A Step-by-StepGuide to

ExportingA Team Canada Inc Publication

Acknowledgements

This publication was made possible by the cooperative efforts of Team Canada Inc‘s members and partners who, in the spirit of partnership, dedicated time and resources to develop this authoritative guide for exporters.

Special thanks to the Forum for International Trade Training (FITT) for assisting Team Canada Inc with this project.

Additional copies may be obtained by calling 1-888-811-1119 or visiting our web site atexportsource.gc.ca to view the on-line edition.

Aussi disponible en français.

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PREFACE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. IS EXPORTING RIGHT FOR YOU? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. CREATING YOUR EXPORT PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3. RESEARCHING AND SELECTING YOUR TARGET MARKET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4. MARKETING YOUR PRODUCT OR SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

5. ENTERING YOUR TARGET MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

6. GETTING YOUR PRODUCT OR SERVICE TO MARKET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

7. FINANCING YOUR EXPORT VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

8. READING THE FINE PRINT: THE LEGALITIES OF TRADE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

9. THE TRIAL RUN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

APPENDIX A – TEAM CANADA INC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52APPENDIX B – GLOSSARY OF INTERNATIONAL TRADE TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

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TABLE OF CONTENTS

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W orld markets are opening up, barriers are tumbling down, and the free flow of

goods, services, investment and ideas hasintegrated world economies as never before.

Better, faster, more sophisticatedcommunications and travel have reduced the impact of timeand distance on internationaltrade. All of these factors aremaking exporting in the newmillennium more viable thanever before, for businesses of all sizes.

Although exporting can bringsignificant benefits, it can alsoplace demands on companies,especially smaller ones, that theymay or may not be prepared tomeet. A Step-by-Step Guide to

Exporting is designed primarily for small andmedium-sized Canadian enterprises (SMEs) thatare considering entering the export arena for thefirst time.

This guide is designed to give you anunderstanding of the realities of exporting and to provide you with solid, straightforwardinformation on how to assess your exportcapabilities. It also steers you through the process of planning and executing your firstexporting venture.

A Step-by-Step Guide to Exporting will help you:

• assess your company’s export potential

• build an export plan

• research and select your target market

• develop an export marketing plan

• determine the best methods of deliveringyour product or service to your target market

• develop a sound financial plan

• understand the legal aspects involved ininternational transactions.

It also directs you to sources of valuableinformation, programs and services that can help you enter new foreign markets or expandyour export operations. A vast network of peopleand organizations are available to provideassistance to smaller businesses as they prepare forthe global marketplace. How can you access thatassistance? This is where Team Canada Inc (TCI)comes in.

PREFACE

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“When you look at thesmall business sector,

which is larger, growingfaster, and creating

more jobs than the bigcompanies, that’s where

you see Canada’sentrepreneurial spirit

at its best.”S T

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Team Canada Inc, a virtual network relying onthe cooperation of all levels of government, worksto help Canadian businesses succeed in worldmarkets. This single window for Canadianbusiness vastly simplifies access to everythingfrom training and financing programs for the new exporter, to on-the-ground support inforeign markets for more experienced Canadianbusinesses. Team Canada Inc is your first stop en route to the information, counselling, market intelligence, financial assistance and on-the-ground support you need to make yourexport venture a successful one.

You can access the full range of TCI exportservices and expertise, by calling 1-888-811-1119(toll-free). A trained information officer located at your nearest Canada Business Service Centre(CBSC) will answer your questions and transferyour call directly to the export program or servicethat best meets your needs. This informationservice is available Monday through Friday, from9 am to 5 pm in every time zone in Canada.

You can also take advantage of ExportSource,Team Canada Inc’s on-line resource for exportinformation. In fact, you may come to think of it as your own virtual export office. But unlikeother offices, this one is open 24 hours a day,seven days a week. This innovative web site letsyou simultaneously search across a wide range ofprograms and services offered by TCI partners.

A companion product to A Step-by-Step Guide to Exporting is available on ExportSource atexportsource.gc.ca. It will link you to sources ofinformation and assistance that can help youprepare for the world of international trade.

With the right tools in hand, you’re already onestep closer to export success!

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INTRODUCTION

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Competing in the New MillenniumCanada’s economic growth and job creationprospects are tied to trade and, more than everbefore, trade is tied to the global economy.

That was Then, This is NowFrom the beginning, whenCanadian exports were limited to fish, fur, forest and mineral products, thesereliable goods and services – and our reputation – were all we needed to excel in theinternational marketplace.Trading our resources and ourresource-based manufacturedgoods allowed Canadians to enjoy one of the higheststandards of living in the world. That was then.

This is now. Over the last 20 years, significant changeshave taken place – broughtabout by instant communicationand rapid scientific andtechnological advances.

C T F

• Canada is the most trade intensive of the G-7 industrialized countries, and is theseventh-largest trading nation in the world.

• International trade is the fastest-growingarea of the Canadian economy.

• It is estimated that every $1 billion inexports creates or sustains 11,000 jobs in Canada.

• One job out of every three in Canadadepends on goods and services exports.

• Exports account for over 40% of Canada’sgross domestic product (GDP).

• International investment is responsible formore than one out of every 10 jobs inCanada, over 50% of its exports, and 75%of its manufacturing exports.

• It is estimated that over 1.3 million jobs (1 out of 10), over half of total exports and75% of manufactured goods exported aredirectly tied to Foreign Direct Investment(FDI) in Canada.

“The real discussionshould be ‘how do we,

as governments, asbusinesses, as individuals

come to grips with thenew phenomenon of

globalization? How dowe turn globalization toour advantage and that

of all our citizens?’Because for me… thestruggle is not ‘how to

stop globalization’. It isto harness the forces

of globalization and make them work for us

and for our people, and for the good of

people around the worldinto the 21st century.”

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Today, scientific and technological progress isdriving change. It has energized economic activity through new ideas, new products andnew services and it has made the world smaller,by bridging distances and speeding upcommunications. Businesses no longer need tolimit themselves to their own domestic market –the entire world is within their reach.

Three fundamental factors determine a country’sability to trade: its natural resources, its knowledgebase, and its ability to produce competitively.

The first factor determines what a country has towork with; the second, the skills and knowledgeof its people; and the third, its ability to put these to work to achieve the greatest productivityand growth.

The emergence of a truly global economy meansthat the world marketplace is now open forbusiness all day, every day. It is a marketplaceunencumbered by distance, unrestricted bytechnology and unmindful of country of origin.For Canada to maintain its enviable position asone of the world’s leading trading nations andeconomies, we must understand and embracethese new realities.

So, before you make a decisionabout entering the global trading arena, read on to find out how you can get yourcompany on the right track tosuccessful exporting.

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“ Experienced or juststarting out, callers onthe Team Canada Inctoll-free line areamazed at the qualityof our exportinformation service.They like the way we customize answersto their needs and howwe can connect them to the right people forexpert advice andcounselling.”I O,

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IS EXPORTING RIGHT FOR YOU?

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Why Export?Exporting means new business opportunities andincreased sales. With careful planning, even the

smallest Canadian company canmake it big on the internationalscene. But there are many otherreasons that a company shouldconsider for exporting, such as:

Enhanced DomesticCompetitiveness: Companies thatoperate solely in the domesticmarketplace can easily becomecomplacent and out of touchwith what’s happening in theirindustry. Those that export,compete with the best in theworld. They have to work hard

to keep their product or service on top. This notonly makes them competitive in export markets,but it helps them succeed in their own backyards.

Diversified Markets: For some companies, thesize of the Canadian marketplace can besomewhat limiting to the future growth of theirorganization. Access to larger markets, toemerging markets, and to niche markets wheretheir products or services are rare or unique, areall good reasons to seriously consider exporting.

Greater Economies of Scale: By having access to a larger market base, companies can startproducing on a scale that allows them to makethe most of their resources.

Are you Ready?While exporting holds significant economicpromise for most companies, it takes time – oftenmonths or even several years – before an exportingcompany begins to see a return on its investment.

What does it mean to be export-ready? Export-readiness refers to a company’s level ofpreparedness to do business in an export market.Simply stated, it means that the organization hasa marketable product or service as well as thecapacity, resources and management commitmentto compete on a global scale.

So, how do you become “export-ready?” In fact,two-thirds of the export effort takes place athome, in Canada, before you venture abroad.

The first step is to evaluate your export potential,resources and knowledge. You can save valuabletime, effort and resources if you begin with an accurate assessment of whether you’re ready to enter the global marketplace. Considereverything: language and cultural issues, differentmonetary systems, legal and tax implications,sources of financing, the need for careful researchinto new market opportunities, the foreignbusiness environment, modes of transport to get your product or service to the market, and,the measures to ensure the protection of yourintellectual property.

Consider the following questions before youdecide to launch your export venture:

• Human and Financial Resources:Do you have: the capacity to handle the extra demand associated with exporting,

“First of all, do yourhomework and know

yourself. Realize that itis a commitment for along, long term. Know

your strengths… Doyour research on your

product or your serviceand then go for it.”

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T B C E

Source: Adapted with permission from the Forum for International Trade Training, Going Global.

Benefits

Increased Sales: If you are selling domestically and salesare good, now’s the time to start exporting.

Higher Profits: Your export profits can grow faster if allfixed costs are covered by your domestic operations orother sources of financing.

Less Dependence on Traditional Markets: You canstrengthen your company by diversifying intointernational markets, as well as into niche markets.

Diversified Markets: Companies that export can takeadvantage of booming markets around the world.

New Knowledge, Experience and Enhanced DomesticCompetitiveness: New ideas, approaches and marketing techniques learned from exposure to the global marketplace can often be successfully applied in Canada.

Global Competitiveness: Today, many foreign companiesare entering Canadian markets, while Canadiancompanies are exporting to international markets.Exporting paves the way to global competitiveness.

Challenges

Increased Costs: Exporting involves many short-termcosts, such as extra travel, production of new marketingmaterials and hiring additional sales staff. If you’relooking to make a quick buck, you’ll probably bedisappointed.

Level of Commitment: Your flexibility in dealing withforeign clients is a key to success, combined with yourwillingness to devote time, effort, skills and resources toestablish – and maintain – your presence in foreign markets.

Sensitivity to Cultural Differences: Familiarize yourselfwith the differences in language, culture and businesspractices in your target market.

Paperwork: When exporting products or services, beprepared for the extensive documentation that is oftenrequired by Canadian or foreign governments.

Accessibility: Foreign clients must be able to contact youquickly and easily.

Competition: It is important to have a thorough knowledgeof the competition in your target market.

internally efficient systems to respondquickly to customer inquiries, personnelwith good culturally-sensitive marketingskills, sufficient capital or lines of credit to produce the product or service, andsenior management support for your export objectives?

• Competitiveness: Do you have: a product orservice that is unique and/or competitive inyour target market, proven, sophisticatedmarket-entry methods, and market researchthat confirms the potential viability of yourproduct or service in the chosen target market?

• Expectations: Do you have: clear andachievable export objectives, a realistic idea

of what exporting entails, an openness fornew ways of doing business, and anunderstanding of what is required to succeedin the international marketplace?

Are you ready to take on the challenges anddemands of international trade? Consider thefollowing issues:

• Exporting involves many short-term costs, such as extra travel, production of new marketing materials and hiring of additional sales staff. If you’re looking to make a quick buck, you’ll probably be disappointed.

• Financial risks can be higher, althoughmany options now exist to reduce such risks.

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T E S

Every day, Canadian companies are competing successfully in foreign markets. Here are some of their tips for success.

Zoom in on the most promising markets: Successful companies concentrate on one foreign market at a time, moving onto the next only after succeeding in the previous one.

Learn from experienced companies: Talk to Canadian companies that have succeeded in your target market. Many arewilling to share what worked for them and what didn’t. Contact your industry association to find names of successfulexporting companies in your sector and target market.

Plan for the financial resources you’ll need: Exploring foreign markets can take longer and cost more than expected. Beprepared for additional costs for market research, product launchings and personal visits.

Gear up for demand: Be prepared to meet increased demand from a successful foreign sale. Don’t forget to plan howyou will adapt your product or service to the needs and tastes of your target market.

Make personal visits: Building business relationships in foreign markets is best done face to face. Faxes, phone calls ande-mail are great for follow-up, but nothing beats meeting in person.

Study the market and the culture: Business people and customers in most foreign markets appreciate your efforts tolearn about their culture.

Set realistic expectations: Developing foreign markets is a long-term commitment. It takes time, effort and resources.Make sure your management is committed to the export venture. Be prepared for the long haul, and persevere.

Source: Adapted with permission from The Canadian Trade Commissioner Service, Expand Your Horizons.

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• A great deal of paperwork is involved tosatisfy the requirements of Canadian and

foreign governments.

• Products or packaging mayhave to be modified tosucceed in overseas markets.

The Next Step: Acquiring Export Skillsand Finding Sources of AssistanceAddressing the questions aboveshould give you a good idea ofhow ready your company is tobegin exporting, and what areasneed improvement. The next

step is to make sure that your company has, orcan acquire, the skills and services it needs tosuccessfully carry out an export venture.

There is no substitute for experience when itcomes to exporting. Familiarity with foreigncultures and business practices, the ability tospeak foreign languages, knowing how tonegotiate and structure contracts and how to get paid for your products and services, andidentifying key contacts in the exportingcommunity are all important.

There are many ways to bring export skills into your company: training existing personnel, hiring or partnering with an experienced exporteror firm, or contracting for the services of aninternational trade expert. Whichever approachyou choose, be sure to take advantage of theexport development services available from TeamCanada Inc and its partners.

As well, new-to-exporting companies can benefitby simply calling up local companies that aredoing business in their target markets. Mostbusinesses are willing to share their experiencesand help others avoid common mistakes.

“It is critical tounderstand your market

and the major focus ofyour business before youenter the international

marketplace. Alignyourself with strategic

partners, find your nichein the marketplace

and localize yourproducts to meet the

market demand.”C E A

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Another way of acquiring theright export skills is to becomeinvolved in your local exportcommunity events, such asbusiness breakfasts and seminarsorganized by boards of trade,export clubs, and chambers ofcommerce. Events can be greatopportunities to get together andshare experiences on exportmarkets, and on exporting in general.

Once you have researched and selected your targetmarket, and you have accessed the services ofTeam Canada Inc in Canada, you can then beginto access the services of the Canadian Trade Commissioner Service abroad. Trade commissionerslocated in foreign markets can assist you withexporting, international business contacts, foreignbusiness leads, licensing, joint venture develop-ment and foreign market access.

