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Preparing to Export


Provided By Dubai Export Development CorporationContent Partner for SME Toolkit UAE


Benefits of Exporting

Exporting offers a company numerous benefits and opportunities in a global marketplace. The massive restructuring of political boundaries, the opening of new consumer markets, historic trade agreements, abolition of quotas, and the World Trade Organization (WTO) have created unprecedented opportunities for businesses to export. There has never been a more opportune time for UAE firms to capitalize on these market shifts. The following are some of the reasons why firms may wish to export:

  • Increase in sales and profits: If a firm is performing well domestically, expansion into foreign markets is likely to improve its profits.
  • Gain global market share: By exporting, a firm will learn from its competitors - their strategies and what they have done to gain a share in foreign markets.
  • Reduce the level of dependence on existing domestic markets: By expanding into foreign markets, a firm will increase its marketing base, and reduce its dependence on local customers.
  • Offset market fluctuations: By tapping global markets, firms are no longer held captive by economic changes, varying consumer demand, and seasonal fluctuations within the domestic economy.
  • To make use of excess production capacity: Exporting can increase the utilization of production capacity and length of production runs, thereby reducing average unit costs, and achieving economies of scale.
  • Enhance competitiveness: Exporting enhances a firm’s and a country’s competitive outlook. While the firm will benefit from exposure to new technologies, methods and processes; the country will benefit from an improved balance of trade.
  • Find excellent no-cost or low-cost experts in export. For many firms, the decision not to export is based on the fear of the unknown. Export promotion organizations such as Dubai Export Development Corporation have been established to assist firms that are contemplated venturing into export markets.

 

The Exporting Process

Any exporter stands a much a greater chance of success if, as a first step they start thinking about their objectives in terms of:

  • What products to export
  • Where to export
  • How to export

Lack of a definite set of goals or objectives will lead to dissipation of efforts in wrong direction and a waste of resources. The objectives need to be realistic, should take into account the existing situation of the market, the exporter’s position in the market and competition. The objectives should neither be too ambitious nor too modest. The objectives should not be modified constantly if the same is not attained in target period. But efforts should be intensified or resources should be redirected effectively to attain an objective in time.

Once the export goals and objectives have been formulated the exporter needs to understand the export process: the feasibility analysis; planning foreign market entry; and implementation. The stages are outlined below:

Stage 1: Export Feasibility Study

  • Analyze domestic performance.
  • Assess the firm’s capacities.
  • Consider the demographics, social, political, and economic factors of target markets.
  • Confer with international trade experts (e.g. in the fields of marketing, finance, legal, and logistics).
  • Select target markets.

Stage 2: Planning foreign market entry planning

  • Conduct market research into the industry sector.
  • Evaluate market research.
  • Decide how the product will be marketed.
  • Comply with target country licensing, standards and certification requirements.
  • Apply for the necessary patent, trademark, and copyright protection.
  • Identify taxes, tariffs, duties, quotas, or other non-tariff trade barriers.
  • Establish pricing strategy.
  • Seek financing.

Stage 3: Implementation

  • Determine methods of distribution.
  • Implement marketing plan.
  • Choose sales representatives, or sales methods.
  • Negotiate sales contract.
  • Produce finished product.
  • Obtain insurance cover.
  • Complete the required paperwork.
  • Package and label the product.
  • Ship the product.

 

The Export Traps

The following are some avoidable traps that can become problematic for exporters when writing the international plan.

Seek no-cost or low-cost advice: Firms that are new to exporting or are expanding into an unfamiliar foreign market often do not obtain qualified export counselling before developing their international business plan. Public and private sector professionals and organizations are available throughout the UAE to help firms clearly define their export goals, objectives, and a foreign marketing and finance. Some of the organisations who can offer help and advice to companies looking to export include the following:

  • Department of Economic Development, P.O.Box: 13223 Dubai, Tel : + 9714 2229922, Fax :+9714 2020226, www.dubaided.gov.ae
  • Ministry Of Economy, P.O.Box: 901 Abu dhabi, Tel 02 626 0000, Fax 02 627 1100,   Dubai Office: 3625 Dubai, Tel: +9714 2952800, Fax: +9714 2955700, email economy@economy.ae, www.economy.ae

 

Obtain management commitment: Before researching and writing the plan, the person responsible for developing the foreign market strategy must make sure that top management is firmly committed to the project. That person will then be better equipped to negotiate with foreign and financial partners to overcome the initial difficulties and financial requirements of exporting. All parts of the firm, from management to finance, marketing, production and training, must understand and appreciate the firm’s export expansion plans. Detailed CVs of all senior staff should be included in the international business plan.

