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International Business Training - Trade Articleshttp://www.ibt-articles.com/absnet/?z=2Assessing Country Risk and Customer Risk—Part 3

This is the third part in my series of articles on country risk and customer risk assessment.

To recall, it is important to classify both countries and customers because a rogue customer in a good (from a risk perspective) country is not a much better risk than a good customer in a rogue (from a risk perspective) country.

In this part I will concentrate on the second of four data sets available publicly from the internet.

One of the many wonderful things the Organisation for Economic Co-operation and Development (OECD) does is to measure country risk. They do so using a specifically devised model called the Country Risk Assessment Model (CRAM).

All countries are categorised according to the credit risk they pose, consequently the categorisation is meant to reflect country risk. According to the OECD:

Country risk is composed of transfer and convertibility risk (i.e. the risk a government imposes capital or exchange controls that prevent an entity from converting local currency into foreign currency and/or transferring funds to creditors located outside the country) and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes)
(Source: http://www.oecd.org/tad/xcred/crc.htm, Accessed 15 March 2013)

As a result of recent classification criteria changes a number of issues relevant to the OECD classification need to be explained, as shown below.

According to the rules of the Arrangement, two groups of countries are not classified. The first group is not classified for administrative purposes and is comprised of very small countries that do not generally receive official export credit support. For such countries, Participants are free to apply the country risk classification which they deem appropriate.

The second group of countries is comprised of High Income OECD countries and other High Income Euro-zone countries. Transactions involving obligors in these countries (and any countries classified in Category 0) are subject to the market pricing disciplines set out in Article 24c) and Annex XIII of the Arrangement.

All other countries (and a limited number of supranational multilateral/regional financial institutions) are classified into one of eight categories (0-7) through the application of a two-step methodology:

The Country Risk Assessment Model (CRAM) produces a quantitative assessment of country credit risk based on three groups of risk indicators (the payment experience of the Participants, the financial situation and the economic situation).

A qualitative assessment of the CRAM results by country risk experts from OECD members, considered country-by-country to integrate political risk and/or other risk factors not taken (fully) into account by the CRAM. Accordingly, the final country risk classifications are achieved through a thorough discussion amongst experts and a consensus-building process.

The country risk experts meet several times a year. These meetings are organised so as to guarantee that every country is reviewed whenever a fundamental change is observed and at least once a year. Although the meetings and details of the CRAM are confidential and no official reports of the deliberations are made publicly available, the list of country risk classifications is published after each meeting.
(Source: http://www.oecd.org/tad/xcred/crc.htm, Accessed 15 March 2013)

CRAM adopts both a quantitative and a qualitative approach to arrive at the best possible classification. Current data and historical data is freely available on the OECD website.

Based on these data, users may be able to do their own country risk assessment, by grouping certain countries using their own criteria. One common approach is to group countries by geographical location, for example Southeast Asia or the ASEAN member nations. These groupings should detect patterns of risk that will reflect the economic status of the country and may also assist in gauging the risk levels of particular areas.

Whilst in these articles I make generalised statements, it is not unusual for certain geographical areas to share some risk commonalities. For example many countries in Africa are categorised a high risk according to CRAM. Consequently, it is likely that doing business in Africa will be comparatively more risky than doing business in parts of Asia or the Middle East. For sellers and buyers alike, the idea is to paint a picture about a country or an area; you may think of this as a quick reference guide or a short-cut to risk management.

Basically, if one knows that a particular area has high risk, you should approach these negotiations differently than negotiations in low-risk area, and your business solutions may also be different or more restricted in choice. For example in risky countries Delivered Incoterms 2010 (DAT, DAP and DDP) may not be desirable options and more secure payment methods may also be required.

Of course, part of the examination of CRAM data is exactly what is required to arrive at our own country or country grouping classification.

It should be remembered that CRAM data, like any other data, is only partially useful in the analysis because of two primary reasons:

Events in the world change quicker than the data can be published. For example, CRAM data is typically updated on a six-month basis, but events occur all the time.
CRAM data has limitations, as outlined above. The difficulty with relying on one data set alone is highlighted by the current crisis in Cyprus. CRAM does not report any data for Cyprus because they are an EU member, but this does not mean that Cyprus is currently a highly acceptable risk.

It is therefore important to compare a several sets of data to get a much more informed opinion—a more balanced and rounded view, if you like—of nations that we may be interested in doing business with.

I will review another set of data in my next article.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=520Mon, 20 May 2013 00:00:00 GMTLetter of Credit Compliance: #2 Yellow Corn or Better

The Uniform Customs and Practice for Documentary Credits (UCP) states: "The description of the goods, services or performances in a commercial invoice must correspond with that appearing in the credit." (Article 18 c) What does this mean to an exporter? What does it mean to a bank?

Every letter of credit will indicate a description of the merchandise covered by the letter of credit. Does the bank expect to see the merchandise description on the invoice exactly as shown on the letter of credit? What about punctuation, capital letters and spaces?

In a workshop on letters of credit for a staff of commodity traders from a grain company, they said that they became frustrated by their bank's interpretation of a letter of credit. The letter of credit described the merchandise as "#2 Yellow Corn or Better." The company shipped #1 Yellow Corn and described it on the invoice as "#1 Yellow Corn."

Astonished, they said, "The bank rejected the invoice! Why would they do that?"

Bankers cannot develop expertise in all kinds of merchandise they see in the documents that come across their desks. In the first 10 minutes on the job, a commodity trader likely learns the grading system for corn. However, bankers have no expertise as commodity traders. How does a banker know #1 is better than #2? Maybe #3 is better than #2.

Since bankers can't possibly know everything about every type of merchandise, their limited role should include nothing more than precisely comparing the merchandise description on the invoice to that on the letter of credit. One insightful attorney advised me early in my career, "You are only required to compare, not interpret." Good advice.

What possible alternatives do the traders have? Since the invoice must match the letter of credit, traders might prepare an invoice that describes the merchandise with a caption identical to the letter of credit: "#2 Yellow Corn or Better." Then, below the caption the invoice might carry a notation: "merchandise actually shipped: #1 Yellow Corn." Since this is not in conflict, a bank should find it acceptable.

Regardless of the actual goods shipped, the merchandise description shown on the invoice must precisely match the description stated in the letter of credit in order for the exporter to receive payment. This principle is the cornerstone of strict compliance.

The UCP goes on to state, "Banks deal with documents and not with goods, services or performance to which the documents may relate." (Article 5) In other words, a bank does not care what goods might have actually been shipped or even if any goods have been shipped at all. An exporter must simply supply documents that strictly comply with the terms of the letter of credit to collect payment from it. The bank does not concern itself with the underlying sales contract and the shipment itself.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=518Mon, 13 May 2013 00:00:00 GMTThe NAFTA Producer Solicitation—Part 2: The Producer Responds

In our last installment, a NAFTA participant issued a lengthy diatribe berating his producers for poor NAFTA documentation. Upon receiving this letter the producers responded in kind. Following is a summary of the responses received.

Oh Exalted Client, Ruler of Our Universe, in Whose Presence We Dare Not Breathe the Same Air and With Whose Wisdom We Dare Not Trifle:

We are in receipt of your snarky letter and would like to point out just a few issues you may have overlooked you self-centered twits.

We are not stupid, thank you.

You have sent us a list of 250 items.

You have not purchased 180 of these items from us within the past 5 years.

Twenty of these included on the list are not items we stock or sell to you.
Perhaps it is you, who needs to get your act together before proceeding with your solicitation.

If you are not placing commercial pressure on us, why have you charged us $10K for telling you the truth that one of our goods was imported from China? We outsourced this item to China at your request in order to meet competitive pricing pressures. This was done with full knowledge of and approval by your quality engineers. You can't have it both ways. You may have the low-priced Chinese product or the higher-priced NAFTA-eligible product. Please make up your minds and we will source accordingly.

You do realize that many of your finished goods and our components are already duty free in Canada right? Issuing a certificate of origin to you is not going to make them any freer. Can you please explain to us why you insist on proceeding with this senseless charade?

We also provide you the safety gloves and glasses used by your employees on the production line. These are considered indirect materials under the NAFTA and can be considered originating value regardless of any response from our company.

Without cooperation from your company we are unable to classify your proprietary components. As a result we are unable to identify the proper NAFTA rule of origin and to make a final determination. You help us with the HS codes and we'll help you with a more accurate NAFTA certificate. Deal?

We estimate that responding accurately to your request for NAFTA certification will require us to expend at least four hours per item. This request for NAFTA certification is beyond the scope of work currently detailed within our contracts with you. We therefore respectfully request you compensate us for that time. At a modest $25 per hour, $100 per item, 250 items we will issue an invoice for $25K. Upon receipt of payment we will release this year's NAFTA certificate to you.

Perhaps you are under some misconception that we need your paltry business. We are the single global supplier of the material for which you are requesting information. After some consideration we have determined that our business is not positively affected by participation in trade agreements. We therefore regret to inform you we will not be providing you a certificate of origin.

Regrettably Yours,

Your Soon to be Former Supplier

Obviously an intervention is in order.

As you read these letters you might recognize your own firm. You may find yourself identifying with one or both of the parties. Before resorting to either of these less-than-diplomatic letters, keep in mind the following the next time you send or receive a NAFTA solicitation.

NAFTA is voluntary. Even though there might be considerable commercial pressure to cooperate, there is nothing within the NAFTA that compels you to participate. Before resorting to sniping at each other, buyers and sellers should take a more collaborative approach. Buyers in particular should remember that their suppliers could choose to opt out of the program at any time.

NAFTA has rules. If you are going to play the game you have to play by the rules. Admittedly the rules are not intuitive. If the program is not clear to you, get yourself to a seminar before completing any documentation for your customers.

NAFTA has consequences. If you choose to ignore the rules, the regulators of Mexico, Canada and the United States have authority to get your attention. While the U.S. government can fine a U.S. company, the other governments have the authority to bar your participation in their countries.

NAFTA has benefits. Duty avoidance is the primary benefit of participation. As a non-importing supplier this may not be obvious to you. Your NAFTA originating goods, however, should be more competitive in the marketplace when compared with non-originating goods.

NAFTA is a process. The certificate of origin is the last step in that process. Prior to issuing a certificate of origin companies must first certify that their goods originate under the NAFTA. This requires them to classify their goods and any material inputs used in manufacturing those goods. It also requires them to solicit certificates of origin from their producing suppliers.

This brings us full circle. Solicitation, while a nuisance, is just one of several important steps in the greater NAFTA process. Without dependable statements of origin from producers of goods and materials, parties may not be able to achieve the duty avoidance benefit of the NAFTA. Instead they risk the consequences.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=519Mon, 06 May 2013 00:00:00 GMTExport Basics: Using Your Business Card Overseas

Even in today's digital age, the exchange of business cards remains a common practice. A business card is an effective tool for both broadening your network of contacts and promoting your company. This is especially true for a small and medium-size company looking to expand internationally.

In many countries, business cards are exchanged at the onset of introductions and thus play a role in fostering long-term business relations. A business card is a reflection of your company and can create an important first impression. In fact, when handled effectively, it can be one of your company's most valuable marketing tools to promote and further the credibility of your business.

Here are some suggestions for using business cards when traveling overseas.

Include the right details. In addition to the primary details—company, name, address, phone, fax, email and website—be sure to include your title. Doing so indicates your rank and hence status within your organization. Include "USA" in your address to lessen the chance for confusion when presenting your card. Also, in many parts of Europe business people include their advanced degrees on their cards. Based on the industry you work in, you may want to follow suit.

Include a short tagline. If you are a new business and your company name does not indicate your line of business, a tagline may be just what is needed. Just keep it brief. Some examples would be "custom cable manufacturing" or "on-site machining solutions."

Have the cards professionally printed. You may want to save money by making your own cards in-house rather than using a professional printer, but the difference will be noticeable. First impressions count, and business cards are often one of the initial ways potential clients learn of your company. When printing, remember that heavier paper and embossed lettering demonstrate quality and reliability. A wide range of reasonable options are available for printing cards, many even available online, so don't skimp.

Have your card details translated. In many countries, the back of the card is not blank but shows the translated version of your card details. When traveling overseas, present this side of the card face-up. If you travel to a range of regions, you may want variations of your card in different languages. If you are traveling to Chile, you would have one side in English and the other in Spanish; when traveling to Brazil, the translated side would be in Portuguese. Just be sure to have an experienced translator do the translation for you and a printer who can support foreign language alphabets.

Use a business card holder. It is worth having a separate case or card holder just for business cards. This both looks professional and keeps your cards organized, reducing the risk of pulling a wrinkled card from a back pocket. Not only can you keep you own cards in there, but you can place cards you receive from your prospects in the back of the holder so they won't be misplaced.

Have cards on hand. In some cases that means plenty of cards. A common complaint of Americans exhibiting at their first overseas tradeshow in Asia is too often they run out of business cards just when a key prospect appears. Even though you may be selective with whom you exchange cards, prepare to bring an abundance. Likewise, keep a few in reserve so you are not caught on the spot empty handed. In some cases, receiving a business card without presenting one in turn hurts your chances for establishing a business relationship.

Learn the appropriate business etiquette. It is not uncommon in the U.S. to hand out business cards in a meeting as if dealing cards in a poker game. But for international visitors, the exchange of business cards may have its own protocol, such as presenting a card with your right hand only in the Middle East or using two hands in Japan. In many parts of Asia, writing on the card and sticking it in your back pocket immediately upon receiving it shows a lack of sensitivity. So learn the appropriate etiquette in the country before traveling.

Store the cards you collect. It does no good to collect business cards if you cannot locate details in a prompt manner. When you come back from an overseas trip, you may have a stack of cards that needs to be sorted. Many scanner and software options exist for scanning in your cards, such as CardScan or CardSnap. This enables you to readily organize and search card details, sort as needed, and easily contact people afterwards.

