Exporters Guide


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Getting Started
Economic Outlook A recipe for Export Success Export Market Planning Financial & Management Resources Trading Overseas The Company Profile Selecting and researching your export markets Developing a market entry strategy Visiting the market Participating in foreign trade shows and exhibitions 4 8 12 14 20 21 22 27 30 32

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Going Global
EFIC: Working with Australian exporters Internal business review and export readiness Hague-Visby Rules limitation Export costing and pricing guidelines Government funding Business seeks greater government engagement Environmental Credentials Australian Made drives sales 36 37 39 41 46 49 54 56

Customs & Logistics
International Trade Documentation Managing the volumes of international documents Navigating export risks Any fool can stuff a container 57 61 64 66

The editor, publisher, printer and their employees and contractors are not responsible for the accuracy or correctness of the text or contributions contained in this publication and are not liable for any consequences of any use made of the products, or reliance on the information referred herein. © Copyright 2010 The Australian Industry Group, 51 Walker Street, North Sydney NSW Australia. Except where expressly reserved to authors or contributors in this publication, the copyright is reserved to The Australian Industry Group and aside from permitted use under the Copyright laws of Australia, no part may be reproduced by any process or means without prior wirtten permission of The Australian Industry Group.

Focus on the Americas
Overview of the relationship & opportunities – Americas Opportunities in Brazil Changing perceptions in Colombia – Latin America could be the next Asia Colombia: Land of opportunities for exporters and investors Doing business in Chile Australia & Chile sign new tax treaty IP rights Latin America Powers of attorney in Latin America Doing business in the United States: Legal issues An overview of selling to the US retail sector 72 75 77 79 82 84 85 86 88 90

Getting Help
Australia to heed safety standard deadline Industry & Investment NSW TradeStart Brand Australia Enterprise Connect Support for Victorian Exporters Support for Queensland Exporters Sustainable approach underpins good business Ai Group Assistance 92 94 95 96 97 98 100 102 104


By Innes Willox, Director International and Government Relations, The Australian Industry Group

The Australian Industry Group is Australia’s largest national industry body, representing around 10,000 large and small manufacturing, construction, engineering, defence, IT and service industries in every state and territory.
anufacturing is a major sector of the Australian economy, with output and employment levels that remain greater than mining and agriculture combined. It is the source of employment for over one million Australians, constitutes about 13 per cent of GDP, and generates about 40 per cent of Australia’s exports. In an increasingly globalised world, where global supply chains are becoming more relevant to industry growth and success, Ai Group is dedicated to developing an export culture within Australian industry and providing the skills and resources to effectively transition companies to exporting as part of their normal business activities. Ai Group has a nearly 140-year history, and over the last 20 years has placed an increasing focus on assisting member companies (particularly small and medium sized enterprises) to develop an export culture by: • Providing cost-effective and accessible trade facilitation services; • Building cooperative relationships with Austrade, State Government trade and investment organisations, and like-minded industry associations; • Establishing formal cooperation agreements in over 20 key overseas markets with sister organisations; • Employing full-time experienced trade facilitation staff to assist companies to develop offshore trade opportunities; • Providing export-oriented training and information programs; • Providing individual market-entry planning and business matching services; and • Developing programs for trade missions and exhibition participation. Ai Group also actively contributes to the development of Australia’s trade policy, with the aim of reducing both the direct and indirect barriers faced by Australian companies in export markets, as well as assisting Australian companies who face unfair market competition from overseas suppliers. Ai Group is closely involved in the FTA negotiations embarked upon by Australia in recent years – bilateral agreements with China, South Korea and Japan, as well as regional negotiations on a transpacific FTA and negotiations with the Gulf Cooperation Council in the Middle East. Ai Group is also involved with the recently implemented regional agreement between the ASEAN countries, Australia and New Zealand. Ai Group takes an active role in each of these areas, and continues to work with member companies to ensure that these agreements reflect industry’s broad interests. Ai Group also remains closely involved in the negotiations for multilateral market access under the World Trade Organization. The negotiation of bilateral and regional FTAs is a necessary tool, however, to obtain more immediate market access for industry, given the slow rate of progress under WTO auspices. Ai Group delivers the Federal Government’s TradeStart program in Victoria, which helps small and medium sized enterprises achieve their first export sales and future success. We also ensure our member companies are informed of the full range of government funding and programs available to assist their export development activities. This guide gives an excellent overview of the resident expertise within the Ai Group Trade and Export Development Department, with many of the team having contributed articles to the publication. We have given particular focus to providing practical information which will help you make a positive contribution to Australia’s export success and, more importantly, will in assist you to secure growth for your business. I know that you will benefit from the information in this practical guide, and I encourage you to make full use of the excellent resources available through Ai Group’s Trade and Export Development Department.



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Economic outlook: global trade outlook more optimistic, but uncertainty persists
By Martin Petch, Senior Economist, The Australian Industry Group

There are now signs that the world economy, and therefore global trade, is on the mend following the ‘Great Recession’ of 2009. For Australian exporters this will mean a broader base of potential areas of market growth.


hile the collapse in trade flows at a global level in 2009 was the most significant in the post-war period, Australian exporters with significant exposure to the emerging markets, particularly in Asia, were shielded from the worst effects of the downturn. For those firms primarily exposed to the key industrial economies of the United States, Europe, the United Kingdom and Japan, the experience was much tougher. The current economic outlook is that the key industrial economies will continue slow recoveries. The emerging economies with exposure to these markets will see growth assisted by this development, though domestic demand, driven by the effects of recent policy stimulus, will continue to play a major role in their growth outcomes. Looking ahead, as Chart 1 shows, based on the International Monetary Fund’s (IMF) April 2010 forecasts, Australia’s key export markets are expected to see an improvement in economic growth during 2010, though from different starting points. Japan, the United States and United Kingdom will see growth recover from recession in 2009, with the US seeing the best growth performance. China and India will see growth pick up in 2010, following relatively mild slowdowns in the previous year. (continued page 6)

Chart 1: Growth performance in Australia’s key trading partners - 2010 and 2011

Source: Australian Bureau of Statistics Cat No. 5368 and International Monetary Fund World Economic Outlook April 2010.

The Commonwealth Budget forecast for 2010-11 confirmed the overall positive outlook in Australian exporters’ key markets through the period to 2012 as illustrated in Table 1. Table 1: Economic performance in major economies and Australia’s main trading partners 2009-11 Estimates 2009 0.0 -2.4 -4.1 -5.2 8.7 6.4 -0.6 Forecasts 2010 4.75 3 0.75 1.75 10 7 4.25 2011 4.75 2.5 1.25 2 9.5 8.25 4.25

Major trading partners United States Euro area Japan China India World

Source: Commonwealth Budget Paper No. 1 2010-11.



Overall, the global economy is still in the early stages of recovery though it remains patchy with the advanced economies sluggish compared with the more robust conditions seen in emerging markets. Sovereign debt market instability, most notably in Greece, provides the key current uncertainty for economic outlook, particularly in the industrial economies. To date, however, though equity and foreign exchange markets have seen volatility as a result of sovereign debt concerns, broader financial market conditions have improved and, of particular importance, bank lending constraints have eased. The improvement in overall financial conditions, signs of improvement in confidence, and ongoing policy stimulus measures should see the world economy grow by just over four per cent in both 2010 and 2011. The patchiness in the global recovery is reflected in the outlooks for Australia’s key export markets. China has been a key support for Australia’s export and broader economic growth during the global downturn, through the domestic incomes boost derived from solid export demand and above-trend commodity prices. The Chinese economy continues to grow strongly, driven by domestic demand that is reflecting investment supported by the Chinese Government’s fiscal stimulus program and stimulatory monetary policy. China’s economy is expected to grow by 10 per cent in 2010, before easing to around 9.5 per cent in 2011 driven by Government policy and an improvement in export demand. An important risk to China’s strong economic recovery is that growth has been, and continues to be, reliant on government stimulus. For strong growth to continue into 2011 there will need to be a sustained recovery in Chinese consumer demand, private business investment and global demand for Chinese exports. However, strong credit growth has increased the risk of high inflation and

asset price bubbles, particularly in the housing sector. Chinese policymakers have tightened policy to offset overheating, and further market-based and administrative measures are likely, with uncertain impacts on the level of China’s growth over the next year or so. Japan’s economic outlook remains quite weak following the 5.25 per cent decline in GDP in 2009 — the worst performance of any of the major industrial economies. Into 2010, in a climate of soft investment and consumer demand, exports have been the main driver of the Japanese recovery, supported by the resilience of emerging economies, in particular China. The Japanese economy is expected to grow by 1.75 per cent this year, though this is subject to a number of risks, including the sustained falls in the prices of consumer goods and services, which are causing households to delay purchases and contributing to a climate of weak domestic demand growth. Another risk is that the sovereign debt issue currently affecting global equities and currency markets may cause a significant increase in global risk premiums and slower than expected economic growth, particularly in the Euro area, with flow-on effects into demand for Japan’s exports. India’s economy has been resilient despite the global financial crisis and severe drought conditions. Growth of seven per cent is expected in 2010, reflecting improved business and consumer confidence, better weather conditions, and stronger foreign capital inflows. As with China, the strength of the domestic economic recovery has provoked concerns about potential inflationary pressures and, in response, India’s central bank has tightened monetary conditions. The United States’ economic outlook has improved, with the US economy growing at its strongest rate in over six years by the end of 2009. There have been some positive signs that consumer spending and business investment are beginning to pick up. Consequently, the US economy looks like

recording growth of three per cent in 2010. Despite this improved outlook, US consumer demand continues to be constrained by weak employment prospects, reduced credit availability and falling asset prices, which have eroded household wealth. In addition, and reflecting recent weak consumer demand, capacity utilisation remains well below its historical average, although the corporate sector is recovering, with corporate profits returning to near historic highs. Business credit constraints have eased, although they remain tight relative to pre-crisis levels, particularly for small businesses. Small businesses, which drive US employment growth, remain relatively pessimistic and this will restrain the recovery in the US economy in the short term. The economic outlook for the Euro area remains soft, with a number of the peripheral regional economies including Spain, Ireland, and Portugal putting in place rapid fiscal consolidations. This will significantly affect economic growth in these economies and the Euro area as a whole. The Euro area recovery is expected to be modest, with GDP forecast to rise by only 0.75 per cent this year, and the outlook will rely on the extent to which the core Euro area countries, notably France and Germany, can boost domestic demand to offset the contractionary impetus on the periphery. Overall, the outlook for Australia’s key markets remains promising over the next two years. The prospects of better growth in the US and Japanese economies will add to the overall gains in growth of Australia’s key regional trading partners.


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A recipe for export success
By The Australian Industry Group

To produce a successful exporter, Mix equal parts of the following ingredients: 1. 2. 3. A long-term view Thorough planning, including of financial and management resources Excellent preparation of: • Presentation Materials • Product • Market Intelligence • Cultural Differences Know how to cost and place products • Product Pricing • Distribution Agreement • Strategic Partnerships Regular visits to the target market Business relationship management skills Attention to detail and quality


5. 6. 7.



Let’s examine the ‘ingredients’ of this recipe in closer detail. 1. Long-term view There is no concrete profile for a successful exporter, although the main attribute for success is the definitive “commitment”. A company’s size has little influence on the success of an overseas market entry; indeed success can be attributed to the long-term commitment by senior management to follow through the export venture with both financial and human resources. A sustained effort is required in order to reap the rewards. It is inevitable that an export venture will experience problems and difficulties, which will require additional effort by company representatives over and above their usual responsibilities. In this respect, the support of senior management is essential. The organisation must be seen to support their personnel over the long haul that all company representatives will experience. 2. Thorough planning Thorough planning is covered in detail in the successive articles in this publication titled: ‘Export market planning’, and ‘Financial and management resources required for export’. Breaking into any new market requires considerable funds. One of the major impediments firms experience in realising their export potential is the cost associated with developing their distribution networks and general marketing activities. In basic terms, creating an export market is equal to creating a whole new business, and requires budget planning which is quite separate from normal business costs incurred in Australia. 3. Preparation Presentation materials. The preparation of presentation materials is covered in the successive article in this publication titled: ‘The company profile – a passport to trade’. Product preparation. Aside from the preparation of presentation

materials, it is probable that market research you undertake may highlight a need to adapt the product and its characteristics to suit the target market. For example: • there may be a prejudice against the packaging, which may prohibit market entry; • the brand name may have to be modified, translated or changed to suit the market needs; • apparel or furniture sizes, for example, may have to be changed; • fashion trends, seasonal differences and consumer preferences for taste or colour may be critical; and • market research may reveal the need to adapt to foreign government standards, including the labelling regulations in the target market. Market intelligence. From the above examples, the need to thoroughly explore your potential new market is clear. Market research will pave the way for you, eliminating many problems before they begin, and before you have gone too far to avoid the mistake becoming a costly one. This aspect is covered in detailed in the article ‘selecting and researching your export markets’ in this publication. Cultural differences. Finally, business cultures and ethics differ from country to country. The exporter must negotiate by the host market’s rules, or not at all. There may be language limitations in a non-English speaking country that may require your product and promotional literature to be modified. Where English is not the prominent language of the country, negotiations may be frustrated by misinterpretations and misunderstandings. Ensure you understand the culture to which you are about to introduce your product. It may be the difference between success and failure. 4. Costing and placing products Product pricing. The final determination of a product’s export price should be left until the completion of

A company’s size has little influence on the success of an overseas market entry; indeed success can be attributed to the long-term commitment by senior management to follow through the export venture with both financial and human resources. A sustained effort is required in order to reap the rewards.



your market research. The price of the product will be determined by many of the factors that are particular to the target market. The first aim of an exporter is to establish the product in an overseas market. For this purpose the exporter may seek to set the lowest possible price with the narrowest of margins above export costs. A loss may be acceptable at first, especially if establishment and promotional literature costs are likely to be high. Market research, to date, should have uncovered components that will affect the final costing, some of which will include tariffs, quotas and sales tax requirements. It could also have uncovered non-tariff add-on costs. Most importantly, there is also the consideration of how much the target market is willing to pay for the product. Given all of our research so far, you might find that you need to modify your product considerably so as to reduce the cost to suit the market. Distribution agreement. The distribution agreement is a document that sets down in writing the understanding between the vendor and distributor with regard to the sale of a particular product or products in a given territory at a given price, including payment terms, sales terms, and so on. Perhaps even more than the written word, the spirit behind the words that seek to work toward your mutual benefit is of paramount importance. Particularly in Asian countries like Japan, such contracts are not viewed as documents that should be carried out to the letter, but rather as a statement that sets out to do business in accordance with agreed procedures, providing there are no major changes in either party’s circumstances. They regard the moral obligations that accrue from building trust between individuals as the key to solving any unexpected difficulties. Court actions would mean a tremendous loss of face and reputation, and would evidence a sad lack of human trust.

In the west, too, continual reference to the distribution agreement, or even worse, legal contest of the document, would indicate a lack of willingness to achieve mutual benefit, not to mention an expensive and damaging exercise. There are numerous distribution options for a given product and territory, and selection of the best option will arise only after examining issues such as: • how many mark-ups the product can sustain (given lengthy distribution chains); • trading terms expected from the distributor; • infrastructure offered by the distributor such as warehousing, transport, showrooms; • services offered by the distributor such as contribution to advertising, product liability insurance, ability to speak English; • the distribution territory and final outlets covered by the distributor; and • size and reputation of the distributor. In considering whether distribution or other arrangements are most suitable for individual requirements, refer to the article ‘Developing a market entry strategy’ in this publication. 5. Visit the target market This aspect is covered in detailed in the article ‘Visiting the market’ in this publication. 6. Managing business relationships One thing successful exporters have in common is a close involvement with their contacts in their chosen export market. One of the greatest faults of would-be exporters is inadequate attention to prospective agents/importers after initial contact has been made. Particularly in Asia, frequent contact is expected in order to show your earnestness and long-term interest. A lack of communication from an Australian company could be perceived as a lack of interest in the relationship, and the Asian company may feel neglected.

The Asian example aside, remember how much time you invest in your interstate agents so as to ensure they continue to pursue your (and their) best interests. Factor in cultural, language, geographic and other differences, and you are coming close to seeing how much input is required of you. 7. Attention to detail and quality Australian companies are often criticised for not paying enough care and attention to detail, particularly with paperwork and commitments. This can seem to be a rather petty complaint, but the ramifications can be serious. Successful exporters stand out through their attention to detail, commitment to timeliness and (contractual or other) obligations, as well as quality assurance systems to ensure consistent provision of high-quality goods. If you think that your company needs an export audit to see if the ingredients of your export success are right, please email trade@aigroup.asn.au and request a free consultation.


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Export market planning
By Len Philips, Business Advisor, The Australian Industry Group Why plan? The rationale for exporting is usually self-evident, whilst the reasons for planning may not be as obvious. The final plan is the guide to what you intend to do, how you will go about it, who is responsible for what, and when, and the anticipated results. What is far more important than the plan is the process. The systematic process of analysing all aspects of your business, your competitors and potential export markets provides a solid base for a move into exporting. It will indicate the weaknesses that you will need to overcome and it also unearths opportunities. General Dwight D. Eisenhower was a little more succinct in his quotation: “Planning is everything. The plan is nothing.” Australia is unlike any other continent, as we have to send goods by sea or air to sell to another country. In most of Europe and the USA, exporters can deliver their goods by road or rail using the same packaging and delivery processes they would for local sales. To a great extent, the Europeans and Americans export using the same currency. The decision in Australia to develop a company into a long-term sustainable exporter is significant and will determine the future direction of the organisation. It requires a serious commitment initially from the decision-makers and then from all in the company. Simply by default there will be change of culture in the organisation as the business becomes involved and affected directly by the international markets and the people involved in those markets.

The planning process 1. Examine your existing business, products or services • How important is export? • Export is just one of a range of strategic options. • Is the company and its products or services ready for export? 2. Preliminary market research • Is there a demand for your product/ service, and is it acceptable in the market? Do you have to change any aspects of your products or services? What is the size of the market and your potential sales level? Who are the customers and end users? • Who are the competitors? What are their quality levels and price? Can you compete? • What are the costs to develop the market? • Which is the preferred way to operate: through distributors or agents or sell direct? In some markets (often those that have developed in recent years) the business must have the facility to sell via the Web direct or through distributors to be able to access the market. • Who are the potential distributors or agents?

One of the best and often most cost-effective ways of carrying out research is to make a preliminary but well-planned visit to the markets you are considering. This is a suggestion I make to all of my clients as in my experience, a few days in the market allow the clients to meet a number of people in their own industry, and simply through mutual interest they obtain significant knowledge even from potential or direct competitors. From my observations, where language is a barrier, if you sit two individuals together – especially those with long term experience in an industry – their understanding of what they are trying to convey to each other is often in advance of the translator’s explanations. From this visit you would normally prepare a well-focused market brief and have a good idea of the markets you will consider. 3. Target market selection This is really a process to prioritise the markets you will approach; often the opportunities are more numerous than the resources available to address them. Limited finance is normally a barrier, particularly for SMEs, but often the biggest issue is sufficient experienced and skilled staff. • Carry out a market portfolio analysis • Prepare a strategic mission for each market • Determine the specific opportunities and problems associated with each market



• Prepare a financial analysis and financial framework for the market entry and development strategies • Place the markets in a priority list, which shows the timing for initial markets and future markets 4. Strategy development • A range of options are considered, including: - Indirect exporting through a local customer - Exporting via agents or distributors - Manufacturing or supplying a service under licence - Joint venture - 100 per cent offshore ownership • Pricing policy • How you are going to promote you product or service? • Detailed market entry plan.

5. Writing the export market plan The final step is to translate the strategies into the plan. Comprising an action plan, time plan and a financial plan, the final plan should specify: • Key actions • Key responsibilities • Milestones and outcomes • Associated time frames • Allocated resources • Cash flow projections 6. Performance monitoring Export market planning is a dynamic process and becomes part of the usual review of company operations. The review process should assist in periodical updating of the plan and in ensuring that opportunities are being maximised and that previously identified market potential has been turned into reality. Plan monitoring occurs at three levels: • Strategic • Tactical • Operational

Conclusion The PAN’AGRA research program of the London Business School, which was supported by the British Overseas Trade Board and the Australian Trade Commission, carried out a project, ‘First steps to export success’ in 1997. Although this report is over ten years old, its relevance remains. They came up with three recommended first steps to success: • Make well-prepared market visits to build local knowledge and confidence • Seek relationships with local distributors and they will ultimately lead to cooperative, long-term partnerships. • Choose export managers for their people skills and learning skills, as much as for their technical skills. Ai Group staff are able to conduct an export audit for companies and advise on their export planning needs. For more information, please email trade@aigroup. asn.au

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Financial and management resources required for export
By The Australian Industry Group

The development of a new export market involves much more than simply achieving an initial sale. Rather, it involves the successful identification and development of a range of factors necessary to allow long-term profitable business results to be achieved. This is particularly important as initial trial sales are in most cases not going to justify the considerable time and financial investment in export marketing.
Specifically, the new market development will involve some or all of the following: • Building new relationships, usually in unfamiliar cultural and business environments. • Adapting for new market needs as foreign markets vary from the familiar domestic market • Arranging efficient and reliable distribution. • Establishing methods of monitoring the market, particularly for consumer markets that are typified by change • Developing a plan or strategy that is realistic, affordable and flexible enough to grow with market penetration. Development of a new export business is essentially similar to the creation of any new business. This requires financing an initial investment, a great deal of management time and commitment, and good planning. Whilst this article focuses on financial and management resources required for export, the importance of having an export plan cannot be overstated. (Refer to the article on export market planning in this publication.) Management resources required for export development Without doubt the single most important success factor common to exporters is commitment to export from top management.

(continued page 16)



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One of the immediate effects of commencing overseas market research could be the generation of enquiries from the market as your product or name becomes known.

This commitment is required to ensure that export development receives priority within the company and to allow adequate resources to be made available. It also encourages all employees to contribute to the success of any export process. In this regard, it should be noted that in addition to marketing, the involvement of production, warehousing and administration personnel is necessary to deliver export orders on time and to specification. In a practical sense, it is important to define who will be responsible for doing what and when. The tasks to be undertaken will at least include the following: Marketing and research tasks • Market selection and market research. This would involve analysing the most suitable market, identifying the nature of the opportunities, gaining an understanding of distribution, competitors and likely customer needs, and establishing initial contacts. • Assessment of market entry strategies. This involves effective methods of introducing your products and establishing importation and distribution. These strategies may involve trade show participation, agency or distributor agreements, special arrangements for customer testing, and trial orders. Ultimately, it will involve ongoing marketing activities. • Preparation of a company profile and other marketing material. A company profile is a key tool in international marketing for introducing your company and its products or services to potential business partners or customers. The profile is both a marketing and a planning document as its preparation requires the gathering of a broad range of information. • Planning preparation and undertaking market visits. Eventually it will be necessary to make a series of visits to the market during

This is where the ready availability of company profiles and suitable marketing can be very helpful.

both the initial and market development phases. In fact, regular visits on an ongoing basis will normally be required as the market develops. Market visits are expensive regarding both time ` and money, so maximum benefit should be derived from the time spent on this activity. It is also important to remember that time spent overseas is time spent away from the business in Australia, so it may be necessary to train suitable people in order to maintain continuity in the domestic management role. Handling enquiries. One of the immediate effects of commencing overseas market research could be the generation of enquiries from the market as your product or name becomes known. It will be necessary to put mechanisms in place to evaluate and respond to these enquiries. This is where the ready availability of company profiles and suitable marketing can be very helpful. Identifying sources of assistance. The Federal Government and most of the state governments operate a number of schemes that potentially provide assistance to exporters. Companies should familiarise themselves with these sources of assistance and how they can be used to best effect. Negotiating sales and distribution agreements. Inevitably companies will be seeking to negotiate appropriate agreements to lock in distribution and sales arrangements. This can be a long and difficult process, taking up considerable time and often requiring multiple market visits.

Product related tasks • Undertake proper export costing and reverse pricing. It is essential to determine the cost competitiveness of your product. On the basis of this, it may be determined that modifications are required for the product to find an appropriate value/ cost niche within the particular market. (continued page 18)


“To see our product selling out in the Middle East is simply fantastic!”
Marilyn Lanyon, Simply Tomatoes, Boort, Victoria

Export assistance from the Victorian government has helped Marilyn Lanyon of Simply Tomatoes find a niche market in the Middle East for her gourmet green tomatoes. A delicious blend of green tomatoes, olive oil, herbs and garlic, her product Simply Green Tomatoes has taken Marilyn, from Boort in North West Victoria, to the gourmet food capitals of the world. “We were thrilled when the Victorian Government suggested we export, because we saw it as an opportunity to discover what the world thought of our product,”says Marilyn. “From our first trade show in Singapore we got orders from South East Asia and Europe. But now we’ve found a niche area in the Middle East, where Simply Green Tomatoes is really loved and appreciated. “I have a motto when it comes to exporting - take small steps but think big. If you do your research and believe in your product you can export”.