Conduct market research: Many international business plans are weak in terms of market research. Market research should confirm the exporter’s instinct that a product will be acceptable, and sell in a particular market. Confirmation is sought through research carried out on small focus groups with respect to the design, size, color, and all other characteristics of the product, or by sending product samples, or by generally understanding the unique preferences of potential foreign customers.

Determine the export price:  Pricing a product is the most important factor affecting financial projections in the international business plan. Many first-time, or infrequent exporters do not consider the various non-domestic costs that can contribute to the per unit price. Among the special elements to consider when exporting are, the percentage mark-up, sales commissions, freight forwarder processing and documentation fees, financing costs, letter of credit processing fee, export packing charges, labeling and marking, inland freight charges, unloading at the terminal, insurance, translation of product materials, credit terms, payment schedules, payment currencies, insurance, commission rates, warehousing costs, after-sales servicing responsibilities, and costs of replacing damaged goods, etc. Each of these costs should be taken account of in the financial projections, and budget. For further details in this area please refer to the EDC publication, ‘Pricing for Export’ which also includes a pricing matrix.

Highlight the firms’ capabilities: Price is not the only factor contributing to a buyer’s decision to purchase a product or service. Other important factors include management capability, production capacity, quality control system, technical cooperation with foreign firms, and system for handling orders, export experience, financial standing, and links with banks. These points should also be included in the international business plan.

 

Exporter Registrations

The following registrations and/or procedures need to be completed in order to commence exports:

  • Trade License - The exporter requires establishing their trade license as per standard classification of Economic Activities from the respective trade license body.
  • Certificate of Origin - On obtaining the same, depending on activity of the company mentioned in the License and also the exact products to be exported, Certificate of Origin document will be issued to the person interested in export. He then has to approach Customs for the Customs Code for exports.
  • Customs Code - The exporter should contact the Dubai Customs Department to obtain a Customs Code for exports. The documents required to obtain this Customs Code are a copy of trade license and a completed application form (issued at the Customs office counter). Only after obtaining this code can he conduct any export activity.
  • Customs Importer/Exporter code - it is a pre-requisite for the shipper to process necessary Customs Bills for which a valid Import/Export code from the Customs Center is required. The application form has to be type script, signed & stamped by the authorized signatory and should be submitted along with [1]. Trade License Copy, [2]. Copy of the Sponsor’s passport for verifying the signature [3]. Copy of Chamber of Commerce Certificate, [4]. Payment (which at the time of this publication is AED 20)

 

Specific requirements for exporting food to GCC

No specific formalities are required for exporting food to GCC provided the exporter holds a valid Import & Export license from the Regulatory Board and holding Importer/Exporter code from Customs. However, a health/fitness certificate has to be submitted for certain specific items. When these food products are exported from UAE to GCC countries, the exporter needs to submit an export packing list with details of consignment viz. specification of products / quantity etc. Dubai Municipality then issues the exporter with the Official Health Certificate for Export to GCC Countries. This has to be provided to the shipper at the time of shipping. For further details regarding  the specific requirements relating to the export of food to GCC countries contact requires Dubai Municipality (Food Section, Contact: 04 221 5555) .

