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The Step-by-Step Guide to Exporting will help you get your business export-ready and well positioned for commercial success abroad.
Learn the essential principles of exporting whether you are a novice, intermediate or advanced exporter.
The Guide will help you to:
The Canadian Trade Commissioner Service (TCS) is pleased to introduce the new Step-by-Step Guide to Exporting, an essential reference tool for all Canadian companies currently active or interested in exploring business opportunities in international markets
Whether you’re doing business in established markets, such as the E.U. and U.S., or considering reaching out to markets like China, India, South Korea, Colombia or Brazil, global markets offer you access to new customers, revenue and ideas. They also provide you with the flexibility to spread your business risk and extend the lifecycle of your products and services. These advantages are not possible when you sell only to a smaller consumer market in Canada.
Trading abroad can boost your company’s profile, credibility and bottom line. Companies that export their products or services sell more, and are more profitable than those that don’t. Whatever your company size or sector, the rewards from selling your products and services overseas can have exponential returns.
The following Guide is intended to help prepare you to take your business to the world. Our global team of trade commissioners are located in more than 160 cities worldwide to guide your journey and support your export success.
Doing business outside Canada can be a complex undertaking. The Step-by-Step Guide to Exporting (the Guide) is intended to help get your business export-ready and well positioned for commercial success abroad. Learn the essential principles of exporting whether you are a novice, intermediate or advanced exporter. The Guide compiles practical insight and proven tips used successfully by thousands of Canadian firms of all sizes and in all sectors. The Guide will help you to:
Canada has always been a trading nation. Exports and imports consistently account for about two thirds of the country’s GDP. As the liberalization of global commerce continues, more and more Canadian companies are joining the international market every year.
Why would a company that’s already doing well within Canada consider becoming an exporter? There are several good reasons to export, including:
Access export information and tools through MY TCS, an online platform for Canadian SMEs brought to you by the TCS.
Make the TCS your personal link to business intelligence from around the world! Create your profile for MY TCS today.
Exporting has many challenges, but you can surmount them through careful preparation and planning. Among these challenges are:
Source: Adapted with permission from the Forum for International Trade Training, (FITT) Going Global.
Exporting goods and exporting services present quite different challenges. The former must deal with packaging, customs and physical delivery, for example, while the latter confronts issues such as work permits, credential validation, language and travel to and from the market. When exporting goods it is also important to remember that there is often a service component that should be anticipated (installation, training, service, warranty, etc.).
An export-ready business is one that has the capacity, resources and management to deliver a marketable product or service on a global scale at a competitive price. The trick is to determine whether this is true of your company—and if it isn’t, how to make it happen.
Your first step is to think about the resources and knowledge your business already has. Consider the following as a starting point:
Your expectations. Do you have :
Human resource requirements. Do you have:
Financial and legal resources. Can you:
Competitiveness. Do you have:
Can your product or service find a worthwhile market outside Canada?
Answering this question is crucial. If there’s no demand for what you’re offering, it would be unwise to proceed.
Special events like conferences, seminars or business networking sessions offer excellent opportunities to explore market potential and profit from other people’s experiences with exporting.
When analyzing the export potential of your products/goods or services, you may want to account for the following considerations:
Customer profiles
Product modifications
Transportation
Local representation
Exporting services
Capacity
Trade commissioners can help you prepare for international markets and assess the market potential of your product/goods or service.
Historically, Canada’s leading exports have been natural resources and commodities. But in a global marketplace, diversifying our exports into the area of science, technology and innovation (ST&I) is essential to maintain a robust and adaptable economy. The Government of Canada has built formal ST&I relationships and partnerships with both established and emerging innovation networks around the world. International partnerships are an essential catalyst for ST&I, as these collaborations often accelerate the pace of discovery and result in improved commercialization.
Partnerships include research and development (R&D) and the transfer of ST&I to the global market. An outward-looking approach to development will ensure that our exporters have access to leading-edge research and will ultimately lead to a higher standard of living for all Canadians.
Canada’s domestic market for many advanced technologies is relatively small. The aerospace sector, for example, can’t support the full-fledged commercialization of a service or product domestically. Finding an international market or supplying companies in Global Value Chains can, therefore, be essential to an ST&I company’s survival.
If your company falls into this category, you will almost inevitably have to internationalize. Remember that “internationalizing” can mean R&D collaboration with an overseas company, forming an international partnership or investing in a foreign business that complements your own.