Working with Canada’s Regional Trade NetworksIn every region of Canada, Regional TradeNetworks bring together federal, provincial andprivate-sector players to strengthen services tolocal businesses for success in global markets.

These services include:

• export readiness assessment

• export counselling

• export preparation and training

• information on trade fairs and missions

• introduction to foreign buyers visiting your region

• contacts in international markets

• leads on worldwide business opportunities

• liaison with Canadian embassies

• export financing and insurance

• market information and intelligence9

I P S E P

The following questions should help youassess the potential of your product or servicein the target market:

• Customer Profile. Who already uses yourproduct or service? Is it in broad general useor limited to a particular group? Is it popularwith a certain age group? Are there otherdemographic similarities? Is the use of yourproduct or service influenced or affected byclimatic or geographic factors? If so, whatare they?

• Product Modification. Are any modificationsrequired to make it appeal to foreigncustomers? What is its shelf life? Will it bereduced by time in transit? Is the packagingexpensive? Can it be modified to satisfy the specific demands of foreign customers?Is special documentation required? Does itneed to meet any technical or regulatoryrequirements?

• Transportation. How easily can it betransported? Would transportation costsmake competitive pricing a problem?

• Local Representation. Does it requireprofessional assembly or other technicalskills? Is after-sales service needed? If so, is it available locally or do you have to provideit? Do you have the resources to do so?

• Exporting Services. If you are exportingservices, what is unique or special aboutthem? Are your services considered to beworld-class? Do you need to modify yourservices to allow for differences in language,culture and business environment? How doyou plan to deliver your services: personally…with a local partner… or electronically?

• Capacity. Will you be able to serve both yourexisting domestic customers and your newforeign clients? If your domestic demandincreases, will you still be able to look afteryour export customers or vice versa?

“ Be patient. International businesstakes a long time. Make it a long-terminvestment and don’tgive up.”C E A

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While there are exceptions to every rule, exportveterans and trade specialists know that certainfactors make the ramp-up to internationalmarkets easier, faster and less risky. To test your“export-ability,” answer the followingquestions and then check your score:

1. Is your product or service already available?

A. currently in production or being developed

B. at the prototype stage

C. at the idea stage only

2. Is your product or service selling in the Canadian market?

A. selling, and market share is growing

B. selling, but market share is low

C. selling in only one city in Canada

3. Do you have the surplus productioncapacity or available specialists to meetincreased demand for your product or service?

Yes No

4. Do you have the financing required toadapt your product or service to suit your target market and to promote it?

A. financing is in place

B. financing is being arranged

C. no financing available

ABOUT YOUR FIRM

5. Is management committed to sustainingyour export effort?

Yes No

6. Does your firm have a good track record of meeting deadlines?

Yes No

7. Does management have experience inexport markets?

Yes No

ABOUT YOUR PRODUCT OR SERVICE

8. Does your product or service have adistinct competitive advantage (quality,price, uniqueness, innovation) over yourcompetition?

Yes No

9. Have you adapted your packaging(labelling and/or promotional materials) for your target market?

Yes No

10. Do you have the capacity and resources toprovide after-sales support and service inyour target market?

Yes No

11. Do you have a Free on Board (FOB) or Cost, Insurance and Freight (CIF) price list for your product, or a rate list for yourservice?

Yes No

A “E-”

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12. Have you undertaken any foreign marketresearch?

A. completed primary and secondary marketresearch, including a visit to the targetmarket

B. completed some primary and secondarymarket research

C. no research

13. Is your promotional material available inthe language of your target markets?(Business cards, brochures, web sites)

Yes No

14. Have you started marketing your productor service in your target market?

Yes No

15. Have you engaged the services of a sales representative/distributor/agent, orpartnered with a local firm?

Yes No

16. Have you hired a freight forwarder orcustoms broker?

Yes No

Source: Adapted with permission from the Departmentof Foreign Affairs and International Trade,Businesswomen in Trade On-line Assessment.

HOW DID YOU SCORE?

If you selected “A”, or answered “Yes” to 12 - 16 questions, congratulations! Youunderstand the commitment, strategiesand resources needed to be a successfulexporter. At the very least, you have thefoundation in place to take on the worldand succeed.

7 - 11: Not bad, but there seem to be areasof weakness in your export strategy. It maybe wise to seek advice and guidance fromgovernment experts, export consultants orthe international trade branch of yourfinancial institution.

Less than 7: While you may be ready to visitfaraway lands, you will need to do a littlemore homework before you export.

Take a few minutes to complete the Take A World View Export ReadinessDiagnostic Tool, which can be accessedthrough the ExportSource web site atexportsource.gc.ca. This tool is designed forexporters of either goods of services, and is adapted to your intended export market.It consists of nine modules, each focusingon specific areas of a typical business.

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I f you were setting off to an unknown country or territory, you wouldn’t want to

leave without a map. You need to know what lies ahead, which direction to take and what is the best route. This is what your overall export plan does – it’s your map to a safe and profitable journey.

With this in mind, this chapter will introduce themajor elements of an export plan. The chaptersthat follow cover most of the elements in greaterdetail, allowing you to build the plan as you go.In addition to outlining the export plan, thissection will first review some of the importantpoints that should be part of your overall businessplan, which incorporates both domestic andinternational activities.

What will Planning do for You?Planning and preparation are essential for

any business, domestic orinternational. They set a courseand define a purpose. A soundplan tells you where yourbusiness is going and how it willget there. It forces you to look atyour company’s operations andre-evaluate the assumptions

upon which it is founded, and it helps youidentify weaknesses and strengths in youroperations.

With a plan, you lead, not follow. Time andagain, it has been shown that businesses with a plan do better than those without one.And planning is all the more important ininternational trade, which is often more complexand riskier than domestic business.

Most financial institutions and other lendingagencies will not consider providing funds to abusiness that cannot show a well-developedbusiness plan. Indeed, the plan will likely berequired by others outside of the business atvarious stages, such as potential partners orinvestors, in order for them to fully understandyour goals and objectives.

Western Economic Diversification Canada, inconjunction with Team Canada Inc and otherpartners, has designed an excellent on-line system for developing an export plan called theInteractive Export Planner, which is availablethrough ExportSource at exportsource.gc.ca. Mostcommercial banks and financial institutions alsooffer advice and tools to help you develop yourbusiness plan.

The following outline will help you identify thetype of information that should be included inyour business plan. Even if you have an existingplan, you should review it against the pointsbelow to make sure that all of the essentialelements are addressed and incorporated.

CREATING YOUR EXPORT PLAN

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“It takes years to build a market, but only days to lose it.” C E

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Essential Elements of a Business PlanA business plan should contain the followingelements:

1. Introduction (or Executive Summary)

Short description of:

• Business Objectives

• Product/Service

• Market and Customers

• Management Team

• Financing Requirements

2. Company Description

• History and Status

• Background and Industry

• Company’s Objectives

• Company’s Strategies

3. Products/Services

• Product/Service Description andComparisons

• Innovative Features (Patent Coverage)

• Applications

• Technology

• Product/Service Development

• Product/Service Introduction Schedule andMajor Milestones

4. Market (Domestic and/or International)

• Market Summary and Industry Overview

• Market Analysis and Forecasts

• Industry Trends

• Initial Product(s) or Service(s) to beintroduced

5. Competition and Risk Factors

6. Marketing Program

• Objectives

• Marketing Strategy

• Sales and DistributionChannels

• Customers

• Staffing

7. Management

• Founders

• Stock Ownership

• Organization and Personnel

• Future Key Employees andStaffing

• Education and

8. Facilities

9. Capital Required and Use of Proceeds

10. Financial Data and Financial Forecasts

• Assumptions Used

• 3 Year Plan

• 5 Year Plan

11. Appendixes

• Detailed Management Profiles

• References

• Product Descriptions, Sketches, Photos

• Recent Literature on Product, Market, etc.

(Source: adapted from Canada-Alberta BusinessService Centre business plan outline)

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“It takes patience. Youcan’t expect to sellproducts overnight. You have to plan for thelong haul and take thetime to examine thelocal culture, find outhow things are donethere and adapt. Part ofthe process includesfinding the right localpartner.”C E

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Creating a Successful Export PlanNow that you have prepared your business plan,or reviewed and revised an existing plan, it’s time to start building your overall export plan.Much of the information you’ll need for yourexport plan can be gathered by working throughthe remaining chapters of A Step-by-Step Guide to Exporting.

Basically, the export plan is a business plan that focuses on international markets. It identifies your target market(s), export goals,activities and objectives, necessary resources and anticipated results.

Essential Elements of an Export PlanAn export plan should contain the followingelements:

Introduction: This section provides thebackground for your export plan. It shouldsummarize the history of your product or service, the reasons and rationale for introducingit into a foreign market, as well as any requiredfinancing and conditions for accepting anyinvestments, if applicable.

Domestic Market Performance: If your companyhas been operating in the domestic market, use this section to describe its performance. You should address:

• the company

• the product or service

• history of performance

• resources (human and financial)

• organizational structure

• domestic marketing strategy

Export Objectives and Goals: In this section,indicate what you expect to achieve by enteringan export market. Describe your goals in shortand long time frames, such as one-year and five-year outlooks.

Your Target Market: This is where youdemonstrate what you’ve learned through yourinternational market research. (See Chapter 3.)Try to describe the following topics:

• target market and industry structure

• buyer analysis and projected demand for yourproduct or service

• competition and market shares if known

• distribution and promotional channels

• government regulations (trade restrictions,import duties, documentation)

• challenges and opportunities identified intarget market

• cultural factors

Delivery: Indicate how you plan to deliver theproduct or service to your target market, and why you feel this is the appropriate choice. (See Chapter 6.)

Marketing Plan: This is a key section of yourexport plan, and should include the followingelements: (See Chapter 4.)

• sales strategy

• pricing

• promotional strategy

• channels of distribution

• after-sales service

• tracking methods

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Sales Forecast: Outline your:

• monthly forecast for the upcoming year

• annual forecast for the next few years

Production Plan: Provide an assessment of your:

• physical plant requirements

• machinery and equipment

• raw materials

• inventory requirements

• suppliers

• required personnel

• estimate of production costs

Risk Assessment: Address the following questions:

• How do you expect competitors to react toyour entry into the market?

• Do you have contingency plans for potentialproblems?

• Does the political or economic situation inthe market pose any risks?

• What are the critical internal and externalfactors in the market that could affect yourbusiness?

Implementation and Development: Describe thesteps you’ll take to achieve your export objectives.Include details on the roles of various parties,tasks to be undertaken and timing.

Market Performance Evaluation: Describe themethods you’ll use to track and measure yourprogress in the market. Later, you can amendyour export plan and your actions, based onfeedback you receive from each export venture.

Financial Statements: Include the previous year’sbalance sheets and income statements.

Financial Forecasts: Include forecasts for incomeand cash flow.

Financing and Capitalization: Address thefollowing questions:

• What are your financing needs?

• What financing services will you use (e.g. government, bank)?

• What means of financing will you use (e.g. letter of credit)?

Source: Adapted with permission from Western EconomicDiversification Canada, READY FOR EXPORT: Building AFoundation For A Successful Export Program.

Internet users can find another excellent template for export planning on the CanadaBusiness Service Centre-Alberta web site atwww.cbsc.org/alberta/

Once you’ve prepared your export plan, review itcarefully to make sure it includes all possibleexpenses and provides a realistic assessment of theopportunities in your target market.

Your export plan is not a final and staticdocument. Be prepared to change and amend itas you learn from your exporting experiences.

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RESEARCHING AND SELECTINGYOUR TARGET MARKET

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N ow that you are well on your way todefining your company’s export plan, it is

time to research and select a target market foryour product or service.Companies start exporting formany different reasons, but nomatter what your motivation is, thorough internationalmarket research is absolutelyfundamental.

What is InternationalMarket Research?Simply put, it is the process ofgathering the information that will help you make sound export marketing decisions.Well-executed market researchwill give you an accurate pictureof the political, economic andcultural factors that will help you determine how to operate in your target market.

You may already be aware of anopportunity in a foreign market,but need specific information tohelp you take advantage of it. Or maybe you have a targetmarket in mind, and you wantmore detailed knowledge of the

demand for your product or service. Marketresearch will help you understand these needs and opportunities.

For example, research can confirm that anopportunity in a particular market actually exists, and can help you understand the market’scharacteristics. It can also give you insight intohow a new market can be developed. In this way, you can determine what is important tocustomers and what is likely to influence theirbuying decisions. Research should also reveal the dynamics of the target market, the trends that characterize it, and the forces driving those trends.

“Focus on your market,and research it

thoroughly. Select yourdistributor and clarifyyour expectations with

one another right up front.And most importantly,

be confident. Thedemand will be strong

if you have a goodproduct or service – and

Canada has an excellent reputation for

quality and integrity.Canadians are well-liked internationally,

and people want to dobusiness with us.

The business is there,but we have to be more

aggressive in going after it, and once we

find it, we still have toclose the deal!”

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Have you heard the story of the winery thatlost thousands of dollars worth of product bydesigning red bottling labels? The product,destined for Japan, was an instant failurebecause of the politically-incorrect colour.

Or what about the misadventure of amarketing campaign that was launched by aleading manufacturer of sports footwear? Atelevision commercial employed a nativeAfrican tribesman to test out the latest shoedesign and provide a comment in his nativelanguage. Unbeknownst to the advertisingagency prior to the commercial’s nationalrelease was that the tribesman’s comment,when translated into English, was far fromcomplimentary about the shoe he was askedto promote! Any cultural or language issuesthat could affect the sale of your product orservice should be discovered in your marketresearch. If not, your export venture couldbecome a humorous (and unprofitable) story.

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Good market research not only saves you time,money and effort, it enhances your potential forsuccess and reduces the potential risks associatedwith your proposed export venture.

Getting Ready to Start ResearchingYour market research should include:

• determination of your objectives for thetarget market as well as for the research

• selection of a process for gatheringinformation

• collection of the necessary information

• analysis and interpretation of the data

• decisions based on the information gathered.

Your first step is to assess which markets you want to target. Next, try to narrow your searchdown to the most promising ones. A moredetailed study of each of these markets will help you prepare for the next step in the exportcycle – developing your marketing plan.Source: Adapted with permission from Industry Canada,Take A World View... Export Your Services (Strategis).

MARKET TYPES

Choosing one (or several) markets for yourproduct or service, and understanding the type of market you’ve selected, will help you decidehow to best approach it. Generally, most foreignmarkets fall into one of the following threemarket types:

Type 1 – Fast-paced, competitive economies (e.g. United States,Western Europe)

• Efficient product and service delivery,excellent quality assurance and an in-depthmarketing plan are critical to success.