 

Procedures for Exporting Seafood to EU & Other Countries

In UAE, seafood exports are categorized into:

  • Local Sea food
  • Re-exports of Imported Sea Food


1. Eligibility for Export Local Sea Food  

There is a specific list of local seafood which may be exported and this list can be obtained from Ministry of Fisheries and Agriculture. (Ministry of Agriculture & Fisheries, P.O Box 1509, Dubai, UAE, Tel: 971-4-2958161, Fax: 971-4-2957766. www.uae.gov.ae/maf) An exporter who is eligible to export local seafood to EU and other countries needs to satisfy the following conditions:

  • Exporter should be UAE National and above 18 years of age
  • Professional License as fisherman
  • Have refrigerated vehicles for transport

 2. Eligibility for Re-exports of Imported Sea Food

Company to be Limited Liability Company with 51% UAE national as partner to the organization:

  • Technical team to handle the consignment of imports and confer to the quality therein
  • Certificate of Origin of imports consignment
  • Cold Storage for Inventory warehousing
  • Undertaking not to export local seafood
  • Refrigerated vehicles for movement

 

Custom Procedure for Exporting of Diamonds

Ownership authentication by means of license and establishment will be verified. UAE exporter holding valid Commercial Trade License issued by competent authorities can export any permitted products subject to the license activity clause of the Trade License. As for diamonds, they have to obtain Kimberly Certificate from the competent Authorities.

Export of Gold Jewelry

The exporter is required to obtain Trade License mentioning dealing with gold jewelry trading followed by other mandatory documents such as:


  • Original Invoices (5 copies) signed and stamped by exporter raised in favor of Importer with details of consignment.
  • Packing list
  • Shipping instruction form provided by the cargo company with all relevant company and contact details of exporter and receiving party.
  • Purity Certificate as approved by World Gold Council / Dubai Gold Council if insisted by the importer may be required to be supplemented.

For Gold Jewelry, Dubai happens to be a major redistribution hub for GCC. For retailers wanting to export, Dubai Municipality conducts an inspection of samples – for quality 22K has to comply with a rating of 916.

Documents required are:

  • Trade License of exporter (activity should mention jewelry trading / manufacturer trader)
  • 5 Original Invoices issued to the receiving party with details of consignment. Each invoice has to be signed and stamped by the exporter
  • Packing list
  • Shipping instruction form must be provided by the cargo company with all relevant company and contact details of exporter and receiving party.
  • Customs bond (guarantee) requires to be paid at customs before shipping the goods by the exporter.

 

Exports of IT software

Procedures at the time of exports of customized IT software are:

  • Trade License of exporter (activity should mention dealing with IT)
  • Contractual agreement between exporter and the overseas client.
  • Original Invoices (5 copies) signed and stamped by exporter raised in favor of Importer with details of consignment.
  • IT software Copyright documents to be produced with the Customs Department
  • Any restriction in particular towards the implementation and usage of the software in the destination country needs to be reaffirmed by the Importer and accordingly issue a declaration form to the exporter.
  • Other procedures in reference to the application etc. if any are required to be undertaken with the respective bodies.

 

Producing an Export Plan

Developing an international business plan requires careful planning and a commitment of time. As with any new business operation, the decision to export must be envisioned with a long-term business investment attitude rather than a short-term profit objective. Before making a commitment to enter into international business agreements, the development of an international business plan is an important and key step for determining a product’s readiness for export. A well-prepared plan will assist the business in assessing the potential of a product in international markets; facilitate application for financing and how much it will cost to export a product. The core elements of a business plan include the following:

 

ELEMENTS AND EXPLANATION

Executive Summary

State what makes the company successful and then list the competitive advantages over domestic and foreign competition.

Present Situation

Identify the company’s products with export potential.

Objectives

Define long-term goals and how exporting will help to attain those goals.

Management

Firstly, conduct a company analysis in order to ensure that the decision to export is supported by all levels of management and secondly, to decide who will execute what functions.

Description

Answer the question: Why is the product/service unique in an international market?

Market Analysis

Determine what the opportunities in this market are.

Target Customers

Find out the demographic and socio economic profile of the target customer.

Existing Competition

Conduct an inquiry to determine the firm’s competitiveness within the industry. In analyzing competition, it is helpful to know what market shares are and what the excepted industry/market trends are.

Focus Group Research

Focus research on a small group of potential customers in order to gain feedback and constructive criticism.

