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Technical Assistance for Food Exporters
The Product
The Label
The Package
Systematic Market Research
A Step-by-Step Approach to Market Research
Screen Potential Markets
Assess Targeted Markets
Draw Conclusions
Tariffs and Harmonized System Codes
Locating a Foreign Buyer
Benefits of Trade Show Participation
Preparations and Budgeting for Trade Show
Participation
Technical Assistance for Food Exporters
Now that you have decided to commit valuable
resources to exporting, it is time to research and make the necessary,
technical changes to your product so that it may enter foreign markets.
Your product may only require a label change; however, it could
require ingredient modification and new packaging. Due to the variety
and number of enforcement and regulation requirements, exporters
of agricultural products must address certain technical issues to
ensure the product's success overseas.
Besides obtaining required certificates prior
to the export of certain products, changes to the product itself
and its packaging may also be necessary. You should fully research
the technical changes needed for each market. Modifications add
expenses.
The Product — Will
it need adaptation? Regulations for food additives differ from country
to country. The U.S. "Generally Recognized as Safe", or
GRAS, additives may have maximum content levels or may be prohibited
altogether in foreign countries. Documentation is important not
only for the amount of additive, but also the source of the product;
secondary or indirect additives are also regulated in most countries.
Many times, additives must appear on the label in the list of ingredients.
Exporters must assure the safety of their products.
Pesticide tolerance or maximum residue levels (MRL's) of the import
country must be met. Documenting pesticide use and residues throughout
your entire production process will increase your knowledge of your
product and assist your compliance with the regulations. The best
method of monitoring pesticide applications is to follow the established
state or national guidelines. The national guidelines require that
for a period of two years, the producer must record within the span
of 14 days the brand or product name of the pesticide, the EPA registration
number, and be aware of any contract requiring that certain residue
standards be met.
Good sanitation procedures are a must! Give special
care to microbial growth during the shipment and storage of products
since the distribution time is longer than that for domestic sales.
Also, fresh foods must be pathogen controlled while processed foods
should be pathogen free. Countries may differ on their bacterial
standards, so once again know the regulations before the contracts
are signed.
Another aspect of your product may need modification.
The product formula or recipe may have to be modified to satisfy
tastes of the local population of the target country. For instance,
a new flavor to which the locals are accustomed may need to be developed.
The Label — What
changes will be needed? The product label is an important element
in the promotion of your product. Labeling provides required information
and a further opportunity to position the product in the market
through attractive graphics. To present your product favorably to
a foreign buyer, your label may need certain alterations. Product
and brand names as well as label colors must be carefully considered
for their cultural significance in each country. For example, in
Japan white signifies death while green is a favorable color in
Saudi Arabia.
Like the United States, each country has label
standards designed to inform and protect its consumers. The gravitation
toward a more nutritionally informed consumer has caused global
labeling requirements to become more stringent. Even though this
move toward higher standards exists, there is not one standard set
of requirements but rather the particulars differ from nation to
nation. Some nations will allow "stickering" of your U.S.
label in order to comply with their requirements, whereas other
nations will not. Every label should include certain elements: the
common name of the product, the net weight or volume in metric units,
the brand name, the name and address of the packer or shipper, the
country of origin, the recommended storage temperature, special
handling instructions, and the name of officially approved fungicides
or bactericides used in the packaging process. It is also beneficial,
and many times required, to include all information in the native
language of the country to which you are exporting. Remember that
these as well as other changes will result in additional costs,
which should be calculated in your selling price. In addition to
these items your company should calculate the cost of registering
your brand name or trademark in the foreign country. It is possible
your exact brand is already in use in the foreign country. Do this
research before investing lots of money. You can search at the U.S.
Patent office to find out if your trademark is already registered
in the USA: http://www.uspto.gov.
The Package —
What needs to be modified? Depending upon the product(s) shipped,
companies will encounter varied constraints based upon the type,
size, condition and environmental impact of the container/package
utilized. Be aware of the regulations before a contract is signed,
because an adaptation of the packaging will increase your production
costs. The portion size of the package may also need changes to
conform to local eating habits. Additionally, the package may need
to be changed so that the product has an adequate shelf life for
the new market to which it will be shipped.
In today's world of environmental concerns, the
environmental impact of packaging has become a major issue regarding
packaging requirements. Many countries have established mandatory
recycling programs, packaging bans, and solid waste reduction programs.
Many of these laws such as the German Waste Recycling Ordinance,
require the importer of a product to return the excess packaging
to the exporting country or recycle/reuse all transportation package
material.
