Export Guide Line
Actually exporting can be a profitable way of expanding your
business, spreading your risks and reducing your dependence on the local market.
Astride research shows that, on average, exporting companies are more
profitable than their non-exporting counterparts.
Exporting
exposes you to new ideas, management practices, marketing techniques, and ways
of competing that you wouldn’t have experienced by staying at home. All this
considerably improves your ability to compete in the domestic market as well.
By
going overseas, you can become more efficient and increase your productivity.
Exporting companies have better growth prospects, highly skilled, highly
productive staff and tend to adapt technology and best practice techniques
faster.
Even
if you have a limited domestic market, you should think about exporting -
around a quarter of new exporters are born global.
This section gives you an
overview of Singapore’s goods clearance regime, and points you to resource
where you can obtain more knowledge on the different technical aspects of
handling the logistics of exporting your goods.
(5)
Financing your export operations
(6)
Dealing with the legal side of export
If your destination market
belongs to a regional group, you need to find out if there are any regional
law, regulation and restriction upon the export and import of your type of
goods or services within that region. For instance, European Union rules bear
consideration if you are exporting to an EU market and ASEAN rules if you are
exporting within ASEAN. Your line of basic inquiry into this aspect can also
take the same format as above.
EXPORT GUIDE
(1)
Selecting your export market
If Which country should you
export to? Which market segment of your target country will get you the best
returns?
Importance of market research
Each industry has its own
unique characteristics. Even within the same industry, the conditions and ways
of doing business may vary across different countries, regions and states. When
you export to a new market, you will need to find ways of handling all these
differences to maximise your chances of achieving long-term export success.
The success or failure of
your export venture is largely determined by how well you perform your market
research prior to exporting. You will need to thoroughly evaluate the pros and
cons associated with various markets before the choosing the most appropriate
market for your exports.
Often, sustainable export
success comes down to your experience, personal network and your primary
knowledge of the market. Such capabilities take time to build. You can start
building your own market selection expertise by taking the first step –
performing your own secondary market research before you invest further in
gathering primary market data. Diligently carrying out secondary research on
your markets will help you:
·
Contrast and
compare different markets
·
Gauge the
potential for business within a particular market
·
Make informed decisions
about the market you should approach
·
Fine-tune your
business decisions for your chosen market
Identifying your market
Identifying the market that best suits
your product or service will be one of the most important internationalisation
decisions that you will make. While regional markets may be easier and cheaper
to enter, more distant markets may be more challenging but could yield higher
returns. You will need to decide how you will strike a balance between
available opportunities and chances of success.
Some
factors about a market that you may wish to consider include:
·
Its political
stability, economic situation and security
·
Its demographics,
size and segmentation of your target consumers
·
Its local market
trends affecting your product or service
·
Competitors’
products or services and performance
·
Accessibility of
local distribution channels
·
Import and entry
regulations and procedures
·
Common entry
models of other importers
·
Entry strategies
that best fit your business
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Challenges and issues to be aware of
You will need to consider all the possible challenges to
exporting and whether you can overcome them. Some common challenges faced by
exporters include:
·
Existence of import
barriers such as quotas and currency restrictions
·
Customs tariff
and duties
·
Taxation on
corporate entities and profit repatriations
·
Health and safety
regulations
·
CE marking for
exports if you are exporting products to Europe
·
Environmental
standards, industry regulations, quarantine and regulatory requirements
·
Accreditation
issues
·
Payment methods
·
Legal issues
·
Intellectual
property protection
·
Accessibility of
local logistics to distribute your products in the market
In conclusion
This section serves as a basic guide
and is not exhaustive. You will likely find other influencing factors or issues
not mentioned in this section. Whichever your industry, if you are exporting
for the first time, a good way to begin will be to concentrate your efforts on one
export market before expanding into other markets. Once you gain traction and
confidence in exporting to one market, you will be better placed to build up
your market selection capabilities for another market. Please refer to other
steps of this guide for more tips and information to help you kick start your
export journey.
(2)
Marketing and branding your exports
Importance of having an export marketing
and branding plan… and documenting it
An export marketing plan acts as your
blueprint for your intended export activities. It guides you in implementing
your marketing strategies and executing the critical actions you need to
achieve your export objectives.
When exporting to the international
market, you will need to define your brand values with your overseas customers
in mind, understanding their needs and wants in order for your export sales to
be successful. As such, you will need to develop a branding plan to align your
brand values to customer needs, aspirations and values. This will help ensure
that you will be able to deliver your brand promise to your intended customers.
For lean enterprises, hectic
day-to-day operations can consume much of your daily energy and focus. By
pre-planning and laying out the implementation steps of your marketing and
branding strategy before you execute, you can optimise your budget and reap
cost-savings, and help yourself stay focused on your end goal as you adapt your
actions to your daily business processes. When you document your pre-planned
marketing and branding strategies in clear written form, you give yourself a
quick reference guide that you can call upon as and when you need to modify
your goal perspectives when making decisions during your hectic days. This will
prevent you from straying from your intended path, ultimately helping you avoid
costly detours that distract you from your export goals.
Issues to consider when developing your
marketing and branding plan
When
developing your own export marketing plan, some major issues you should
consider are:
·
Your
export market size in terms of demand and consumer characteristics and your
export market environment in terms of your potential competitors. Try to predict
possible future trends. Have you done a thorough market research to better
understand the market you entering?
·
Your
internal strengths and weaknesses. What are the opportunities and threats that
you will encounter in your export market?
·
Your
marketing mix for your product or service in terms of channels, promotion and
publicity. How are you going to execute each of them?
When
developing your own export branding plan, some major issues you should consider
are:
·
Whether you
should have a different brand for each export market
·
Whether
you should have multiple brands with different pricing either across all
markets or for each export market
·
What
your brand values are and how you will be communicating them to your target
customers effectively
·
Whether your
brand is localised to the local culture and is not offensive or intrusive
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For more self-research on the major
components of an export marketing and branding plan, you may wish to explore
the examples published by the New Zealand government here:
Marketing and branding tools you need
For
elements of a marketing mix, you may wish to read this:
An important element of developing
your own export marketing and branding plan is budgeting for it. Here, you can
learn about the various actions you need to take to get this done:
Resources to help you
(i)
Marketing
and branding books, periodicals, websites, blogs and books such as “Export Now”
by Frank Lavin, found here:
(ii) IE Singapore’s
(iii) Other government assistance, such as BrandPact.
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(3)
Entering your selected market
Time to choose your market entry
strategy
After you have done your market
research and narrowed down your chosen market, the next step is to consider how
you will enter your chosen market.