To find out how the Victorian Government can assist your company to export, visit Export Connections at www.export.vic.gov.au


• Product Development and Modification. The task of altering products, and possible consequent changes to manufacturing requirements, will also need to be undertaken. This may mean changes to sizing, additions to ranges, or options on complete product re-engineering. This will require cooperation between marketing, development, and manufacturing personnel. • Identifying production requirements. The expansion, or at least possible changes to production requirements, will require careful planning and scheduling. There is always potential conflict between meeting existing customer requirements, and slotting in new and often novel requirements for overseas customers on short notice. Administrative and logistical tasks The development of exports places a number of ongoing administrative demands on companies. These include: • handling of export documentation involving new methods of payment; • meeting customs requirements both in Australia and in other countries; • working with banks to ensure appropriate finance and payment arrangements; • working with both marine and export credit insurers; • arranging shipping through freight companies, shipping lines, or other parties; • liaising with customers in the export market; • coordinating budgets and monitoring the overall plan. In many cases these tasks, whether marketing, product related, or administrative, will need to be undertaken in addition to existing activities. Nevertheless, it is necessary that they are seen as an integral part of the business. As input and cooperation will be required from various people, particularly in larger organisations, the best results will be obtained when people believe that it is part of their core activities.

Financial resources The development of a new offshore market will always involve expense. The types of areas where new or additional expenditure may be required are listed below. Naturally, the size of the expenditure will depend on the nature and scale of the project involved. Marketing expenditure • Production of marketing materials including multilingual material. • Market research, either through the Australian Industry Group, Austrade or consultants. • Travel and accommodation for market visits. • Trade show participation including development of display material. • Updating of the company website is necessary in a number of emerging markets to be able to carry out ordering and payment on the web either directly or through distributors. Product development and modification • Resizing of products. • Development of new tooling, patterns etc. • Design of new product lines. • Modification of consumer and/or transport packaging. • Achievement of quality accreditation. • Meeting of government requirements – health certification, product safety standards etc. • Provision of training and in-market product support. Capital expenditure • Acquisition of new or additional production equipment. • Establishment of offshore offices, support arrangements, warehousing and distribution.

• Equity in joint ventures. Financing Costs • Additional raw material and finished products inventory costs. • Extended credit terms. • Currency and credit risk. • Financing of additional transport costs. • Marine and credit insurance requirements Export administration and other costs • Documentary credit arrangements. • Cost of overseas intellectual property protection. • Cost of extended product liability insurance (note: this in particular is often overlooked and can be significant). • Customs and other export administration costs. Companies should determine as early as possible the likely size of all these costs, and take appropriate account in their export costing. It may also be necessary to modify or stage the export development plans to allow an appropriate cash flow position to develop. Conclusion This article introduces the areas that are likely to take up management time and financial resources when entering new export markets. Proper planning and management of the people involved is essential to minimise both the time and costs involved. The Trade and Export Development team at The Australian Industry Group is available to assist you in addressing these issues. Please email your details and requests to trade@aigroup.asn.au



Trading overseas
from them.


or young tourists, the two greatest risks associated with travelling are getting lost and losing their money. Either is traumatic, but having both occur simultaneously can devastate the best and most meticulously planned itinerary. Australian businesses travelling offshore in either an import or export capacity are equally at risk of ending up in an unfamiliar

and institutional clients to small to medium-

Businesses dealing with suppliers or customers offshore are also exposed to FX markets. Movement in FX markets can have as many clients, such as importers and exporters, make or receive payments denominated in foreign currencies. On conversion to the AUD, these payments can change in value from one day to the next depending on the relative value of the currencies involved. With the recent trend of the AUD now rising towards parity with the USD, importers and exporters may wish to think through how mitigate its effects on their business by speaking to a NAB FX Specialist. Journeying offshore can be both exciting and risky, but you don’t need to travel alone—NAB can go with you. So, if that’s prepared to understand your business as well as it understands foreign trade, let’s talk.

home and abroad. Two key risks Australian exporters and importers face are related to interest rates and foreign exchange (FX). Adverse movements in either of these markets can

the unique risks associated with importing and exporting. But these risks can be both managed and transformed into the business. Importers and exporters need to be absolutely certain of their access to funds. Trading cycles—both domestically and internationally—can be volatile depending on macro-economic and sectoral factors, so Australian businesses need to make sure they partner with an organisation that can facilitate transactions as needed. National Australia Bank’s Trade Finance specialists provide solutions based on working capital businesses—from large retail, wholesale

inability to take advantage of growth opportunities. When a client borrows money for trade requirement they are taking on risk related to interest rates. The Reserve Bank of Australia has indicated that Australian interest rates will continue to rise towards average historical settings, so mitigating the risk of an adverse interest rate movement is critical for Australian businesses. Depending the trade cycle lasts, there is an opportunity to manage that interest rate risk with a tailored solution that can deliver a known interest rate level or map out a worst case scenario.

Talk to a NAB FX Specialist on 1800 019 215, or a Trade Finance Specialist on 13 10 12 or visit www.nab.com.au/tradeoverseas.



The company profile – a passport to trade
By Craig Malcolm, TradeStart Export Adviser, The Australian Industry Group

International marketing involves a systematic approach to introducing both your company and product to a new market, and to developing relationships in the market in order to build a long-term, profitable business. It is customary in the international market to formally introduce your company to a prospective overseas business partner by presenting your company profile.


company profile is a powerful The contents of the profile marketing tool, designed to convey The profile does not need to be an expensive or glossy production. It does, however, your corporate image and aims need to contain comprehensive information in a clear and concise format. The company to influence, inform and persuade the profile can contain many of the following subject headings: reader. Name What sells the product What is a company profile? Address Samples A company profile introduces your Postal address Packaging/promotion company and its products to prospective Contact person Quality customers or business partners such as Telephone Distribution methods importers and distributors. Fax Trading terms From your company profile, an Email/website FOB and CIF prices in A$ and the export overseas prospect forms an initial opinion History of company currency of your company and its products/ Business strategy Minimum orders services, and is then able to consider further negotiations, either in the form of continued correspondence or by meeting with your company’s export representative. The company profile aims to generate interest and inspire a willingness to enter negotiations. In summary the company profile: • is a basic tool of international trade; • introduces your company to the international market; • contains information describing your business, its objectives, capabilities and product(s); • has universal application; • is your corporate signature in the market place; • is your communication tool for market research purposes; • is your passport to successful business Role of export in business strategy Why this export market now? Description of all product lines Number of employees Number/location of manufacturing facilities Company turnover Sales by units Product specification Manufacturing methods Wholesale cost/unit Age of product Typical use of product Typical users Competitive products Features/benefits of product Current marketing strategy Target markets Export potential Export experience Knowledge of the target market Product availability Preferred distribution Australian content Willingness to adapt product Willingness to travel Freight specifications Market segments Existing competitors Potential competitors Distribution mechanisms Key sales and distribution outlets Seasonality Regional variances Current market position



Selecting and researching your export markets
By The Australian Industry Group

There is a wide range of export markets a company could consider. It is important to select those export markets that offer the greatest opportunities, keeping your company’s capabilities in mind. Targeting the right market is an important first step in export market development. Nothing is worse than working on the most effective market entry strategies aimed at the wrong market.
ne of the quickest ways to select your market is to build a list of potential target markets while slowly building market data and other pertinent information on market opportunities for the company’s range of products or services for export. Not only will this help to build an initial list of possibilities, but it will also help to ensure that no hidden agent will potentially block or retard the export development process. This initial discussion of various options is also useful in identifying information requirements – in other words, critical assumptions we are making


about potential target markets that need to be checked. In summary, the objectives are to: • clarify the current market preferences of the senior management and their reasons for these preferences; • identify important information gaps as a basis for the development of a market research brief; and • decide on a shortlist of potential export markets. This should lead to the following outcomes: • A shortlist of potential export markets to consider further (companies

exporting already will have reviewed their existing export markets as well as potential new markets); A summary of high priority information required to make this market choice.

Selecting your target markets The choice of which overseas market to target is arguably one of the most critical steps in planning for export. Selection of the right market will lead to early success and further encouragement from your shareholders, financiers, employees and customers. (continued page 24)


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However, this is also one of the most expensive steps because of the need for market research data, and is the most time consuming. In order to reduce financial risks, a staged approach has been adopted for the selection of target markets. This approach will reduce the likelihood of researching inappropriate markets. There are two steps in this phase of research: 1. Identify unsuitable markets – eliminate those with hostile domestic environments or those where your products or services may not be acceptable. 2. Identify market potential – ascertain those that present good opportunities for your product/services. Step 1 - Identify markets that are unsuitable The primary focus is to find out if there are any prohibitions against your product or service in the export markets you are considering. Always be prepared to look further than the obvious regulations. There are often rules that restrict access to other markets. This initial investigation should allow you to eliminate unsuitable target markets.

Once you have established whether or not your product/service is permitted, your next step is to establish what restrictions may be imposed on your product/service in those countries. Key non-tariff barriers facing Australian exporters may include: • Buy national products campaign • Rules and marks of origin • Technical standards and certification • Nominated importer requirements • Customs delays • Export subsidies • Financial and counter-trade obligations • Anti-dumping law • Sanitary regulations and protocols • Quarantine restrictions and pre-shipment inspection Step 2 – Identify potential markets The rest of the potential markets will be assessed for the opportunities they offer. You will need to conduct research to determine factors relating to: • Size of market (population and spending power) • Political and economic stability • Market growth potential • Level of competition • Practicality of supply or servicing

from Australia, compared with suppliers geographically closer Local culture such as religion, customs, lifestyles and business practices that may impact on your success (For example, marketing of alcoholic products to Muslim customers would be culturally unacceptable).

Setting priorities Your company would have export market preferences on the strength of your knowledge of the products, domestic market experience and interaction or networking within the industry in which it operates. It is important to continuously review these possible export target markets and to identify their particular advantages and disadvantages as new information comes to hand. The two key questions that need to be addressed are: • How attractive are each of the export markets to your company? • How effectively can you compete in these markets?

(continued page 26)

Checklist for potential export markets
• • • • • • • • • • Which markets/segments are your competitors targeting? Which countries are major importers of the products/services? Which countries are major suppliers? What level of economic development is ideal for the use or consumption of the products or services? Which countries are at this stage of development or fast approaching it? What are the sizes of the various markets being considered and a rough estimate of the market supply structure – proportion of demand met by domestic production vs. imports? How fast are the imports growing? What are the potential market barriers? How costly is it to enter the market? How large/well-developed are the potential industry, commercial or consumer users? What is the product life cycle of this market? In which markets does your product/service have a natural competitive advantage?



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Preparing the market research brief In the process of selecting your target markets, gaps in information would have been defined and listed as needing further research.

It is important that the objective of the research is well defined and designed to address the key issues relating to the target markets.

Researching the market After the process of target market selection on the basis of the available information, you are now ready to proceed with in-depth research of three to four target markets. Initially, research will focus on product potential by looking at the following issues: • Size of the market • Competition • Pricing • Market entry barriers • Distribution channels Depending on the market and the nature of the product, a low-cost electronic search of business databases should yield basic data to complement previous knowledge of the target market. This process will further reduce the target markets to two to three key markets for in-depth research. You can analyse and prioritise target markets and identify major research issues that need to be addressed. The analysis should look at the relative market attractiveness and competitive position of a given market for your range of products or services. This will be helpful in resource allocation decisions, particularly in allocating resources to developing markets with high growth trends and future profit potential.

• • • • • • • • • •

Market share Established brands Established distribution network Competitive price Innovative product/services or marketing Prestige image Product/service quality Superior packaging or presentation Network of contacts Patents/copyrights

Market attractiveness and competitiveness attributes Attractiveness: • Market size, growth trends • Entry cost, investment requirements • Degree of price and supplier competition • Buyer’s strength and level of product/ market understanding • Level of market entry barriers • Level of technological /product innovation and development • Ease or difficulty of doing business (language and cultural barriers) • Political and economic stability Competitiveness: Competitiveness relates to attributes that would give any company a strong competitive position in the market under consideration from an industry perspective.

Preparing the market research brief In the process of selecting your target markets, gaps in information would have been defined and listed as needing further research. This information list should form the initial data requirements that can be built into a well-planned, focused research brief. It is important that the objective of the research is well defined and designed to address the key issues relating to the target markets. Generally, a well-planned research brief should contain the following basic information: • Aspects of the market to be investigated and in what depth • Why the information is needed and how it will be used • Information about the products to be exported • Information about the client company commissioning the research Market research briefs are built upon the company profile document, which is discussed in the article ‘The company profile – a passport to trade’ in this publication. The Australian Industry Group Trade & Export Development Team can assist in developing a research brief and conducting overseas market research on your behalf. Please email trade@aigroup. asn.au for more information.



Developing a market entry strategy
By The Australian Industry Group

Having obtained knowledge and understanding of the selected market, the business must now determine the best market entry strategy for that market. It may be direct export/distributorship, joint venture/partner, or alliance arrangements.

• • •

t is interesting to note that the most appropriate market entry strategy is often a trade-off between: Costs of alternative strategies: Generally speaking, the closer to the consumer, the more expensive the option. Control over decision-making and your products: The closer to the customer, the better the controls. Risk: The more control, the less risk. However, greater control means higher costs, which increases the financial exposure: a different type of risk. Price: The closer to the customer, the higher the return to your company.

Government regulations: Certain strategies may have to be adopted to comply with government regulations. • Management skills: Operating on an international basis requires new management skills. Until such skills are developed or acquired it is wise to start slowly. The following checklist may be a convenient way to quantify some of the aspects you need to consider when selecting your market entry strategy. You will need to modify this list to make it relevant for your products/services and target industry; cross out irrelevant items, add additional items, and so on.

Evaluating market entry options 1 Costs a) How will you support your market entry? Is finance a limiting factor? b) Are the gross margin and volume potential high enough to afford an aggressive presence in the market (e.g. local office)? c) Could turnover be improved with a more aggressive presence in the market to be able to gain economies of scale? d) Could production costs be reduced? (e.g. local assembly or contract packaging?) e) Has a reasonable payback period been allowed when considering an aggressive market entry strategy?



A market visit is essential before finalising your market entry strategy. There is nothing to replace a firsthand view of the physical market conditions together with meeting with counterparts in your industry.

2 Control a) How important is it to control: • How aggressively your product is marketed; • How your brand is promoted; • How your product is serviced; and • How much market information is fed back to you? 3 a) b) c) d) e) f) g) h) Risk How stable are expected sales? How politically stable is the market? What is the risk of losing market share? Would risk be reduced by a more aggressive presence in the market? What are your competitors’ strategies? Do currency fluctuations pose a risk? If so, what is the level of sensitivity? What is the risk of non-payment? Should you insure against this? What are the risks and consequences of not meeting orders on time?

5 Government regulations a) Do local government regulations restrict or encourage a more aggressive presence in the market? b) What incentives are available from the target market government? 6 Management Skills a) What skills are required to have a more aggressive presence in the market? b) Are these skills available within your company? c) If not, are they difficult to acquire or develop? What will they cost? d) How long will it take to acquire or develop these skills? A market visit is essential before finalising your market entry strategy. There is nothing to replace a firsthand view of the physical market conditions together with meeting with counterparts in your industry. A market visit may be in conjunction with a trade fair/trade show display or instore promotion. Participation in an overseas buyers’ mission visiting Australia can also achieve worthwhile results. For assistance in developing a market entry strategy for your business, email trade@aigroup.asn.au.

4 Price a) Could a better price be won for your product if it were marketed more aggressively? b) How much control do you have over pricing? c) Do you apply a ‘cost plus’ or ‘what the market will bear’ approach, or a combination of both? d) Could prices be cut by having some or all of the product manufactured or packed locally?



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Visiting the market
By The Australian Industry Group

After a company has researched and identified potential markets and devised strategies to enter those markets, the next step is to actually locate a buyer. If that buyer is the end user of a company’s product/ service, a relatively simple transaction may result. In many cases, however, Australian exporters generally need an in-country presence through a representative or distributor to reach the eventual buyer. Whilst customers may be identified through attendance at trade shows, virtual showcases, trade missions, direct mail campaigns, and advertising either through print or digital media, whatever method is chosen, an initial trip to the market (and potentially many trips) will be required.


t is essential for companies to develop a planned approach to target export markets. Visiting a market provides an opportunity to meet with counterparts in your industry, and also provides a valuable firsthand view of the market conditions and business culture. You are able to experience direct reactions to your company, and its products/services. A number of market entry methods are available to Australian companies, and include: • Individual market visit program; • Visiting or exhibiting in an overseas trade show; • Participating in a virtual showcase; and • Participating in a trade delegation. Ai Group can assist members with all options.



Preparing for business travel abroad Business travel abroad can identify and uncover new customers, and improve relationships and communication with established foreign representatives and associates. As in domestic business, there is nothing like a face-to-face meeting with a client or customer. The following suggestions can help companies prepare for a trip. • Be very familiar with the latest market research data you have obtained prior to the visit. • Prepare processes for dealing with the follow-up actions required after the visit. • Decide on who is to travel and ensure that they are authorised to make decisions. • Accomplish as much as possible before the trip begins. Connect with federal and state government organisations, industry and alliance bodies, have the names of possible contacts, arrange appointments, check itinerary and transportation schedules, etc. All important meetings should be confirmed before leaving Australia. • Send company profile and/or samples to potential customers in advance of your trip. Provide ample time for them to be shipped to the destination. • Become familiar with local culture/ protocols. This is important to ensure you do not offend the local community. • Ensure that your hotel is in the right area – have address in local language as well as in English. A good idea is to have a map of the hotel’s location (this can be done through Google Maps). • Learn some key words/greetings. • In the current international security climate – ensure that passports are current (with at least 6 months before expiry), and the appropriate visas are obtained. A well-planned itinerary enables a traveller to make the best possible use of time abroad. Although travel time is expensive, care must be taken not to overload the schedule. Two or three definite appointments, confirmed well

in advance and spaced comfortably throughout one day, are more productive than a crowded agenda that forces the business person to rush from one meeting to the next before business is really concluded. The following travel tips should be kept in mind: • The travel plans should reflect what the company hopes to accomplish; give some thought to the desired outcomes and priorities. • Remember that you will be required to make notes after meetings, and potentially fulfil actions agreed to in the meeting, all the while dealing with outstanding issues from Australia. Allow reasonable time between meetings to complete all that needs to be done. Also take into consideration time zones, as this will have a huge impact if you are visiting the UK, EU region, Middle East and the Americas. • Keep the schedule flexible enough to allow for both unexpected problems (such as transportation delays) and unexpected opportunities. It is important that you familiarise yourself with destinations and travel times within a city. Knowing that it takes two hours to get from one meeting to another, even though on a map it looks close, is important when you are setting meetings. • Check the normal workdays and business hours in the countries to be visited. Be aware of public, religious and summer holiday periods, as some markets can come to a crawl during these times. • Check whether individuals to be met are comfortable speaking English, and if not, arrange for an interpreter. It is important to remember that you are working in another culture, and it is necessary to appreciate the export market’s business protocols. • Prepare a detailed list of questions before departing and refer to it during the trip. • Be disciplined in note taking both during and after meetings. • Carry business cards printed both in English and in the language of the country being visited.

Business travellers who plan to carry product samples with them should be alert to import duties that they may be required to pay, and to ensure they can provide the correct documentation to customs. Travellers should also be aware of any changes to luggage limits and security arrangements. In some countries, duties and extensive customs procedures on sample products may be avoided by obtaining an ATA (Admission Temporaire) Carnet. This is a standardised international customs document used to obtain duty-free temporary admission of certain goods into the countries that are signatories to the ATA Convention. In any case, appropriate documentation, such as a commercial invoice should be prepared.

Post-visit actions When people return from business travel, they are often so busy catching up on outstanding work that the most important aspect of a market visit is forgotten – follow-up. Often after a trip, you will have a pile of notes and business cards that will require attention. Ideally your trip should not be considered complete until you have satisfactorily dealt with all these outstanding actions. The following action list may assist in setting your priorities. • Review meeting notes and business cards, and list contacts in order of potential business. • Confirm mutual expectations in writing with everyone you met. • Make a priority list of information that was requested from you and respond to the enquirer promptly. • Maintain regular follow-up, including religious/holiday greetings. It is important to maintain your connection and continue to develop your relationship with your contact through regular emails, phone calls and/ or video conference to ensure that your opportunities are maximised. Ai Group can assist with preparing for a market visit, or can visit the market on your behalf. We regularly organise trade missions to key markets, thereby maximising the impact your visit will have. For further assistance email trade@ aigroup.asn.au.



Participating in foreign trade shows and exhibitions
By The Australian Industry Group

Trade shows and exhibitions are some of the most effective direct marketing methods. However, there are many areas to cover in order to ensure success. Trade shows can provide a convenient and efficient method of finding out more about market opportunities as well as assisting in making valuable business contacts.
evertheless they can often be costly in both time and financial resources and therefore companies should carefully assess the suitability of shows as well as ensuring that the maximum benefits are derived from participation. Choosing the right exhibition Whilst it is true that exhibitions are the most effective direct marketing medium, caution should still be exercised over the choice of event. Not all exhibitions work or will work for you. There are around 360 exhibitions taking place throughout Australia each year involving an estimated 10,700 exhibiting companies. The challenge is to ensure that the right companies exhibit in the right exhibitions. In order to conduct the selection process you must establish goals. Possible goals include: • Generate sales; • Gather business contacts for postshow follow-up; • Identify agents, distributors etc.; • Launch a new product; • Enhance existing customer relationships ; • Develop product awareness; • Reach a new market; • Demonstrate a complex product; • Conduct market research; and • Generate media coverage. When you book space in an exhibition you are not really buying floor space, you are buying an audience. You must ensure that you choose to exhibit in a show that attracts the type of audience that will purchase your products or services.




In evaluating an exhibition you should obtain the following information from the organiser: • Previous audience analysis • Copy of show catalogue • Is there computerised registration? • How does the organiser plan to promote the show? • How will visitors find your display in the exhibition? • Is the visitor database available after the show? • References from previous exhibitors • Will the organiser be conducting a marketing campaign to your target audience? The reputation of the exhibition and the organiser are also key elements in your decision to exhibit. Find out what others in the industry think of the event and the organisation. Ask industry associations whether they are supporting or participating in the show and ask them about the organiser’s reputation. Ask your customers which shows they attend and why. Check with industry publications. Are they exhibiting and is the show growing? Pre-show administration Okay, sure you are busy. We know that you have many competing pressures. There is never enough time to do everything you want to do. But if you do just one thing, read the exhibitor manual. Why? • You will save money • You will get what you need, when you need it • Your show experience will be productive • You will reach your show objectives If you don’t take the time to read the manual now; • You may encounter higher costs • You may not be able to obtain the services and supplies that you will need • You may encounter frustrating delays and inconvenience

Pre-show promotion It really pays to begin selling prior to the show. You not only promote higher attendance at the event, but, more importantly, you are letting your customers and prospects know where to find you at the show. Here are some proven techniques to try. • Let your customers know you will be at the show and note the location, dates and times of the event • Mail special invitations or show admission tickets to your customers • Use email to remind your clients to meet you at the exhibition • Schedule advertising to coincide with the show dates. Find out when and where advertisements promoting the show will appear and buy adjoining advertising space On-site/showtime • Offer price discounts or value-added promotions. • Target customers/prospects on-site and schedule specific appointment times during the show. • Develop easy ways to qualify new prospects such as collecting business cards or conducting a prize draw. • Hand out unusual giveaway items with your name and phone, fax numbers and website address imprinted on them. • Distribute discount coupons valid for a specified time period after the show. Post-show follow-up/evaluation Many companies fail to conduct the appropriate post-show follow-up. They can be inundated with leads, and not have the necessary classification system to prioritise the follow-up. Most post-show follow-up can actually be prepared prior to the show. • Immediately following the show, contact all prospects/customers who visited your stand. • Analyse coupon redemption patterns and build a database for the future. • Ask for referrals from prospects and customers. • Begin planning for your next show.

The reputation of the exhibition and the organiser are also key elements in your decision to exhibit. Find out what others in the industry think of the event and the organisation. Ask industry associations whether they are supporting or participating in the show and ask them about the organiser’s reputation. Ask your customers which shows they attend and why. Check with industry publications.



