By Saroya Kirton
[WASHINGTON, DC] – The recently held Guyanese American Chamber of Commerce (GACC) webinar which discussed expanding Guyanese exports to the United States offered useful information and advice to exporters from the South American republic.
The information ranged from the complex bilateral and multilateral trade agreements which provide access to the U.S. market to hands on advice on how exporters, especially small and medium sized enterprises could meet the myriad of phytosanitary and other food safety measures in addition to strategies which they could employ to ensure sustained business.
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The importance of meeting the required quality, supplying the requested quantities and ensuring the timely delivery of shipments was clearly identified as a key priority for capturing and maintaining market share.
Demerara Distillers Limited Executive Chairman Komal Samaroo, referring to his company’s efforts to access the US market for Guyana’s internationally award winning El Dorado Demerara rums, had this advice for exporters seeking to enter the US market:
“To access the US market for any product the relevant legislation, regulations and standards must be taken into consideration by Caribbean producers. In this context producers must decide whether they will enter at (a) the commodity level i.e. supplying raw materials to a US producer, (b) contract manufacture in the Caribbean for a US brand owner or (c) or going higher up the value chain by introducing their own brand into the US market. “
Samaroo’s frank advice might be hard to come to grips with for small producers who lack the capacity to access and understand fully the complexities of voluminous legislation and to strategically analyse their operations to determine which of Samaroo’s options best suit them. And even when an option is exercised that is not the end of the process.
“Regardless at whichever level a producer decides to enter the US market, finding the right business partner(s) is a key to success. For successful business relationships to be developed with business partners, producers have to build alignment with their partners to avoid conflicts and disputes later on. This can be quite a time-consuming process, but it is absolutely necessary if one is to build a sustainable business,” the DDL executive chairman points out,” Samaroo said.
One of the challenges in many developing countries, with few exceptions, is the business culture of small and medium size producers who are often reluctant to embrace the “think big” mentality and are hardly encouraged to do so by their governments.
Very few governments in developing countries gear their economic development policies to give meaningful support to small producers. These governments are comfortable keeping small producers comfortable with their “bottom house” operations which deny them seizing the numerous opportunities for expanding production and capitalizing on export markets.
The U.S. is the largest consumer market in the world and therefore very competitive and highly regulated. Consequently, as webinar panelists concluded -product, packaging, placement, positioning, pricing and promotion-the six P’s- are critical to successful entry to the American market.
Guyana’s Director of Foreign Trade Dr. Dianne Glasgow in her presentation at the webinar pointed out that bilateral and multilateral agreements with the U.S. provide for preferential access to that market but economies of scale are a restricting factor:
“Approximately 5,700 tariff lines or products (at the 8 digit level) are now covered by CBERA (Caribbean Basin Economic Recovery Act) trade preferences, of which approximately 387 were added by CBTPA. Guyana was designated beneficiary status on November 24, 1988.
Among the products eligible for duty-free treatment under CBERA/CBTPA are agricultural products (e.g. rice, chilled or frozen fish, pasta, fruits and vegetables), certain leather handbags, luggage, flat goods (wallets and portfolios), work gloves and leather wearing apparel, Petroleum and Petroleum Derivatives. In addition, products such as sugar (including syrup and molasses) and beef (including veal) as well as some other agricultural products are subject to tariff-rate quotas (TRQs) and food-safety requirements. These preferential schemes are key to the price competitiveness of Guyanese exports to the United States given Guyana’s lack of economies of scale in production, concomitant on its small market size,” Dr. Glasgow said.
On the issue of economies of scale, both Robert Hans, chief executive officer of IOS Partners, an international business consulting firm in the U.S. and John Dickson of the World Trade Center Association both emphasized the critical importance of meeting all the requirements of export markets.
They both advocated what Dickson described as the need for “syndicated purchasing, production and exporting”, meaning that small producers could come together to purchase raw material, and produce and export as a collective. This model has worked in various parts of the world.
Security and trade compliance also play an integral role in the subject of exports. Robert Monzon, a supply chain security specialist explains, that partnership programs like CTPAT promotes “economic growth through the collaboration with industry on security and transparency throughout the entire supply chain”. CTPAT, which stands for Customs Trade Partnership Against Terrorism, is a layered enforcement strategy that protects supply chains, identifies security gaps, implements specific security and trade compliance best practices, and maintains the integrity of low-risk cargo entering the United States. It is the primary supply chain security program in the US and largest in the world.
CTPAT establishes processes and procedures that must be implemented in order for that company to be CTPAT certified. Procedures including container inspection for illegal products, cargo and container security using non-intrusive technologies, and having an assigned supply chain security specialist who verifies program practices are a few of the many benefits of the program.
According to Monzon, it is especially important that companies who Guyanese businesses are exporting to have certain supply chain security practices already in place to ensure successful acts of trade.
While knowledge of the technical and logistical aspects of export trade are vital, Rishma Eckert of Eckert Law PLLC, explains that it is very important for an exporter to understand the legalities and the contractual relationship with the buyer of Guyanese products as a first step.
First, exporters must do their “due diligence” and research company status, check company reputations, ask for proof of funds, and professional references. Researching company status and reputations could be as easy as a simple google search.
Second, Eckert encourages exporters to look at transport terms with a contract. Steps such as defining responsibility and risk of loss, differentiating between land and sea transport, and streamlining shipments are pragmatic courses of action that can simplify situations if something to go wrong.
Third, clearly defining the payment terms of when, how, and what happens if there is a breach of contract can ensure a smooth transaction between parties.
Lastly, when dealing binational transfers, the choice of law and venue is one the major mistakes seen in purchase orders and contracts exporting to the US. If there is a dispute, the location of litigation is very important. Buyers and sellers are in control and have options, they can choose to be governed by CISG or choose their legal jurisdiction.
The GACC webinar proved to be a helpful and important resource for viewers interested in exporting to the US. In addition to explaining the intricacies of bilateral trade agreements, the webinar served as a firsthand look into the potential and future of the Guyanese export potential.
Saroya Kirton is an economist. A graduate of Rollins College she focuses on trade and development issues in developing countries. She is based in Washington, DC.