There
are various methods of entering a market. Some common ones are:
·
Direct
exports, leveraging on trade shows, representative offices and e-commerce to
market your product or service
·
Indirect exports,
through agents, distributors and franchising
·
Branch or
subsidiary, through acquisitions or joint venture partnerships
IE
Singapore can assist you in each of these market entry methods.
Types of market entry methods
Direct
exports
Most exporters usually
begin by exporting directly. In this common scenario where a Singapore firm
receives an order from an overseas buyer and subsequently sells directly
overseas to that buyer, the Singapore firm gains the following advantages:
·
A higher return
as there is no cost of in-between agents brokering the deal
·
The opportunity
to establish a direct relationship with the overseas buyer
·
The freedom to
determine its pricing strategy
·
The quickest way
to sell into the overseas market
However, one disadvantage is that the
firm will need to spend more time and resources to develop its relationship
with the overseas buyer to establish and strengthen trust. Nevertheless, the
potential higher returns and speed of getting into the market may very well
justify this additional cost of relationship building.
To help you sell directly
overseas, you will need to have some form of presence that enables you to
attract global buyers to your product or service offering. You can begin by
participating in trade shows, then setting up a representative office in your
target export market. Or you can establish your presence on the internet
through the use of e-commerce. Many exporters commonly start by employing all
three methods.
Trade shows
Participating in trade shows is not a
method of market entry. Rather, it is a means of giving yourself an opportunity
to exhibit your products or services in your target market. Participating in
the trade show allows you to meet potential buyers, agents or distributors, and
you can meet your current agents or
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distributors to build up relationships
and update them about your latest products and services.
Singapore’s trade
associations and chambers organise many trade shows that you can participate in
(check out their respective websites for their scheduled overseas trade shows).
IE Singapore through its International Marketing Access Programme
(IMAP) provides funding through the associations and chambers to assist
companies to participate and defray costs in these trade shows. Check out IE
Singapore’s website for the list of IMAP supported trade shows. You can also
tap on Double Tax
Deduction to defray your costs of participating in trade shows.
Representative
office
A representative office is
an office which you establish in your target export market to conduct marketing
and other non-revenue generating activities. A representative office is
generally easier to establish than a branch or a subsidiary, as it is not used
for actual business (e.g. sales) and therefore is less regulated. Your
representative office can perform various marketing activities to raise the
awareness of your product or service to your potential buyers.
To assist you in establishing your
overseas representative office, IE Singapore is able to provide you some help
such as in office rental and manpower. Please contact us to find out more.
e-Commerce
Amazon.com is a multi-billion dollar
business conducting its business purely on the internet and selling directly to
end consumers. There are also many world-renowned brands which exponentially
increased their global market shares through selling their products, services
and after-sales services directly to end users online. Some familiar names are
Apple, Microsoft, and Dell, among others.
In this day and age of exploding
online usage, not having a corporate website is no longer an option. In Asia
today, there are one billion internet users, 273 million in North America and
77 million in the Middle East (figures extracted from Internet World Stats), and
these numbers are growing. Through the web, millions of sellers and buyers have
transacted across borders easily and instantaneously.
For businesses, having an online
presence has become an essential, even compulsory, operational element.
Electronic commerce, or e-commerce for short, is the buying and selling of
products and services over the internet. With an online sales presence, you
will expose your product or service to an immense global marketplace. Therefore
you should not ignore tapping on the power of the Internet to sell directly to
buyers around the world.
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To begin, you need to set up a website
that clearly states your products and services offerings and how buyers can
contact you. Your website can also leverage on other websites to further market
your products and services, such as through Alibaba, e-Bay, Gmarket and even
Amazon. These web portals provide the necessary technical and software support
which you can tap on to easily and quickly set up your presence on their
platforms. Thereafter you can proceed to leverage on the traffic that their
sites draw to start selling to the sites’ visitors.
IE Singapore offers some assistance
for you to set up your e-commerce capability. We conduct regular workshops on
e-commerce which you can attend to learn more. Please check the IE Calendar of Events regularly
for upcoming workshops.
Indirect
exports
You can sell your product
or services overseas through an intermediary, such as through in-market agents
and distributors, and by partnerships through licensing or franchising.
Compared to direct exports, you will need to incur the cost of commissions
charged by your intermediary and you will not have the opportunity to build a
direct relationship with your end buyers. However, the advantage is that you
will be able to reduce resources as your intermediary will handle all
licensing, shipping, distribution and logistics arrangements, and the cost of
indirect exports is lower than fully funding a sales force in the market.
Agents
An agent will assist you to secure
your sales in exchange for a commission. As in all business relationships, you
are advised to do your due diligence. Choose agents who are knowledgeable about
the market, with proven sales track records, have experience clearing your type
of goods from Singapore through the local customs, and possess the network to
the right customer segment.
Distributors
Distributors purchase your
products from you and then resell them to their customers. In such an
arrangement, the distributor will handle all sales enquiries, after sales
service and price setting. You will have a lower profit margin, but you will
enjoy more resources for carrying out after-sales service.
When selecting a distributor, due
diligence must to be properly carried out. You have to determine whether your
distributor has the proven sales track record, the commitment of its sales
force to selling your product, its product mix (such as whether it is also
carrying competitors’ products), and its marketing plan to push your products.
Having a checklist will help you in your selection process.
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Alternatively, you may
engage consultants who have the expertise and connection to assist you in
sourcing for potential distributors.
IE Singapore is able to
assist you should you wish to engage a consultant to help you source for
distributors overseas. Please contact us to find out more.
Franchising
Franchising is the practice
of using another firm’s successful business model. As a franchisor you can
build chain stores to distribute your goods. Your success will depend on your
franchisees which you have to provide with the know-how, training and marketing
to ensure their success. For more information on franchising, you can approach
the Franchise and Licensing Association
(Singapore) for assistance.
Branch or subsidiary
When your business has expanded to a
profitable stage through the above market entry methods, you will have gained sufficient
knowledge about your target market and financial and manpower resources to move
toward establishing a branch or subsidiary directly in your export market to
conduct sales operations. To establish a branch, you need to be aware of the
market’s legal, tax and profit repatriation regulations. This will require you
to engage legal and financial advisers to assist you.
In conclusion
The market entry methods mentioned in
this section are the most common types but the list is not exhaustive. You may
very well have other ways of entering your chosen market. Whichever method you
choose, IE Singapore is here to help you. Please refer to other steps of this
guide for more tips and information to help you kick-start your export journey.
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(4)
Logistics of getting your exports into market
Why you should plan your logistics well ahead of transporting your goods
to your export market
All your efforts at ensuring the good
quality of your products will come to naught if your products do not reach your
intended customers. Determining and planning ahead the best mode of
transporting your products internationally is fundamental to closing a
successful sale.
