed all of the above to ensure your international contracts are secure? Have you ever had any experiences with contract fraud, and if so what did you learn from the experience?

The post 5 ways due diligence can prevent fraud in your international contracts appeared first on Trade Ready.

When compared to U.S. SME’s at 33 percent, German firms at 20 percent and Chinese small and medium sized firms at 60 percent, it is pretty clear that Canadian firms have not caught on to the opportunities that are available from exporting.

It is also why we buy Chinese laptops, Japanese robots, South Korean smart phones and Taiwanese computer parts. In return, we sell pork bellies, oil and natural gas and raw logs. This is hardly a model for a 21st century economy.

Rethinking the entire approach to exporting

Much has been written about the causes underlying our utter lack of international activity, from an unwillingness to take any kind of risk, to cost concerns, to a lack of qualified international trade professionals and managers, and a general lack of market knowledge.

How difficult can it be to do an environmental scan of a country with potential on Google?

Then there’s the old worn out excuse of little or no government support.

These may be legitimate but in the end they are excuses. We need to fundamentally rethink how we encourage and develop the capability of Canadian SME’s to actively pursue international markets.

Let’s start from the top down.

1. There is a need for a national organization, perhaps based on the Saskatchewan STEP or Australia’s Austrade models, that works closely with SME’s in both training them to become export capable, and identifying customers in export markets.

2. No more government trade missions where the focus is on politicians. Trade missions should be business to business driven, with matchmaking and follow up incorporated in each mission.

The National Research Council used to undertake these in Asian markets and they were hugely successful.

3. Let’s start talking in the media and industry associations, and chambers of commerce, and from governments at the Federal and Provincial level about realistic markets. India and China are not realistic markets for most SME’s unless they operate in very specific niche markets.

Canadian firms need to know more about where real opportunities and real customers are.

There is a need to promote Latin and South America, East and West Europe, and the small strong markets in Asia such as Singapore, South Korea and Taiwan.

What can SME’s do?

4. Understand that we live in a competitive global world and learn about it. In a recent survey, over 75 percent of Canadians had not heard of the Trans Pacific Partnership (TPP), a trade deal that, if implemented, will fundamentally change the Canadian economy.

5. Be prepared to spend money and time gaining the necessary knowledge and training on international activities such as Incoterms, letters of credit, and freight forwarders. It’s not rocket science and it should be a part of every SME’s activity.

6. Understand the value of the impact of social media on your international marketing potential. While Canadians have the highest use of the internet on a per capita basis among OECD countries, less than 15 percent of Canadian retail firms have simple e-commerce capabilities.

It’s not that difficult to set up a PayPal account, and in twenty minutes you can identify a segment of real customers using LinkedIn – I have seen it done.

7. Understand it is not about markets; it is about reaching real customers. It doesn’t matter which country(s) you choose to sell in (except for China and India) but it does matter if they have customers.

Ask your colleagues and your networks where they sell to in the world, why they have been successful, and what lessons they have learned.

In my little corner of the world, Victoria, British Columbia, there are dozens of SME’s that sell globally and they are more than willing to share their lessons with other local firms looking to expand internationally.

Why this matters

In the next twelve to eighteen months Canada will be a signatory to two major trade agreements that will impact the domestic competitive scene.

The first is the Canada EU Free Trade Agreement. This is not like NAFTA or just a reduction in tariffs. This agreement is far reaching in areas such as foreign investment, government procurement and intellectual property.

The second is the Trans Pacific Partnership. Much of what constitutes this agreement has not been made public yet, but according to reports it will cover procurement, foreign investment, labour mobility, environmental standards and business practices.

The TPP has twelve countries at the table and Canada is not in a strong bargaining position. So, it is important that Canadian SME’s be aware of its impending implementation and what its impacts might be.

The current Canadian government is committed to trade agreements and opening up the Canadian market. The world is about to march in the door, so perhaps we should go and visit them first.

A bit of practical advice

Succeeding internationally is not that difficult if you are prepared to spend the time and resources to find real customers. A few hints in that pursuit:

8. Pick on someone your own size. Don’t go after customers in large, complicated, non-transparent markets. Choose countries that have SME’s that want to work with you.

9. Pick country(s) that have growth potential and a need for your product or service. Don’t know where to find them? Try Google.

10. Partner up. You will need agents or distributors or local partners. Find the good ones and cherish them. They will save you time, money and headaches.