Success in any new business venture is directly impacted by the range of contacts you know and, just as importantly, who know you. Business cards can play a key role in growing your network of contacts. As you expand your network overseas, a professional quality business card presented in the proper manner at the appropriate time can create a critical first impression. So spend the time and plan accordingly.

FRANCIS "CHIP" PETERS is a commercial officer with the U.S. Commercial Service Minnesota office located in Minneapolis.

About the U.S. Commercial Service

As the trade promotion unit of the U.S. Department of Commerce's International Trade Administration, the U.S. Commercial Service connects U.S. businesses with international buyers through a network of offices in 108 U.S. cities and U.S. Embassies and Consulates in more than 70 countries. Services include export counseling, market research, business matchmaking, participation in trade events, international partner searches, advocacy and more. For more information visit www.export.gov.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=517Mon, 29 Apr 2013 00:00:00 GMTBuilding Your International Brand

A Canadian colleague and long-time friend recently asked me for marketing advice around how to create a successful international brand. My friend is a Chief Operating Officer who just joined a new venture with a young manager heading up the marketing effort. The marketing manager is highly concerned about developing a new logo and perhaps needs to widen his perspective of developing the venture's brand. Generally, I would define a brand as a customer's perception of a company based on their cumulative experiences with that company. This may include what someone has heard from a secondary source; what is published in media; any marketing, product or service usage; and any continued follow-up in customer service or sales. In the case of companies with widely diverse products and multiple industries, the brand would break down somewhat by industry (ex. General Electric).

Great international brands in any industry are carefully built over time. As with most aspects of marketing strategy, it starts with the end in mind. What do you want your brand to be in five or 10 years? What value do you want your clients to perceive from their cumulative experiences of not only using your products and services, but in all of their interactions with your company? What adjectives would you want your clients and other stakeholders to use when describing your brand? Does the brand need to have the same reaction across all of your markets? International brands need even more attention to cultivation than domestic brands due to the complexities of multiple cultures, languages, legal systems, etc.

Here are several factors to consider as you move forward in your international brand's development:

Start with Consistency—The quickest way to destroy the value of a brand is by being inconsistent. A product may have great promotional marketing, but if the product can't live up to the hype it will soon garner a bad reputation. Likewise, if an in-country distributor is responsible for after-sale customer service but does not return customer phone calls, the brand will greatly suffer. And if your product is the industry low-cost leader and a good value for the price, your international markets cannot be charged a price that covers the shipping, tariffs and other international logistics costs and prices at the top of the market. Building a consistent brand can help drive marketing decisions about who represents your products overseas, customer service standards, product development priorities, and yes, even logos.

Ending In-Country Relationships on a Good Note—This is a brand-damaging issue particularly for American, Canadian, Australian and Northern European companies. Oftentimes these cultures make business decisions based on financial returns, particularly short-term profits. International markets require time to develop. But when operations in a specific foreign market need to be harvested, it is vital to your company's brand to leave on a good note. Some firms cut their losses, leaving partners unpaid or customers unsupported. But a bad brand reputation will linger far longer in most international markets than in Western countries. Companies that have tried to reenter a country later after a hasty departure will find a much more challenging business climate. Instead, consider finding ways to make the transition to leaving a little easier for partners and customers. A little extra effort will keep that door open and protect your brand.

Invest in Local Corporate Responsibility—The level of corporate responsibility efforts expected of the business community varies widely from country to country. As a foreign company, you would never want your firm to come in below the average level of community involvement. Corporate responsibility should tie in some way to your company's industry and mission. For instance, if your company delivers language classes and cultural corporate training, your philanthropic efforts should center around a related area like supporting immigrant refugees.

Protecting Your Trademarks, Copyrights and Patents—Finally, be sure to register your intellectual property with each national government. Especially in China, the IP piracy capital of the world, a great international brand is often copied. Or worse, the trademark could be registered first by someone other than your company with plans to extort payment from you. It's worth the protection no matter how imperfect.

For more information about international branding, international marketing and operations, please visit The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=516Mon, 22 Apr 2013 00:00:00 GMTAssessing Country Risk and Customer Risk—Part 2

This is the second part in my series of articles on country risk and customer risk assessment. In part 1, I explained why it is important to classify both countries and customers. A rogue customer in a good (from a risk perspective) country is not a much better risk than a good customer in a rogue (from a risk perspective) country.

In this article I will concentrate on the first of four data sets available publicly from the internet.

Bribery and corruption is a significant world problem. The lack of transparency is a huge problem for business. Successful business relationships are based on predictability of outcomes. The seller expects the buyer to be fair about accepting goods and making timely payment, and conversely, the buyer expects the seller to deliver goods on time. Where bribery and corruption exist, these processes are distorted and predictability is lost. Instead of orderly business conduct, we witness chaos and, at times, outright intimidation.

Transparency International (TI) is an organisation that is dedicated to fighting corruption. Their website has a wealth of information about corruption around the world. TI regularly publishes data about corruption in a number of publications available for download free of charge. One of the most important of these publications, in the context of this series of articles, is the Corruption Perceptions Index (CPI) that is published annually. In the 2012 CPI, 176 countries were classified according their corruption perception. The classification is done on the basis of 0 to 100 points—the lower the score the higher the corruption, and vice-versa.

The reader is encouraged to view the publication, especially the chart on page three that provides a summary of the nations around the world and their corruption status; quite a visual impact. The data in this chart may provide interesting disclosure.

The significance of transparency cannot be underestimated. A country with high levels of corruption may be likened to a patient with a severe illness. Left unchecked and untreated, that illness is likely to progress to a terminal sickness that will ultimately see the patient lose their life. In much the same way, corruption in a country, left unchecked and untreated, is likely to curtail business opportunities and economic development in that particular country. Usually in highly corrupt countries the majority of the population is oppressed, lacks basic freedoms, and is typically quite poor while the rulers enjoy extraordinary comforts. Under such circumstances it becomes difficult to conduct ordinary legal business transactions. Often facilitation payments are demanded by local bureaucrats who will otherwise be able to magically interpret whatever rules are in place to your detriment. Of course, if you do become a party to facilitations payments, how do you put a stop to it in the future? This becomes tantamount to blackmail. In as much as anything else, these considerations bring to question one's ethics and the degree to which these ethics are adhered to. Whilst the question and definition of ethics is always difficult, one thing is for sure: if it is illegal, it is also unethical.

Corrupt practices (and being part of these as a foreigner) are illegal in most developed countries, and there are also penalties in the host countries for activities conducted abroad. For example a seller in country A engages, or becomes a party to, corrupt practices in country B. The seller may be in breach of both local laws in country B as well as laws in country A (home country). This situation is best avoided at the onset. If corrupt practices are required to gain business, it is always best to walk away from the deal.

The benefit of analysing the TI website and reading through their publications is that an entrepreneur has the opportunity to become familiar with likely business practices in the foreign country. As the old saying goes: forewarned is forearmed.

The data from TI needs to be put into perspective with events that may occur between one publication and the next; at times 12-month periods. Changes in political leadership or a change of philosophy from current political leaders do occur. However, it is always prudent to keep a close watch to see whether the words match the actions—after all, words are cheap. Investigating the presence or absence of corruption is the first step in analysing country risk.

I'll introduce another set of data to be considered in my next article.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=515Mon, 15 Apr 2013 00:00:00 GMTThe Nigerian Cement Story

When Nigeria struck oil in the mid 1970s, it became a cash-rich country. As a result, the Nigerians began to import large quantities of consumer goods. The goods arrived at a much faster pace than the out-of-date ports could handle. Ships sprouted up in the harbor like weeds in an untended garden. Because the ports had become so out-dated, they could bring only one ship in to dock at a time, unload it, send it back out, and bring in the next ship.

Crowded conditions slowed unloading by as much as six months. (Some stories claim that it took as long as 24 months, which I cannot verify.) In addition, Nigeria charged the ship owners up to $4,000 a day in demurrage charges (a charge for the detention of a ship beyond the time allowed for unloading).

The government conducted a survey of the situation and determined they would need five million metric tons of cement to upgrade the port facilities. The problem compounded when five ministers in the government thought they had responsibility to order the cement. Consequently, they placed orders for 22 million tons of cement.

When more than 250 cement ships arrived, they only further added to the congestion and, of course, they could not unload. After about six months of waiting on the high seas in the hot and humid weather, you can probably guess what happened to the cement! It took on moisture, hardened and became useless while on board the ships.

The government immediately instructed the banks, "If you issued letters of credit for shipments of cement, don't pay." What did the banks do? They obeyed the law of the land and they didn't pay. If a shipper of cement had an irrevocable letter of credit from a Nigerian bank, suddenly it became a useless piece of paper.

How does one foresee a risk such as this? The answer: You don't. You could have the best international economist on staff who monitors and plots every possible economic trend he can find, and this risk could still be unforeseen. What makes this story so bizarre is each of the five Nigerian ministers simultaneously making a stupid decision. Since economists don't track stupid mistakes, they can't possibly predict, "Well, I think the trend shows we are due for a stupid mistake!"

How can exporters protect themselves in a scenario such as this? By having the letter of credit confirmed by another bank in another country. When a bank confirms another bank's letter of credit, the confirming bank essentially guarantees payment. Effectively, the confirming bank has issued the letter of credit themselves thereby obligating themselves to pay even if they cannot collect from the issuing bank. In this story, some confirming banks found themselves in the position of having to pay the exporters even though they were unable to collect from the Nigerian banks. It's the protection—or insurance—that an exporter wants and the risk a bank willingly takes when it confirms another bank's letter of credit.

This lesson provides an excellent example of sovereign risk. Let's define sovereign risk with the question, "Can the government intervene in any way to prevent payment from being made?" Sovereign risk includes the stability of the government and the economy.

Now, the end of the lesson: What happened to the ships? Rumor has it that the cost of chipping the cement out of the holds exceeded the cost of the ships. So, the ships were intentionally sunk and remain on the bottom of the ocean off the coast of Nigeria.

Note: I first heard this story when I attended a seminar conducted by Jim Harrington in the late 1970s. Since then I have verified what I could and have slightly revised and embellished the story based on others' recollections of this incident.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=511Sat, 16 Mar 2013 00:00:00 GMTThe NAFTA Producer Solicitation—Part 1: The Exporter's Conundrum

We've all seen them. Either we've drafted them, received them, or rolled our eyes at them. They are the infamous NAFTA solicitation letters we receive from our customers each year. The first time I heard that solicitation was a part of the NAFTA I blushed. Obviously I had the wrong idea. I've since learned that solicitation refers to letters like the following:

Dear Supplier:

We respectfully request you send us a NAFTA certificate of origin or equivalent manufacturer's affidavit for the following articles we purchase from your company and that you manufacture. See the attached list.

If you are not the producer of these goods, we respectfully request you pass along a NAFTA certificate issued by the producer or an equivalent manufacturer's affidavit from that producer.

The official NAFTA Certificate of Origin, CBP form 434, and its continuation sheet, form 434A, are available from U.S. Customs and Border Protection. The PDF version of these forms is conveniently available within the forms menu at CBP.gov. Instructions for completing the NAFTA Certificate of Origin are printed on the back of the form. An example of an acceptable manufacturer's affidavit form is also attached as an alternative.

A third form is attached, which may be used to inform us of the country of origin of goods that do not originate under the NAFTA. Use this document for goods of any nation including U.S., Canadian and Mexican goods that you know are made in North America but you do not know or cannot prove they meet the higher standard of origination under the NAFTA.

Thanks you for your prompt response and cooperation.

Sincerely Yours,

Very Important Customer

Most of the letters I've seen follow some version of the script above. One would think that this would be effective and that, after about 20 years of doing NAFTA, suppliers would be schooled in working with the forms.

One would have another think coming.

Anecdotal experience indicates that the state of the NAFTA Producer's Certificate of Origin is in disarray. I would even go so far as to say it is in chaos.

One frustrated NAFTA participant inked the following producer's solicitation letter and, in a moment of poor judgment, sent it to all of his domestic suppliers.

Dear Ignorant Domestic Supplier:

Against our better judgment we are asking you, once again, to complete a NAFTA certificate of origin, hoping against all hopes that in the past year you might have attended a seminar on the subject and finally have gotten your act together.

We are only doing this because, well, we really need to ensure that our goods meet the NAFTA rules when exporting to Canada and Mexico. This gives us and you a competitive advantage in the marketplace.

If you are still not confident in the method of completing this document, please, Please, PLEASE do not guess. The instructions are on the back of the form. When you fill out the document incorrectly it makes you look really, well, uh... stupid. There! It's been said. You know how you can tell when your teenager is lying? Well it is the same way with the NAFTA certificate. It is obvious but difficult to explain. A couple of clues for you:

The signature date is the date you sign the document. DUH! It is amazing how many of you appear to come into the office on your New Year's holiday to sign these forms.
Be consistent with your date order. Please don't give me MM/DD/YYYY in one field and DD/MM/YYYY in the next. By the way, this is a U.S. form. I would prefer you use U.S. date order. If you are going to use some other date order, please label the date accordingly.
The first instruction on the back of the certificate says to complete the certificate in full. Please don't leave any fields blank.
If field 1 "Exporter"” and field 4 "Importer" are confusing to you, we suggest you create a document that looks just like a NAFTA certificate of origin. Label it "Producer’s Affidavit." Change field 1 to "Buyer." Drop field 4. Is that easer for you now?
While "A" might be a good grade in school, it is usually the wrong preference criterion on a NAFTA certificate, at least for manufactured goods like yours.
Oh yeah, field 9 "Net Cost" is not asking you for the price of your goods.
We purchase 250 items from your company yet you responded with a single line that says "fasteners, spare parts, bearings and electrodes." You may as well have filled the description field with the word "stuff." Yes, we really do need a separate line declaring NAFTA eligibility for each of the items we purchase from you.

