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TTPP, JETRO's business matching site, provides extensive supports to business people who want to find international business partners for their overseas production, sales assignment, market development and business support services as well as business people who want to start or expand their trade businesses such as export and import transactions.

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Advice for Int'l Biz Avoid risks by learning actual cases of troubles with international business

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How to Avoid Troubles When Using Outside Specialists
Print this articleJuly.2013
How to Avoid Troubles When Using Outside Specialists
- Keypoints Are Picking the Right Specialists, Clarifying Contractual Terms and Managing their Performance -

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

When launching a new project such as entry into an overseas market or
new field, it is becoming increasingly necessary to locate staff having
the specialized skills and knowhow from the outside.

Among the requests for consultation I have received recently, some
complain that "we hired a designer, but he is too loose about time
commitments and has no business manners in his behaviors. What should
we do?" and "we employed a freelance engineer as a manager for our
overseas project, but all he does is to complain about treatment he
gets and he doesn't do the work. Relations with other staff are also
deteriorating. Our employees are losing their interest in the project,
so we have decided to fire him".

Seen objectively, I believe that both the contractors and the contractees are in the wrong. Therefore, I summarize ways to avoid such trouble when employing outside specialists.

  1. When selecting specialists, consider not only their abilities and experience, but also scope of work and basics in execution of work
    First, determine the specific requirements such as the abilities and experience needed as specialists including specific data about their career and license ("experienced over 10 years as YYYY" or "with license for XXXX"). Further, do you want specialists able to handle as broad a range of work as possible even if only shallowly or do you want one with depth for focused work. This perspective would also help in selecting specialists.

    No matter what the job, the basics are "reporting, communication,
    and consulting". Employers sometimes take a broader view that "we are
    looking for skills not available in general staff, so cannot apply
    our usual rules". However, if these basics cannot be met, the project
    will not go well. Not only that, things will get emotional at the end.

    Further, trust is also very important, so it would be best to conclude
    a "confidentiality agreement" stipulating that matters learned during
    the work not being divulged to third parties without permission.


  2. Set down details on commissioned work in contract
    Once you decide on someone, the next step is the contract. Prepare a
    contract which clearly sets down details on the commissioned work
    such as the content of the work, scope of responsibility, required
    attendance, time schedule, and remuneration. If not doing this, the
    contractees (specialists), who in particular do not have anyone
    watching their back in the company or organization, will become
    increasingly paranoid or will feel left out. If this worsens, the
    specialists will lose interest in the work and start defying their
    manager.

    Detailing the work in the contract as fast as possible will foster
    mutual understanding between the contractor and contractees, and lead
    to respect and appreciation. Furthermore, this will enable maximum
    utilization of the abilities of the specialists.

    Further, since the project is new, the longer the contract period,
    the greater the possibility of unanticipated new work arising. I have
    heard of examples where the outside specialists were forced to do work
    which the regular employees did not like and outside their specialty
    (outside the contract).

  3. Understand and manage work of specialists
    Many expect that "since these are people with high specialist abilities,
    even if we leave them alone, they will undoubtedly do good work for us"
    or believe that "we do not understand the technical field, so cannot
    caution or instruct the specialists." Such insufficient management
    sometimes leads to things going in a direction off from what the
    contractor asks them to do. If the contractor allows this state to
    continue unchecked (or fails to notice it), trouble sometimes ends
    up occurring at the end.

    The contractor should correctly explain information required for the
    work to the specialists to enable them to suitably and smoothly do
    their job. Further, the project manager has to keep suitable tabs
    over the state of progress of the work of the specialists and whether
    the work is of a satisfactory quality. For this, the contractor has
    to adopt a stance of understanding and studying the work of the
    specialists. This leads to establishment of a relationship of mutual
    trust.

  4. Find the right specialists
    The sequence is reversed, but finally I will provide some advice on
    how to find the most suitable specialists.

    (1)Set a trial period
    When desiring to use outside specialists for a long period of time,
    not only should the specialists be skilled and experienced, but also
    they should understand and cooperate in your company's style and
    business policies and communicate and fit in well with your project
    staff.

    If setting a trial period in the contract and providing an opportunity
    for evaluation after the trial period to determine whether the work
    can be done on a basis satisfactory to both sides, the incidence of
    trouble would be much lower.