Want to start exporting today? Take this quiz, check your score and be sure that you are ready.
The term “economic globalization” refers to the rapid expansion of international trade and capital flows since the 1990s. The world’s economies have become even more closely integrated than ever.
Globalization has caused many businesses to divide their products or services into components. Instead of producing the components themselves or obtaining them from domestic suppliers, businesses outsource certain aspects of the work to other countries. Economists call this co-dependency a Global Value Chain (GVC).
A value chain (whether global or not) consists of activities that bring a good or service from its conception to its end use and beyond. This includes design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. When those activities are no longer contained within a single geographic location, such as a country, we have a GVC.
Global value chains aren’t new. Trade and investment were becoming broadly internationalized in the late 19th and early 20th centuries. But due to the outbreak of the First World War, followed by the Great Depression and the Second World War, globalization didn’t really move to the forefront until the last quarter of the 20th century.
International trade has evolved from companies that once manufactured products in one country and sold them in another. It is also departing from the branch–plant approach, wherein a business produced its goods in a foreign market and sold them almost exclusively in that market. Instead, international trade is now increasingly characterized by intermediate inputs (for both goods and services) who may be found anywhere in the world.
For more information, visit Global Affairs Canada’s Office of the Chief Economist.
There are three major forces driving the growth of GVCs, according to the Office of the Chief Economist:
Unless time concerns dictate otherwise, companies can afford to move their goods production and services provisions to locations that offer the best competitive advantages.
Advances in information and communication technologies (ICT) mean that companies are much less limited by distance when operating in foreign markets.
New bilateral trade and investment treaties, lower global tariffs and liberalized economies in developing markets, such as China and India, have allowed companies to gain access to markets that were formerly closed to them.
Global value chains allow each link of the export chain to specialize in what it does best. This leads to greater efficiency, increased productivity and lower consumer prices for higher-quality goods and services. At the same time, this trade environment stimulates the intense global competition that encourages innovation.
Companies worldwide have had to adapt to the evolution of GVCs. For example, non-core activities may be outsourced to suppliers, partners or affiliates in countries with lower labour costs or other competitive advantages. Alternatively, SMEs may supply goods or services to a GVC established by another company, including a foreign multinational.
In general, Canada has been reasonably successful at adapting. Our excellent R&D environment and highly skilled workforce, together with our long experience as a trading nation, have underpinned this success. However, Canada now has to meet the challenge of supporting a technologically advanced and diversified economy. Canadian businesses can do this by creating GVCs for their industry sector, by participating in existing chains, by merging with larger firms or by acquiring other companies.
3.1 Why plan?
If you plan your export project thoroughly, you’ll have a better chance of doing well in your target market. Bad planning (or no planning) can lead to major failure abroad and could severely damage your domestic operations as well.
Financial institutions and other lending agencies will not normally provide funds to a business that lacks a well-developed export plan. In addition, potential partners and investors will want to see exactly how you plan to achieve your objectives.
In short, you’ll get nowhere without an export plan. This chapter will help you create one.
Export myth: Exporting is too complicated for my company to undertake
Remember, you don’t have to do everything yourself. Outside experts can represent you, find overseas customers, manage sales orders, handle paperwork and deliver the goods.
3.2 Foundation: your business plan
A good export plan begins at home. Now is the time to review and renew your business plan if it is out of date. If you don’t have one, this is definitely the time to create one.
3.3 Building on the foundation: your export plan
Once you’ve polished up your business plan, you can start creating your export plan. This step isn’t something you’ll finish in a week. Even after you’ve begun exporting, you’ll need to update it regularly.
An export plan is a business plan that focuses on international markets. It identifies your target market(s), export goals, necessary resources and anticipated results.
Your export plan should contain the following:
After the export plan, market research can be the most important contributor to your international success. There are more than 190 countries in the world and you want to target the right one(s) for your product or service.
To do this, you need information that will provide a clear picture of the political, economic and cultural factors affecting your operations in a given market. Market research is the key to understanding your opportunities. It can confirm that an opportunity actually exists, provide you with insight into how a new market can be developed, or help you discover what’s important to your potential customers.
The three basic stages of international market research, while detailed, aren’t particularly complex:
Collect statistics that show your sector’s product or service exports to various countries.
Identify five to 10 large and fast-growing markets for your product or service. Look at their performance over the past three to five years. Has market growth been consistent year over year? Did import growth occur even during periods of economic slowdown? If not, did growth resume with economic recovery?
