Saudi Arabia – Not Just for Oil

oil fieldsSaudi Arabia – Not Just for Oil

When one thinks of Saudi Arabia and international trade, oil typically comes to mind first, but times are changing. The price of oil has been on the decline over the past couple of years and as such Saudi Arabia has been diversifying its economy. As a result, opportunities exist for exporters.

Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world. Among the top exports is of course, oil, but also plastics, metal goods, construction materials and electrical appliances. In terms of imports, the country’s leading commodities are vehicles, machinery, electronic equipment and pharmaceuticals. U.S. exporters of these products have found Saudi Arabia to be an excellent market for decades.

Trade Lanes

Diversification and Infrastructure

Diversification is important for Saudi Arabia in order to grow its economy and as such government investments in infrastructure and non-oil industries are on the rise. Not surprising, the construction sector is the largest driver of economic activity in Saudi Arabia after oil particularly as government-sponsored projects such as hospitals, specific industry-related economic hubs and infrastructure are driving most of this need.

Indeed, ambitious infrastructure projects are underway with five rail projects to connect not only the major cities within the country but also to serve as a link between the Red Sea and the Persian Gulf as well as with the six other countries of the Gulf Cooperation Council (GCC). This is an interesting development for many reasons, as the Arabia Peninsula is one of the only regions of the world that jumped to modern air and ocean ports infra structure without first developing a rail network. For U.S. exporters, especially those shipping to major inland points such as Riyadh (the nation’s capital), the presence of rail cargo could lower the cost of inland delivery substantially and increase delivery times.

Expansion plans are also underway at airports in Riyadh, Jeddah, Madinah, Nijran, and Tabuk primarily for passengers but will undoubtedly benefit cargo also.

Furthermore, ocean port projects include expansion of the country’s largest port in Jeddah, as well as improvements to ports in Jazan, Al-Madhaya and Fursan. Inland ports are also being built in specific industry-related economic hubs known as Economic Cities.

Along with infrastructure investments, Saudi Arabia has identified several industries for further development such as healthcare, life sciences, automotive, information technology, logistics, alternative energy and manufacturing.

Because of the high volume of imported automobiles and automobile parts, there are particularly high expectations to expand the domestic automobile manufacturing industry. Currently there is local production of light trucks only on a small scale by Isuzu, Daimler, Volvo and MAN. Tata, Jaguar and Land Rover are considering local assembly operations in Saudi Arabia.

In addition, Saudi Arabia is the world’s largest importer of defense equipment and as a result, the government is also working towards developing a manufacturing base for weapons parts and components.

Trade

The Department of Customs at the Ministry of Finance oversees all merchandise moving through Saudi customs ports. In addition, the Saudi Food and Drug Authority (SFDA) are empowered by the Saudi Council of Ministers to have a representative at eight Saudi ports of entry with Saudi Custom officials to regulate and control the entry of medical devices. As such, medical devices are only allowed entry into Saudi Arabia through the three major international airports, two seaports in Jeddah and Dammam, and three land entry points.

On the global front, Saudi Arabia joined the World Trade Organization (WTO) in 2005 and as part of this trade organization is committed to its rules including transparency in trade requirements and more accommodating to non-Saudi businesses. Being a WTO member, Saudi Arabia is expected to bind its tariffs on over three fourths of U.S. exports of industrial goods at an average rate of 3.2%, while tariffs on over 90% of agricultural products are set at 15% or lower.

Additionally, as a member of the Gulf Cooperation Council (GCC), Saudi Arabia applies an external tariff of 5% for most products, with a limited number of GCC-approved country-specific exceptions.

Despite being a member of WTO, Saudi Arabia still favors Saudi businesses. In addition, there are also concerns of counterfeit products. In some consumer goods, for example, it is estimated that as much as 50% of the entire Saudi market is counterfeit. In order to restrict the entry of counterfeit products, the Saudi Customs Authority now requires all imported goods to clearly display the “Country of Origin” or “Made in ….” on items in an irremovable manner.

So, Saudi Arabia is much more than oil. True, oil still remains a leading export commodity but the country is working hard to diversify from its dependence and as such suppliers of numerous industries such as automotive, pharmaceutical, consumer goods and manufacturing should benefit as this country opens its doors further to global trade.

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Trade with the largest European Economy – Germany

Trade with the largest European Economy – Germany

germany importsAs one of the largest producers of automobiles, Germany offers great opportunities for U.S. automotive equipment suppliers. It is the largest European economy and the third largest export and import economy in the world. Centrally located in Europe, Germany’s 2014 GDP was $3.8 trillion with real growth rate of 1.6%.