• If you are not fluent in the language, you can work through a local partner tohandle linguistic and cultural differences and challenges.

Type 2 – Relationship-based, relatively affluenteconomies (e.g. some countries inSouth America)

• Interpersonalcommunication skills,cultural sensitivity andlinguistic fluency are criticalfor developing a businessrelationship with a localpartner.

• Initially, relationships needto be developed at a seniorlevel.

Type 3 – International FinancialInstitution (IFI)-funded economies (e.g. Africa)

• Developing or changing economies.

• Market development takes time.

• Flexibility and political astuteness areimportant.

• It is helpful to have experience working with third-party funding organizations (e.g. Canadian International DevelopmentAgency or World Bank).

Some countries, such as Japan, havecharacteristics of both market types 1 and 2.Source: Adapted with permission from Industry Canada,Take A World View...Export Your Services (Strategis).

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Market A Market B Market C

1. Market Type• fast-paced (1)• relationship-based (2)• IFI-funded (3)

2. Political Highlights• government overview• who’s who• major political themes• relations with Canada, including agreements

3. Economic Highlights• domestic economy• economic trends• imports/exports (general)• imports/exports (to/from Canada)

4. Business Information• currency• language• business practices and regulations• differences in legal framework• government procurement practices• work relationships • office hours

5. Partnering Options• Canadian firms doing business in target market• major firms from target market doing business

in Canada• options for local partners

MARKET PROFILES

The following table might be helpful in summarizing your findings and in comparing three potential target markets:

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Market A Market B Market C

6. Support for Market-Entry Strategies• industry associations• trade events in target market• other networking options• trade media• research facilities• market research sources

7. Cultural Considerations• greetings• forms of address• do’s and don’ts• cultural differences• attitude toward Canadians• general tips

8. Canadian Trade Commissioner Service abroad• market prospect: help to assess your potential

in your target market• key contact search: lists of qualified contacts• market reports for some sectors

9. Travel Tips• visa or other requirements• work permits• business support services • hotels• telecommunications• tipping• voltage• religious holidays

Source: Adapted with permission from Industry Canada, Take A World View...Export Your Services (Strategis).

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Types of ResearchThere are many ways to begin studying a market.Some companies simply rely on a “gut feeling,”

while others use sophisticatedtechniques such as formalstatistical modelling of markettrends and saturation points.The more detailed the research,the less chance there is ofoverlooking somethingimportant. Essentially, however,

there are two main types of market research:secondary and primary.

Your secondary research begins here in Canada,and consists primarily of using data from othersources, such as periodicals, studies, marketreports, books, surveys and statistical analyses.Many of these are available through Team CanadaInc, as well as through chambers of commerce,economic development organizations, industryand trade associations, and Canadian companiesthat are already doing business in your targetmarket.

Once you’ve completed your secondary research,move on to the primary research phase. Thisinvolves collecting market information throughdirect contact with potential customers or othersources. The Canadian trade commissioners atembassies and consulates can help you assess yourpotential in your target market and provide lists ofqualified contacts.

Unlike secondary research, primary researchrequires a considerable amount of personalinvolvement through interviews and consultations.When asking for information from foreign ordomestic contacts, communicate your company’sobjectives at the outset, and present yourquestions clearly and concisely.

The following suggestions will help you avoidconfusion when requesting such information:

Company Description: Give a brief two- or three-paragraph description of your company, itshistory, industries/markets served, professionalaffiliations (if any), and your product or service.

Objectives: Briefly list or describe one or moreobjectives for your planned export product orservice, based on your secondary market research.

Product or Service: Clearly describe the productor service you want to export.

Questions: Base your questions on your secondaryresearch, and be as specific as possible. Contactsare more likely to take the time to answer yourquestions if it’s clear that you have alreadyresearched the subject matter.

O- R

ExportSource is one of the best on-linesources for this type of information. It links to all major Canadian market information web sites, and provides information ongovernment and private sector services,market and sector information, andeverything from trade statistics, to trade leads, to potential partners.exportsource.gc.ca

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“The internet hasbecome the global

trader’s most valuableresearch tool.”

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A S-- A M R

Step 1 – Screen Potential Markets

• Collect statistics that show product or service exports specific to your sector to various countries.

• Identify five to ten large and fast-growing markets for your product or service. Look at them over thepast three to five years. Has market growth been consistent year to year? Did import growth occur evenduring periods of economic recession? If not, did growth resume with economic recovery?

• Select some smaller emerging markets that may hold ground-floor opportunities for your product orservice. If the market is just beginning to open up, there may be fewer competitors than in moreestablished markets.

• Target three to five of the most promising markets for further study.

Step 2 – Assess Target Markets

• Examine trends that could influence demand for your product or service. Calculate the overallconsumption and the amount imported.

• Study the competition, including the extent of domestic production and the major foreign countries youwill be competing against in each target market. Also look at each competitor’s Canadian market share.

• Analyse the factors affecting marketing and the use of the product or service in each market, such aschannels of distribution, cultural differences and business practices.

• Identify any foreign barriers (tariff or non-tariff) for the product or service being imported into thecountry, as well as any Canadian barriers (such as export controls) affecting exports to the country.

• Search for Canadian or foreign government incentives to promote the export of the product or service.

Step 3 – Draw Conclusions

• After analysing the data, you may decide that your marketing resources would be more effectively used in a few countries. In general, new-to-exporting companies should concentrate on fewer than ten markets; one or two countries are usually enough to start with.

Source: Adapted with permission from Western Economic Diversification Canada, READY FOR EXPORT: Building A FoundationFor A Successful Export Program.

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Y our international customers may havedifferent tastes and needs than your domestic

customers. Creating a marketing plan based onthese specific needs will help you to become amarket-driven global organization.

A good marketing plan should answer thefollowing questions:

• What are the characteristics of your targetmarket?

• What is your competitor’s approach to the market?

• What is the best promotional strategy to use?

• How do you need to modify your existingmarketing materials, or even your product or service?

What is Marketing?Marketing should not be confused withadvertising, sales or promotion. In fact, marketingis the strategy that drives all of these processes toeffectively communicate your message to thetarget audience.

The Four “P’s” of Marketing, commonly referredto as the marketing formula, include:

• Product: What is your product or service andmust it be adapted to the market?

• Price: What pricing strategy will you use?

• Promotion: How will you make yourcustomers aware of your product or service?

• Place: How and where will you deliver ordistribute your product or service?

In international trade, several other factors shouldbe examined and included in your marketingformula, resulting in the 13 P’s of InternationalMarketing. Those factors are:

• Payment: How complex are internationaltransactions?

• Personnel: Do staff have the necessary skills?

• Planning: Have you planned your business,market, account, and sales calls?

• Paperwork: Have you completed all of therequired documentation?

• Practices: Have you considered differences incultural and business practices?

• Partnerships: Have you selected a partner tocreate a stronger market presence?

• Policies: What are your current and plannedpolicies?

• Positioning: How will you be perceived inthe market?

• Protection: Have you assessed the risks andtaken steps to protect your company and itsintellectual property?

Source: Forum for International Trade Training, GoingGlobal

MARKETING YOURPRODUCT OR SERVICE

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Building your Marketing PlanBecause marketing is an ongoing activity, yourmarketing plan is a work in progress – it must becontinuously revisited, revised and modified.Consider the following questions when buildingyour marketing plan:

• What is the nature of your industry?

• Who are your target customers?

• What is your company’s marketing strategy?

• What products or services do you plan to market?

• How will you price your products and services?

• Which segment of the market will you focus on?

• Does your marketing material accuratelyconvey the quality of your products or servicesand the professionalism of your company?

• Where are your potential clients?

A good marketing plan should contain thefollowing elements:

Executive Overview: State the purpose of yourmarketing plan. Provide an overview of yourobjectives, and how the plan will be used in yourexporting strategy.

Product or Service Analysis: Give a cleardescription of your export product or service, its unique selling points and how marketable it might be internationally. In other words,demonstrate that your core competency is world-class.

Market Analysis: Describe your target market interms of size and trends. Include key economic,social, political and cultural considerations, aprofile of your target customer, buying patternsand factors influencing purchasing decisions.

Competitive Analysis: Analyse the competitivenessof your product or service. This will help you toeffectively position it in your target market, andto decide on pricing and marketing options.

Goals: State your objectives in terms of marketshare, revenue and profit expectations. Indicatethe position you would like to occupy in thetarget market, and explain how you will go aboutachieving it.

Marketing Strategy: Describeyour marketing strategy,including information on specific product or service pricing recommendations, mode of delivery, and proposedpromotional methods.

Implementation: List theactivities you’ll undertake toimplement your marketing plan, indicating target dates and who will perform theactivities. Prepare a detailedmarketing budget.

Evaluation: Design a method ofevaluating your marketing plan at variousintervals to determine if your goals are beingachieved and what, if any, modifications may be needed.

Summary: Include a half-page summary of yourmarketing plan’s goals, describing how they fitinto your overall export plan.

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“Treat all marketsdifferently. Don’tassume that becauseyou’re successful in one,you’ll be successful inanother. There arecultural differences out there that you need to respect.” C E

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Determining your PriceStrategic pricing is key to successful marketing.As in domestic markets, the price of your product

or service determines your profit margin. Take into accountall of the variables that mayaffect price.

In setting a realistic export price,examine production and deliverycosts, as well as factors in yourtarget market. Proper pricingtakes into account costs, marketdemand and competition.Determining the real cost ofproducing a product or

providing a service, then bringing it to market, isprobably the most important factor in assessingthe financial viability of your export venture.

In addition to the costs of production, overheadand research and development, other specificexport related expenses must be taken intoaccount, such as:

• market research and credit checks

• business travel

• international postage, cable and telephonerates

• translation

• commissions, training charges, and othercosts involving foreign representatives

• consultants and freight forwarders

• product or service modification and specialpackaging.

G S M C

The following table outlines some of the basic differences between marketing techniques for exportingservices versus exporting goods.

GOODS SERVICES

FACTOR

Demonstrations Sample product Presentation of capabilities

Initial marketing by Sales representatives Firm’s principals

Stages of marketing Marketing your product Marketing your firm AND your service

Local market presence Sales/distribution facility Office or virtual office in target market

INFORMATION NEEDS

Cultural factors Product design and packaging Interpersonal dynamics

Local associations Distributors, marketers Service industry

Local events Trade shows Conferences (as speaker)

Media Product advertising Press coverage

Local partners Production/distribution firms Other service firms

Government procurement Goods acquisition Services contracts

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“In the beginning, tradecommissioners helped uswith distributors. Nowthat we are established,

we lean on their shouldersfor advice… Posts really

help us to understandthe country and how to

do business there.”E

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MARKET DEMAND

As in domestic markets, demand in foreignmarkets can affect your price. In other words,what will the market bear?

For most consumer goods, per-capita income is afairly good way to gauge a market’s ability to pay.Per-capita income for most industrialized nationsis similar to that of the United States, while it ismuch lower for the rest of the world. Someproducts/services may create such a strongdemand that even low per-capita income will notaffect their selling price. Generally, however,simplifying the products or services to reduce theselling price may be the best option in these typesof markets.

Also keep in mind that currency valuations alterthe affordability of goods. Your pricing should tryto accommodate currency fluctuations and thecomparative value of the Canadian dollar.

COMPETITION

In domestic markets, few companies are free toset prices without considering their competitors’pricing policies. This is also true in exporting.

If a foreign market is serviced by manycompetitors, you may have little choice but tomatch the going price, or go below it, to win ashare of the market. If your product or service isnew to a market, you may, however, be able to seta higher price.

PRICING STRATEGIES

How will each market affect your pricing?Product or service modifications, shipping,insurance, exchange rate fluctuations and bordertariffs need to be factored into your price. Andyou can’t ignore your competitors’ pricingstrategies.

Include your market objectiveswhen setting your price. Are youattempting to penetrate a newmarket? Looking for long-termmarket growth? Pursuing anoutlet for surplus productionproducts? Needing to price your first service contractcompetitively in order toestablish credibility?

You may have to tailor yourmarketing and pricing objectivesto certain markets. For example,pricing strategies for developingnations, where per-capita incomemay be low, will likely differ fromyour objectives for high per-capita markets such as Europe orthe United States.

Several pricing strategies are available:

• Static Pricing: charging the same price to allcustomers.

• Flexible Pricing: adjusting prices for differenttypes of customers.

• Full Cost-Based Pricing: covering both fixedand variable costs of the export sale.

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“Start by networking in Canada. Talk to or meet with experiencedexporters that dobusiness in your targetcountry. Theirknowledge and experiencecan help you avoidcommon pitfalls or costlyventures. They can give you a feel for howbusiness is done in thatcountry and explain thecultural nuances thatyou must be aware of.”E,

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A G E C

The following guide will help you determine your costs and develop your pricing strategy:

Category Detailed Items Costs Timing

Marketing and • agent/distributor feesPromotion • advertising, media relations

• travel• communications• materials (brochures, business cards)• trade fairs and exhibitions

Production • unit cost of manufacture• product or service modification

Preparation • labelling• packaging• packing• marking

Documentation • inspection• certification• document preparation• cargo insurance• freight forwarder’s fees

Transportation • lading and related charges• carriage• warehousing and storage• insurance

Customs • customs and others duties at port of entry

• customs brokerage fees

Financing • Costs of financing• interest charges• exchange rate fluctuations• export credit insurance

Source: Forum for International Trade Training, Going Global

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• Marginal Cost: covering only the variablecosts of production and exporting, whileoverhead and other fixed costs are paid out of domestic sales.

• Penetration Pricing: keeping your price lowto attract more customers, discouragecompetitors and gain quick market share.

• Market Skimming: pricing the product highto make optimum profit, among high-endconsumers, while there is little competition.

After determining your costs and selecting an appropriate pricing strategy, establish acompetitive price for your product or service that gives you an acceptable profit margin.

PromotionPromotion refers to all of the communicationstools used to let consumers know about yourproduct or service, and to convince them to buyit. This is your most visible marketing activity. In fact, well-planned promotional strategies can make or break your chances of success. You should know the distinct characteristics ofeach market.

Be careful with your name or corporate image.Stories abound of large and small companies alikelaunching products in other countries only todiscover that their brand name, logo or marketingmaterials convey negative or inappropriateconnotations in the local language or culture. So do your best to ensure that materials aresensitive to local tastes and consumer preferences.