Apply the same research questions to select smaller emerging markets that may not have as many competitors as an established market.
Target three to five of the most promising markets for further study.
Examine trends that could influence demand for your product or service. Calculate the overall consumption of products or services like yours and identify the amount imported.
Study the competition, both domestic and international. Look at each competitor’s Canadian and foreign market shares.
For marketing purposes, become familiar with channels of distribution, cultural differences and business practices.
Identify any foreign barriers (tariff or non-tariff) for the product or service being imported into the country, as well as any Canadian barriers (such as export controls) affecting exports to the country.
Research potential federal, provincial or foreign government incentives to help you promote the export of your product or service.
After analyzing the data, you may decide that you should restrict your marketing efforts to a few countries. In general, one or two countries are usually enough to start with.
With these conclusions in hand, you can begin to develop your marketing strategy (see Step 5 – Reaching the customer: developing your export marketing strategy).
There are many ways to study a market, but the more detailed and objective your research, the better.
There are two main types of market research: secondary and primary.
Secondary research can be done in Canada, using data sources including periodicals, studies, market reports, books, surveys and statistical analyses. Many of these are available online, as well as from chambers of commerce, economic development organizations, industry and trade associations, and Canadian companies that are already doing business in your target market.
After completing your secondary research, collect market information through direct contact with potential customers or other sources. Primary research almost always demands direct, personal involvement through on-site interviews and consultations.
State your company’s objectives at the outset and present your questions clearly. For example:
The Canada Business Network’s export section is a hub for the Canadian export market and includes links to market and sector information, trade statistics and sources of trade leads and potential partners.
Canadian Trade Commissioner Service
The TCS site offers access to contact information for trade commissioners that can provide advice and skills to further your business abroad.
MY TCS provides access to hundreds of market reports, export publications and guides as well as upcoming trade events, webinars, podcasts and videos. Create a profile and opt-in to receive email notifications of new opportunities to expand your business through exporting.
The website of Agriculture and Agri-food Canada’s Agri-food Trade Service offers a wealth of market studies and country reports for companies in the agri-food sector.
Export myth: I can’t compete overseas
That’s not necessarily true. If your business sells domestically, why wouldn’t it find customers abroad? Remember, price isn’t the only selling point—other factors such as need, utility, quality, service and consumer taste can make you competitive.
Long before you fill your first order, you’ll need an export marketing plan.
You’ve already examined the elements required to produce an effective export plan under section 3.3. Now, you’re ready to tackle the specific marketing components of your export plan. While you’re developing it, remember not to confuse marketing with advertising, sales or promotion. Marketing is strategy. The other three are the tools your strategy will use to reach your target audience.
A good marketing plan should be built around your research and will answer the following questions:
Commonly referred to as the “marketing mix,” the four Ps of marketing are:
International trade is more complicated. Add the following nine Ps to the list to produce the 13 Ps of International Marketing:
Source: FITT, Going Global
Be prepared to translate documents into the language(s) of the target market. Current and potential customers will appreciate it.
Your marketing plan is a work in progress that you will have to modify continuously. As you develop it, consider the following questions:
As for content, a good marketing plan is closely related to your export plan and should contain the following sections:
Strategic pricing is one of the most important factors in achieving financial success. Part of setting a realistic export price, and therefore an appropriate profit margin, is to examine production, delivery and distribution costs, competition and market demand. You should also understand the variables of your target market and other export-related expenses, such as:
As in domestic markets, demand in foreign markets can affect your price. In other words, what will the market bear?
For most consumer goods, per capita income is a fairly good way to gauge a market’s ability to pay. Per capita income for most industrialized nations is similar to that of Canada or the United States, while it is much lower for much of the rest of the world. Often, simplifying products or services to reduce the selling price may be the best option in less affluent markets.
In domestic markets, few companies can set prices without considering their competitors’ pricing. This is also true in exporting.
If you have many competitors in a foreign market, you may have to match or undercut the going price to win a share of the market. However, if your product or service is unique, new or demonstrates superior quality, you may be able to set a higher price.
How will each market affect your pricing? Include product modifications, shipping and insurance in your calculations. And, as mentioned above, you can’t ignore your competitors’ pricing.
Refer to your market objectives when setting your price. For example, are you trying to penetrate a new market? Looking for long-term market growth? Or pursuing an outlet for surplus production?