Germany is home to such automobile manufacturers as Adam Opel AG, BMW, Daimler AG and Volkswagen. Besides being a large producer of automobiles, Germany also is the home to chemical conglomerates such as Siemens and BASF as well as to pharmaceutical companies such as Bayer. As a result these particular sectors of the German economy are especially well suited for export as well as for the import of inputs and raw materials from overseas markets such as the United States. For imports, automobiles and vehicle parts are the largest such commodities along with electronics equipment.

Trade lanes

  • Top export destinations from Germany are France, the US, UK, China and the Netherlands.
  • Top import origins into Germany are the Netherlands, China, France, the US and Italy

Infrastructure and Logistics

Germany has a well-defined and mature transportation infrastructure. It is home to Europe’s second largest container port, Hamburg as well as Europe’s largest inland port, Duisburg. In addition, the Rhine and Elbe rivers serve as major thoroughfares for barge traffic.

Its airport network consists of 23 airports that offer international service including Frankfurt which is the 9th largest airport in the world in terms of cargo with 2,132,132 tonnes moved in 2014.

Much of the cargo within the country is transported by truck as opposed to rail. As a result, because of the preference of truck, tolls are utilized. However, there has been an attempt to shift more cargo on rail to reduce emissions and road congestion.

The rail is operated by private operator, Deutsche Bahn, but receives government funding. With 37,900 kilometers of track it is one of the largest networks in the world. In recent years, Deutsche Bahn has been successful in extending its German network to China providing an alternative solution to that of air or ocean for shippers. For U.S. exporters the presence of such a well developed infrastructure means that the entire country is accessible for potential sales and distribution opportunities.

Because Germany is a member of the European Union, it follows European Union trade requirements in addition to its own requirements. The Integrated Tariff of the Community, referred to as TARIC (Tarif Intégré de la Communauté), is designed to show the various rules which apply to specific products being imported into the customs territory of the EU or, in some cases, exported from it. To determine if a license is required for a particular product, check the TARIC.

Some European directives to be mindful of include REACH, “Registration, Evaluation and Authorization and Restriction of Chemicals”, which requires chemicals produced or imported into the EU in volumes above 1 metric ton per year to be registered with a central database handled by the European Chemicals Agency (ECHA). Another directive, Waste Electrical and Electronic Equipment (WEEE), requires U.S. exporters to register relevant products with a national WEEE authority or arrange for this to be done by a local partner.

According to the US’ website www.export.gov , Germany’s regulations and bureaucratic procedures can be a difficult hurdle for companies wishing to enter the market. Complex safety standards complicate access to the market for many U.S. products. It is advised that U.S. suppliers do their homework thoroughly and make sure they know precisely which standards apply to their product and that they obtain timely testing and certification.

Goods imported into Germany from non-EU states are subject to an import turnover tax. The import turnover tax rate equals the value-added tax rates of 19% levied on domestic products and has to be paid to the customs authority.

A mature market, Germany continues to offer great opportunity for exporters particularly in automotive, chemical and pharmaceutical manufacturing. Be mindful of the intricacies associated with customs and duties within Europe and to Germany; otherwise enjoy the benefits this country has to offer.

IoT In the Logistics Space

IoT In the Logistics Space.

IoTEvery once in a while the logistics business gets to be “cool”. We’re not using a tired old pun here about the “cool chain” or perishable transportation solutions. Instead, we’re excited at the moment by the phenomenon known as the “Internet of Things” or IoT. As we’ve shown in some previous posts here at the Exporting Excellence™ blog we really like data and how it can be applied to (or derived from) international business, and IoT is all about the data.  From tracking passenger baggage to initiating preventative maintenance orders on aircraft, IoT is having a profound impact on the field of logistics and there are several ways that your business can benefit from this trend.

As we had mentioned in our post on big data, routine business processes create a great deal of data. This is primarily a byproduct of the increase in digital and online business processes – quite simply, every click we make in a browser, app or other program generates a data point that gets recorded somewhere, somehow. Big Data essentially focuses on how to compile, sort and interpret such data. IoT on the other hand is more concerned with how to “make” more data by bringing devices and gadgets that were previously inanimate and silent to “life” using network and digital communications. The result of compiling all this extra data is to enable businesses to use their resources more efficiently which in turn can increase sales, profitability, or other key business performance attributes.

We were really impressed with this recent report published by Deloitte University (part of accounting and consulting giant Deloitte Touche Homatsu) that offers some great insights into how IoT has been successfully adopted into supply chain and logistics processes as well as the many opportunities that it offers.