Advertising: Carefully select the media –television, radio, newspapers and magazines –that have a good circulation within your targetaudience. For example, advertising on televisionmay not be a good idea in a country like India,where televisions are scarce, but where radio is very popular. Identify local or internationalpublications or TV/radio stations that have a good circulation or audience with your targetcustomers.

Promotional Materials: An eye-catching,professionally designed brochurecan be extremely effective, andcan be used almost anywhere.You may need to redesign yourmarketing materials, beingcareful to use simple and clearlanguage, and avoiding NorthAmerican fads that foreign buyersmay not understand. Pictures orgraphics, for example, can oftentell a story much better thanwords can. Package design itselfmay also be an issue – certaincolours, pictures or symbols usedin Canada may be inappropriateor offensive to some cultures.

Your promotional materialsshould be translated into themarket’s language. In many partsof the world, however, English is common inbusiness, even when it’s not the native language.If translation is required, hire a professionaltranslator with experience in commercial and business materials. It’s also a good idea to have a native of the country review yourtranslated materials.

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“In , we earned per cent of ourrevenues from oneUnited States-basedcustomer. This was ahigh-risk situation so we started building alocal and regionalpresence to target exportopportunities. We did this with the help of a number of well-positioned strategic partners.” C E

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Your promotional materials reflect your company’s professionalism. In many countries, first impressions areoften lasting impressions.

The following table will help you make the most of your marketing tools:

Marketing tool Desired impression Yours should be...

Business cards High quality and professional • easy to read• in the appropriate language• consistent throughout your firm• distinctive and informative• up-to-date and complete, including

area codes, country, telephone andfax numbers, postal code, e-mailand web site addresses

Brochures Creative and appealing • easy to read and informative,highlighting your uniqueness

• professionally designed and printed• visually pleasing

Customer testimonials Your company is highly recommended • representing your best customers• from top executives• included in your brochure

News articles Your company is a recognized leader • quoted in your brochure• reproduced on your letterhead• displayed in your office• sent to potential clients

Videos Sophisticated and interesting • professionally produced• oriented to the quality and

benefits of your product or service• clear and concise• easily available

Web site Comprehensive and informative • professionally designed• informative• visually pleasing• up to date • equipped with e-mail response• offering on-line purchasing

(if appropriate)

Source: Adapted with permission from Industry Canada, Take A World View...Export Your Services (Strategis).

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Direct Mail: A targeted direct mail campaign canalso be very effective. Research and experience inyour target market will allow you to build a baseof potential buyers and clients to whom you candirect your company’s message. Include newsabout your company, such as a new product orservice or a successful project bid, to introduceyour campaign.

Media: Publicity is a good way to establishawareness, profile and credibility. Using themedia wisely can be highly economical andprofitable. Prepare a media kit that introducesyour company, new products/services ornewsworthy activities, and include copies of anyarticles published about your company.

Personal Visits: Personal contact with potentialclients is perhaps the best means of promotion.Many cultures value personal contact in theirbusiness relationships, and attention to culturalissues often impresses foreignbusiness contacts.

Trade Shows: Attending orparticipating in internationaltrade shows is an excellent way topromote your product or service.As well, it allows you to checkout the competition and conductmarket research. If it is difficultfor your company to take part in a trade event, consider teaming up with other Canadiancompanies, or joining a federal or provincial group delegation or exhibit.

“ Our company’sinternational success isdirectly related to ourcommitment tocultivating distributionagreements in keymarkets. Last year, webroke into Europe in a big way, selling over millionthrough major Frenchdo-it-yourself chainsand Belgian, Swiss,German and Austriandistributors. As a result of these contracts,we now have percent of the market in France.” C E

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B y now, you have likely confirmed that thetiming is right for you to start gearing up to

export – you have researched one or morepotential export markets and you have developeda marketing plan. Choosing a market entrystrategy is your next key step.

Successful exporting depends on many factors. Ifyou are a manufacturer, you need an effective wayto deliver your goods to your target market andto distribute them. This may involve usingintermediaries, direct selling or partnering. If you

plan to export services, you needa mechanism to help you secureand manage contracts in themarket, which usually calls forsome form of local presence.

Identifying the characteristicsand regulations of your targetmarket will help you decidewhich entry strategy to pursue.For example, in relativelyaccessible markets such as theUnited States, direct selling may be a viable option. For

other markets with cultural differences, complexlocal business practices and unfamiliar legalenvironments, it may be better to find a local partner.

Entry StrategiesBased on your market research, you should have agood idea of a number of markets that holdpromise for your product or service. From whatyou know about these markets, you should nowdecide which method of entry best suits yourneeds.

DECISION FACTORS

• How is business conducted in your targetmarket and industry sector?

• What are your company’s export strengthsand weaknesses ?

• What is your company’s financial capacity?

• What product or service are you planning to export?

• How much service and after-sales supportwill your customers require?

• What trade agreements or barriers (tariffs,regulations, policies) apply to your targetmarket?

The traditional means of market entry can begrouped into three broad categories: direct exports,indirect exports and partnering/alliances. However,international trade includes a number of othermarket-entry mechanisms, such as investments,joint ventures and licensing agreements.

ENTERING YOUR TARGET MARKET

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“It’s very important fornew exporters to go to atarget market personally

and get a feel for localconditions. It’s also

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familiar with the localbusiness culture.”

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DIRECT EXPORTS

• For products, market and sell directly to the client.

• For services, negotiate, contract and workwith the client.

Selling directly to foreign customers may give a higher return on your investment than selling through an agent or distributor. It mayalso mean lower prices. Direct selling lets youhave contact with your customers, but it also has its disadvantages. Since you don’t have theservices of a foreign intermediary, it may take youlonger to become familiar with the market. Aswell, your customers or clients may take longer to get to know you, which is often an importantconsideration when doing business internationally.

INDIRECT EXPORTS

• For products, market and sell to an intermediary, (e.g. foreign distributor, domestic trading house). You can also retain a foreign agent or representative who does not directly purchase the goods.

• For services, negotiate and contract with aforeign intermediary who, in turn, negotiatesand contracts on your behalf.

For many new exporters, using an intermediarymay very well be the best way to enter a market.

AGENTS AND REPRESENTATIVES

Choosing the right market is only the first step.With this in mind, one idea is to seek out astrong local agent or partner in your targetmarket. While many small business owners aretempted to jump on a plane and start knockingon doors, a local agent can save you an enormousamount of time and money.

An agent secures orders from foreign customers inexchange for a commission. A representative is aspecialized agent who generallyoperates within a specificgeographic area and who sellsrelated lines of goods or services.

Both agents and representatives may be authorized to enter intocontractual sales agreements with foreign customers on yourbehalf. They are usually paid acommission only when they sell your product or service.

An agreement with a foreignagent or representativeimmediately gives you a presencein your target market. This is normally less costlythan setting up your own direct sales operation,and allows your representative to make morefrequent sales calls. It also gives you control overthe product or service and its price – animportant advantage.

A good foreign agent or representative can help in many ways – by researching markets, advisingon financing and transportation options, clearingcustoms, providing access to potential customers,making collections, and supplying informationon local business practices, legal rules andcultural traditions.

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“ Your agents in theinternational arena are the face of yourcompany locally. Wechoose our peoplecarefully, train themwell, and then we trustthem to represent ourbusiness wisely.” C E

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S F A D

This checklist should be tailored to your owncompany’s specific needs, as key factors mayvary with the products, services and countriesinvolved. Answering these questions will helpyou determine if prospective agents ordistributors meet your needs.

Size of Sales Force• How many field sales personnel does the

agent or distributor have?• What are its short- and long-range

expansion plans, if any?• Will it have to expand to accommodate your

needs properly? If so, would it do so?

Sales Record• Has its sales growth been consistent? If not,

why not? Try to determine its sales volumeover the past five years.

• What are its sales objectives for the nextyear? How were they determined?

Territorial Analysis• What territory does it now cover?• Is it consistent with the coverage you’re

looking for? If not, is it willing and able to expand?

• Does it have any branch offices in theterritory you wish to cover? If so, are they located where your sales prospects are greatest?

• Does it plan to open additional offices?

Product or Service Mix• How many product or service lines does

it represent?

• Are they compatible with yours?• Does it represent any other Canadian firms?

If so, which ones?• Would there be any conflict of interest?• Would it be willing to alter its present

product or service mix to accommodateyours, if necessary?

• What would be the minimum sales volumeneeded to justify handling your lines? Do its sales projections reflect this minimumfigure? From what you know of the territoryand the prospective agent or distributor, isits projection realistic?

Facilities and Equipment• Does it have adequate warehouse facilities?• What is its method of stock control?• Does it use computers? Are they compatible

with yours?• What communications facilities does it have

(e.g. fax, e-mail)?• If servicing is required, is it equipped and

qualified to do so? If not, is it willing toacquire equipment and arrange for training?If so, to what extent will you have to sharethese additional costs?

• If necessary, would it be willing to inventoryrepair parts and replacement items?

Marketing Policies• How is its sales staff compensated?• Does it have special incentive or motivation

programs?• Does it use product managers to coordinate

sales efforts for specific lines?• How does it monitor sales performance?• How does it train its sales staff?

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FOREIGN DISTRIBUTORS

Unlike agents, distributors actually purchase your product or service and resell it to localcustomers. Often, they set the selling price, provide buyer financing, and look after warrantyand service needs.

An added bonus is that the distributor canusually provide after-sales service in the foreignmarket. On the other hand, using a foreigndistributor may reduce your profit margins andresult in a loss of control over your productand/or price.

SELECTING AN AGENT OR DISTRIBUTOR

Many avenues are available to help you select asuitable foreign agent or distributor. Canadiantrade offices abroad, trade associations, businesscouncils and banks are useful sources ofinformation. Talking with other Canadianexporters or potential foreign customers can helpyou identify prospective agents or distributors.

Once you’ve developed a list of candidates to sellor distribute your product or service, you shouldvisit the market to meet with potential agents ordistributors. Talk to several firms, and check their references to make sure they are reputable.You can also protect yourself by entering into alimited-term trial agreement – if the foreignintermediary does not meet your expectations,you can find an alternative once the trial period is over.

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• Would it be willing to share expenses forsales personnel to attend seminars?

Customer Profile• What types of customers is it currently in

contact with?• Are its interests compatible with your lines?• Who are its key accounts?• What percentage of its total gross receipts

do these accounts represent?

Principals Represented• How many principals does it currently

represent?• Would you be its primary supplier?• If not, what percentage of its total business

would you represent? How does thispercentage compare with other suppliers?

Promotional Thrust• Can it help you research market information?• What types of media does it use, if any, to

promote sales?• How much of its budget is allocated to

advertising? How is it distributed? • Would you be expected to share

promotional costs? If so, how will thisamount be determined?

• If it uses direct mail, how many prospectsare on its mailing list?

• What printed material does it use todescribe its company and the lines it represents?

• If necessary, can it translate your advertisingcopy?

• Does it have its own web site?

Source: Adapted with permission from WesternEconomic Diversification Canada, READY FOR EXPORT:Building A Foundation For A Successful ExportProgram.

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TRADING HOUSES

Trading houses are domestic intermediaries that market your goods or services abroad. A full-service trading house handles a great manyaspects of exporting, such as conducting marketresearch, arranging transportation, appointingdistributors or agents, exhibiting at trade fairs,and preparing advertising and documentation.

Some act as “principals” or “export merchants,”buying products outright from Canadiansuppliers, while others act as “agents,” selling on commission. Some also specialize in specific industry sectors, such as agri-food ortelecommunications, while others focus onparticular foreign markets.

New exporters often use tradinghouses because they don’t want to sell directly to foreigncustomers or go through theprocess of finding a foreign agentor distributor.

PARTNERSHIPS AND ALLIANCES

Another option is to developsome form of partnership athome or abroad. There are manyadvantages associated with this

type of arrangement. For example, a good partnercan complement your capabilities and provide theexpertise, insights and contacts that may makethe difference between success and failure.

A well-structured partnership benefits bothparties in the following ways:

• each company focuses on what it does and knows best

• partners share the risk

• a partnership extends each party’s capabilities into new areas; ideas andresources can be pooled to help both sides keep pace with change

• several markets can be approachedsimultaneously

• a partnership can provide technology, capital or market access that you might notbe able to afford on your own.

Strategic alliances can also be very profitable. One of the easiest ways to export is to look at acompany that has a complementary product or service. You may be able to form a strategicalliance, which is less costly for you because youcan use another company’s distribution andmarketing expertise.

Three basic steps are involved in developing apartnership strategy:

• deciding whether or not partnership isappropriate for you

• defining the form and structure that bestsuits your needs

• finding a partner that meets your criteria and complements your strengths and offsetsyour weaknesses.

Before investing time and money in finding apartner, make sure that it makes sense for yourcompany. If your needs can be satisfied in-house,a partner may not be necessary. If the problem isfinancial, you may be better off looking forinvestors. But, if after evaluating these options,something is still missing – special expertise, localmarket presence – then you should take a closerlook at partnership options.

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“Form marketingalliances with trusted

companies. When theyrecommend us to theircustomers, that goes along way to building

credibility for us.” C E

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If you are confident that a partnership wouldbenefit your company, the next step is to defineits form, structure and objectives. Start byevaluating your company’s goals and its ability toachieve them. Then, outline what you expectfrom the partnership.

Once you’ve decided on the type of partnershipthat best meets your needs, look for the rightpartner – one that complements and strengthensyour capabilities, and that will work well withyour company.

E-COMMERCE

The evolution of globalization and the “oneworld” approach to business has been acceleratedwith the advent of electronic commerce, or e-commerce. It is now possible for more and morecompanies to use the Internet to access theirforeign customers by means of online marketing,automated ordering and payment systems,supply-chain management networks, Internettelephony, and even “virtual” offices within thetarget market. For more information on how e-commerce may be a market entry solution for your company, visit the “Task Force onElectronic Commerce” on the Industry Canadaweb site at e-com.ic.gc.ca where you willfind information and links to many different e-commerce resources.

Working Abroad Individuals or firms who are providing services inother countries should be fully aware of thepersonal and business issues involved in workingoutside of Canada. Since the most valuable assetin this circumstance is the “well-being” of theservice provider, exporters of services can preparefor problems that may arise concerning health,finances, taxation, foreigners’ rights, and more,

prior to leaving Canada. Canadian citizens whohave worked abroad for an extended period mustalso be aware of their responsibilities uponreturning to Canada, particularly those relatingto taxation of foreign income. The Department of Foreign Affairs and International Tradepublishes a guide called “Working Abroad:Unravelling the Maze” that will assist serviceexporters in becoming aware of all of these issues(also available on their web site at www.dfait-maeci.gc.ca/travel/consular/working_abroad-e.htm).