You may have to tailor your marketing and pricing objectives to certain markets (e.g. developing nations). There are several pricing strategies available:
After you’ve determined your costs and chosen your pricing strategy, establish a competitive price for your product or service that gives you an acceptable profit margin.
Use this handy checklist to track your costs and develop your pricing strategy.
The outcome of your promotional strategies can make or break your export venture.
Promotion refers to any or all of the communications tools listed below that you may use to convince people to buy your product or service.
Advertising. Carefully select the media that have a wide circulation within your target audience. If few people have televisions, is radio a better bet? Or print? Or online advertising? Or social media? Word of mouth promotion (testimonials, samples, etc.)?
Promotional materials. You may need to remove elements that are inappropriate, offensive or meaningless in the target market. Then have a commercial writer adapt these materials into the native language, and have it double-checked by a native of the country.
Direct mail. A targeted direct mail campaign can be very effective if you do your research and gain experience in your target market.
Media. Prepare a media kit that includes a profile of your company, new products/services, newsworthy activities and any articles published about your company.
Personal visits. Many cultures value personal contact as the best means of promotion and building business relationships.
Trade shows. Attending or participating in international trade shows allows you to promote your business, check out the competition and do market research.
Internet. Be prepared to commit time and money to keeping your website up-to-date, useful to customers and maintained in other languages.
Social media. Consider the most appropriate online platform for your audience and market. What is your demographic and where do they congregate, communicate and share information with business peers? Is it Facebook, LinkedIn or Twitter? Or are there local social media platforms relevant to the market (e.g. WeChat in China or XING in Germany)?
Developing the right marketing tools is crucial to the success of your business. Below is a list of tools and tips to get you started.
Developing a market-entry strategy simply means finding the best methods of delivering and distributing your goods. Or, if you’re exporting services, it means setting up ways to obtain and manage contracts in the foreign country.
Global Affairs Canada has trade commissioners across Canada who can:
You’ve chosen the most promising markets for your product or service. Now, based on your market research, you must decide which entry method best suits your needs.
Some factors to consider:
The traditional means of market entry fall into four broad categories: direct exports, indirect exports, partnerships and acquisitions/investments. We’ll examine each of these and then look at the question of intermediaries: agents, distributors and other go-betweens.
For products, you market and sell directly to the client. For services, you negotiate, contract and work directly with the client.
Advantages of direct exporting
Disadvantages of direct exporting
For products, you market and sell to an intermediary such as a foreign distributor. You can also retain a foreign agent or representative who does not directly purchase the goods.
For services, you contract with an intermediary who then negotiates and contracts on your behalf.
For many new exporters, an intermediary may be the best way to enter a market.
You might find it advantageous to partner with a local company whose strategic position complements or enhances your own. A well-structured partnership can benefit both parties in the following ways:
You develop a partnership strategy in three steps:
There are several different forms of partnerships. The primary options are:
A partnership isn’t the only way to tap into the resources of a foreign company. Acquiring a firm in your target market, or making a substantial investment into one, can achieve the same results.
Through acquisitions and investments, you immediately gain access to the local market, as well as patents and other intellectual property, resource availability, access to capital, specialist expertise, proprietary technology and product differentiation.
You may also enjoy lower operating and production costs in your foreign operation than at home.
To sell goods or services to foreign corporations, it is essential to conduct research to understand their supply chain sourcing practices. Incorporating the mechanism by which you access the supply chain should be considered in developing your market-entry strategy. Corporations have different sourcing needs, practices, guidelines or entry points to their supply chain. Some approach their supply chain management in terms of Tier 1 and Tier 2 suppliers, for example, with Tier 1 suppliers selling directly to the corporation and with Tier 2 selling to Tier 1. Also, some require their potential suppliers to register their business on an online portal for consideration. Many multinational corporations also have corporate supplier diversity initiatives to source from women, minorities and other groups that are traditionally underrepresented in supply chains. For these initiatives, the key contacts and process for entering the supply chain are typically different (i.e. potential requirement for certification). This, however, does not preclude designated groups from accessing other parts of the supply chain; it is simply a unique entry point that may provide them with a competitive advantage.
The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is a landmark agreement that provides Canadian exporters with guaranteed preferential access to the world’s second largest economy and Canada’s second largest trading partner after the United States. Visit the CETA Portal for key insights into regional and sectoral benefits, as well as market-specific overviews, testimonials from Canadian businesses, and upcoming CETA events and webinars.
