Tuesday, November 13, 2007/
Anyone planning to export for the first time should take off their rose-coloured glasses and heed some guidance about the traps that await them.
I have the privilege of dealing with many different new exporters from various industries. Most are very astute business people with passion and creativity. However, the one thing many have in common (to their disadvantage) is that they have a “rose-coloured glasses” view of exporting and are easily seduced by the perceived glamour of “going global”. Many get so excited when a party is interested in distributing their product overseas, they often fall prey to a couple of choice “first love” mistakes:
- Entering into a relationship with the wrong person or entity for their business.
- Forgetting to ensure that they have satisfactory structures and local arrangements to support their exporting venture.
So how do you avoid the exporters’ trap of being caught like a lovesick teenager?
- Research the potential importer. Contact other companies they distribute for (especially Australian companies) and ask questions about them. Do they work hard, do they pay on time? It amazes me that this embarrasses people, but most people will happily share stories about their business, especially horror stories!
- Ensure that the importer has similar business values to you.
- Ensure the importer has experience in the market.
- If your gut tells you not to enter into a relationship with an importer then listen to it! Guts are always right in exporting 🙂
. Get a commitment from the importer in the form of a signed heads of agreement or memorandum of understanding before sending samples or fulfilling a trial order. This should have all your key terms and conditions in it, especially payment terms, incoterms, minimum order quantities.
- Get the importer to sign a confidentiality agreement BEFORE sending them samples.
- Ensure that your local arrangements, especially for manufacturing, are as watertight as possible, prior to making any promises to fulfil orders. A couple of my past clients learnt this the hard way.
One client had a potential multi million dollar deal for the export of hyperbaric chambers to the United Arab Emirates. Just as the order came in, workers at the manufacturing plant on the NSW coast went on strike. The client did not have any formal arrangement in place with the manufacturer and as a result lost the million-dollar deal.
Another client was shipping 27 tonnes of bird seed to New Zealand. A condition of the border control in New Zealand was that all grain be heat-treated prior to passing into the country. The client signed terms and conditions with the heat-treatment company in New Zealand without reading them. The heat-treatment company overheated the grain, scorched the lot and without removing the shrink wrap, so the grain went mouldy!
The client tried to recoup costs from the heat-treatment company, which refused to pay because the terms and conditions said that they waived any liability for damage if the job was required due to border control requirements. The battle was eventually won through insurance companies but the experience illustrates the importance of tailoring your terms and conditions with your suppliers to your needs, and if not then at least reading the fine print of the terms and conditions they give you.
That client eventually established a manufacturing plant in New Zealand but not before having a scare at the thought of losing a very lucrative exporting partnership.
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