11. Get competitive. Figure out what makes you the best at what you do and build on that. By the way, it’s not because you are a Canadian company. No one cares. They do care about product quality, after sales service, good communications and strong supply chains.

12. Budget for market development. Nothing is free and international markets can take time to develop.

13. Commit to staying for the long term. Good customers are hard to find, and once found are worth the effort.

Your thoughts on what Canadian SME’s need to do to play a bigger role in exports?

The post 13 ways Canadian SME’s can improve on their dismal export rates appeared first on Trade Ready.

Ann Archer, CITP|FIBP, is an International Logistics Specialist for General Dynamics Land Systems – Canada (GDLS-C), a company based out of London, ON which manufactures light armoured vehicles (LAVs) and provides full fleet life cycle support including upgrades, repair services and training. Its global customers are governments and armed forces around the world.

With twenty-three years of experience in international trade, Ann is capable of taking on even the largest projects, ensuring that the goods she is responsible for will reach their destination without issue anywhere in the world.

From small-town Ontario to global markets

Ann’s global trade career began in 1992, working as an Export Sales and Marketing Manager for Cold Springs Farm Ltd. in Thamesford, ON. In the role, she was responsible for the international exports of turkey commodities.

It required close coordination with both the Canadian Turkey Marketing Board, to ensure all production quotas were met at a national level, and the Canadian Food Inspection Agency (CFIA), to ensure all documentation and quality inspection met regulations.

It was during Ann’s years in this role that she first encountered FITT, and decided to take FITT courses.

She says that taking the courses made her feel confident that her skills matched up against the highest competency standards for international trade professionals.

In 2006, she earned her elite CITP®|FIBP® designation, and feels that having the designation has had an enormous impact on her career, particularly in proving her expertise in the industry.

Being a CITP®|FIBP® has numerous positive influences. For example, it is a symbol of competency and credibility when working with other trade partners.

She also says that completing FITT courses has similarly proved her international trade knowledge and commitment to it as a career.

“Education teaches discipline, provides self-esteem. Education tells your employers that you can work hard to accomplish things. Employers look for people who have stuck with their education. They want an employee who they know is going to be able to discipline themselves to come in to work, set goals and achieve them.”

Meeting new challenges in a new industry

After spending fifteen years with Cold Springs, Ann decided to move to GDLS to accept her current role in 2007.

As an International Logistics Specialist, Ann is responsible to ensure both import and exports of material and vehicles reach their international destinations compliantly, meeting cost, schedule and performance.

One step for Ann is dealing with ITAR (International Trade and Arms Regulations) compliance, TDG (Transportation of Dangerous Goods), Canadian import-export controls regulated by  Foreign Affairs and International Trade Canada, and ensuring all regulations set out by the Canadian Border Security Agency  and U.S. Customs and Border Protection are met.

Along with compliance documents, Ann has also had to execute and support letters of credit for foreign government agencies.

Another of her responsibilities is negotiating contract air charters to take vehicles or related equipment like turrets to countries like Switzerland, South Africa or Saudi Arabia for demonstrations or exhibitions to government officials.

Ann frequently uses different temporary export methods to send vehicles to trade shows in countries like the UAE, France, Australia and India, as well as for demonstrations for government officials in Europe, Africa, South America and the Middle East.

She must balance the pros and cons of air, ocean and ground transportation to find the best single or multi-modal method of sending the goods to their intended destination, while working with the necessary freight forwarders and all levels of government officials needed to approve the exports.

Speaking the languages of her trade

Ann says that one of the challenges of her position is remembering not only the terms and acronyms of international trade, but also those of the customer.

“We ship a lot of unique material and use various acronyms and often make reference to military terms.  One day I received an email that simply stated that according to Hoyle, this is how it should work.

“Puzzled, I read it a couple of times, wondering to myself if Hoyle might be a reference to a customer or Army representative. Finally I turned to my coworker who was copied on the same email and asked who or what is a Hoyle? Their response was “You’re asking me? I am from Europe.”

“My supervisor had overheard the question and stated, “Isn’t that an old rule book on card games?” Sure enough, it was.”

It turned out that the phrase “according to Hoyle” now means the speaker is asserting their authority on the subject.

The moral of the story is if you want people to understand you the first time, please be clear and concise and don’t use slang or acronyms.

