6 Things to Do Before the Import of Your Goods (#5 is a Must)
MINIMISING THE FINANCIAL RISK
Finance is obviously fundamental when exporting & importing: you want to be paid quickly and without complications. Here are some factors to cover.
1. Credit checks
When you receive your first order, it is important to conduct the same credit checks as you would with any new customer in New Zealand.
Ask for credit references and follow these up.
The minimal cost of an overseas phone call could save you a substantial amount of money should the credit references cast any doubt. Also, ask for the names of any other New Zealand suppliers they purchase from.
Once you are satisfied with a customer’s creditworthiness, establish clear payment terms in advance of the deal.
To protect yourself against payment default, use payment methods that provide you with some security, for example, irrevocable letters of credit. Your bank will be able to provide advice on various payment options and their relative advantages, plus advice on the reputation of overseas banks that may be involved in the process.
2. Export credit guarantees
The best way to eliminate the risk of not getting paid is to secure payment up front (for example, if you sell online, you probably require the customer to pay by credit card first before you process the order). In reality, however, some business clients will be looking for at least 30-60 days credit terms.
Along with price, quality and expertise, being able to offer your customers credit has become an increasingly competitive factor in international trade. If you can offer attractive credit terms, you may stand a better chance of securing the deal.
Private credit insurance companies can provide short-term trade credit insurance for many markets and credit-worthy clients worldwide. However, if you are exporting to riskier countries or your buyer is seeking finance terms beyond 12 months, then consider contacting the New Zealand Export Credit Office (ECO), visit www.nzeco.govt.nz
3. Damage or loss of goods
Consider marine insurance for loss or damage caused to goods during transport. Many marine insurers now provide insurance policies that cover multi-modal transport.
Do an internet search for ‘export insurance’ to find a specialist broker, or alternatively, talk to your bank when discussing payment options and credit guarantees as they may be able to offer insurance or recommend a suitable company. Also, talk to your freight forwarder.
4. Exchange rates
What risk will any fluctuation in foreign exchange expose you to? Volatility in currency exchange rates can seriously erode your projected profitability from an export order. Consult your bank about the best way to manage currency risks.
Options include managing the risk by borrowing and selling in the same foreign currency, maintaining foreign-currency accounts, or by offsetting component import costs with export receipts in the same foreign currency and with forward contracts.
5. Unsolicited enquiries
As strange as this may seem, success can be one of the bigger risks in exporting.
To succeed as an exporter, you must be fully committed to your export strategy. Record your thoughts on how you will deal with success. Consider what export success would be for your business, in terms of customers and sales levels.
Also consider what you may need to do in your business to sustain this activity (trips overseas, employees, reinvestment in your business). Success can generate unsolicited enquiries.
Once you have enjoyed some success, your market visibility will increase, so expect more attention both from New Zealand companies wanting to benefit from your efforts and unsolicited enquiries from overseas companies.
These can often be very speculative queries from people who are not committed buyers. Be selective about which enquiries you pursue and concentrate on those from your main target markets. Validate any enquiries carefully, and always confirm the importer’s ability to pay before sending any goods.
You may want to use an agent to check the potential importer’s financial credentials, such as how long the importer has been operating. When you deal with unsolicited enquiries, remember the adage that ‘if it looks too good to be true, it probably is too good to be true.’
There are some steps you can take to protect your business and determine whether or not the enquiry is genuine in such circumstances. These include:
- requesting a copy of the company’s business licence
- requesting a copy of the company’s certificate of import/export authority (available from certain countries only)
- asking for references from other companies that they have dealt with in New Zealand and internationally
- checking out their website
- commissioning a company credit report to verify the company’s operations, territory, and payment history. You can do this direct via www.dnb.com for a nominal fee.
If in doubt, don’t do any deals.
6. Protecting your intellectual property
Intellectual property protection in New Zealand does not automatically extend to other countries, so you need to seek expert advice. The important principle in all intellectual property protection is to think ahead: take steps to prevent problems or conflicts before you begin.
The worst case scenario is entering a market place with a unique product or service only to find that competitor starts copying you. If the competitor is large, then the damage will often have been done before you can react, even if you have some intellectual property protection in place.
Remember potential customers or distributors will want to see that you have secured intellectual protection in their markets as it creates a significant barrier to competitors, builds credibility, adds value and helps prevent other businesses copying your products or services.
An established market position in New Zealand may be of advantage when you export, but it does not provide freedom from competition where someone ‘piggy-backs’ on your designs and products.
Patent attorneys can help you establish and maintain ownership of any intellectual property you develop or seek to exploit. They can advise you about legal mechanisms for protecting your intellectual property in New Zealand, and when you should seek protection in overseas markets.
Getting the right mix and timing depends on the type of product or idea and your plans for its commercialisation, marketing and distribution.
Patents can provide an enforceable monopoly for 20 years to any person or company to exploit new and innovative products and process. It is essential your patent attorney establish a priority date prior to any disclosure, use or commercial dealing with your innovation.
The priority date is the date that a patent application is registered as filed with the Intellectual Property organisation in a market.
Registered designs can provide an enforceable monopoly for a set period for certain new or original features of design, such as shape, configuration, pattern or ornament embodied in an article. The monopoly period in New Zealand is 15 years.
As with a patent, it is essential your patent attorney establish a priority date prior to any disclosure, use or commercial dealing with the innovation.
Copyright gives rights to the creators of original works, including those of literature, drama, music, recordings and computer programmes. It also covers art, such as models and working drawings.
Copyright, (noted by the symbol ©) allows the creators to control exploitation and is granted automatically. In most countries, it does not require formal registration but double-check with your patent attorney that this is the case in the market you are going to enter.
A trademark is an identification symbol used to distinguish one company’s products from similar products made by others. It is noted with the symbol ® or ™.
Once you decide to target major markets, you cannot rely on your New Zealand trademark protection. You must ensure your trademarks are available for use, and if possible, for registration in other markets.
The ™ symbol may be used when trademark rights are claimed in relation to a mark, but the mark has not been registered with the government trademarks office of a particular country or jurisdiction.
The ® is used to indicate that the mark has been so registered. Registration can be renewed indefinitely after the initial registration period. It is generally unlawful to use the ® symbol with a mark when that mark is not registered.
Although it is not mandatory to use either symbol, the force of convention is such that the symbols are widely used around the world. It is not necessary to register a trademark; however, this does confer a statutory monopoly.
One disadvantage of the internet is that it is possible for someone to register a domain name in markets where the right to use the trademark may be owned by another party.
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