U.S. Exports of Banking Equipment

U.S. Exports of Banking Equipment

Here’s What We’ve Noticed:

If you follow the world of online transactions and mobile payments, then you’ve heard about such important events as the IPO of Square, Inc. and the spinoff of PayPal from global ecommerce giant Ebay. While these startups and relative new comers to the financial markets are gaining market share the fact remains that banks continue to be the most important players in the global market for financial services, products, payment processing, and the like. So what exactly does this have to do with logistics and exports? check scannerCertainly there are the super high value logistics services of transporting currency, gold and other cash equivalents, but at Crescent Air Freight we’ve been seeing something more compelling in the banking business. Specifically we’ve experienced considerable growth over the past year in the export of banking equipment such as check scanners, ATM’s, money counters and the like. What is becoming clear from these traffic patterns is that the global banking industry is undergoing a huge change and new technologies threaten to disrupt financial business models as a growing percentage of populations in emerging markets reach middle class status. As such, the demand for banking equipment will increase in the years to come.

Emerging Markets

As the base of middle class consumers around the world expands, a variety of banking or commerce related products have seen their demand grow. Point-Of-Sale terminals for example have seen a sharp increase in demand over the past few years. Additionally, beyond payments, the proliferation of inventory management systems, loyalty programs and advanced vending machines has spurred demand for both software and hardware that is required to support such transactions. As such, Transparency Market Research forecasts point-of-sales terminals market growth to be at 11.6% annually from 2014 – 2020. Considering the market size was estimated to be $36.86 billion in 2013 there’s clearly a great deal of growth yet to come.

Aside from banking, retail and healthcare are two areas that are expected to continue to feed demand for point-of-sale and payment processing equipment. In terms of countries, U.S. exporters in this segment will find demand in many of the emerging markets of the world. According to The World Bank, cash demand in Europe is growing at 4.5% per year and within BRIC countries cash demand rates are growing at 11% per year. South Africa is another bright spot in terms of the demand for cash and banking equipment.

If cash demand is influenced by population then it stands to reason that China and India need to be at the very top of the list of potential growth markets for this sector. Indeed the number of ATM’s in China has tripled since 2009 making it the largest ATM market in the world.

India has also experienced rapid growth over the past decade, ranking as the world’s fourth largest ATM market in 2014, and trailing only China, the United States and Japan. However, as rural development increases in India and as cash demand increases proportionately, it is expected that India will surpass the United States as the second largest ATM market in the world.

In addition to ATM’s, we have observed (and U.S. export data confirms) growth in demand for U.S. exports for check scanners and money counters over the past year. In addition to emerging markets we have seen upgrade cycles and bank branch expansion in markets such as Qatar and the United Arab Emirates drive significant project demand in 2015.

The Trade Data

According to U.S. Census Bureau statistics, 2014 exports of point-of-sale equipment were valued at US$202.3 million which reflected a slight decrease from 2013 levels. The largest markets for U.S. exports in this category were Canada, Mexico and China.

ATM exports are even more appealing for U.S. companies and 2014 overseas sales stood at $103.80 million which was almost a 100% increase over 2013 levels of $50.7 million. Leading markets for U.S. exports of ATM’s were the Philippines, South Africa, and India.

The Outlook

The outlook for banking equipment exports will likely remain strong for several years to come. The combination of technology, population growth and increased global consumption will ensure a steady need for equipment to support all segments of this market and its transactions.

Banking equipment is of high value and generally has a long life cycle. Hence, its logistics and transport are similar in many ways to that of other capital goods such as oil & gas equipment or even sensitive electronics. A combination of direct flights and sailings, high quality trucking services and destination delivery options and a good system of tracking in transit will ensure that exporters get true value from the logistics process that supports their export sales.