Methods of transporting your goods
overseas
There are four main modes of
transporting your goods to your overseas export market, namely by air, sea,
road and rail. Based on your customer’s requirements and orders, you could work
out your logistics plan by choosing one of the transport modes or use a mixture
of them. In addition, it is important for you to factor in the possibility of
delays during the journey.
This section discusses the
four main modes of transporting your goods in terms of their respective strengths,
cost and utility.
By
air
Air transport is the fastest mode of
delivery and therefore suitable for delivering goods over a long distance, when
the goods are required urgently or perishable. It may be one of the most
expensive modes of transport, but it is your best choice if delivery speed is
your main concern.
By
sea
Freight shipping is one of the most
economical ways to deliver your goods, particularly for bulky items. However,
this mode is also the slowest delivery method.
By
road
Road transport by trucks or goods
vehicles is best for delivering goods within a country, district or overland to
the airport or port.
By
rail
Rail transport is a common for
delivering goods within a country, or from country to country within the same
continent. However, the use of rail depends on the infrastructure available and
the country you are transporting to.
Overview of Singapore’s customs regime
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The
role of Singapore Customs
Singapore Customs is the
government authority of Singapore on trade facilitation and revenue enforcement
matters. It is responsible for the implementation of customs and trade
enforcement regulations including those related to free trade agreements and
strategic goods. You need to be registered with Singapore Customs before you
can import, export or tranship goods in, out of or through Singapore.
Types
of goods
Most countries restrict the movement
of certain items such as pharmaceuticals, animals, explosives, etc. Governments
issue permits to control the outflow of goods across their national borders.
The Singapore government adopts the same principles and practices. If you are
intending to import, export or transship goods which are restricted or
controlled by Singapore, you may face more stringent requirements when seeking
approval to do so.
Controlled goods
In Singapore, the import, export and
transhipment of some goods are subject to the control of their respective
controlling agencies. Some agencies require you to apply for a licence or
obtain approval prior to the intended import, export or transhipment. You
should submit applications to the relevant agencies through the TradeNetÒ system to
obtain licence or approval before importing, exporting or transhipping the
goods.
Please view here for
the list of controlling agencies in Singapore.
Please view here for
the list of controlled goods.
Please view here for
the list of controlled exports.
For a more comprehensive list of items
that are subject to control by the relevant controlling agency, please view here.
You can apply here for approval or
licence from a controlling agency.
Strategic goods
The Strategic Goods Control List
contains descriptions of items that are subject to control under the Strategic
Goods (Control) Act. If you are intending to import, export or
tranship any strategic goods you required to apply for a strategic goods permit.
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More information on export of strategic goods can be
found here.
Procedures
All imports, exports and transshipment
of goods have to be done according to the standard procedures of Singapore
Customs. Singapore Customs publishes its import and export procedures together
on its web page. It
is important that you familiarize yourself with these procedures before
attempting to move goods in or out of Singapore.
Permits
Permits are required for all movements
of goods in, out or transshipping from, Singapore. The application processes
for all three categories of permits are published together by Singapore Customs
on its webpage here. All
permit applications have to be submitted electronically through the TradeNetÒ system for
approval and processing by Singapore Customs for moving goods via sea, road,
rail or air in, out or through Singapore.
Exporting out of Singapore
Important
background information before you start
Singapore’s
export regulations
The export of goods from
Singapore is regulated under the Customs Act and the Regulation of Imports and
Exports Act as well as their relevant subsidiary legislations.
Customs
excise and duties
Generally, all goods
(controlled or non-controlled) exported from Singapore are not subjected to GST
and/or duty payment.
Verify
the type of your goods
This is the first step you
need to take. Prior to seeking any approval, you need to verify whether your
goods are considered as controlled or strategic goods by the Singapore Customs,
as more stringent restrictions will apply to the export of such goods out of
Singapore.
Get
your permits
Once you have verified whether your
goods are restricted or not, next you will need to apply for an OUT Permit
though TradeNetÒ whether or not
your goods are controlled or non-controlled items.
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As the exporter, you will
be the party that issues the commercial invoice to your overseas customer. You
are required to declare the FOB value of the goods in the export permit
application. More information on export requirements can be found here.
Importing into your target market
Getting your goods out of Singapore
is first half of your goods’ journey to their destination market. The last half
involves clearing them through the customs of their destination market.
The customs of one market
differ from the next. In this section, we point you towards the customs
authorities of the most common destinations where you can obtain further
information and assistance.
·
Indonesia
The Indonesian Directorate General of
Customs and Excise is an authority under the Ministry of Transportation
Republic of Indonesia. There are several forms and documents you need to
complete when exporting to Indonesia, for example the Indonesian Customs Tariff
Book (BTBMI) and the Customs Declaration for Importation (PIB). View the import
and export regulations here, or
refer to the Indonesian
Customs Guide for more information.
·
China
China Customs provides
the customs policy and regulations for goods entering China, the import and
export statistics of the country, and a guide to its formalities. For HS codes,
tariffs, and service providers (logistics providers, distributors etc), please
refer to the ETCN website for more
information.
·
India
The Central Board of Excise and Customs is
India’s government authority overseeing the collection of customs duties and
administration of matters relating to India’s customs. It is an arm of India’s
Ministry of Finance, Department of Revenue.
·
Vietnam
Vietnam Customs is the
main government body in charge of all import and export procedures and
regulations of Vietnam. When importing goods into Vietnam, there are customs
declaration procedures and several documents to submit, such as the import
goods declaration forms, commercial invoice, bill of landing and more. It is
important for you to understand the formalities and procedures before exporting
to Vietnam.
·
Myanmar
When exporting to Myanmar, you have to
prepare a customs declaration form for clearance by the Myanmar
Customs Department. The import documents required include the import
license/permit, bill of landing, invoice, packing list and more.
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The above information
provided by the customs authorities of the various countries gives a general
view of their respective customs procedures. You should always consult your
appointed logistics provider for the latest updates from the ground in your
export market.
Increase your profit margins by reducing
your export costs with FTAs
FTAs are free trade
agreements, signed between countries to lower or abolish tariffs on movement of
goods between their borders. The aim of FTAs is to facilitate and encourage
trade flows between two nations by lowering the costs for businesses trading
between the agreement countries. Knowing what FTAs are and utilising them will
help lower your costs, increase your bottomlines, and improve your ease of
market entry. This is because FTAs are legally binding agreements made by two
or more countries which result in benefits for your export business in terms
of:
·
Reducing
or removing trade barriers such as tariff concessions for eligible exports and
quantity restrictions for committed sectors;
·
Facilitating
cross border movements of goods and services between the territories of the
signatory countries; and
·
Establishing
trade promotion initiatives by signatory countries such as safeguards against
government expropriation, alternative dispute settlement mechanisms or
increased convenience for business travels.
