New Zealand businesses are recognised internationally as being innovative, creative and demonstrating ingenuity in the development of high quality products. Successful exporting takes a singular clarity of purpose and drive. Riding the highs and lows is a vibrant journey bringing satisfaction and rewards at many levels. Plan with care and resist the temptation to take shortcuts. Before taking the plunge to grow your business through exporting you will need:
CLARITY OF PURPOSE
Have a clear vision for your product and how it will compete in an overseas market. Understand the issues of access and have a plan in place that allows you to measure and manage to ensure success.
Capability is about your people (including agents), governance structures, technical ability and processes that perform in a market and keep performing.
It will not be ‘what you know’ in most markets it will be ‘who you know’. Develop good networks which will give you access to good market knowledge and distribution systems. Build a team around you of positive mentors.
You will need this to fund growth, visit, research, test markets, meet people, create a local network and go back and do it all again, if you are going to succeed.
Exporting to new markets takes time and patience. You will flirt with failure on a rewarding journey to success.
Are you export ready?
ASSESS YOUR EXPORT POTENTIAL before committing resources to exporting. Below are key factors to consider:
Develop your export strategy planning to:
- spread your risk
- enable a controlled expansion of your production capacity
- operate within a financial framework your business can fund sustainably
- be strategic in seeking and responding to opportunities
- Include and consider the following:
Personal contacts are the foundation of success in trade. Even if you think you will just sell online, ensure you have the budget to visit the market you are considering, attend a relevant trade fair or conference, before you make a commitment. It is important to assess the suitability of your goods or services for a market, identify any applicable cultural factors, and regulatory requirements. Trust is fundamental to the success of any relationship. You may need to visit a market several times before securing valuable contracts. Factor in regular travel to your established export markets. Maintaining a frequent presence in each market is essential to continued success.
CONSIDERING A NEW MARKET?
- product currently available, quality, price, origin
- applicable local labour rates, subsidies
- population, potential volumes required
- currency stability, the usual currency for trade
- political stability, government intervention levels
- applicable duty on New Zealand imports and whether any import quotas
- cultural considerations
- on-line marketplaces available
Visiting the market enables the development of personal contacts with key organisations.
- Is the export of your product controlled or prohibited? Check here: NZ Customs
- Does the importer require an import licence or permit?
- Is the sale of the product regulated – require permits to sell?
- What regulations/standards apply?
- What are the labelling requirements?
- Are there waste regulations to consider for your product and/or packaging?
- What certification and documents will be required to enable import and sale of the product?
- How does a foreign product obtain necessary certification?
- Research the words and images of your branding/advertising.
- Check no undesired implications in local language, both official and colloquial
- Will advertising need to be changed to be sensitive to local custom/religion?
- Check for existing brands with the same or similar names
Before promoting your innovative product in a foreign market, even on-line, protect your IP where possible and understand:
- the options available to effectively protect your brand and IP in the market
- risks associated with exporting to markets with ineffective IP enforcement
- common time lag in a market before a product may be replicated and a cheap copy available
Understand where your product fits in the market. Determine how and where your product would be sold and marketed, as well as the potential price range, by evaluating the pricing and marketing of existing products in the market.
Decide on the preferred distribution channel to the end user, whether this will be direct or via an existing distributor with a compatible product range.
- Determine freight options identifying available routes, associated costs and delivery times
- Investigate warehousing options
- Identify a Freight Forwarder with experience for your intended market and for your type of product
Your local representative will be the face of your brand and your eyes and ears in the market. Choose representation with values aligned to your business and sound local knowledge.
- Evaluate options before basing your own staff in the market or appointing a local agent
- Determine in advance how a representative’s performance will be measured and remunerated.
- Understand the implications of choosing to service the market from New Zealand and need for more frequent visits. Also whether you or your team have the language skills and ‘local knowledge’ to successfully grow your share of the market.
Clearly defining the terms and conditions at the outset of a sale, representation arrangement or even permitting access to IP, will minimise risk of costly misunderstandings which can escalate quickly with distance and language differences.