HKTDC Food Expo A Banquet of Delights


uccessful food business from all over the world will gather in Hong Kong for the 21st HKTDC Food Expo in 2010. This pre-eminent event in the Asian fair calendar continues to grow from strength to strength, attracting more than 600 exhibitors from 24 countries and regions in 2009 – 23% more than the year before. Adding spice to the fair were exhibitors from new participating countries including Brunei, Chile, the Czech Republic, Indonesia, Mexico, New Zealand, Pakistan, Palestine, Peru and Singapore. The fair is specially designed to meet the needs of different types of exhibitors and buyers by being divided into the Trade Hall and the Public Hall.

The Trade Hall is an excellent brand building platform for international food retailers, suppliers, wholesalers, brokers and sales agency representatives, and is grouped into pavilions in which exhibitors can market their specialties. The Trade Hall





EFIC: working with Australian exporters to overcome financial barriers
Export Finance and Insurance Corporation (EFIC) provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their businesses overseas.
s the Australian Government’s export credit agency, we help successful businesses to win export contracts, finance their export activities and protect export trade or overseas investments when their bank is unable to provide all the support they need. We work directly with exporters or with their banks to provide loans, guarantees, contract bonds and insurance products which can be tailored to meet the needs of both large and small exporters. EFIC is uniquely placed to do this: we use over 50 years of export finance and industry expertise, contacts at financial institutions around the globe, the strength of our AAA credit rating and an entrepreneurial business approach to make export deals happen. Here are some of the financial barriers our clients have faced and the financial solutions EFIC has provided.


EFIC provided bonding support for Park Assist’s Seattle CBD parking contract.

EFIC’s solution: a working capital guarantee Cairns-based manufacturer Tescorp Hydraulics won its largest-ever export contract, worth A$1.5 million, for a UK electricity sector project. The company was contracted to supply a purpose-built system to install new power cables to secure electricity supplies for Greater Manchester. In order to deliver the contract, Tescorp needed additional working capital. EFIC provided a working capital guarantee for A$950,000 to Tescorp’s bank, the Commonwealth Bank to help the company fulfil its contract. The guarantee enabled Tescorp to access additional working capital from the bank without the company being required to provide further security.

‘Having provided similar machines for projects elsewhere, we were confident we could meet our UK customer’s requirements’, said Tescorp’s general manager Andrew Sands. ‘However, financing the initial production for a project of this size presented a new challenge. We were impressed with EFIC’s ability to work with our bank and put together a financing package.’

EFIC’s solution: a performance bond arranged through EFIC’s US bonding line Park Assist, a specialist in parking guidance based in Sydney, secured a US$780,000 contract with the City of Seattle to provide an electronic parking guidance system. The system will include dynamic LED message signs that give motorists real-time information on parking space availability in the central business district. The contract required the company to lodge a performance bond worth 100 per cent of the contract value, with scope for

the bond value to increase by 25 per cent in line with possible increases in the contract value. EFIC underwrote the performance bond to help Park Assist fulfil its contract. The bond was issued by Liberty Mutual Insurance Company (Liberty Mutual), a bond provider in the US, under an ongoing arrangement between EFIC and Liberty Mutual known as a US bonding line. In the US, contractors are typically required to provide performance bonds to guarantee the entire contract value, compared with 10 to 15 per cent of the contract value elsewhere. The relationship between EFIC and Liberty Mutual makes it easy for EFIC to provide eligible SME exporters with access to performance bonds in the US market. ‘Our company is growing dynamically in Australia and overseas’, said managing director Daniel Cohen. ‘EFIC’s support with the US bond freed up a significant amount of our working capital, helping us to fund our strong export growth.’

For information about how EFIC can assist your export business, call 1800 093 724 or visit www.efic.gov.au.



Internal business review and export readiness
By Len Phillips, Business Advisor, The Australian Industry Group

Export development usually requires a high level of investment and resources, and the timeframe can be years before a satisfactory economic return is obtained, therefore planning is critical for a successful outcome.


given in exporting is that the business must be able to compete within the chosen markets in quality, price and service. To succeed in building a sustainable and profitable export business, organisations must continue to be competitive and also develop long-term mutually beneficial export market business relationships. The investment made in carrying out a review of an existing business, and determining the potential and level of export readiness of the business prior to moving into a market, is usually a smart investment, even if the decision is to focus on the local market and not export.

Quality, price and service are a constant consideration in Ai Group’s process for carrying out reviews and determination of export readiness for clients. The process will determine how exporting will affect the current business, its capabilities and needs to commence exporting. The review and export readiness looks at the following: 1. Policy 2. Products and/or Services 3. Processes 4. Finance 5. Market Conditions

1. Policy • Are the board/owners committed to exporting? • Has the CEO allocated time to be involved in developing export sales? • Has the company considered and developed all recognised opportunities in all of the domestic markets? 2. Products and/or services • Is the product or service selected for exporting compatible with the potential export market? If not, what changes have to be made before the product or service can be sold in the selected markets and what will they cost?



The investment made in carrying out a review of an existing business, and determining the potential and level of export readiness of the business prior to moving into a market, is usually a smart investment...

• • •

What is the products’/services’ sustainable competitive advantage locally and in potential export markets? Are the products/services of high quality? Are the products’/services’ prices competitive in the export market? What is the Australian Harmonised Export Commodity Classification (AHECC)? Are the packaging and/or instructions compatible with the potential market? If not, what changes have to be made before the product/service can be sold in the selected market and what will they cost? Are there any product or service restrictions in the market being developed? If there are restrictions, has the company obtained the necessary licence or agreement to operate in the market?

costing system require upgrading to take into account currency variations? Is there an understanding of grants and assistance available from state and federal governments? Does the company have a formal business plan?

5. Market conditions • Are there any product/service restrictions in the market being developed? If there are restrictions, has the company obtained the necessary licence or agreement to operate in the market? • Will your domestic marketing strategy have to be changed when used in the overseas market? What is the level of competition in the market from your existing and local competitors in the proposed market? How many visits have been made to the potential markets? Who are the potential distributors in the market? The key success factors among longterm sustainable exporters are: High quality products or services High level of commitment from senior management Cooperative, long-term relationships with local distributors Favourable market conditions Export marketing strategies similar to domestic marketing strategies Having carried out your internal business review and export readiness, you will be in a position to decide on the best way forward. If it confirms the export potential, the next step is market research and development of an export strategy and plan.

• •

3. Processes • Does the company have an effective and current web page that can be understood in relevant languages? • Does the company make performance comparisons with major international competitors? • Has a staff member been appointed to lead the export project?

• • • • •

• •

Are there sufficient management and staff skills to commence exporting? Do existing patents or trademarks cover overseas markets? What other strategies are in place to protect your intellectual property (IP)? Does the company have the current production or service capacity to service an export market?

4. Finance • Is there sufficient funding available to set up exporting and has it been committed in the budget for developing export markets? • Do the funding requirements take into account the long term nature of exporting and the potential that profitability may be over one or two years away? • Does the current product and service

Ai Group is able to conduct an export review for organisations and advise on export planning needs. For information email trade@aigroup.asn.au



Hague-Visby Rules limitation of ‘package’ value and what it means to you.
“Shippers who rush completing the detail on their shipping documentation run the risk of serious loss when it comes to a claim,” notes Stephen Ford, Managing Director, Associated Marine.


nder the Hague-Visby rules, a shipper is entitled to have identification of the goods, the

“units” for the purposes of Articles 4, rule 5 (a) not one “package”. The defendant appealed and the Full Court of the Federal Court of Australia held that the carrier was entitled to limit its liability to two SDRs per kilogram of the cargo damaged. This decision was based on Article 4 rule 5 (c) which provides that where goods are consolidated in a container, the number of packages or units stated in the sea-carriage document as packed in the container shall be deemed the number of packages for limitation purposes. To be effective, suggests Ford, the enumeration on the face of sea-carriage documents must clearly identify the number of packages or units “as packed”, using words that make clear the number of packages or units separately packed for transportation. “The risk for loss is high, as in the El Greco scenario, if documentation is ambiguous when detailing the number of items “packed”, especially if there is only one package or unit, which is the container itself.” Ford goes on to say that the findings in the El Greco case demonstrate the gap in the detail on the bill of lading, the exposure for the exporter and the unfortunate consequences for El Greco. “Even though 200,945 pieces were packed into approximately 2,000 packages for shipment, there was no reference to those packages on the bill. The court, therefore, had no other recourse but to award an amount of two units per kilogram of gross

weight or approximately $38,000. If the accurate number of packages were shown on the bill of lading, the case against the carrier would have been much stronger and an award to reimburse a sum closer to the total amount lost more likely.” It is vitally important then, that any shipper accurately completes the application for shipment form and does not just “tab” through the fields to get the task completed quickly. Shippers should take the time to complete the fields accurately and once the bill of lading is produced check the details are correct before continuing with the transaction. Remember it is in the carrier’s interest to have as little detail shown on the bill of lading as possible. Ford notes that: “Insurance for importers/exporters is a complex area. It is critical that shippers understand the risks and exposures they are facing and have appropriate insurance cover in place. Associated Marine recommends that the first step is for shippers to have a discussion with their insurance brokers for the most appropriate solutions. The El Greco case demonstrates that the risk was in the detail and, with the insertion of the number one, the loss was significant”.

number of packages or pieces (or weight) as well as their condition at the time of shipment, shown on the bill of lading. However, as many exporters already know, it is in the carrier’s interest to have as little information as possible on the face of the bill in an attempt to limit their liability per package in the event of loss or damage. The effect of how damaging this limitation of liability can be for the shipper was illustrated very clearly in the El Greco case.1 The plaintiffs, El Greco, shipped posters and prints stowed in a container. On arrival at the destination, the goods were found to be heavily damaged by seawater. The plaintiff sued the carrier. The defendant’s case was based on the assumption it was entitled to limit its liability to two SDR’s per kilogram because there was only one package for the purposes of the Hague-Visby Rules. This argument was based, in part, on the bill of lading issued by the defendant describing the goods as “1 x 20 ft general purpose container said to contain 200,945 pieces posters and print”. However, it also showed the number one in the column headed “No. of Pkgs.” and, at the bottom of that column, against the “Total number of Packages” was also inserted the number one. The trial judge gave judgement for the plaintiffs holding that there were 200,495

1 El Greco (Australia) Pty Limited & Anor v Mediterranean Shipping Co. SA 2004

Shipping Law - Martin Davies & Anthony Dickey, Thompson Lawbook Co 2004 Presentation ‘Recent Development in Maritime Law 2004-2005’ delivered by Professor Martin Davies at Blake Dawson Waldron Brisbane, Sydney and Melbourne, August 2005


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Export costing and pricing guidelines
By Craig Malcolm, TradeStart Export Adviser, The Australian Industry Group

In today’s international market, knowing your own business cost base may not be sufficient. Market intelligence is now becoming imperative to success. Knowledge about the business practices and pricing policies of your offshore business partners, particularly in exclusive distribution arrangements, could be the key to your success.


or instance, if your offshore distribution chain is seeking margins well above your competitors, your export price may be under constant negotiation. This is undesirable and is not conducive to the continuation of a harmonious distribution arrangement. Consideration of reverse pricing, duties, other charges and margins along the distribution chain will enable the exporter to be in a better negotiating position. Companies are in a position to enhance international market opportunities in relation to cost by: • Establishing if any imported components are subject to import duty and seeking duty drawback (your freight forwarder/customs agent is in a position to assist with your entitlements); • Improving stock turns, which will enable inventory holding costs to be reduced; • For small and medium enterprises, getting a freight forwarder to handle your forwarding and documentation requirements can be advantageous. Forwarding agents may be in a better position, due to their relationship with shipping and insurance companies, to negotiate reduced rates; and • Being well informed about the various foreign exchange risk management tools available. 5.1.3 Mark-up/Margin Before consideration of costing logistics for export, it is important to clarify the difference between mark-up and margin. Margins are referred to in the worked costing logistics example below. Confusion with mark-ups will affect the outcome of pricing and reverse pricing analysis. Mark-up Definition: sale price minus cost (i.e. gross profit) expressed as a percentage of cost. Cost A$100.00 Sell A$154.00 Mark-up 54 per cent Margin Definition: sale price minus cost (i.e. gross profit) expressed as a percentage of sale price. Cost A$100.00 Sell A$154.00 Gross Profit A$54.00 Gross margin = gross profit A$54 x 100 = 35 per cent Sales value A$154



Easy reckoner Mark-up % 5.26 11.11 17.65 25.00 33.33 42.86 53.85 66.66 100.00 Gross margin % 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 50.00

How does the exporter determine the selling price for their products? Shown below are a variety of commonly used methods: Cost-plus method. In the cost-plus method calculation, the exporter starts with the domestic manufacturing cost and adds administration, research and development, overhead costs, freight forwarding, distributor margins, customs charges and profit. The net effect of this pricing approach may be that the export price escalates into an uncompetitive range. Marginal cost pricing. This method considers the direct, out-of-pocket expenses of producing and selling products for export as a floor beneath

which prices cannot be set without incurring a loss. This would include any product modifications, plus economy of scale savings, as the incremental cost of producing additional products for export should be lower than the earlier average production costs for the domestic market. Buyer based. Perceived value. More psychological than based on economics. Competition based. Benchmarked to competitors or market average. Price adjustment strategies. Discount pricing and allowances, rebates; discriminatory pricing; and promotional pricing (loss leaders to attract customers). Export Costing There are a number of additional charges to take into account when exporting your product. The list below shows some of those factors to be considered: • Rate per kilo or container • Export packaging • Cartage • Documentation • Local surcharges • Insurance • Finance charges • Certification • Local permits and/or certificates • Stocking fees • Labelling

• • • • • • •

Import duty Inland charges Warehousing Agents’ commission Market visits Advertising and promotion Product liability insurance

Note – There is no GST on exports Tips for exporters • The exporter should attempt to make the buyer’s decision process as easy as possible by preparing your export price list CIF in the currency of the country and port of product destination. • Make an effort to understand the way business is done in the export market and conduct your business similarly offering the same value proposal as local suppliers. Payment terms, delivery and after-sale servicing are important considerations. Include a proviso in your price list – ‘Prices subject to change’. • Consider currency fluctuations when preparing the price list. Include a clause that the price is subject to exchange rate fluctuations and allow a percentage variation.


A world of trade information at your fingertips
The Department of Foreign Affairs and Trade (DFAT) offers a range of traderelated services to help Australian businesses access global markets:
3 3 3 3 3 Information on how the Government is pursuing better market access for Australian goods and services overseas Information on Australia’s Free Trade Agreements and the World Trade Organization Free country trade/economic fact sheets Statistical publications and specialised statistical services www.dfat.gov.au/trade For information on the practical aspects of exporting: www.austrade.gov.au

For business liaison officers in your State/Territory, contact:
3 3 3 3 3 3 3 DFAT Victoria, phone (03) 9221 5555 or email vso@dfat.gov.au Website: www.victoria.dfat.gov.au DFAT NSW, phone (02) 9356 6222 or email dfat.nsw@dfat.gov.au Website: www.dfat.gov.au/sydney DFAT Queensland, phone (07) 3405 4799 or email dfatbris@dfat.gov.au Website: www.dfat.gov.au/brisbane DFAT Western Australia, phone (08) 9231 4499 or email dfat.wa@dfat.gov.au Website: www.wa.dfat.gov.au DFAT Tasmania, phone (03) 6238 4099 or email dfat.tasmania@dfat.gov.au Website: www.dfat.gov.au/hobart DFAT Northern Territory, phone (08) 8982 4199 or email dfat.darwin@dfat.gov.au Website: www.dfat.gov.au/darwin DFAT South Australia, phone (08) 8403 4899 or email adelaide.sa@dfat.gov.au Website: www.dfat.gov.au/adelaide



Australia’s trade with the world
ustralia’s trade in goods and services with the world totalled $563.3 billion in 2008-09 – an increase of 14.5 per cent over the previous year. Australia’s integration in the global economy, and particularly the dynamic Asia-Pacific region, is a modern economic success story. In 1988-89, Australia’s exports of goods and services were worth $55.5 billion. Twenty years later, they had risen to $284.7 billion. Trade contributes to one in five Australian jobs, and has lifted the prosperity of working Australian families by up to $3,900 per annum (source: Centre for International Economics, 2009).


3 In addition to being a major global supplier of mineral exports — like coal, iron ore
and gold — Australia is also a significant exporter of:

3 services such as education and tourism, intellectual property, professional and
business services;

3 energy commodities of natural gas and petroleum; 3 manufactured goods including aluminium, cars and parts and medical
products; and

3 agricultural products such as beef, wheat and wine. 3 Major trading partners are located in Asia — China, Japan, Republic of Korea,
ASEAN; North America — the US — and Europe — United Kingdom and Germany.

For more information, go to: http://www.dfat.gov.au/trade

3 Australia’s trade diversity was a considerable asset in the Global Financial Crisis. 3 Two million Australians are employed in trade-related industries 3 Australia has thrived as a liberal trading nation 3 Since lowering tariff barriers, Australia’s GDP has surged and trade has become
a more important part of the economy.

2008 A$b Goods and Services Ranking – Exports 1 Coal 2 Iron ore and concentrates 3 Education-related personal travel services 4 Gold (a) 5 Personal travel (excl education) services 6 Natural gas 7 Crude petroleum 8 Aluminium ores and conc (incl alumina) 9 Wheat 10 Beef (f.c.f.) Top 10 Merchandise Export Partners (b) World (BOP basis) 1 China 2 Japan 3 Republic of Korea 4 India 5 United States 6 United Kingdom 7 New Zealand 8 Taiwan 9 Singapore 10 Thailand 224.3 32.3 50.8 18.4 13.5 12.1 9.3 9.3 8.3 6.1 5.3 196.5 42.4 38.2 15.6 14.5 9.6 9.0 7.9 6.5 5.4 4.2 -12.4 31.0 -24.8 -15.4 7.2 -20.5 -3.4 -15.3 -21.4 -12.6 -20.6 12.0 29.2 13.5 13.0 21.9 2.5 14.2 -1.0 10.4 11.1 7.2 46.6 30.1 15.1 14.7 11.7 9.2 10.3 6.5 3.8 5.0 39.4 30.0 17.7 15.6 12.1 7.6 7.2 4.8 4.7 4.3 -15.5 -0.6 17.1 6.1 4.0 -17.3 -30.6 -25.9 25.2 -13.3 — — — — — — — — — — 2009 A$b % change Trend growth 5 year (%)

(a) Balance of payments basis. (b) On a recorded trade basis. Sources: ABS trade data on DFAT STARS database and ABS catalogue 5368.0 Updated: 12/03/2010





Government funding – supporting your financing needs
By Jacky Millership, Associate Director, Government Programs and Policy, Grant Thornton Australia Pty Ltd

There is an enormous number of generous industry assistance programs offered by various levels of government in Australia. Governments provide these funding programs in order to support a broad range of their policy objectives, including the development of export-oriented companies. However, we frequently observe situations where businesses that have a legitimate opportunity to claim government benefits are either unaware of the existence of these programs or do not maximise available returns.
f course, accessing government funding programs will, by its nature, always require a significant commitment of time and resources by applicants. Programs almost always also require a matching financial co-contribution from the applicant and therefore it is very important to carefully consider how any potential funding will directly contribute to achieving the company’s overall strategic plans and objectives. In this context it is fair to say at the outset that government funding will generally not solve a business’ finance


needs, however it is an important element of the finance mix which many businesses are not good at leveraging. Challenge number one: finding the right program(s) The difficulty for companies is that it is a very confusing picture to unravel: should I be looking to local government, state government or federal government for support? Having ascertained that, with which department or number of departments should I make enquiries? Take programs for manufacturing companies alone as an illustrative example –

here is the problem in a nutshell: • There are eight key departments at the federal level, which must be closely monitored to determine what is on offer for manufacturing companies • These eight key departments are responsible for around a dozen key agencies that each administer their own subsets of government programs • These departments and agencies are relatively ‘siloed’ and are either generally unaware of, or cannot advise on, other departments’/ agencies’ programs



There is a rapidly changing policy and program mix; what you ascertain is available today may have no bearing on what is offered next week State governments often have a similar number of departments and agencies providing funding programs, some of which may be able to be utilised either in conjunction with federal government programs or separately in areas where federal funding may not be available Funding may even be available at the local government level although such programs are usually of a more modest nature.

Challenge number two: creating successful applications Once a company has determined the best program, or mix of programs, to suit its strategic objectives, it then has to go about creating a successful application. Some programs can be relatively straightforward to access, while gaining access to others can be an extremely arduous and time consuming exercise. Many companies do not have the time or human resources to dedicate to the task nor do they have a good understanding of the government approval processes involved. They also often lack experience in structuring applications to suit the government program merit criteria or in many cases the diverse skillsets required to assemble the data to support an application. Often the project a company is looking to have supported does not perfectly fit the identified funding program mould. What would be considered an eligible/non-eligible activity, what would be considered eligible/ non-eligible expenditure and what project outcomes meet the specified program objectives? In summary, how can a company present the best case for support? While applications can be time consuming to prepare, receiving a decision from Government can be an equally lengthy process. Factor in a number of months for any funding which is provided on a competitive basis.

Challenge number three: managing the compliance and reporting obligations As with the application process, the management of compliance and reporting obligations can be relatively straightforward or very complex, depending on the scale of the grant and the type of grant. That said, grants which are considered straightforward can certainly trip up the unwary; companies banking on certain fund amounts can be caught out when their claims are rejected on the grounds of insufficient compliance documentation. In other cases, some programs have complex legislation which sits around them, making it very difficult for companies to know enough to leverage all the benefits. Many companies prefer to outsource the administration of their government program access to an experienced service provider so that they can remain focused on the every day business concerns that they handle best. Entitlement programs versus competitive, merits-based funding A key delineator between programs are so called ‘entitlement’ programs versus ‘competitive, merits-based funding’. Entitlement programs usually enable a company to claim a refund against retrospective eligible expenditure. They are called entitlement programs because if a company meets the eligibility criteria, spends money on eligible activities, and submits a claim within the prescribed program criteria, they are entitled to a refund. Competitive, merits-based funding, on the other hand, is not guaranteed even if on paper you appear to be eligible in all respects. In these cases, funding is released gradually or in ‘rounds’. Applications are ordered from most worthy to least worthy, and a percentage of the top applications are funded, according to their worthiness and the amount of funding allocated in that period, or to that round. How to get started 1. Take a look at any entitlement programs that enable you to claim a refund against retrospective expenditure.

The Export Market Development Grant (EMDG) enables companies to claim up to 50 per cent of the past year’s (or past two years for first time claimants) eligible export marketing costs The new R&D tax scheme introduced for the 2010/11 year enables companies to claim an R&D tax credit, providing a 45 per cent refundable credit for companies with a turnover under $20 million. This means companies will receive a tax refund of 45 per cent of their R&D spending when they lodge their tax return. (Larger companies may access a 40 per cent non-refundable credit.) Tariff Concessions are a much underutilised benefit available to importers of goods. There are a range of tariff concession schemes which enable the duty payable to be reduced or eliminated. Companies that have paid too much import tariff can reach back four years for refunds.

2. Determine whether prospective business activities can attract funding. If your company currently invests in, or intends to invest in any of the below activities, it is likely that there is a grant, scheme or program you should be considering: • significant imports; • new or established exports; • R&D or innovation activities; • environment and sustainability investment and/or innovation; • infrastructure investment; • venture capital raising; • automotive industry investment and/ or innovation; • textile, clothing and footwear industries; and • business development (small companies). 3. Speak to specialist advisers who have practical experience across the full range of programs to ensure you optimise legitimate benefits. For more information, please contact Jacky Millership, Tel: (03) 8663 6723 Email jmillership@grantthorntonvic.com.au



Entering China by design
Victorian architectural firm, Architektonic, brings sustainable design in China full circle

oburt Betadam, Director of Victorian architectural firm, Architektonic, says that he learned very early on that a picture speaks a thousand words, particularly in China. This comes back to the fact, he says, that in the Chinese language, each written character is a visual representation of an idea. Architektonic specialises in sustainable ‘green’ architecture and design, and Jobert has had great success using 3D animation when presenting to Chinese clients. “The Chinese see sustainable ‘green’ architecture as a very Western idea, but we’ve discovered that we can show with pictures how sustainable ‘green’ practices have been used in traditional Chinese architecture for millennia.” Since his first exploratory fact-finding visit to China in 2004, Joburt credits much of the company’s expansion to the assistance of the Victorian Government’s Export Connections initiative. “We have taken part in every Victorian Government construction trade mission in China for the past four years,” Joburt explains. “Operating in China is all about developing relationships, and these events have opened doors and enabled us to be introduced to important Chinese officials that we would never have been able to meet otherwise. “Government to government relationships in China are very important and this is where the Victorian Government has been great for me. As well as assisting with introductions, the Government has been able to act on our behalf in negotiations when required.”


