WHITE PAPER MADE IN AUSTRALIA EXPORTING GLOBALLY Your guide to exporting overseas. 1.
WHITE PAPER Contents 01. A national exporting outlook 02. Opportunities for Victorian exporters 03. Advantages to exporting 04. Exporting risks and challenges, and how to minimise them 05. Market entry opportunities 06. Preparing to export 07. Export documentation 08. Funding your exporting venture 09. Finding an expert to help 10. The VECCI International Business Development team 01.
A national exporting outlook Australia enjoys many productive trade relationships particularly with its top four partners: China, Japan, the USA and the Republic of Korea. In 2012, these relationships saw Australia reach a new two-way trade high of $623.8 billion. Australia s trade largely focused on the Asia-Pacific region, with more than 70 per cent taking place with member economies of the Asia-Pacific Economic Cooperation (APEC) group. Minerals and fuels, especially iron ore and coal, played a vital role in Australia s economic success, making up nearly half of the nation s exports. Australia ranks at number 22 in global exporting with a 1.4 per cent share. At the top of this list are China, the USA and Germany. 02.
WHITE PAPER TOTAL AUSTRALIAN EXPORTS 2012: Services $51.2 billion (17%) Minerals and fuels $145.6 billion (48.5%) Gold $16.3 billion (5.4%) Rural goods $34.8 billion (11.6%) Manufactured goods $40.4 billion (13.4%) Other goods $12.2 billion (4.1%) Following a record high in 2011, Australia s total goods and services exports fell four per cent to $300.4 billion in 2012. Export volumes grew 6.7 per cent while export prices fell 10.2 per cent. Australia s manufacturing exports decreased by 3.1 per cent to $40.4 billion, due in part to the strength of the Australian dollar. Services exports reached $51.2 billion in 2012, with travel services accounting for 60 per cent. 03.
VICTORIA S MAJOR EXPORT PARTNERS 1 1 China: 16.6 per cent 2 New Zealand: 9 per cent 6 5 4 2 3 3 Japan: 7.8 per cent 4 United States: 6.9 per cent 5 Singapore: 4.7 per cent 6 Other Opportunities for Victorian exporters Exporting remains an important contributor to Victoria s economic growth, competitiveness and prosperity, despite the national decline. Our state continues to strengthen its international trade relationships, particularly with its major export partners: China (16.6 per cent), New Zealand (9 per cent), Japan (7.8 per cent), USA (6.9 per cent) and Singapore (4.7 per cent). Victoria contributed $33.6 billion to national exporting in 2012 or an 11 per cent share comprising $21.4 billion in goods and $12.3 billion in services. 04.
KEY AUSTRALIAN EXPORT MARKETS 2012 ($BILLION) 1 China: (26.2%) Goods $73 Services $5.7 Total $78.7 2 Japan: (16.6%) Goods $47.8 Services $2 Total $49.8 WHITE PAPER 3 Republic of Korea: (7.2%) Goods $19.8 Services $1.8 Total $21.6 4 United States: (4.9%) Goods $9.4 Services $5.3 Total $14.6 5 India: (4.7%)Goods $12.2 Services $1.8 Total $14 6 New Zealand: (3.7%)Goods $7.4 Services $3.7 Total $11.1 7 United Kingdom: (3.5%)Goods $6.7 Services $3.9 Total $10.6 8 Singapore: (3.4%) Goods $7.1 Services $3.2 Total $10.3 9 Taiwan: (2.9%) Goods $8 Services $0.6 Total $8.6 10 Malaysia: (2.2%)Goods $5.1 Services $1.7 Total $6.7 Source: Department of Foreign Affairs and Trade Victoria s major goods exports are wool, cars, wheat, dairy products and aluminium. Our major services exports are education-related travel, personal travel and business travel. Austrade states that exports contribute to around 20 per cent of annual Gross Domestic Product (GDP). However, only four per cent of businesses are currently involved in export activities. 05.