In conclusion, agricultural exporters need to
prepare themselves for the technical requirements of each target
market. Know which questions to ask and to whom these questions
should be directed. For answers to technical questions, ask your
foreign customer, your freight forwarder or the Foreign Agricultural
Service of the USDA.
The Foreign Agricultural Service's Office of
Food Safety and Technical Services Division provides technical information
about allowable pesticide requirements, food labeling and standards,
sanitary and phytosanitary requirements, acceptable food additives,
and the certification and testing requirements of countries importing
U.S. agricultural and food products. In addition, the office is
responsible for monitoring the interagency working group on trade
and environmental issues and responding to inquiries that relate
to the sanitary and phytosanitary texts of the General Agreement
on Tariffs and Trade (GATT) and the North American Free Trade Agreement
(NAFTA). Additionally, you might contact the consular office of
the country to which you wish to export.
Systematic Market
Research
A systematic method of market research should
involve a preliminary screening of potential markets followed by
a careful assessment of the targeted markets. Exporters engage in
market research primarily to identify their marketing opportunities
and constraints within individual foreign markets and also to identify
prospective buyers and customers. Results of this research should
inform the company of the largest markets for its product, the fastest
growing markets, market trends and outlook, market conditions and
practices, and competitive firms and products. Based on all the
information gathered, a company must decide which markets are the
most promising and the number of markets the company is prepared
to enter. Even if the firm is planning on utilizing an export intermediary,
it should select its markets before selecting the intermediary,
because many EMC's and ETC's have strengths in some markets but
not others.
Markets may be researched using primary or secondary
data sources. Primary market research consists of a company collecting
data directly from the foreign marketplace through interviews, surveys,
and other direct contact with representatives and potential buyers.
Primary research has the advantage of being tailor fit to meet company's
needs and provide answers to specific questions, but this data collection
is very time-consuming and expensive. Most companies employ secondary
data sources such as trade statistics for a country or a product,
to focus its marketing efforts. This type of research is a valuable
and a relatively easy first step for a company to take. Many times,
it may be the only step necessary if the company decides to utilize
an export intermediary and export indirectly.
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A Step-by-Step
Approach to Market Research
1. Screen Potential Markets
Step 1: Obtain export statistics that indicate product exports
to various countries. The Foreign Agricultural Service (FAS) compiles
historical data on the value and volume of agricultural exports
to pinpoint trends in exports of particular commodities and products
in specific markets. The agency's BICO reports contain U.S. trade
data on agricultural, fish and forest products. The agency also
analyzes and tracks the U.S. agricultural trends worldwide, for
both the calendar and fiscal years. BICO data is available from
the FAS homepage www.fas.usda.gov.
.
Both the Department of Commerce and Small Business Administration
(SBA) have many services that can assist with the process of market
research. Many cities have U.S. Export Assistance Centers (USEAC)
containing both offices. Companies may also purchase PIERS data,
which includes detailed information on shipments from many major
seaports. PIERS can be contacted at www.piers.com.
.
Companies should also consult the National Trade Data Bank (NTDB)
for current and historical trade related releases, international
market research, trade opportunities, country analysis and access
to their trade library. The trade library consists of over 40,000
documents related to international trade. Through the NTDB companies
can also gain access to Country Commercial guides, Market Research
Reports, Best Market Reports and U.S. import-export statistics.
Access to the NTDB or individual reports can be purchased through
the STAT-USA website or by contacting them via mail, fax or by phoning
1-800-782-8872.
If you are still encountering problems with your
research after consulting these sources, pursue other avenues. These
are several questions to consider that may lead you to the information
you are seeking. Do your domestic competitors export to certain
countries? Could demographic, government expenditure, health, investment,
labor and employment data of foreign countries help you?
Step 2: Identify 5 to 10 large and fast
growing markets for your company's product. Look at the performance
of that product during the past 3 to 5 years. Has market growth
been consistent year to year? Did import growth occur even during
periods of economic recession? If not, did growth resume with economic
recovery?
Step 3: Identify some smaller but fast-emerging
markets that may provide ground-floor opportunities. If the market
is just beginning to open up, there may be fewer competitors than
in established markets. Growth rates should be substantially higher
in these countries to qualify as up-and-coming markets, given the
lower starting point.