This program offers grants for strategic reviews, business development plans, group activities and networking. Grants are also available to subsidise the cost of participation in export-related workshops.

The Victorian Government provides funding to project manage groups of Victorian companies to participate in Overseas Trade Fairs & Missions. Missions are conducted by geographic location (e.g. South America) or by industry sector (e.g. ICT, food and beverage).

For regionally-based exporters, the Regional Inward Buyer program provides one-off grants to facilitate inward buyer missions to regional Victoria, while the Targeted Trade and Investment Missions program provides support to regional companies and industries to develop overseas markets.

The Export Networks program provides funding of up to $10,000 for new and existing business networks to provide export information, training services and mentoring programs to their members. These networks can be organised along industry lines, regionally or by market focus.

The Victorian Government helps create clusters of companies with complementary skills and services to build critical mass and bargaining power in bidding for major international projects.

The Victorian Government offers export assistance through its Export Connections initiative. The program is open to both new and established exporters.

The Access Program offers on the ground support for Victorian companies and is delivered through Victorian Government Business Offices around the world, including in the USA, China, Japan, India and Middle East.

The First Step Exporter program provides up to $10,000 in funding to help companies research and explore opportunities in their first export markets.

For more information about Victorian Government Export Connections programs, visit www.export.vic.gov.au



Business seeks greater government engagement to improve free trade agreements’ effectiveness
by Nicole Forrester, Senior Adviser – Public Policy, The Australian Industry Group

In recent years, successive Australian governments have attempted to deliver industry with better access to export markets through multilateral, regional and bilateral free trade negotiations. Government has encouraged Australian industry to recognise that the benefits of these efforts go beyond mere tariff reductions for exported goods.
ndeed, comprehensive preferential trading arrangements do have the potential to open opportunities and reduce business costs and time for Australian exporters. They do this by addressing behind-the-border non-tariff barriers and streamlining regulatory arrangements such as licensing and reciprocal recognition of standards and qualifications. But are the potential benefits of our existing agreements being realised? How do Australian companies perceive the outcomes of the government’s negotiating efforts? In late 2009, Ai Group surveyed members with annual exports valued between $40,000 and over $1 billion across industries including manufacturing, construction, printing and publishing, ICT, retail, and food and beverage on the effectiveness of Australia’s existing free trade agreements (FTAs). On average, a little over one-third of exporters reported that they had received any benefit from exporting to destinations with existing free trade agreements. Of the individual agreements, only 55 per cent of respondents saw the Australia-


United States FTA as being effective, with effectiveness figures for other agreements being: New Zealand, 48 per cent;

Thailand, 25 per cent; Singapore, 18 per cent; and Chile, 17 per cent.



Reported effectiveness of FTAs

There are, of course, pockets of true success in each agreement. Members were encouraged by benefits from reduced import duties, improved market opportunities and, under some agreements, increased labour mobility. While existing exporters reported some moderate benefits in the markets they already serve, members reported that an agreement doesn’t necessarily motivate companies to seek export opportunities in new markets, or encourage companies that don’t currently export to do so. A range of other factors is at play, including the continuing high value of the Australian dollar, domestic economic circumstances, the overall market maturity, industry capability, and the usual risk factors that industry takes into account when moving into new markets, including political, economic, legal and technological risk. Even with an FTA in place, the challenges for Australian exporters remain high. In some cases, an agreement, when implemented, hasn’t been able to deliver the liberalisation agreed to because of old, or new, behind-the-border measures that act as barriers to free trade. Exporters to FTA markets continue to face serious non-tariff barriers, such as quarantine and other health, safety and environmental measures, and standards which are used at the border to protect domestic industries. In addition, FTAs are extremely detailed, complex agreements that are crafted in legalistic language making them particularly difficult for SMEs to decipher and to comprehend exactly ‘what’s in it for us?’ In essence, the potential benefits of these agreements are not being fully realised by Australian industry.

Why is it so critical to get this right? Over the last two decades of unilateral trade liberalisation, Australia has become one of the world’s most open economies, with tariffs averaging less than 3.9 per cent. This provides increased market access for importers and makes increasing our exports a critical goal if we are to avoid a balance of payments blowout. There is also no doubt that international trade is fundamental to the ongoing growth of the Australian economy. Industry is aware – now more than ever – that in order to grow, it has to maximise its participation in the global supply chain. Beyond representing our best means to long-term economic growth, exporting forces Australian companies to increase their competitiveness. It also helps them to access global innovation and technology and to develop new management and marketing techniques. A review into Australia’s trade performance by Mortimer1 found that export industries, and successful exporters within industries, have higher productivity

levels than those focused only on the domestic market. In the face of increased pressure from global competition at home and abroad, Australian industry knows that it must compete on productivity, price and quality. But to do so successfully, the government must deliver domestic and foreign policy settings that support an internationally competitive and sustainable Australian export sector. According to Mortimer1, ‘the growth in export volumes has been markedly slower in this decade than in the previous two decades. Australia has lost global market share in manufacturing, services, agricultural and resource exports’. After rising rapidly from the late 1980s until 2001, the share of exports in our gross domestic product (GDP) has also declined as shown below. And despite our comparative resilience during the recent global financial crisis, the global economic slowdown has taken its toll on our export. Australian export income for the 2009 calendar year was valued at $27.4 billion – 10 per cent lower than in 20082.

Exports of goods and services as a percentage of GDP 1987 to 20071



Given this reality, substantially increasing the number of exporters, as well as the volume of our exports, remains a fundamental goal for Australian industry. It also needs to be a fundamental goal for Australian governments. So where to from here? While acknowledging that some ground can and has been gained though FTAs, the signing of such agreements simply can’t resolve all the issues nor fully realise the potential of Australia’s export growth. To truly capitalise on FTAs, the challenge is twofold; on one hand increasing industry’s understanding of what agreements can deliver, and on the other, improving the capacity of industry to take advantage of the agreements that have been negotiated. Meeting these challenges and turning the potential benefits of FTAs from a theory to a reality requires clear and strong followthrough assistance from government. Such assistance includes programs to encourage industry to look beyond these shores – an extremely costly enterprise for a small business – to develop and maintain contacts and credibility in new markets. Support for export market development plays a huge role in industry’s ability to actually capitalise on the market access gains delivered by FTAs. On this front, industry needs greater engagement from government. Disappointingly, while the 2010 Federal Budget saw a continuation of government programs to support exporters, funding for these programs was cut not expanded. The Export Market Development Grants (EMDG) scheme will be funded to $150 million per year, which is a cut of $50 million. With a return of at least $13 in additional exports for each $1 granted, the economic multiplier effect of the EMDG Scheme and its strong cost-effectiveness as a trade development program justifies expanded government support for the scheme. The TradeStart program, a national network of export advisers providing SMEs assistance to commence and grow their exports, received funding in the Budget for another four years, albeit at the much reduced level of $14.4 million. TradeStart

has had a huge impact and a great return on investment with limited resources. Since 2002 it has assisted 2000 businesses to achieve more than $750 million in exports – its funding from 2006 to 2010 was a total of $23.3 million. These programs must be understood as investments in Australian productivity and ingenuity, not handouts. They are crucial to assist Australian businesses to explore the potential of entering new markets more successfully. The Mortimer Review1 reported that the federal government devotes a modest $675 million per year to trade and investment programs and clearly identified the need to strengthen the linkages between market access negotiations, trade and investment promotion and facilitation and market development. There is a serious disconnect between the level of government resources invested in negotiating necessarily complex FTAs, compared with the resources applied to ensuring their successful application. This is a cause for concern and an opportunity for engagement. More funding for these programs, not budget cuts, is the best way to continue to deliver highly effective support mechanisms to small and medium Australian enterprises to grow their exports. The Department of Foreign Affairs and Trade (DFAT) says that ‘it is too early for any econometric modelling to be conducted with any confidence on the impact of Australia’s FTAs’3. But it has become clear to industry that the hard work actually starts when an agreement comes into force. So the importance of maximising an agreement’s effectiveness through post-implementation strategies cannot be underestimated. Success will require better engagement by both government and industry. Industry is willing and able to do its share of the heavy lifting. Ai Group is already working with members to improve their knowledge and understanding of FTAs, and is working with Australian governments through continuous feedback on what is happening ‘in the field’. Industry’s desire for greater government engagement is not only about financial assistance, like export development

programs. It also reflects the need for a more strategic, long-term coordinated approach to export development rather than an ad hoc programmatic (essentially, budget to budget) management of trade policy. Greater engagement across, and within, government is also needed. There are clear advantages to creating a closer policy bridge between DFAT and Austrade, such as maximising cooperation and joint planning and formulation. A closer, formalised policy development relationship between DFAT and Austrade would better harness the intelligence gained from the daily battles fought by exporters on the ground. This would better inform negotiations, implementation and evaluation of priority market development and subsequently allow for tailoring of Austrade programs based on the specific gains achieved in market access through these agreements. While FTAs cannot alone resolve all the barriers that confront Australian companies in the international trading environment, the potential benefits of existing FTAs are simply not being fully realised by Australian exporters. FTAs should be seen as only one part of a much larger strategy of increasing Australian exports – not a strategy in and of themselves. Equipping Australian firms with the tools required to seize better market access opportunities is equally as important as negotiating FTAs. Industry and Government share an important responsibility to better educate businesses about the opportunities that these agreements present. Doing so will greatly improve Australian industry’s ability to capitalise on these agreements, which is key to their effectiveness. Ai Group is a strong and constant support for the principles of free trade, which can create a more level international playing field, and will continue to call for greater government funding to strengthen the linkages between market access negotiations, trade and investment facilitation and market development.
1: ‘Winning in World Markets: Review of Export Policies and Programs’, by David Mortimer AO, 1 September 2008, commissioned by the Department of Foreign Affairs and Trade. 2: Australian Bureau of Statistics. 3: ‘Review of Bilateral and Regional Trade Agreements’, Submission to the Australian Productivity Commission by the Department of Foreign Affairs and Trade.



Concessions help zebra find its stripes

When he was 14, John Cox saw the original King Kong on late-night TV, and he knew that all he wanted to do was make creatures for movies.
ulie Anderson – project coordinator at John Cox’s Creature Workshop – said that for the next few years, John spent every weekend in his father’s garage, working with plasticine, borrowing books from his local library and writing to people in the industry. When he was 19, John set up his own company to produce creatures and animals for television commercials and mini series. Now, with the assistance of AusIndustry’s Tradex scheme, John Cox’s Creature Workshop produces fantasy creatures, monsters and realistic animals for multi-million dollar films such as Babe, Racing Stripes and Scooby Doo. The widely recognised original ‘Bundy Bear’ is also another of John’s creatures. Being registered for Tradex means John Cox’s Creature


Workshop does not pay customs duty or GST on the materials it imports to produce for export. The company registered for Tradex to import fur and fibres from the United States, and to import specialist motors for its control systems. “The fibre company we deal with in the United States is a world-leading supplier that specialises in making fur fabrics for films,” Julie said. “Another big plus is they’re used to dealing with the sort of deadlines that come with films.” The company also imports specialist motors to recreate lifelike movements, and to pre-program voice and action sequences. “Our animals are very realistic,” Julie said. “In the movie Babe,




Get Ready Pack
Losing contracts or missing opportunities because you cannot demonstrate your environmental credentials?
Keep up to date records on their environmental legal obligations Develop an accredited environmental management system i.e. ISO 14001 Develop environmental procedures relevant to their operation(s) Conduct audits (energy, water and waste) to identify opportunities to reduce their environmental footprint and implement actions Conduct environment training for staff Depending on the size and operation of a business, it may not be necessary to develop all those outlined above. Companies should identify and prioritise what actions need to be developed first.


Companies tendering for Government and Non-Government projects are being increasingly required to show that they have environmental policies and procedures in place as well as demonstrate how they are reducing their environmental footprint. Companies that are unable to display their environmental credentials may be at risk of being unsuccessful. For example tender documents are asking the following types of environmental questions: Do you have a company environment policy? Do you have copies of current legislation in relation to the Environment? Do you have a documented Environmental Management System? Do you have documented environmental procedures for the work you carry out? What environmental initiatives or recent improvements have you implemented to limit the environmental impact by the services you provide? Has your company developed and implemented any waste, water or energy minimisation initiatives?

What services are available to industry?
Ai Group provides the following services to assist companies fulfil their tender requirements: Development of environmental policies and procedures Development of environmental management systems (EMS) Determine companies environmental legal requirements and keep them up to date with changes to legislation Conduct on-site training Conduct audits (energy, water and waste)


What should you be doing?
Companies tendering for projects will need to demonstrate their commitment towards sustainable business practices in order to fulfill all the tendering requirements. In order to do this, companies may need to: Develop an environment policy to be signed by the Managing Director

Further information
For further information contact Ai Group’s Energy and Sustainable Help Desk on 1300 733 752 or sustainablebusiness@aigroup.asn.au

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Promoting products as Australian drives sales: survey


new survey has confirmed that promoting products as Australian in foreign markets can have a positive impact on sales. The survey, conducted by YSC Online in February 2010, found that products carrying the Australian Made logo were much more likely to have experienced increased sales over the past two years than products that do not. “The findings of the survey are exciting because they clearly show that marketing products as Australian gives businesses a competitive advantage. This is entirely consistent with Australia’s ranking as one of the strongest nation brands in the world. In spite of a challenging financial climate, it is encouraging to see that the number of exporters using the logo has grown in almost all surveyed markets,” says Ian Harrison, Chief Executive of the Australian Made, Australian Grown Campaign (AMAG).

Clearly branding products as Australian made or grown makes business sense – not just because consumers around the world think positively about Australia, but also because research from selected export markets show that importers hold our products in high regard. According to a 2009 Horizon Consumer Science research project, 1 in 3 importers in Dubai are interested in importing Australian made products if they are not already doing so and consider our products to be of high quality (60%), reliable (60%), pure and natural (56%) and innovative (52%). “All these positive views of Australia combine to give our exporters a fantastic opportunity to give their products a competitive advantage by branding them as Australian. The survey from Dubai showed that 89% of importers want to see Australian branding on Australian products,” says Ian Harrison.

The Australian Made, Australian Grown logo has been promoted in a number of export markets during the past three years as part of a government funded project administered by the not-for-profit AMCL. The logo can be found on more than 10,000 products, sold here and around the world. In 2009, AMCL experienced record growth in the number of new products being registered to carry the symbol.

To learn more about how to register to use the logo and participate in export promotions, please visit www.australianmade.com.au or freecall 1800 350 520.



International trade documentation
By TridentGLOBAL Pty Ltd

The export of goods outside of Australia is heavily controlled by laws and other government enforcement policies. The purpose of this is to restrict the exporting of specific goods, ensure compliance and to enable accurate international trade statistics.
International trade documentation falls into five main groups: • Australian government • Commercial • Transport • Importing country • Miscellaneous Australian government documents There are 26 government permit issuing agencies in Australia that are responsible for exercising the controls over exports and providing assistance to exporters. Some of the main agencies are: • Australian Customs Service (ACS) ACS administers the control of exports from Australia in terms of the customs (prohibited export) regulations. Documents required by ACS are principally for statistical purposes (export declaration number – EDN), prevention of prohibited exports and sub-standard commodities (restricted goods permit). • Australian Quarantine & Inspection Service (AQIS) The function of AQIS is to provide the inspection and certification necessary to enable the maintenance of market access for most of Australia’s agricultural exports. AQIS has implemented a system known as EXDOC to manage request for permit (RFP), custom declaration and health certificates for meat, dairy, fish, grain, horticulture, wool, skins and hides. It helps ensure that primary products meet the required standards for Australian exports and health regulations of the importing country. • Department of Defence This department is responsible for the control of dual-use technology items, i.e. those items that have a commercial use but may conceivably be used for military purposes, e.g. encryption or cipher devices used for scrambling radio transmissions. (export permit) • Australian Maritime Safety Authority (AMSA) AMSA control the shipment of hazardous goods by sea freight (dangerous goods declaration). Control of hazardous goods by air is the responsibility of the international organisation of airlines – International Air Transportation Association (IATA). • Australian Wine and Brandy Corporation (AWBC) The AWBC regulates and ensures compliance with all wine exports from Australia. They assist in increasing and sustaining demand for Australian wine. Wine exporters must obtain export documentation through the Wine Export Approval System (WEA) and receive approval of the Australian Customs Services prior to shipment. This can be processed a number of ways including electronic data transfer (EDT), online or manually. Commercial documents • Commercial invoice The commercial invoice is prepared by the exporter or seller of the goods and assumes additional importance in the international transaction to its importance in the domestic market. This is particularly true when the method of payment is by a documentary letter of credit as inaccurate completion of the export invoice may result in delays or non-payment for even minor typographical errors. Please see example on page 59 • Packing list The packing list advises the consignee of the details of the contents of packages and their individual weights, measurements, marks and numbers. A detailed packing specification assists the customer in clearance and handling of goods. In some countries it is a mandatory document required by the authorities of the importing country. Please see example on page 60 • Certificate of insurance When required by the terms of sale, this document is normally obtained by the exporter on behalf of the buyer. The cost of the premium is inclusive of the price shown on the commercial invoice and protects the buyer in the event of loss or damage to the goods during transit. • Bill of exchange or draft The terms of sale agreed between buyer and seller will dictate whether the bill of exchange will be used in a consignment. The draft provides some security for the seller by covering the transfer of shipment documents to the buyer through the banking system. The buyer will not be able to take possession of the documents, and thus the goods, until he/she has made payment to the overseas bank, or accepted the draft for payment at a future date.



Transport documents Transport documents will be encountered in most shipments, and will vary according to the mode of transport chosen to export the goods. • Forwarding instructions (FI) The principle purpose of the FI is to instruct the shipping company or agent of the shipper’s instructions for the preparation of the bill of lading. • Pre-receival advice (PRA) Export receival advice (ERA) has been replaced by the electronic pre-receival advice (PRA). It is an electronic system that approves the container transport to the wharf. The details can be processed electronically which will aid in reducing errors. • Bill of lading (B/L) The B/L is the most important document associated with the movement of goods by sea. It is a receipt for the goods, evidence of the transport contract between the shipper and the shipowner, and a document of titles to the goods. The shipping company will not normally release the B/L until the goods have been loaded onboard and the vessel has departed from the port of loading, the exception being when the shipper requires a Received for Shipment’ B/L. • Shipper’s letter of instruction (SLI) The SLI performs a similar function for air freight consignments to that of the FI for sea freight consignments. It is used to give details of the cargo to the airline or agent and provide instructions with regard to the preparation of the air waybill. Please see example on page 60 • Air waybill (AWB) The AWB is issued by the designated airline or freight forwarder. It is a receipt for the goods and evidence of the contract of carriage between the shipper and carrier. However, unlike the B/L the AWB is not negotiable. Similar documents are issued for goods sent by courier services. Importing country documents The following documents are those most commonly required by the authorities of importing countries: • The certificate of origin

This is a simple document issued by organisations such as the Australian Industry Group. As the name implies it is a certification that the goods to be exported are of Australian origin or growth/ manufacture. This document cannot be used to certify goods of foreign origin. Please see example on page 59 • The invoice and combined certificate of value and origin Former countries of the Commonwealth allowed each other preferential rate of duty. This document was primarily developed for that purpose; it does not require certification by a Chamber of Commerce and is prepared by exporters to provide a more detailed price structure for the calculation of import duty. • Consular invoice The consular invoice is normally issued by the consulates or embassies of those countries resident in Australia. A fee for the set is sometimes charged in addition to the legislation fee payable once the documents have been processed and presented for legalising. • Clean report of findings (CROF) Many developing countries now require that the CROF document is presented as one of the mandatory import documents, normally under the terms of a documentary letter of credit and associated import licence. The CROF is obtained from inspection agencies such as SGS and Bureau Veritas who are employed by the importing country. Miscellaneous documents Documents falling into this category may vary and are normally required either as a result of the regulations peculiar to a particular industry or for a specific country or region of the world. • ATA Carnet The ATA Carnet document allows the temporary importation of samples and exhibition goods into certain countries without the payment of duty or bonds. It is controlled by the International Chambers of Commerce (ICC). Application for the issue of a carnet is made through the Chamber of Commerce.

• Health and halal certificates These documents are relevant to the meat industry and provide certification that the animals were free from disease and were killed in accordance with the religious beliefs of the importing country. • Certificates of conformity to specifications and inspections certificates Certain industries and contracts demand that the goods are inspected prior to shipment. The inspection may be performed by an independent organisation or the exporter’s own quality control department. The inspecting authority issues a certificate to the effect that the goods meet the contract specifications. Although the inspection may be completed by one of the agencies mentioned previously, it is not a requirement of the importing country but one associated with the specific contract between seller and buyer. • Dangerous/hazardous goods certificates Goods falling into the following category must be carefully documented and handled to avoid risk to life and damage to the vessels or aircraft in which they are transported. Subsequently there are very specific regulations which exporters should obey if they wish to avoid severe penalties. All of the documents outlined above are based on the United Nations Layout Key for Trade Documents. Exporters using less standardised documents (e.g. word processing or spreadsheets) do not fully integrate with the standard of the UN layout. The United Nations layout is highly recommended for export trade documentation as it ensures the highest standard of consistency and accuracy internationally. For further graphical representation of the documents listed, please see Malbon J and Bishop B, (2006), Australian Export – A Guide to Law and Practice.



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QS004G 1/25 - 6/25 KS006W 7/25 - 18/25 KS006DLV 19/25 - 20/25 FW001B 21/25 BM003S 22/25 - 25/25

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Flight No PACKING LIST EK69/EK223 Departure Date 8 Aug 2005 Departure Date Method of Despatch Sea Air Post 10 Aug 2005 C/Nos Letter of Credit No Arrival Date 10 Aug 2005 Unit Net Gross Cubic Packing List Details Quantity Wt. KGS Wt. KGS Vol. (m3 ) Units
Queen Size Towels - 6 cartons King Size Towels - 12 cartons King Size Deluxe Towels - 2 cartons Face Washers - 1 carton Bath Mats - 4 cartons 48 48 48 100 48 25.300 42.000 48.500 6.500 16.600 30.300 51.000 50.000 7.250 19.600 0.300 0.600 0.220 0.050 0.200

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Managing Export Documentation
By TridentGLOBAL Pty Ltd

International trade is recognised as being extremely complex due to the compliance requirements of exporting and importing countries. It involves understanding the correct use of documents, customs compliance and the management of payment and delivery risks.


number of key areas that need to be covered in international trade include packing, labelling, sea/air freight, marine insurance cover, financial payment methods, government regulations and international commercial terms (incoterms). Obtaining the necessary permits for import/export can take weeks. According to the United Nations Conference on Trade and Development, the average international transaction involves 27-30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the re-keying of 60-70 per cent of data at least once. One of the main setbacks for exporters includes document preparation.

There is an endless list of compliance required documents depending on the exporter’s terms of trade and forms of payment. These include export declaration numbers (EDN), health certificates, letters of credit, certificates of origin, commercial invoices, bills of lading etc. Completing, and sending/receiving these documents manually, can cause many discrepancies. Exporters may often find that their goods have been delayed or even rejected due to inadequately prepared documents. TridentGLOBAL research indicates that organisations generally adopt one of the following methods to manage their international trade: • Outsourcing documentation and compliance to a third party • Modifying their existing ERP software

• •

Developing export software in-house Purchasing a dedicated system like TridentGLOBAL to manage the whole process

Pitfalls of outsourcing Outsourcing export management and compliance to a third party can prove to have many disadvantages. These include: • The exporter’s loss of control due to the process being independently managed by a third party • Manually re-entering the data which allows greater room for error • Prolonged turnaround time on documents including customs clearances, PRAs and health certificates.



Simplify the process According to TridentGLOBAL, companies looking to export need not be deterred as there are many ways to help simplify the process. Export software solutions with different levels of capability may be purchased to assist with managing the international trade process. Things to look for when purchasing a solution: • An organisation that thoroughly understands international trade and holds extensive industry experience; • Software that is modular and can be tailored to your unique business circumstance if necessary; • The provider is able to deliver the export management solution with a high level of service and support. Integrating with enterprise resource planning ERP is a single software solution that optimises internal business processes by coordinating operational planning.

