WHAT IS IT ABOUT EXPORTS AND ACRONYMS?!
F.E.W. (Free Export Workshop) on ASEAN, INCO Terms and Negotiating!
The Wagga City Council in partnership with Industry & Investment NSW's Small Business Month in September to host a fascinating (and free!) workshop on exporting, with a specific focus on opportunities in ASEAN (Assocation of South-East Asian Nations). And there were plenty of acronyms flying around! There is a sizeable book devoted to INCO Terms, or in plain language, ‘International Commercial Terms'.
As David Douglas from freight forwarder Henning Harders Australia explained, INCO Terms ‘are the ABC of dealing with overseas markets'. The book can be sourced at www.iccwbo.org/incoterms. It defines 13 terms including acronyms such as FAS (Free Alongside Ship), FOB (Free on Board), CIF (Cost Insurance Freight), DAF (Delivered at Frontier) and so on. These all relate to the sharing of costs and risk between the buyer and the seller in international traffic. ‘Don't assume anything!' says David.
There is a huge infrastructure task involved in overseas trade. Jason McGregor from Sydney Ports said they handled 1.9 million TEUs (twenty-foot container equivalents) in 2009/10, which is one third of Australia's containerised trade. Trade volume totaled 28.16 million tones, in addition to which there were 119 cruise vessel visits. There is a major 63 hectare land reclamation project at Port Botany which will increase capacity by 1.6 million TEUs; a second bulk liquids berth planned by 2012; an intermodal hub in Western Sydney with a dedicated rail line to Port Botany; and a plan for a replacement cruise terminal west of the Harbour Bridge.
Matthew Tyrell from Travelex explained the approach to managing foreign exchange risk. Mark West from ANZ noted that ‘ANZ has a bigger presence in Asia than the other big three Australian banks combined!' ANZ finances 22% of trade flows between Australia and Asia.
Mark gave a graphic example of the hazards of export, showing a picture of the 230 metre Chinese-owned ‘Shen Neng 1', a bulk coal carrier having run-aground on the Great Barrier Reef on 3 April this year. Thanks to the commercial arrangements put in place by ANZ, the Australian exporter successfully secured payment for the 65,000 tonnes of coal on board the Shen Neng 1.
Ian Bennett from Australian Business provided some fascinating insights and tips for business negotiations in South-East Asian countries.
‘Negotiation is an in-built part of Asian culture and is unavoidable, so be prepared!' says Ian.
‘Negotiating in ASEAN has become an art and when asked for your best price, many Australian executives will immediately give the bottom price without realising this is only the beginning of the negotiating process. Put simply, have three price lists! Price List A is what you would really like to achieve, price list B is what you would consider acceptable, and price list C is your final offer' says Ian.
The need to be aware of the different cultures in each country is paramount, and the ignorance of apparently simple things like public holidays can mean wasted effort and time, such as happened during a Queensland government sponsored export development tour. The Queensland organiSers had not realised that their trip coincided with a public holiday and so they spent a day sightseeing and ended up seeing junior executives rather than the senior executives who they originally made appointments with.
The free trade agreement between ASEAN, Australia and New Zealand (AANZFTA) came into force on 1 January, 2010 and should create new opportunities. There are 12 countries covered by the agreement with over 600 million people and combined GDP of A$3.1 billion. These countries account for 19% of Australia's trade, with over 40% (around 18,500) of our exporters already trading with the region.
AANZFTA will lead to the progressive elimination of all forms of barriers to trade and investment within ten years, but with significantly improved market access delivered very early. Already very low tariffs or no tariffs apply to most agricultural commodities to this region.
Useful contacts and links:
Industry & Investment NSW, Wayne Murphy - 02 69216 422
Freight Forwarders:
Alan McKeown, Border and Customs Shipping - 02 60213 200
David Douglas, Hennings Harders - 0418 261 909
Ian Bennett, Australian Business - 1800 505 529
Matthew Tyrell, Travelex - 02 9282 0395
Mark West, ANZ - 131314
For INCO Terms - www.iccwbo.org/incoterms
AANZFTA and Fact Sheets on key markets - www.dfat.gov.au/trade