If you do need to use acronyms, spell them out the first time you use them.  Remember we work in a diverse environment, with different age groups, backgrounds and ethnicities.”

The right people create the right results

Since Ann started her current role, she has managed to achieve major goals.

Ann was able to synchronize the company’s scheduling production with their ocean transportation and end user delivery requirements, saving the company over $6 million.

She is also proud of her ability to play a role in the company’s larger objectives, such as being awarded contracts with the Colombian Government, the Peruvian Government, and Saudi Arabia.

For her efforts, Ann has won several major company awards, being on the team receiving the GDLS Global Supply Chain Management Council Excellence Award twice, as well as “several Spontaneous Recognition awards for cost avoidance, outstanding efforts and going above and beyond expectations” in her role.

She credits the quality of professionals in the company for her personal and team success.

“In today’s global environment, competing against or working with several strategic partners, under a strongly regulated environment, companies cannot afford to be complacent. The strength is in the people.

Having a well-educated, diversified group of people, I believe, has helped carry us forward, and remain strong and ahead of our competition.

After completing her FITT courses and having her CITP®|FIBP® designation for over eight years, there is no doubt that Ann has the education and expertise necessary to continue to excel in global trade, and to help her company stay ahead in international markets.

The post Ann Archer, CITP|FIBP – International Logistics Specialist appeared first on Trade Ready.

Kevin Duncan, CITP|FIBP, is a Senior Buyer Technical Procurement at NOVA Chemicals, where he ensures compliance with all customs, and manages an important supply portfolio, providing competitive pricing while maintaining strong supplier relationships.

He has almost 30 years of experience working in international trade, specializing in global customs (Canada, EU, China), international logistics and supply chain management, import/export, commercial documentation, transportation and freight forwarding.

Discovering the global marketplace through brick phones and Commodore 64s

Kevin got his start in the international trade industry in 1986 after completing a diploma in Business Administration and Marketing at Loyalist College and taking a position as International Sales Scheduler for Motorola Information Systems in Brampton, Ontario. He was tasked with scheduling international orders from overseas offices to the production floor for high tech communications equipment.

“Computers and phones were really taking off globally at this time and the demand was huge. I started working with so many countries and it opened my eyes to what a huge global marketplace is out there.”

I knew then that I would want to be involved in International Trade and hopefully get out there and see the world.

In 1987, Kevin moved to Calgary, Alberta and took a position with NOVA Chemicals Corporation., Canada’s largest petrochemical company and the company he still works for today. His first role within the company was in International Customer Service. He soon moved on to International Logistics Coordinator and Global Packaged Logistics Coordinator, positions he held for two decades.

At the time, NOVA was in a period of rapid expansion and Kevin was responsible for international customer service, working with letters of credit and processing trade documentation for China, India, Africa and South American companies.

He points out how things were done a little differently in the field back then.

“We did Export documents by hand as there were no computers to manage documents like we have today, so we learned the hard way. You didn’t want to make a mistake on a letter of credit, especially in some countries because you might not get paid. There was a lot of pressure to be perfect and manage detail. I credit this role in helping me in my career today.”

Becoming a leader in a new era of exports

In June 2008 Kevin was promoted to International Customs and Trade Compliance Manager, and again in 2011 to Senior Customs and Commodities Manager at NOVA Chemicals Inc. in Pittsburgh, PA.

These roles saw him take on a leadership position in the trade compliance and supply chain management of the company. This growing responsibility helped steer him towards earning the CITP®|FIBP® designation in 2012.

I had a colleague who was a member of FITT and he told me about the FITT skills program. I researched it and found it to be something that was missing in today’s workplace and something that is promoting Canadians to get out and see the global market as a positive thing for their business.

Kevin had watched NOVA and Motorola grow from their exporting endeavors, and their reliance on export markets to move their products. He says exporting strategically gave them a competitive advantage.

“Companies in Canada need to realize their markets are not just North America and that there are skilled people out there that can help them grow and diversify their sales.”

In order to do that, companies need to have educated, trained staff to lead those exports in new markets successfully.

Getting involved in international trade training and development

Kevin says FITT’s solutions for educating international trade professionals made him want to take a more active role in the development of trade training in Canada.

FITT provided the education and training that was lacking in Colleges and Universities that focused on International Trade. To me, this was why I liked this program, and as a result I wanted to get involved more.