Exporters are increasingly benefiting from solutions that not only manage export requirements, but also link with ERP systems that manage order entry, inventory, production and distribution. TridentGLOBAL customers have the advantage of this ERP integration which means that their customers’ time to react to market is accelerated significantly by being able to transfer the data within the two systems quickly. The solution should have a focus on achieving cost savings on internal and external processes. A seamlessly integrated ERP and global trade solution will increase operational efficiency and provide visibility of shipping schedules. Integrating an organisation’s distribution process within an export management solution will sustain growth and maximise efficiency. Tips to help make the export process easier • Keep up-to-date with government agencies including AQIS, customs,

chambers, and financial institutions and industry associations. • First time exporters may benefit from outsourcing the export process to an agent whilst transactions are low. Once transactions start to increase it is advisable to manage the export process in-house with fully trained staff. Appropriate training can take place with relevant bodies such as Australian Industry Group, and the Australian Institute of Export and Chambers of Commerce. • High volume exporters should look at integrating their existing ERP solution with a global trade solution to ensure that internal processes are accurate, productive and cost-effective. By following the tips outlined above, your organisation can maximise the benefits of your chosen export management process.

Export solution market summary
Small exporters Most entry level exporters process less than 20 consignments a month. For that reason it is reasonably cheap to purchase software that can manage some export processes and limit the reliance on third parties. Medium/large exporters Developed exporters can process anywhere from 20 to 1,000+ consignments per month. To capitalise on the exporter’s potential, an integrated software and services solution, which can be easily managed in-house, is required.



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Navigating Export Risks





If you think any fool can stuff a container … think again!
By Russell Burke, ICAL International Customs and Logisitcs Pty Ltd

This phrase is the title of an excellent and valuable short film produced by the marine mutual insurer, The UK P&I Club in London. The film logically depicts and describes the correct processes that traders should follow when arranging for the receipt, stowing, sealing, and dispatch of containers.
he P&I Club states, in the opening of its film, that as many as one in every six container journeys results in damage to cargo, and the annual costs associated with this damage add up to more than $5 billion. They also state that inadequate packing and stowage cause many of the losses and damage. They emphasise that despite their reassuring appearance, steel containers can easily become a sauna, a steam bath, a refrigerator, or a rubbish bin if proper consideration is not given to the choice of container for the cargo and the voyage, and/ or proper stowage, security, sealing and ventilation of the unit. In our continuing efforts to help shippers avoid damages and loss, we have been using the film in our Ai Group lectures on international logistics for the last 12 years. There is no better name for this article on container stowage than the title of the P&I Club’s film. Make a packing plan and choose the right container for the job. Depending upon the kind of cargo, the transit route and ultimate destination of the container, a shipper may require a particular kind of specialised container, or may require a general purpose dry container in either a 20 foot or 40 foot length. If necessary, make a packing plan, taking into account the sizes, weights and kind of goods that will be loaded, and look at this in relation to the internal dimensions, payload limit, lashing points and other relevant aspects of the containers available for your job.




Here is a list of some of the kinds of containers, most available in either 20 foot or 40 foot length, that are in use by shipping lines in the Australian trades: • Dry, general purpose steel containers in 20 foot and 40 foot lengths (45 foot boxes are not used by shipping lines in the Australian trades at this point in time). Container external heights range from 8 feet to 9 feet 6 inches. • Tank containers (Tank-Tainer) for carrying liquids • Open top containers – with walls and doors and a removal tarpaulin roof – for crane access – for heavy or long cargo that cannot be loaded using forklift trucks • Collapsible flat rack containers that can be ‘nested’ when returned empty • Flat rack container (with fixed corner posts and removable side gates) • Bolsters (flat beds with no ends or sides) • Half height containers • Insulated containers • Refrigerated containers with integral refrigeration units. It is important to choose the right container for the journey and kind of cargo. Such issues as internal height clearance, strength of lashing lugs along the container walls, ventilation or refrigeration needs, floor strength, cleanliness, and how to prevent damage to cargo and containers are significant considerations. If in doubt about the right kind of container, consult with a shipping line or forwarder as to what is available and suitable for your purpose. Remember that many lawsuits have arisen because of damage caused to containers and cargo by poor packing and inappropriate choices of container type. Check with your customer Make sure, before embarking upon the stowage of cargo into a container, that your overseas customer can accept and unload the container without any undue or unexpected delay or cost arising.

The payload weight limit of the container and weight limits for land transport in Australia and overseas As well as choosing the right kind of container for the cargo and the journey, it is also incumbent upon the shipper to ensure that the weight limitations of the box, and the legal weight limits of trucks for land transport are not exceeded. Failing to check this most vital issue could result in serious accidents and criminal culpability. Many countries have strict limits placed upon the weights of trucks on their roads, and in some cases these are considerably lower than Australian legal limits. We know of one case where an Australian exporter loaded 75 tonnes of cargo into a 40 foot container and caused major damage to lifting equipment at the wharf terminal when a mobile lifting machine attempted to remove it from a train. The P&I Club makes the profound point that a voyage across the seas can involve massive waves, and the consequent rolling, pitching and yawing of the ship and its cargo can result in a ‘white knuckle’ ride for the cargo. Add to that the fact that temperatures can soar to above 50 degrees Celsius inside a box and you have a case for their statement, ‘if you think any fool can stuff a container, then think again!’ Below is a comprehensive (but not exhaustive) checklist of considerations and processes that should be followed when requesting, receiving, stowing, sealing and dispatching containers. Container stowing basics Pre-stowing checks of the container • Upon receiving an empty container for packing/stowing, conduct at least the following checks upon the container: i. Is the container seaworthy? Conduct the following checks and inspections! Do a ‘light’ test for holes and bad seals by stepping inside the empty box and closing the doors – any holes or bad seals will allow light to penetrate and therefore reveal the location of the faults. ii. Is the container straight and square, and are the walls, floor and ceiling in good condition?

All containers received for packing should be inspected and a ‘container condition report’ completed. Where containers show signs of damage, rust, or other deterioration it is wise to photograph the box upon arrival. These two measures will protect the shipper against any false claims that they damaged the container. iii. Is the container clean? Are there any residues, liquid, powder, or soils, in the container? Be careful – residues could be hazardous. Make sure that breathing masks, safety goggles and gloves are available for such possibilities. iv. If you have ordered a ‘food’ or ‘medical’ grade container – have you received such? v. Does the container have appropriate ‘lashing’ points along the container? These need to be sufficient in terms of quantity and strength for particular kinds of cargo. vi. The payload limit of the container The load should not exceed the weight limitations of the container or of the packages in which goods are packed. And, importantly – it is not wise to leave the container loading until the last day before loading onto the vessel or other conveyance. Why? Because it is possible that you could receive an unacceptable container and if you have left it to the last minute, you could find yourself in a very bad situation. This is especially important for shippers who are remotely situated from the depots where empty containers are held, and also for shippers who must comply with precise delivery dates under their sales contract or letter of credit. Stowing the cargo in the container Load distribution, placement, and centre of gravity • The cargo load should be as evenly distributed as is practicable, both laterally and longitudinally, to avoid tilting. • Heavy goods should be stowed under lightweight goods – a high centre of gravity can be very dangerous. • Liquids should be stowed under dry goods.



Bracing, cushioning, and prevention of chafing, scratching or other damage to the cargo and container • The cargo load should be properly cushioned, braced and secured, with no void spaces that allow it to move and be damaged, or cause damage to other goods. • Take action to prevent chafing, scratching or other disfigurement of the cargo. • Designing package sizes to fit onto pallets with a small indent between the edge of the pallet and the vertical wall of the packages will provide a useful way of preventing chafing of the load. • Some useful tools for these purposes are, ‘airbags’, slip-sheets between layers and between rows and ranks, shoring beams, and other devices that can maintain separation and remove all void spaces that would allow shifting of the load. • Webbing straps with ratchets fitted are very useful for securing loads, but be aware of their breaking strength capacity. • Try to avoid hammering nails through the floors of containers.

Cross-contamination and incompatible cargo • Do not place incompatible or potentially contaminant goods near other goods, or in a place that would result in cross-contamination or a hazardous situation. • Do not load heavy goods on top of lightweight or crushable goods. Safety concerns regarding cargo stowed near the doors • When loading containers, ensure That cargo near the doors is properly secured so that no accidents can occur when the container doors are opened at the destination. Safety concerns related to powders, liquids and other possible hazards • Do not allow any packages that may leak or spill their contents to be loaded in to a container. This is especially important when loading powders or liquids that could cause contamination of the entire load, and could produce a serious hazard en route or for those persons receiving the container.

Prevention of sweating and condensation problems • Where necessary, act to prevent sweating by proper ventilation of cargo. • Containers have vents – taping over these vent holes may cause moisture problems by trapping moisture that is inside the container. • Use dry shoring and dry pallets • Be careful of containers that have been recently washed – the container floor may contain a substantial amount of water. • Use desiccants to absorb moisture en route. There are several ways of doing this. There are many products designed to sit flush inside the recesses of container walls. Shippers can construct their own absorbers by using vermiculite or other inert moisture-absorbing materials, properly contained to prevent spillage during transit. • If moisture is an issue, then consider not only the desiccants, but also the use of container lining materials that can cause any condensation on



Do not allow seals to be affixed to containers by persons whose trustworthiness is unknown. Check shipping documents to ensure that the recorded seal number is the same as the one affixed by the shipper.

Provision of packing lists and fumigation certificates • It is a good idea to affix any fumigation or other treatment certificates to the outside of the container doors in a sealed plastic pouch. This will alert the receiving parties, and/or any authorities that may wish to examine the cargo, to the possible presence of hazardous gas or other chemicals. • It is also a good idea to affix a container packing list to the inside of the container door. Dispatch of the container from the packing premises • Do not allow your container to be carried on a vehicle that is obviously unroadworthy – it could result in criminal damages. • Ensure that the trailer on which your box is carried is fitted with proper twist-locks to secure the box, and that the twist-locks are in working order and are properly engaged before leaving your premises. • Ensure that the container’s doors are properly secured, and the seal properly fitted before dispatch.

or other hazardous chemicals upon the opening of the container. The potential safety problems related to fumigant gases such as methyl bromide and sulphuryl fluoride are great indeed, and one should be careful of bringing containers in to a closed warehouse for unpacking. It is common to find that containers that have been fumigated have not been properly vented prior to shipment and this means that whoever receives and opens the container may be faced with the presence of large amounts of the fumigant gas.

the ceiling to flow down the walls and into the desiccant, rather than drip from the container roof onto the cargo. • If loading containers on rainy days or in otherwise humid conditions, take account of the amount of moisture that could be present in: a. The ambient air; b. Any wooden packing, shoring, or pallets; c. The container floor; and d. The cargo itself. Recognise that containers will be exposed to the sun and can become very hot inside. This, in the presence of moisture, can cause the container to effectively become a ‘steam-room’ during transit. Therefore, the use of desiccants and container ceiling liners may be imperative. Sealing, documenting and dispatching the container • • Seals and security Use bolt seals instead of flimsy seals of plastic or metal strip. Make sure that seals are handled carefully, and that seal numbers and colours are properly recorded on shipping documents.

Arrival of the container at destination – issues of concern Safety issues for persons receiving and unpacking the container • Safety glasses to prevent eye damage must be worn by the person who uses a bolt-cutting tool or angle-grinder to remove a bolt seal. Gloves should also be worn. • Restraining straps should be placed across the container doors to prevent any cargo packed near the doors from falling onto the person who opens the container doors. • Gas masks should be at hand to prevent breathing any fumigant

Damage to, or loss of cargo, discovered upon opening/unpacking of the container • It is of the utmost importance to follow proper practice in situations where damage or other loss is discovered upon opening or unpacking a container. • Cameras should always be available to photograph the stow, the damaged cargo, or other evidence. • The insurance policy or certificate should also be readily available, and its list of rules and obligations upon the insured must be adhered to precisely. • Carriers and other parties upon whom you or your insurers may have a claim, should be notified immediately. • If the goods are imported from overseas, there may be duty and GST/ VAT refunds involved. Therefore it may be necessary to notify the customs service of the damage or loss. Other issues of significance in relation to containers and stowage Due diligence The nullification of claiming rights against insurers and shipping lines If a shipper packs goods into a container that is not seaworthy, or is otherwise unfit to carry the goods, it is most likely that any claim for damage or loss that results from such unfitness for carriage will be voided. This is a condition of every marine and transit insurance policy for cargo.



Likewise, the terms of carriage under a bill of lading will have similar provisions, thereby making it essential that every shipper conducts a ‘due diligence’ check on containers to be packed with cargo. For a freight forwarder or other party who packs goods on behalf of others, it is imperative that they understand the consequences of packing cargo into ‘unfit’ containers. Where a ‘third party’ is doing the work of loading containers, they could find themselves being sued by their customers, or their customer’s insurers, for having loaded goods into a faulty container. Being sued by a shipping line for container damage As mentioned above under the heading of ‘Pre-stowing checks on the container’, it is very wise to complete a container condition report for every box received for packing. Where the box shows evidence of damage or deterioration, it is even wiser to take photographs of the container. Trucking companies may cause damage in transit, the depot operator who has supplied the empty box may cause damage, or the depot operator may have failed to record damage caused by previous users. The unwary shipper or container packer, who has no procedure for recording the condition of containers upon receipt and dispatch, is a person who is at risk of being wrongly sued for damage to containers. Requests for food and medical grade boxes to be in written form Again, it is wise to make only written requests when you need a clean, food grade, or medical grade container. The reason is obvious. If you have to reject a dirty or otherwise unfit container, who will pay for the additional trucking and lifting costs involved in returning the unfit container and bringing a suitable container to your premises. Containers are subjected to very severe treatment in their working life, and it is very common

to find great numbers of containers in poor condition still in use. Data loggers in containers These tiny devices, capable of measuring such phenomena as temperature, airflow, relative humidity, shock impacts and tilting, are invaluable tools for shippers of perishable and other sensitive cargo. There are many small and inexpensive models available and they are able to upload recorded data into computers. The use of data loggers can protect the shippers’ and insurers’ interests where goods have arrived at the destination in a damaged state. The data logger will provide supporting evidence in a claim. Summary Whilst this article provides coverage of most aspects of container stowage and related issues, it is certainly not exhaustive, and does not canvass the special cases of the stowage of dangerous goods, refrigerated cargo, or the stowage of bulk materials in liner bags for use in general containers, or the use of Tank Containers. However, information on those subjects and detailed instruction on every aspect of container packing is now available on the Internet. A remarkable work called The Container Handbook can be freely downloaded (in English) from the website of The German Insurance Association (GDV e.V.) at www. containerhandbuch.de The Transport Information Service (TIS) from the German Insurance Association (GDV e.V.) provides specialist information from German marine underwriters on various aspects of the transport sector, including cargo Information for a total of 190 products, technical information about containers, technical information about fit-forpurpose packaging, and articles dealing with load securing. Visit their websites at: www.gdv.de and http://www.tis-gdv.de The ‘Any Fool Can Stuff a Container’ DVD, and other relevant

loss prevention educational films can be purchased from Marisec Publications in the UK. Go to their website at www. marisec.org to order online. Also visit the loss prevention section of the P&I Club website at www.ukpandi.com. We consider the process of container packing to be an art at the very least, and in many cases, a scientific or complex undertaking requiring great consideration and study. People who approach the issue with a cavalier, careless attitude are not only asking for trouble for themselves, but are also putting other people’s cargo, and even lives, at risk. With the exception of the title, this article comprises material that is part of the textbook, International Logistics and Freight Forwarding Manual, which is distributed by the author, Russell Burke. © Copyright 2010.


equip and sustain the Australian Defence Force


A strength of Australian defence industry is its ability to develop unique and innovative products to meet the demanding requirements of the Australian Defence Force (ADF), which operates in some of the harshest environments in the world. These are valuable attributes when marketing in the global arena. However, Australian companies face many challenges when competing for export business. Successive Australian Governments have recognised this and have created a specialist unit within the Defence Materiel Organisation (DMO) to assist—the Defence Export Unit. Launched in 2008, the Unit’s mission is to assist Australian defence industry to export in order to sustain strategically and operationally important defence industry capabilities and in doing so better support the ADF. To date, the Unit has supported over 20 companies in achieving export sales in excess of $350 million and is assisting many more companies in future export endeavours.

Assistance is provided by: » researching foreign defence markets » indentifying overseas acquisition opportunities » advising on methods for accessing foreign defence markets » advising about foreign defence industry and acquisition policies, including offsets policies » coordinating a whole of government approach to exploit export opportunities

Working with the ADF and Department of Defence, the Unit can facilitate opportunities for individual defence companies. Such facilitation can include: » preparation of letters of support » assistance with incoming foreign delegation visit programs, such as the United States’ Comparative Testing Office visits » assistance with access to foreign government and military officials » coordination of overseas ‘Team Australia’ missions and trade shows » cooperation with other DMO industry assistance programs

Assistance is conditional on the company: » having an Australian Business Number » performing a substantial amount of work in Australia, with the intellectual property owned by Australia » demonstrating a clearly defined business and export plan » having a product, technology or service that is mature, and not conceptual or in development » demonstrating an understanding of the commitment of resources (staff, time and dollars) needed when entering the export market

While assistance is available to all Australian defence companies, small to medium size enterprises will benefit most from the services offered by the Unit. The Defence Export Unit is eager to assist those companies whose products or technologies support Defence’s ‘strategic and priority industry capabilities’, and enhance the support provided to the ADF.

email: teamaustralia@defence.gov.au web: www.defence.gov.au/teamaustralia

DEFENCE MATERIEL ORGANISATION | www.defence.gov.au/dmo


Overview of the relationship and opportunities for Australian companies in North & South America
By Grame Barty, Regional Director – Americas, Austrade

The ‘Americas Region’ for Austrade comprises the USA, Canada, and Latin American and Caribbean countries.
ur focus for supporting exporters and investment to and from Australia is in eight main countries where we have an established points presence across the USA, east and west Canada and the ‘Latin 6’ – being Mexico, Colombia, Brazil, Peru, Chile and Argentina with increasing interest in trade relations emerging from Cuba. Goldman Sachs predict that three of the top five economies – USA, Mexico and Brazil – will come from the Americas Region. Canada will feature somewhere in the top ten. In the global financial crisis the Latin 6 economies held up well and are now rebounding very quickly, and the USA will remain the world’s largest consumption economy. Why is this and what are the drivers? In essence they comprise the following: • The USA remains the worlds largest and most sophisticated consumer and services economy • The USA population will increase by nearly 100 million by 2050 and a large portion of that growth will come from Hispanic origin (mostly Mexican) compared to the flat or decreasing population in Japan, China and Europe • Mexico will remain a major beneficiary of sustained USA economic growth and is increasingly looking to Asian markets to diversify




Brazil is an economic powerhouse – energy, food and water independent with massive investments in agriculture, advanced manufacturing and an already urbanised population (unlike China) Colombia is the rising star of the region. With a population of 44 million based in the Gulf and Pacific, it is resource-rich and water, food and energy secure Peru and Chile are resource giants and are fuelling China’s growth in much the same way that Australia does.

Opportunities for exporters in the United States • The USA remains Australia’s largest economic partner when trade and investment flows are taken together. Austrade sees that substantial and growing demand exists in the USA for professional and financial services, innovation in advanced manufacturing, and particularly for technology and services in the energy and environment area. • Austrade is working with many of the top-rated advanced biofuels companies in the US to explore opportunities for doing business in Australia. As emerging US companies receive significant government and or industry funding – and as multinationals enter the sector – they are seeking global opportunities for research collaboration, feedstock production, demonstration sites, and new markets; particularly in the Asia-Pacific region. As such, a number of companies have begun investigating Australian opportunities, particularly in relation to algae for jet fuel replacement, but also Gen 2 cellulosic biopower and ethanol solutions based on waste, or crop feedstock such as sugar cane and canola. • Austrade is implementing a major strategy to create linkages in policy, programs, research and innovation in water sustainability and management, particularly in the southern and western states of the

USA. The strategy is also receiving interest from Mexico, Canada, Peru and Chile. Processes, methodologies, technology or devices or other innovations for managing urban consumption, precision agriculture irrigation, water trading or environmental management are all keenly sought after. Austrade is working with a number of major US based systems and service integrators that hold a large share of US Government contracts and that are active in Australia. These organisations are interested in both trade and investment opportunities with Australia, with energy and security being major areas of activity. The USA is a major services market for Australia and our largest market for professional services. Services trade with the United States is sophisticated, broad-based, and unique in being dominated by professional services rather than travel. Sectors include business services, project management, franchising, engineering, and government services. Consumer related exports to the USA, including major commodities such as beef and wine, remain very significant to Australia. Australian music, digital media and fashion also remains very popular in the US market. Consumer demand is the major driver of the US economy however changing tastes, overall economic conditions, as well as factors such as exchange rates can have a significant impact on exporters requiring detailed market knowledge and understanding of trends together with a strong communication and engagement strategy.

Opportunities in Latin America – ‘the L6’ • The economic relationship between Australia and Latin America is dominated by mining and resources. Latin America, as an emerging market, is primarily characterised by Australia as a significant investor with many major resources companies

having operations in Latin America; e.g. BHP Billiton, Rio Tinto, Xstrata, Orica, GRD Minproc, and Mincom. These operations, in turn, help to open up and ‘pull through’ opportunities for Australian suppliers of mining equipment, technology and services; eg engineering services providers such as SKM, Worley Parsons, Transfield Services, and GHD, as well as equipment companies such as Austin Engineering and Groundprobe. Latin America is a significant market for Australian coal exports – especially Mexico and Chile with the requirement for LNG and geothermal products, technology and services to increase in those countries in particular. In Brazil, wind power and LNG are increasing renewable opportunities. Australia’s commercial relationship with Latin America is increasingly diversified. For example, Australian energy companies (such as Pacific Hydro and Hydro Chile) are investing in Latin America, while Macquarie Group recently launched its Mexican Infrastructure Fund and National Australia Bank has an office in Brazil. There is also increasing interest in Australian expertise in other services, such as water and environment. Key sectors of opportunity for Australian exporters and investors in Latin America include mining, mining equipment, technology and services, energy (coal, renewable, oil and gas services and LNG), agribusiness technology and services, infrastructure, ICT, construction, education, and other engineering and consulting services. Education services remains one of the great stories of the last decade in the L6 with over 30,000 students annually participating in programs offered by Australian institutions. In Brazil, Australian expertise in sports infrastructure and services as well as events management will become an increased focus, with the country hosting the 2014 FIFA World Cup and the 2016 Rio Olympics. Major events, such as the soccer World



Cup in Brazil and the Olympic Games in Rio de Janeiro, will boost growth and provide unique opportunities for Australian suppliers and service providers. Austrade is developing dedicated programs to assist Australian enterprises access to business in the lead-up to and during these events. • Austrade’s Latin America regional team works closely with a range of allies to ensure a fully integrated ‘Team Australia’ approach to activities in the region, including DFAT, the Council on Australia Latin America Relations (COALAR), the Australia Latin America Business Council (ALABC), the Australian Industry Group (Ai Group), the Mining Equipment and Services Council (MESCA), and Austmine. • Colombia is one of Austrade’s Latin 6 priority markets and offers significant opportunities for Australian enterprises, particularly in mining & energy, infrastructure, professional services and education. In December 2009, Minister Crean signed a bilateral Memorandum of Understanding to strengthen trade and investment ties between Australia and Colombia. Austrade currently operates a ‘virtual office’ in Colombia with a single district manager based in Bogota. Austrade is actively considering options for expanding dedicated resources to support leveraging opportunities in this growth market. Opportunities in Canada • Australia continues to enjoy a strong and stable trade and investment relationship with Canada with two-way investment growing and no major market access issues.

• Key sectors of opportunity for Australian exporters and investors in Canada include mining technology and services, clean energy and environment (including water management), financial, professional and business services, wine (one of Australia’s largest per capita wine markets), health including medical, pharma, biotech, and the commercialisation of R&D and technology. • Australia investments in Canada are concentrated in mining and resources (BHP Billiton, Rio Tinto, Alcan) as well as services to the mining and energy sectors (WorleyParsons, Transfield). • However, Australia’s investments in Canada are becoming increasingly diversified ranging from professional and financial to software and food manufacturing: - Plenary Group and Macquarie Group (both are leaders in provision of public private partnership financial solutions for infrastructure) - Computershare (runs the largest share registry service in Canada) - GHD, Coffey - Bakers Delight, Flight Centre (both have extensive franchised operations) • Austrade is continuing to promote Canada as a market distinct from the US while also seeking sectoral synergies across North America as they benefit clients. Sectors of focus are services, education, energy, mining and environment and wine/food and agritech. Within these groupings, specific focus is on:




Services – financial, professional and business services; student recruitment and facilitating university-to-university research collaboration; medical and health devices and services; life sciences. Energy, mining and environment – equipment, technology and services for oil and gas; mining; clean tech; green building; water technology. Wine, food and agritech – wine; speciality, natural, organic and health foods; meat; food safety/traceability services; agrisustainability services.