    (2)Consult with organizations and associations of specialists
    If you cannot judge the abilities or suitabilities of thespecialists
    required, contact the organizations or associations to which the
    specialists belong or the industrial organizations which use those
    specialists and get them to introduce specialists suitable for your
    needs. This will give you greater options in selection of manpower.
    The organizations will know about many case studies as well.
    Therefore, you will be able to obtain advice on contracting out work
    and ways of managing it.

    (3)Use employment agency for finding specialists
    While running up costs a bit, one idea would be to utilize the services
    of a reputable employment agency. If a specialized agency, it could
    provide assistance in the consideration and selection of the best
    manpower of course and also help in the preparation of suitable
    contracts (drafts), dealing with trouble, and finding a replacement
    in the event the specialists quit.

How to Check Trustworthiness of Potential Partners on Your Own and Avoid Risk and Trouble
Print this articleSep.2009
How to Check Trustworthiness of Potential Partners on Your Own and Avoid Risk and Trouble

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

When you receive a contact mail regarding your business proposal registered in TTPP, while hopeful about the deal, you probably often are uncertain whether the contacting party can really be trusted. TTPP calls its users' attention to scam mails.

When doing business with some unknown party overseas, it is important to be cautious ? doubly cautious. Here, I will mention some points by which you can gauge the trustworthiness of another party by e-mail at the initial stage of negotiations so as to avoid risk and trouble. I recommend that you check these points yourself and judge whether the other side can be trusted.

1. Check the characteristics of the first contact mail
First, let's check the following in the received contact mail.
- Is the e-mail address that of a company (company-like) organization?
- Does the e-mail clearly indicate details?
- Is appropriate business writing style used in mail sent by a company or a businessperson?
- Was the text drafted using some free software or other simple automatic translation program?
- Are there any features of scam mail in it?

*Free e-mail addresses - beware
First, look to see if the e-mail address of the sender is a free mail account or a fee-based address such as generally used by companies. Most scam mails and spam mails use free mail accounts. From the viewpoint of trust, free mail accounts are suspicious in business. Even in e-mail addresses of private individuals, the degree of trustworthiness is low. This is even truer for big deals.

*Lack of clear specific details: Serious offers will include various questions If an inquiry or offer is serious, it will not be a simple message of one or two lines expressing interest. It should include a clear indication of the degree of interest, questions, and other details. Also, check to see that the details of the contact mail match your proposed offer.

*Nonbusiness-like language
The English used does not have to be perfect, but check to see if language used by the other party lacks due courtesy. Be careful of e-mails written in a too casual manner, high pressure e-mails asking you for example to "respond urgently" or "send an estimate immediately", or anything unintelligible.

*Simple automatic translated text
In international deals, considerable communication is involved - not only in the actual import or export, but after sales as well. I sometimes see cases where someone utilizes simple automatic translation programs available on the web to convert their language to Japanese or English for the contact mail. Most of these are unintelligible. Trust is not even an issue in these cases.

*Scam mails
Even if all of the above checks fail to turn up any problem, there is still the possibility of the e-mail being a scam. Most scam mails are written in polite English with details carefully included. On the other hand, scam mails follow certain patterns. Please see TTPP's web page on how to deal with scam mails.

** TTPP ? Beware of Scam Mail
https://www.jetro.go.jp/ttppoas/remarks/index.html

2. Check matters other than e-mail
There are ways to check the trustworthiness of another party other than by examining the e-mail.
- Check the website of the other company
- Search for the name, president, and manager-in-charge of the company over the Internet
- Try calling by phone
- Check of the company responds in queries in a timely fashion

*Website
The lack of a website has a direct impact on trustworthiness. If there is an English language website, it would be possible to check it against information which the company registers at TTPP and the company's inquiries or offers. If something does not match, ask about it or consider suspending the deal.

*Search of media
If English is frequently used in the other country's media, for safety's sake, try using a search engine to look up the name of the other company, its president, and other facts. I myself discovered once in the past that the name of the president of another company was mentioned in a suit over fraud.

*Telephone: Get idea of work environment of other party
Once communicating fairly well by e-mail, how about calling up the other company directly once? From the telephone response and background noise, you can get an idea of the shape of the company's organization.

*Timely accurate response
You can also guess the trustworthiness of the other party by how accurately and timely your inquiries are responded to. Beware of other parties' strangely trying to hurry the deal, changing to high-pressure tactics midstream, or sporadically breaking off contact.

Above, I explained some ways for checking up on the trustworthiness of other parties, but of course you are similarly being checked. In dealing with an unfamiliar party, I recommend you not only investigate the trustworthiness of the other party, but also make sure you yourself appear reliable so as to build a solid foundation for future business.