Singapore exporters can enjoy the
highest number of trade benefits in the regions, with its 19 FTAs currently in
force. Benefits range from preferential access to certain sectors, tariff
concessions, easier entry into other markets and intellectual property
protection. To know more about the benefits of FTAs and the latest FTAs
updates, please explore the Singapore FTA
website.
Finally, remember to protect yourself
against transport risks
Many things can happen to your goods
from the moment they leave your possession until they reach your buyer. The
most common logistics risks usually are loss of goods or damage to goods
occurring during transit, or goods being denied customs clearance at
destination. Less common logistics risks occur when an unforeseen circumstance
arise, such as theft, accidents, natural disasters or negative political events
resulting in confiscation. Please refer to Step 7 of this Export Guide for some
ideas on how you can reduce your transport risks.
Do it yourself or engage a service
provider?
When you arm yourself with basic
customs knowledge, you are better placed to lever up your skills or those of
your employees when taking care of your delivering operations. You will also be
better placed to assess if you will be getting value for money if you decide to
engage a logistics service provider, which will in turn help you fully maximise
the services you paid for.
There are several logistics companies
that you can engage for a one-stop service, and you may wish to consider
establishing a working relationship with one or more of such firms to increase
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your long-term operational
productivity by reducing daily hassles. International logistics firms such as UPS, DHL or FedEx may
be more expensive but possess a wider global coverage. In recent years, some
Singapore logistics firms have become strong regionally and may cost less if
your export strategy covers only the ASEAN region. Whichever provider you
choose, you should always balance cost against utility.
Resources to help you
(i)
Singapore Customs
training programmed
Singapore
Customs Academy is run by Singapore Customs to train Singapore-based
businesses in customs procedures, customs laws and international regimes and
more. Please check its training
calendar regularly for the latest training programmes and updates.
(ii) IE Singapore’s Export Clinics on market-specific
logistics issues
Launched in 2012, IE
Singapore has partnered with multi-national logistics firms to conduct Export
Clinics which deliver detailed technical and administrative knowledge on
exporting goods to various markets. These clinics provide Singapore business an
interactive platform to help them address very specific and detailed customs
and documentation issues of getting goods into individual markets. The proven
success of our small classroom format encourages a high level of interactivity
between participants and the logistics practitioner. Please visit our Calendar of Events regularly
for our next Export Clinic on logistics.
(iii) Market-specific logistics overviews in IE Singapore’s
i Advisory Seminar Series
IE Singapore’s iAdvisory
Seminar Series are market specific seminars targeted at delivering the latest,
on-the-ground market intelligence for Singapore businesses by our in-market
speakers and IE Singapore’s Centre Directors. Beginning 2012, our iAdvisory
Seminars incorporate presentation segments and panel discussions on logistics
and customs issues of the market addressed by each seminar, where it is
relevant to address the topic of logistics. Please browse through our all iAdvisory
Seminar highlights for the market of your interest, or check
regularly for updates.
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Once you have decided to grow your
business through exports, the next necessary step is to assess how you can
finance it. You should review your business’ financial capacity, explore all
financing options, and subsequently determine the quantum of funds you will
require for expanding your business by exporting.
Reviewing your financial capacity
Your financial capacity depends on the
financial position of your business. In other words, the financial health of
your business will affect your sources and access to funds. For example, if
your business has insufficient equity capital or has already incurred a
substantial amount of loan debts, your application for additional bank loans
are unlikely to go through.
You may wish to approach your bank for
an assessment of your business’ current financial strength and eligibility for
loans or credit facilities.
Financing options available to you
Here
are some common financing options available:
Retained
earnings
If your business is financially
strong, this may be the best option for you as there will be no costs of loan
interests and your cash flow will not be reduced by repayment commitments.
Bank
loans or credit facilities
Typically, businesses rely on this
mode of funding for all types of business expansion. Identifying the right bank
and thoroughly planning the terms and conditions of your loan or credit
facilities is crucial to maximising your returns on investment against your
debt requirements.
Friends,
relatives and family
In certain cases, friends, relatives
and family can be supportive and help you finance your expansion at no cost for
the loan. In some other cases, they may ask for share in the business. This
option is most friendly and flexible, but note that you may put personal
relationships at risks if your business expansion does not proceed according to
plan or suffer losses. It is also wise to document the terms of such loans even
if your personal contacts do not insist upon it.
Third
party investors
Angel
investors
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Business angel individuals or groups
are quite common in Singapore, more so than other countries in Asia. These
investors look for good business models and ideas that they believe in and are
willing to invest in the initial seed funding, often with little interest in
taking an active management role in the business.
While the rates of return of
investments required by angel investors are higher than the interest rates of
bank loans or credit facilities, there are two advantages: one, there is no
repayment schedule affecting cashflow, and two, some business angels may be
interested to proceed to a full active equity stake when the business has
matured to an acceptable stage, and this provides the business a potential
source of future funding. You will need to thoroughly plan and carefully
consider the exit or reinvestment mechanism of your angel investors, and in
this respect you will need to hire a lawyer experienced in putting together an
angel investment deal.
We have identified a website on angel
investors which may be of interest to you here.
The Singapore Venture Capital Association also
provides a list of angel investors you may seek.
Private
equity and venture capital investors
Commonly termed as PE and VC
investors, such investors are either high net worth individuals or
well-organised private sector firms managing a pool of funds from other
investors. In the latter category, you will likely be dealing with professional
investment analysts or fund managers. Do note that PE and VC investors are
mostly active investors who take active management roles and, in many cases,
eventual management buyout through public listing or acquisition. They will
only be suitable if selling out to third parties is your eventual goal or, if
you intend to go for public listing, their expertise and experience in
management and operations will be invaluable. You will need to thoroughly plan
and carefully consider the exit or reinvestment mechanism of your PE or VC
investors, and in this respect you will need to hire a lawyer experienced in
putting together a PE or VC investment deal.
The Singapore
Venture Capital Association also provides a list of PE and VC
investors you may seek.
Government
assistance schemes for you
The Singapore government provides
various financial assistances to support you in exporting or internationalising
your business. These schemes are offered through IE Singapore, SPRING and
Inland Revenue Authority of Singapore. They are not intended to finance you
fully, but to give you a leg up in the forms of eligible expense subsidies,
insurance and tax deductions.