Conclusion The eight major target markets of Austrade in the Americas Region are all high performing economies with robust futures based on consumption, resources, services, agriculture, increasing populations and sovereign wealth. In many ways what has made us successful is making them successful. So in a way we are selling to ‘peers’. These markets understand and admire the role Australia has played in developing its economy, capabilities and role within the region, and see our exporters and investors as adding great value to what they already do. The sales pitch in this region is that Australia is already an energy and mining ‘superpower’ managing to adapt to living in an increasingly hostile climate environment, and has created an outstanding financial and professional services base from which to operate globally. You, the exporter, will help them create the same enviable capability and lifestyle in their markets!

In many ways what has made us successful is making them successful. So in a way we are selling to ‘peers’.



Brazil Trade Bureau The B of Bric:
By Luis Aroeira Neves, International Trade Advisor, Consulate-General of Brazil

Global and Australian media have, in recent years, repeatedly mentioned the growing prospects of the Brazilian economy.


n the World Investment Survey 2009, from the United Nations Conference on Trade and Development (UNCTAD), Brazil ranked fourth as the preferred future destination for international investors. The survey polled CEOs from 241 global corporations. Amongst the main criteria foreign investors quoted for selecting Brazil were: size of the domestic market, market growth, existence of suppliers and partners clusters, availability of natural resources, and access to international and regional markets. While many Australian companies have been in Brazil for years (Nufarm, Agrichem, Woodside and Pacific Hydro), others, such as Seek Limited and WorleyParsons, have recently joined them. However, many companies are missing out mainly due to

lack of awareness of the range and depth of opportunities available in Brazil. There is a growing consensus about the economy’s prospects and plenty of untapped potential for investors. For Australian businesses looking to expand internationally, it may be the right time and place to look beyond export-only strategies. Brazil basics Brazil has always been a country of superlatives. Having the largest land area, economy and population of the Southern Hemisphere, Brazil is also the fifth largest country in the world in terms of land area and population. Brazil has approximately 48 per cent of South America’s land area, 40 per cent of its GDP, and half of its population. According to the IMF and

World Bank, it is the ninth largest economy in the world, and is likely to become the fourth or fifth largest by 2050. The size of Australia with an extra NSW, Brazil has a population almost 10 times that of Australia. It is Australia’s oldest diplomatic partner, as well as its main trading partner in South America. Bilateral trade and investment have been growing steadily between the two countries. Australia and Brazil share many common economic characteristics, endowed with mineral resources, and boasting strong agribusiness, manufacturing, banking and services sectors. Culturally, Brazilians and Australians share a common taste for BBQ, beach and beer. Even Australian rum



and jacaranda trees can be traced back to when the British fleets stopped in Rio de Janeiro on their way to Australia. Aussie gum trees dot millions of hectares of planted forests in Brazil. Australian wine is more common at Brazilian restaurants than ever before. The Brazilian economy offers a domestic market with growing purchase power and a strong manufacturing base: from mining machinery and equipment to luxury coaches; from renewable ethanol fuel to remote sensoring equipment; and from executive jets to soya beans. Brazil produces and ships products around the world with increasing efficiency. This is still a developing country and there is homework to be done, but this is precisely where the opportunities for Australian companies may reside. Still, with seemingly endless water, arable land, mineral, oil, renewable and human resources, there is much room to accommodate growth. Foreign Direct Investment topped US$45 billion during 2008, with FDI growing at annual rates of 35 per cent. Having hosted the Pan American Games in Rio de Janeiro in 2008, Brazil is now preparing to host the FIFA World Cup in 2014 and the Olympic Games in 2016. There are many opportunities for Australian companies willing to make the jump and open a subsidiary or manufacturing base in Brazil. Many international businesses’ first contact with Brazil is by exporting, but after a few visits to Brazil, they decide to open manufacturing bases there. When a country of superlatives realises its potential As a rule of thumb in Brazil, you might want to have a local partner, or acquire an established Brazilian business (WorleyParsons did this in their acquisition of CNEC Engineering). In most areas there are no caps or limitations to foreign companies’ ownership. Australian companies should see Brazil as a developing country that is quickly realising its potential, and they should not wait until all their competitors are already there to consider it.

Brazil has a unique mix of size, extensive mining, oil and renewable energy resources, established manufacturing clusters, growing domestic market, prudent economic management, diversified economy, and stable democracy. Brazil also has access to neighbouring markets within the South American Common Market. Take agribusiness for example. In the last 20 years, Brazil changed from a middle-ranking country to being the world’s largest exporter of beef, chicken, green coffee, orange juice, sugar, ethanol, tobacco, and soya beans. It still has a plentiful supply of arable land outside of protected or ecologically sensitive areas. Another example is oil. Brazil is now self-sufficient in oil and posed to become a major exporter after many offshore oil field findings in the last years. Petrobras, the Brazilian oil giant, is the world’s largest deepwater oil driller. In 2009, Euromoney magazine ranked the company as the best managed and most improved company in the whole of Latin America. With fuels and agribusiness booming, the industry clusters around it also prospered. According to OECD’s 2009 Survey of Brazil, by using prudent fiscal policies, the country reaped the benefits of the boom in commodities exports, with a relatively mild downturn, and a quick rebound. Both the World Bank and the IMF predict Brazil will grow between 4 per cent and 5 per cent in the next two years. More importantly, there is a growing consensus that the long-term prospects of the economy are very positive. Benefits from establishing a subsidiary or manufacturing base in Brazil are many; from tax concessions, export schemes, capital goods import duty exemptions, and access to various state and federal schemes trying to address specific shortages. For instance, there are public–private partnerships, infrastructure projects, special schemes for the World Cup and Olympic Games, as well as for the manufacturing, mining and agribusiness clusters. There are also specific programs in states and regions that need to develop further.

In 2010, the government of Brazil enhanced the export financing capabilities of BNDES, the National Development Bank, by establishing an export credit agency. Australian companies in the construction, hotel, infrastructure, and manufacturing sectors are strongly encouraged to consider Brazil as part of their global strategy. Brazil topped stock market returns amongst emerging economies in 2008. The property sector is also blossoming. Brazil will invest heavily to upgrade the country’s infrastructure (Until 2014, US$2 billion alone is being invested to upgrade São Paulo’s subway system). The Brazil Trade Bureau, a division of the Consulate-General of Brazil in Sydney, has been building bridges between the two largest economies in the Southern hemisphere for decades. Our area of expertise relates to empowering potential investors in Brazil, as well as Brazilian exporters, to find business opportunities in Australia. For more information, please contact: Luis Henrique Aroeira Neves International Trade Advisor Brazil Trade Bureau Consulate-General of Brazil Phone: +61 2 9285 5713 Email: luis.neves@brazilsydney.org or trade@brazilsydney.org Web: www.brazilsydney.org



Latin America could be the new Asia, and Colombia is a market on the move
Queensland Treasurer, Andrew Fraser

In April, I led a Queensland Government ministerial trade delegation to key markets in Latin America, visiting Chile, Peru, Brazil and Colombia.
he trade mission confirmed my belief that Latin America is shaping up as the new Asia for Queensland and Australian exporters. Global investment bank Goldman Sachs predicts that by 2050 the list of the world’s five biggest economies will include two Latin American nations – Brazil and Mexico. Latin America is a growing market for Queensland’s exporters. The four countries that I visited imported a combined $1.45 billion worth of merchandise goods from the State in 2008-09. The region continues to grow and its governments are implementing economic growth plans for continued development in the medium-to-long term. Latin America is also showing signs of recovering from the recent financial downturn quickly in comparison to other global regions. The International Monetary Fund (IMF), in its latest Regional Economic Outlook report released in early May 2010, predicts regional GDP growth of four per cent for Latin America in 2010, after a contraction of 1.8 per cent in 2009. Five year growth is forecast at more than 30 per cent. These economic forecasts back our decision to place a new Queensland Government business development manager in Chile, and a new trade position in Brazil to be appointed in the next 18 months – a move that will make Queensland the first Australian state with dedicated trade representation in Brazil. These new business development managers will work to assist the State’s companies to do business across the whole Latin America region. Today, Queensland companies are increasingly engaged in Latin America. There are about 30 companies operating in Chile, for instance, enabling a team approach to expansion in this market. Merchandise exports from Queensland to Chile were worth $569 million in 2008/09 representing more than two thirds of Australia’s exports to Chile. In Brazil, Queensland exports were valued at $1.15 billion – more than three quarters of Australia’s exports to this country.




Brazil’s economy alone is worth in the vicinity of $2 trillion, and with the Olympics and the FIFA World Cup coming to the nation over the next six years and new oil reserves being recently discovered, there is certainly more business to be done by Australian companies in Brazil. Our business development managers will be charged with supporting Queensland’s exporters, as well as increasing our presence and building new export markets in targeted Latin American growth markets – particularly Peru and Colombia. My visit to Colombia in April was the first by a Queensland Government Minister, and I am certain it won’t be the last. Queensland is working hard to enable our businesses to take advantage of Colombia’s growth phase. Colombia is a fast growing export market for Queensland in Latin America. The state’s merchandise exports to Colombia have grown, admittedly from a small base, by an average of more than 30 per cent per year over the past five years. The IMF’s figures predict that Colombia’s economy will grow in 2010 by a moderate 2.3 per cent, but this will bounce back in 2011 to grow by 4.0 per cent. Trade Queensland has identified strong opportunities in Colombia’s mining, agricultural, and education sectors, and there are also potential opportunities in the telecommunications sector.

These key opportunity sectors in Colombia are well-suited to match the strengths of Queensland’s exporters, particularly in servicing the mining sector and the associated infrastructure requirements. Colombia is already a key market in Latin America for Queensland’s international education and training sector. In 2009, there were 3,254 Colombian student visa enrolments in Queensland, up almost 30 per cent on the 2008 figure. Most of these students were enrolled in English language or vocational education courses. Nationally, Colombia is second only to Brazil as a source of international students to Australia from Latin America, with 9,866 enrolments by Colombian students in Australian educational institutions in 2009. My visit to Bogata on 28 April 2010 continued the work that the Queensland Government is doing to strengthen our relationships with Colombia. I signed a new Statement of Intent with the Colombian Government and met with Colombian Government and business leaders. Queensland is now the only Australian State to have a trade agreement with Colombia, giving our businesses and institutions a valuable edge in gaining ground-floor access to this market. The new Statement of Intent focuses on cooperation in mining-related industries, education and training, climate change initiatives and innovation – all areas with great growth potential.

I also attended a key business reception to discuss Queensland’s current Statement of Intent with the Colombian mining State of Antioquia, which encourages collaboration in mining research and development. This state-to-state agreement aims to improve mining efficiencies and encourage information sharing on mining-related public and private sector programs in both Queensland and Antioquia. Under this agreement, there is potential to increase business in the mining sector, including safety initiatives, health research, testing, certification and training programs. There is further potential business to be done in environmental technologies relating to mine site regeneration, water management and climate change in the future. Reflecting a mutual trade interest, Colombia is also taking a strong interest in Australia. Colombia’s Minister for Foreign Affairs, Mr Jaime Bermudez, visited in March 2010 and announced the establishment of an AustraliaColombia Business Council. Colombia’s Minister of Trade, Industry and Tourism, Mr Luis Guillermo Plata, also came to Australia in March last year. Colombia, like the rest of Latin America, should not be overlooked by Australian exporters. It is a nation that is breaking from its traditional image and increasing its focus on doing business with the world.

Colombia is a nation that is breaking from its traditional image and increasing its focus on doing business with the world.



Colombia: land of opportunities for exporters and investors
By The Embassy of Colombia in Australia

Welcome to Colombia! We warmly invite you to discover a different country, strategically located in the northern corner of South America, with coasts on both the Caribbean Sea and the Pacific Ocean, offering access to markets in the US, Latin America and the Caribbean. Competitive advantages make us your ideal export platform.


ver the last few years, Colombia has lived through an all-time high growth and development phase. As a result, social indicators have improved dramatically. Colombia has achieved solid structural growth, based on an increase in the investment rate and higher productivity levels. The Colombian Government is committed to generating the most favourable conditions for domestic and foreign Investment.

Preferential market access to more than 1.2 billion consumers thanks to Free Trade Agreements (FTA) Colombia’s 2010 trade agenda includes nine agreements with 45 countries. The Government is committed to establishing Free Trade Agreements with key strategic partner countries to generate better conditions for investment and trade. These agreements have opened markets in the Andean Community, Central America, Canada, Mercosur, EFTA countries and more recently with the European Union.

Attractive incentives for investors In order to attract foreign investment (one of the government’s key priorities), new strategies were designed. These include, amongst others, the creation of free trade zones and the establishment of legal stability contracts. What are free trade zones? Free trade zones are geographical areas, within the national territory, for the development of industrial goods and services or commercial activities under a special tax, customs and foreign trade regime.



Benefits • Single 15 per cent income tax rate for industrial users of goods, industrial users of services, and operators, except for commercial users, which are taxed at the general rate • No customs taxes (VAT and customs duties) on merchandise imported from abroad • VAT exemption for raw materials, inputs and finished goods sold from a national customs territory to industrial users of a free trade zone • Exports made from free trade zones to foreign countries (except Peru) benefit from international trade agreements signed by Colombia • Goods produced, manufactured, transformed or resulting from any production process developed in a Free Trade Zone are recognized as being ‘of national origin’ • Possibility of performing partial processing outside of the free trade zone for up to nine (9) months • Possibility of selling, inside the national territory, 100 per cent of the goods or services produced in the free trade zone with customs tariff and VAT payable only on the percentage of inputs imported from third countries. The most competitive free trade zone in Latin America: 15 per cent income tax as well as the possibility to sell to local markets Income taxes – Deductible expenses Deductions include the following, amongst others: • 40 per cent of the capital invested in the acquisition of productive real assets acquired • 100 per cent of the amount paid for Industry & Commerce, sign and billboard, and property taxes during the corresponding taxable year, as long as they are directly related to the taxpayer’s economic activity • 25 per cent of the tax paid on financial transactions may be deducted, regardless of their

relationship to the taxpayer’s economic activity. Colombia offers legal stability contracts to guarantee investment projects • Investments over US$1.84 million1 (150.000 T.U)2 • The condition that the investor pays one per cent premium based on the amount of the investment. 0.5 per cent in unproductive periods. • Signed contracts from three to 20 years maximum. Investment opportunities • Biofuels - Income tax exemption for ten years - 6.5 million hectares (16.1 million acres) suitable for biofuel production - World’s fifth largest palm oil producer - Productivity of 9,000 litres of ethanol per hectare every year - Growing market. For 2020, a production of 1.4 billion litres of ethanol and 1.2 billion litres of biodiesel per year - Assured demand. In 2020, E20 and B20 - Creation of a ‘green seal’ to identify the national biofuel production with good environmental and social practices. • Cosmetics - Market of US$2.6 million and production of US$2.4 million - Cosmetic exports grew by 23 per cent between 2003 and 2007 - Country with the second largest flora biodiversity in Latin America - Market for men’s cosmetics pocket share duplicates the European women market share - More than 242,000 professionals and technicians available to work in the cosmetic industry - Products with natural ingredients grew 9 per cent between 2003 and 2008.

• IT Services - 27,000 business graduates and 13,000 engineering graduates per year - Seven cities with more than 500,000 inhabitants - Neutral Spanish accent - Market: US$1 billion, growing at a rate of 42 per cent in three years. • Tourism - 1.45 million foreign travellers visited Colombia in 2008 - Tourism growth to Colombia (9.73 per cent) more than doubled the worldwide growth (2 per cent) – 2008 data. - Income tax exemption for new or remodelled hotels - Medical tourism: is the practice of travelling abroad to obtain healthcare services, generally at a small fraction of the cost in a person’s home country. • Pioneer program in reproduction immunology; the first test tube baby born in Latin America; first pacemaker in the world • Colombia is the second best country for scientific and health infrastructure in Latin America: (IMD, 2008) • 3,000 medical graduates every year. • Infrastructure: Projects that add up to more than US$25 billion, just in 2009.

1 The investment requirement is calculated iwth an exchange rate of COP$2000 = US$1. It is responsibility of the investor to calculate the investment requirement at the moment of submitting the application for the Legal Stability Agreement. 2 One Tax Unit equivalent COP$24.555 or US$12.2



Sector Tourism Eco-tourism Late yield crops Forestry

Tax exemption period 30 years for companies that build or restyle hotels before 2018 20 years starting from 2003 10 years after the start of production in crops planted between 2003 and 2013 Permanent exemption for investment in new forest plantations, sawmilling and timber plantations Publishing of books, magazines, booklets or collections of scientific or cultural characteristics are exempt until 2013 10 years for products manufactured in Colombia with high scientific and technological research content, starting from 2003

Australia’s trade and investment relationship with Colombia: Major Australian exports, 2009 (IN A$M): Nickel ores & concentrates Electrical distributing equipment Electrical circuits equipment Electrical machinery and parts Major Australian imports, 2009 (IN A$M): Coffee and substitutes Cut flowers and foliage Insecticides, herbicides, disinfectants Cereal preparations Source: DFAT For additional information go to: www.investincolombia.com or www.mincomercio.gov.co 21 6 6 4


17 1 1 1

New medicinal products and software

Renewable energy 15 years for sale (by the generators) of electricity based on wind resources, biomass or agricultural waste River transport 15 years starting from 2003 to provide services in slabs and boats with net weight below 25 tonnes

Source: Proexport



Doing business in Chile
By M. Paz Camus, AUSCHAM, Chile Australia Chamber of Commerce

Chile is a very attractive market, not only because of its 16 million inhabitants (6.5 million of whom are located in Santiago), but also due to the large network of trade agreements held with major countries in Latin America and the three countries that make up North America. These agreements have positioned Chile as a competitive and interesting country to establish a base of operations, with the objective of developing the local market and, furthermore, tackling the rest of Latin America.
he political and economical stability achieved in Chile through diverse governments has also marked a trend towards credibility and significance of the country’s long term objectives. Like Australia, the Chilean economy is based on the export of raw materials, with copper being the main export and mining the major sector, followed by agriculture and forestry. Over the past few years, Chile has used the word development as its main axis of operation. The country joined the Organisation for Economic Co-operation & Development (OECD) and as the new President of Chile, Sebastián Piñera, has stated, the country is on its way to becoming a developed economy in the next 10 years, having also overcome extreme poverty. As such, it is important to attract capable investors, capital and technology providers to achieve the much expected growth.


Chile possesses a Foreign Investment Statute (Law Decree 600) which has the following benefits for foreign investment: • Investment can be made in foreign currency, tangible assets (new or used), technology or in loans. • The minimum investment accepted (through the above methods) is US$5,000,000 or equivalent in other currencies (there are other manners for minor investors). The loans associated to the investment cannot correspond to over 75 per cent of the total foreign investment. • The contract guarantees free access to foreign currency for the remittance of capital and profit or interest rates. • The investor may repatriate the capital one year after the date of admission. Profit can be transferred abroad at any time after paying the corresponding taxes (due to profit) or having performed the respective tax retention.

The contract guarantees to freeze the customs and value added tax until the entry of the investment in physical assets has been completed. • The contract guarantees non discrimination to Chilean investors. Though constraints to internal loan access might apply, all of them have recently been removed. • At the investor’s request, the contract can guarantee a fixed income tax rate of 42 per cent for a period of ten years. However, foreign investors may choose to give up this tax rate and be subjected to the overall income tax system. The contract may also guarantee the invariability of the special tax to mining over a period of 10 years. • There are additional benefits for investors over US$50,000,000



Market behaviour in Chile Chile is an easy country in which to operate without too many bureaucratic requirements or special rules for foreigners. There are equal opportunities for locals as well as foreigners. To form a company is a relatively simple process, although longer than in Australia. It takes approximately between 20 to 30 days until it is operational and has a Tax I.D. Number. There are a number of ways to operate in Chile: 1. Assign a representative based upon a contract whereby the representative acts on behalf of the investor and at the investor’s risk to perform one or more business transactions. 2. Create an agency or branch of the foreign company. 3. Create a limited liability partnership. The liability of the partners is limited to the amount of individual participation. The corporation is managed by a manager and requires two partners as a minimum. 4. Create a corporation. The liability of the shareholders is limited to the amount of individual participation. Requiring two partners as a minimum, the corporation may be private or public and is managed by a board of directors, whose members may be replaced at any time. Public corporations are subjected to the control of the superintendence of values and insurance. 5. Create a limited individual liability partnership whereby the partner is liable to the amount of capital contributed or to a bigger amount specified in the deed of the partnership. 6. Create a partnership of shares which can have one or more partners. Taxes All taxes in Chile are imposed nationally. There are no significant council, province or regional taxes except for council permits. The entity in charge of overseeing taxes in Chile is the Service of Internal Tax Office (SII). SII is also in charge of issuing instructions, administrative

resolutions and interpreting tax legislation. The main sources of national income taxes are: • Tax on company and personal income. This is based upon two factors: the location of the taxpayer’s residence and the source of income. Foreigners pay tax only on income obtained in Chile during their first three years. 1. The first category tax, at a 17 per cent rate (currently there is a bill which would raise it to 19 per cent and 18.5 per cent in the year 2011 and 2012 respectively and then to return to 17 per cent permanently) which applies to the profits from industry, commerce, mining, property and other activities involving the use of capital. 2. Special tax to mining from 2006. Mining activity is subject to an additional tax named ‘Specific Tax to Mining activity’, also known as ‘Royalty Mining’ and varies according to the tonnes of exploitation (a modification is under study). 3. The second category tax, with progressive rates, applies to income derived from the personal services of employees. 4. The income of independent workers and professionals are considered as income related to the complementary global tax (same proportion and progress rates as the second category tax) and applies to the residents’ total income (coming from both categories). 5. The additional tax applies to the total income of both categories of partnerships or non residents. The profit generated by partnerships which have non- resident partners or shareholders are subjected to this tax when this profit is withdrawn; they are distributed as dividend or remitted abroad. • Value added tax (VAT) of 19 per cent to all sales and services. The VAT paid on imports, purchase and services received (state credit) deducted from VAT payable for sales and services provided (state debit).

The taxpayer, seller or provider of services must present a monthly tax return declaration and pay the state net debit on the 12th day of the following month. Exports are not VAT tax levied. The VAT paid on the purchase of assets and services, which are necessary to produce the exported assets, are deducted from the VAT payable from other sales or it is reimbursed by the Tax Service Office (SII). • Customs duties on imports of virtually all goods and products amount to 6 per cent of the value of the import, but between Chile and Australia, as well as between Chile and over 35 other countries, there is a Free Trade Agreement and therefore this tariff may become zero depending on the item imported. Stamp and stamps tax, due to acquiring loans of 0.5 per cent, if the loan is repayable on demand or has an expiry date. The tax rate will be 1.2 per cent for foreign loans regardless of the amount (there is a bill to decrease it to 0.6 per cent). Futhermore, the tax regime includes property taxes, tax over inheritances and donations (currently in the process of modification) and other minor taxes. Market opportunities Chile is aware of the limitation of being a country based upon the exploitation and export of natural resources. Australia, in this regard, is an example for Chile. The development of new technology, focused on the efficient production processes of natural resources, especially in mining and agriculture, are welcome and can be very lucrative. Chile is looking at desalination plants in Australia, wind, and geothermal energy in the hope of applying them to the north of the country where the major part of the mining sector is located. Another interesting business opportunity has arisen from the impact of the disastrous 27 February 2010 earthquake. It has provided a market for diverse alternatives of construction as well as quick implementation materials.



Australia and Chile sign new tax treaty: Taking a “regional” view, and what will it mean?
By Harris Gomez Group

Australia and Chile have signed a comprehensive new income tax treaty. The treaty will free up the exchange of taxpayer and bank information between the Australian and Chilean tax authorities and will supposedly aid both governments in reducing tax evasion.


he Australian Government stated that “the new income tax treaty between Australia and Chile will provide certainty and stability of tax treatment for Australian and Chilean cross-border investors and reduce tax-related barriers so the economic relationship between our countries can continue to grow”. Largely a consequence of Chile’s desire to join the Organisation for Economic Cooperation and Development (OECD), the treaty will eliminate double taxation on income and is likely to cause a significant increase in the flow of investments from Australia into Chile. Provisions of the new tax treaty include: • Reductions in source-country withholding taxes on certain crossborder payments of dividends, interest and royalties; • Rules to determine when an enterprise or an individual of one country may be taxed on its activities abroad; • An agreed basis for determining the allocation of profits within a multinational company to reflect the pricing that would be adopted by independent parties; • Rules that ensure that profits derived from the operation of ships and aircraft in international traffic are generally taxed only in the country of residence of the operator. Also, income derived by crew members from employment exercised aboard an aircraft operated in international traffic is only taxable in the cabin crew’s country of residence; • Rules for the taxation of income, profits or gains from the alienation of property;

Provisions that ensure that pension and retirement annuities are taxed only in the country of residence of the recipient; • A general obligation for both countries to relieve double taxation on cross-border income by permitting tax paid under the other country’s laws, and in accordance with the proposed treaty, to be allowed as a credit against tax payable under their own laws; • Mechanisms through which the Australian and Chilean administrators may, by mutual agreement, resolve tax disputes and relieve double taxation; • Rules to protect nationals and companies of one country from tax discrimination in the other country; • A framework to provide for the full exchange of taxpayer information; and • Special rules to preserve the application of existing tax arrangements between Chilean and Australian companies under the provisions of the Chilean legislation DL 600 (Foreign Investment Statute). This is of particular importance to Australian mining companies with investments in Chile. Australian lawmakers are determined to introduce legislation into Parliament as soon as practicable to give the new treaty the force of law. The provisions of the new treaty will take effect in Australia in four different stages after coming into force, which will be 1 January 2011 if it is ratified by Parliament this year. If it is ratified sometime next year it will come into effect on 1 January 2012 and so on.