Calculated Risk

Estimate the industry and the firm’s performance over a period of three to five years so that the firm may calculate risks accurately.

Marketing Strategy

Determine how customers will be attracted and their interests sustained.

Pricing/Profitability

Develop an international pricing strategy;

Selling Tactics

Carry out direct mailing, cold calling, and advertising tactics. 

Methods of Distribution

Determine where and how to deliver overseas.

Advertising

Consider foreign labeling and packaging requirements literature translations, and customer relations.

Public Relations

Develop a regular and consistent product/service up program, internal newsletter; write for technical magazine, press releases etc.

Business Relationship

Articulate a plan for developing international business relationships, include culture training. Determine the type of relations (e.g. agent/distributor, representative, supplier, direct export, etc.).

Manufacturing Plan

Indicate initial volume, expansion requirements, source materials, location of manufacture, etc.

Financial History

List out a five-year Profit and Loss Statement.

Financial Projections

Remain realistic and conservative.

12-Month Budget

Anticipate costs for financial year of exporting.

Cash-Flow Projection

Calculate Cash Receipts vs. Cash Disbursements.

Balance Sheet

Illustrate liquidity and cash position.

Break-Even Analysis

Calculate number of units to sell for break-even.

Source/Use of Funds

Decide from where the funds will be obtained to start or expand export operations.

Use of Proceeds

Decide where profits and loans will be dedicated.

Conclusions

State exporting goals, total capital required profile, expected schedule and general comments.

Appendix

Add the curriculum vitae of key people involved in the company’s export program, as well as key accounts, potential customers, market survey data, drawings, agreements and financial projections to the plan as an appendix.

 

How EDC Can Assist Exporters?

The EDC was established to provide exporters with the services required for Dubai based exporters to enter or expand into foreign markets including trade information, branding advice, financial, legal and foreign trade representation and access to potential buyers.  The EDC will undertake an advocacy role for exporters in their relations with government and other relevant agencies through the formation of long-term and mutually beneficial partnerships. As an autonomous organization funded by the Government of Dubai, the EDC has developed four broad categories of services as shown below:

 

Export Preparation

This involves working with exporters in order to develop their export capabilities and creating an awareness of their products and services. More specifically these activities include:

  • Raising Export Awareness
  • Providing Export Publications
  • Providing General Information on Export Markets
  • Providing Information on Export Assistance, including Export Credit
  • Assisting with Developing Export Skills
  • Assessing Export Capability and Readiness

 

Export Facilitation

Here EDC seeks to Support the export activities of exporters through creating global networks, foreign market intelligence, trade events and financial assistance packages. More specifically these activities include:

  • Conducting Export Market Assessments
  • Assisting with Developing Export Strategies
  • Conducting International Market Research
  • Identify and Introducing International Buyers
  • Providing Financial Export Assistance, through the Grants Program, and Non-Financial Export Assistance
  • Providing Qualified Export Opportunities
  • Facilitating Participation in Local Events and Exhibitions

 

International Assistance

One key aspect of EDC’s activities is to enhance the exporters’ ability to penetrate foreign markets through the provision of market access and compliance data, advocacy and representation in foreign markets

  • Providing In-Market Briefings
  • Providing General Support and Customized Assistance
  • Accessing Government Representatives
  • Facilitating Participation in International Events and Exhibitions
  • Support for Projects and Tenders

 

Buyer Matching

In order to match foreign buyers with domestic exporters EDC has developed a bouquet of services which include the following: 

  • Providing In-Market Briefings
  • Providing General Support and Customized Assistance
  • Accessing Government Representatives
  • Facilitating Participation in International Events and Exhibitions
  • Support for Projects and Tenders


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Disclaimer 

EDC is grateful to International Trade Centre for allowing it to use material from its Trade Secrets: The Export Answer Book for Small and Medium Sized Exporters, September 2006

EDC makes no warranty, express or implied, as to the fitness, appropriateness of the above information for a particular purpose, or assumes any legal liability for the accuracy or usefulness of any information contained in this study. Any consequential loss or damage suffered as a result of reliance on this information is the sole responsibility of the user. 

 

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