Exporting to a global market provides businesses with the opportunity to increase sales and can lead to a variety of direct and indirect benefits. Wider customer base Increased sales and profitability Spreading risks Advantages to exporting 1. Wider customer base The majority of the world s potential customers live outside of Australia. By expanding business horizons to a global market, this customer base is exponentially increased. 2. Increased sales and profitability Businesses that export to overseas markets are generally more profitable than those who don t, mainly because exporting businesses are meeting a demand for goods and services that may not exist in the domestic market. Export businesses provide goods or services to a far more diverse customer base with different spending habits that therefore increase sales opportunities. 06.
WHITE PAPER Economies of scale Seasonal fluctuations Enhanced innovation 3. Spreading risks Businesses who limit their customer base to the local market often expose themselves to all the potential risks and events of that market. For example, a major change in consumer spending habits, a local recession, or a switch in fashion or style over one season could rapidly see sales and profitability plunge. An exporting business will be able to counter any of these risks as its sales are spread over different markets. 4. Economies of scale Increasing a customer base by expanding the market to overseas customers allows the associated benefit of economies of scale. This means average costs per product will decrease due to expanded operations. This is particularly pronounced where the product or service is universal and needs no major modifications for different markets. 5. Seasonal fluctuations Exporting to overseas markets can help a business particularly those selling consumer goods to even out seasonal demand from different markets. For example, a product line out of style in the Australian market may still be in demand in an overseas market, thereby extending its sales life and profitability. 6. Enhanced innovation The process of dealing with an overseas market through exporting will expose a business to a myriad of different business ideas, technologies and practices that can all be adopted and contribute to a significantly more efficient and productive business. 07.
Despite the numerous benefits of exporting, as with any business venture, there are risks and challenges for businesses that embark on exporting overseas. Legal risk Political risk Culture 08. Exporting risks and challenges, and how to minimise them These risks will vary depending on where you are exporting. An important part of the exporting process is identifying those risks and mitigating them with the help of an expert. 1. Legal risk Legal systems vary from country to country and it is vital not to assume that an importing country has the same or similar laws as Australia. These differences may apply across all facets of business and it is imperative to be aware and be able to comply with all legal requirements before beginning the export process. One of the main areas is contract law, where issues of contract terms and enforceability are of great importance to the exporter. Other significant differences in legal systems may apply to taxation, intellectual property, packaging and labelling requirements, occupational health and safety, and product liability and consumer warranties. 2. Political risk A range of political influences can have a major effect on the ability of a business to successfully land and/or distribute and sell their product overseas. It is vital to be as
WHITE PAPER Exchange rate risk Corruption and bribery risk Non-payment risk knowledgeable as possible as to any political instability or changes in government policy that may impact your business, staff or assets. Some to consider include trade embargoes, political upheaval, civil unrest, and restricted imports. 3. Culture The obvious and less obvious differences in culture can have a major influence on business dealings. Anyone seeking to do business with overseas markets should be familiar with local business culture and practices. 4. Exchange rate risk For an exporter, profit margins can be rapidly decreased or even lost completely by fluctuations in currency values. This is difficult to combat, particularly for smaller businesses, as hedging the currency risk requires paying fees that can negate the benefits of hedging. It is important to work with a financial expert to deal with this type of risk. 5. Corruption and bribery risk Corruption and bribery are illegal in most countries in the world. Australian law regarding corruption applies extra territorially, meaning that even if the offence occurs outside of Australia, it is still punishable under Australian law. For example, an Australian can be prosecuted in Australia for bribing an overseas official whilst overseas. 6. Non-payment risk This type of risk is not exclusive to exporters, but the consequences of non-payment by an overseas customer can be disastrous for a business. It is important to decide on a payment option that matches the acceptable level of risk. This can include secure methods such as prepayment or an irrevocable Letter of Credit. 09.
Victorian companies export more than $30 billion worth of goods and services annually to around 200 countries, including the world s largest and fastest-growing economies. Opportunities in key partner countries include: 10. Market entry opportunities China is the most popular destination for Victorian goods and services, with $3.6 billion worth exported from Victoria in 2012. Major exports to China are currently wool and animal hides, dairy products, live animals and food products. China also remains the largest source market for international education students in Victoria. A burgeoning middle class in China makes it an exciting opportunity for many Victorian goods and services export industries, including premium food and beverage products, ICT, tourism, biotechnology and sustainable urban building. While Free Trade Agreement discussions continue with China, the Australian and Chinese governments agreed upon the commencement of direct trading between each country s respective currencies in April 2013. This development will enable greater investment between the two countries and make it simpler for Australian businesses to buy and sell in the Chinese market.