Effective Use of Product Exhibitions
Print this articleJul.2007
Effective Use of Product Exhibitions
== Advance Preparations Ensure More Effective Visiting and Participation in Exhibitions ==

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

By making better use of product exhibitions, you can expect to broaden your product lineup, obtain information on the industry, market, and competitors, and effectively open up new sales channels for your own products. On the other hand, I often hear of people having dropped into exhibitions held here and there and of firms having participated in them but not having had much success.

Here, I would like to give some hints on how to effectively make use of exhibitions to increase your business.

1. Visiting Overseas Exhibitions
Regarding the effectiveness of visits to overseas exhibitions, I will focus on two cases: (1) collecting information for entering new overseas markets through exports and (2) uncovering new products and securing local agent rights.

(1) Collecting Information for New Entry
When considering newly entering an overseas market, overseas exhibitions are truly a "treasure trove of information" in terms of market research for advance preparations. Many people from the industry interested in that market will be there. Specifically, competitors, agents and other prospective business partners, potential customers, industry experts (representatives of industrial journals, newspapers, etc.), representatives of business support services, etc. will attend. Information distributed through the Internet or on paper at the exhibitions such as the lists of exhibitors, market summaries, and information on new products and technologies are also essential for studying the market. Also, by actually making the rounds of all of the booths and talking with the industry people, you can get the latest information, that is, advance primary info. I have been involved in this type of work for the past 20 years and think that the most important thing for new entrants is to familiarize themselves with the industry as fast as possible. Therefore, I recommend that you try to actually talk with as many people as possible in exhibitions.

(2) Uncovering New Products and Securing Local Agent Rights
When a product is unique, there will always be trading companies, sales agents, etc. competing with you to secure local agent rights. To get a step ahead of the competition, advance preparations are important. The ideal approach is to go see the prospective companies and products at exhibitions. For this reason, it is important to routinely gather information through all available sources such as JETRO, industry experts, related websites, and foreign embassies and chambers of commerce as quickly as possible.

In many cases, the exhibition sponsors will provide information such as brief summaries of the exhibitors through the Internet etc. in advance. First check through this and send an e-mail to the exhibitors interested in to get appointments. By doing this, you can inform the other party of yourself in advance and can impress your interest upon the other party.

"In any case, don't go to exhibitions without first checking up on them and making appointments!" This is the secret to effective utilization of exhibitions. Visiting overseas exhibitions is expensive, so it is important to make appointments with companies in which you are particularly interested in advance (in particular with the managers).

2. Participation in Overseas Exhibitions
For effective participation in overseas exhibitions, I will discuss two cases: (1) advance research into the costs and effects of exhibitions and (2) advance PR for increasing the number of visitors.

(1) Advance Research Into Costs and Effects of Exhibitions
It is necessary to research in advance whether participation in an overseas exhibition would really be necessary for your purposes. If a world famous specialized exhibition of the industry, if you are well acquainted with the industry, information on it will naturally come to you. In this respect as well, it is important to maintain a broad network in the industry.

If deciding on a prospective overseas exhibition to participate in as a result of collection of information, while depending on your business plans, I would recommend that you visit the exhibition site once. If then judging that it would be effective for developing your new customers, you could reduce losses by then deciding to participate.

The actual exhibition involves a lot of work such as contacts with the sponsoring side, arrangements for constructing and running the booths, and transporting the exhibited products. You can do all of this yourself, but can also get help from global logistics service providers and other support companies strong in diverse geographical areas. In almost all cases, the initial consultation will probably be free, so first try and contact such services.

(2) Advance PR to Increase Number of Visitors
Let me explain some ways for making participation in exhibitions more effective. After deciding to participate, prepare press releases in the language of the sponsoring country and send them to the local industry papers and magazines. Of course, this is predicated on your technology and products having news value. Press releases have a better chance of being picked up if you can have a local magazine etc. introduce specialized industry writers to draft it for you. Next, if you can obtain a list of potential customers such as a list of members of industrial organizations, there would also be the technique of sending in advance a letter introducing your company and its participation in the current exhibition by direct mail attaching articles written by those writers and reporters. That is, the key is how much you can drum up interest before the exhibition and can increase the number of visitors on the day of the exhibition.

Three Points in Understanding English Language Contracts
Print this articleJun.2007
Three Points in Understanding English Language Contracts

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

The topic in the previous month's issue (May 2007) was the risks in specific international transactions and how to deal with them in contracts. This time, we will return to the basics and explain three points for correctly understanding English language contracts.