To top this all off, you are completing a federal form. There are legal ramifications for making false NAFTA claims. As the controller of your corporation you should know this, but you signed it anyway. Yours was the single worst certificate of origin we received from all of our suppliers last year.

Speaking of which, we know you are acting as the distributor for many of the goods we purchase from you. We really would like to get a statement of origin from the underlying producer of the goods. We need this because we export some of your goods as aftermarket parts to our Canadian and Mexican clients. If we do not have a producer's document we have to make a claim of No1 in field 8 of our exporter's NAFTA certificate. This is a weak statement and is frequently challenged by the destination import authorities. As a result we do not claim NAFTA on these goods. This results in the client paying duty when it probably isn’t necessary.

Please, Please, Please share a copy of the producer's certificate with us. We promise, crisscross applesauce, we will not disintermediate your company and work directly with the producer. We would be happy to put that promise in writing. What? You do not have a producer' NAFTA statement to share with us? Are you crazy? In other words you haven't done your homework, but you were willing to make a false statement on a federal document just to get us off your back? We realize you think you know that the goods originate. NAFTA, however, is not a belief system. It requires documentary evidence that a good qualifies for the program.

And no, we are not going to dictate to you nor teach you how to complete the certificate of origin. That includes providing HS codes. That is your responsibility.

Please do not interpret our commercial urgency as a threat that you must misrepresent your goods as being North American. We simply need to understand the facts within our supply chain so that we can, in turn, respond confidently and truthfully to our clients.

If you are still confused, we can only recommend that you attend a seminar on the subject. We have found the folks at International Business Training have the best course out there. They present the information in such a way that even your company will understand it. Their instructors are also consultants willing to work directly with your company to implement a NAFTA process.

Finally, please respond to this letter.

Condescendingly Yours,

Your Soon to Be Former Client

After receiving such a letter you don't think the producers are going to remain silent, do you? Stay tuned for the producer's response in our next installment.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=514Mon, 01 Apr 2013 00:00:00 GMTExport Basics: Communicating Effectively With Your International Clients

Many small and midsize companies in the U.S. deal with overseas clients and vendors every day. Meeting your international business contacts in person often provides the chance to strengthen business relationships. Such occasions also offer excellent opportunities to make presentations about your company, products or services.

You may find yourself conducting a product demonstration to one or two persons or presenting a company overview to a roomful of people. How will you communicate? You have options if you speak the local language fluently, but in most cases you will most likely communicate in English.

What if you are giving an industry update to a multinational audience at an overseas tradeshow? The odds are high that your audience will expect you to communicate in English, the primary language of international business. But not everyone in the audience may speak English fluently. As a result, they may misinterpret some of your message and key points if you don't modify how you present.

There are some steps you can take when presenting to an international audience to help ensure you'll be understood.

Adapt your communication style. The style of communication in the U.S. tends to be informal and direct. We immediately use first names and rarely use titles. This is not always the case elsewhere where formalities and titles play a role. It's easier to start off initial introductions more formally and switch to a less formal manner as the relationship develops.

A little use of the local language can go a long way. If your ability to converse in the local language is limited—or as is more often the case, non-existent—you can still learn a few words of greeting. This simple act can help promote smooth relationships, demonstrating your willingness to learn about their culture. Just be sure to practice your pronunciation ahead of time.

If you try speaking in the local language, keep your comments short. I remember listening to an American executive read his entire five minute speech written phonetically in the local language. He thought the audience would appreciate the gesture, but any goodwill he hoped to generate was soon replaced with frustration. It would have been better if he had made a brief greeting in the local language, and then switched back to speaking in English.

Speak clearly and slowly. Your goal is to be understood. Read the faces of your audience. Are they following your words? A slightly slower pace may help. Some listeners may speak English fluently, but others may not. You should gauge your audience's level of comprehension and proceed accordingly.

Outline each point you want to make. If you're going to highlight three benefits of your product, simply say, "There are three points to cover…" and then proceed to describe them.

Be descriptive. A picture is worth a thousand words. Slides with diagrams and pictures (and not just text) can help convey the points you want to make. Likewise, stories and analogies help in explaining technical or complex topics.

Avoid slang and clichés. There are many expressions we use every day that don't translate well, from "You betcha" to "Hold on a sec." So if you think your audience may not understand you, rephrase those statements to "I agree" and "Please wait." U.S. sports terms in particular are not always understood, so telling someone they need to "step up to the plate" may cause more bewilderment than initiative.

Simple terms work best. Keep in mind that those who speak English as a second or third language may be more likely to understand more commonly used English words such as "win" instead of "triumph" or "start" rather than "commence." So again, adjust accordingly.

Speak from the perspective of your audience. Temperatures, weights and time can all be measured differently. If you're explaining distances, include kilometers and miles or talk about driving time. Likewise, if talking about the weather, give the temperature in Fahrenheit and Celsius. Also in much of Latin America, North and South America are often considered one continent. Thus, anyone from that continent is an American. A way to avoid any confusion is to simply use the term U.S. or "the States" in lieu of American.

Use humor with care. You may have a hilarious joke to tell, but does it readily translate? A punch line isn' funny if it's not understood. That doesn't mean you should void humor. One effective approach is to poke fun at yourself. That way the audience can laugh along with you since everyone can relate to making a mistake.

Tips for Working with an Interpreter

If the audience doesn't speak much English and it's critical that your message be completely understand, hire an interpreter. Some points to keep in mind:

Select an interpreter with expertise in your area. Does your industry use its own jargon or involve complex technology? Interpreters often specialize in particular industries. Select one familiar with your type of business. Ask for references.

Share your talk with the interpreter ahead of time. If you have a prepared speech, let your interpreter read it beforehand. The interpreter can then ask you for clarification of industry-specific expressions in advance of your talk. For the same reason, provide interpreters with your product brochures and company profile ahead of time.

Remember that your talk has just doubled in length. Be prepared to break up your presentation into translatable chunks, pausing often to permit the interpreter time to translate to the audience. This often means your presentation will take twice as long to complete. Plan to either set aside more time or shorten your speech.

Communication is an essential part of any business undertaking, no matter where you are located. The key to successfully presenting to an international audience requires equal measures of preparation and adaptability.

FRANCIS "CHIP" PETERS is a commercial officer with the U.S. Commercial Service Minnesota office located in Minneapolis.

About the U.S. Commercial Service

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=513Mon, 25 Mar 2013 00:00:00 GMTIndonesia: An Emerging Market – Part 6

The Republic of Indonesia is the largest and most populous economy in Southeast Asia with 240 million people, making it the fourth largest country in the world. Located in the heart of the economic growth in Southeast Asia, it is a vast polyglot nation that stretches more than 5,000 kilometers across the equator and is made up of more than 17,000 islands.

In the first five articles in this series, I provided an overview of Indonesia, the investment opportunities that exist, the country's value proposition, and the non-tariff barriers to doing business in the country. Despite these challenges, Indonesia represents a market that cannot be ignored.

INDONESIA: A COUNTRY WITH SIGNIFICANT UNTAPPED POTENTIAL

Indonesia is unique in many ways. It is the biggest archipelago in the world, the largest Muslim-majority country, the world's third largest democracy, and a leading exporter of numerous high-value commodities such as palm oil and thermal coal. Its distinct characteristics are now coupled with political stability, self-reliance, and robust economic growth that saw the country largely shielded from the global economic crisis. Equipped with lessons from previous financial upheavals, the Indonesian economy has withstood the global financial crisis better than many analysts expected.

A 2012 World Economic Outlook report published by the International Monetary Fund illustrates that Indonesia is one of only six countries (along with Brazil, Argentina, India, China and Saudi Arabia) in the G20 that was experiencing growth 2.5% higher than pre-crisis levels. This country is bursting with geothermal energy that could power its growing economy and set an example for countries looking to develop cleaner energy sources. But confusing government regulations and other hurdles are blocking billions of dollars in potential investments.

Many world institutions and observers have predicted that Indonesia will soon migrate from being an emerging economy to an advanced economy. If the non-tariff barriers identified in this series of articles are removed, foreign direct investment will start flowing into Indonesia and help alleviate issues relating to physical and commercial infrastructure, unemployment among youth, and poverty levels.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=512Mon, 18 Mar 2013 00:00:00 GMTLeveraging Your Product’s Life Cycle in International Markets

Tom sits in his midwest office wondering if he is doing all he can to sell his specialized machinery into international glass markets. His fellow sales directors in nearby companies are trying all sorts of new marketing programs around social media and QR codes. Should he be working to change his company's marketing to keep pace with the times, or can he reach his sales goals and market potential sticking with what seems to work today. As with most questions in international markets, it depends.

The more I work with companies selling products in various points along the Product Life Cycle, the more I believe that your product's life-cycle stage profoundly affects how you market that product. When your markets are in other countries, it is also important to consider that your product may be at different stages in different markets. For instance, Apple's iPads may soon be reaching the Late Majority Stage in the U.S. But in Bangladesh, this product is definitely still considered the domain of Innovators. Apple purposefully innovates in order to keep its focus on Innovators and Early Adopters.

Now back to Tom's dilemma. As a sales director in a technical industry, Tom needs to identify where his products fit in their Product Life Cycle and then leverage that stage to help get the most profits out of international markets. Here are examples on how to do this in every stage of the cycle:

Innovators—The greatest marketing challenge for a product that is so new it's actually innovative? Market education. Internationally, it helps to forget about national borders and focus on amplifying your messages. Try to get publicity and speaking engagements. Attempt to recruit industry thought leaders to try out your new product for a reduced price in exchange for giving a positive testimonial. In the beginning, it's not about where the business comes from, it's about getting ANY business at all.

Early Adopters—Now that at least some in the market know about your type of product, it's time to look for the kind of customers that will take a chance with new technology and ideas. Internationally, it would be wise to identify any industry clusters. These are areas where an industry has an ecosystem with suppliers, producers and oftentimes a local trained workforce. Here are some examples of industry clusters:

Software Clusters: Bangalore, India; Silicon Valley, USA; Vancouver, Canada; Tel Aviv, Israel
Aluminum Can Clusters: Aurangabad, India; Beijing area, China
Alternative Energy Clusters: Denver, USA; Munich, Germany; Oslo, Norway

Focusing on where an industry has several potential clients can save time and financial resources. At this product stage, it is not critical to saturate the market. Instead, it is focusing only on those clients who would be willing to try your new product to hopefully gain competitive advantage over slower-adopting competitors.

Early Majority—You will know that a product or product category has hit the early majority when you no longer have to explain what your product does. People in the industry know about it and more are considering changing over. This is the time to hire and train competent marketing and sales staff who can serve not only your home market, but markets overseas. When it makes sense, hire bilingual staff. In this stage it is not uncommon to see new market entrants or even large industry players watching to see which technologies they would like to acquire from smaller companies. Consider strategic international partnerships to shore up your companies weaknesses. For instance, if you know that India is an important market for your products, consider partnering with an existing Indian company with products compatible to yours to share marketing data and client lists. Consider entering new international markets where the opportunity justifies the initial costs.

Late Majority—By now, markets have begun to saturate. In some markets, new innovations may have already been developed to replace aging products. But many products, particularly in industrial market segments, can successfully remain in late majority for even decades. More than ever, sales and marketing efforts hinge on the business relationship between supplier and customer. Customer service takes on a new level of importance worldwide. Production efficiencies are more critical as price pressures can squeeze profit margins. This may be a time to look at some new international markets, but ONLY where the product is still in an earlier product life stage.

Laggards—If your product happens to have hit the last product stage, hopefully you have extremely loyal customers who appreciate your products and continue to pay to service or support them. Tom may be in this product stage, and he should seriously be considering new product development or acquisition. There is no market growth at this stage, and if there is profit to be made, someone will likely figure out a way to improve your part of the market. If this product is still profitable, it is time to augment your product offering with products that have greater market growth potential.

I hope this article was of some use to you in your international marketing planning. For more information about international marketing particularly in B2B markets, please visit The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=510Mon, 11 Mar 2013 00:00:00 GMTAssessing Country Risk and Customer Risk—Part 1

This is the first of a series of articles on country and customer risk assessment, and it provides a background for some of the issues I'll be exploring in later articles.

Any entrepreneur interested in exporting to a foreign country or importing goods from abroad is inevitably faced with assessing the risk of doing business with both the relevant country and the particular customer or supplier.

Risk assessment is something that should be done by any entity. The process of assessing risk varies from organisation to organisation and industry to industry simply because the context and, therefore, the variables are not the same.

The International Organization for Standardization publication, Risk Management: Principles and Guidelines, (publication ISO 31000:2009), outlines a basic approach to managing risk. This is the latest version of risk management standards. The world's first risk management standard was published by Standard Australia/New Zealand in 1995, and through subsequent amendments and enhancements, these standards were ultimately incorporated into the ISO standards some 14 years later. The risk management process is outlined in a diagram at the ISO website.

The process of risk assessment starts with the determination of the risk context. This is extremely important because in order to manage risk one needs to know what they are managing and how processes and procedures work. Once the risk context is known it needs to be assessed. Risk assessment typically starts with the identification of risk, an analysis of that risk, and the evaluation of that risk. The last step in the chain is the treatment of risk.

In looking at the figure referred to in the link above, it can be observed that communication and consultation, as well as monitoring and review, are processes inherent in the risk management process. This is because the risk management standard follows an Enterprise Risk Management (ERM) approach, one where all key stakeholders are involved in the risk management process.

ERM is the opposite of the silo mentality that quarantines and compartmentalises decision-making processes from other parts of the organisation. For example, sales and marketing decide on terms of payment for export sales without consulting the finance area. The most important thing to remember about risk management is that it is not the person or the department that carries the risk, but the enterprise as a whole! It should be remembered that a person does not work for the department or a manager, they work for the enterprise and, consequently, it is about ERM in the context of managing risk.