Chile and beyond (how to really take advantage of the double tax agreement) Your business needs to be strategic and take a regional view. Map out where you want to go and in which new markets you want to participate. You should seek assistance in understanding what is involved with regards to taxes (local and international). For example, are you intending to do business in or manufacture in Brazil or Peru? If so, what is involved locally and what are the implications to your Australian business? Depending on your markets, you may want to consider bringing your products through Chile’s free trade zone in Iquique. Chile, in comparison to Australia, enjoys stronger and more competitive trading treaties with many Latin American countries, including Brazil, Colombia and Mexico. There are also tax free zones in Brazil that may serve you better. Chile has over 55 Free Trade Agreements and some 26 double tax agreements so it is important to have up-to-date and accurate advice in relation to the following: • Free Trade Agreements • Double tax agreements • Tax free zones • MERCOSUR or MERCOSUL • NAFTA • P4 Treaty • Madrid Protocol If you need any assistance or have any queries in relation to any of the above, please feel free to contact Harris Gomez at hmg@hgomezgroup.com, Sam Gearing at sfg@hgomezgroup.com, or go to www. hgomezgroup.com



Intellectual property (IP) rights in Latin America
By Harris Gomez Group

Contrary to popular belief, there is no such thing as an “international” or “worldwide” patent, or “international trademark” that covers the whole planet in one application.
logos, descriptions of those goods/services in which it seeks to protect its trademark and so forth. Applications are reasonably straightforward, however the authorities can take a hard line on accepting some trademarks (in the event of the prior registration of a same and/or similar trademark, and even in some cases where the chances of there arising confusion in the market are minimal). Any objection raised by the authorities can be appealed by the applicant. Practical tips It is common to see Australians come to Latin America and market their product and/or service (through various trade shows), set up, trade and then realise they have no protection, or even worse are in infringement of a third party’s IP rights. We advise our clients before even setting up to ensure that their IP rights are protected and that they are able to use their IP. This can be achieved by conducting quick and inexpensive searches. From a business perspective, we have found that our clients, who have their IP in order, send a good message to the marketplace as they are strategically and effectively able to transact with their buyers, especially in the case where the buyer is a large multinational like BHP, who in some cases require that you are the owner of the IP rights prior to entering into a purchase contract. In most Latin countries, the rule of law is adhered to and strictly enforced, regardless of whether or not you are a foreigner, so protection of one of your business’s most valuable assets is a worthwhile cause. If you need any assistance or have any queries in relation to any of the above, please feel free to contact Harris Gomez at hmg@hgomezgroup.com, Sam Gearing at sfg@hgomezgroup.com, or go to www. hgomezgroup.com.

mechanism exists under the Patent Cooperation Treaty (PCT), administered by the World Intellectual Property Organization (WIPO), whereby applicants can make international patent applications. However, this merely simplifies the process to make national applications in each PCT member state (of which there are over 125) and protects the applicants’ rights to a national application for a limited amount of time. Similarly with trademarks, international registrations can be made via the Madrid Protocol (of which there are currently 84 member states, but of Latin American countries, only Cuba is a member state) and the Paris Convention (of which there are over 100 members) however there is no mechanism in place which provides international blanket patent/trademark protection. Significant benefits arise from these international treaties/conventions however many applicants and/or patent/trademark owners misunderstand their international IP rights. Depending on the status of any patent/trademark application with IP Australia, further applications can leverage


off those IP Australia applications courtesy of these treaties/conventions. All Australian businesses that currently operate, or intend to operate, in the Latin American market should review their current IP rights in relation to the region. IP applications in Latin America National applications need to be made in each individual country in Latin America and in some countries, for instance Brazil, the process can take a minimum of three (3) years until final registration. In general however, the process takes approximately two (2) years (presuming that no objections are raised by the authorities or the public) from application until final registration. All applications need to be filed in Spanish (except Brazil, which requires that the application is filed in Portuguese), and those translations need to be certified. The applicant may choose to have a local representative in that country of application, and that relationship will need to be evidenced in the form of a power of attorney from the applicant to the agent. Just like those applications in Australia, the application will need to include designs and/or drawings (in the case of patents),



Powers of attorney in latin america – part of “la vida”
By Harris Gomez Group

In comparison to Australia, where Powers of Attorney (POAs) (ironically referred to in some circles as a ‘licence to steal’) are not an especially common instrument when doing business, Latin America cannot operate without POAs, which are part of la vida. In a direct business culture clash with Australia, in Latin America, parties entering into a contract must have express and written authority to do so. The most common instrument of doing this is a POA. Whilst Board resolutions can be used as an alternative for some functions, they are less commonly used. POAs are typically used for instructing professionals, lawyers, accountants, architects, engineers (not doctors or vets) and so forth.


n Chile, all incorporated companies must have a legal representative. That person must be a Chilean citizen, is legally responsible for the company, and rights of authority automatically vest with the legal representative when the company is incorporated. Where the company is effectively a subsidiary of an Australian company, it is common for the Australian company to give a POA to the Chilean company’s general manager/gerente general or equivalent, to attend to day-today functions in its role for the business, for instance entering into employment contracts, leases of office space and/or buildings, entering into business contracts and attending to the company’s banking needs. In the instance that an Australian company wants to give a POA to a person in Chile, that POA must be signed in front of a Notary Public in Australia, then legalised at the Chilean Consulate and/ or authenticated by the Department of Foreign Affairs and Trade (depending on the treaty with Australia regarding notaries). Once the original is sent to Chile, it then needs to get “locally” legalised and registered. A similar process applies to granting a POA in Argentina, Peru, Colombia and Mexico. The wider the powers contained in the POA, the more practical. However this has the drawback of being more dangerous. If the person has too much power, he/she can close you down and deal with funds, so the key is trust. The company needs

to find the right balance. That is ‘wide’ versus ‘specific’. In some cases, Australian companies give very limited powers in the POAs and are too specific, so much so that the general manager cannot do anything without the Australian parent company’s approval. This obviously has negative practical impacts on the business. POAs are easy to revoke, so they are safe in that respect. Practical tips on POAs: 1. Do a background search on whom you intend to provide with a POA. This is inexpensive and there are companies in Australia such as Seraphim Risk Management from Melbourne that can attend to this; 2. Work out exactly what the person (to whom the powers will be vested) will be doing and work from there. Work out limits. For instance, the powers can be split into dealing

with employment contracts, banking, debt collecting, representation before public agencies and political authorities, mail, sales, business contracts, real estate and so forth. Similarly, each section can have a corresponding monetary limit; and 3. Separate the role of the general manager and legal representative and thus have a ‘check and balance’ (we find in many cases clients innocently give one person both these functions and thus ‘put all your eggs in one basket’). If you need any assistance or have any queries in relation to any of the above, please feel free to contact Harris Gomez at hmg@hgomezgroup. com, Sam Gearing at sfg@ hgomezgroup.com, or go to www. hgomezgroup.com.



Doing business in the United States: legal issues
by Steven Williams BA DJuris

Though exporting to the United States can be profitable, conducting business activities in what amounts to a foreign country raises a number of legal issues.
Legal risk Unless an Australian company’s product is regulated in the United States (such as pharmaceuticals, medical devices etc.), there is little that legally prevents the company from doing business directly in the USA. If the Australian company can find a US customer for its products, it can sell those products directly to the customer. This is often the simplest means of doing business in the United States, but it carries a degree of risk. A foreign company, whether Australian or other, that sells its products in the USA can be made to answer in a United States court for any injuries that arise from the use of those products. A company might also be subject to a breach of contract claim in the USA or some other commercial dispute with a US customer, distributor, or sales agent. One solution to these issues is to ensure that the insurance policy covering the Australian company covers any injury claims that might arise in the United States. Most Australian business insurance policies specifically exclude coverage in the USA though some Australian insurance companies will waive this exclusion (usually in exchange for a higher premium for the insurance). In regard to the risk of commercial disputes, this can often be minimised through written agreements between the parties. The process of making the sale in the United States may be as simple as a US customer placing an order with an Australian company, and the Australian company then filling the order. In such a transaction, there may be a minimum of documentation between the parties. This can complicate the merits of the dispute since the actual terms of the transaction might not have been clearly defined, and it can also raise other issues such as whether Australian law or US law applies to the dispute and where the dispute will be litigated.



To avoid these issues, it is usually good business practice for the parties to enter into a written agreement that clearly states the terms and conditions applicable to their transactions. Such agreements are widely available on the internet and from companies that publish legal forms, but obtaining legal advice should also be considered. Executing a written agreement up-front can help prevent later misunderstandings and legal bills. Income tax The US-source profits of a foreign company doing business in the United States can be subject to US income taxation regardless of where the company is based. For US federal income tax, however, a double tax agreement (DTA) between Australia and the United States exempts certain Australian companies from this rule. Under the DTA, the USsource profits of an Australian company are not taxable in the United States at the federal level provided the company does not carry on its business activities through a permanent establishment in the USA. Whether an Australian company has a permanent establishment in the USA is an issue decided on the facts and circumstances of each case.

The right to assess income tax is not exclusive to the US federal government, and the 50 individual US states also have the power to assess income taxes. With only a few exceptions, every US state assesses an income tax or a gross receipts tax on companies doing business in their state. Because the DTA is an international treaty between the countries of Australia and the United States, it is not binding on the individual US states, and it provides no protection against state income taxation. Whether an Australian company will be subject to a particular state’s income tax regime usually depends on whether the company has enough business contacts with that state to establish a nexus (a connection between the state and the foreign company) that is sufficient for the state to assert tax jurisdiction over the company. For example, merely warehousing goods in the USA is not enough to have set up a permanent establishment under the DTA (so an Australian company storing its products in the USA would be protected from US federal taxation), but this may be a sufficient nexus for the company to be liable for state tax in the state where the goods are stored. Structuring US business activities to avoid or minimise US federal and state taxation obligations should be given careful consideration by an Australian company planning to expand into US markets. Trademarks A trademark is a distinctive mark, usually in the form of a word or symbol, which when applied to a good or service, distinguishes it from similar products made by competitors. This permits consumers to tell one brand from another, and trademark law grants certain rights to parties that use distinctive marks in relation to their products or services. However, since a country’s trademark law extends only as far as the country’s borders, trademarks used or registered in

Australia are not protected in the United States. If an Australian company will be selling goods in the USA that bear a trademark, thought should be given to registering the mark in the United States. Travel to the United States Australians do not usually need a visa to travel to the United States and can enter the country under the Visa Waiver Program (VWP). Before travelling, Australians must apply through the Electronic System for Travel Authorization at www.cbp.gov/xp/cgov/travel/id_visa/ esta/. The VWP allows admission into the United States for up to 90 days for tourism or limited business purposes such as meeting with potential clients, negotiating contracts for goods or services that will be provided from outside the USA, and attending trade shows. Admission under the VWP does not permit the person to work in the USA or to provide any kind of productive labour. Australians, like all other foreign nationals, can work in the United States only if they have the appropriate visa. For further information, please contact: Steven Williams Tel: (02) 9238 6672 Email: steve@sbwilliams.com.au Web: www.sbwilliams.com.au



An overview on selling to the US retail sector
By Amy K Frey, President, ATC International

Measured solely by revenue numbers, the US represents one of the largest retail markets in the world. According to the US National Retail Federation, total US retail sales in 2009 was US$4.1 trillion. Although retail sales have declined in the past two years, the US market continues to represent enormous selling potential for Australian manufacturers.
Trends While a slower economy has required US retail buyers to become more assertive, the current climate has also helped to encourage buyers to be more open to better pricing, smarter products and new vendors. This presents both a challenge and an opportunity for companies selling to the US retail market for the first time. In recent years, major US retailers have been expanding their product categories to gain larger market share. Supermarkets and drugstores now carry a wider assortment of general merchandise, mass merchants are selling food items, and home improvement retailers are selling appliances and work clothing. While superstores are rigorously competing with each other in every major category, direct marketers (including catalogue companies and e-commerce sites) are steadily winning customers from traditional brick and mortar stores. In 2010, US direct market sales are expected to grow by 3.5%. Growth in online shopping has been largely driven by an increasing number of fast internet connections in US homes. Direct market sales have also been increasing due to enhanced marketing tools used by savvy e-commerce sellers such as Amazon.com. To improve customer service and stay competitive among younger demographics, traditional retailers are working fast to integrate and upgrade their internet systems. For instance, they are offering multi-channel distribution networks such as being able to order online and pick up instore or order online and make a return instore.



Brand names continue to play an important role in US consumer choice and US retailers are aggressively increasing their store brands (i.e. private labels). As store brands expand, major retailers are sourcing direct from foreign and local manufacturers at an increasing pace. US retailers are continuing to identify paths to more efficient logistics structure, such as requiring their vendors to ship direct to consumers to fulfill catalogue or internet orders. They are also seeking to manage their inventories with fewer markdowns and greater perceived value at regular price. To do this, retailers are looking for vendors to help them develop lower starting price points, which also can result in a change in their traditional mix of product. Consumer tastes and expenditures are trending toward “lifestyles of health and sustainability”. Eco-friendly products and services, eco-friendly facilities, and eco-friendly activism are being heavily promoted among US retailers and strongly supported by US consumers. For the future, analysts are predicting that the US consumer focus will be on high value items with long life, low impact on the environment and low energy consumption as well as items that promote a healthy lifestyle. Tips for approaching the US retail market Marketing materials and price lists – Prepare marketing materials that are US-friendly such as a price list in US dollars, FOB pricing from a US warehouse and trading terms that are consistent with what other US suppliers offer. Avoid colloquialisms like ‘jumper’ or ‘gumleaf’ in product descriptions. If you are selling your products wholesale, there is no sales tax so references to GST should be removed. If you are intending to bring giveaway gift items to a trade show, do not ship them with the samples –carry them with you in your luggage! Trade show gift items are often the cause of many tragic delays when trying to clear trade show samples shipments through US customs. Allow a lot of extra time when shipping samples and trade show items to the US.

US trade shows – trade shows are a great place to learn about the market, meet initial customers, gain publicity for your product and to network with potential sales representatives or other valuable industry contacts. While you may not write a lot of orders in the initial show, the networks and market research achieved through participating in US trade shows will substantially help to establish an ongoing US business. Make sure that the trade show is right for your product and, if possible, visit the show prior to participating. Start small – While large US retailers have huge appetites for product, their purchasing power makes them very demanding customers. Because of these demands they may not always be the best way to begin in the US marketplace. Mistakes on orders shipped to larger retailers can be costly not only in terms of charge backs but delays can even result in losing the account. Start out with smaller retailers to get the supply chain finetuned. Smaller retailers will be more forgiving if a shipment is held up in US customs or if somehow a mistake was made in communication. Larger US retailers are more likely to cancel a late order and not order again. Payment terms – Most small and medium-sized US retailers do not usually pay by bank wire or transfers. Instead they will pay by credit card or US dollar cheque. Have a payment system ready that involves either using your Australian merchant facility to process credit cards (be careful with exchange rates!) or identify a convenient and inexpensive solution for depositing US dollar cheques. Find out how long it takes for overseas cheques to clear in your bank and how much it costs per cheque to deposit. Establish a Base – US retailers prefer to purchase products that are available from a US-based warehouse. Third party logistics providers can offer an easy solution for holding product in the US and some 3PL suppliers offer additional services to help assist with other aspects of doing business in the US, such as bookkeeping or customer service.

Establishing a US – base is more attractive to US retail buyers who prefer not to receive orders from overseas. Larger US retailers may also want extended terms that can be up to 60 days. Domestic Shipping – For many retail industries in the US, the customer will pay the freight from a US warehouse to their store. This makes pricing easier, but you will need to establish a system for calculating the US freight upfront. For smaller parcels, use www.ups.com to gain a general understanding for US domestic ground shipping costs. To do this, you will need the US postal codes (origin and destination) as well as the weight of the parcel. Freight rates (palletised orders) are also available on the web and can be obtained from a variety of carriers online. Freight rates are usually less expensive if you ship on the account of an established freight consolidator or US logistics providers. Be persistent – Most Australian exporters are surprised at how much longer it takes to secure their first substantial order in the US. Be persistent and continue to follow up and visit the market regularly. While the end result can be very lucrative, as the saying goes, “good things take time”. The US market is large, buyers are approached every day by new suppliers and it takes time to be seen and get heard. Do not be discouraged! Demonstrate that you are in the US market for the long run and be persistent. ATC International has been helping Australian exporters succeed in the US market for over 20 years. In addition to offering logistics and business management services, ATC also offers a variety of services that are specifically designed for exporters new to the US marketplace.



Australia to heed safety standard deadline
The European Commission has extended the deadline for the transition from standard EN 954-1 to standards EN ISO 13849-1 and EN/IEC 62061. Rockwell Automation Area Manager – Safety, Gary Milburn, explores the implications to Australia’s industrial community.
EN/IEC 62061, with no reference to EN 954-1. Importantly, this transition has implications reaching farther than in Europe alone—Australian machine builders and component manufacturers must also prepare. Setting the standard In order to plan a logical course through the transition to these new standards, it is important to realise that the change affects two fundamentally different user types; the designer of safety-related subsystems, such as controller and component manufacturers, and the designers of safety-related systems, such as machine builders. Soon—if not already—working to EN 954-1 will be considered unacceptable by both groups. In contrast to EN 954-1, EN/ISO 13849-1 and EN/IEC 62061 have been structured to accommodate the design of more sophisticated safety control system applications. In fact, EN/ISO 13849-1 is fated to become the most commonly used standard for all machine safety control systems, including complete systems, subsystems or individual components. Both EN/ISO 13849-1 and EN/IEC 62061 incorporate a ‘probability of failure’ assessment calculation—a feature lacking in EN 954-1. Here, a performance level (PL) is assigned once a range of requirements are satisfied. These include: reliability data for all system components; diagnostic coverage (DC) of the system; software requirements; and protection against common-cause failure and systematic faults. It’s important to note that the category rating system will be retained.


In recent times, the functionality of industrial machinery has advanced considerably. Industrial processes are being continually enhanced with more sophisticated PLC-based technologies capable of driving throughputs and product quality to levels never thought to be possible. As a result, the functional safety standards that govern the manufacture and safety rating of such machinery and their components are evolving to accommodate the latest technological advancements. Machine builders and component manufacturers must be vigilant, and remain up to speed with changes to performance requirements, and the standards that specify them. For Australian companies—especially those with export activities—of particular interest is the impending transition from EN 954-1: 1996 ‘Safety of Machinery, Safety related parts of control systems’, to

the newer EN/ISO 13849-1: 2008 ‘Safety of Machinery – Safety related parts of control systems’, and EN/IEC 62061: 2008 ‘Safety of machinery – Functional safety of electrical, electronic and programmable electric control systems’. Recently, the European Commission extended the three-year transition period to five years, revising the deadline to conform to EN/ ISO 13849-1 to 31 December 2011. With the complete withdrawal of EN 954-1 now inevitable, its continued use alone is destined to become problematic in Europe and closer to home. The soon-to-be-superseded standard is not suitable for some of the more advanced technologies commonly used in modern machine-control applications and safety products. In fact, the impact of the impending switchover is now being felt, with many machine-specific (C type) standards already calling for compliance with EN/ISO 13849-1 and



The new standards require control system designers to calculate the performance level of their safety circuits so that the safety rated control systems provide adequate integrity. Product-specific functional data from component suppliers may then be used in conjunction with tools such as the SISTEMA Performance Level calculation tool from IFA (formerly BGIA) (Institute for Occupational Safety and Health of the German Social Accident Insurance) to confirm that the PL rating has been achieved. For Australian machine builders and component providers, the early adoption of these newer functional safety standards is likely to yield long-term benefits. Attention exporters At present, Australian industry has adopted standard AS 4024.1 2006 ‘Safety of Machinery’. However, like EN 954-1, AS 4024.1 does not incorporate a probabilistic component, or require the designation of a PL. While compliance with AS 4024.1 will suffice (for the time being) for machinery destined for local use, it is a different story for local machine builders and component manufacturers with European export operations, as well as those with export aspirations. Even though compliance with EN 954-1 is technically acceptable until the end of 2011, overseas purchasers of Australian-made machinery are more likely to demand compliance with EN/ISO 13849-1 in order to future-proof their investments. If local machine builders and component manufacturers haven’t already implemented internal systems to comply with EN/ISO 13849-1, or begun this process, then international purchase orders may be lost. Interestingly, ISO 13849-1 was published in 2006, which means machine builders and component manufacturers have already had four years to bring their systems up to speed. The recent time-extension to comply with the new standards indicates that a significant number of industrial businesses and machine type C standards were not yet in a position to comply by the original 31 December 2009 deadline.

Rockwell Automation streamlines safety calculations Rockwell Automation has created a library of its safety products and their associated functional safety data. Users can simply drag the product model number into the SISTEMA Performance Level calculation tool and verify PL ratings automatically—a real time- and labour-saving innovation. Additionally, documentation produced by this calculation tool provides proof of due diligence of the safety rated control system design. To access this library of functional safety data, as well as other safety standard information and tools, visit Rockwell Automation Safety Solutions Portal at http:// discover.rockwellautomation.com/EN_Safety_Solutions.aspx

Anecdotal evidence has suggested that complying with the new standard comprised more work on its initial implementation than first anticipated— especially for small- and medium-sized machine builders with limited resources. Here, machine builders are potentially required to change their processes and designs to satisfy the new requirements. As a result, it would be prudent of Australia-based businesses to learn from the oversight of some of their European colleagues and begin the process of complying with EN/ISO 13849-1 sooner rather than later. Global opportunities There is real potential for the requirements outlined in standard EN/ ISO 13849-1 to become those specified in the Australian marketplace. Furthermore, with electro-mechanical and electronic control systems converging at a rapid rate, and the adoption of a quantifiable methodology, it makes sense for such a global harmonisation of functional safety standards to take place. However, in the ever-changing field of functional safety standards, many businesses don’t have the resources to keep abreast of new requirements, let alone execute them in a systematic way. While the adoption of EN/ISO 13849-1 and EN/IEC 62061will throw up some challenges, it will also present a number of opportunities for enterprising Australian companies. As it becomes more difficult and timeconsuming for end-users to comply, it is likely that they will look to outside contractors and experts. This presents a business opportunity for system integrators in particular. By skilling-up and positioning themselves as experts in EN/ ISO 13849-1 and EN/IEC 62061, system integrators can relieve the workload from machine builders and end-users.

Additionally, enterprising solution providers will develop tools to enable Australian machine builders to comply with these newer standards as soon as possible. Early adopters will not only move ahead of the competition and gain a competitive advantage, but also help better protect workers and machinery. Company background Rockwell Automation Australia and Rockwell Automation New Zealand are subsidiaries of Rockwell Automation, Inc.—a leading global provider of industrial power, automation control and information solutions that helps manufacturers achieve a competitive advantage in their business. The company brings together leading global brands in industrial automation which include Allen-Bradley® controls and services and Rockwell Software® factory management software. Its broad product mix includes control logic systems, sensors, humanmachine interfaces, drive controllers, power devices, and software. Headquartered in Milwaukee, Wis., the company employs about 19,000 people serving customers in more than 80 countries. In Australia, the company’s technical resources and national network of distributors provide technical and logistic expertise to ensure its customers meet their manufacturing productivity objectives. Enquiries Anne-Marie Ward, Rockwell Automation marketing communications manager E-mail: award@ra.rockwell.com Australia 37 Chapman Street PO Box 190 Blackburn Victoria 3130 Telephone: +61 3 9896 0300



Ai Group is the platform for industry access to the standards setting process The Australian Industry Group (Ai Group) is the key industry representative stakeholder involved in the standards setting process in Australia. Through Ai Group, more than 600 industry representatives access over 300 Standards Australia technical committees as well as other standards and regulatory bodies. Maintenance and alignment of Australian and International Standards is critical to industry participation in global markets. Standards facilitate market exchange and trade, ensure product and process safety, quality and integrity, integrate emerging technologies and business models, and ensure environmental and social issues are addressed. The Ai Group is committed to the standardisation process through the recent appointment of a standards coordinator who will coordinate appropriate representation of Ai Group members on technical and regulatory committees.