English language contracts are required in all sorts of occasions in international business and international transactions such as long-term sales agreements with overseas companies, appointment of sales agents overseas, and commissioning of subcontracted production. I personally negotiated business contracts with companies of various countries for 20 years and was involved in drafting the actual agreements. Further, when living in the U.S., I made use of my qualification as a U.S. certified public accountant and checked all written contracts concluded by my company from the viewpoint of American business law. These contracts were all in English.

While a contract, note that an "English language contract" is not an English translation of a Japanese language contract used in Japan.

< > Assumptions in Japan Are Not Valid Elsewhere
When handling English language contracts in practice, the most difficult thing for Japanese is of course that English is a foreign language. Not only are the actual expressions different, but also the contracts are based on the culture, customs, and contractual thinking of the home countries of the English language, Great Britain and the U.S., and are steeped in Anglo-American law. That is, English language contracts are hard to understand by Japanese since they differ from Japanese language contracts in their very foundations.

As a typical example, Japanese contracts often include a clause like "any doubts arising over matters not provided for in this contract shall be resolved by deliberation between the parties of the first and second parts in good faith". English language contracts seldom include this. Instead, they set down detailed provisions covering all conceivable cases. They also provide arbitration clauses and jurisdictional clauses for the resolution of disputes.

< > Eliminate Vagueness and Find Clarity
Another point which Japanese companies or individuals must bear in mind when checking or drafting English language contracts as contract parties is that even if an English language contract is not based on Anglo-American law, the English legal terminology is interpreted based on Anglo-American law. That is, whether the other country in the contract is the U.K., the U.S., or another English speaking country or a country not having English as an official language, insofar as a contract is in the English language, the English legal terminology is generally interpreted based on Anglo-American law.

Anglo-American law requires clear agreement between the contractual parties, that is, grounds enabling sufficient legal compulsory force to be given even when judged by the court. Antifraud laws etc. require that important contracts be in writing. Further, the usual practice is for individual matters agreed upon in the process of contract negotiations to be included as clauses in the final written contract.

< > Learn the Patterns of English Language Contracts
Since English language contracts are drafted based on the thinking of points 1 and 2, the inevitably end up increased in number of pages and at first glance appear complicated in content. Therefore, most Japanese first tend to cringe at the thought of having to read them. However, there is a real handy point which one should learn. That is, English language contracts may be roughly broken down into two parts: principal terms and general terms.

The principal terms are terms which differ with each contract and form the heart of a contract. For example, in the case of usual business contracts, these are the parts identifying the goods and services covered by the contract, the price, the terms of transactions, terms of payment, and other terms unique to the contract. First, focus on and carefully check these principal terms.

On the other hand, general terms are terms set down in common in many contracts. Of course, "common" does not mean all the same in content. It means the terms frequently appear in English language contracts. The language is also similar. That is, English language contracts include many set patterns. Once studying and getting used to the general terms of English language contracts, it becomes possible to immediately judge where the key points are based on these patterns.

When Engaging in International Business, Don't Forget that the Overseas Business Environment, Culture, and Value Systems Differ
Print this articleApr.2007
When Engaging in International Business, Don't Forget that the Overseas Business Environment, Culture, and Value Systems Differ

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

Advances in means of transportation and means of communication have enabled even small businesses to easily participate in international business. The increasingly shorter distance with other countries both has its merits and its demerits - such as the increasingly less attention paid when engaging in international business.

I have often worked as a consultant at government agencies overseas. There, I have been consulted by many overseas manufacturers. Through such activities, I have learned that many practices of the Japanese invite misunderstanding and trouble in international business.

1. Communications Should be Clear and Fast

One of the typical complaints that overseas businessmen have is that "we are often asked to send catalogs or samples, but don't hear anything back after sending them. Even when inquiring about this, we don't receive any replies. We suspect the other side is collecting information for illicit use".

Japanese companies do indeed use catalogs and samples so to weigh potential partners and products. Once a company grows to over a certain size, however, the person in charge almost never can initiate business on his own. Further, as discussions in the company become protracted, interest tends to wane. Still, when receiving requested catalogs or samples, the polite thing to do is to send a simple thank you letter and inform the other side of about when you will contact it about the results of your study.

Even if you conclude you don't want to do business, you shouldn't just allow things to stand. If explaining your reasons, you can help the other side to understand Japanese companies and the Japanese market. At your next business negotiations, you might even be able to expect a better response or terms.