You’ll have to familiarize yourself with your target market’s import regulations, product standards and licensing requirements. If you’re a service exporter, you may have to acquire professional or other accreditation from the country where you’ll be operating.
The World Customs Organization (WCO) has developed an initiative to help protect the international supply chain against terrorist exploitation: the SAFE Framework. It aims to establish and integrate standards for supply chain security and management, strengthen cooperation among customs administrations and promote the seamless movement of goods through well-secured international supply chains.
Unless you’re exporting to the United States, reporting your exports is mandatory under Canadian regulations. For details on how to do this, download or read online the Canada Border Services Agency’s Guide to Exporting Commercial Goods from Canada.
The B13A Export Declaration, along with the appropriate permits and licences, must also be prepared by exporters prior to exporting to all non-U.S. destinations.
You’ll need an export permit if:
There are four ways of getting your product to your customer’s doorstep: by truck, rail, air or ocean. Choosing the right shipping method, or combination of methods, is vital to export success—you want the product to get there on time and at the lowest cost.
Agriculture and Agri-food Canada’s Agri-food Trade Service has a useful list of shipping resources that are applicable to most sectors.
Trucking is popular for shipments within North America, but service declines once you go beyond the major industrialized countries.
Rail is widely used when shipping to the United States or to and from seaports.
Air is more expensive than surface or sea transport, but the higher costs may be offset by faster delivery, lower insurance, cheaper warehousing, exotic markets and better inventory control.
Shipping large items, bulk commodities and goods to offshore markets that do not require fast delivery is more economical by sea.
To provide a common terminology for international shipping and minimize misunderstandings, the International Chamber of Commerce has developed a set of international commerce terms known as Incoterms. Familiarize yourself with these terms so that you know you are speaking the same language as your buyer or intermediary.
You’ll need to deal with a lot of documents when delivering products to foreign countries. You don’t normally do it all yourself, however—use freight forwarders and customs brokers to help reduce the workload abroad.
Freight forwarders will help you improve your delivery times and customer service. These agencies will negotiate rates for you with shipping lines, airlines, trucking companies, customs brokers and insurance firms. They can handle all of your logistical requirements, or just negotiate your shipping rate; it’s up to you.
Assume your products will have a bumpy ride, particularly if you’re shipping overseas.
Pack them to survive rough-and-ready cargo handlers and poor roads.
During transit, handling and storage, your goods may be exposed to bad weather and extreme temperatures. If they need special temperature controls or other protective measures, be sure they get them.
The type of shipping may determine the kind of packing you should use. For example, if the goods are carried by ship, you need to know whether they will be placed above or below deck.
Labelling regulations vary widely from nation to nation, so verify the required labels before you ship.
Your product may not clear customs if labels don’t conform to local requirements such as product weight or electrical standards.
Marking distinguishes your goods from those of other shippers. Marks shown on the shipping container must agree with those on the bill of lading or other shipping documents; they may include some or all of the following:
Provide a packing list that identifies and itemizes the contents of each container. Each container must also contain a packing list itemizing its contents.
International carriers assume only limited liability and make the seller responsible for the goods up to the point of delivery to the foreign buyer. For this reason, you must have international transportation insurance.
Marine transportation insurance protects both ocean- and air-bound cargo. It also covers connecting land transportation. There are three main types of marine transportation insurance:
Export documentation identifies the goods and the terms of sale. It also provides title to the goods, evidence of insurance coverage and certifies a certain quality or standard. Several documents are required for overseas shipping and fall into two categories:
Goods shipped by sea are typically insured for 110% of their value, to compensate for the extra costs involved in replacing lost goods.
Shipping documents are prepared by you or your freight forwarder. They allow the shipment to pass through customs, be loaded onto a carrier and be transported to the destination. Key shipping documents include:
* A bill of lading is used for land and ocean freight, while an air waybill is used for air freight. Note that the ocean bill of lading can be a negotiable instrument that passes title to the goods. Other types of bills pass title to the consignee as soon as the goods are delivered.
The most important collection document is probably the commercial invoice, which describes the goods in detail and lists the amount owing by the foreign buyer. This form is also used for customs records and must include:
Other collection documents include:
If you’re importing goods in order to re-export them, you might be able to use the Duties Deferral Program, administered by the Canada Border Services Agency (CBSA). The program relieves or defers payment duties if the goods are in transit through Canada and will not be sold here.