Putting the Entry Strategy to Work Your entry strategy is an important part of bothyour marketing plan and your overall export plan. Putting it in place is just as important aschoosing the right one.

Whether you choose direct selling, indirectselling or partnering to enter your target market,all strategies are based on relationships. At theheart of any business venture are people. Whilethis fact is important in business generally, ininternational trade it is emphasized by differencesin culture and business practices. Successfulmarket entry depends on finding the right buyers, agents, distributors and partners in yourtarget market.

The Canadian Trade Commissioner Serviceabroad can provide you with lists of qualifiedcontacts in your target market. These sources havethe local knowledge you need to refine andimplement your market entry strategy. The listscan include: potential buyers, partners; agents,manufacturers’ representatives; distributors,importers; consultants, accountants; governmentofficials; associations, chambers of commerce;freight forwarders; lawyers and patent attorneys;technology sources; financial institutions.

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T o sell your goods and services in Canada,you must comply with a variety of

regulations. The same is true in foreign markets –and invariably, the regulations are different. Thismeans that your goods and services may have tomeet certain safety and quality standards, healthand environmental regulations, and packagingrequirements. For service exporters, it may alsomean acquiring professional accreditation.

EXPORT DECLARATION

One of the most common forms that exporters ofgoods should be aware of is the Canada Customsand Revenue Agency form B13A Export Declaration.This form, along with the appropriate permitsand licenses, must be prepared by exporters priorto exporting to all non-U.S. destinations. Formore details on mandatory reporting of exports,contact your local Canada Customs and RevenueAgency office to obtain guide RC4116 – ExportingGoods from Canada. As an alternative to fillingout form B13A, exporters may wish to submit itelectronically by using the Canadian AutomatedExport Declaration software available from theStatistics Canada web site www.statcan.ca

EXPORT PERMITS

The first step in logistics planning is to determinewhether you need an export permit, which is requiredwhen the destination is a country on the AreaControl List (a list of countries to which any export,except humanitarian items, requires an exportpermit) or when the goods are on the Export ControlList (a list of goods and technologies that requireexport permits to be exported from Canada,pursuant to the Export and Import Permits Act).There are two types of permits: a General ExportPermit and an Individual Export Permit.

Transporting and Delivering your Product or Service Getting your product from where you are to your customer’s doorstep is often as important as the product itself. Determining the best mode of transportation, delivering on time andsetting up customer service are all vital elementsof successful exporting.

DELIVERING PRODUCTS

A number of documents are required for movingproducts to foreign countries, including those for shipping, transportation, tracking, customsclearance, delivery and receipt.

There are four options available for getting yourgoods to foreign customers. Often, more thanone mode of transportation is used for any givenexport shipment.

Truck: Trucking is popular for shipments withinNorth America. Even when shipping goodsoverseas, trucking is often used to deliver theproduct to its final destination. The quality ofavailable trucking services declines, however, onceyou go beyond the major industrialized countries.

Rail: This is another common option, especiallywhen shipping to the United States. Rail is alsowidely used when shipping to seaports fortransport abroad, and from seaports to a finaldestination.

Air: International air freight is expanding rapidly.Regular service to U.S. and overseas destinationsis readily available from major Canadian airports.Not all destinations are covered, however, andspecial charters may be required for more exoticmarkets. Shipping by air is more expensive than

GETTING YOUR PRODUCT OR SERVICE TO MARKET

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surface or sea transport, but the higher costs maybe offset by faster delivery, lower insurance andwarehousing costs, and better inventory control.

Ocean: Exports of goods to offshore markets ismost often transported by ocean carriers.Shipping large items, bulk commodities andgoods that do not require fast delivery is moreeconomical by sea.

FREIGHT FORWARDERS AND CUSTOMS BROKERS

Freight Forwarders can guide you through theextensive paperwork involved in internationaltrade, and help you improve your delivery timesand customer service. A good freight forwardercan also help you clarify conditions on the letterof credit with your customer and bank.

There are freight forwarders for both air andocean shipments. Many also specialize inarranging shipments to certain countries, while others concentrate on particular types of products.

Freight forwarders negotiate rates with shippinglines, airlines, trucking companies, customsbrokers and insurance firms on your behalf. You can choose how involved you want to be inthis process. A freight forwarder can provide acomprehensive service that takes care of all of your logistical requirements, or can simplynegotiate a rate with a shipping line.

Customs Brokers will clear your goods throughcustoms, prepare customs documentation, andremit duties owing on exported goods. They arealso good sources of information on recent tariffchanges and other customs-related developments.

DELIVERING SERVICES

The challenges associated with delivering servicesto a foreign market are no less complex, albeitquite different from those in exporting products.Delivering services often depends on such factorsin your target market as:

• extent and reliability of telecommunicationslinks

• existence of a reliable infrastructure ofcomputers, faxes and modems

• frequency and convenience of air linksbetween Canada and the market

• technological sophistication, receptivity andflexibility of customers

• potential support through official channels,government departments and internationaldevelopment agencies

• ability to satisfy legal regulations governingwork permits or professional certification.

Services can be delivered using different modalities.

• Provider Visits ClientThis is the service delivery modality that ismost easily recognized as an export activity.You will probably need to meet the clientrepeatedly, often at the site.

• Client Visits ProviderThe classic example, and a very importantincome earner for Canada, is tourism. Everyyear thousands of Canadians earn goodincome by meeting the needs of visitors whopay for services with earnings generated incountries around the world.

• Establishment in the MarketIn general this modality is more likely to beused by large firms, but it is important to anyfirm that wishes to become a major player inany market. Legal firms, accountants, andmajor banks are examples of businesses thathave established a presence in numerousforeign markets.

• Remote DeliveryRemote delivery has expanded dramaticallywith the availability of modern communicationstechnology, such as the Internet. Someexamples are the increasing use of electroniccommerce, or medical diagnosis andtreatment for remote locations.

More information on exporting services is availableby visiting Take a World View at strategis.ic.gc.ca/twv.

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Packing, Marking and LabellingTake special care in packing, marking andlabelling your products for export. They oftentravel long distances and are transferred from onemode of transportation to another. They shouldbe protected from damage or theft and clearlymarked so they are not lost in transit.

When packing your goods, take into accounttheir final destination and the transportationinfrastructure in both transit and target markets.Often, goods shipped overseas are handledroughly due to poor roads and repeated loadingand unloading from sea, to rail and to road.

Ensure that your goods are properly labelled.Markings on containers must identify the buyer,the port of entry, gross and net weights, thecountry of origin, and any cautions. A packinglist identifying the contents of each containermust also be included, and all markings mustagree with those on the bill of lading (or othershipment documents).

Consider the following factors when selectingyour packing method:

• Adverse weather conditions and extremetemperatures may occur in transit. Certaintypes of goods may require special tempera-ture controls or other protective measuresduring transit, handling, or storage.

• The type of carrier in which products are to be shipped may determine the kind ofpacking you should use. For example, if the goods are carried by ship, you need toknow whether they will be placed above orbelow deck.

• At port and handling facilities, as well asduring transit, cargo may be handled roughlyand should be packed with extra care.

• Proper packing can reduce the risk of theftduring transit.

Labelling, packaging or advertising restrictionsshould be taken seriously. For example, yourproduct may not clear customs if labels don’tconform to local requirements, such as thecountry’s official language, product weight, fibrecontent, ingredients, electrical or other technicalstandards.

Marking distinguishes your goods from those ofother shippers. Marks shown on the shippingcontainer must conform to those on thecommercial invoice/bill of lading, and mayinclude some or all of the following items:

• the buyer’s name or some other form ofagreed identification

• the point/port of entry into the importingcountry

• the gross and net weight of the product inkilograms and pounds

• identification of the country of origin, e.g. “Made in Canada”

• the number of packages

• appropriate warning/cautionary markings

• a packing list, plus one copy in eachcontainer, itemizing the contents.

Export DocumentationExport documentation identifies the goods andthe terms of sale, provides title to the goods andevidence of insurance coverage, and certifies thatthe goods are of a certain quality or standard.

A number of documents are required for overseasshipping, which generally fall into two categories.

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SHIPPING DOCUMENTS

Shipping documents are prepared by you or yourfreight forwarder, and allow the shipment to passthrough customs, to be loaded onto a carrier, andbe transported to the destination. Key shippingdocuments include:

• commercial invoice

• special packing or marking list

• certificate of origin

• certificate of insurance

• bill of lading

A bill of lading is used for ocean freight; an airwaybill is used for air freight; and rail and truckbills of lading are used for land freight. The oceanbill of lading can be a negotiable instrument thatpasses title to the goods. This is unlike the othertypes, which are “straight” bills of lading that pass title to the consignee as soon as the goods are delivered.

An insurance document is also required,particularly for international shipments, given therisks of damage or loss during transit. Goodsshipped by sea are typically insured for 110% oftheir value, to compensate for the extra costsinvolved in replacing lost goods.

COLLECTION DOCUMENTS

Probably the most important collection documentis the commercial invoice, which describes thegoods in detail and lists the amount owing by theforeign buyer. This form is also used for customsrecords, and must include the date of issue, the names and addresses of the buyer and seller, the contract or invoice number, a description of the goods, the unit price, the total weight and number of packages, shipping marks andnumbers, and the terms of delivery and payment.

Other collection documents include certificates oforigin, certificates of inspection, and import andexport licences, which are supplied as required. Forexample, a NAFTA certificate of origin is used tosecure duty-free, or lower duty rate, entry into theUnited States and Mexico for Canadian exports.Also, certificates of inspection are used to ensurethat goods are free from defect.

InsuranceGenerally, cargo insurance is more important ininternational transportation than in domestictransportation. International carriers assume onlylimited liability for goods when shipping by air orsea. Terms of sale often make the seller responsiblefor the goods up to the point of delivery to theforeign buyer. For this reason, transportationinsurance is absolutely essential, particularly foroverseas exports.

Marine transportation insurance protects bothocean- and air-bound cargo, and also coversconnecting land transportation, of which thereare three main types:

• Free of Particular Average (FPA) is thenarrowest type of coverage. Total losses arecovered, as well as partial losses at sea if thevessel sinks, burns or is stranded.

• With Average (WA) offers greater protectionfrom partial losses at sea.

• All Risk is the most comprehensive,protecting against all physical loss or damagefrom external causes.

In international transportation, it is important toremember that once the documents transferringtitle are delivered to the foreign buyer, you are nolonger liable for the goods.

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Y ou’ve got a great product or service, a marketentry strategy, and you’re eager to land your

first sale. But wait! What about financing? Howcan you ensure that your foreign customers willmake good on their purchases? What will you doif a customer asks you for financing?

You may think that talkingabout financing before you’vemade your first sale is likeputting the cart before the horse,but knowing your export financeoptions can be critical.

Imagine that you have justreceived a huge overseas order for your product or service.Suddenly, you need moreproduction capacity andfinancing to fill the order. Whenit comes to paying for the sale,the buyer will likely want a 30-, 60-, 90-day, or even longerpayment plan. And what if thebuyer defaults, or goes out ofbusiness before paying? Formany new or smaller exporters,

self-financing a growing export business can be very risky.

There are, however, a great many financingoptions that can minimize your risks and give you a competitive edge in world markets. Manynew exporters are unaware that they may be ableto offer their foreign customers competitive loansor financing terms through such Team CanadaInc members as the Export DevelopmentCorporation (EDC).

Export Finance PlanningWhile stories abound of small firms turning into successful exporters overnight, most exportsuccess stories involve sustained effort overrelatively long periods of time. Maintaining thiseffort requires financial stability and strength.Successful exporting often calls for the financialstability that comes from established domesticsales or other sources that give you a reliable cash flow.

A secure cash flow or cash budget is absolutelyessential to fund your export drive. Exporting canbe costly. Remember, even though Canada is oneof the least expensive countries in the world inwhich to do business, the costs of exporting canadd up. A secure cash flow can help to supportyour export activities during the time it takes tobuild income and eventually achieve profitability.

FINANCING YOUR EXPORT VENTURE

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“Research on theintricacies of each

foreign culture is crucial,and it’s important to be

diplomatic, especiallywhen ‘securing payment’

for overseas sales.Demanding payment

up-front can be aterrible insult in some

cultures. Yet, it’simportant to be paid,

especially since exportersusually need to make a

sizable investment to gettheir products intooffshore markets.”

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A financial plan that covers the various costs anddemands of exporting is key. This should includea cash budget to cover your export activities forthe first two or three years. This will highlightyour financing requirements, so you can betterplan how to finance your activities.

Your financial plan should also include a longer-term cost-benefit assessment of your exportobjectives, commonly referred to as a capitalbudget. Essentially, this provides you with anoperating plan against which actual expendituresand revenues are measured.

Both the cash budget and the capital budget canhelp you navigate your firm through the financialwaters of exporting. The cash budget helps youdetermine the timing and amount of your cashexpenditures. The capital budget gives you anoverview of the funds you’ll need to completeyour export project. It will also indicate when theproject will start generating positive cash flows.

You need to know the timing of both cash inflowsand outflows. You’ll have a hard time arrangingthe right financing if you don’t have a thoroughfinancial projection, or if you don’t know whenthe project will begin to show a profit.

Cash flow is important in domestic business, buteven more crucial to international trade paymentson transactions which are usually more delayedthan domestic transactions. Ensuring that yourcompany has sufficient cash or operating lines ofcredit should be your principal objective in yourfinancial plan. Cash flow planning can help youdefend against such problems as:

• exchange rate fluctuations

• transmission delays

• exchange controls

• political events

• slow collection of accounts receivable

These segments of your financial plan relatemainly to your company’s current financialsituation. Accurate details are important to the overall effectiveness of your export plan. Ensure that the complexity and length of yourexport plan match the funding being sought. A financing plan for a multiphase, high valueproject will be more complex than the financingplan for a $10,000 transaction.

K F E

• Is your current financial position sound?

• Do you have a financial plan to cover exportdevelopment costs?

• Are sufficient funds available for exporting?

• Have you developed an export costingsheet?

• Are you able to wait for payment?

Source: Adapted with permission from the AtlanticCanada Opportunities Agency, The Atlantic CanadaOpportunities Agency Trade Tool Kit.

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Getting PaidThere are four common ways for customers topay an invoice in international trade: cash inadvance, open account, letter of credit anddocumentary collection. The following are listed inorder of increasing risk to your company.