According to Japanese culture and language practices, it is considered impolite to clearly refuse something to another party. As a result, Japanese end up using somewhat tortuous expressions instead. If translating these directly into the foreign language, the result will be vague in content and will lead to misunderstandings. Alternatively, if being timid and not giving any answer, Japanese will sometimes be thought impolite. When Japanese deal with each other, they can guess the answer just by experience and the behavior of the opposing party, but foreigners can't do this. If the other party in a business deal is a foreigner, it is important to communicate your intensions clearly and quickly.

2. Awareness of Rights and Obligations

Japanese businesses stress mutual trust over contractual rights and obligations. Sometimes things which your company should do are done for it by the other party at no charge, damage which your company has incurred is kept from spreading by the other party giving a grace period for payment or a discount even if the other party has no responsibility for this, sales assistance will be provided to help increase profits, and other cooperation will be extended. In back of this is the fact that companies with business relationships are deemed to be in the same boat in terms of future fate.

If bringing this attitude with you in international business, the Japanese side will often up end criticizing the other party as "not having a cooperative attitude" or "not paying it back for its kindness", while may be criticized from the foreign side for "poking its nose into another person's business". Trade transactions are conducted along international rules. Japanese must learn those rules and respect the rights and obligations set down in contracts.

3. Be Logical and Objective

All businesses are rapidly becoming internationalized. Even in Japan, beginners are jumping right into foreign trade in an increasing number of cases. Unfortunately, business often will not go as smoothly in the developing countries as in Japan and the other industrialized countries. Some Japanese take an arrogant attitude to their business partners. Among them, some will simply conclude that the other country is bad or the people there are all bad if failing in business just once. Each country has its good points and its bad points and its good people and bad people, so this kind of attitude is very rude.

Of course, sometimes the other party will have problems in knowledge or attitude, but sometimes the background surrounding the business, for example, the improperly functioning infrastructure, institutions, educational system, etc. and differences in culture or value systems will be the cause. If things don't go the way you want, don't become emotional. Leaving yourself enough of a margin of comfort so as to logically and objectively analyze the reasons why they are not going well and devising suitable countermeasures is the secret to successful business.

I have previously discussed the above matters in past TTPP Newsletters as well.Please also see those articles.

https://www.jetro.go.jp/ttppoas/howto/index2.html

-When Negotiating with Foreigners, Using English with Its Clear "Yes" and "No" is Convenient (Jun. 2006)
-How to Contact Suppliers When Starting Imports (Feb. 2006)
-How to Improve Negotiating Skills (Aug. 2005)

How to Effectively Utilize TTPP
Print this articleFeb. 2007
How to Effectively Utilize TTPP

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

I myself have been a TTPP user since 2002. Since then, I have received over 300 contacts and have made deals with both Japanese and foreign partners. I will summarize some of the points I have learned through this.

1. Success in Business Depends on Own Wisdom and Hard Work

First of all, the fact that TTPP is a free service on the Internet easily accessible by anyone, anywhere, at anytime is a big plus. However, you have to be constantly on guard as there are people misusing it. JETRO is not equipped to check on whether the proposals registered with it from around the world, including the registrants themselves, are all legitimate. Even if it could, the separate problem would arise of whom to have bear the costs. Further, if the checking process took too much time, the problem would arise of a delay in posting the proposals.

As JETRO is a public organization, it has to keep its doors open wide for broad access and cannot refuse postings just on the suspicion of something being dubious. Naturally, it is not gathering proposals targeting specific companies or individuals. Users have to pick and choose from among the many proposals and think and investigate whether they can do business through them.

2. Trade Deals Require English Language Ability and Study and Experience in Trade Practices

The advances made in communications and means of transport have enabled easy communication and transactions with other countries. Unlike when buying from overseas catalog vendors or buying souvenirs when on overseas trips, trade deals require at least a high school graduate's level of English language ability and knowledge on trade practices.

This is not to say that there aren't businesses overseas with staff that can speak Japanese, but they are extremely limited. Successful trade requires both learning and experience, so if newly starting to trade, I would recommend training the staff in trade or requesting backup from specialists. The inexperienced sometimes start by just copying others and then have to rush off to specialists when trouble arises. In such a case, time and money are conversely required to clean up the mess. Not only does this lead to a loss, but also sometimes one's reputation is ruined and one's business itself is destroyed.