There are three components to the Duties Deferral Program:
The challenges of delivering services to a foreign market are just as complex as those of delivering products. The challenges are different, however, and often depend on factors in your target market, such as:
You’ll most likely be delivering your services by one, or a combination of, the following methods:
If by chance your first international order is far larger than you expected, how are you going to finance the expansion you need? Payments can take months, and buyers may default or go out of business.
Self-financing a growing export business can be very risky, especially for new or smaller exporters. Fortunately, there are options that can minimize your risks and even give you a competitive edge.
Even though Canada is one of the least expensive countries in the world in which to do business, the costs of exporting can add up.
Because of this, your export drive will need a reliable cash flow. You will also need a comprehensive financial plan for the export venture. If you don’t have one, it will be very difficult to arrange the financing your venture may need.
The most important objective of your plan, however, is ensuring that your company always has sufficient cash or operating lines of credit. To do this, the plan must include:
You’ll need to know the timing of both cash inflows and outflows. Cash flow planning can help you defend against such problems as:
Accurate details are important to the overall effectiveness of your export plan.
There are several sources of financial aid available to Canadian exporters. The TCS can help you navigate through which of these programs may be of value to your company. A sample of relevant programs from Global Affairs Canada and other government departments include:
Can Export is a new program that increases the competitiveness of Canadian companies. It will provide up to $50 million over five years in direct financial support to SMEs in Canada seeking to develop new export opportunities, particularly in high-growth priority markets and sectors. Delivered by the Trade Commissioner Service (TCS) of Global Affairs Canada, in partnership with the National Research Council Industrial Research Assistance Program (NRC-IRAP), Can Export provides financial support for a wide range of export marketing activities.
Global Opportunities for Associations (GOA) provides contribution funding to support national associations undertaking new or expanded international business development activities, in strategic markets and sectors, for the benefit of an entire industry (member and non-member firms). Annual non-repayable contributions range from a minimum of $20,000 to a maximum of $250,000; funding approvals are made for a one-year period for activities and related expenditures taking place between April 1 and March 31 of the following year. GOA provides matching funds of up to 50% of eligible expenses.
Export Development Canada (EDC) offers several financing products for Canadian companies to support their international transactions: to pay for the up-front costs associated with the production of a large export order, to expand into new markets or to respond to a buyer’s request for financing. EDC’s role is to help Canadian companies go, grow and succeed internationally. They do this by providing you with financing to cover costs such as work in progress, buying equipment or setting up an office overseas; providing insurance to protect against risks such as not getting paid, political unrest or customer bankruptcy; working with your bank to get the bonds you need posted; and helping you break into new markets which includes introducing you to potential customers. For more information, visit EDC online or call 1-800-229-0575.
The Business Development Bank of Canada can help you meet your working capital needs through long-term financing and flexible repayment options. BDC’s Market Xpansion Loan helps Canadian companies finance the expansion of their domestic market or explore new and larger foreign markets. The BDC Market Xpansion Loan is designed to help exporters realize projects that are key to their growth and success, without putting their cash flow at risk. For more information, visit their website or call 1-877-232-2269.
One of the greatest challenges for a Canadian exporter is standing out from international competitors in the eyes of interested buyers. Offer your foreign government customer the option of an expedited, government to government contract with a Government of Canada assurance of contract performance. The Canadian Commercial Corporation (CCC) works with you to validate the lead with the customer, lay the groundwork for an unsolicited joint proposal, negotiate the contract with the foreign government on favourable terms, sign the contract and then subcontract to your company for the work.
Contact us today to find out how CCC can help qualified companies secure export contracts.
The AgriMarketing Program, overseen by Agriculture and Agri-food Canada (AAFC), aims to enhance marketing capacity and competitiveness of Canada’s agriculture, agri-food, fish and seafood sectors. The Program assists industry associations to identify market priorities and equip themselves for success in global markets, and provides funding for industry associations to develop and implement long-term international strategies.
Canada Business Network has links to international, federal and provincial bodies that offer financial information and assistance to both new and experienced exporters.
In need of a credit insurance that is quick and hassle-free? See how EDC’s Trade Protect allowed an Ottawa-based company to focus on making commercial drones instead of worrying about getting paid.
Export Myth: Exporting is too risky.