·
IE Singapore’s Global Company Partnership
www.rmg-guide.com
ü
Capability
Building and Market Access – This assistance supports up to 50% of eligible
expenses for your company to build business capabilities or gain access to
global markets. For more information, you may click here.
ü
Loan
Insurance Scheme – This assistance helps Singapore businesses secure short-term
trade financing lines by getting them insured by commercial insurers against
insolvency risks. The programme also comprises of LIS+ whereby the Government
underwrites loans that are beyond the capacity of commercial insurers. For more
information, you may click here.
·
Inland Revenue Authority of Singapore’s Avoidance of
Double Taxation Agreement
This agreement between Singapore and
another country serves to prevent double taxation of income earned in one
country by a resident of the other country. The agreements also provide for
reduction or exemption of tax on certain types of income. Singapore has a
comprehensive list of agreements with various countries. For more information
you may click here.
·
SPRING’s Angel Investors Tax Deduction Scheme
This tax incentive scheme aims to
stimulate business angel investments into Singapore-based start-ups. This is
targeted towards smaller businesses and is suitable if you are intending to
fund your next stage of business by way of angel investment. For more
information, you may click here.
·
Enterprise One
This portal was launched by
the Singapore government to provide Singapore businesses a one-stop information
portal for learning about all other financing assistances supported by the
Singapore government. It covers loans, grants, tax incentives, equity financing
to help you start and grow your business via developing new products, improving
business processes, protecting your intellectual property, and venturing
abroad, etc. To view the site, you may click here.
Business plans and export strategy plans
are essential
Having a written business
plan and export strategy plan is important to keep you on track towards achieving
your vision when growing your business through exports.
Having
these plans is important if you intend to seek bank loans or credit facilities.
Having them is a
pre-requisite if you intend to seek angel, PE or VC investors. You need to put
together a sound business plan to enable your bank or prospective investors to
understand your business, and a sound export strategy plan to enable them to
understand why you require funding for expansion. Your past financials should
be included in your business plan. Your
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export strategy plan should
include financial modeling, projecting potential profits in best, worst and
most likely scenarios.
Determining the quantum of funds you need
A financial forecast is
essential in determining the quantum of funds you need. Upon drawing up your
financial plan, you can now assess if the amount of funding required can be met
by your company’s financial capacity or eligibility for borrowing. You need to
understand the costs of expansion to your business as opposed to the potential
revenue it will reap. Basic components that you may have to include in your
financial plan are:
·
Sources
of revenue in the foreign market – Price per unit of product at each year,
projected sales in consideration of in-market competition and demand, and
methods of collective revenue in the foreign market (i.e. cash in advance or
letters of credit).
·
Cost of funding –
Interest charges, repayment terms and credit insurance.
·
Cost
of goods and sales – Cargo insurance, consular legalization, container loading,
dispatch, export documentation and packing, import duties, truck unloading or
wharfage, telecommunication costs and supplier terms of payment (Non-exhaustive list).
·
Export
promotion and marketing costs – Advertising, trade shows, supplies, travel,
promotional materials, communication equipment (Non-exhaustive list)
·
Export
administration costs – Legal fees, commission fees, freight forwarder fees,
insurance premiums, salaries, office supplies (Non-exhaustive list).
The above is a
non-comprehensive list of components to be inserted into your financial
planning. Other considerations such as foreign exchange volatility and taxes
(i.e. transfer pricing, market’s corporate tax, personal tax compliance) can
also affect your cash flows drastically. For more information on potential tax
issues, you may click here.
Regardless of your funding
options, it is always advisable to approach an export consultant when drawing
up your export operation financing plan.
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Steps to protect your transaction
When you embark on exporting, your
organisation inevitably becomes an international business entity, exposed to
events occurring in markets beyond Singapore. This means that you have to
identify external events that have potential effects on your business and take
action accordingly:
Step
1 – Protect your confidential information and assets
Before any negotiation with your
buyer, review your business information/assets to determine information which
is sensitive, and information which is critical to sealing the deal. Sensitive
information or assets include a new product or design in development, your
financial information, your buyer and customer lists, your contacts, your price
and costing lists, and your insider industry knowledge, which could prove
detrimental to your business if leaked to your competitor. A common protection
you and your potential buyer can adopt is to sign confidentiality or
non-disclosure agreement between you before any party releases sensitive
information.
Step
2 – Comply with Singapore law
Find out the laws and regulations and
if there are any restrictions (i.e. bans, quotas or controls) imposed by
Singapore upon exportation of your type of goods or services to your
destination market. All exports laws, regulations and restrictions are
administered by the Singapore Customs. Please refer to Step 4 of this Export
Guide.
Step
3 – Comply with the law of your destination market
Find out the laws and regulations and
if there are any restrictions imposed on importation of your type of goods or
services into your destination market. A suggested line of basic inquiry into
your destination market could be as follows:
·
Customs
regulations
·
Import tax or
tariffs
·
Disclosure or
declaration requirements
·
Price controls
(such as those related to anti-dumping or anti-trust laws)
·
Currency exchange
controls
Please refer to Step 4 of this Export
Guide for the customs websites of various destination markets. For some
markets, it would be prudent to make yourself aware of the foreign government’s
policies on nationalisation, expropriation and confiscation of foreign imported
goods to determine the risk level for your export transaction.
Step
4 – Comply with regional laws
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Step
5 – Review your business structure
The licensing and import requirements,
customs and excise duties in your destination market could be different for
sole proprietorships, partnerships or corporations. If you are currently a sole
proprietorship or partnership, now is the time to review if your export goals
could be achieved efficiently under this structure. If not, you may wish to
consider if your export goals will be better served by converting your business
structure into a corporation.
Step
6 – Take advantage of internationally accepted uniform standards
Find out the international laws,
regulations and conventions applicable to you. Increasingly, international
agreements, treaties and conventions are exerting practical effects on
cross-border private commerce instead of being limited to relationships between
governments. There are numerous types of international laws in force today. You
will benefit from having some knowledge of these:
·
Incoterms® - Incorporating Incoterms® (international commercial terms) into
your overseas sales agreement will
help you avoid costly misunderstandings by clarifying the tasks, costs and
risks involved in delivering your goods to your buyers.
·
Convention on Contracts for the International Sale of
Goods (CISG) - Small
and medium enterprises are usually
more disadvantaged in negotiating cross-border contracts as they have weaker bargaining
positions and less access to legal advice causing more exposure to problems
arising from different laws. The Singapore Academy of Law publishes a brief
explanation of how the CISG
applies to Singapore.