So what is the opportunity that IoT brings to the freight business? At the moment, most of the attention is focused on tracking cargo. The ability for an importer to determine how far from port their material sits, for example, seems to hold value for major wholesalers and retailers. Some specialized applications such as temperature monitoring for perishables and transit time tracking for pharmaceuticals seem to be gaining traction as well. A recent example of IoT technology hard at work that we came across was in the logistics of beer kegs. Already a high value segment of the logistics business, IoT is now enabling beer distributors to know how much beer actually remains in a keg. This information actually allows a bar to waste less beer (and more importantly increase yield per keg) and at the same time allows distributors to plan deliveries more efficiently. The “pre-IoT” way of measuring the amount of beer in a keg was to physically tilt it and see how heavy or light the keg was. New kegs, equipped with sensors and IoT technology can actually report the accurate quantity thereby enabling a more efficient supply and utilization process. It’s a product called iKeg from SteadyServe and you can learn more about the concept from this Wall Street Journal blog post or the company’s website. 

All of us in the logistics industry need to embrace our moment of “cool.” There is no need to expound on the many, many ways the internet has changed the world around us … we feel it everywhere. The logistics industry has lagged a bit in technological advancement because we are still a hands on, deliverable operation. It’s easy to leave the “cool” internet technology to those businesses that don’t have so many moving, physical parts. With IoT we are getting a chance to pull the technology available everywhere else, into our business. If IoT can make us operate smoother, track shipments easier, regulate temps better on perishable cargo….. what isn’t “cool” about that? And really, is anything “cooler” than increased profitability and efficiency derived from your supply chain?

 

 

The Pain of Demurrage Costs

The Pain of Demurrage Costs.

At Crescent Air Freight we spend a lot of time focusing on the hidden costs of logistics. We get clients and prospects to see what bad logistics can cost them far beyond the freight invoice by examining the impact on cash flow, profitability and brand equity. The concept is simple: poor logistics decisions (usually based on price alone) can result in delayed deliveries which can cause delayed payments, lost sales, and lack of product availability in overseas markets. However, there’s also a very real cash cost that comes with improper logistics planning and it’s known as demurrage.

demurrage costs

Demurrage, also known as detention, is a cost resulting from extended use of equipment, warehouse space, or other transportation resources. Basically, it’s a penalty charged for using someone else’s equipment or space. For example, railcars accrue demurrage if they are not unloaded in a timely manner; Vessels accrue demurrage if they are forced to wait at a port beyond a standard free time allotted by the port authority; Truckers charge detention when vehicles or drivers are made to wait for cargo pick up or discharge.

The problem that arises is when a demurrage or detention scenario arises, cargo owners often find their goods being held at ransom. Demurrage or detention charges are almost always expensive and your goods cannot be released until those charges are paid. Even worse, since such charges accrue on a daily basis, there’s very little room for negotiation and the final cost can change based on the time of receipt of payment!

NEW INCOterms CTAUnlike standard INCOTERMS which sets protocols for “who pays what”, the unfortunate reality is that demurrage costs are basically paid by the party who wants their goods so badly, they’ll even pay a penalty just to get them. Honestly, this can be avoided…it doesn’t have to happen. The solution to the problem, almost always lies in being prepared ahead of time and planning for eventualities. Matters like vessel detention or railcar detention tend not to be very relevant to the supply chains of our customers. However, port detention of export or import containers, airport storage of air freight shipments, and carrier demurrage charges for ocean freight containers gated out beyond “free time” are all examples of demurrage that occur on a daily basis. Obviously, this imposes heavy costs on cargo owners and can be avoided with better logistics planning.

Solutions to the demurrage/detention problem begin with the proper planning of a shipment and all the formalities associated with the arrival or departure of those goods. For example, we once had a client who wanted their export cargo out of their warehouse and into a container 7 days prior to the cut off date for a vessel headed to Australia. The problem was that the steamship line only allowed the container to be pulled out for loading purposes 5 days prior to the vessel cut off. Our client was unaware of the fact that they would have to pay a penalty for being 2 days too early. The solution was rather simple: we researched the details of the fees, calculated the cost of the extra storage and asked the client if they were willing to pay for it. Guess what happened? The client said “no”! They were very appreciative of us taking the time to research the cost associated with their plan and helping them to understand their true costs. However, had we not done this, it would have resulted in a few hundred dollars of charges that their trucker would have to pay upon returning the container. That’s right, the trucker would have been on the hook, and that’s one of the tricky parts of demurrage costs – it doesn’t just affect the cargo owner, but can also create headaches for their vendors or customers.