WHITE PAPER Japan is Victoria s second largest exporting market, with $1.7 billion of exports in 2012. Japan is a particularly valuable market for Victorian food and beverage exporters, worth around $800 million in 2012. Major products exported to Japan from Victoria include dairy products, aluminium, wood chips, beef and scientific and medical equipment. Tourism and international education are valuable services exports from Victoria. Higher-level services such as IT, nanotechnology, aerospace and sustainable environmental technology all offer significant prospects for services exports to Japan. Progress continues on Free Trade Agreement negotiations between Australia and Japan that will further facilitate and strengthen trade in goods and services and open up new opportunities for Australian exporters to Japan. India is one of Australia s fastest growing export markets, increasing at a rate of around 11 per cent annually since 2007. Goods exports from Victoria to India were worth $326 million in 2012, with the major products being exported including wool, fruit and nuts, dairy products and wheat. India is a major source of international education students and tourists for Victoria. A number of Indian Government priorities are signalling significant export opportunities for Victorian businesses, including a focus on sustainable food, energy and water resources. Increasing demand for education, tourism, ICT and food and beverages will continue to drive export demand. However, exporters should be aware that India still applies one of the highest rates of import duties in the world at an average of 40 per cent. There is significant potential to expand trade in services between India and Australia 11.
Market entry opportunities continued and negotiations to conclude a Comprehensive Economic Cooperation Agreement between the countries have commenced, which will assist in broadening the base of merchandise trade by addressing tariff barriers and behind the border restrictions on trade in goods. 12. South East Asian (ASEAN) countries accounted for $3.7 billion worth of Victorian exports in 2012, with 80 per cent of these going to Singapore, Thailand, Malaysia and Indonesia. Major goods exports from Victoria to ASEAN countries included dairy products, wheat, aluminium and beef. The close proximity of ASEAN countries provides a significant trade advantage for Victorian business, as does the ASEAN-Australia-New Zealand Free Trade Agreement that covers 12 countries in the region and provides for the reduction and elimination of the majority of tariffs on most products. Export opportunities in the region include food and beverage
WHITE PAPER products, international education and tourism and infrastructure and associated services. South Korea is a rapidly growing economy that has significantly opened up its economy to foreign trade in recent years. Victoria exported $940 million worth of goods and services to South Korea in in 2012, with the major exports being aluminium, automotive parts and dairy products. Demand exists for exports in food and beverage products (notably dairy and meat), tourism and energy technology. A Free Trade Agreement between Australia and South Korea, currently in its final stages of negotiation, would deepen this trade relationship. The USA remains a key export market for Australia. Victorian goods exports to the USA accounted for $1.5 billion in 2012, including meat, pharmaceutical products, aircraft parts and measuring and analysing instruments. This US market is one of the most competitive, therefore Victorian exporters must be well prepared before entering into it. Opportunities for growth in exports include ICT, medical devices, sustainable technology, defence and aerospace, and food and beverage products. 13.
Preparing to export Determining if a business is ready to export requires a detailed analysis of all aspects of operations and a clear understanding of what is entailed in the exporting process. Put simply, a business must know that it has a product or service that is in demand in an overseas market, have an export plan, and possess all the necessary resources to sustain the exporting process. Strong domestic operations are vital as resources will be diverted towards the export dealings. It is essential that businesses seek the support of an analyst to assess the validity of exporting. The VECCI ExportCheck Diagnostic tool provides a business a valuable insight into business operations and any changes that may be needed to ensure a business is ready to export into target markets. It also assesses a businesses ability to succeed in markets where Australia has Free Trade Agreements in place or currently in negotiation. The Export Check Report focuses on five key areas of operations: strategy, planning and market knowledge products and services sales and marketing compliance finance. 14.