 

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JAPAN – Powering US Exports

Japan – Powering U.S. ExportsJapan export chart

While ample attention has been paid to BRIC countries and a new focus is developing on MINT countries the fact is that Japan has long been one of America’s largest trading partners.  In 2012 U.S. exports to Japan totaled US$116 billion and with a combined 2 way trade volume of $204 billion, Japan stands as America’s 4th largest trading partner as well as the 4th largest market for U.S. exports.

As we had highlighted in this recent post Japan is the 3rd largest market for U.S. medical devices and equipment exports and in fact, according to some estimates may even be the largest market for these U.S. manufactured products.  Not surprisingly then, products classified as “Optical and Medical Instruments” account for the largest amount of U.S. exports to Japan.  Additionally, U.S. exporters will find strong demand in Japan for aircraft and parts thereof, machinery, electrical machinery and meats.  Collectively these five categories account for the majority of U.S. exports to Japan.

While the value of Japan as an export market has been well documented and established for decades, U.S. exporters need to look beyond market size and pay attention to key aspects of the trade process including logistics infra structure and trade practices and the implications of these matters on landed cost.

As a country with significant land and size constraints, as well as a dearth of natural resources, Japan faces very high costs of real estate and raw materials.  As a result costs of warehousing, labor, fuel and other inputs of the logistics process are high.  U.S. exporters should be aware of this, especially when selling goods on a Door-to-Door basis.  While Japan has excellent infrastructure, services such as trucking are very expensive and can have a significant impact on order profitability.

Similarly, with warehousing, Japan lacks the square footage that American companies are used to and this makes itself evident in terms of high storage costs.  U.S. businesses who are required to arrange storage of raw materials or finished goods inside Japan must carefully consider these costs when evaluating the viability of an export sale to this market.

U.S. exporters must also be aware of Japanese customs regulations.  While Japan is a great market with significant potential, it has also been traditionally highly protective of its local industries.  As a result, exporters must ensure proper compliance procedures are being followed not only by themselves but also by buyers, distributors or their subsidiaries in Japan.

In order to maintain compliance with Japanese customs regulations, U.S. exporters must ensure that their customer has secured the necessary import permits from the Director-General Japanese Customs.  Once an import permit has been established, exporters must ensure that all shipments are accompanied by a Commercial Invoice, Bill of Lading or Airway Bill, Certificate of Origin and Packing Lists.

For exporters dealing in goods that are licensed, a copy of such licensing and/or original documentation is required.  Similarly, goods that qualify for duty exemptions or rebates should be accompanied by statements of reduction and any supporting paperwork that may apply to WTO trade, non-WTO trade and the General System of Preferences.  Failure to comply with these requirements can result in goods being detained or even confiscated upon arrival in Japan which can have a severe impact on order profitability and repeat or long term export sales in the country.

Fortunately, Japan has world class transportation infrastructure.  Hence while the cost of doing business may be high, the ability to physically access all major markets exists, and is highly efficient.  Japan’s ports, and in particular Yokohama are amongst the biggest in the world in terms of container shipping volume and offer state of the art handling.  Japanese airports, similarly boast world class handling, and both Tokyo (Narita) and Osaka (Kansai) are amongst the biggest airports in Asia in terms of cargo throughput.

Japan’s market size and spending power, as well as recent government initiatives to boost consumer and public spending will ensure it’s position as a growth market for U.S. exporters for years to come.  With this potential comes a great number of opportunities to meet market need and with nearly four decades of exporting experience to Japan, Crescent Air Freight has consistently ranked amongst the premiere logistics service providers on the U.S. to Japan trade lanes.  We welcome the opportunity to put our considerable experience in Japan to work for your export and import business in this dynamic market.