Step 4: Target 3 to 5 of the most statistically
promising markets for further assessment. Consult with the Southern
United States Trade Association (SUSTA), The Foreign Agricultural
Service, your state department of agriculture, the U.S. Department
of Commerce, Small Business Development Centers, business associates,
industry associations, freight forwarders, the National Trade Data
Base (NTDB) and others to help refine targeted markets.
After completing the preliminary research assessment
of the possible target markets, use the Market Research and Assessment
Appendix D and Market Factor Assessment sheet included in Appendix
E to compare the possible market choices:
- Select two countries in which you think your product has the
best market potential;
- Review the market factors for each country;
- Research data/information for each country;
- Rate each factor on a scale of 1-5 with 5 being the best;
- Select a target market/country based on your ratings.
2. Assess Targeted Markets
Step 1: For each country, examine trends for your company's
product, as well as trends for related products that could influence
demand. Calculate overall consumption of the products and the amount
accounted for by imports. To obtain the reports of this service
of the Foreign Agricultural Service visit www.fas.usda.gov,
or contact the Trade Assistance and Promotion Office (TAPO) of FAS.
Additional services are available from the U.S. Department of Commerce
such as Industry sector analyses (ISA's), alert reports and country
marketing plans. These services provide the economic background
and market trends for each country. Additionally, demographic information
(population, age, etc.) can be obtained from World Population, a
Bureau of the Census publication and the Statistical Yearbook published
by the United Nations.
Step 2: Ascertain the sources of competition,
including the extent and quality of domestic industry production
and the major foreign countries the company is competing against
in each targeted market. International Market Research Studies (from
the U.S. Department of Commerce) can help with its U.S. market share
figures.
Step 3: Analyze factors affecting marketing
and use of the product in each market, such as end-user sectors,
technological developments, local pricing practices, channels of
distribution, cultural idiosyncrasies and business practices.
Step 4: Identify any foreign barriers (tariff
or non-tariff) for the product being imported into the country.
Identify any U.S. barriers (such as export controls) affecting exports
to the country. The best way to find out barriers to trade of agricultural
products is to contact the International Trade Policy Office of
the Foreign Agricultural Service. This office has the lead role
in USDA international trade negotiations and monitors foreign governmental
actions that affect U.S. agricultural products in world markets.
International Market Research Studies and Country Market Surveys
are useful resources.
Step 5: Identify any U.S. or foreign government
incentives to promote exporting the product. Once again, International
Market Research Studies and Country Market Surveys are helpful.
3. Draw Conclusions
After analyzing the data, your company may conclude that its
marketing resources would be better utilized if applied to only
a few countries. In general, a company's efforts should be directed
to fewer than 6 markets if the company is new to exporting, but
in many cases one or two countries may be enough with which to start.
The company's internal resources should help determine its level
of effort.
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Tariffs and Harmonized
System Codes
In order to export your product it is necessary
to determine your product's Harmonized System or Schedule B code.
The Harmonized Code System classifies transactions under the categories
of approximately 8,000 different products leaving the United States.
Every item is assigned a unique 10-digit code and then is placed
into broader categories of 6 and 4 digit codes. This code is part
of a system in which worldwide tariffs are levied by harmonized
code. For help in determining your product's harmonized code, contact
the U.S.
Bureau of the Census.
Once you have the harmonized system or HS code
for each of your company's products, visit the Trade Information
Center homepage or contact FAS to find the tariff rate for your
product in the country you want to export to.
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Locating
a Foreign Buyer
Once you have determined that your company is
in a position to export and the target markets have been selected,
locate customers. You should employ any and all which seem appropriate
for your product.
AgExport: The AgExport Services Division
of the Foreign Agricultural Service is an excellent contact for
initiating the search for foreign buyers. It has AgExport Action
kits which include information on many services: sales leads from
foreign buyers, free advertising for your product overseas, lists
of foreign buyers of food and agricultural products, assistance
in presenting your products at international trade shows and many
more services.
For more information about the services offered,
contact the Trade Assistance and Promotion Office (TAPO). This office
can serve as a first point of contact for information on foreign
markets, export counseling and referrals to all other programs and
services of the U.S. Department of Agriculture.
USDA Export Development Cooperators: The
cooperator program is one of the oldest FAS market development efforts
abroad. The Cooperators International Offices provide the contact
points for foreign representatives of industry associations, according
to market sector and country. These international offices can assist
you to develop your channels of distribution and contact with potential
buyers. A list of cooperators is available on the FAS homepage.
State Regional Export Associations: SUSTA
is one of four state regional trade groups, which serve all fifty
states. These state regional trade groups offer many services including
advice and assistance in the process of locating foreign buyers.