Exporting doesn’t need to be riskier than doing business at home—it’s just different. Letters of credit, export credit insurance and reference checks through banks and international credit reporting agencies can help protect your business. Trade laws also tend to be straightforward and legal advice about them is easily available.
There are several ways for customers to pay an invoice in international trade: cash in advance, letters of credit, documentary credit, documentary collection and open account. We’ll examine them in order of increasing risk to your company.
Cash in advance is your most secure option because it eliminates all risk of non-payment and adds to your working capital. Unfortunately, few foreign buyers are willing to pay cash in advance, although some will pay a portion when goods or services are specially ordered. For services, a retainer might be paid upon signing a contract, after which progress payments are matched to deliverables.
Letters of credit (L/Cs) name a bank to receive and check shipping documents and to guarantee payment. With an L/C, the costs of financing a transaction may be borne by either the exporter or importer.
Both sight- and term-payment provisions can be arranged.
Letters of credit can be confirmed or unconfirmed. For example, a Canadian bank can confirm an L/C issued by a foreign bank, thus guaranteeing that the Canadian bank will pay the exporter even if the foreign bank doesn’t. This kind of L/C is much better for you than the unconfirmed one.
L/Cs can also be irrevocable, which means they can’t be cancelled or amended without your approval. The most secure L/C is one that is both confirmed and irrevocable.
In practice, an L/C works like this:
Exporters can also use sight and term documentary credits:
In a collection, you ship goods to an importer (your customer) and forward the shipping documents to a collecting bank. Next, the customer pays the collecting bank in exchange for the documents. You then obtain the money from the bank.
With a collection, no bank has guaranteed that you’ll get paid, and you’re required to finance the shipment until your customer receives the goods and pays through a sight or term draft.
Open accounts require you to ship goods and pass title to the customer before payment is made. In these cases, you’re fully exposed to any credit risk associated with the customer until payment is received. In addition, because open account terms usually allow 30, 60 or 90 days (or even longer) before payment is due, you are, in fact, financing the transaction for your buyer.
The effects of your buyer not paying can be severe and lasting.
You can protect your company through EDC’s Accounts Receivable Insurance (ARI). ARI protects you against non-payment by covering up to 90% of losses resulting from a wide variety of commercial and political risks. Better still, you’ll be able to free up your capital and, possibly, extend more attractive payment terms and credit options to new customers.
In international trade, contractual arrangements can be much more prone to complications than domestic ones. Language barriers may cause misunderstandings. Cultural and geographical impediments may crop up. Words often have different meanings in different places.
International business contracts must, therefore, be specific and all-encompassing. This will go a long way toward reducing misunderstandings, misconceptions and disputes.
Finding a legal professional who specializes in international trade will help you sidestep regulatory and legal pitfalls and, if necessary, resolve disputes. You should also acquire some knowledge of international conventions, the business laws governing your target market and existing trade agreements between that market and Canada.
Problems in international business contracts can occur because of differences in the laws of the countries involved. When different laws are applied, results may be inconsistent and substantive rights may depend on whose law applies. For example, one law may require that a contract be written, whereas another may not. Or, under one law, persons who are not a party to the contract may have certain rights, whereas under another law they may have no rights.
A contract covering the sale of goods involves transferring, or agreeing to transfer, goods to a buyer for a sum of money.
The actual transfer of the property distinguishes the sale of goods from other transactions such as leases or property loans.
The term “goods” includes all movable things and excludes real estate and intangibles such as debts, shares, patents and services. Furthermore, the fact that money changes hands distinguishes a sale of goods from other transactions, such as barter or counter-trade.
Several factors hinge on the exact legal moment when the buyer takes ownership of the goods (in formal terms, when title passes or is transferred from you to the buyer).
You must deliver the goods to your buyer in one of two ways:
Your contract should specify where the delivery will take place. In international matters, this is usually defined by using terms as Cost, Insurance and Freight (CIF) or Free on Board (FOB).
If you meet all the conditions of the contract, your buyer must accept the goods. Refusal to accept them without justification gives you the right to sue for damages. If you breach a condition of the sale, the buyer can legally reject the goods.
Upon request, you must allow your buyer to examine the goods. The buyer can accept or reject them by:
Once any of these types of acceptance or rejection have taken place, the buyer can no longer refuse the goods, even if you have breached a condition of the contract.