CASH IN ADVANCE

Cash in advance is the most secure option for an exporter, since it eliminates all risk of non-payment and bolsters working capital.Unfortunately, few foreign buyers are willing topay cash in advance, although some will pay a

portion when goods or servicesare specially ordered. Forservices, a retainer might be paidat the start upon signing acontract, after which progresspayments are matched todeliverables. If you can get cashin hand, however, you obviouslyhave fewer worries.

LETTERS OF CREDIT

Letters of credit provide somemeasure of security to both theimporter and exporter by relying on banks to receive andcheck shipping documents

and guarantee payment. By specifying particularterms, a letter of credit can allow the costs offinancing a transaction to be borne by either the exporter or importer. Both sight and termpayment provisions can be arranged.

There is also a distinction between confirmed andunconfirmed letters of credit. A letter of creditissued by a foreign bank can be confirmed by aCanadian bank, constituting a guarantee thatpayment will be made. This is an undertaking bythe Canadian bank to pay, even if the foreignbank does not. Confirmed letters of creditprotect exporters against the risk of non-paymentby the foreign bank. The most secure form is aletter of credit which is both confirmed andirrevocable.

C L C

Address the following questions whenexamining letters of credit (LCs):

• Are the names of the applicant (buyer) andthe beneficiary (exporter) complete andspelled correctly?

• Is the LC irrevocable?

• Is the LC confirmed by a reputable Canadianbank?

• Is the amount and currency of the LCacceptable?

• Are the shipping and expiry datesacceptable, and is the time period forpresentation of documents sufficient?

• Can the shipping instructions be met?

• Are the goods or services to be providedaccurately described ?

• Are the insurance specifications acceptable?

Source: Adapted with permission from the AtlanticCanada Opportunities Agency, The Atlantic CanadaOpportunities Agency Trade Tool Kit.

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worldwide, it isabsolutely essential tohave your financing

in place, andguarantees...often

make the differencebetween winning and

losing a contract.” C E

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DOCUMENTARY CREDITS AND COLLECTIONS

Exporters can also make use of sight and termdocumentary credits. A documentary creditcalling for a sight draft means that the exporter isentitled to receive payment on sight, i.e. uponpresentation of the draft to the bank. A termdocumentary credit, in contrast, may allow forpayments to be made over terms of 30, 60, or 90 days, or at some specified future date.

In a collection, the exporter ships goods to animporter and forwards shipping documents to acollecting bank which obtains payment from the importer in exchange for the documents. A collection differs from a letter of credit in thatthe exporter remains exposed to credit risksassociated with the importer because no bank hasundertaken in advance to pay the exporter uponpresentation of the documents. Under collectionterms, the exporter is required to finance theshipment until the importer receives the goods(sight draft) and sometimes longer (term draft).

OPEN ACCOUNT

Open account terms require the exporter to ship goods and pass title to the importer beforepayment is made. In these cases, the exporter isfully exposed to any credit risk associated withthe importer until payment is received. Inaddition, because open account terms usuallyallow 30, 60, 90 days, or longer, before payment is due, the exporter effectively finances thetransaction. Often, this period is extendedbecause the importer pays after the due date.

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You’ve assessed your export capabilities,researched potential export opportunities, created a marketing plan, selected an entrystrategy, studied how to deliver your product or service to your target market, developed afinancial plan and an overall export plan.

You may now be in a position to negotiate a saleor contract with a potential buyer. As with anydomestic transaction, it’s vital that you protectyour interests, and have legal recourse if any ofthe parties don’t live up to their part of the deal.

Find out about the rights and regulations ofbusiness within your target market. Be aware of international conventions, business lawsgoverning that country or region, and tradeagreements that may exist with Canada.Obtaining the guidance of a professional who has detailed knowledge of international laws and agreements will help you to sidestep potentiallegal pitfalls or resolve disputes.

International ContractsAfter you have taken a good look at the risks,calculated the costs, determined a viable priceand the client has accepted your offer, you’ll needto draw up a contract to cover all aspects of thetransaction. In theory, for a contract to arise, oneparty makes an offer and the other accepts it.Essentially, a contract is an agreement that the lawwill enforce.

The contract “crystallizes” the arrangement thatyou’ve negotiated with your customer or partner.In the area of international trade, however, manyquestions can arise, particularly concerning such

issues as which laws govern the contract, whatrecourse is available if your client defaults, orwhat to do if a dispute arises.

By their very nature, international businesscontracts are more prone to complications thandomestic ones. The parties are usually fromdifferent countries. Language barriers may lead to misunderstandings. Cultural and geographicalimpediments may crop up. Words may havedifferent meanings in different countries.

And, most important, the parties are used todifferent laws and business practices. This is whyinternational business contracts must be precise,specific and all-encompassing – to reduce the risk of misunderstandings, misconceptions and disputes.

The Proper LawCertain basic issues are common to all internationalcontracts, but the most fundamental principle is that of the governing or “proper” law of thecontract.

Problems in international business contractsoccur because of differences in the laws of thecountries involved. When different laws are applied,results may be inconsistent, and substantive rightsmay 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 mayhave specific or general rights, whereas underanother law they may have no rights. It istherefore essential to establish from the outsetwhich law governs.

READING THE FINE PRINT: THE LEGALITIES OF TRADE

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Resolving DisputesMany issues can become controversial ininternational trade transactions. For example:

• disputes with agents

• collection of payments due

• breach of contract or warranty

• intellectual property rights

• secured creditors’ rights, e.g. seizure of assets

• enforcing foreign judgments.

Resolving disputes formally through the legalsystem can be costly. Whenever possible, try tosettle out of court.

Selling GoodsUnder Canadian law, buyers and sellers mustmeet a number of obligations, many of which canbe modified or waived by the contract.

A contract covering the sale of goods involves the seller transferring or agreeing to transfergoods to the buyer for a sum of money. Theactual transfer of the property is important,because it distinguishes the sale of goods fromother transactions such as leases or property loans.The term “goods” includes all movable things,excluding real estate, and such intangibles asdebts, shares, patents and services. Further, thefact that money changes hands distinguishes asale of goods from other transactions, such asbarter or counter-trade.

TRANSFERRING TITLE AND RISK

Several elements hinge on determining the exactlegal moment when the buyer takes ownership ofthe goods (in formal terms, when title passes or istransferred to the buyer).

Risk: The transfer of title affects the parties’ rights in case of total or partial loss, damage ordestruction of the goods.

Rejection: Once it has occurred, transfer of titlemay preclude the buyer from rejecting the goods,despite valid complaints regarding quality,quantity or description.

Price: Once the buyer takes title, the seller cansue the buyer for the full unpaid price, rather thanmerely for the lost profit.

Rights of Action: After taking title, the buyer canenforce his or her property rights through courtaction or other methods.

DELIVERING GOODS

The seller must deliver the goods to the buyer inone of two ways:

• physically, by delivering a legal document oftitle, such as a bill of lading; or

• symbolically, by delivering, for example, thekey to where the goods are stored.

The contract should specify where the deliverywill take place. In international matters, this isusually defined by using such InternationalCommerce (INCO) terms as Cost, Insurance andFreight (CIF) or Free on Board (FOB). If thecontract does not specify the place of delivery,then this becomes the seller’s place of business,and the delivery is considered complete when theseller delivers the goods to a carrier.

BUYER’S ACCEPTANCE

If the seller does not break any of the conditionsof the contract, the buyer must accept the goods.Refusal to accept the goods without justificationgives the seller the right to sue for damages. But,if the seller breaches a condition of the sale, thenthe buyer can legally reject the goods.

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Upon request, the seller must allow the buyer toexamine the goods. The buyer can accept or rejectthe goods in one of three ways:

• by conveying his/her acceptance to the seller;

• by acting in a manner that is inconsistentwith the seller’s ownership of the goods, e.g. by reselling the goods after they aredelivered; or

• by keeping the goods without notifying the seller that he or she has decided to reject them.

Once any of these types of acceptance or rejectionhas taken place, the buyer can no longer refusethe goods – even if the seller has breached acondition of the contract.

UNPAID SELLER’S RIGHTS

The best protection for sellers is payment inadvance, or upon delivery. Next is payment byconfirmed letter of credit. If neither is possible,then the seller should take out security for theunpaid purchase price. This can take severalforms, for example, it can be independent of thegoods themselves, such as a written guarantee or amortgage against real estate. The most commonmethod is to reserve title, or to take a securedinterest in the goods.

Selling ServicesService contracts can range from a handshake topages of legal and technical specifications.Whatever the form, both parties should have thesame understanding of:

• the service to be provided

• the personnel who will provide the service

• the personnel or facilities to be madeavailable to the client

• the date on which the provision of service isto begin (and end)

• payments to be made

• benchmarks or dates when payments are tobe made

• circumstances under which the contract maybe terminated, and any implications in termsof completion of the work, handing over thework completed to date, partial payments,penalties, and so on

• the procedure in case the client is unable to make available the agreed personnel,information or facilities

• conditions for holdbacks

• conditions for the return of bid orperformance bonds or guarantees

• procedures for resolving disputes.

Protecting Intellectual PropertyRightsIntellectual property (IP) is a collective term used to refer to new ideas, inventions, designs,writings, films, and so on, which are protected by copyright, patents and trademarks.

Always protect your ideas. Whether or not youalready have patent or copyright protection for yourproduct or service in Canada, you should considerseeking similar protection in your target market.

Patent and intellectual property law, however, iscomplex, so it is best to obtain the advice ofprofessional legal counsel.

To protect your IP rights in Canada, you shouldestablish ownership with the CanadianIntellectual Property Office (CIPO). If sellingoutside of Canada, learn about IP rights andregulations in other countries.

Exporters should bear in mind that the cost ofregistering and maintaining foreign patents is high,and if they go this route they should also be pre-pared to pursue offenders, if necessary in the courts.

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Through CIPO’s data banks, you can findsolutions to technical problems. And, becauseCanada is a member of the Patent Co-operationTreaty, you can file applications for patents innearly all the countries where you needprotection, with just one application in Canada.

The following describes the key IP elements, andexplains how they can be protected:

Patents: For inventions (and new or improvedtechnology), protection in Canada extends up to20 years from the date the application is filed. Youcan receive a patent for a product or a process thatis new, useful and inventive.

Copyrights: Literary, artistic, dramatic andmusical works, and sound recordings areprotected for the life of the author, plus 50 years.Copyright is automatic, thus registration is notobligatory. However, registration providespresumption of rights in the event of a courtdispute.

Trademarks: Words, designs, or a combination ofthese, which are used to distinguish your goods orservices from those of others, are calledtrademarks. A trademark registration gives theowner the right to its exclusive use in Canada.Protection can be renewed for 15-year periods.

If you’re starting a business, you may wish toensure that no one else has registered, is awaitingregistration, or is using a trademark or tradename similar to yours.

Industrial Designs: These protect the visualfeatures of shape, pattern, ornamentation orconfiguration, or a combination of these, of afinished manufactured product. Unless you have a registered design, you cannot make a claimof ownership or protect the design againstimitations. Registration gives you exclusive rightsfor up to 10 years.

As a cautionary note, exporters of intellectualproperty should be aware of those countrieswhich do not uphold intellectual property lawsand standards, making legal recourse in the eventof a violation more complicated. Exporters areadvised to consult the Canadian IntellectualProperty Office (CIPO) or a professionalspecializing in international intellectual propertyissues on the countries that represent this risk to determine what legal action, if any, is attheir disposal.

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A number of web sites offer information onintellectual property issues, including:

• Canadian Intellectual Property Office(http://cipo.gc.ca);

• World Intellectual Property Organization(http://www.wipo.org);

• Take a World View...Export Your Services!(http://strategis.ic.gc.ca/twv).

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N ow that your overall export plan is in place,you’re likely eager to close that first export

sale. But before you start shipping 100,000widgets to the other side of the world, test thewaters with a trial run, especially if you are newto exporting. By following these steps, you can

test the viability of your exportventure. At the same time, you’llbe reviewing all of the pointspresented in A Step-by-StepGuide to Exporting.

SELECTING YOUR MARKET

Many new Canadian exportersstart with the United Statesmarket because of its proximityand familiarity. While there areadvantages to this approach, youshould also look at opportunitiesin other export markets.

PLANNING AND PREPARATION

Whether you export goods orservices, many of the following preparatory stepswill be similar.

• If you’ve decided to mount your trial run inthe U.S., choose a specific regional market asyour focus.

• Research the market by reviewing theinformation available from Team Canada Incand its ExportSource web site.

• Ask the Canadian trade commissioner inyour target market for help in assessing yourpotential (market prospect) and to provideyou with a list of qualified contacts (keycontact search).

• Visit cities in the region, talk to potentialbuyers and intermediaries, request a face-to-face briefing with the Canadian trade commissioner there to discuss the latest development on the marekt and your future needs.

• Develop a network of contacts and potentialpartners. Find out who your competitors andpotential allies are, and who are the mostimportant importers, distributors and agentsfor your product or service.

• If working through agents and distributors,make a short list of potential candidates andassess their qualifications and capabilities.Develop a profile of the ideal associate, thenselect the one whose skills and experiencebest complement your export objectives. If exporting a service, consider the possibilityof finding a local partner to represent your interests.

• Put together a promotional package describingyour company and its products or services.

• Attend a regional trade fair, if possible. Dosome preliminary promotion and establishcontacts with potential buyers and associates.

• Make arrangements with key export serviceproviders such as freight forwarders, tradinghouses and customs brokers.

CONCLUDING THE TRANSACTION

The following is a summary of the proceduresinvolved in concluding a deal and shipping goods to your buyers. Service exporters will sharecertain steps, although they don’t have to dealwith documentation, freight forwarding, shippingor customs clearance.

THE TRIAL RUN

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“Study your potentialclients, their needs and

their requirements.Select the most

promising of yourprospects. Concentrate

your effort until you getresults. Then provide

extremely strong after-sales service. Then

they’ll ask you back.”C E L

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Checking References

• customer’s credit rating

• other exporters who have had dealings withthe customer

• ask the Canadian trade commissioner in your target market to provide you withinformation on the local companies ororganizations that you have identified (localcompany information)

• profile of business

Whether you’re dealing with end-users, retailers or intermediaries, check references. You can dothis by contacting other Canadian exporters,commercial banks, people in the industry, or yourtrade commissioner.