“I participated on the members panel for the study that was done back in 2011/2012 for trade training in Canada and I was really impressed at how FITT took a leadership role in the study and used a cross section of trade professionals to complete the study and facilitate the dialogue between the members and the third party companies that developed the report for Canada.”

After earning his CITP®|FIBP® designation, Kevin found people wanted to know more about how they too can improve their skillset and expertise in global trade. This common drive and curiosity within the industry has led to some excellent networking opportunities.

“The biggest thing CITP has done for me is it has gotten people asking me what the CITP®|FIBP® designation is, and how can they get one. The people who ask are really interested in getting the skills to better understand how to Import and Export. I have the ability to network with people who understand trade.”

Making a difference is its own reward

Throughout his time with NOVA, Kevin has proven himself to be a valuable, effective member of his team. He has been recognized with several internal awards for his work, including winning the President’s Award. He won the award as part of the export team responsible for exporting a record-setting amount of material from NOVA’s plants around the world.

“We helped NOVA Chemicals market products globally when the North American market was not as strong. We had to do some crazy things to move product to many difficult countries to export too. Being part of a team with a clear goal, achieving it, and getting recognized for it is the best award you can get.”

While he considers this a great achievement, his proudest accomplishment is being able to make a difference every day in his work, acting as a leader in his field and helping his colleagues navigate the complicated world of international trade and compliance.

My proudest accomplishment is being a go-to person in my company for many folks who don’t understand International Trade and International Trade Compliance. I like to help people and be a resource for people to help navigate the many challenges in shipping globally.

“I helped develop a Customs Compliance Network at NOVA along with my colleagues who have a passion for trade and trade compliance. This team of people is a cross section of regulatory, logistics, customs, legal, product integrity, procurement, etc. that meet regularly to tackle the complex trade and customs issues companies face today.

“The knowledge is shared across the organization and so I am proud to say our company does really well in this area. To me that’s my biggest reward, seeing my company succeed. With great people and a passion for excellence you can do great things. Our leaders at NOVA recognize the good work this team does and supports us when we need their help because they know we can deliver the goods.”

The kind of wisdom that only comes from experience

When asked about his experiences in international trade in the field, visiting countries around the world, he offers this advice:

“My best advice is to respect cultures and treat people like you would want to be treated.”

In all my travels I have found that most people want the same things in life: to be happy, to be safe and to live well and be free.

“We are lucky as Canadians to have all these things and when you travel you meet many people who have maybe one or two.”

Kevin recalls one instance where he may have been a little too polite:

“My favorite travel story like many relates to food. I was a very nervous traveler and some food would make me sick, so many times I would not feel like eating on trips and this would make me tired and I would lose energy. It was so bad I had to go get some help and after that I had a new attitude. Enjoy the experience and try new things was my new motto.”

“When having dinner with a President of a Chinese chemical company there was some pickled duck tongue on the table. He slowly spun the table so the plate lined up with me to try it. Being polite but adventurous, I took several of them and they were not that bad. I then spun the table back to the Chinese President who had encouraged me to try them in his sly way. He took a look and sad ‘no thanks, those things make me sick.’”

Kevin continues to be involved in the prosperity of Canadian international trade as much as he can. He has been on the Board of Directors and Audit Committee of the Canadian Association of Importers and Exporters (IE Canada) for the past two years. There he provides oversite and helps shape the direction of IE Canada as an advocate for in customs, trade issues, training and regulation.

The post Kevin Duncan, CITP|FIBP, Senior Buyer Technical Procurement appeared first on Trade Ready.

Due diligence on a trading partner means:

• The nature of the prevailing legal tradition and the ability (or not!) to enforce redress even if you do “win” the case
• The nuances and complexities of cross-cultural interaction and negotiation
• Selection of local representation

…the list is long, and for many, daunting.

Diligent finance means you get paid

As an exporter (to take one view on the conduct of trade), if you do everything correctly and succeed in closing an attractive deal – or even better, establish a promising relationship – but somehow fail to get paid in the end, after producing and shipping the agreed goods or services, then all that effort and all the skill and effectiveness may be for naught.

This is where a generally misunderstood and underappreciated element of international commerce comes in: trade and supply chain finance.

Before your eyes glaze over in despair and disappointment at the prospect of  a discussion of – ugh – finance, think of this as your “SHOW ME THE MONEY” moment.