The biggest risk to any organisation is humans. We are imperfect beings capable of individual thought and incapable of cloning actions. Whilst individuality is a wonderful human trait that provides diversity and innovation, from a risk management perspective these variables are problematic. With risk we want to define and contain processes, so we have certainty of outcomes as much as possible. To highlight the differences in humans, why is it that a group of students sitting for the same exam achieve different grades? Or why is it that if a person does the same multiple-choice test twice they do not necessarily get exactly the same answers? In this context, a machine is preferable to a human because the machine will keep repeating the same process exactly the same way it was programmed, good or bad as the case may be, whereas humans are less predictable. Having said this let me reassure the reader that I am not advocating that computers should run the world. I still fundamentally believe that humans are higher-order beings; we may just need to be a bit more disciplined about what we do to achieve better outcomes.

Risk is omnipresent; it is inherent in every process of everyday life be it private, social or business. Risk is unavoidable, and that is why it is important to manage it, for if you do not manage risk, it manages you—not a good position.

Risk is managed according to the perception of risk. This perception is based on overt or covert knowledge. We know about something, or we suspect something. We then react to these stimuli. Risk acceptance (known as risk appetite) varies from individual to individual and enterprise to enterprise. It is difficult to say this amount of risk is wrong or not as it depends on how people view risk.

We are all different and have varying perspectives on things. Are people who do bungee jumping crazy or just having fun and seeking an adrenalin rush? Some might say it is probably safer if you just have an adrenalin injection. The point is that the bungee jumpers have assessed that risk as being acceptable, and the non-bungee jumpers have not. Neither group is right nor wrong, they are just different in their risk assessment.

Ok, but how does this relate to country risk and customer risk?

The assessment of country and customer risk needs to be done not only on the basis of likes and dislikes or preferences, but it must take a more scientific approach. That is, data must be gathered about particular countries and customers in order to make an informed assessment with all key stakeholders to achieve the best outcome for the enterprise with as little bias as possible.

In the next articles I will draw on data from four publicly available sources and provide examples of how these data may be used to construct a profile of a country. I will also provide some suggestions about researching customer risk.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=509Mon, 04 Mar 2013 00:00:00 GMTExport Basics: Seven Tips for New Exporters

Smaller businesses often think that exporting is only for large multinational companies. But that's usually not the case. In fact, more than 97% of all U.S. exporters are small and medium-sized businesses employing less than 500 people.

What's really surprising is the number of businesses that are not exporting. In fact, according to the U.S. Department of Commerce, less than one percent of the 30 million companies in the U.S. actually sell their products internationally. Many of these firms could benefit from exporting but have yet to do so.

Why would a business that is successful in the U.S. market want to start marketing overseas? There could be many reasons from increasing sales volumes to extending product life cycles. But the bottom line remains that exporting can be a way to keep your business growing and profitable. And if your company doesn't target new overseas markets, chances are that your competition will.

Furthermore, the export process has become much more streamlined in recent years for even the smallest firms due in part to the internet, improved logistics services, and the array of export assistance programs available from the U.S. government and other organizations. If you already have a track record of selling in the United States, one of the world's most open and competitive economies, then you are likely a good candidate for selling overseas.

Before launching an export initiative, it is essential to plan and prepare. Selling a product or service overseas means doing business in a new environment where language requirements, shipping documentation forms, and payment options all may be different. To deal with those challenges, here are some key points to consider:

Make a Commitment. Businesses new to exporting can expect to face a number of challenges such as redesigning packaging or establishing a new distribution channel. The whole process usually takes time—often two to three years to really establish a foothold. No matter how prepared businesses are to enter an overseas market, they initially will make mistakes. It's important that top management understand this because, without that strong backing, there may be a tendency to pull back at the slightest sign of a setback.
Do Your Research. Many companies spend more time and money researching how to expand their existing domestic market than on how to sell in another country. To be successful overseas, do some research on potential markets. Which countries are leading suppliers or leading importers of your products? Which countries have the lowest duties? There are various considerations and approaches your company could take, but most importantly you should write an international marketing plan. Whatever strategy you choose, you will need to be prepared to address a range of potential issues from unique labeling requirements to new competitors.
Focus Your Efforts. In creating any new process, it's best to focus on one area first. Likewise, many successful exporters began by selling in just one overseas market, learning from that experience, and then applying that knowledge to new international markets. For example, first-time exporters in Minnesota often target Canada as the first international market to enter. The proximity of Canada and the benefits of the reduced North American Free Trade Agreement tariffs are advantageous for new Minnesota exporters ramping up on their export knowledge.
Set Aside Resources. Entering new markets requires resources, primarily time and money. Companies in the best position to export already have an established track record of domestic growth and a steady stream of revenues. The process of first entering overseas markets can present a steep learning curve and often present new requirements and in-house procedures that can range from how goods are packaged to how sales orders are processed. For many companies, gearing up a business to export means having to reallocate resources from domestic business opportunities.
Increase Your Company's Export Knowledge. Look for opportunities to develop and expand the export knowledge of your staff. Working towards a credential is a way to ensure that a baseline of skills is developed. For exporting companies, it may make sense to encourage staff to attain the Certified Global Business Professional credential. More commonly called the CGBP, this credential is a nationally recognized professional designation that demonstrates an individual's practical knowledge in conducting international trade including supply chain management, international marketing and trade finance.
Line Up Experts. It's unlikely that one person will know all aspects of the export process in full detail. As you prepare to export, look to establish a network of specialists with expertise across a range of issues such as shipping documentation, letters of credit, or international contracts. Some expertise you may want to develop in-house; others you will want to outsource. At a minimum, you will want to identify a freight forwarder, banker and attorney who can assist you. A good starting point for new exporters is your state's District Export Council, an organization comprised of local business leaders who act as consultants to small- and medium-sized businesses who want to export.
Leverage Government Resources. The U.S. Commercial Service, which has Export Assistance Centers located across the U.S. and offices in many American Embassies and Consulates overseas, is a global network of trade professionals who can provide on the ground support in many overseas markets to assist U.S. exporters. Services include helping U.S. companies find new business partners overseas, exhibit at international overseas trade shows, research opportunities in new markets, or address market access issues. To find the U.S. Commercial Service office nearest you, visit www.export.gov.

Successful exporters can generate increased revenue and profits. But exporting is not without its own set of challenges and requirements. For small and medium-sized businesses that are first-time exporters, planning and preparation are critical for ensuring success.

FRANCIS "CHIP" PETERS is a commercial officer with the U.S. Commercial Service Minnesota office located in Minneapolis.

About the U.S. Commercial Service

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=508Mon, 25 Feb 2013 00:00:00 GMTIndonesia: An Emerging Market – Part 5

In the first four articles in this series, I provided an overview of Indonesia, the investment opportunities that exist, the country's value proposition, and some of the barriers to doing business in Indonesia. In this article I examine some more of those obstacles.

NON-TARIFF BARRIERS IN INDONESIA: OPERATIONAL

Indonesia is a low-tariff country by developing country standards and has been rather successfully implementing its tariff liberalization program, but since the global financial crisis, new non-tariff barriers have emerged.

Labor Related Problems

Foreign corporations have faced a backlash from local communities in Papua and northern Sumatra as workers often go on strike to push for higher wages and better treatment. Case in point: Under President Suharto, only one trade union was allowed, and its activities were strictly controlled. The collapse of the Suharto regime in 1998 ushered in a frenzy of trade union activity as repressive regulations were lifted. Instead of dealing with one labor union, employers now have to deal with multiple labor organizations, many of which are in competition with one another for membership. Investors in such an environment often find it difficult to dismiss employees due to confusing regulations and labor laws.

Skilled Labor Shortage

Like many other emerging countries, Indonesia's severe shortage of skilled labor is due to out-migration of skilled workers, an aging workforce, and a lack of capacity to provide training. While the education system has been successful in fulfilling basic requirements like literacy, the universities and colleges in the country are widely considered archaic. Foreign universities have faced a challenge to set up campuses in the country in obtaining the necessary licenses and have been discouraged by the National Education Law that prohibits foreign owned, for-profit educational institutions.

Declining Manufacturing Base

For Indonesia manufacturing was the engine for growth in the 1980s and much of 1990s. The average growth of manufacturing in the years preceding the Asian financial crisis was 11.9%. Since then the manufacturing sector has been almost stagnant. One of the primary reasons for this decline in manufacturing is the substandard infrastructure in Indonesia, which forces transportation costs to go up. Investors are reluctant to invest in infrastructure projects due to lack of legal certainty regarding land ownership and use.

Logistical Problems

Indonesia stretches more than 5,000 kilometers across the equator and includes more than 17,000 islands. This vast size has made the development of an efficient national transport network a challenge. The country's most populated island, Java, faces huge congestion around its sea ports, which needs to expand and modernize. The road network has failed to keep pace with car purchases in the main urban centers, pressing the need for public transportation. Jakarta's main port of Tanjung Priok, for example, needs to more than triple its container handling capacity in the next seven years if it is going to keep up with expected growth in Southeast Asia's largest economy.

To remove the logistical bottlenecks, Indonesia will need to spend $70 billion a year on infrastructure alone for the next five years in order to keep economic growth at an annual rate of six to seven percent or higher, according to a global publishing, research and consultancy firm based in Jakarta.

Condition of Social Infrastructure

Indonesia's continuing weakness continues to lay in infrastructure both in terms of social infrastructure such as sewage and electricity transmission as well as transportation. Consistent availability of electricity is one of the main challenges. Periodic blackouts and high costs are obstacles that many producers complain about.

Public transportation is either seriously underdeveloped or completely absent, which leaves the relatively few and poorly maintained roads and highways around the nation unable to cope with the daily volume of cars, truck and motorcycles. Within the confines of large cities like Jakarta, it is even worse. The roads, while better maintained, cannot handle the volume of cars, mini-buses, and the ubiquitous scooters (over five million of them) that carry workers in from the surrounding countryside. Such issues serve to undermine Indonesia's strong economic fundamentals, constrain growth, and dampen investor interest.

Retailing Challenge

Traditional markets still account for around 60% of total retail spending throughout the country as modern retail facilities are heavily concentrated in Java. Government regulations to protect traditional retailers can create non-tariff barriers in this industry. As per regulations put in place in 2002, modern retail outlets can only be set up a certain distance from existing traditional markets.

Challenges certainly exist, but in my final article in this series I will summarize the reasons why Indonesia remains on the path toward becoming one of the world's advanced economies.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=507Mon, 18 Feb 2013 00:00:00 GMTTuning Up the International Marketing Engine

January and February can be a good point in the year to re-evaluate your international marketing program. Are you reaching your sales potential? How much did your company's revenue grow compared with the competition? Do distributor discounts compensate for higher overall gross margin?

Here are aspects of your international marketing that should get at least a once a year review:

Ready for a New Market Entry Mode?

Most companies initially enter international markets using in-country distributors or representatives. The risk is low and allows the company to reach new markets without much knowledge or experience about selling into the new market. The trade-off is that distributors normally receive a healthy discount margin for their services.

As a company gains experience in a specific country, it may be advantageous to plan for transitioning to more direct selling and exports and save the discount margin.
If your company is already direct exporting, the next step in growth is usually to open an in-country company sales/operations office. This allows locally hired staff to sell and service your products, as well as to better capitalize on in-country knowledge that directly helps your company be more profitable.
There may be advantages in considering buying a smaller local competitor for their customer base, government connections and better local tax rates.

Each of these market-entry modes has an increased potential of profits than the mode before it, as well as higher risks.

Re-Evaluating International Distributor Performance

Since many companies grow internationally by local distributors or representatives, periodically it helps to review each distributor's performance. Is the distributor generating its own sales leads? Have sales been steadily increasing and keeping pace with industry growth? What is the cost of supporting that distributor from your home office with any training, marketing and communications? High maintenance, low result distributors should be put on notice.

For those distributors that vastly achieve beyond expectations, supporting and rewarding your stars should be a priority. Is there any way to expand a good distributor's reach? It is certainly worth consideration.

Where in the Sales Process are You Losing (Potential) International Clients?

Most products and services sales involve some sort of sales process. The idea is that a customer needs to know you and your product first, then decide they like you, and finally choose to trust you and your product to deliver at or above expectations. Every industry and product category has its own sales process. The way to know if your sales process is efficient is to compare what sales leads go into the sales process and how many turn into clients.

International sales add an extra layer of complexity to sales. First, there may be an added layer of an outside resource, the distributor. Are leads effectively going to the distributor and eventually turning into sales? Second, international sales may involve other languages and the risk of poor translation, which can delay a sale while trust is rebuilt. Third, non-verbal cultural cues can be misread and what seems to be an imminent sale may actually be no sale. Further time is wasted while a sales rep tries to continue a futile sales process. And finally, are international lessons learned being shared throughout the sales and marketing team so that experience can help move the sales process along more efficiently going forward?

To find issues in the sales process, it helps to follow the numbers: number of initial sales leads, number of leads qualified to become sales, length of time in process and various sales stages, and finally how many sales from the various sales staff and international sales channels.

For more information about international marketing in B2B industries, please visit The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=506Mon, 11 Feb 2013 00:00:00 GMTOn the Future of Customhouse Brokers

Dear John:

I've enjoyed reading your articles about trade compliance and other customs matters. I would be interested in hearing your thoughts on how CBP's Simplified Entry Pilot is going to affect employment in the brokerage industry.