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Importing & Exporting with Indonesia

MINT (Mexico, Indonesia, Nigeria & Turkey) – Drivers of Future Growth for U.S. BusinessesScreen Shot 2015-01-21 at 7.20.50 PM

Continuing our focus on the global markets that offer the brightest prospects for U.S. exports and imports, we now turn our attention to Indonesia. Our previous reports had focused on the BRIC countries, namely Brazil, Russia, India and China. Subsequently, a new crop of countries known as MINT (Mexico, Indonesia, Nigeria & Turkey) has arisen as drivers of future growth for U.S. businesses. MINT is an acronym originally coined by Fidelity Investments, a Boston-based asset management firm and was popularized by Jim O’Neill of Goldman Sachs, who had created the term BRIC. The term is primarily used in the economic and financial spheres as well as in academia. Its usage has grown especially in the investment sector, where it is used to refer to the bonds issued by these governments. These four countries are also part of the “Next Eleven”. We recently profiled Mexico and identified it as a source of excellent two way trade with the United States. This month we turn our attention to the Indonesian part of MINT

Based on key metrics such as market size, growth potential and accessibility, Indonesia has emerged as a country offering strong economic growth potential. According to World Trade Organization statistics, Indonesia is the world’s 27th largest exporting country. Indonesia is also the world’s fourth most populous country after China, India, and the United States and the world’s third most populous democratic country after India and the United States. In 2009, BRIC and Indonesia represented about 42 and 3 percent of the world’s population respectively and about 15 percent of global GDP altogether. All of them are G20 countries. By 2015, Internet users in BRIC and Indonesia will double to 1.2 billion. In 2009, Indonesia was the only member of the G20 to lower its public debt-to-GDP ratio – a positive economic management indicator. U.S. companies exporting industrial machinery and equipment, chemicals and food products can benefit from opportunities in Indonesia.

From a logistics perspective, Indonesia does have some significant limitations that can adversely affect your export business. The primary issue the country faces in this regard is a weak transportation infrastructure. While Indonesia has been steadily investing in its ocean ports and diversifying traffic away from the main port of Jakarta, there is still a great deal of work to be done. Airport infrastructure in the major cities of Jakarta and Surabaya also are strong and well suited to international trade. However, poor road infrastructure can create significant challenges for U.S. exporters who are selling goods on a DDU or DDP basis. Delays in delivery times and increased costs associated with locating suitable trucks for local delivery can inflate costs thus eroding profit margins on export sales.

Another major issue that U.S. exporters must contend with, and one that poses serious obstacles to Indonesia’s growth as a desirable market for foreign goods and investment, is that of customs procedures. The basic documentary requirements for import into Indonesia are rather straightforward. Exporters must provide:

1. Airway Bill or Ocean Bill of Lading that show the actual cost of transport.

2. Commercial Invoices that clearly state the buyer and seller of goods.

3. Certificate of insurance.

4. Certificate of Origin.

Despite these clear and brief requirements, however, the potential for delays and cost overruns resulting from customs compliance issues is significant. For example, the requirement that shipping documents should state the actual cost of transport is significant as Indonesian customs charge import duties on the combined value of merchandise value and cost of transport. Exporters must be aware of this as it has a direct impact on the landed cost of their merchandise. Logistics providers should be aware of this and ensure that their documents reflect accurate charges so as to prevent their clients from unnecessarily facing excessive duties which can result in lost profits and claims from dissatisfied or “overcharged” customers.

Similarly, the accuracy of information stated on commercial invoices is of utmost importance. Discrepancies in the details of the seller, buyer or merchandise stated on invoices can cause Indonesian customs officials to withhold release of goods until corrections or amendments are made thereby resulting in additional costs such as storage, detention charges, courier costs for replacement documentation and fines or penalties for incorrect paperwork.

While the potential of Indonesia as a market for U.S. goods is significant, exporters and logistics companies must be keenly aware of the pitfalls that come with shipping to this market. Knowing these pitfalls is significant to your growth in logistics. Even with pitfalls Indonesia will be ranked seventh in GDP by 2050 according to Jim O’Neill. The country is the largest economy in Southeast Asia and a member of the G-20 major economies. Currently Indonesia has the world’s 9th largest GDP-PPP and 16th largest nominal GDP. Definitely not a market to ignore.

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