Visiting Prospects

• gather insights into your customer’soperations and requirements

• ask the Canadian trade commissioner toprovide you with advice on timing andorganizing your trip (visit information)

Visits to important customers in your market(s)are strongly recommended. A visit can give youuseful insights into the operations and credibility,as well as the requirements, of potential customers.Your efforts, in turn, give you credibility withyour customers and clients.

Finalizing the Sale

Confirm the following details of the transactionwith the buyer:

• quantity

• payment terms

• shipping/trade terms

• transportation method

• price

Be sure both sides agree on quantity, paymentterms, shipping/trade terms, mode oftransportation, price and other specifics of the

sale. Typically, the process will be initiated when your sales department receives a purchaseorder from the buyer. You should respond with an acknowledgment of the order or a salesconfirmation.

Preparing a Letter of Credit (LC)

• the buyer issues an instruction to his or herown bank

• the buyer’s bank sends your bank the LC

• your bank sends the LC to you

The letter of credit is an important document.Review it carefully, along with your freightforwarder, banker and legal counsel. It must beconsistent with your sales agreement, and youmust comply with all of its provisions. Rememberthat the buyer’s bank can latch on to anydiscrepancies in your documentation – it paysupon receipt of correct documents, not uponsuccessful completion of the transaction. If aname or address is misspelled, if the shipping dateis wrong, or if all charges are not included, youmay be unable to collect.

Prepare other Documentation

Your shipment must be accompanied by allrelevant documentation, including:

• commercial invoice

• packing slip

• shipper’s instructions

• certificate of origin

• standards documentation (if necessary)

• health/sanitary certificate (if necessary)

Freight Forwarding

Your freight forwarder prepares the followingdocuments:

• customs invoice

• consular invoices (if required)

• special packing or marking list

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• insurance and certificate of insurance

• bill of lading

Your freight forwarder delivers copies of alldocuments to you, your buyer and yourcommercial bank.

You can now inform your freight forwarder thatyour container is packed and supplied with therequired documentation. Your freight forwarderwill then begin preparing the paperwork anddeliver the shipment to the buyer.

Your shipment must be accompanied by atransportation document such as a bill of ladingor air waybill that specifies the mode oftransportation, the route the goods are to takeand delivery times. It must be presented to your bank with the letter of credit and otherrequired documents.

The shipment may also require a certificate ofinsurance as proof that it is insured against loss or damage. Insurance must comply with thespecific coverage indicated in the letter of credit.(All-risk insurance is normally the best type ofcoverage for exporters.)

Shipment

• your freight forwarder sends the goods to the carrier

• your customer receives all relevantdocumentation, allowing the shipment toclear customs

Once your shipment has been delivered to thecarrier, your freight forwarder prepares and sends copies of all documentation to you, yourcustomer and your bank. Your customer will benotified that the product has been shipped, andwill be told when to expect arrival. Your customerthen uses the documentation to clear theshipment through customs.

Customs Clearance

• the goods clear customs at the destinationentry point

Customs clearance varies depending on how youexport your product or service. For example,when shipping goods to a wholly owned subsidiaryin a foreign country, you’re responsible for takingthe goods through customs, transporting, storingand delivering them. In many cases, however, the buyer is informed that the goods are beingheld in customs, and arranges to have themcleared and delivered.

Collection

After the shipment has been sent:

• the freight forwarder presents your bank withthe LC and all accompanying documentation

• you present your bank with a sight draft(demand for payment)

• your bank passes the documentation to thebuyer’s bank with a demand for payment

• the buyer’s bank accepts the documentationand lets you know when the funds will betransferred

• your bank transfers funds to your account

The freight forwarder presents your bank with the LC and all required documents (includingcertificates of inspection, commercial invoices,packing lists and insurance certificates). Yourbank checks all documents for discrepancies andverifies that the shipment was delivered on time.

Finally, the draft and documents are delivered toyour customer’s bank. If no discrepancies arefound, the draft is accepted and you are notifiedof acceptance. At a specified time, your bank willreceive funds from your customer’s bank, andyour trial run is complete.

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Reviewing and Revising yourExport PlanAfter you have completed your trial run, it’s agood idea to review your export plan and reviseit, if necessary. The following questions will helpyou determine if your plan needs to be revised incertain areas.

PRODUCT OR SERVICE

• Should your product or service be modifiedin some way that was not anticipated?

• Do you need to strengthen your ability toprovide training to use the product orservice?

• Are better arrangements required forproviding after-sales service?

PRICE

• Is your price competitive?

• Can you accept a reduced profit margin tomake your price more competitive?

• Can you raise your price and still increaseyour profits?

TARGET MARKET

• Have any of the assumptions you made aboutyour target market not materialized and, ifso, what are the implications?

• Are there other markets that might be bettersuited to your product or service?

• If you have had some initial success, shouldyou expand your effort within that country,or to other countries?

INTERMEDIARIES

• If selling through intermediaries (agents/representatives), are you satisfied with theirperformance?

• If selling to a distributor, has the expectedquantity of orders been placed? If not, hasthe distributor explained the shortfall or

recommended changes in your product,service or price?

• If selling through a trading house, howsuccessful has it been selling your product orservice abroad? If the performance has beenpoor, should you look at other options?

• If working with partners abroad, has therelationship been mutually beneficial?

FINANCING

• What methods have you been using to securepayment for foreign sales?

• Have they been satisfactory?

• How long have you had to wait for payment?

• Has there been a negative impact on yourworking capital?

• Have you had credit or collection problems?

• Have you incurred any bad debts?

• Are you satisfied with the services of yourbank?

PROMOTION

• Is there a better, more cost-effective way topromote your product or service?

• Does your promotional material (e.g. brochures,sales letters, samples) need to be modified orimproved?

• Have you learned anything about your targetmarket that warrants a reassessment of yourpromotional strategy?

SHIPPING

• Are you and your foreign customers satisfiedwith the methods of shipping and deliveringyour product or service?

• Are there less expensive or quicker ways toget your product or service to the market?

• Is your freight forwarder doing a good job?

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T eam Canada Inc, a virtual network relyingon the cooperation of all levels of

government, works to help Canadian businessessucceed in world markets. This single window forCanadian business vastly simplifies access toeverything from training and financing programsfor the new exporter, to on-the-ground support inforeign markets for more experienced Canadianbusinesses. Team Canada Inc is your first stop en route to the information, counselling, market intelligence, financial assistance and on-the-ground support you need to make yourexport venture a successful one.

Team Canada Inc Members currently include:

• Agriculture and Agri-Food Canada

• Atlantic Canada Opportunities Agency

• Business Development Bank of Canada

• Canada Economic Development for QuebecRegions Agency

• Canada Mortgage and Housing Corporation

• Canada Commercial Corporation

• Canada Customs and Revenue Agency

• Canadian Heritage

• Canadian International Development Agency

• Department of Foreign Affairs andInternational Trade

• Environment Canada

• Export Development Corporation

• Human Resources Development Canada

• Indian and Northern Affairs Canada

• Industry Canada

• National Farm Product Council

• National Research Council Canada

• Natural Resources Canada

• Public Works and Government Services

• Statistics Canada

• Transport Canada

• Western Economic Diversification Canada

Team Canada Inc provides a single source ofinformation about international businessdevelopment activities offered by federaldepartments, the provinces, the territories and theprivate sector. The result is an unprecedentedeffort to streamline services to the Canadianbusiness community – getting the right kinds ofservices, quickly and efficiently, to the companiesthat can benefit.

Team Canada Inc ServicesGeneral Export Information Services are availablevia a single-window access connecting you to afull range of government export services andexpertise.

• Export Information Service – Call 1-888-811-1119 toll-free and a trainedinformation officer will discuss your exportneeds and provide you with the appropriateexport information, sources or contacts. Thisservice is accessible via your local CanadaBusiness Service Centre Monday throughFriday, from 9 am to 5 pm in every time zonein Canada.

APPENDIX A – TEAM CANADA INC

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• ExportSource – exportsource.gc.ca – Team Canada Inc’s official web site.Simultaneously search across a wide range of programs and services offered by Team Canada Inc members and partners.

Skills Development Services can be accessed in awide variety of formats and are offered by variousgovernment organizations, trade and industryassociations and other export service providers.

• Export Preparation Guides – visitExportSource for an on-line version of theStep-by-Step Guide

• Export Skills Training – half-day workshopssuch as the Going Global series; intensivetraining (classroom or on-line) which canlead to professional designation as a CertifiedInternational Trade Professional (CITP)offered by the Forum for InternationalTraining; market and sector-specific seminars offered by various TCI membersand partners

• Preparation for U.S. – for first-handexposure to new markets, participate inNEBS, New Exporters to Border States;NEBS Plus for other U.S. markets

• Preparation for Other Markets – similar tothe NEBS program, NEXOS is for overseasmarkets and NEXSA for South Americanmarkets.

Ask about other similar programs which can helpyou to enter a market for the first time.

Export Counselling Services are provided atvarious stages of the export preparation processand are designed to address specific exporterneeds.

• Export Readiness Assessment – helps you todetermine how ready your company is forexport markets and helps to identify possibleaction items

• Export Plan Development – specificinformation, intelligence and referral toexport service providers helping you toidentify and select your target markets

• Export Plan Implementation – includes useof opportunity identification mechanismssuch as the WIN Exports database and the International Business OpportunitiesCentre (IBOC). These tools are an integralcomponent for trade commissioners abroadwho use them to learn about your companyand serve as a mechanism to channel leadsback to Canada.

Market Entry Support Services are primarilyintended for companies which have demonstratedthat they are capable and committed to theexport market. They should have an export plan,a short list of target markets, and should be readyto invest the time and effort required to cultivatethe market.

• Market Information and Intelligence –market and sector-specific studies,information on projects funded byinternational financial institutions andmarket intelligence in the form of specificopportunity identification, bid matching and competitive intelligence

• Trade Missions and other Trade-relatedEvents – outbound and incoming missions,trade fairs, pre-mission briefing sessions,market-focus seminars and a variety of othertrade-related events

• Market-specific Advice and Guidance referralto specific events, contacts and introductionto the services of the Canadian TradeCommissioner Service and its network ofoffices around the world. Guidance is also provided to help overcome barriers tomarket entry including regulations, culturalconsiderations, business ethics, among others.

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• Market Development Funding – for example,Program for Export Market Development(PEMD), Canadian InternationalDevelopment Agency (CIDA Inc) IndustrialCooperation, as well as a number ofprovincial programs

Export Financing Services are provided to satisfya wide range of needs

• Needs Assessment and Counselling –provided by dedicated teams of specialistswho have experience in assessing the needsand providing guidance to small andmedium-sized businesses in accessing a widerange of export financing options

• Working Capital to augment existingoperating lines of credit – examples include:bonds and guarantees, export receivablesinsurance, pre and post shipment workingcapital financing (including guarantees),specific export working capital and termlending

• Foreign Risk Mitigation – Examples include:export credits insurance, political riskinsurance, credit guarantees, discounting and bonding.

• Medium and Long Term Foreign BuyerFinancing is available for the purchase ofCanadian capital goods and services in theform of direct loans, lines of credits andnotes purchases.

All of the services noted above are available righthere in Canada, through Team Canada Inc andits partners and through Regional TradeNetworks (RTNs) located in each provice.

ASSISTANCE IN YOUR TARGET MARKET

Any market entry strategy requires establishingprimary market contacts for your company, either in person or through the assistance of a landedrepresentative.

With offices in more than 120 cities worldwide,the Trade Commissioner Service helps new andexperienced companies that have researched andselected their target markets. The 500 tradeofficers operating from Canadian embassies andconsulates facilitate the market entry of Canadianbusiness and institutional clients across the fullspectrum of exporting, investment and technology.

Companies who want to access this service shouldfirst register with the WIN Exports database of the Department of Foreign Affairs andInternational Trade. Information on Canadiancompanies residing in the WIN Exports databaseis accessed by the trade commissioners abroad to match the capabilities with the needs ofprospective foreign buyers and clients.

All offices of the Trade Commissioner Serviceoffer the following core services:

• Market Prospect: help to assess your potentialin the target market

• Key Contacts Search: qualified contacts andpartners

• Local Company Information: currentinformation on local businesses

• Visit Information: practical guidance onorganizing your trip

• Face-to-face Briefing: market intelligencefrom our officers in the field

• Troubleshooting: advice on resolving criticalbusiness challenges

Trade officers can also refer Canadian clients tolocal service providers in target markets for 5specified additional services such as extensivebusiness program confirmation, translation andinterpretation, hotels/business centres and indepth market research, for example. Tradecommissioners can also facilitate trade andinvestment missions into foreign markets withinthe agreed framework of the TCS BusinessMission Agreement.

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Regional Trade NetworksYour first stop en route to the information,counselling, market intelligence, financial assistanceand on-the-ground support you’re looking for.

The 10 Regional Trade Networks (RTNs) acrossCanada are partners of Team Canada Inc,offering you, as an active or potential exporter,export development services. RTNs are animportant part of the Team Canada Inc approachto helping you capture emerging opportunities ininternational markets. The networks consist offederal, provincial and local Team Canada Incpartners who have joined together to help you togain the maximum benefit of available exporterservices. In short, their job is to help you toacquire the information and market intelligencethat you need to launch your product or serviceabroad by providing assistance in:

• export preparation and skills development

• creating your export plan

• participating in trade fairs, seminars, andmissions

• collecting market information and intelligence

• determining your export financing needs

• accessing assistance in the target market

Before you tackle a new global market, contactthe RTN in your area at:

Toll free 1-888-811-1119Monday through Friday 9am to 5pmFurther information on the RTN partners is available online at: exportsource.gc.ca

REGIONAL TRADE NETWORKS ACROSS CANADA:

RTNs are located across the country in thefollowing regions:

• British Columbia

• Alberta

• Saskatchewan

• Manitoba

• Ontario

• Quebec

• New Brunswick

• Nova Scotia

• Prince Edward Island

• Newfoundland and Labrador

Trade Team Canada SectorsTaking on the World!YOUR SECTOR CONTACTS IN TEAM CANADA INC

Government and industry are working together inkey sectors to plan trade promotion initiatives tohelp Canadian companies succeed in global markets.

Trade Team Canada Sectors currently operate in:

• Advanced Manufacturing Technologies

• Aerospace and Defence

• Agriculture, Food, and Beverages

• Automotive

• Bio-Industries

• Building Products

• Electric Power Equipment and Services

• Environmental Industries

• Health Industries

• Information Technologies andTelecommunications

• Plastics

• Service Industries and Capital Projects

...to offer the services and activities you need.