As a relatively new licensed broker, I am getting my sea legs in the entry writing department of a national brokerage firm. I've had a chance to read some of the formal congressional reports from U.S. Customs and Border Protection (CBP) outlining this program and with references to redefining the role of the broker and eliminating costly barriers to trade, I'm more than a little concerned that brokerage is going to be just another dead-end career in the future. I mean isn't dealing with the complexities of the customs process precisely why we have our jobs? I guess if you develop sophisticated enough tools and software, the middleman is always apt to get eliminated eventually. Think of what has happened to travel agents, for example. Anyway, we don't all have the experience to get jobs as compliance analysts just yet, so what are all the entry writers/brokers going to be doing in 5-10 years?

Best regards and thanks again for the insightful articles.

Frank Lee Speaking

Dear Frank:

Thank you for your kind remarks. I am flattered, not so much by your comments, but by your confidence that I might be capable of predicting the future. With my ego adequately inflated allow me to confer with my magic 8-ball.

Beware of the government calling anything a simplification. That usually means it will get more complex. Also be wary of anything the government calls a pilot. That means the new and old practices will run in tandem for many years to come. Complexity begets employment.

To date the simplified entry pilot has only begun to simplify the entry and only for a select few. While CBP has heralded the initial pilot as a success, the changes have yet to extend to the entry summary and duty payment process. Remember too that over the past couple of years the keystrokes required for a complete commercial import have only increased. Consider, for example, the additional data burden placed on importers under the ISF (10+2) process.

Will the role of a Customhouse Broker change over the years? Absolutely! Thank heaven for that! The role of the entry writer will not go away, it will evolve. From my perspective the dynamics facing the commercial importer will result in more, not fewer opportunities for brokers.

Consider the following:

The U.S. has implemented three new trade agreements in the past year.
Future massive trade agreements are in the offing such as the Transpacific Cooperation agreement.
CBP is considering allowing brokers to pre-certify importers in the ISA program.
Commercial importers seldom hire or retain the expertise they need over the long term to meet their regulatory obligations. Instead they rely on the expertise of third-party brokers.
Despite the increased popularity and ease of self-filing, many importers will continue to choose to outsource the customs entry process.
New and inexperienced companies are continually emerging generating new opportunities for brokers.
The economy continues to expand in the area of international trade. The pie continues to get bigger.
The government continues to push the expansion of U.S. exporting. This cannot happen without maintaining a correspondingly robust import economy.
As CBP rethinks the role of the broker it is using terminology such as force multiplier. While this term has yet to be defined, I can only imagine it means the broker will have more, not less responsibility.

All of the above represent change, growth and increased complexity in the import process. This means opportunity for the trade community and the brokerage industry.

Your employer has been innovative in responding to the changes in the past and capitalizing on those changes. Yes they have been leaders in automation. Will that marginalize your role inside the company? While your daily tasks may change and productivity expectations rise, I doubt that your job will disappear.

You already know that being a broker is not a get-rich-quick scheme. Neither is it, to use your phrase, "just another dead-end career." As long as there are national borders, there will always be a role for knowledgeable professional intermediaries in the import process. Your challenge will be to remain up-to-date with the changes and, therewith, to continue to provide value to your clients.

Good luck to you.

John D. Goodrich

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=505Mon, 04 Feb 2013 00:00:00 GMTExport Basics: The Overseas Trade Show

Small and midsize U.S. businesses looking to expand into new markets should not overlook international partnering opportunities. By signing up a distributor or dealer overseas, your product or service can have a global reach. Overseas trade shows provide broad access to potential customers and partners.

You don't need to be exhibiting to benefit from a trade show (or trade fair as they are commonly called overseas). By simply registering as a visitor, you have the opportunity to walk the exhibition floor and make valuable contacts, see how competitors overseas stack up, and discover new ways to market or position your product. And when your company decides to have its own booth at an overseas trade show, you'll know more of what to expect.

I've attended, exhibited and spoken at trade shows in a various countries on several continents. In many respects, most trade shows are similar: spacious halls, vast crowds and numerous exhibitors. But attending an overseas trade show does add a new element since you may need to adapt your communication style as well as your marketing message.

Here are a few steps you can take to prepare for this encounter.

1. What language do you speak? If you're multi-lingual, you have a leg up. If English is your only language, you still have the advantage of speaking the primary language of international business. In working with distributors worldwide, I found there is often at least one person in an office who speaks English, maybe not fluently, but at a level so that we can communicate effectively. The main obstacle is often my use of English: I had to remember to speak clearly and avoid such American colloquialisms as, "Let's get the ball rolling."

2. What information is on your business card? You may know that Plymouth, MN is in Minnesota, but the shipping clerk at your new business prospect in Asia may not. As a result, a much needed package may be sent to another state or even another country (Plymouth, UK, perhaps) by mistake. To avoid confusion, simply write out Plymouth, Minnesota USA.

3. How do you interact? Since trade shows typically draw visitors from a wide number of countries in a region, there is no single answer. The best advice is to be observant and adaptable. Do introductions start with a formal exchange of business cards, as is common in East Asia? If other attendees are in business suits and you're dressed casually, what impression do you create? Do you immediately use a person's first name upon meeting even though others address each other by last names or titles? To help prepare for cultural differences, even just a brief overview can be very beneficial. The Culture Shock book series covers cultural issues for many countries, and CultureGrams—concise, four-page reports on a country's history, customs and lifestyle—can both be invaluable. And best of all, your local library may have copies.

4. Do you need to adapt your marketing materials? Are you going to translate you brochures, product data sheets, and presentation slides? Will you localize them for cultural differences, such as writing euros instead of dollars in a French-language version for Belgium? It may not make sense to have your marketing materials localized if you don't have a distributor in place yet. For a regional show, you could have a short description of your company translated into multiple languages printed on one sheet. You could then hand out this document with your other English-language marketing material. Also, if your product or service is complex, using charts or diagrams may simplify details. As the saying goes, a picture is worth a thousand words.

5. Are you prepared? As with any show, preparation is critical. You may have a list of overseas contacts you would like to meet in person. Schedule a meeting, especially if they will be attending for only part of the event. Likewise, book hotel lodgings as far in advance as possible. Do you have a valid passport? Do you need a Carnet, or customs document, so that you can bring in demonstration products tax-free? Your local U.S. Commercial Service office, which is part of a global network of trade specialists, is often the best starting point. To find out more, visit Export.gov and look for the nearest U.S. Export Assistance Center in your state.

6. And when you're ready to exhibit. The U.S. Commercial Service's Trade Fair Certification program, a cooperative arrangement with private-sector trade show organizer, can be a great resource for small businesses ready to exhibit at trade shows overseas. For trade shows that become certified, participating U.S. exhibitors benefit from expanded services such as oversight and coordination of event services, promotional support, exhibitor marketing facilitation, and show site assistance. Often there is a U.S.A. Pavilion where U.S. companies are co-located in one section of the trade show space highlighted with signage. This can be very beneficial since often foreign buyers looking for quality products with strong support specifically seek out U.S. products to carry. To learn more about what upcoming trade shows are being certified, visit the Trade Events page at Export.gov.

Attending trade shows overseas can be an effective way to meet in person with potential distributors, see your competition, and learn of new marketing opportunities for your product. Take advantage of these opportunities and plan ahead.

FRANCIS "CHIP" PETERS is a commercial officer with the U.S. Commercial Service Minnesota office located in Minneapolis.

About the U.S. Commercial Service

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=502Sun, 27 Jan 2013 00:00:00 GMTIndonesia: An Emerging Market – Part 4

In the first three articles in this series, I provided an overview of Indonesia, the investment opportunities that exist, and the country’s value proposition. In this article I discuss the regulatory and environmental barriers to doing business in Indonesia.

NON-TARIFF BARRIERS: REGULATORY AND ENVIRONMENTAL

Compared to most developing country standards, Indonesia is a low-tariff country and has been rather successfully implementing its tariff liberalization program. Since the recent global financial crisis, however, new non-tariff barriers have emerged that make doing business in this country more difficult. These non-tariff barriers include, but are not limited to, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions.

Complex Regulatory Environment

Indonesia has a complex regulatory and legal environment that leads many foreign and domestic companies to avoid the justice system. Companies are often advised by legal experts to resolve disputes through arbitration outside Indonesia. That is because the Indonesian judicial system operates irregularly and opaquely. In the World Bank's Doing Business survey in 2012, Indonesia is ranked 129th out of 183 countries, with particularly high scores (implying greater difficulty) in the areas of starting a business, getting electricity, enforcing contracts, and resolving insolvency.

The Indonesian government ruled in April 2012 that foreign investors must divest themselves of 51% of ownership in local mines to local entities by the tenth year of operation. The government also announced that it will ban the export of raw materials including copper, iron, nickel and bauxite by 2014.

Corruption and Bribery

Potential and current investors point at corruption, red tape and an uncertain legal environment as the main challenges for conducting business in the country. Companies continue to be concerned about concessions based on personal relationships and demands for irregular fees to obtain government contracts, permits or licenses. Bribery typically occurs during licensing procedures, as the level of bribes is positively correlated to the number of business licenses a company must obtain in order to comply with regulations.

Local Content Requirements

Another non-tariff barrier relates to local content requirements for component parts in the manufacturing sector. Component part producers in Indonesia, however, continue to produce less sophisticated and lower quality products. This barrier forces the foreign manufacturers to establish manufacturing of component parts in Indonesia. However, the high rate of investment needed to establish these facilities, combined with the atmosphere of bureaucracy and corruption, make it a challenge.

Intellectual Property Right (IPR) Violations

A study commissioned by the Indonesian Anti-Counterfeiting Society and undertaken by the University of Indonesia's Institute for Economic and Social Research in 2011 states that Indonesia loses $4 billion in potential taxes each year as counterfeit goods flood into the country. Counterfeiting affects all sectors of the economy, from designer goods to more worryingly medicines. Agriculture and healthcare are the two sectors of the economy that are most affected by counterfeiting with 15% of pesticides and 16% of medicines being counterfeit. The impact of counterfeiting is not limited to lost tax revenue. The study estimates that during the last eight years 174,000 people have lost their jobs because of counterfeit goods.

Unemployment and Poverty

The lack of a connection between education and industry in the past has led to high rates of youth unemployment. The World Bank noted that the country's youth unemployment is five-times higher than the regional average. In January 2010 the official figure stood at 68,000 unemployed graduates out of the 350,000 graduates created every year.

About 15% of the population lives below the country's official poverty line of around $1 a day, but advocates for the poor say the percentage would be larger if Indonesia set the bar a little higher, say, at $1.25. Relatively sluggish growth in labor-intensive industries has meant slow progress in curbing unemployment, which is over seven percent.

Threat of Terrorism

The investor community is cautious about investing in Indonesia due to the incidents of several major terrorist attacks in Indonesia, including the October 12, 2002, Bali bombings; the September 9, 2004, bombing of the Australian Embassy in Jakarta; the October 1, 2005, Bali bombings; and the July 17, 2009, bombings of the Ritz-Carlton and Marriott hotels in Jakarta. While Indonesian authorities have proven highly effective in disrupting terrorist plots and networks, risks of such incidents are very real and have affected manufacturing as well as tourism sectors.

Natural Hazards

Since Indonesia is located between the Pacific Ocean and the Indian Ocean in line with the equator. The country is vulnerable to the El Nino/La Nino phenomenon that includes failures in crop harvests. Natural hazards are also present: occasional floods, severe droughts, tsunamis, earthquakes, volcanoes and forest fires. Indonesia contains the most volcanoes of any country in the world. Significant volcanic activity occurs on Java, western Sumatra, the Sunda Islands, Halmahera Island, Sulawesi Island, Sangihe Island, and in the Banda Sea.

As you can see, while Indonesia offers plenty of opportunity as an international market, it has plenty of barriers to a successful entry. I will discuss the operational barriers in my next article.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=504Sat, 21 Jan 2012 00:00:00 GMTPicking Low Hanging Fruit and Other Marketing Strategies for International Companies

We live in uncertain economic times. But I believe that we learn far more about how to grow stronger companies in lean times than in times of plenty. That said, this month I am sharing some of my hard-won marketing advice that I often give to internationalizing clients in B2B markets.

Pick the Low Hanging Fruit

Many companies have tightened their marketing budgets, leaving fewer staff to do more with smaller budgets than just a few years ago. This means that you need to lower the costs associated with acquiring additional sales. This may involve selling additional products and services into your current customer base. Customers who already know and trust your company will likely take less time and effort to sell than someone new.

I have a client who went back through their previous sales pipeline and by sending one final email acquired several new clients. Developing a referral program can be effective. Oftentimes companies compensate the referring customer, but this can be more profitable than signing on new customers directly.

In international markets, finding low-hanging fruit among your existing customers can take more creativity. It may come from a new incentive structure for international distributors. Companies can also look for market niches where potential customers already understand the general value of the product or service. Whether in your home market or elsewhere, tracking the costs associated with cost of sale will help guide you towards the most profitable markets.

Focus on the Right Niches

For growing companies, focusing on the right market niches can mean the difference between profitable expansion and an exercise of frustration. A good place to start is by looking at your current client base. Which clients are the most profitable? Which ones appreciate the value of your products or service the most? Which ones had the shortest sales cycle? And what do your best clients have in common? Look for shared demographics, business structure, markets, and even psychographics of your client contacts. Your best niches will reflect those same characteristics.

Build and Nurture Your Competitive Advantages

Every company has a set of strengths that make it unique in its industry. These competitive advantages need to be continually developed over time. If your company has the most advanced technology in the industry, you'll want to stay ahead of the pack. If your company has a lower production cost structure, then you'll want to position as the low-cost leader. Companies often get into trouble trying to be all things to all potential customers. The worst mistake is to price your products or services below the competition, while offering a superior product. The highest profit margins come from aligning business decisions with your competitive advantages.

