Free Trade Agreements ---- have your say

Australia has now signed on to 6 Free Trade Agreements, and the original one with New Zealand remains the most comprehensive.

The newer agreements cover the United States of America, Thailand, Singapore, New Zealand & ASEAN, and of course Chile.  There a number of other agreements under negotiation, including with China, Japan, India, Korea, Malaysia, Indonesia, the Gulf Co-operation Council and the Trans Pacific Partnership.  The Government’s pursuit of high-quality, truly liberalising free trade agreements that support the multilateral trading system complements its commitment to multilateral trade reform and liberalisation, including concluding the Doha Round of trade negotiations.   .

What does this all mean for Australia’s small to medium exporters?  It means the government has a goal of trying to remove the distortions in international trade flow that detract from quality and price being the determinants of success in another market. Some of these distortions are created by high tariff barriers at the border, but increasingly they are the ‘behind the border’ issues like quotas, content rules or trade facilitation charges and requirements that effectively bar, or price-out  products and services from certain countries.

In addition to tariff reductions, as a large services exporter we need to see our businesses given the same opportunity to compete and win business as both local providers and other international players. Ensuring that IP protection is honoured in these partner countries is another important consideration.

The government has teams led by the Department of Foreign Affairs and Trade (DFAT) working on the content of future FTAs to ensure Australian business is not disadvantaged by exclusions  from the partner country, and to highlight any existing issues that restrict access by our exporters.

How do they know?  Well to a large extent they rely on information given by Australian businesses currently exporting to or working in, or wishing to work in, the partner country.  To this end consultation sessions are run in each state to seek the experiences and views of Australian business and those that support them. There is also the ability to forward submissions, by email, letter or fax, to the negotiating teams or via your DFAT State Manager.  Addresses for the FTA teams can be found on the DFAT website pages on each FTA negotiation.  These views are listened to and incorporated into discussions, and the size of your company is not the determinant.

So the important action for exporters, and particularly for the small to medium exporter without a full time advisor, is to have a look at the agreements under negotiation, and provide your legitimate feedback and views.  This is the stage where your concerns will be taken into consideration, and perhaps influence a key part of the outcome for your company and others.

The existing agreements that we have in place are also reviewed at regular intervals to see how effectively they are working, so practical experiences should also be forwarded through to DFAT.

FTAs include a lot of detail, and there may be many exporters who are not aware of the potential benefits of the agreements we have in place for their business.  For instance under the tariff reduction schedules for their particular product, there may be relative advantages in exporting under say the Australia-Thailand FTA vs the AANZ FTA (which also includes Thailand).  The full details on the agreements and the tariff levels (and the origin certificates where required) can be found on the DFAT website at www.dfat.gov.au.

We would encourage exporters then to take advantage of the FTA’s in three ways:

1.    Provide information on any issues effecting, or likely to affect your business under an FTA under negotiation.

2.    Review existing agreements to ensure you are aware of benefits to your company.

3.    Provide feedback on experiences (both good and bad) under existing agreements so that they work as effectively as possible.

With FTAs, the government is listening, so have your say...

EFIC helps Australian exporters to keep working capital flowing

Melbourne-based Environment Systems and Services (ES&S) has provided weather and meteorological solutions in locations as far afield as Antarctica and Samoa, for clients from China, Korea and Japan.

Like many SME businesses, ES&S faces the constant challenge of maintaining enough working capital to win contracts, deliver on contracts, develop business opportunities, and generally keep the business running.

To win contracts with the Polar Research Institute of China and the Defence Acquisition Program Administration of the Republic of Korea, ES&S were required to provide advance payment and performance bonds to their buyers.

These bonds give a buyer comfort that if an exporter doesn’t perform the contract obligations, they can claim for lost upfront payments and related losses. An exporter usually asks its bank to issue the bonds in favour of its buyers. However, to do so banks generally require the exporter to provide assets to secure the bond. Sometimes all available assets are already secured or valuable working capital is tied up to provide this security.

Export Finance and Insurance Corporation (EFIC), Australia’s export credit agency, helped ES&S  by providing guarantees to ES&S’ bank to satisfy the security requirement. This allowed the bank to issue the advance payment and performance bonds to ES&S’ buyers.   

“EFIC’s financial assistance helped to free up our working capital so we could meet the customer’s requirements,” said Bob Wright, CEO of ES&S.