Find out more about Trade Team Canada Sectorsby calling Team Canada Inc toll-free at:1-888-811-1119 or by visiting the Team CanadaInc web site at exportsource.gc.ca

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E xporting is more complex than selling in adomestic market. It is helpful to familiarize

yourself with key trade expressions andtechniques. Among other areas, you shouldunderstand some or all of the following aspects:

• the laws, regulations and practices governingyour product or service in your target market;

• export documentation, including invoices,bills of lading, certificates of origin, andhealth and safety certificates;

• tariffs, customs duties and processing fees aswell as taxes payable on your shipment;

• export-related services offered by brokers,trading houses, agents, freight forwarders andinsurance companies;

• how to label, pack, transport and store yourproducts;

• payment options such as letters of credit, billsof exchange and open account transactions.

General TermsInternational trade carries its own particularterminology. The following are general tradeexpressions that new exporters will encounter inpublished sources and trade discussions.

Anti-dumping Duty: A special duty imposed tooffset the price effect of dumping that has beendetermined to be materially harmful to domesticproducers. (See also Dumping.)

Countertrade: A general expression meaning thesale or barter of goods on a reciprocal basis. Theremay also be multilateral transactions involved.

Countervailing Duties: Additional dutiesimposed by an importing country to offsetgovernment subsidies in an exporting country,when the subsidized imports cause materialinjury to domestic industry in the importingcountry.

Dumping: The sale of an imported commodityat a price lower than that at which it is soldwithin the exporting country. Dumping isconsidered an actionable trade practice when itdisrupts markets and injures producers ofcompetitive products in the importing country.Article VI of the General Agreement on Tariffsand Trade permits the imposition of special anti-dumping duties against dumped goods equalto the difference between their export price andtheir normal value.

Export Quotas: Specific restrictions or ceilingsimposed by an exporting country on the value orvolume of certain exports designed, for example,to protect domestic producers and consumersfrom temporary shortages of the goods affected orto bolster their prices in world markets.

Export Subsidies: Government payments orother financially quantifiable benefits provided todomestic producers or exporters contingent onthe export of their goods and services.

GDP/GNP (Gross Domestic/NationalProduct): The total of goods and servicesproduced by a country.

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APPENDIX B – GLOSSARY OFINTERNATIONAL TRADE TERMS

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Subsidy: An economic benefit granted by agovernment to producers of goods, often tostrengthen their competitive position. Thesubsidy may be direct (e.g. cash grant) or indirect(e.g. low-interest export credits guaranteed by agovernment agency).

Surcharge or Surtax: A tariff or tax on imports inaddition to the existing tariff, often used as asafeguard measure.

Tariff: A duty (or tax) levied on goodstransported from one customs area to another.Tariffs raise the prices of imported goods, thusmaking them less competitive within the marketof the importing country. Under the NorthAmerican Free Trade Agreement, most tariffs onCanadian goods and services to the United Statesand Mexico have been eliminated.

International Commerce (INCO)TermsShipping terms set the parameters forinternational shipments, specify points of originand destination, outline conditions under whichtitle is transferred from seller to buyer, anddetermine which party is responsible for shippingcosts. They also indicate which party assumes thecost if merchandise is lost or damaged duringtransit. To provide a common terminology forinternational shipping, the following INCO termshave been developed under the auspices of theInternational Chamber of Commerce.

Cost and Freight (C&F): The exporter pays thecosts and freight necessary to get the goods to thenamed destination. The risk of loss or damage isassumed by the buyer once the goods are loadedat the port of embarkation.

Cost, Insurance and Freight (C.I.F.): Theexporter pays the cost of goods, cargo andinsurance plus all transportation charges to thenamed port of destination.

Delivered at Frontier: The exporter/seller’sobligations are met when the goods arrive at thefrontier, but before they reach the “customsborder” of the importing country named in thesales contract. The expression is commonly usedwhen goods are carried by road or rail.

Delivered Duty Paid: This expression putsmaximum responsibility on the seller/exporter interms of delivering the goods, assuming the riskof damage/loss and paying duty. It is at the otherextreme from delivered ex works (see below),under which the seller assumes the leastresponsibility.

Delivered Ex Quay: The exporter/seller makesthe goods available to the buyer on the quay orwharf at the destination named in the salescontract. There are two types of ex quay contractsin use: ex quay duty paid, whereby the sellerincurs the liability to clear the goods for import,and ex quay duties on buyer’s account, whereby thebuyer assumes the responsibility.

Delivered Ex Ship: The exporter/seller mustmake the goods available to the buyer on boardthe ship at the location stipulated in the contract.All responsibility/cost for bringing the goods upto this point falls on the seller.

Delivered Ex Works: This minimal obligationrequires the seller only to make the goodsavailable to the buyer at the seller’s premises orfactory. The seller is not responsible for loadingthe goods on the vehicle provided by the buyer,unless otherwise agreed. The buyer bears allresponsibility for transporting the goods from theseller’s place of business to their destination.

Ex Works (EXW): The price quoted applies only at the point of origin and the seller agrees to place the goods at the disposal of the buyer atthe specified place on the date or within theperiod fixed. All other charges are for the accountof the buyer.

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Free Alongside Ship (FAS): The seller quotes aprice for the goods that includes charges fordelivery of the goods alongside a vessel at theport. The seller handles the cost of unloading andwharfage, loading, ocean transportation, andinsurance are left to the buyer.

Free Carrier...(named port): Recognizing therequirements of modern transport, includingmulti-modal transport, this principle is similar toFree on Board (see below), except that theexporter’s obligations are met when the goods aredelivered into the custody of the carrier at thenamed port. The risk of loss/damage istransferred to the buyer at this time, and not atthe ship’s rail. The carrier can be any personcontracted to transport the goods by road, sea,air, rail or a combination thereof.

Free of Particular Average (FPA): This type oftransportation insurance provides the narrowesttype of coverage – total losses, and partial losses atsea if the vessel sinks, burns or is stranded, arecovered.

Free on Board (FOB): The goods are placed onboard the vessel by the seller at the port ofshipment specified in the sales contract. The riskof loss or damage is transferred to the buyer whenthe goods pass the ship’s rail.

Free on Board Airport (FOB Airport): Based onthe same principles as the ordinary FOBexpression, the seller’s obligation is fulfilled bydelivering the goods to the air carrier at thespecified airport of departure, at which point therisk of loss or damage is transferred to the buyer.

Free on Rail and Free on Truck (FOR/FOT):Again, the same principles apply as in the case ofordinary FOB, except that the goods aretransported by rail or road.

With Average (WA): This type of transportationinsurance provides protection from partial losses at sea.

Transportation and Delivery TermsThe following are common terms used inpacking, labelling, transporting and deliveringgoods to international markets. They are inaddition to the above INCO terms.

Area Control List: A list of countries to whichany export (except humanitarian items) requiresan export permit.

Bill of Lading (Ocean or Airway): A contractprepared by the carrier or the freight forwarderwith the owner of the goods. The foreign buyerneeds this document to take possession of the goods.

Certificate of Origin: A document that certifiesthe country where the product was made (i.e. itsorigin). A common export document, a certificateof origin is needed when exporting to manyforeign markets. It must be used for Canadian-made goods to qualify for preferential tarifftreatment under the North American Free Trade Agreement.

Commercial Invoice: A document prepared bythe exporter or freight forwarder, and required bythe foreign buyer, to prove ownership and arrangefor payment to the exporter. It should providebasic information about the transaction, includingdescription of goods, address of shipper and selleras well as delivery and payment terms. In somecases, the commercial invoice is used to assesscustoms duties.

Consular Invoice: A statement issued by a foreignconsul in the exporting nation describing thegoods purchased. Some foreign governmentsrequire Canadian exporters to first obtain consularinvoices from their consulate in Canada. A fee isusually charged.

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Customs Declaration: A document thattraditionally accompanies exported goods bearing such information as the nature of thegoods, their value, the consignee and theirultimate destination. Required for statisticalpurposes, it accompanies all controlled goodsbeing exported under the appropriate permit.

Customs Invoice: A document used to cleargoods through customs in the importing countryby providing documentary evidence of the valueof goods. In some cases, the commercial invoice(see page 58) may be used for this purpose.

Dock Receipt: A receipt issued by an oceancarrier to acknowledge receipt of a shipment atthe carrier’s dock or warehouse facilities. (See alsoWarehouse Receipt.)

Ex Factory: Used in price quotations, anexpression referring to the price of goods at theexporter’s loading dock.

Export Control List: A list of goods andtechnologies that require export permits to beexported from Canada, pursuant to the Exportand Import Permits Act.

Export Permit: A legal document that isnecessary for the export of goods controlled bythe Government of Canada, specifically goodsincluded on the Export Control List (see above) orgoods destined for countries on the Area ControlList (see page 58).

Freight Forwarder: A service company thathandles all aspects of export shipping for a fee.

Insurance Certificate: A document prepared bythe exporter or freight forwarder to provideevidence that insurance against loss or damagehas been obtained for the goods.

Landed Cost: The cost of the exported product at the port or point of entry into the foreignmarket, but before the addition of foreign tariffs,taxes, local packaging/assembly costs and localdistributors’ margins. Product modifications priorto shipment are included in the landed cost.

Packing List: A document prepared by theexporter showing the quantity and type ofmerchandise being shipped to the foreigncustomer.

Pro Forma Invoice: An invoice prepared by theexporter prior to shipping the goods, informingthe buyer of the goods to be sent, their value andother key specifications.

Quotation: An offer by the exporter to sell thegoods at a stated price and under certainconditions.

Warehouse Receipt: A receipt identifying thecommodities deposited in a recognizedwarehouse. A non-negotiable warehouse receiptspecifies to whom the deposited goods will bedelivered or released. A negotiable receipt statesthat the commodities will be released to thebearer of the receipt.

Financial and Insurance TermsThe following are the most commonly used termsin international trade financing.

All Risk: This is the most comprehensive type oftransportation insurance, providing protectionagainst all physical loss or damage from externalcauses.

Cash in Advance (Advance Payment): A foreigncustomer pays a Canadian exporter prior toactually receiving the exporter’s product(s). It isthe least-risk form of payment from the exporter’sperspective.

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Confirmed (or Irrevocable) Letter of Credit: ACanadian bank confirms the validity of a letter ofcredit issued by a foreign bank on behalf of theforeign importer, guaranteeing payment to theCanadian exporter provided that all terms in thedocument have been met. An unconfirmed letterof credit does not guarantee payment so, if theforeign bank defaults, the Canadian exporter willnot be paid. Canadian exporters should acceptonly confirmed/irrevocable letters of credit as aform of payment.

Confirming House: A company, based in aforeign country, that acts as a foreign buyer’sagent and places confirmed orders with Canadianexporters. They guarantee payment to theexporters.

Consignment: Delivery of merchandise to thebuyer or distributor, whereby the latter agrees tosell it and only then pay the Canadian exporter.The seller retains ownership of the goods untilthey are sold, but also carries all of the financialburden and risk.

Document of Title: A document that providesevidence of entitlement to ownership of goods,e.g. carrier’s bill of lading.

Documentary Collection: The exporter ships thegoods to the foreign buyer without a confirmedletter of credit or any other form of paymentguarantee.

Documentary Credit (sight and term): Adocumentary credit calling for a sight draft meansthe exporter is entitled to receive payment onsight, i.e. upon presenting the draft to the bank. Aterm documentary credit may allow for paymentsto be made over terms of 30, 60, or 90 days, or atsome specified future date.

Draft (Bill of Exchange): A written,unconditional order for payment from one party(the drawer) to another (the drawee). It directsthe drawee to pay an indicated amount to the

drawer. A sight draft calls for immediate payment.A term draft requires payment over a specifiedperiod.

Export Financing House: A company thatpurchases a Canadian exporter’s foreignreceivables on a non-recourse basis uponpresentation of proper documentation. It thenorganizes export arrangements and provides front-end financing to the foreign buyer.

Factoring House: A company that buys exportreceivables at a discount.

Open Account: An arrangement in which goodsare shipped to the foreign buyer before theCanadian exporter receives payment.

Partnership, Alliance and Market Entry TermsThe following expressions define the various typesof partnership or alliance arrangements as well asmethods of market entry common ininternational trade.

Agent: A foreign representative who tries to sellyour product in the target market. The agent doesnot take possession of – and assumes noresponsibility for – the goods. Agents are paid ona commission basis.

Co-marketing: Carried out on the basis of a feeor percentage of sales, co-marketing is an effectiveway to take advantage of existing distributionnetworks and a partner’s knowledge of localmarkets.

Co-production: This arrangement involves thejoint production of goods, enabling firms tooptimize their own skills and resources as well astake advantage of economies of scale.

Cross-licensing: In this form of partnership, eachfirm licenses products or services to the other. It isa relatively straightforward way for companies toshare products or expertise.

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Cross-manufacturing: This is a form of cross-licensing in which companies agree tomanufacture each other’s products. It can also be combined with co-marketing or co-promotionagreements.

Distributor (Importer): A foreign company that agrees to purchase a Canadian exporter’sproduct(s), and then takes responsibility forstoring, marketing and selling them.

Franchise: This is a more specific form of licensing.The franchise is given the right to use a set ofmanufacturing or service delivery processes, alongwith established business systems or trademarks,and to control their use by contractual agreement.

Joint Venture: An independent business formedcooperatively by two or more parent firms. This type of partnership is often used to avoidrestrictions on foreign ownership and for longer-term arrangements that require joint productdevelopment, manufacturing and marketing.

Licensing: Although not usually considered to bea form of partnership, licensing can lead topartnerships. In licensing arrangements, a firmsells the rights to use its products or services butretains some control.

Trading House: A company specializing in theexporting and importing of goods produced orprovided by other companies.

Legal TermsThe following are some of the more commonlegal terms encountered in internationaltransactions.

Arbitration: The process of resolving a dispute or a grievance outside of the court system bypresenting it to an impartial third party or panelfor a decision that may or may not be binding.

Contract: A written or oral agreement which thelaw will enforce.

Copyright: Protection granted to the authors andcreators of literary, artistic, dramatic and musicalworks, and sound recordings.

Intellectual Property: A collective term used torefer to new ideas, inventions, designs, writings,films, and so on, protected by copyright, patentsand trademarks.

Patent: A right that entitles the patent holder,within the country which granted or recognizesthe patent, to prevent all others for a set period oftime, from using, making or selling the subjectmatter of the patent.

Trademark: A word, logo, shape or design, ortype of lettering which reflects the goodwill orcustomer recognition that companies have in aparticular product.

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