At other times, the problems can be caused by documentation mistakes in customs paperwork resulting in cargo being held at the port of destination. In such an instance, the delay might be caused by the exporter or importer of record, and it is the local customs authority that raises the objection, but the storage expense accrues at the airline terminal and often has to be advanced by the customs broker or trucker collecting the cargo at time of release. We once saw a client lose tons of a perishable food product in Turkey this way just because their logistics service provider at the time neglected to get documentation approved in advance of the shipment. That one step alone would have prevented thousands of dollars in unnecessary freight charges plus the confiscation of product.

Sometimes, the shipper can choose to take the cost of demurrage or detention as a cost of doing business. It can be strategic at times, although still a cost. Remember the client who tried to ship too early? Well, some months later they actually asked us to pull a container ahead of the free time allotted by the vessel operator just so they could have their product shipped out before the end of the quarter. In this scenario, it was actually beneficial for them to pay for detention rather than to have the good be in inventory at the start of a new month.

And, every once in a while, we get to see a cool scenario unfold where the shipper gets the last laugh. For example, at various times during the ISAF war effort in Afghanistan, ocean freight containers were delayed at the border crossing between Afghanistan and Pakistan. At certain times of heightened tensions, the delays stretched into weeks and demurrage applied to the shipping containers to the tune of thousands of dollars. The liners demanded these charges of truckers when the unloaded containers were brought back to the port and shippers, including many U.S. companies, were forced to pay penalties that were vastly more expensive than the cost of freight or even the merchandise itself. However, with some crafty logistics support on their side, some shippers simply decided to buy their own containers and ship them full of goods. The cost of buying a “shipper owned container” is higher than the cost of using one owned by the liner, but shipper owned containers are not liable to “in & out” demurrage costs. In effect the shipper’s were treating the containers as disposable and not bothered if they came back at all. This actually was the most cost effective solution to countering exorbitant detention costs that shippers were forced to pay.

These are just a few examples of how logistics costs can have a devastating impact on order profitability. However, the good news is that many of these problems can be avoided if your logistics service provider takes the time to understand your business, specific product requirements, and your import/export goals.

 

 

 

 

Top 7 Markets for U.S. Paint & Coatings Manufacturers

Top 7 Markets for U.S. Paint & Coatings Manufacturers

Why are we looking at paint you ask?  From the logistics perspective it’s a very interesting commodity actually.  To begin with, it’s liquid and hence dense.  Density is a crucial element in the logistics planning and handling process.  As we explained in this prior post, density has a direct impact on total landed cost.

Crescent Paint ImageAnother matter of interest for us at Crescent Air Freight is the fact that paints are almost always classified as hazardous materials which is something that requires special handling and attention.  Despite a standard set of international regulations, no two airlines handle the acceptance and transport of hazardous commodities in the same way, hence we’re always on our toes as we help our clients plan their export processes for paints. 

Lastly, paint is a product that crosses industry lines.  We ship it as a raw material for our automotive customers.  We also handle coatings for our clients who deal in various manufacturing industries such as boat building, construction materials and sometimes even foods.  Yes, foods!  Now there’s no paint in your food supply, but there are coatings and one such example is shellac.  Food grade shellac is what makes your kids candy shiny.  Without it, candy would be a lot less appealing to look at.  Meanwhile, it’s also a flammable liquid and hence hazardous. 

So plain old paint meets the needs of a lot of different industries and hence we felt it was important to take a look at this commodity and its value overseas.  Accordingly then, here are the top 7 markets for paints and coating as defined by the U.S. Department of Commerce’s statistics for 2014. 

 

  1. Canada – 2014 U.S. Exports of Paint & Coatings – $1,106,629,000.00

The logistics of shipping paint to Canada is rather simple since the overwhelming majority of shipments travel over the road.  U.S. exporters would do well to look at this market for its size and ease of trade and transport procedures. 

 

  1. Mexico – 2014 U.S. Exports of Paint & Coatings – $595,175,000.00

2nd place by a wide margin, but nothing to sneeze at, Mexico offers many of the exact same benefits as Canada.  Cross border trucking eliminates many of the logistics hassles that come with air and ocean freight transport.  Meanwhile, with industries as diverse as construction and automotive manufacturing, Mexico offers strong demand for U.S. made paints & coatings. 

 

  1. China – 2014 U.S. Exports of Paint & Coatings – $126,153,000.00

A country with an industrial base the size of China’s is going to consume a lot of raw materials.  Coatings and paints fit well here, especially where it comes to high end/high value products.  Exporters, however, need to be careful with logistics compliance as this market requires shipping by air or ocean freight and each of those modes has separate and unrelated procedures for compliance in both the U.S. and in China. 