Recently ES&S won a subcontract as part of Japan’s Grant Aid programme for improving the weather forecasting system and meteorological warning facilities in Samoa.

Under the subcontract, ES&S received periodic payments from its customer, however, the time lag between when ES&S incurred costs and received payments meant that the company faced a working capital shortage and needed additional funding to perform the subcontract.

EFIC provided a six-month $500,000 export working capital guarantee to ES&S’ bank, ANZ, enabling the bank to lend the same amount to ES&S.

“EFIC’s support enabled us to access additional working capital to undertake this contract and provide essential improvements to Samoa’s weather forecasting and meteorological warning facilities while continuing to expand our overseas business,” said Colin Cookes, Owner and Chairman, ES&S.

For more information: visit www.efic.gov.au

RELATED CASE STUDIES

http://www.efic.gov.au/casestudies/Pages/esschina.aspx

http://www.efic.gov.au/casestudies/Pages/esskorea.aspx

http://www.efic.gov.au/casestudies/Pages/Environment-Systems-and-Services-Samoa.aspx

Why should you attend the Import Procedures & Documentation course offered by the Australian Institute of Export?

By Maxence Lefebvre

You will learn about successful import practices, documentation, finance and payments, transportation options, marine insurance, customs clearance and risk management in a friendly environment. Classes are relatively small, with approximately 15 people and open discussion is encouraged between trainers and participants. The facilitator and trainers are experts and professionals working in areas related to importing. The main facilitator, Dianne Tipping, a highly skilled expert with years of experience in international business, runs her own business and has been solving import and export issues for many years. During the training, you will have the opportunity to meet several other experts from the banking and insurance industry and the Australian customs.

Understanding importing is vital for your business! “Why? Customs Brokers do the job for us.” This is a common answer when it comes to importing.

Having the ability to understand and judge how a third party is managing your freight movements is essential in order to overcome the risks associated with importing. Are the import procedures respecting the law? Am I using the latest and correct Incoterms® and insurance policy? Is the job done effectively and cost efficiently?

This Import Procedures & Documentation course can assist in showing you the risks in importing, arming you with real life examples and giving you the ability to make changes to your import strategy in order to import more efficiently and/or decrease the risks associated.

“After participating in the 2-day course offered by the AIEx in Sydney, I would like to tell you a bit more about my experience and what I learned during this training."

The course is well balanced with theory, practical examples and discussions. You will start with the basic principles of international trade and finish with a very detailed description of the different types of containers used in the import process. At any time, participants are encouraged to ask questions, even if this is specifically related to their business. The background and experience of the facilitator make the learning experience practical rather than academic.

You will be provided with all necessary materials: course note folder with copies of presentations and support material, the Australian Import Handbook (value of $89), Incoterms® 2010 Chart, notepads and pens. The 2-day course will end by working on a case study that summarizes most of the points discussed in the course, using samples of real import documentation. After those 2 days, you will receive a certification of attendance.

There is another aspect, less often considered, but which can considerably positively affect your learning experience with the AIEx: learning from the other participants. Indeed, you are encouraged to share with the rest of the class and explain your difficulties and issues. By listening to other companies, you may find out some risks that could possibly affect your own business. You may want to know the solutions the facilitator will give to others and consider it for yourself. Other participants may ask questions that you might not have thought of. Once again, this spillover effect is more than encouraged through discussion and interaction.

You must also appreciate the fact that the learning outcomes from this course will not only be relevant to your imports. You will obviously learn a lot for other areas of your business. Indeed, this will also be relevant to your exports (using Incoterms®, insurance policy, and so on.), your intercompany and other overseas operations.

The objective at the AIEx is to support and follow Australian businesses for the long term. You will be more than welcome to come back and ask for some more advice after training.

Remember, that it does not matter whether you want to start importing or you are already importing and looking to streamline your process and eliminate areas of risk. In both case you will learn a lot from this training, feel confident in this field of expertise and be able to have your own opinion about whether your company is optimizing and securing its import strategy and processes.

Find more info on AIEx website: http://www.aiex.com.au/education-training/short-courses-workshops

Maxence Lefebvre is interning with the Australian Institute of Export while studying a postgraduate program majored in International Business at Macquarie University, Sydney.