3. Proposals Registered at TTPP Provide Information for Judging Feasibility of Business
- Mutual Understanding Starts With Contact Mail

Why don't those of you registering proposals check them again for details? There is a "5W1H" rule to proposals. Have you clearly described "what products or services" you are offering or interested in, "who" is doing the selling or buying, "where (region or port)" you are selling from or want to buy from, "when" you want to do it (delivery or time constraints etc.), or "which/how to" form of business you are interested in, that is, a simple transaction or a tie-up? If the information is insufficient, the contacting side will hesitate from taking the first step and your proposal will not be effective.

Contact mail sometimes has no relation to the details of your proposal and sometimes are detailed like direct mail. You should make it a point to send a short reply to serious inquiries made even when turning them down. I think this is common courtesy as a businessman insofar as you are the one registering the proposal. The initial contact mail will sometimes be too short and hard to understand. In some cases, you reply will prompt further detailed explanations from the other party, clear up the misunderstandings, and lead to successful deals.

When you send out contact mail as well, since the registering party has already disclosed a certain amount of information on itself, you must be ready and willing to inform it about yourself as well - what kind of business you are, what kind of transactions you are interested in, etc. If you just say "I would like an estimate" or "please send a catalog" and give no further details, the other party will think that you are probably just trying to collect information or will be leery of you since it does not know what kind of business you are,so you might not get a quick response.

If you maintain a professional attitude as a businessman, work to improve yourself every day, and can consider not only your own situation, but also the other party's position, you should be able to use the TTPP more effectively.

If you click on the following URL, you can read the columns in the back numbers of "How to Use TTPP", "Advice for Int'l Biz" and "Lesson for Int'l Biz". Please refer to these so as to more effectively use the TTPP.

https://www.jetro.go.jp/ttppoas/howto/index.html

Building Business in Vietnam for Japanese Companies
Print this articleOct.2006
Building Business in Vietnam for Japanese Companies

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

In recent years, concerns over the over-concentration of production in China have led to increased interest in shifting or dispersing some production to Vietnam. Below, I will summarize my view of Vietnam as developed through my experience in arranging production contracts in that country and as a speaker at seminars teaching Vietnamese companies how to do business in Japan.

- The per capita GDP is about US$500 or still less than half that of China. The economy has however been growing at a rate of 7% or so since 2000. In 1995, the country joined ASEAN, normalized diplomatic relations with the U.S., and made its full-fledged debut back into the international community.

- I believe that the Vietnamese are very friendly toward Japan, are hard working, and have a strong desire to improve themselves. The country has an area of about 90% that of Japan. The population is just under 90 million, but is increasing by a million every year. If considering the fact that about half of the population is under 20, I believe that this will become a hot market in the future.

- Vietnam is aiming at being number one in the world in Japanese speakers as a national policy. Universities are training engineers and experts who speak Japanese. Compared with the other ASEAN countries, I feel that English is not that well understood. I was consequently even more surprised at the large number of Japanese speakers.

- In terms of cumulative amount of foreign capital investment in Vietnam from 1995 to 2003, the leading investors were Japan, Taiwan, Singapore, South Korea, and Hong Kong. From this, it can be understood that the country is a favorite production site for the Asian industrialized economies. About 500 Japanese companies, large and small, have invested in Vietnam.

Vietnam is a treasure house of rattan, bamboo, and other natural material products, wooden work products, embroidery and bead products, and other handcrafted goods. The lacquerware, ceramics, etc. are also considerably well made and can be purchased at a reasonable price. The Vietnamese are inherently very good with their hands. They need only be advised on the colors and designs preferred in modern day Japanese life and the areas which Japanese are picky over (for example, left-right symmetry of baskets, absolutely straight straight line parts, etc.) and adopt an attitude of working with the customers to make their products.

Many Japanese companies of a certain size or more are sending designs and specifications overseas and experimenting with imports. Vietnam still does not have sufficiently developed supporting industries. The more someplace has to rely on imports for materials, the higher the prime costs. Therefore, even if labor costs are low, one can't make a profit unless the products are mass produced or the unit prices are high. This situation is the same as China about 10 years ago. Many however believe that there will be considerable improvement in a few years.

Finally, Vietnam adjoins China at its north. An increasing number of companies are incorporating Vietnam into their supply chain management systems with China (in particular, South China). For transporting goods between China and Vietnam overland, not only do the roads have to be improved, but also customs clearance procedures at the two countries have to be speeded up. To do business with Vietnam, I think it will be necessary to adopt a medium term outlook.