Your best protection as seller is payment in advance or upon delivery. Next is payment by confirmed letter of credit (preferably irrevocable). If neither is possible, then you should take out security for the unpaid purchase price. This can take several forms, but the most common method is to reserve title or to take a secured interest in the goods.
Service contracts can range from a handshake to pages of legal and technical specifications.
Whatever the form, both parties should have the same understanding of:
The usual Western business practice is to negotiate a transaction and then build a buyer-seller relationship around it. In the business cultures of many countries, however, this process is reversed. One starts out by building a personal relationship with a prospective customer and, once that relationship has been established and everyone is comfortable with it, the actual business negotiations can begin.
While the ultimate goal of all parties is to sign a contract, the immediate objective in a relationship-based business culture is to establish the personal connections. Your non-Canadian counterparts often see this as a necessary precondition for serious negotiations.
Responsible Business Conduct (RBC) is about companies doing business abroad responsibly in an economic, social and environmentally sustainable manner.
RBC can enhance a company’s ability to manage stakeholder relations, prevent conflicts, mitigate social and environmental risks and contribute to the sustainable development of communities, regions and countries.
RBC involves companies understanding the impact of each of their functions on the surrounding economy, community and environment, and adjusting their activities and operations to create value for themselves and other stakeholders.
In January 2018, the Government of Canada announced new measures to strengthen its approach to Responsible Business Conduct.
The Government of Canada expects that Canadian companies will promote Canadian values and operate abroad with the highest ethical standards. They are expected to respect human rights and all applicable laws and to meet or exceed widely recognized international standards for responsible business conduct.
There are good business reasons for integrating RBC practices into operations and these are becoming increasingly important to companies’ success abroad. Among them are:
RBC tools and practices can contribute to an organization’s long-term business success by helping them to develop sustainable business practices, manage social risks and build strong relationships with a broad range of stakeholders.
No country is entirely free of corruption. But if corruption is established it can hinder economic growth and good governance, and decay the fabric of society. Corruption is an obstacle to sustainable development, with the potential to enlarge economic gaps and breed organized crime. Unchecked corruption leaves little room for democracy to flourish, little room for freedom to expand and little room for justice to prevail.
Significant gains have been made in the global fight against corruption. Better understanding of its economic, political and social costs has spurred on recent international efforts to fight corruption, encourage transparency and increase accountability. Canada strongly supports international efforts to combat corruption, regarding it as a good governance issue, a crime problem and a drag on economic, social and political development.
There are international standards for almost everything, from the ingredients in food to the certification of electrical equipment.
If you’re an exporter, you need to ensure that the standards you use in your export product or service comply with those of your intended target market.
Adopting international standards will increase your competitiveness, make it simpler for you to exchange technical information with foreign experts and save you money and effort when it comes to testing and recertifying to move into a new market.
Intellectual property (IP) rights are valuable tools to protect various aspects of innovative business activities. IP rights very broadly mean legal rights that result from intellectual activity in the industrial, scientific, literary and artistic fields.
Trademarks, patents, copyrights and industrial designs are referred to as “IP rights.”
IP rights are “property” in the sense that they are based on the legal right to exclude others from using the property. Ownership of the rights can also be transferred. Like physical assets, IP assets must be acquired and maintained, accounted for, valued, monitored closely and properly managed in order to extract their full value.
Enlisting the guidance of an IP specialist as you follow these steps will be beneficial.
Conduct “freedom to operate” searches on trademarks and patents before commercializing products and services that may conflict with the IP rights owned by others in the marketplace.
To find a national IP office in your target market, visit the Directory of Intellectual Property Offices.
IP professionals, like registered patent or trademark agents or IP lawyers, can help you avoid the common IP pitfalls made by exporters, such as:
Visit CIPO’s website for a list of registered qualified agents for trademarks and patents.
Take advantage of expert services for searching and registering your IP. The realm of IP is a legal one and you would be ill-advised to navigate it alone or even ignore IP all together.
In addition, you may wish to consult the TCS.
By slightly modifying a patented invention, I can go “around” the patent and sell my modified product without any worry.
WRONG: If a patent has been properly written and filed with the help of a registered patent agent, chances are it would stand as a solid defence.
My Canadian IP right protects me worldwide.
WRONG: IP rights are territorial—recognized and enforceable only within the country or region where they were granted.
Many issues can become controversial in international trade transactions. For example:
Consult with legal counsel in the jurisdiction of the contract should a dispute arise to explore options for dispute resolution.