Agricultural Trade Officers (ATO's): The
agricultural trade officers or attaches are the official representatives
for the U.S. Department of Agriculture overseas. They are in frequent
contact with foreign buyers and overseas representatives of U.S.
companies and associations. Additionally, ATO's help exporters establish
contacts with government officials and participants in foreign trade.
The agricultural trade officers are also responsible for compiling
reports about their respective markets, which may be obtained through
the FAS website. Requests for assistance from the ATOs should be
as specific as possible. For general information about a country
utilize the FAS homepage.
Trade Shows: Trade shows are one of the
most effective means of introducing and promoting food and agricultural
products overseas. Trade shows offer the opportunity to contact
a great number of companies in one trip without incurring the expenses
of numerous visits to the market. There are trade shows aimed at
many different sectors of the food industry. Your company should
look carefully at they type of buyers that will be attending a show,
before deciding to participate. For information about international
shows contact the International Trade Shows Office of the Foreign
Agricultural Service (FAS) or visit the FAS homepage. Another source
of foreign buyer contact is the International Buyer Program sponsored
by the International Trade Administration of the U.S. Department
of Commerce. In this program, qualified buyers and prospective representatives
and distributors are recruited from all over the world to participate
in US domestic trade shows.
Other Sources:
- The International Divisions of Commercial Banks
- International Freight Forwarders
- State Port Authority Offices
These three sources all possess a vested interest
in exporting. By promoting U.S. products, these sources are increasing
the chances that their services will be needed. In addition to their
interest, these sources can be extremely helpful because they have
ongoing contact with international trade representatives.
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Benefits
of Trade Show Participation
As previously mentioned, trade shows are an excellent
opportunity to introduce and promote food and agricultural products
overseas. Because so many buyers and sellers are convened in one
location, participation in a trade show has many benefits including:
- Trade shows are one of the least expensive methods of conducting
in-country market research and testing to gauge customer attitudes
- Trade shows provide face-to-face contact with buyers
- Trade shows permit product demonstrations, which is an excellent
way to promote and sell your product
- Trade shows provide cost-effective direct sales opportunities
- Trade shows offer opportunities to meet important agents and
distributors
- Trade shows provide a positive sales and public relations environment.
Also, they provide the opportunity for members of your staff to
meet other companies' personnel.
- Trade shows offer the opportunity to conduct market intelligence
and monitor the activities of competitors
- Trade shows can be useful for staff training, education, and
recruiting
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Preparations
and Budgeting for Trade Show Participation
Thorough planning for participation in a trade
show is essential for the success of the exhibit. Unfortunately,
many companies overlook the essential preparatory step of adequately
budgeting for the show. While budgeting is more difficult for the
first trade show, the costs of future shows should be easier to
ascertain. To help you construct your budget for participation in
a trade show, we have included a Budget Framework for Trade Show
Participation in Appendix F. On the most basic level, the expenses
involved in trade show participation are:
Space Rental — Prepayment of booth
space is vital. Having paid in advance, your company is more likely
to obtain a prime location at the show and will also benefit from
early payment discounts. In addition, late payments could result
in the cancellation of your booth reservation or additional late
charges.
Exhibition Booth Design and Construction —
At FAS-sponsored trade shows, booth rental cost includes booth construction
and basic furnishing for the booth. However, in most trade shows
rental space does not mean that you will receive a constructed booth.
Thus, your company will have to make arrangements for the design
and construction of a booth. In such instances, booth fittings will
also need to be rented. Such fittings include shelves, tables, chairs,
telephone, water, plants, carpeting, electrical fittings and a chiller
or freezer, etc. Due to these additional rental needs, this component
is often the most expensive portion of trade show participation
costs.
Promotion — Effective promotion both
before and during the trade show is necessary to ensure your success.
While the organizers' promotion will bring visitors to the trade
show, your company must carry out its own promotion in order to
attract visitors to its booth. Your company will benefit most from
trade show participation if you do research and contact potential
customers prior to the show.
Shipping and Customs — The costs
of shipping samples and booth materials to the show should be well
planned. Depending upon the location of the show, your company needs
to allocate the adequate amount for shipping expenses. Forethought
and careful scheduling are vital in order to avoid additional charges,
which can be incurred from delays in shipping, improper completion
of customs documents or storage charges.
Personnel Costs — The costs incurred
by the company representatives who attend the show are considered
personnel costs. The major components of these costs would include
accommodation, airfare, ground transportation and meals.
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