(This column was prepared based on a presentation at the ASEAN Japan Centre in August 2006)

Hints When Searching for Partner Factories in Developing Countries
Print this articleSep.2006
Hints When Searching for Partner Factories in Developing Countries

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

Due to cheap labor costs, the number of Japanese companies wishing to manufacture goods in developing countries is increasing. When establishing a factory, there can be sole investments (100% equity) and joint ventures with businesses of the partner countries. If not having enough funds for that or not having enough leeway in terms of knowhow or human resources to run an overseas business, one can have a business in the partner country manufacture one's own goods on an OEM basis. This use of OEM deals is particularly common in light industrial goods.

Some hints for finding and increasing overseas partner factories as well as avoiding failure will be given here.

1. Calculate overseas contracted manufacture by total costs including guidance, inspection, transport, and storage

In the case of developing countries, the level of infrastructure is completely different from that of the industrialized countries. In addition, even if leaving out the level of skill of the workers, there are differences in the work ethic and sense due to differences in national character and social systems. Unlike when using domestic subcontractors, it is important to give detailed specifications and directions as well as to settle on the definitions of defect products and also to bear in mind the possible need to visit the site itself in order to provide guidance and conduct inspections.

In the initial transactions, a high occurrence of defective products should be expected. If selling the goods in the Japanese market, there are also import costs (shipping, customs, domestic transport, etc). While something may be simply judged as "cheap" based on the worker wages and the factory shipment price, if running a detailed cost calculation, the result may not be much different than with domestic made products. Furthermore, there will be cases where the risks are also increased as a result of ordering by container transport in mass quantities and having to put the products in storage.

2. Objectively investigate and evaluate facts when selecting overseas partners and dealing with trouble

There have been cases where the partner or intermediary has been trusted and left to handle everything and as a consequence the entrusting side has been cheated out of money or its knowhow and designs have been stolen outright and the partner has ended up as a competitor before the entrusting side knows it. There are also cases of people coming to us complaining that "we placed an order with a local trading company, but there has been no progress for a long time". These problems have a tendency to occur because the entrusting firm is a beginner in international business and overly trusts the overseas firm because it can speak its language.

In the selection of a business partners in a partner country, it is crucial to be careful and make several trips to the site to check on the facts, investigate the partner business, and otherwise make an objective evaluation. If problems occur, it is also important to investigate the causes and consider means to prevent reoccurrence. When dealing with foreigners, sometimes people are strangely tolerant, thinking that initial mistakes can't be helped and optimistically believing that the partners will gradually adjust and regret their present inability. In fact, those people are blinding themselves to the problem. Even if it is difficult, one should face problem directly and deal with it.

3. Study of business schemes and compare their merits and demerits

There are cases of businesses thinking only of tying up with a local manufacturer in the pursuit of low labor costs and as a result reaching an impass. One of our own business partners is a Japanese business with partner factories in China. All four of these partner factories are actually Korean run. This is because while our partner has had experience in contracting with Chinese businesses, Korea is traditionally strong in the area concerned and has the knowhow. Further, a large amount of Korean materials are used. Therefore, Korean businesses can more readily procure the raw materials. In the same regard, the procurement of raw materials in Vietnam, which lacks supporting industries, is difficult and thus its low-cost labor sometimes cannot be taken advantage of. One idea might be to use a local trading company with experience in the procurement and import of such raw materials as an intermediary and to select as a partner a Vietnamese subsidiary of a country strong in that industry.

Please think of a number of business schemes, compare their relative merits and demerits, and choose which one is best suited for your own firm. In the case of a small business, start from business undertakings feasible for one's own capacity. Good planning calling for step-by-step progress will lead to the reduction of risks. There is also a habit of thinking that large-scale operations would be possible due to economic gaps. In developing countries, production can come to a full stop due to reasons unfathomable in one's own country.

Patent Filing Risks and Technology Transfers (Part 2)
Print this articleAug.2006
Patent Filing Risks and Technology Transfers (Part 2)

Mr. Meguru Miyazaki, President, Business Creation & Collaboration Network Ltd.

In the previous part (Part 1), I discussed the risks in filing patent applications when expanding overseas. In this part, I will discuss some aspects of patent filing knowhow.

According to President Yama of the intellectual property firm Nihon-ir Co. technology transfers are not as widespread in Japan as in the West for the following reasons.

1. Patent specifications are unclear and hard to understand, so are only read by a limited number of persons.

2. Specifications contain little information about the inventions. Only the basic natures of the inventions are described, e.g., "my invention is so-and-so." This makes it easy to copy the inventions. Therefore, there is the problem that writing the specifications so as to make the basic natures of the inventions hard to understand seems to have become a valued skill.