Industry & Investment NSW

This opportunity has put the label on the radar of the most influential buyers and media in the USA. We have also made sales”: a Sydney women’s fashion designer who took part in G’Day USA. “We made great contacts and received a lot of interest from the show”: a regional builder that participated in the Big 5 in the Middle East. “The exhibition allowed us to not only meet potential new customers but also reconnect with existing overseas customers”: a health care company that visited Medica in Germany… …a few of the comments from companies that have benefitted from Industry & Investment NSW’s trade promotion program. Breaking into new markets overseas depends on having access to practical, reliable and up-to-date information, with advice on markets, customer preferences, distribution and marketing practices, political issues, cultural requirements, legal problems, government assistance programs, etc. Industry & Investment NSW (I&I NSW)

provides a range of services to companies across the State wanting to get into exporting or build their export activities. I&I NSW has a State-wide network of Export Advisers available to give practical advice and assistance to companies to take full advantage of international market opportunities. The trade promotion program comprises trade missions, international exhibitions and individual market visits. Participation in the program is a good way to investigate the dynamics of your target market first-hand. Trade missions are a very effective way for companies to visit international markets and meet one-on-one with targeted buyers. Trade missions are a good option for an initial visit to a new market. They are either a group from similar industries or a general mission to specific countries. As a member of an official government trade mission, participants gain credibility and often have access to important decision makers who would be difficult, if not impossible, to access if going alone. International exhibitions are suited to high volume markets such as consumer

goods, food and beverages, and sectors such as construction, mining and agribusiness. As an exhibitor you are exposed to a high volume of potential buyers, agents and distributors. I&I NSW also assists businesses preferring to travel on their own to target markets. This option is particularly good for businesses in niche markets where a few key buyers can be identified and approached. To participate in I&I NSW’s trade promotion program, a company must: 3 operate principally in NSW 3 produce internationally tradeable goods and services 3 be export ready 3 have sufficient financial resources to mount an export campaign 3 have at least two years trading history, and 3 have positive growth in their domestic business.

For more information on the trade promotion program, go to: www.export.nsw.gov.au or telephone (02) 9338 6918.



TradeStart is a Federal Government funded program, and part of a national network of export assistance offices, and partnerships between Austrade and a range of local private and public sector organisations throughout Australia. These TradeStart Partners employ Export Advisors who are well versed in the needs of exporters and potential exporters and skilled in matters of international trade.
he prime objective is to assist small and medium-sized enterprises (SMEs) to commence exporting and to convert irregular exporters to sustainable export activity. TradeStart also provides assistance to established exporters to expand into new markets as well as advice and guidance on overseas investment and joint venture opportunities.


The TradeStart program addresses the needs of individual businesses, drawing on the combined resources of Austrade and the TradeStart Partner. The program contains elements of coaching and action learning, with the goal being to assist each business to achieve long-term success in their first and subsequent export markets.

The TradeStart Program: • Promotes exporting, international business and the Australian Government’s trade agenda. • Assists potential exporters to become established exporters. • Assists established exporters to increase export sales and to enter new markets. • Works co-operatively with other relevant agencies to maximise the export success of TradeStart clients. • Represents Austrade and provides access to the full range of its services for both existing and potential Austrade clients. There is also access to assistance from Austrade’s extensive coverage of overseas offices. Am I eligible for this program? To be considered eligible for the program your business should have: • a current Australian Business Number (ABN) • Australia as its main place of business • • In addition, your business must have: a product, service or patented intellectual property with clear export potential management commitment to becoming an exporter and developing the export side of your business.

This includes a willingness to visit the market if appropriate, the ability to develop an export budget and the financial resources to get into export, including budgeting to visit the market • a plan to grow the business • marketing materials, such as a website or brochure, with an understanding that materials specific to the international market may need to be developed • the ability to build supply capacity. What is expected of you? Participants are required to: • commit resources and reasonable management time to the program • meet the various costs of participation, including travel and the cost of using Austrade services in international markets. Ai Group has experienced export advisers ready to assist your entry into the export market. For more information please contact the TradeStart adviser below or e-mail: tradestart@aigroup.asn.au to arrange an interview. Your TradeStart Adviser: Victoria Craig Malcolm (03) 9867 0170



Brand Australia
Brand Australia is a $20 million, four-year program that was announced by Trade Minister Simon Crean on 26 August, 2009. The program will provide an overarching, strategic approach to positioning Australia in the global marketplace.


he intent of the program is to ensure that Australia is as highly regarded as a global citizen and global business partner as it is as a holiday destination. For the last two years Australia has ranked ninth on the Anholt-GfK Roper index, which measures the image of 50 nations annually. The index examines six dimensions of competence; exports, governance, culture, people, tourism, immigration and investment. Australia’s highest rankings are in the People and Tourism categories, and it is also rated one of the most desirable places to live and work. Another strength in the country’s reputation is in Governance. Our weakest areas of reputation are in the categories of Culture and Exports – although they are still highly competitive. Brand Australia will emphasise the aspects of Australia that make it attractive as a business destination, such as: • Australia’s economy was one of only a handful of advanced economies to

grow through the recent global economic turmoil. • The World Bank rates Australia as one of the easiest places in the world to do business. • Australia has one of the world’s highest rates of patent applications for innovations in renewable energy and biotechnology. • Australians invented the modern standard for WiFi, with the breakthrough IEEE 802.11a for wireless internet. • Australia is the world’s largest net exporter of coal (accounting for 29 percent of all exports). It also has the world’s largest known reserves of zinc, uranium, lead, nickel and silver. • Australia is a world leader in mining technology and services. Mining software developed in Australia is used by mines throughout the world.

A concept called ‘Australia Unlimited’ has been chosen as the visual identity for Brand Australia as it both encapsulates the current image and perceptions that are had of Australia, whilst at the same time allowing for the incorporation of more assertive and dynamic elements than are traditionally known. The next step is to develop the brand architecture and encourage Australian government organisations and businesses to co-brand their products. This could include Australia Unlimited branding of overseas scholarships, and selected exports. The creative agency will also be required to develop and implement digital and direct marketing activities to encourage the Australian exporter community to become involved in the Brand Australia program.



Use Enterprise Connect to review your business before you export
Thinking of exporting but feel you need to undertake a review of your whole business first? Ai Group business advisers, through this free Australian Government service, review every aspect of your business with you. As a result you can ensure that your strategy, business processes, management systems, financial controls, marketing, innovation measures and people are at their optimum before venturing into exporting.


he Australian Government will then match up to $20,000 spent by firms to implement improvements recommended by the business review.

What is Enterprise Connect? Enterprise Connect is a key $50M per year initiative designed to ensure that business has better access to new ideas and new technology. Under this service, business advisers offer free business reviews to small and medium enterprises. Depending on the particular needs of each company, advisers can apply one of a range of business diagnostic tools to analyse a company’s strengths and opportunities, benchmark against similar organisations internationally, and recommend actions to help companies cut costs, and become more innovative, efficient and competitive. Who is eligible? Companies meeting the following criteria are eligible: • turnover between $2M – $100M (in regional areas $1.5M – $100M) • possessing an ACN (and trading for at least three years) • operating in manufacturing or manufacturing-related services, clean energy, mining technology, defence, creative industries or remote Australia. What is involved? An independent business adviser will work with you to help: • assess your business strategy • identify the strengths and weaknesses of your firm • identify potential areas for improvement and growth • identify how the firm can address these areas. Common recommendations include: • strengthening strategic plans with revenue growth targets • implementing sales and marketing strategies • designing a staff training plan • reviewing HR practices • introducing formal innovation strategies and procedures for development of new products (including those with export potential) • implementing lean audit/methodologies. Access to $20,000 through tailored advisory service Matched government funding of up to $20,000 is available to engage specialist consultants to assist with the implementation of recommended actions.

Connected services Your business adviser can connect you with a range of other Enterprise Connect services, including payment of half the cost of a full-time researcher to work in your business for a year ($50,000), searching for new technology or knowledge required by the firm; and linking you with research organisations or other relevant government grants and assistance. An example of Enterprise Connect assistance Apollo Window Blinds in NSW was established in 1988, employs over 40 staff and turns over approximately $8M per year. The company undertook a business review early in 2009 with an Ai Group Enterprise Connect business adviser. “The timing of the review was ideal given the economic climate. We had the chance to analyse our business from a different perspective, looking at current operations and evaluating new business opportunities,” said Joe Zammit, Operations Manager. “The review highlighted the importance of focusing on key target markets to realise growth objectives, supplemented with efficiency improvements and staff training in areas such as lean manufacturing,” continued Mr Zammit. Analysis of the business was undertaken over three to four months via a series of sessions with senior management and members of the sales, production planning and manufacturing teams. An accurate picture of the organisation’s strategic, operational and financial performance was assembled. “The review confirmed the organisation’s commitment to product and service innovation as part of its future direction. We have recently launched our new cut to order take home blind service in line with this strategy,” commented Mr Zammit. “The review allowed us to step back and with David’s help ask ourselves serious questions about the future of the business and how these were going to be met both from an external market perspective and internally through staff development and training.” Ai Group is one of the partners in the Enterprise Connect program funded by the Australian Government. Ai Group has 15 business advisers who are part of a larger Enterprise Connect team located across Australia. For contact details of your local adviser contact: Anne Younger Tel: 03 9867 0172 Email: ayounger@aigroup.asn.au Further details on Enterprise Connect can be found at www. enterpriseconnect.gov.au



From Coleambally to California: Rubicon Systems’ innovative irrigat every drop of water
A global leader in irrigation technology, Victorian company Rubicon Systems have developed canal gate technology that is substantially reducing water losses associated with open canal irrigation across the American south-west.
r Trevor Boomstra, CEO, Rubicon Systems America Inc., says that similar climatic conditions between Australia’s Murray Darling region and America’s south-west led Rubicon to seek opportunities in America for its demand-driven irrigation products. “In the US, and in many other parts of the world, old rudimentary techniques are still being used regarding water irrigation,” he said. “Around fifteen years ago we recognised that water distribution needed to be controlled in a better way. This was confirmed when Victoria recently experienced its longest drought in 30 years.” Mr Boomstra says that Rubicon sought assistance from the Victorian Government when they decided to enter the American market three years ago. “We did our research and identified that opportunities existed in the substantial markets of Colorado, Texas, California and Arizona,” he explains. “The Victorian Government was able to help us with business matching, networking and other introductions, and the Victorian Government Business Office in San Francisco facilitated an introduction to the Californian Secretary of Agriculture. Things really started happening for us in the States after that.” Rubicon’s solutions include the design and manufacture of highly


engineered water control gates and precision water measurement instrumentation, combined with wireless communications networks and advanced monitoring and control software. “Our specialised irrigation software allows for the efficient release and distribution of water in large irrigation areas, managing water flow and balancing water supply and demand,” said Mr Boomstra. “Our software allows operators to control every drop of water in the system, because they know where every drop is at any point in time.” “We have had some great success and have attracted some highly experienced engineers to work for us in the US,” he said. “We have seen strong interest in our solution in California, with a small Total Channel Control installation in place and a larger installation contract recently signed in the Central Valley. There are striking similarities between Victoria and California in terms of climate, scarcity of water, importance of agriculture, and a trend towards drier and warmer weather.” Mr Boomstra said that Rubicon now has over 30 customers in the US and Canada with over 200 control gates in use today. “In the US, we are continuing to promote and focus on installing total solutions that will enable better control and measurement of water that

results in increased water distribution efficiency.” Victorian Government services a gateway to export opportunities. Despite a challenging global economic climate, international markets still offer a wealth of new opportunities for Victorian companies, from major manufacturers to small businesses providing specialist services. To help capture these opportunities, the Victorian Government offers a suite of programs and services for both potential and established exporters through its Opening Doors to Export Initiative. The First Step Exporter program provides up to $10,000 in funding to help companies research and explore opportunities in their first export markets. Victorian companies have used the program to attend trade shows in the USA, European Union, China and the Middle East. The Grow Your Business program offers grants for strategic reviews, business development plans, group activities and networking. Grants are also available to subsidise the cost of participation in export-related workshops. The Trade Fairs and Missions program enables groups of Victorian companies to access overseas markets on an industry sector or regional basis.



ion technology tracks

Examples include the building and construction industry trade mission to Cityscape China in July 2009, the defence and aerospace mission to the Singapore Airshow in February 2010, and the Dubai Gulfoods trade fair attended by a range of Victorian companies in February 2010. Financial assistance available for trade fairs and missions includes: • up to $40,000 for groups of companies to participate in outbound trade fairs • up to $30,000 for groups of companies to participate in outbound trade missions • up to $200,000 for groups of companies taking part in Industry capability missions • up to $15,000 to support inbound trade missions. The Export Networks program provides funding of up to $10,000 for new and existing business networks to provide export information, training services and mentoring programs to their members. These networks can be organised along industry lines, regionally or by market focus. The Export Clusters initiative brings together clusters of companies who have complementary skills and services to build critical mass and bargaining power in bidding for major international projects. For regionally-based emerging and existing exporters, the Regional Inward

Buyer program provides one-off grants to facilitate inbound buyer missions to regional Victoria and the Targeted Trade and Investment Missions program provides support to regional Victorian companies and industries to develop overseas markets. Assistance and initiatives focused on specific industry sectors includes: • the Agribusiness Development program, which helps grow the export potential of Victoria’s agrifood producers • the ICT Trade Events and Export Assistance program, which supports export ready ICT companies to attend overseas trade fairs and missions • the Education Provider Bookshelf program, which helps registered educational institutions enhance their international marketing activities. Arts Victoria’s International Program and Victoria Rocks - Music Touring Grants are available to support local artists and arts organisations to exhibit and perform overseas. The Access Program offers on-theground export support to companies through Victorian Government Business Offices around the world, and includes Access America, China, Japan, Malaysia, India and Middle East. The program offers short term office facilities and market support services in-country and has been used by hundreds of Victorian companies.

Governor of Victoria Export Awards The Governor of Victoria Export Awards is one of the most prestigious business awards in Victoria. There is a total of 12 award categories, plus the Victorian Exporter of the Year Award and the Victorian Export Award for Innovation Excellence. All category winners are automatically entered into the Australian Export Awards. These major awards are a great way for companies to add value to their businesses by boosting market awareness of their products in the local and international marketplaces, generating increased respect within their industry and promoting company pride.



Support for Queensland exporters
By Trade Queensland

The Queensland Government’s export agency, Trade Queensland, assists Queensland businesses – big and small, regional and metropolitan – to go global with their world-class products and services.
rade Queensland’s General Manager, Rob Whiddon, says that many global economies are showing signs of recovery from the recent economic crisis more quickly than was first expected, and Trade Queensland is working to meet renewed demand for access to market information and resources in key overseas markets. “The global financial crisis saw Queensland businesses closely examining their operations and expansion plans, with many becoming interested in exporting as a way to access new markets, and to more evenly distribute business risk. “As a result, Trade Queensland has continued to seek out new opportunities globally, and to direct its resources to help businesses access export markets wherever Queensland has a competitive advantage. “We recognise that it’s important for us to have people in the right places globally to advise and assist our companies, and make it easier to do business in those places at the right time. “We continually assess the value to our clients of our overseas trade and investment representation, and we try to maintain a strong degree of flexibility,” Mr Whiddon said. “The Latin America region is a case in point. The economic recovery in Latin America is advancing faster than anticipated, according to the International Monetary Fund (IMF) in its latest Regional Economic Outlook report released in early May.




“According to the IMF, we can expect strong growth in Latin America with regional GDP expected to grow by four per cent, after contracting by 1.8 per cent in 2009 as a result of the financial crisis. “To take advantage of this growth, the Queensland Government recently announced that Trade Queensland will establish on-the-ground representation in Latin America, with new business development managers in Chile this year and in Brazil in 2011. “China, India, the Middle East, and South-East Asia stand out as priority growth markets for Queensland exporters in 2010-11. And we continue to pursue opportunities with our major traditional trade partners, including Japan, the USA and the UK. “Papua New Guinea is also shaping up as a key growth market, especially for export-ready businesses located in key service centres in North Queensland. “In terms of key export sectors, opportunities continue to arise for Queensland companies in mining, infrastructure and construction, and in servicing development assistance contracts. There is additional new global interest in ‘green’ building products and services. “Opportunities are beginning to present themselves in countries hosting significant world sporting events such as the 2014 FIFA World Cup and the 2016 Olympic Games in Brazil, and the London 2012 Olympics, where government spending is creating significant business activity. “Queensland’s international reputation for providing world-class education services also continues to grow, with more than 100,000 overseas students from around 120 countries enrolling in Queensland in 2009. “International students have a double value in terms of trade outcomes. They boost the local economy, while helping to promote our State’s strengths overseas and build important links that can form the basis of future business

relationships,” Mr Whiddon said. With headquarters in Brisbane, Trade Queensland has a domestic network of export advisers spanning the state, and a global network of representatives in 15 key overseas locations – all dedicated to helping Queensland business achieve exporting success. This will grow in 2010 to 16 locations with the appointment of a business development representative in Santiago, Chile. Most services are provided to business free of charge, shaped by the needs of Queensland’s new and established exporters, and are aimed at assisting Queensland companies to achieve greater profit through going global. In 2008-09, Trade Queensland assisted nearly 3,000 clients to become export-ready and make new export deals. Approximately 44 per cent of these were based in regional Queensland. The agency managed 21 trade missions, with 307 Queensland companies participating. These missions covered destinations such as China, Japan, the USA, Europe, Latin America, the Middle East, South East Asia and South Asia. The agency contributed to more than $500 million in export deals in 2008-09.

Statewide network:
Brisbane (City) Gold Coast (Southport) Mackay region (Mackay) North Queensland (Cairns and Townsville) Rockhampton region (Rockhampton) Sunshine Coast (Birtinya) Toowoomba (Toowoomba) Wide Bay Burnett (Bundaberg) Western Queensland (Barcaldine) Lockyer Valley (Gatton)

Global network:
China (Beijing, Guangzhou, Hong Kong, Shanghai) Europe (London) India (Bangalore, Mumbai and Kolkata) Indonesia (Jakarta) Korea (Seoul) Japan (Tokyo) Saudi Arabia (Riyadh) Taiwan (Taipei) USA (Los Angeles) United Arab Emirates (Abu Dhabi) Latin America (Chile) from late 2010



Sustainable approach underpins good business
By Kylie Hargreaves, Executive Director – International Markets & Trades, Industry & Investment NSW

Eco-sensitivity, corporate social responsibility (CSR), sustainability – the notion is simple; corporations can and should take into account the impact of their actions on communities and the environment.
he idea has been around for several decades, often referred to as the triple bottom line; people, planet, profits. But it hasn’t really been until recently that the notion of sustainability has gone mainstream, and its application in business is now seen as good business sense. Australian exporters need to be aware of the fact that sustainability is a market driver that is here to stay. It is also a trend that is more prevalent in many overseas markets, than it is here in Australia. There are almost daily debates occurring in markets like the UK, Europe and the US; do consumers really want responsible products and services, and will they pay a premium for them? What are the pros


and cons of eco-labelling, the dangers of ‘greenwashing’ (false claims), and how can small business cost-effectively provide for independent auditing of claims? But while we are still a fair way of from this all being sorted out, exporters need to think carefully about the potential impacts on their business. Increasingly, foreign buyers are asking potential suppliers to outline their eco-credentials along with all their other product/service benefits. Put another way, they are applying a ‘sustainability scorecard’ to suppliers. Suppliers with poor ratings may increasingly find themselves locked out of international supply chains.

Kylie Hargreaves



Walmart, the world’s largest retailer, rocked the world earlier this year when it announced they would be applying an index to all 100,000+ suppliers around the world. They further announced that they would be seeking to eliminate 20 million metric tonnes of greenhouse gas emissions from their supply chain by the end of 2015. One surmises that suppliers who don’t improve their index rating, won’t be asked to supply in the near future. Marks & Spencer, the UK’s largest retailer, recently announced they want to be the world’s most sustainable retailer by 2015. This after their 2007 pledge of 200+ million pounds for their five-year ‘Plan A… because there is no Plan B’ CSR strategy. Why so aggressive a stance? Because to be very crass, being ethical pays. By 2009, only two years into Plan A, M&S reported that the energy and waste cost savings alone had already made over 39 of the Plan A strategies cash positive. Importantly, according to research by the Reputation Institute, Plan A had also made M&S the most reputable brand in the UK. Which brings us to consumers. A recent survey covered in Brandweek (USA) noted that despite the very negative impacts of the GFC, 75 per cent of consumers surveyed still believe that social responsibility is important, and 55 per cent of consumers said that they would choose a product that supports a particular cause against similar products that don’t. So if finding new customers, saving energy and water, and reducing waste sounds like good business to you, think about focusing on your sustainability scorecard.


Self-understanding – identify where you consume the most energy and water, where you generate the most waste. Focusing on the largest consumption and waste areas ensures you get bigger results, faster. Gather baseline data, so you will be able to identify improvements. There are numerous free online tools to help you with this step. Identify ways you could reduce consumption and waste – reduce, reuse, recycle. Get all your employees involved; create a new KPI or award system to help people strive to innovate, conserve and create Ask your suppliers to communicate to you any of their own sustainability credentials, programs and ideas Think about getting certified or awarded – there are numerous choices; find one that works for you and most importantly, is recognised by your customers Beware of ‘greenwashing’ – make sure any claims you make can stand up to scrutiny. Reputations and businesses can be destroyed on-line, in an instant, these days. Lastly, don’t forget you can also give back though a focus on community – it doesn’t all have to be eco-friendly activity.










Trade and export development
Ai Group Trade Desk provides comprehensive information, mentoring assistance and advice on trade and export issues. The depth of experience and knowledge of trade and export means that you can get the most professional, specialist advice and support to establish or expand your business overseas.
Acting for you The Australian Government is currently negotiating to improve market access for Australian goods and services via a range of bilateral, regional and global forums. Ai Group’s Trade Policy team is responsible for advocating the views of industry in trade negotiations. As a result, Ai Group works closely with government and member companies to ensure that industry’s specific interests are safeguarded. Assisting your business • Telephone advice: import regulations in various countries, export documentation, government grants, banking and logistics, accessing free trade agreements, visiting overseas markets. • Export documentation: we have the authority to issue certificate of origin, letter of free sale, letter of support for visa applications, certificate of manufacture. • Courses, Seminars and Workshops: we have programs suitable for owners/directors, export marketing management and clerical staff. • • Trade missions: we work with governments to provide low cost trade missions and exhibitions. Market research: designed for companies who know what they want to do and where they want to go, but don’t have the time to do the legwork. Publications: the Export Manual clarifies exactly what it takes to be a successful exporter, and breaks the export process down into a number of easily followed and practical steps. TradeStart: provides companies with a flexible package of advice, market research, coaching/mentoring, training and practical support to help them achieve export sales. Ai Group also has a range of information services to provide members with up-to-date information on trade and export development issues. These include: TradeWays e-zine Market visit guides Exporters guide Industry magazine Industry newsletter Ai Group website www.aigroup.com.au

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Advancing Australian Industry With extensive experience in international marketing, export market development and business planning, the Ai Group Trade and Export Development Team is well placed to assist you in developing your international business. Our consultancy services include: • Export documentation and certificate of origin. • Overseas market research to provide you with the market intelligence needed to develop a successful international business strategy; • Business matching to assist you in identifying suitable agents, distributors or partners in your target market; • Organising market visits;

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Preparation of promotional materials for export marketing; Assistance with the development of an effective export marketing plan or market entry strategy; Assistance with business and strategic planning to position your company for growth; and Assistance in accessing various government grants and assistance programs.

For more information on our services contact the Ai Group Trade Desk. Tel: 03 9867 0158 Fax: 03 9867 0157 Email: trade@aigroup.asn.au Web: www.aigroup.com.au/trade

If you’re starting to export or keen to grow your international business, Industry & Investment NSW (I&I NSW) can help you.
I&I NSW provides information, advice and support to help NSW businesses develop their export capabilities. We also offer workshops and events to help potential and existing exporters develop and grow their business, including: • Getting Started in Exports • E-business for Exporters • Exporting Australian Services, and • industry sector and market-specific briefings and seminars. I&I NSW also offers financial assistance to help eligibleNSW businesses participate in trade missions and international exhibitions. We have export advisors across the State. Contact one for mentoring and advice.

For more information, call 02 9338 6958 or email export@business.nsw.gov.au



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