Trade is a great deal of fun, and it is personally and professionally enriching, but it is, after all, most commonly a commercial undertaking, at the end of which one hopes to be paid handsomely, for having ventured where others dare not.

What do we mean when we say trade finance?

Trade finance – quite literally the financing of international trade – has a long history of operating modestly and quietly in the background, facilitating billions in annual merchandise trade flows without seeking so much as a tip of the proverbial hat in acknowledgment.

It is unassumingly enabling the flow of financing in support of trade, while at the same time, helping to mitigate risks of all kinds, in the most challenging markets on the globe. In this respect, one might say that trade finance is very Canadian in character: effective, low-key and unpretentious.

In our training and advisory activities, and in recently published “Financing Trade and International Supply Chains” (Gower, UK), we argue that trade financing at its core is about some combination of four elements:

• The facilitation of secure and timely payment across borders
• The provision of financing to one or more trading parties
• The effective mitigation of a wide variety of risks
• The enabling of information flow about aspects of the physical and financial flows related to a trade transaction or relationship

Trade finance accounts for trillions of dollars worth of trade transactions

While the use of traditional mechanisms like documentary letters of credit (L/Cs) are in (relative) decline in many markets, the long-established and much-maligned L/C still facilitates roughly 10% of annual merchandise trade flows, which are in the $18 trillion range today.

It does so on the basis of rules and practices that are broadly understood and accepted throughout the world, in no small part due to the work of the International Chamber of Commerce Banking Commission in Paris, and the related jurisprudence that has evolved around such mechanisms.

More recently, and particularly in the post-2009 economic and business environment, many trading partners have opted to shift away from traditional mechanisms, despite their advantages, due to cost and process intensiveness.

Companies of all sizes, in markets around the world, are increasingly conducting business on open account terms – where the exporter produces and ships the agreed goods, and the importer sends payment at an agreed point in the transaction.

Financial institutions and trade finance ‘boutiques’, as well as various technology-based platform providers, have been working to evolve their value proposition in this area.

The brand new world of supply chain finance

Supply Chain Finance (SCF) is so new, in fact, that there is a multi-association effort underway now to devise a common set of nomenclature and terminology around the financing of international supply chains.

This effort falls under the auspices of the ICC Banking Commission that involves numerous specialty industry associations.

Until recently, some providers of traditional trade finance would have contended (perhaps some still do) that there is nothing fundamentally new in SCF. This is, in my view, a short-sighted perspective that ignores one major reality:

The shift to SCF models motivates bankers, financiers and traders to look at the conduct of trade in the context of an ecosystem of trading relationships, and not merely on a bilateral, one buyer, one seller approach.

The need for supplier finance programs

Even as governments tout the importance of SMEs as engines of economic value-creation, there exists an environment (globally) where small and medium-sized enterprises report ongoing, serious challenges in accessing timely and affordable financing in support of their international ambitions. The evolution of trade and supply chain finance is both critically needed and more than welcome

Supplier Finance Programs (also referred to as Buyer-Led Supply Chain Finance, among other terms) are one of the most popular and growing favours of SCF in the market today.

The key in such programs is that a large global buyer engages with their primary banker to provide financing to strategically important members of their (typically emerging market based) SMEs. This is done on the basis of invoices submitted by the qualifying suppliers and approved for payment by the buyer.

In effect, the invoice(s) are discounted, and the supplier receives funds significantly earlier than would otherwise be the case, improving cash flow and working capital.

This financing is extended on the basis of the credit standing of the large buyer (since the bank is ‘lending’ against an invoice that has been approved for settlement).

This tends to make the financing less expensive than what the supplier would be charged on their own merit, and allows the buyer to assure a steady and sustainable supply of key production components from strategic suppliers.

Innovation in SCF solutions

In addition to various SCF techniques taking hold in the market, there is a very visible increase in the application of technology to the provision of trade and supply chain finance.

Trade-related documentation is being increasingly ‘dematerialized’ and dealt with in electronic format. Likewise, settlement and financing models, are shifting from paper-based models to data-driven solutions that take the subjectivity out of payment and financing decisions.

This also accelerates the payment and financing process significantly, and thus helps to inject material amounts of liquidity – read cash – into the global market.

This at a time when industry estimates (Asian Development Bank, 2015) suggest that there is a global gap in trade finance in the range of $1.9 trillion annually, and at a time when government and international institutions are increasingly focused on sustaining the success of SMEs in international markets.