The International Chambers of Commerce’s (ICC) comprehensive range of model contracts cover most areas of international trade. These are all available from the Auckland Business Chamber. Using these templates to draft contracts for your specific circumstances enables a contract to underpin all arrangements early with nominal expense and legal assistance.
It is important to determine your price position before initiating conversations with potential clients or agents – even an informal price indication, which turns out to be too low, can be very difficult to increase.
- Establish all associated costs including the impact of terms of trade, payment terms, promotional cost, representation cost, insurance, after-sales service, packaging cost/disposal obligations, duties & taxes
- Determine the competitiveness of pricing based on costs against the pricing of competitor products
- Clearly explain the terms of trade, payment terms and what is included in a price offer
TERMS OF TRADE - INCOTERMS® 2020
Codified by ICC, Incoterms are internationally recognised rules which clearly define when the costs and risks involved in the delivery of goods transfer from seller to buyer. Buy your own reference copy of Incoterms 2020.
- Determine and understand the implications of the agreed Terms of Trade
- Establish the impact of different Terms of Trade options on pricing
Getting paid is essential and managing the time frame between production and payment will be critical to sustainable trade.
- Meet with the international advisor at your bank to evaluate the risks, costs and advantages associated with available payment terms and mechanisms before exporting
- Consider different pricing offers based on different payment terms
- Understand how to your cash flow will be impacted by export business and how to manage
- Determine how best to manage your foreign exchange requirements.
There are a wide range of risks associated with export and these need to be identified, understood and mitigated where possible.
- Risk factors to examine include: political & economic climate; creditworthiness & trustworthiness of importer; IP integrity; currency exchange fluctuations; transportation; border delays; payment default
- Identify best Terms of Trade and Payment Terms for the applicable risk factors
- Speak with an Insurer or Broker experienced in providing insurance for international trade. Policy types to investigate include Marine Cargo Insurance; Product Liability Insurance; Trade Credit Insurance & Business Travel Insurance.
Identify mechanisms available to resolve any disputes and ensure that the process and mechanisms for dispute resolution are clearly stated from the outset in contracts and offer statements.
- Conduct communications in writing and keep the “paper trail”.
- Follow up verbal conversations, irrespective of how informal, with a written summary of the points discussed and decided
- Obtain a written acknowledgement from the other party
- Use ICC Contract templates to draft contracts and seek legal advice from advisors experienced in international trade to review, before signing any contract.
There will be additional tax implications when trading internationally. Speak with your tax advisor and consult Inland Revenue to ensure you are aware of applicable tax implications and have taken these into consideration in your export plan. Consider whether double taxation agreements are in place to cover any earnings you may have in a foreign market and how to manage the provisions.
Correct paperwork is the difference between getting paid or not, having goods reach consumers or shipped back at your cost. This is a job for the detailed person. Accuracy is essential. There is zero tolerance even for spelling mistakes. For assistance contact: Chamber of Commerce Certificate of Origin and certifying service
- Check, double check and have a second person triple check
- Ensure statements contained in documents are true and correct
- “Get it right the first time”. There are limited options to amend or replace documents once they have been presented. Incorrect documents increase the risk of the importer and exporter being ‘flagged’ for additional scrutiny of future, current and past consignments, goods being denied entry, fines being imposed or prosecutions initiated.
- Check goods meet criteria for 'New Zealand Origin' under relevant Rules of Origin prior to any commitment to provide a Certificate of Origin especially when a Free Trade Agreement Certificate of Origin is specified in Letter of Credit terms.
For general information about exporting:
- NZ Customs Customs clearance
- MPI Primary goods and Food products
- NZTE Guides and courses for new exporters
Disclaimer: The above information is supplied as a guide only. It does not purport to be comprehensive. No person should act in reliance on any statement above without first obtaining specific professional advice. Auckland Regional Chamber of Commerce and Industry makes all reasonable efforts to ensure that the information published in this resource is accurate and up-to-date. However the matters covered are subject to regular review and no warranty or representation can be provided regarding the accuracy of such information. The Auckland Regional Chamber of Commerce and Industry does not accept liability for any losses or damage arising directly or indirectly from reliance on the information.
Copyright © Auckland Regional Chamber of Commerce and Industry 2019.