Downside of export ignorance.

• Author: CLAYTON, GRAHAM

When you are new to exporting, you often don't know what you do not know, and that can be costly. Over the years I have heard many tales of woe involving fundamental mistakes made by novice exporters. Hopefully relating a few of these will act as a helpful warning to some export beginners.

I once overheard a couple of small business owner-managers complaining to a business advisor about the non-performance of a foreign sales agent whose services they had both contracted.

They had each paid the agent $10,000 to represent and promote their products in a promising European market, but after a full year had received no orders.

It turned out that the agreement that they had entered into was a retainer devoid of any performance requirements. They had included a sales commission, 4 or 5 per cent on the value of any sales orders secured, as an incentive, but they had not stipulated anything in the way of required activities or expenditures to ensure that the agent was indeed trying to market the products and generate sales orders.

This issue of getting into unfavourable business agreements in order to penetrate foreign markets is not that uncommon. A couple of years ago a consulting colleague asked me to look at a distribution agreement that his client had been sent by a Middle Eastern commercial importer of electronic equipment equipment.

The agreement was probably the most one-sided import-distributor agreement that I have ever seen. The importer had all kinds of rights and options, but virtually no significant obligations or commitments, and was asking for exclusive rights to import the product line for the entire Middle East and a large chunk of North Africa.

The deal was too long for a first deal with an unfamiliar firm, especially considering, that they were not guaranteeing any minimum purchase volumes or committing to a major marketing effort with a budget to match.

The Canadian owner of the firm was advised to seek a shorter duration agreement with significant financial and marketing commitments from the importer, or to look elsewhere. He did and the whole thing came to nothing.

New exporters need to be aware of negotiating ploys such as foreign firms putting forward preset contracts around which there is little room for negotiating and which may set unwarranted limits on what is up for consideration.

How many exporters have run into expressions like, "We never do that in the States," or, "this is. the standard contract in..."? It is not...