Drop Bad Clients and Keep the Rest

Do you have a small number of clients that are high maintenance? Perhaps they require high levels of customer service at no additional cost. Or maybe they are never satisfied with your products. I have heard clients who rant over the phone bringing employees to tears and staff morale to new lows. Periodically it may be helpful to conduct a review of current clients. Look at any additional costs that clients pose to the company and evaluate if there are any that need purging when a contract is up for renewal. Moving away from bad clients helps to make space for new, more profitable clients to take their place. It also significantly can boost company productivity.

For more information about international marketing in B2B industries, please visit: The International Entrepreneur.]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=503Mon, 14 Jan 2013 00:00:00 GMTImport-Export Compliance Resolutions for the New Year

Happy New Year!

The beginning of a new calendar year is an optimistic time. It provides a chance to allow the challenges of the past to fade in your memory and to focus on the opportunities ahead. In the spirit of the New Year I encourage you to harness that sense of optimism and to resolve that this year will be different. This will be the year your company gets its compliance house in order!

To help you achieve that goal I encourage you to make a few New Year' compliance resolutions. To get you started I’ve drafted a few resolutions you might wish to adopt as your own.

This year I resolve to

Attend at least one seminar.
One of the challenges of working within international trade is keeping up with the constantly changing environment. As a professional, you owe it to yourself and your employer to attend at least one seminar this year to help you remain current with these changes.
Make a site visit to my broker, freight forwarder or other service provider.
As they say, a picture speaks a thousand words. Meeting the people you work with daily can only help improve that relationship. Visiting their facilities will give you a clearer understanding of their capabilities as well as the challenges they face in servicing your account.
Finally understand the idea of tariff change for trade agreements.
Even for experienced compliance professionals the concepts buried within trade agreements can be complex, none more so than the idea of tariff change. If you really don' understand the concept it is OK to admit it. Do something about it, however! See resolution #1 above.
Discontinue issuing country of origin certificates for trade agreements before I complete #3 above.
Issuing certificates of origin without having documentation supporting those certificates is highly risky behavior for a company. It is only a matter of time before the regulators will catch up with your company. Rest easier by resolving to do it right, or not at all.
Win over Joe/Jane in (sales, purchasing, engineering, traffic, finance, supply chain...) and finally convince him/her to comply with and support company trade compliance policy.
"What?" you reply. "Are you crazy, John? Joe will never get it!" I agree that resolutions should generally be reasonable and achievable. I think getting the cooperation of your colleagues with the fundamentals of compliance is reasonable and achievable. What is not reasonable is that you have given up trying to raise awareness of compliance with your colleagues.
Hold at least one internal trade compliance awareness event within the company.
If you are not willing to do this, I know a guy that does a great compliance presentation and is happy to work with your company. (See the byline to this article.)
Start/complete/update the trade compliance policy and procedure manual for the company.
You know it has to be done. Stop delaying the inevitable. This is the year it will happen!
Attend at least one outreach event sponsored by a regulator of my importing and exporting activities such as CBP, BIS, Census and the State Department.
These events may be few and far between in your area so achieving this goal may be a challenge.
Visit the CBP, Census, BIS, State or Treasury websites periodically to keep abreast of developments. Perhaps attending a regulator's outreach event is not possible. Why not, at least, make an appointment to meet with them online?
Perform or hire a third party to perform a mock assessment of my company's importing and exporting activities.
What does your company do well? Where could it make improvements? If you haven't analyzed your trade compliance program how are you even managing? Increasingly the regulators are holding webinars or posting videos of their conferences.
Identify and implement at least one software application that will improve efficiency and accuracy of my company's trade compliance activities.
As a result of the assessment performed in #10 above you will likely identify an opportunity to automate some of your company's compliance function. Perhaps you need to generate better quality export documents. Maybe you are looking to go online with AES. Is your classification database up to snuff? Let's face it. Your employer is probably not hiring an assistant for you. Automating some of your procedures may be your only option for moving your trade compliance program forward.
Join a local or national trade association.
It can be difficult to bounce ideas off of your coworkers, who aren't familiar with trade compliance. Joining a trade association allows you to network with your peers and to learn that there are others facing similar challenges as you.

Which of the above resolutions can you adopt and which can you adhere to? Perhaps this list has sparked additional ideas for you. Whatever you decide, pick a few resolutions and stick to them. We'll chat again later in the year to see how you are doing.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=500Mon, 07 Jan 2013 00:00:00 GMTThe Top 10 Questions About NAFTA

Editor's Note: In honor of the 20th Anniversary of the North American Free Trade Agreement, I am pleased to republish the most popular article that has ever appeared on the International Business Training website. This article first appeared in 2003.

Over the past several years of writing NAFTA articles, I have received many questions about NAFTA issues. I have compiled a list of the top 10 questions and wanted to share them.

1. Which Harmonized Number should appear in Block 6 of the NAFTA Certificate of Origin: the US, Canadian or Mexican tariff number?

The numbers should be the same in all tariffs at the 6-digit level, but if they are different, the producer should determine if the number provided by the buyer is acceptable. If it is, then use the Harmonized System (H.S.) number.

The prudent exporter/producer should obtain a ruling when there is a H.S. number difference between countries. Canada now requires that invoices indicate the full 10 digits of the Canadian tariff schedule.

2. May Customs Brokers sign certificates?

Yes, if they possess a valid power of attorney from the party who would otherwise complete the certificate (exporter/producer). A customs broker may not prepare a certificate based on a power of attorney from the importer. The importer is not authorized to sign the certificate.

3. How do I know if my good is subject to an RVC (regional value content) requirement?

If your good is wholly obtained or produced in a NAFTA country (all materials traced to earth, preference criteria A), or is produced entirely in the NAFTA territory exclusively from originating materials (preference criteria C), it is not subject to RVC requirements.

If the good meets the specific rule of origin (preference criteria B), the specific rule of origin in General Note 12 will indicate whether or not the good is subject to an RVC requirement.

4. Can more than one preference criterion apply? Can persons preparing the certificate choose the preference criterion they like best?

It is possible for a product to fit into preference criteria A, B and C. The party may use any preference criterion that allows qualification.

5. How important is the Harmonized System number? Do I need to know that number before I can determine if our goods qualify under NAFTA?

The benefits of NAFTA, for most products, are based on either Tariff-Shift or Value-Content Rules. Since determining the specific rule of origin applicable to a product is according to the Harmonized System, it is imperative the correct classification number be determined. If you have the wrong classification number, you will choose the wrong rule of origin, fill out the NAFTA Certificate of Origin incorrectly, and the importer will incorrectly claim the goods are eligible for NAFTA.

Many rules of origin require classification of the bill of materials to determine qualification under NAFTA. Understanding the Harmonized System of tariff classification is a critical prerequisite for applying the rules of origin.

6. Our freight forwarder determined our classification number. Can we hold the freight forwarder responsible for an incorrect classification number?

No, the exporter of record is responsible for determining qualification under NAFTA, including the correct classification. Relying on a freight forwarder to classify a product is very risky.

In order to properly determine the classification of a product, you need detailed knowledge of that product. That may require that you involve an engineer or production manager while you are reviewing the legal notes at the beginning of chapters and sections of the tariff to determine proper classification.

7. I am a documentation clerk at my company. Should I sign the NAFTA Certificate of Origin?

The person who signs the NAFTA Certificate of Origin must be knowledgeable and responsible and have authority to commit the exporter. Customs authorities will question certification by clerks and others who are neither knowledgeable nor authorized to represent the exporter.

There are penalties associated with incorrect completion of the NAFTA Certificate of Origin. The person signing the NAFTA Certificate must understand their liability. Export companies must realize that a person completing the certificate without proper training and understanding of the qualification process established by the NAFTA Rules of Origin is subject to criminal and civil penalties. Therefore, they should carefully decide which person should their NAFTA Certificates of Origin.

8. Does our product qualify for NAFTA if made in the United States?

Not automatically. The product must meet NAFTA rules of origin to qualify. There is a clear distinction in "origin of goods" versus "originating in a North American country."

Rules of origin are designed to ensure NAFTA benefits are accorded only to goods produced in the North American region, not goods made wholly or in a large part in other countries.

The rules of origin specify that goods originate in North America if they are wholly North American. Goods containing non-regional materials are also considered to be North American if the non-regional materials are sufficiently transformed in the NAFTA region so as to undergo a specified change in tariff classification.

9. How long do I have to keep records on NAFTA shipment?

Records are to be kept for a minimum of five years after the date the Certificate was signed or for periods longer than five years if specified. Article 505 of the NAFTA Agreement specifies that along with the Certificate of Origin, other records required to be kept for five years are:

The purchase of, cost of, value of, and payment for the good that is exported from its territory,
The purchase of, cost of, value of, and payment for all materials, including indirect materials, used in the production of the good that is exported from its territory, and
The production of the good in the form in which the good is exported from its territory.

10. What should an exporter in the United States do if, after completing and signing a Certificate of Origin, they have reason to believe that the certificate contains information that is not correct?

Within 30 calendar days of finding this error, the exporter must notify in writing all persons to whom the certificate was given of any change that could affect the accuracy or validity of the certificate.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=501Mon, 17 Dec 2012 00:00:00 GMTIndonesia: An Emerging Market – Part 3

In my first two articles in this series, I provided an overview of Indonesia and the investment opportunities that exist. In this article I discuss the country's value proposition.

INDONESIA'S VALUE PROPOSITION

Indonesia has come a long way from a poor, authoritarian country to a modern democracy with a vibrant economy. The country has undergone a political transformation since the upheaval of 1998 that saw the fall of General Suharto after 30 years of authoritarian rule and a collapse of the Rupiah. U.S. government officials, scholars on Indonesia, and human rights activists widely praise Indonesia for successfully transitioning to democracy.

The country's value proposition reflects its diverse and abundant natural resources, favorable demographics, sophisticated financial sector, technology infrastructure, and modern retailing infrastructure.

Natural Resources

Indonesia is endowed with diverse and abundant renewable (agriculture) and non-renewable (mining and minerals) natural resources. It is one of the largest producers of steel, natural rubber, coal, palm oil, timber, cocoa and tin. In energy and mining, Indonesia is the world's leading thermal coal exporter and home to vast deposits of precious metals such as gold, silver and copper.

The country also has the world's richest reservoirs of underground steam and hot water used to make geothermal power. Hundreds of volcanoes bring heat from the earth's core close to the surface, leading some scientists to estimate that Indonesia could generate more than 28,000 megawatts of power per year. Companies including India's Tata Group, Chevron Corporation, CVZ, and General Electric are eager to invest in Indonesia's geothermal potential, which stems from the same seismic forces that curse the Indonesian archipelago with volcanoes, earthquakes and tidal waves.

Favorable Demographics

Indonesia's lower-middle-income population continue to realize their consumer aspirations off the back of expanding consumer credit and rising incomes. Their GDP per capita reached $4,200 at purchasing power parity by the end of 2010. A growing middle class that is poised to reach 150 million people by 2014 is opening up the scale and scope of the consumer market.

More than 50% of the population is below the age of 30, is highly adaptive to new technology, and has a low dependency ratio among its workforce. In 2010, 53% of Indonesia's population lived in urban areas. It is predicted that by 2025, the population in urban areas will reach 65%. Approximately 65% of Indonesia's population of 240 million constitutes a labor force that is available at a cost that is lower than that of China and Vietnam.

Sophisticated Financial Sector

The liberalization of rules on foreign ownership allowing up to 99% ownership in the finance sector in the past decade has encouraged foreign players to enter the market with 10 majority foreign owned banks including HSBC, ANZ and Rabobank as well as 28 foreign joint venture banks. Indonesia was the pioneer in commercial micro finance in Southeast Asia. The state-owned bank BRI began micro lending facilities in 1978 and had outstanding micro loans valued at $7.4 billion at the end of 2010.

The consumer lending side is where Shariah banks have been the most successful in the past. Consumer financing made up 32.4% of all the Shariah compliant loans issued in 2010, according to Bank Indonesia. Auto financing, in particular, is increasingly popular with approximately 80% of all car purchases in Indonesia being made through loans.

Technology Infrastructure

The Indonesian government has targeted the development of the National Broadband Network for the period 2010-2015. This is in line with the 2009 World Bank study that states that for developing countries, every 10% increase in broadband penetration can enhance economic growth by 1.38%. Currently, except for Maluku and Papua, all major cities in Java and other main islands have been connected by fiber-optic network.

Modern Retailing Sector

Indonesia's modern retail sector holds huge potential for future growth, particularly in the hypermarket sector as well as department stores and specialty outlets. Supermarkets have appeared in major urban centers in Indonesia during the past three decades. At the onset of the liberalization of the retail sector in 1998, foreign supermarket operations began entering the country, sparking a fierce competition with local operators.

Since 1998, foreign companies have been allowed to enter Indonesia's retailing sector. Modern retailers including French multinational retailer Carrefour, Dairy Farm Group, Makro, Matahari, Ranch Market, Lottemart, Sogo and Food Hall are expanding rapidly. The modern retail sector now accounts for approximately 40% of the sector's sales. In Jakarta, at the center of the capital, the huge Grand Indonesia mall opened in 2007 and expanded during the global downturn, adding theme areas with mockups of New York, Japan, the Arabian Peninsula and Paris, complete with a miniature spinning Moulin Rouge windmill.

While Indonesia offers an attractive value proposition, it has not reached its full potential due to significant non-tariff barriers. These barriers can be classified as regulatory, environmental and operational barriers. I will discuss these barriers in more detail in my next two articles.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=499Mon, 10 Dec 2012 00:00:00 GMTHow to Treat International Holidays in Business-to-Business Markets

The month of December is upon us and it is the perfect time to consider how your company treats the various holidays that international and domestic clients celebrate. Some companies choose to overlook holidays since they are based on personal beliefs or cultural traditions. Many consumer-driven companies make or break their earnings based on presents bought during holiday seasons. In B2B companies, I would also encourage you to embrace the cycle of major cultural and religious holidays, using it to forge deeper connections with customers and partners. In most parts of the world, business relationships are between individuals instead of between companies. Those relationships are the glue that hold your business dealings together.