Export documentation WHITE PAPER Obtaining the correct export documentation is vital to ensure your overseas customers get the product for which they are paying. Some of the common forms of export documentation are: Letters of Credit are issued by the importer s bank and provide authorisation of a payment upon delivery Bills of Lading are a title to the goods being transported and define the contract between the exporter and carrier The ATA Carnet is an international customs document that permits duty-free temporary import of goods for up to one year. VECCI is the only approved body in Victoria to issue ATA Carnets as well as Certificates of Origin, both of which many countries require to be endorsed by a chamber of commerce, as well as other commercial invoices and documents. Certificates of Origin identify the origin of the goods being transported and are certified by a government authority or other body that the goods originate in a specific country Bills of Exchange are a demand for payment prepared by the exporter for the importer 15.
Funding your exporting venture While exporting can be a lucrative part of a business, entry into overseas markets is expensive. Costs will depend on the specific country a business is entering into and the nature of products or services. Working capital needs to be sufficient to fill contracts due to the extending time frame between production and customer payment. Funding needs to be made available for market entry costs such as marketing, providing samples to potential customers, overseas visits and engagement of expert consultants to assist with export management, legal and other business advice. Fortunately, there is a range of federal and Victorian grant programs that can assist with establishing an export business. 16. Export Market Development Grants, administered by Austrade, help aspiring and current exporters develop overseas markets by providing grants for specific export promotion activities across a wide range of industry sectors. Enterprise Connect, an Australian Government program, provides a network of government, industry, education and research partners offering comprehensive advice and support to businesses. VECCI is a partner organisation of Enterprise Connect with two business advisers focused on supporting and implementing the program to Victorian small to medium-sized enterprises. The Export Finance Insurance Corporation is the Australian Government s export credit agency and can provide finance and insurance to help Australian exporters overcome financial barriers as they grow their businesses overseas.
PROFIT PLANNING WHITE PAPER GROWTH CUSTOMERS ASSESS FOR FUNDING STRATEGY DIRECTION Grow Your Business is a Victorian Government program offering export planning and management services to help small businesses become internationally competitive through strategic business review and planning, mentoring and group and network programs. VECCI Global professionals regularly work with businesses to assess whether the business is an eligible applicant for government funding, and can assist businesses to make claims processes and applications easier. The Access Program assists Victorian businesses planning to establish new export markets in key countries and regions by providing the use the facilities in Victorian Government Business Offices. Ongoing Trade Fairs and Missions, arranged by both the Australian and Victorian governments, provide Victorian businesses with export opportunities and market intelligence by enabling them to access strategic overseas markets and to showcase the capability of Victorian industry internationally. 17.
Finding an expert to help Exporting can present significant opportunities for business growth. However, challenges for businesses looking to start exporting are common and include identifying the right market, finding the right business partner, devising an effective market entry strategy and securing appropriate resources for development. With a proven history in supporting Victorian businesses to venture into exporting, VECCI Global s experienced team can assist with export strategy planning, and use their essential knowledge and industry contacts to provide businesses with a successful export experience. From market analysis, legal requirements, entry strategies, visitation and cultural training, VECCI Global works with businesses from assessment through to export strategy planning, implementation and assessment, every step of the way. VECCI Global services also include: VECCI ExportCheck Diagnostic tool to help ensure you are ready to export to your target markets export documentation what paperwork you need and how to complete it Enterprise Connect an assistance program designed specifically for SMEs funding support eligibility and applications. 18.
The VECCI International Business Development team WHITE PAPER Eddie Zhao Eddie brings more than 20 years of international trade expertise to VECCI Global, specialising in import, export and investments. With a Masters of Business Administration (MBA) in Australia and Bachelor of Commerce in China, Eddie is well versed in trade arrangements and has an excellent perspective on business culture in both Australia and China. Email: ezhao@vecci.org.au Telephone: 03 8662 5234 Shirley Ng Shirley Ng is a licensed Business Broker and an International Business Development Manager with VECCI Global. Shirley has extensive experience in the business environment, working in a variety of roles assisting Australian businesses to expand into international markets. Working in a diverse range of business types and industries at both strategic and operational levels, Shirley has developed, managed and administered a range of strategic export marketing programs aimed at assisting businesses to achieve business and export sustainability. Email: sng@vecci.org.au Telephone: 03 8662 5172 19.
Contact VECCI Global If you re ready to take the next step, our teams in Victoria and China can walk your business through the export process. Eddie Zhao VECCI International Business Development Manager Email ezhao@vecci.org.au Phone 03 8662 5234 www.vecci.org.au 20.