Step
7 – Protect your intellectual property
If you have spent intellectual effort
to create a product for sale, you should protect your innovation. The law
protects your innovation efforts by giving you rights of intellectual ownership
over your creation. When diligently protected, maintained, accounted for,
valued, monitored and managed, all your innovation assets can become formidable
commercial assets that increase the total net asset value of your business.
Here is a basic two-step approach:
·
Protect your IP in Singapore - You should apply for trademarks to
protect your branding and goodwill,
patents to protect your technology and technological improvements, copyrights
to protect your original creative works, and industrial designs to protect your
product’s shape, look and configuration. Each country has its own IP office to
manage its national IP
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registration system. In addition to
managing Singapore’s national IP system, the Singapore Intellectual Property
Office (IPOS) offers an online
introduction to Singapore IP issues. IE Singapore also organises
workshops, clinics or seminars from time to time on intellectual property
protection issues of specific markets. Please check our Calendar of Events regularly
for the next event.
·
Protect your IP in your destination
market - If you
already have existing patents, trademarks,
copyrights or industrial designs for your products in your home country,
your next level of protection is to find out how to enforce your IP rights in
your destination country.
Some legal clauses used in international
sales contracts
International sales
contracts contain many similar terms as domestic sales contracts. However, they
also include certain clauses to deal with issues arising from having different
laws and legal systems in a cross-border contractual relationships, for
instance, the law of your counterparty has different implications on the
transaction even if the same words are used. Arming yourself with a basic
understanding of some legal clauses commonly used in cross-border contracts
will better prepare you to negotiate your terms with your counterparty, avert
conflict in interpretation to avoid causing misunderstanding, and communicate
with your legal professional by enabling you to ask constructive questions and
assess the quality of the advice you are paying for.
·
Choice of
language clause – choosing a common language for interpretation
If you are contracting with a party
whose official language is not English, it is best that your counterparty and
you mutually designate one language as the official language for interpretation
and dispute resolution to prevent misunderstanding through miscommunication.
·
Choice of law
clause – choosing the “proper”, “governing “ or “applicable” law
It is also advisable to mutually agree
on the dominant legal system. This is very important to any agreement which
involves more than one legal system because choosing one law to apply to your
overseas contract will help you avert misunderstanding rights and obligations
that differ from country to country or conflicting laws that may be
inconsistent with each other.
·
Jurisdiction
clause – specifying how, when and where to handle any disagreement
The jurisdiction clause should also be
instated at the outset, for parties to mutually agree on the court to which
they would bring their lawsuits to if any. The decision should be made in
tandem with the choice of law as it only makes sense to choose a law and a
court of the same legal system.
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·
Force
majeure clause – specifying how parties should fulfill their contractual terms
in event of circumstances beyond their control or prediction
A force majeure clause usually excuses affected parties from
performing their contractual obligations under specified circumstances beyond
both parties’ anticipation and control
(the Latin term force majeure means “superior power”).
Some force majeure circumstances are
natural disasters such as floods, storms, earthquakes, “acts of God”, political
unrest including war, riots, police action or strikes, even runaway inflation,
dramatic currency devaluations or stock market collapse. It is important to
specify a limit on excusing performance such as the length of time, severity of
the occurrence, and separating obligations that could not be performed from
those which could be. It is also important to expressly provide for recourse in
the case of partial performance.
·
Governmental
approval clause – specifying the party responsible for obtaining licenses,
permits, or government permissions
Exporting your goods into a
foreign market requires clearances from Singapore
Customs as well as from the government authorities of your
destination country. Practically speaking, your counterparty should be
responsible for obtaining approvals and clearances from their customs
authorities. Including a governmental clause will enable your counterparty and
you to clearly list who should obtain which approvals from which authority, and
avoid lapses in customs documentation, which may delay delivery and incur
unnecessary cost.
·
Terms
of payment clause – specifying the currency, method of payment, bearer of
charges and fees
An overseas sale involves more than
one currency and this gives rise to many practical issues. There will be
currency fluctuations when payment is remitted to you. Your buyer’s country may
also have restrictions or prohibitions on remittances of its currency. There
will also be costs of remittances incurred to consider such as fees, charges or
transactional or service taxes, which banks typically impose on telegraphic
transfers or letters of credit.
·
Pre-shipment
inspection clause
Your contract should
clearly specify a pre-shipment inspection arrangement. Such an inspection
protects both the importer and the exporter by avoiding disputes arising
subsequently over disputes over quality or identification of the goods. The
inspection costs should be borne by the party which requires this clause, or
mutually by both parties and be factored into the contract price.
·
Delivery,
acceptance and refusal clauses
In a cross-border sale of
goods, payment does not always occur at the same time as the physical delivery
of the goods. Taking physical possession alone does not equal legal acceptance.
Such issues can arise because most contract laws are slightly different in
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deciding when and how acceptance and
refusal has taken place. You should consult your legal adviser on the exact
contract law on this issue applicable to your case.
·
Intellectual
property clause
You should to specify how
your intellectual property (IP) rights are to be handled in the sale to
maximise the value of all your work done in acquiring IP protection. In your
contract, you can specify how your seller is allowed to use the IP of your
product, whether wholly or partially. You can also specify clearly defined
scope of use for your product logo, images and other collaterals. If the sale
includes a sale of your IP rights, you should review whether you have properly
valued your IP to help you derive your sale price. You should consult a good IP
lawyer to help you with this.
·
International
warranty clause
Incorporating a warranty clause has two benefits:
ü Gives your buyer more assurance and added incentive to
agree to your other difficult terms
ü Protects you against abuse by limiting
the circumstances and types of defect or damage you will accede to for
replacement.
You should take into
account convenience and cost when structuring your return or exchange policy,
and then specify clearly in your contract how an exchange or return should be
carried out.
Familiarise yourself with common legal
concepts to help you deal with potential risks
Lastly, there are common problems that
tend to arise in an export of goods, such as damage/destruction, complaints by
buyer, payment issues and rights to legal actions. When you familiarise
yourself with how the concepts and how they interact with one another, you can
better determine the exact moment when your buyer takes legal ownership of your
goods to help you resolve issues when they arise. The three most common legal
concepts are title, property and transfer. Do understand what they are and how
they work with the assistance of your lawyer.
Do I need a lawyer?
This is the most common
question asked when exporters face with problem of dealing with legal issues. While
you are deciding whether to engage a lawyer, we want to highlight some key
reasons you should:
·
Never reuse
drafted agreements for past transactions
You may have heard of the practice of
modifying from previous agreements signed for future transactions. It is
important to note that no two contracts are exactly alike, even if the
transactions are of the same nature involving the same goods and parties.
Rules, laws and customs may have changed without your knowledge. Your
counterparties
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have no obligation to alert you of
these changes and you should never assume that they will.