Here's a balance to strike:

How Do You Know If a Holiday is Celebrated?

In today's multicultural workforce, it is sometimes difficult to know if an individual celebrates the major holidays associated with a country's culture or religion. Last year, I met a Muslim woman from Lebanon who did not participate in the rituals around Ramadan, but did celebrate the gift-giving ritual of Christmas with her family. The best way to find out is to ask someone which major holidays they celebrate.

Sometimes holidays are built into a company's culture. To find out if a company is expecting employees to celebrate a holiday, ask if there are days that the company will be closed for celebration. If you are doing business in a part of the world that traditionally celebrates Christmas, Ramadan/Eid, Jewish high holidays, or Hindu holidays, ask about this a few weeks before the upcoming holiday. This information can easily be stored in the company customer-relationship management (CRM) system and tracked by an administrative assistant/secretary in your company.

Acknowledge the Holiday in a Simple and Sincere Way

A card is one of the best ways to show respect for someone's holidays. It's simple but takes a little effort. Cards can be ordered online, particularly if a holiday is not regularly celebrated in your part of the world. If your business relationship is not as critical, consider sending an email wishing your customer or partner well. But be careful to understand what a specific holiday is all about. Yom Kippur is the holiest day in the Jewish holiday. This year a friend of mine wished her Israeli partners, "Happy Yom Kippur." This was met with a chuckle since Yom Kippur means "Day of Atonement." My friend plans to adjust her greeting when this holiday comes around next year.

Be Ready for the Impact of a Major Holiday on Sales and Shipping

Most holidays are cyclical, falling on the same day each year. But some like Ramadan and Eid al-Fitr are based on the lunar calendar. If you've ever tried to ship your product into the Middle East during Ramadan, you know how hard it is to get anything processed and sent forward to your client. Business grinds to a glacial pace during that month. Likewise, in many countries that widely celebrate Christmas business can slow down dramatically around the end of December as many employees take vacation days to be with their families. In order to keep business cash flow from drying up at a potentially critical point, you may want to time marketing, lead generation and sales cycles to wrap up before a major holiday. There is no reason to be caught unaware when holidays can be known well in advance.

I hope this article helps you in navigating international business relationships. For more information about international marketing, please visit: The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=498Mon, 03 Dec 2012 00:00:00 GMTOutsourcing Trade Compliance: No Passing the Buck

Dear John,

My boss just informed me that, as a budget reduction effort, he is going to outsource all import and export trade compliance activities to a third party logistics firm. That includes my job. When this is done, there will be nobody left at the company that knows anything about trade compliance!

After picking my chin up off of the floor I told him that the law doesn't allow companies to outsource compliance activities; the importer and exporter must have employees that are responsible for the import and export process. My boss asked me to prove it to him. I guess in my panic I was shooting from the hip because now I can't find the regulations that really back me up.

Please help!

Trade Compliance Desperado

Dear TC Desperado,

(Cue 1973 Eagles soundtrack.)

Wow, that is a jaw dropper. Sorry to hear what you are up against. I am also sorry to inform you that the regulations are not so explicit for typical commercial importers and exporters like your company. Nowhere in the import regulations (CFR 19), nor in the export foreign trade or export administration regulations (CFR 15), does it specifically mention that an employee of the corporation must perform the importing and exporting activities of the company or that the company must employee professional trade compliance staff.

The exception to this is found within the International Traffic in Arms Regulations (ITAR, CFR 22). Within the ITAR §120.25 we find the definition of an empowered official and the requirement that that individual be an employee of the exporter. Throughout the ITAR we find references to specific activities that must be performed by the empowered official. If your company deals with ITAR licensable product then this is your answer.

If only the other trade regulations were as clear! Sadly the other regulations merely imply that the company will oversee trade compliance and to do so must have employees that can monitor the process. The implication, however, is not subtle. I'll do my best to lead you through this maze of regulations.

Import Reasonable Care

Within the U.S. import regulations we find that the importer is held to a heightened due diligence standard known as reasonable care. The import regulations allow for the delegation of specific customs business activities to a third party individual or company known as a customhouse broker. This delegation of authority is done under a power of attorney. The regulations do not, however, transfer the accountability for those activities. Responsibility remains with the importer even when specific activities have been delegated to the broker.

U.S. Customs and Border Protection (CBP) has published a range of documents clarifying what is intended by reasonable care. The oversight activities listed within CBP’s Reasonable Care Checklist could only be accomplished if the importer employs knowledgeable trade compliance staff.

In addition, if the third party logistics firm your company will be hiring to assist with the import process is not a customhouse broker licensed by CBP, they may be in violation of the regulations. Their violation, in turn, places your company's import program at risk.

Export Reporting Compliance

The Foreign Trade Regulations (FTR) are somewhat ambiguous when it comes to outsourcing. The FTR speak primarily to the export reporting activity. Within these regulations it is possible to transfer the reporting of the export to a third party agent, usually a freight forwarder, through a power of attorney. In a certain subset of exports, referred to as routed transactions, the export reporting is done by the agent of the buyer. In most cases, the FTR hold your company responsible for providing specific data regarding the export to the agent. The FTR also include a record retention requirement for the exporter, even when responsibilities are delegated to an agent.

How will your company be able to comply with these regulations if there is no one left that will be able to provide accurate data, ensure it is submitted to the government properly, and ensure that history of the transaction is retained within corporate files?

Export Controls

The Export Administration Regulations (EAR) acknowledge the delegation authority within the FTR and also permit delegation of authority to agents for export control purposes, such as applying for export licenses. The EAR, however, clearly state:

The exporter may hire forwarding or other agents to perform various tasks, but doing so does not necessarily relieve the exporter of compliance responsibilities. 15 CFR § 758.3

How will your company be able to meet its regulatory responsibilities if no one is left to monitor compliance?

The Role of Outsourcing

While I empathize with your plight, outsourcing plays a role within trade compliance. When done properly, use of third parties can allow a company to leverage its limited budget to take advantage of professional expertise and software applications it otherwise could not afford. By doing so a company may even enhance its trade compliance profile. Under an outsourcing program you will see your job responsibilities change. Instead of performing the day-to-day trade compliance activities you will find yourself in a supervisory role monitoring the work done by the new service provider. Outsourcing of trade compliance, however, has its limitations.

Your boss appears to be taking the outsourcing model beyond these limits to an untenable extreme. In his efforts to reduce budget he is placing your company at unreasonable risk of violating trade regulations. While it is possible to outsource trade compliance activities, it simply is not possible to outsource regulatory responsibility.

Consider this. When traveling for business I frequently outsource the driving to the airlines. This is fraught with pros and cons, but the airlines usually get me to my destination faster and often cheaper than I could do if I drove myself. In order to transact my business, however, I must take the trip. I suppose, like your boss is proposing, I could send someone else on the trip for me. In order to control my business effectively, I will need to debrief that person when they return and hold them accountable for the results of the trip. After all, it is my company and the buck stops with me.

I hope the above can help you convince your boss that, while it may be reasonable to outsource trade compliance activities, it is not possible to pass the buck of trade compliance responsibility. Once you've convinced him of that I hope you will be successful in convincing him that you are the person to manage that responsibility for the company.

Good luck!

John D. Goodrich

P.S. Origin of the phrase “Passing the Buck.”

In order to avoid unfairness in the game of poker the deal changed hands during sessions. The person who was next in line to deal would be given a marker. This was often a knife, and knives often had handles made of buck's horn; hence the marker becoming known as a buck. When the dealer's turn was done he passed the buck. In other words, he passed on the responsibility for dealing fairly to the next person.

President Harry Truman was famous for the phrase, “The buck stops here,” meaning, of course, that he took full responsibility for his presidency.

Source: http://www.phrases.org.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=497Sun, 25 Nov 2012 00:00:00 GMTIndonesia: An Emerging Market – Part 2

In my first article in this series, I provided an overview of Indonesia and the opportunities that exist. In this article I discuss the investment opportunities available in the country.

INVESTOR CONFIDENCE IN INDONESIA

Indonesia is not only a growing market but also one of the most promising investment destinations in the coming decades. Foreign direct investment, which was held in check for years after the 1997 economic crisis in Asia, is also returning.

Having previously been overlooked in favor of other countries in Asia such as India and China, Indonesia is now hard to ignore. In 1996, the Indonesian government issued a deregulation package that simplified the tariff structure, reduced overall tariff levels, removed restrictions, and replaced many non-tariff barriers.

As the CIA's The World Factbook reports, key global export partners include Japan, China, the U.S., Singapore, South Korea, India and Malaysia (in that order) with total exports in 2011 to the tune of $208.9 billion. Import partners include China, Singapore, Japan, the U.S., Malaysia, South Korea, and Thailand (in that order) with total imports of $172.1 billion.

An estimated 400 Australian firms operate in Indonesia in a range of sectors, including mining, construction, finance and banking, food and beverages, and transport. There have been multiple two-way ministerial visits between Australia and Indonesia since September 2007.

Investment Opportunities

Investment opportunities are ripe in all sectors ranging from infrastructure to manufacturing and services. Indonesia's large domestic market and rising income per capita makes the country a compelling investment destination for consumer goods manufacturers. Government policies privatizing many state owned enterprises, dismantling monopolies, and liberalizing regulations regarding foreign direct investment have laid the foundations for future growth.

Growing sectors such as mining, transportation and telecommunications in Indonesia continues to attract high levels of foreign direct investment. Indonesia enjoyed a 60% annual increase to $17 billion in 2010 and to $19 billion in 2011. In the first quarter of 2012, foreign direct investment reached $5.6 billion, which was 30% higher than the previous quarter.

Opportunities clearly exist, although challenges remain. In the next several articles I will detail Indonesia's value proposition and the various non-tariff barriers that could make investments in the country more risky.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=496Mon, 12 Nov 2012 00:00:00 GMTChina Bashing and Other Ways to Damage Your International Marketing Efforts

The American Presidential election must be this week because China bashing once again has become a national pastime for both leading political parties. And what an easy target China makes; it is a growing competitor to the U.S. both politically and economically. The Chinese government is still at least technically Communist, which reminds American voters over age 45 of Cold War threats of decades past. China is halfway across the world and so less likely to directly confront offenses laid at their feet. And most importantly, diverting blame to the Chinese helps Americans to avoid confronting hard truths about our own state of economic and political affairs that we'd rather not face. But for those of us earning our livelihood from international business, we know that the Chinese are well aware of this folly, and it hurts our business relations right along with the political banter as it crosses the Pacific.

Here is why China bashing by American political candidates, the media and companies is so harmful. First, Chinese government, company leaders and consumer base hear the China bashing and it is taking a very negative tone against American goods and services. And since the Chinese culture focuses on long-term outcomes over short-term, this bashing will be remembered and incorporated into the U.S. Country-of-Origin Effect for years to come.

Second, China is the leading growth market for many of these same goods and services. As American and European markets stagnate, there are still plenty of opportunities in high growth markets like China's. And third, China is the main buyer of treasury bonds a.k.a. any new American national debt. Should China decide to take their investment RMB/Yuan elsewhere, the American government and economy would be big trouble.

For those of us in international business, we have no control over what political candidates or the media do, but we can work to manage the fall out of these actions and its effects on our ability to do business in and around China and other political minefields. Here are my suggestions:

Neutralizing China Negativity

The best antidote to politically charged negativity is to be positive and trustworthy in your professional relationships and dealings with your Chinese suppliers, partners and customers. Show your contacts through your words and actions that your company supports them and appreciates many positive aspects of the Chinese business culture. This politically charged period might require an extra trip to visit Chinese contacts in order to give reassurances that you indeed want a strong business relationship. If the topic of bashing comes up, you can give a fairly positive statement about something inherent to Chinese culture that you like and then quickly change the subject. Your words and actions help to offset negativity that is more distant and vague.

Avoiding Other Political Hot Buttons

Generally speaking, it is best to avoid all political hot buttons. A few to evade at all costs include:

The Israeli-Palestinian Conflict
Gypsies in Europe
Russia's role in any former Soviet country
Japan-China relations
Taiwan-China relations
India-Pakistan relations

There are other political hot buttons to avoid talking about with potential or current partners and clients, but this list should keep you out of some of the worst conversations.

Good luck to all at your current and future international clients! If you would like more information about international marketing, please visit my company website: The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=495Mon, 05 Nov 2012 00:00:00 GMTSo You Want to Be a Customs Broker?

Editor's Note: Throughout 2012, we have occassionally republished some of the most popular articles from the past 10+ years. This article by John Goodrich ranks number seven among our all time greatest hits.

So you want to become a customs broker? What? Are you crazy? Do you know what becoming a broker holds for your future? Well let me tell you! (As if you had a choice.)

First, you will never know quite what to call yourself. My license refers to me as a Customhouse Broker yet the regulations refer to Customs Brokers. I suppose I could abbreviate that by simply stating CHB, but then I am chancing my spell-check inserting a vowel and implying something negative about my weight.

Second, you will no longer be the life of the party. Try this at your next barbeque. Introduce yourself as a customs broker. Watch your friends fumble, look at the tops of their shoes and quickly turn the conversation to the subject of their trip to the Caribbean and how tough it was smuggling that Cuban cigar back into the country. Within one minute you will find yourself standing alone examining the dandelions in the lawn. Frankly, I now invent a new career for myself and tell them I am an actor, an astronaut, an ex-convict or simply a fraud. Admittedly this is deceptive but it is much more entertaining.

Alternatively your friends and family will misunderstand your chosen career and begin to ask for investment advice or assistance with real estate.

If I am unable to dissuade you from your ill-fated path I might as well help you along the way.

Are you eligible?