 CTA

  1. United Kingdom – 2014 U.S. Exports of Paint & Coatings – $56,708,000.00

America’s biggest overseas export market, unsurprisingly, demands a lot of U.S. made paint & coating material.  Trade regulations are easy with the UK and hazardous materials shipping regulations are straightforward, meaning U.S. exporters can confidently add this market to their export business mix without worries over hazmat rejections, documentation errors and discrepancies, etc. 

 

  1. Japan – 2014 U.S. Exports of Paint & Coatings – $52,437,000.00

A popular destination for this commodity is Far East Asia.  Japan is the 2nd biggest Asian market for U.S. made paints and coatings.  Trade policies are generally stable, but the costs associated with shipping hazardous materials to Japan are often higher than other markets.  U.S. exporters should pay close attention to the landed cost of their goods when researching sales opportunities in Japan. 

 

  1. South Korea – 2014 U.S. Exports of Paint & Coatings – $45,850,000.00

Another vital Asian market offers U.S. exporters of paints and coatings great opportunities.  South Korea does have some logistics policies that can add on costs, especially when shipping by air.  For example, cargo arriving in Incheon Airport (Seoul) over the weekend accrues greater amounts of airport storage than cargo arriving on weekdays.  Also, costs of domestic trucking and handling of hazardous materials can carry significant premiums which can directly affect export order profitability. 

 

  1. Taiwan – 2014 U.S. Exports of Paint & Coatings – $42,118,000.00

Much like China, Taiwan’s industrial base has strong demand for high end inputs including paints and raw materials.  U.S. exporters will find Taiwan to be a good market in terms of size and trade policies.  However, shipping hazardous materials to Taiwan by air can be difficult.  The main airlines serving Taiwan often impose high premiums for flying such cargo, and on top of that we’ve even seen circumstances where cargo has been offloaded per pilot’s instructions despite proper compliance with regulations on the part of shippers and their freight forwarders.

 

In addition to these markets, there are terrific overseas export opportunities in countries such as Germany, Brazil, Australia and India to name a few.  At Crescent Air Freight, we have handled the needs of paint and other hazmat shippers for nearly 4 decades.  It takes experience to navigate the complexities of such international shipping transactions and we look forward to putting our capabilities to work for your export business. 

 NEW INCOterms CTAContainer Info & Spec Sheet

 

Exporting to Nigeria

Exporting to Nigeria

As part of our ongoing series of reports on the MINT countries, we turn our attention this month to Nigeria.  Along with Mexico, Indonesia and Turkey, Nigeria stands out as an economy offering strong growth rates and an increasingly favorable environment for trade and foreign investment. 

 NigeriaGraphic

Due to the recent updating of economic statistics, Nigeria now claims to have the largest economy in Africa with a GDP of US$504 billion.  What makes this adjustment in statistics significant, for U.S. exporters in particular, is the fact that Nigeria’s oil industry is no longer as dominant a sector of the economy as it once was.  Under old economic data, it was estimated that the oil industry accounted for 33% of the economy, whereas new data suggests that only 14% of the country’s GDP is derived from oil.  As a result, the Nigerian market offers a more diverse set of opportunities to American exporters.   

 

Despite the changes in economic output, Nigeria remains a challenging place to do business and in this report we highlight some of those issues and the impact they may have on U.S. exporters. 

 CTA

With a population of 170 million, Nigeria is the most populous nation in Africa.  Its recent growth has been derived from the services and international trade sectors.  Areas that offer strong growth opportunity for U.S. exports include the following:

 

Logistics and Trade Environment

 

Like most countries in Africa, Nigeria lacks good transportation infrastructure.  The impact on U.S. exporters can be observed in many ways:

 

  1. Nigerian airports are generally not well connected to the rest of the world.  Lagos, which is Nigeria’s largest city and commercial hub, is serviced by many foreign airlines, however frequency and number of carriers remains insufficient for the needs of the country.  As a result, U.S. exporters who rely on air freight should expect to incur substantially higher freight costs than they would for delivery to other equidistant export markets. 

 

  1. Nigeria’s ocean ports have long been considered an impediment to Nigeria’s international trade.  As a result, U.S. exporters can expect to incur high costs of container shipping which can have a significant impact on export order profitability.  In recent years, however, the government has committed to investing in new ports, and as a result progress has been made over the past decade.