·
Focus on the
business
In the process of securing the deal,
you will likely be occupied with looking after your business interests. Having
a legal expert on your team to help you look after your legal interests while
you take care of the business issues is an advantage that you should not
overlook. This is especially useful if you are trying to secure a long-term
arrangement in new market.
Tips for
getting a lawyer
If you have decided that engaging a
lawyer is right for you, be aware that the lawyer you engage will affect your
future rights and interests. Whatever the size of your budget, your legal
expenditure will form an important component of your total business expenses.
We highly recommend that your prospective legal professional is one who
specialises in overseas sales contracts for your destination market, and that
you search for your legal expert prior to commencing negotiations.
Defray the cost of engaging a lawyer
The government have grants in place to
support you in this area. Legal fees form one of the supportable
internationalisation activities under IE Singapore’s
Global Company Partnership.
Hiring a
lawyer does not help stretch your dollar unless you have done your homework
You will be in a stronger position to
stretch your legal budget if you are able to determine which issues you could
resolve on your own without incurring professional cost. Such a skill can help
you minimise the scope of legal services which you have to pay for. Here are
some examples (non-exhaustive) of issues which you should be able to resolve on
your own without expensive hired help:
Commercial issues
|
||||||||
Examples:
|
You can verify these issues by your own market
research
|
|||||||
· Understanding market needs
|
and due diligence on your
counterparty. To help you gain
|
|||||||
and risks
|
understanding of your market, IE
Singapore offers you
|
|||||||
· Buyer agenda
|
market specific
|
iAdvisory
Seminar Series
|
and Export Clinics,
|
|||||
· Pricing
|
and Market Research Technique Workshops
where you can
|
|||||||
learn how to perform your own market
research.
|
||||||||
Management issues
|
||||||||
Examples:
|
You can resolve
these issues by
discussing with your
|
|||||||
· Internationalisation will
|
management the pros and cons of expanding your
business
|
|||||||
· Staff strength
|
overseas through exporting and what
you need to do so. To
|
|||||||
· Financial considerations
|
help
you analyse your case for your
management, IE
|
|||||||
Singapore offers a free online Export
Readiness Assessment
|
||||||||
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The business considerations behind
hiring a legal professional are no different from those for engaging other
third party vendors. Having a broad understanding of international business
law, common legal concepts in international trade and their practical
implications on an export operation will help you more effectively assess your
potential legal candidates as you discuss your requirements with them.
Resources to help you
1)
Relevant
law firms for your consideration at the online
directory of Law Society of Singapore
2)
Know the rules,
requirements and restrictions of Singapore
Customs on your export
3)
Learn how to take
advantage of Free Trade Agreements
4)
Learn some
international trade terms in Incoterms®
2010
5)
Get
to know the Convention on
Contracts for the International Sale of Goods (CISG) and see how it
applies to Singapore
6)
Other
UNCITRAL
standards on other aspects of international trade such as International
Payments, International
Transport of Goods and Electronic
Commerce
7)
Get
a handle on your intellectual property rights with Singapore
Intellectual Property Office (IPOS)
8)
Get your export
agreement right with our Export
Strategy Workshop
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(7)
Getting a handle on export risks
Importance of developing an export risk
management plan
Even if you have successfully handled
the risks of doing business in Singapore, it does not mean you will also
successfully handle the risks of exporting. Exporting will expose you to a
different set of risks which are likely more difficult to assess and manage
than the domestic risks you are used to. However, you can manage risks well
with good prior planning. Risk management is not about removing risks
altogether. It is about putting yourself in a better position to handle risk when
a risk event occurs.
To develop your own export risk
management plan, you need to identify the risks first, and subsequently assign
a weightage to each risk subject to the potential effect of its occurrence, on
your business. For certain types of risks, you can buy insurance coverage such
as credit risk cover, country risk cover and transit risk cover. For other
types of risks, you can adopt business practices to mitigate the impact of
unfavourable incidents.
Potential risks you may encounter
We highlight only the most
common risks which exporters are likely to encounter. In addition to relying on
this guide, you should also do your homework by:
·
Reviewing your
own unique situation;
·
Identify any risk
you will likely encounter which is not covered by the scope of this guide;
·
Assess these
risks; and
·
Incorporate them
into your risk management plan.
Your objective is to develop a risk
management plan which is customised to your own unique business, and is as
comprehensive as possible.
Risks
can be classified into the following types:
·
Country risks
War or conflict could cause
your buyer to default on payment, your goods to be delayed, destroyed or even
lost. Strikes or other social unrest affecting ports, shipping lines, airports
and rails could cause your goods to be trapped at customs. Unforeseen
regulatory changes could result in the sudden confiscation or rejection of your
goods. The political stability of the country you are exporting to is of
paramount concern as, rules and policies in some foreign countries can change
overnight.
Tips for
countering country risk
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ü Your best defence is to keep yourself
constantly informed and updated of the economic and political situation of that
country, especially its trade, customs and exchange policies which will affect
you as an exporter. In this way, you can change your tactics accordingly and
take preventive measures. To keep yourself forewarned and forearmed against the
instability of your target market, the types of information you seek should
relate to the following aspects of your export country:
Political
|
Stability of
|
Consistency
|
Income
|
Military
|
Leadership
|
and social
|
government
|
of national
|
distribution
|
activities
|
quality
|
news
|
policies
|
||||
Economic
|
Exchange rate
|
Debt
|
Economic
|
Balance of
|
Foreign
|
and
|
restrictions
|
burden of
|
diversity
|
payments
|
reserve
|
financial
|
and volatility
|
the
|
stability
|
cushion
|
|
government
|
|||||
Market
|
Recent
|
Long-term
|
Short-term
|
Speed of
|
Size and
|
potential
|
economic
|
forecast
|
forecast
|
GDP
|
openness of
|
performance
|
increase
|
the
|
|||
economy
|
Some information sources and ideas to help you keep
abreast of the latest developments in your export market:
-
News agencies
(i.e. CNN, ChannelNewsAsia);
-
Updates from your
banks;
-
Updates from
in-market business partners, local workers or agents;
-
Credit ratings of
the government of your target market (i.e. S&P, Moody’s); and
-
IE Singapore
(i.e. iAdvisory
Seminars)
ü
As
a last resort, you may consider purchasing political risk insurance (PRI) from
providers like the Multilateral Investment Guarantee Agency, an arm of the
World Bank. IE Singapore can also assist you with its Political
Risk Insurance Scheme. These schemes should only be used for higher
risk countries, in consideration of the additional costs.