Before becoming a broker you must know if you are eligible. The regulations state that you must:

Be a United States citizen at least 21 years old.
Not be a current federal government employee.
Possess good moral character.

Becoming a broker involves submitting an application to U.S. Customs and Border Protection (CBP), passing a test and undergoing a background check. The current fee for this process is $200. The details for applying are provided on the CBP website.

Prepare yourself!

Some broker candidates mistakenly believe that their entry-writing experience within a brokerage firm is sufficient to pass the test. Unfortunately the exam deals less with the mechanics of a customs entry and more with the complexities of customs regulations.

The test covers four areas of rules and regulations:

The Harmonized Tariff Schedule of the United States (HTSUS)
Title 19, Code of Federal Regulations
Specified Customs Directives
Customs and Trade Automated Interface Requirements document (CATAIR)

Obviously, to be prepared, you will need to read and, yes, understand these documents. If you are unwilling to do this reading, do not even attempt taking the exam. This is, perhaps, where the majority of the test-takers go wrong. I found a couple of techniques helpful in doing my reading.

As with much of federal regulation the reading is ever so slightly dry. OK, it is downright boring. To counter this I would stand at the table and read until I fell asleep. Hitting the floor was an effective alarm clock and would prepare me to read a few more pages. On my less sadistic days I would insert M&Ms between the pages of the book and reward myself along the way. Of course that might be where the moniker CH(u)B came from.

It is highly recommended you index your HTSUS and the CFR19. This will help you navigate the publications quickly during your test.

If at all possible participate in a study course prior to taking the exam. The courses will help focus you on the key exam areas and will validate your understanding of the regulations.

Take practice tests.

Examples of previous broker exams and their answers are available at the CBP website.

Download these exams and time yourself as you take them. You might think four hours would be sufficient to take this test, but you will be amazed how quickly that time can go by.

The answer keys to each exam reference the regulations. Take note of how often certain areas of regulation find their way into the exams. For example you will discover that 19CFR §152 regarding valuation will be tested in some way. You will also note that CBP has organized the test into several key subject areas including entry, classification and warehousing. If you identify the key areas of regulation you will be able to focus your studying time and increase your odds at passing the test.

Persevere!

Don't tell me I didn’t warn you! This is not an easy test. Passing rates for the exam are abysmally low. I am not sure if this is because applicants are lulled into thinking that an 80 question, four-hour, open-book test will be easy or if the test is poorly designed. There is likely some of both involved.

Even though you only need a passing score of 75 you might find you fail on your first attempt. Do not give up! Keep studying and take the test again.

Once you become a broker you will be one of about 11,000 who actively maintain their licenses. You will also find your credential will give you credibility with customers, colleagues and employers, and obviously also with Customs.

Of course, if this line of work doesn't work out for you there is always real estate.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=494Mon, 29 Oct 2012 00:00:00 GMTFiling Your Export Shipments Through AES—Part 2

If your company exports goods valued at more than $2,500 to anywhere other than Canada or goods that require an export license, Foreign Trade Regulations (FTR) require that you file your export information electronically through the Automated Export System (AES). The Census Bureau uses this information to calculate export statistics and shares it with U.S. Customs & Border Protection (CBP) to ensure compliance with U.S. export regulations.

In Part 1 of this two-part series of article, I discussed when the FTR requires that you file through AES, how to register for the service at the AESDirect website, and some hints for taking the certification quiz that is required in order to activate your account. In this article I discuss the advantages of using a software program like Shipping Solutions to complete your AES filings.

The Advantages of Using Shipping Solutions to File Through AES

If your company does very little exporting or if you are satisfied to manually create your export documents and perform your compliance screening responsibilities, it probably makes sense for you to file your SED information through AESDirect by entering the information manually online or by using the free AESPcLink software.

If, however, you are looking for a way to file through AES while also reducing the time it takes to complete your export forms and complete your export compliance screenings, Shipping Solutions makes a lot of sense for your company. Shipping Solutions eliminates redundant data entry, which means the information you enter to prepare a commercial invoice or a bill of lading will also be used for your AES filing. Shipping Solutions allows you to create more than a dozen standard export forms in addition to filing your export information through AES.

The more advanced version of the software (Shipping Solutions Professional) also lets you use this same information to check the U.S. Export Administration Regulations (EAR) to help you determine if you need to apply for an export license before you can ship your goods and to check all the parties in your export transaction against the various government Denied Parties lists.

Changes to U.S. export regulations have increased penalties for export violations to $250,000 or more per violation and could also include bans on exporting and even jail time. For more information about EAR export regulations and an outline of potential export penalties, check out the Department of Commerce publication, Don't Let This Happen to You.

Preparing a Shipment for AES

Whether or not you are an experienced exporter, Shipping Solutions makes filling out your export documents and filing through AES fast and easy. Shipping Solutions' EZ Start Tab allows you to enter the information you need for AES and your export forms, and then the software automatically completes the documents and prepares the data for AES.

To make the program easy to use, the EZ Start Tab is divided into a number of different screens each focusing on either certain types of information (e.g. Contacts and Product Info) or on specific forms (Invoices, Electronic Export Information for AES, and Packing List). By working your way down the list—skipping those screens or fields you don't need for a particular shipment—you will complete a set of export documents.

As a general rule, Shipping Solutions recommends that all users check and complete the pertinent fields on the first five screens: Contacts, Product Detail, Carriers and Ports, Invoices, and EEI. These screens either include information that is required on most of the forms or they represent the basic forms required for exporting, i.e. the invoices and the export information that you are required to file through AES.

As you enter the appropriate information in each of the EZ Start's various screens, Shipping Solutions automatically enters the information in the proper fields on the appropriate forms. So while the exporter information appears on most of the export forms, you only have to enter the information once. (For a more detailed explanation of how to use Shipping Solutions to prepare all of your export documents and to perform your compliance screening, you can view a short video on the Shipping Solutions website. This article focuses specifically on the AES feature in Shipping Solutions.)

In order to prepare a shipment record for an AES filing, you will need to complete the appropriate fields on the Contacts, Product Detail, Carriers and Ports, and EEI screens. You may not need to enter information into all the data fields available on each of the screens (for example, you don't need to enter the NAFTA information on the Product Detail screen if you aren't preparing a NAFTA Certificate of Origin), but at least some of the data fields will be required.

Once you have finished entering your shipping information into the various EZ Start screens, you click on the AES button located on the toolbar at the top of the screen. A new window titled, "Electronic Shipper's Export Document" will open that allows you to review your information before you submit it to AES. If you have not entered information into any of the required data fields, you will see a notice about missing data on this screen. You can then go back to your shipment record and enter this missing information before logging into AES.

If none of the required AES data is missing, no notice will appear. At that point, click on the Submit EEI to AES Weblink button on the screen. You will now see the screen change as you move to the AES website. Enter your user name and password in the pop-up box. If you have login problems, go to the AES login help page by clicking on the "AES Login Help" link on the Electronic Shipper’s Export Document screen.

After entering your user information, your export information will be validated by the AES system. If any data is missing or incomplete, you will be prompted to modify it. This process will continue until the form is correct.

When the validation process has been completed, you will be informed that your form has been successfully submitted. In addition you will receive an email once your AES filing has been accepted by the U.S. Census Bureau. This email will include your internal transaction number or ITN Reference Number. You must include the ITN reference number on certain export documents to notify your freight forwarder, shipping company and U.S. Customs to prove that you filed your export information electronically through AES.

Shipping Solutions provides a field called the AES ITN Code or Exemption Statement on the EEI screen where you can enter or paste the ITN Reference Number so it will appear in the appropriate spots on the appropriate forms. You will also need this number to access your AES filing record if you need to make any changes to it after it has been submitted.

That's all that is required to use Shipping Solutions to file your export shipments through AES. Depending on how many product line items you have in a particular shipment, it can take as little as five to 10 minutes to prepare a shipment record for AES. In the process you've also entered much of the information required to also create invoices, certificates of origin, bills of lading, and a packing list.

You can save even more time in creating your export documents and filing through AES by using the Data Exchange Manager available in the Shipping Solutions Professional version. This Utility allows you to import orders from your company's accounting, order-entry or ERP system and typically eliminates 50% to 75% of the manual data entry.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=493Mon, 22 Oct 2012 00:00:00 GMTIndonesia: An Emerging Market – Part 1

Indonesia gained independence from the Dutch on August 17, 1945. More than a decade after the chaotic overthrow of the Suharto dictatorship in 1998, the country seems to have stabilized. With its abundant resources, large productive and young population, and strategic access to the global mobility network, Indonesia is poised to establish itself as one of the leading economies of the world.

In this series of articles I will discuss Indonesia's success story and identify the non-tariff barriers that must be removed for this emerging market to reach its full potential.

INTRODUCTION

Indonesia is the world's third-largest democracy after India and the United States, and a home to the world's largest Muslim population and the richest natural resources. Foreign investment is on the rise in Indonesia, and there are significant improvements in the general investment climate. Originating from a traditionally agriculture-based economy, Indonesia has shifted a larger portion of its economic activities toward manufacturing and service-oriented industries.

In the past 25 years, Indonesia has steadily liberalized its trade regime and taken a number of important steps to liberalize the economy. Under President Yudhoyono's leadership, the government of Indonesia has adopted a "pro-growth, pro-poor, pro-employment" economy policy. The plan involves a number of specific initiatives including reforming the country's regulatory framework, attracting continued foreign investment, tackling corruption, and removing artificial economic distortions such as oil subsidies.

The government has eased investment rules in areas including health care, construction and electricity generation. The government believes that investors planning for long-term returns will invest in Indonesia due to sound macro-economic fundamentals, relatively stable political conditions, moderate interest rate (6.0%), accelerating economic growth, an emerging middle class, and growing wealth.

As a country of 240 million people and growing, the size of the Indonesian domestic consumer market is an alluring attribute for any investor. The core pillars of economic growth are political stability, a young population with a large domestic market, and vast natural resources.

Indonesia is a member of the Association of Southeast Asian Nations (ASEAN), the ASEAN Free Trade AREA (AFTA), the Asia-Pacific Economic Co-operation (APEC) Forum, and the World Trade Organization (WTO) and follows agreements made in each of these multilateral forums.

Economic Growth

After reaching 6.5% growth in 2011, Bank Indonesia has forecast that GDP growth in 2012 in Indonesia will be 6.4%. Indonesia's relatively young population and the government's stimulus policies, as well as a popular program of direct cash transfers to the poor, have kept the country on a growth path. This growth trend is expected to continue with GDP growth expected to remain steady at around seven percent over the coming years, according to investment bank Morgan Stanley. According to the CIA's The World Factbook, Indonesia's GDP per capita measured by purchasing power parity has risen from $4,300 in 2009 to $4,700 in 2011.

While all income groups have benefited from Indonesia's accelerated growth, the middle class has enjoyed the most rapid advances in terms of spending increases and quality of life improvements, and this group has increased demand for a range of consumer categories from home electronics and appliances to health and beauty products. Under the right economic and political conditions, Indonesia has the ability to migrate from an emerging economy to an advanced economy.

In my next several articles I will detail the investment opportunities available in Indonesia, the country's value proposition, and the various non-tariff barriers that could hamper the country's continued economic growth.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=492Mon, 15 Oct 2012 00:00:00 GMTUnlocking the Potential of an International Trade Show

Going to your first international industry trade show is a rite of passage (of sorts). You and your company are no longer playing in the kiddie swimming pool of just your home market; now there's a lot more space, more players and more risks. Here's some advice on how to make the most out of this opportunity while still playing it safe:

Before You Go…

Preparation for the trade show begins weeks and often months in advance. Always try to get a copy of the attendee list ahead of the show. Make contact with those people you want to meet. Ideally your schedule should be full morning, afternoon and evening talking to prospective clients, partners and suppliers. Depending on which country is playing host to the show, you may also want to meet with local and national government officials in key ministries related to your industry. This is more useful particularly in developing countries. Especially if you are not exhibiting, you may want to pay for a suite in the main hotel so that you can privately meet with people in a comfortable living-room-type setting.

An easy trap that you should avoid is Chinese IP piracy. If your company is interested in entering the Chinese market or already operating in the Chinese market, it is very important that you register your key intellectual property in China ahead of any international trade show. This is because China is a First-to-File registry, and less-scrupulous Chinese companies will canvass a trade show looking for companies' trademarks they can register in China. When the unsuspecting company goes to do business in China, they find out that they can't use their own company or product names because another company owns the trademarks and will only let them us the trademarked names at a high price. Trademarking is a small cost for peace of mind.

At the Trade Show

Widen your reach by meeting lots of people (between scheduled meetings) and finding out what they are trying to get out of the show. Make sure to tell those you meet what types of people you are seeking. This way, people you have just met can be sending you business leads and you can be reciprocating. Bring lots of business cards and have them printed on the back with your information in the local language. Depending on how many attendees will speak your language, you may need to arrange for a translator to accompany you during the show. In the right circumstances, this may greatly improve your trade show outcomes.

For Americans, an international forum also means that it is time to slow down. Americans are used to making deals very quickly. The rest of the world wants to know the players better before even beginning to talk about business details. Be ready to spend more time socializing than at a purely domestic American-focused trade show.

After the Trade Show

This is the most important task—follow up. You need to contact everyone you met after the show. If this person is a potential customer, your message should include a call-to-action to further engage with this person. If this person is a potential partner, then again you will want to continue the conversation. If the person fits no category that you are seeking, I still recommend sending a nicely worded short email. You just never know who this person knows or when they might be able to refer a potential client to you.

Good luck to all at your next international trade show! If you would like more information about international marketing, please visit my company website: The International Entrepreneur.

]]>http://www.ibt-articles.com/absnet/templates/?z=2&a=491Mon, 08 Oct 2012 00:00:00 GMT