 

  1. Nigeria relies heavily on trucking, but simultaneously suffers from poor road infrastructure.  As a result trucking and inland delivery costs are high as it can be difficult to reach final destinations that are away from the major cities or ocean ports.  Absence of a properly functioning rail system only compounds the problem as there is no means to achieve economies of scale with respect to ocean container transport inside the country.  Considering the difficulties associated with inland transportation in Nigeria, it is highly advisable for U.S. companies to ship on a door-to-(air)port basis, thereby leaving local customs clearance and delivery arrangements to the actual importer/end user inside Nigeria. 

 

  1. Customs regulations – Nigerian Customs have long been acknowledged as a barrier to trade.     U.S. exporters should take precautions to ensure that information on commercial documents such as commercial invoices, packing lists and bills of lading are accurate and consistent.  Discrepancies can cause Nigerian authorities to delay clearance of cargo upon arrival and can even result in confiscation of merchandise.  As a result exporters can face losses or reduced profitability in their export sales. 

 

Nigerian customs duties can be as high as 30% of CIF value of merchandise and in special cases can even run as high as 100% as is the case with cigarettes for example.  U.S. exporters must be aware of this as it has a significant impact on landed cost of goods and can significantly impact the viability of export sales to Nigeria. 

 

Imports into Nigeria follow a system of prepaid duty collection whereby Nigerian importers are required to electronically file details of their import shipment and prepay customs duties to a bank which in turn will forward the duty to Nigerian customs.  Nigerian importers will receive a Single Goods Declaration which must be shown on shipping documents in order for the cargo to be cleared in Nigeria.  This is significant for U.S. exporters as it is necessary for shipping documents to bear this information in order for a shipment to clear customs upon arrival in Nigeria.  Failure to furnish this information will result is seizure of goods. 

 

Although exporting to Nigeria can be difficult at times due to the logistics requirements and sanctions, it can also be very lucrative for your business. The opportunity to “own a market” currently exists in Nigeria! If you haven’t already, you should make Nigeria a part of your international growth plans.

 

 

Doing Business with Turkey

What You Need to Know about Doing Business with Turkey

Import Exporting Turkey

As we continue our series on the rising economies of the MINT countries, this month’s focus is on Turkey.  Situated at the crossroads of Europe and Asia, Turkey has long been a significant market for international commerce and continues to enjoy the benefits of its location as the trend of globalization continues.  It’s no surprise that Southern Europe, the Middle East and Central Asia are all vital markets that benefit from Turkey’s infrastructure, manufacturing and trade. 

As a NATO member, Turkey offers an environment that is both politically and environmentally friendly to the United States.  In 2013, U.S. exports to Turkey were valued at $12.1 billion while imports stood at $6.7 billion.  The combined two way trade makes Turkey America’s 37th largest trading partner.  U.S. exports to Turkey, aside from agricultural products, consist primarily of Mineral Oil, Iron & Steel, Aircraft, Industrial Machinery, Cotton Yarn and Fabric. 

Despite offering a friendly trade environment, it’s important to know that Turkish customs has very strict and difficult procedures to adhere to.  Shipments have been known to sit in Turkish government facilities for periods as long as a year simply due to discrepancies in documentation.  U.S. exporters should be keenly aware of the requirements their goods are subject to as a lack of compliance can potentially eliminate opportunity to realize profitable sales.  CTAAgricultural and food products are subject to the highest levels of scrutiny as they require importers to obtain a Control Certificate from the Turkish Ministry of Agriculture and Rural Affairs.  Over the years, we have taken on many customers who experienced tremendous difficulties as their logistics providers did not take the time to plan shipments in close coordination with Turkish customs.  To simply rush the goods out the door without planning for customs delays and objections is a recipe for disaster. 

For commercial goods, outside of the agriculture and foods sector, exporters must ensure that their shipments are properly prepared. They must be accompanied by bills of lading, packing lists and commercial invoices.  We cannot stress the importance of accuracy with your invoices.  Turkish Customs can withhold the release of goods for any discrepancies or irregularities in commercial invoices such as misspellings, discrepancies between commercial invoices and packing lists, improper calculations or tallies on invoices, and other such mistakes.  Exporters who are shipping samples of their products to prospective customers should exercise extra caution as “zero value” invoices will almost never be released by Turkish customs.  “Zero Value” invoices essentially list the product being shipped as an invoice of no commercial value, and from the standpoint of the exporter and importer this is factual.  However, Turkish Customs (and in fact many customs agencies around the world) see this as an attempt to circumvent duties and other taxes which can cause product to be impounded and destroyed.  At the very least this can present a disruption to a marketer’s business process, but more importantly the cost of shipping, storage and potential penalties and fines can cause significant financial losses.  A client of ours once tried to ship a powdered beverage mix to Turkey using one of the global courier companies, but without proper advisement on how to prepare the material, found their product (tons of it actually were being sent over for R&D testing purposes) held up by Turkish customs for nearly 6 months without any corrective action being offered to resolve the matter.  We couldn’t help them with the batch of material that got stuck in Turkish customs, but were able to prevent future mishaps by setting up a process that ensured proper customs compliance well before departure of the goods.  