The perennial mission for those of us engaged in this business, to get more Canadian companies and more SMEs in general interested in international markets, continues to be challenging. Post-crisis realities, however, strongly suggest (again!) that market diversification is a critical target for the Canadian economy.

One way to enable companies in pursuit of such opportunities, is to ensure the availability of adequate levels of affordable trade and supply chain finance.

Another would be to provide competent technical advice and the vision necessary to see that there are transformational forces at work in the business of trade and the financing of trade today.

Complacency among traditional providers is a serious risk, when Facebook now has a banking licence from the central bank in Ireland, PayPal is entering the working capital lending business and encouraging cross-border commerce, and Alibaba announces that it will support its trading community with trade financing solutions.

Bottom line? Trade finance is not a luxury or an esoteric branch of financing to be ignored in the hopes it goes away or fades into the background of a transaction. It is a strategically critical enabler of trade activity, and an evolving part of next-generation international commerce.

The advice and support you get in this area can make or break your international trade aspirations and strategy, so challenge conventional thinking and limited vision from your trade financiers, if you run in to it.

What aspects of your international trade financing can you change to improve your business strategies?

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

The post The role of trade finance in making or breaking your global business aspirations appeared first on Trade Ready.

Pinaki Roy, CITP®|FIBP®, is the Vice-President of Corporate Finance for Reliance Industries Ltd., a Fortune 500 company and the second largest company in India by revenue.

With over 32 years of experience in trade finance, banking, letters of credit and foreign exchange management, Pinaki is one of the leading business professionals in his field.

While Pinaki originally completed a Bachelor’s degree in science, his focus for many years has been on business and particularly trade finance.

Pinaki began his career with the State Bank of India, and he moved from dealing with general export and import bills to reconciling all Canadian-dollar accounts, to eventually becoming the Manager (Exchange Rates) for the Currency Operations Division.

In this role, he covered all merchant transactions performed by the bank. He also played an instrumental role in implementing the bank’s Liberalized Exchanged Rate Management System (LERMS), an important economic reform in India.

Over the ten years that followed, Pinaki worked for four different banks and financial institutions in India, managing foreign exchange services at three of them before opening a new bank branch in Calcutta as the Branch Head with the fourth.

With his many years of experience, Pinaki joined Reliance as the Head of Trade Finance with Reliance Infocomm Ltd. (now Reliance Communications), the company’s telecommunications subsidiary.

He was responsible for importing over a billion dollars worth of mobile and landline phone equipment from leading companies like Nortel and Lucent Technologies (now Alcatel-Lucent).  He also arranged all of the various documents and letters of credit needed to make the purchases.

Pinaki moved into his current role in 2006, and was initially based in London, UK to work on the implementation stage of Reliance’s Jamnagar Export Refinery Project, based out of Gujarat, India.

My past interactions with banking institutions spread across the world and the management of Letters of Credit worth more than USD 4 billion while guiding a team of five officers allowed me to spearhead the financial strategies and development plan for this massive project.

“Since the completion of it and my return to Mumbai,” he explains, “I have continued to establish letters of credit for over USD 2.5 billion for the company’s Oil and Gas Division.”

Pinaki’s other responsibilities include ensuring compliance of regulations pertaining to letters of credit, negotiating with suppliers for finalization of payment terms, and giving clearance for the structure and content of any letter of credit in which Reliance is a beneficiary.

Pinaki is also a frequent expert panelist at industry conferences, including three in 2014 alone, and has served as a guest faculty member at several leading educational institutions across India.

He furthermore reached the finals of Mastermind India in 2002, a spin-off of the famous British quiz show created by BBC.

Pinaki first heard about the CITP®|FIBP® from Alexander R. Malaket, who holds the designation and is a member of FITT’s Board of Directors. Despite already having other diplomas, certificates and certifications in business and trade finance, he felt becoming a CITP®|FIBP® would be a valuable addition to his career.

Considering that a CITP®|FIBP®  represents not only individual achievement but also sets a benchmark for current and potential employers through adding further credibility to their workforce, I believe it to be a deserved recognition for my accomplishments as well as a vital requirement in achieving future goals.

The post Pinaki Roy, CITP|FIBP – Vice-President of Corporate Finance appeared first on Trade Ready.