·
Business risks
ü Failure to meet demand due to inadequate production capacity - This is the biggest and most common risk first-time exporters
usually face. Once you fail to fulfil a customer order, your credibility will
be damaged; hence you should always review and determine if your production
capacity is able to meet the demand before agreeing to the sale.
ü Rejection of goods due to price tactics of unscrupulous importers - Some buyers employ the tactic of rejecting the shipment of
goods due to poor quality, in order to pressurise sellers into negotiating
lower prices. Thus, a good practice is to ship samples of your goods to your
buyer to ensure that he agrees to the quality of goods. By specifying that you
will be producing the main consignment to the same standard as the sample, it
will be difficult for your buyer to reject the consignment later.
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ü Misunderstanding due to cultural and language differences - Many exporters assume that other cultures understand business
and conduct business the same way, especially seemingly similar countries like
China and Malaysia. The best way to minimise misunderstandings is to gain a
full appreciation of the differences through frequent visits to your intended
country of export.
ü Fraudulent enquiries or offers - Remember the old
adage that “if it looks too good to be true,
it probably is too good to be true”. Many unsolicited enquiries or offers may
be from competitors or rivals previously unknown to you and their motives may
range from wanting to benefit from your efforts to covert attempts to discover
information about your manufacturing secrets, quality control or pricing. Be
extremely selective
when dealing with unsolicited enquiries or offers. Some
steps you may take are:
– Request a copy of the enquirer’s business licence
– Request a copy of the enquirer’s certificate of import/export authority
(only
available from certain countries)
– Ask for references from businesses the enquirer has dealt with
– Check out the enquirer’s website
– Conduct searches on the enquirer through the Internet or your known
business
associates in that market
– Commission a credit report to verify the enquirer’s operations,
territory and
payment history.
If in doubt, you should turn down the enquiry or seek
professional advice.
·
Financial risks
When financial risks occur, they
directly affect your cash flow and destroy your potential revenue.
ü Unfavourable currency movements – Exchange rate
movements directly affect your cash flow,
profit, and balance sheet. You should be aware of the following kinds of
currency risks:
– Competitive risk: If you are exporting to a developing
or emerging market, the strengthening of the Singapore dollar
will make your goods more expensive and hence decrease your price
competitiveness in that market.
– Transaction risk: When you sell goods on extended
payment terms in a foreign currency, the conversion of your buyer’s
currency into Singapore dollar during the transaction will incur the risk that
your final cash receipt may not exactly the amount that you contracted for.
– Currency translation risk: There is no exchange risk if you do
not convert your foreign currency receipts or
cash-at-bank. However, once you convert them at the
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year-end for financial reporting, sell
your assets or repay your liabilities, you will incur the risk of adverse
translation rates which decreases your final revenue figure.
– Risks arising from price list exposure: Prices you publish on e-commerce
websites may be denoted in the currency of the target export market in
order to better reach out to your potential buyers. Hence, any strong adverse
currency fluctuations will affect your eventual profit.
ü Hedging considerations - As you mature as an exporter, you may wish to consider developing a proper hedging strategy to
minimise your exchange rate losses. There are several hedging techniques
available. We recommend that you seek proper financial advice when you begin to
develop your hedging strategy.
ü Payment defaults - Your payment risks will arise on two fronts: from the buyer and from processes. Fraudulent buyers will cause
you not only monetary losses but also reputational damage, especially if the
in-market retailers are counting on your buyer to distribute your products.
Recommended verification and background checks are:
– Perform credit-checks on your buyer. You can engage commercial
firms which provide assistance in credit-checking
foreign businesses to do this. Your banker is a good reference for such firms.
For no-fee ratings, you may search the published list of Standard
& Poor’s rated corporates or those of Moody’s and
Fitch to
check if your buyers are already rated.
– Put in place a credit risk management policy. This is a
cost-efficient risk management approach as it reduces the
resources required to assess buyers on a case-by-case basis. It will also help
you apply a uniform best practice when dealing with a new counterparty for the
first time. For new exporters, a best practice credit risk management policy
should cover the following basic areas:
C Counterparty initiation policies –
this requires background checks on new proposed counterparties through
available public information, credit agency reports and counterparty financials
before agreeing to transact for the first time.
C Credit authorities and limits – set
different credit limits for different credit ratings of your counterparties.
C Transaction approval process –
establish a verification process to ensure that counterparty initiation,
contracts, collateral provisions and collection comply with authorities and
limits before a transaction is executed.
C Reserving and capital policy – for
instance, covering expected credit losses by taking a charge against earnings
which you can reverse if the expected losses do not materialise.
– Take up the Trade Credit
Insurance Scheme from IE Singapore to protect yourself against default by your counterparty.
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ü Payment delays -
Even if the buyer is genuine and a good paymaster, payment delays can still arise through poor processes.
Delays in payments negatively affect your cash
flow and thus your production cycles. Some ideas for
tightening your processes are:
– Centralise all your letters of credit activities with one relationship
bank.
– Insist on freely available letters of credit during
negotiations. This gives you the
freedom to present
documents to the bank of your choice. With this option, you
engage your relationship bank to help you reduce
processing time.
– Improve your letters of credit processes. Experienced
exporters often establish a set of internal practices while
negotiating letters of credit to reduce discrepancies.
·
Logistics risks
Logistics risks can occur
if you do not plan and prepare the transport of your goods in advance. Please
refer to Step 4 of this Export Guide. Some ideas on how you can reduce your
logistics risks are:
ü Establishing close communication with your buyer and
choosing a proper logistics advisor;
ü Adopting operational safeguards such
as proper packaging for vibration sensitive goods;
ü Financial mitigation through proper
insurance;
ü Specifying legal clauses to avoid
dispute.
·
Legal risks
Legal risks arise when
there is no proper contract signed between the exporter and the buyer or if the
contract is inadequate in scope. Signing a comprehensive export sales agreement
can help you manage, protect yourself against or even avert many types of
risks. The most common legal risks which may arise are:
ü Intellectual property rights
infringement
ü Confidentiality breaches
ü Misunderstanding of contractual
conditions
Please refer to Step 6 of this Export Guide.
·
Risks from
unforeseen circumstances
Such risks include natural disasters,
accidents, national disease emergencies, theft and in the recent years,
financial collapses of banks and governments. While they do not occur often, it
is impossible to avoid them altogether. You can, however, manage them in certain
ways, particularly their consequences:
ü The financial impact of such risks can be countered by
taking out proper insurance coverage.
ü In your contract, you can also specify
in your force majeure clauses how your buyer and you should respond and bear
the consequences in event of such circumstances. Please refer to Step 6 of this
Export Guide.
ü Operationally, you can put in place
emergency response practices.
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