From a transportation and logistics perspective Turkey is developing its infrastructure at a rapid pace.  Recent government funded projects include investments in tunnels connecting the country’s Asian and European cities, expansion of ports, and the national airline is on track to become the world’s largest airline.  As a result, U.S. exporters will find no shortage of transportation options available for delivery of their export sales.

With a projected economic growth rate of 4% per year, and a growing entrepreneurial class, Turkey offers excellent growth potential.  With a population of nearly 75 million, it is also one of the largest countries in the Middle East and hence boasts a very strong domestic market that will continue to be a source of opportunities for U.S. made goods.    

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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The Top 7 Markets for U.S. Medical Equipment Exports

The Top 7 Markets for U.S. Medical Equipment Exportsmedical bed

The category defined as Medical Devices or Medical Equipment is a broad one.  The U.S. Department of Commerce assigns 5 NAICS codes to this market, and digging into the specifics of each classification reveals several sub sectors and categories.  According to 2012 estimates, the United States market size for medical devices and equipment stands at $110 billion, and U.S. exports of such products were valued in excess of $44 billion.  The United States enjoys a tremendous advantage in this industry over other nations largely due to its advanced R&D capabilities in both the public and private sectors.  Based on data from the United States Bureau of Census covering several NAICS codes, here are the top seven export markets for U.S. manufactured medical devices and equipment for 2014:

7. China – 2014 Medical Devices & Equipment Exports – US$1,520,069.00

It’s rare that China is not at the very top of a list of export or import markets, especially where it comes to trade with the United States.  Nonetheless, with a burgeoning population, China’s potential as a market for U.S. made medical devices and equipment will remain strong for years to come.  The sub sector of “Surgical and Medical Instruments” stands out as the largest category of U.S. exports to China at $762,943,000 in 2014.

6. Germany – 2014 Medical Devices & Equipment Exports – US$2,267,567.00

Europe’s largest economy offers exporters of Medical Devices and Equipment a strong, stable environment for international sales.  While the current strength of the U.S. Dollar against the Euro may pose some short term challenges, higher value products from the United States will continue to enjoy demand and a trade friendly environment in Germany well into the future.

5. Mexico – 2014 Medical Devices & Equipment Exports – US$2,281,228.00

As we highlighted in a recent post, Mexico is a great trading partner for the U.S. as it serves as a source of two way trade.  Surgical equipment, appliances and supplies accounted for nearly 55% of U.S. medical equipment exports to Mexico in 2014.

4. Belgium – 2014 Medical Devices & Equipment Exports – US$3,405,914.00

One of 3 European markets on this list, Belgium has long been a standout market for U.S. made medical equipment.  Surgical instruments, appliances and supplies alone represent an annual export opportunity of $3.3 billion for U.S. companies.

3. Japan – 2014 Medical Devices & Equipment Exports – US$3,560,670.00

Japan ranks as the fourth largest market for U.S. exports as we detailed in a recent post here on the Exporting Excellence™ blog.  According to some measurements, it may even be the biggest export market for U.S. made medical devices.  As home to an aging population and a culture uniquely devoted to caring for its elderly, Japan will continue to be a source of export growth for U.S. manufacturers of medical devices and equipment for years to come.

2. Canada – 2014 Medical Devices & Equipment Exports – US$3,564,214.00

America’s largest export market overall stands to see a similar standing across specific industry segments as well.  Canada offers U.S. medical equipment manufacturers a diverse market, as no specific subgroup of medical devices and equipment accounts for more than 39% of the aggregate exports of this commodity.

1.The Netherlands – 2014 Medical Devices & Equipment Exports – US$3,929,604.00

Despite a strong presence in the global pharmaceuticals marketplace, The Netherlands looks abroad for its medical equipment and device needs and the U.S. has been the primary beneficiary of this search.  As with all European markets, an aging population has a strong impact on domestic demand for healthcare related products.  As we mentioned with Germany, current strength of the U.S. dollar may cause a short term decrease in sales opportunities, however medical goods tend to be better protected from such market events due to necessities.  U.S. exporters would be well served by focusing on this market as part of their future international sales strategy.

There are several other major markets that didn’t make the top seven list here based on specialization.  For example, the category described as Opthalmic Goods enjoys strong demand in Australia, France and the United Kingdom.  Similarly, “Dental Lab Products” enjoy strong demand and growth in Italy and Spain.  Newer or smaller volume exporters should consider developing sales in Saudi Arabia, Singapore and Switzerland all of which offer strong demand for all categories of U.S. medical devices and equipment, but do not have the scale that comes with the top seven markets in this list.

Irrespective of the market or category, a capable logistics service provider is required to facilitate the shipment and overseas delivery of goods such as medical devices and equipment.  From domestic compliance to international customs clearance, Crescent Air Freight offers the depth of expertise and skill to meet the demands of exporters while maintaining focus on reducing the hidden costs and inefficiencies that can come with the process.  We look forward to assisting your business in its international expansion today and for the long haul.

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Did we mention compliance is important?

Did we mention compliance is important? Armored Vehicle

In March we highlighted the Top 5 Export Markets for U.S. Made Defense, Emergency and Security Vehicles. Despite being a highly specialized segment of the automotive industry, in 2015 we at Crescent Air Freight are experiencing double digit growth in this market as well as in the export of parts and accessories of such vehicles.  While there are significant barriers to entry in the way of manufacturing capabilities and intellectual property, the fact is that growth creates opportunities for sales and also for compliance problems.  Here are some insights into the compliance requirements faced by exporters of security vehicles and their parts and accessories.

 

As we have mentioned in earlier posts, the major two sets of regulations governing the export of defense related equipment, including defense vehicles, are International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR).  EAR apply to products that are known as “dual use” items.  Some examples that come to mind include aircraft radar which can be used for either commercial or military purposes.  In the case of vehicles, a more relevant example would be an armored SUV.  Such vehicles are often exported to countries around the world, especially to countries where domestic law and order circumstances require such protection.  However, so long as such vehicle is not armed and contains no military hardware, it is likely to fall under EAR.  “Likely” is the key word here, as there are additional factors that go into considering which regulations apply.  While most manufacturers are aware of the applicable regulations, an experienced logistics provider with experience in defense related shipments can assist in making such determinations.

 

While EAR oversight falls under the Department of Commerce (and specifically the Bureau of Industry and Security) ITAR falls under the purview of the Department of State’s Directorate of Defense Trade Controls.  ITAR applies to military goods or articles and is highly relevant to the export sales of U.S. defense contractors.  In the security vehicles market ITAR regulations apply directly to exports to U.S. military or other military entities.  As with EAR, there are significant variations and clauses in ITAR that must be adhered to in order to maintain compliance.  In the case of the armored example mentioned above, ITAR would apply in place of EAR had the vehicle been outfitted with hardware to attach a weapon to it.  Here too, however, there are substantial variations to be considered for proper classification and while a manufacturer or distributor of such equipment must have a proper “in house” compliance process, and experienced logistics service provider can offer some guidance in the classification process.

 

MRAP InteriorIn addition to the classification of the vehicle or equipment, exporters must also be aware of whether or not the destination country falls under any restrictions or bans for defense or security trade, and this may even apply to countries through which the vehicle transits.  For example, a client of ours ships parts for MRAP’s and Humvees for the U.S. military in Afghanistan, under an ITAR license.  However, their license does not allow their goods to transit through Azerbaijan.  This is significant because the most cost effective routing for air freight to Afghanistan is via Baku, Azerbaijan.  In order to maintain compliance we devised a new routing for the client that allows their product to travel only through nations that are approved for such goods under ITAR regulations.  Regulations also apply to components attached to the vehicle, hence supply chain managers need to be aware of the country of manufacture of parts and accessories that they have sourced for the final product.

 

Irrespective of which license applies, and the fact that manufacturers and distributors are likely to maintain internal compliance programs, one of the most important steps of the defense export transaction that a logistics provider must demonstrate competence with is the proper filing of the Shipper’s Export Declaration (SED) – now known as the EEI.  While the EEI filing is required for all U.S. exports in excess of $2,500.00, there are special classifications for goods shipped to the U.S. military, foreign militaries and foreign governments, all of which are relevant to the export of security vehicles and other defense equipment. 

 

As political events continue to drive demand for U.S. made defense, emergency and security equipment the need for proper compliance is more important than ever before.  Crescent Air Freight offers its clients the resources needed to support their export business in defense and commercial trade.

 

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