Western patent specifications are written in a manner enabling even amateurs to understand them. Further, they describe not only their own inventions, but also the background behind them and other inventions too in great detail. That is, they start from the general idea, proceed to the technology of previous parties (prior art), move on to the problems in the technology and how the problems are solved and how wonderful the solution is, then describe how their own inventions can be utilized in the future. Therefore, if reading such patent specifications, even amateurs (if interested) can pick up hints for new business. The inventions can also be easily understood by potential users.
Patent specifications are like business proposals overseas.

Japanese patent specifications, however, have little information and are hard to understand, so require a certain type of professional able to collect and analyze information and make business proposals to utilize them. This type of ability is not easily taught. The sheer lack of number of people involved in technology transfers is a critical defect. The inventions of Japanese universities and national research institutes are wonderful things, but are seldom transformed into actual intellectual property.

In Part 1, Mr. Yama described the convenience of PCT(Patent Cooperate Treaty) applications when expanding business overseas, but are also international applications other than PCT applications, that is, international applications filed under the Paris Convention.

Usually, when filing international applications, one has to go through both a Japanese and foreign patent attorney, so the cost substantially doubles. His opinion is that the Japanese patent attorney and foreign patent attorney should reduce their charges to a level commensurate with the amount of actual work. This would help small businesses save money when filing applications overseas. The Japanese side should be able to cut its charges in half. Small businesses can't afford to pay the 1 million to 1.2 million yen currently charged for each country filed in.

An acquaintance of mine in the patent translation business mentioned the following as the reasons why the PCT system is not being used so much.

A) According to an American patent attorney he does business with, PCT applications are considered problematic in the U.S. - the main market and one of the few countries adopting the first-to-invent rule. It is difficult to rewrite the claims of PCT applications to match with the U.S. practice. As a result, PCT applications have the demerit of strong rights being unable to be secured.

B) Recently, he attended a seminar for promotion of PCT applications about two times. PCT applications have both their merits and demerits. If the main markets (in particular the U.S.) for the products using the technology and the countries in which competitors are operating are known at the time of filing, directly filing applications in the main countries while claiming priority under the Paris Convention is more cost effective. To obtain European patents, for example, it is sufficient to file a patent application in English at the European Patent Office located in Germany and, when granted, translate the specification into the languages of the previously nominated countries. The costs are therefore greatly reduced.

C) There is some concern over the quality, extent, and up-to-dateness of the database when filing PCT applications through the Japan Patent Office. PCT applications filed through American and European patent attorneys are also still not considered that reliable. Therefore, use of the conventional Paris route applications while keeping down costs is recommended.

This acquaintance was recently asked to help file overseas applications based on a Japanese application filed on July 1, 2005 without using the PCT system. Applications had to be filed in the U.S., Australia, China, South Korea, and Europe by the deadline of July 1, 2006 in order to claim priority rights under the Paris Convention and in Taiwan by a separate route. The customer wanted file directly through the local patent attorneys and bypass any Japanese attorney in order to keep down costs. The end result would be the same as if going through a Japanese patent attorney, but the customer would have to deal individually with the local attorneys in English.

I myself (M.Miyazaki) am not an expert in patents, so if necessary, I will introduce you to a specialist. In that case, please let me know what you want done in what way (for example, if you want to know about the procedures for filing applications overseas or want to ask for a translation) and what kind of person you want to ask these from (professional registered patent attorney or someone who will answer your questions on a more informal basis). If your budget is limited, please also let me know your budget in advance.

Patent Filing Risks and Technology Transfers (Part 1)
Print this articleJul.2006
Patent Filing Risks and Technology Transfers (Part 1)

Mr. Meguru Miyazaki, President, Business Creation & Collaboration Network Ltd.

In the email sent by Mr. Miyazaki's company introduced in the TTPP "Voices of Users", he discussed the risks involved in filing patent applications in international business. We obtained the permission of Mr. Miyazaki for reproducing part of that here for our readers' reference.

A company mainly engaged in the business of developing new construction materials was thinking of transferring its proprietary construction methods to China. For that reason, it was considering combining its old patents, adding new knowhow, and filing a patent application in China for this purpose. It asked about this to a specialized intellectual property company, Chizai Corporation, and was told the following.

A patent application filed in Japan is laid open for public inspection 18 months after its filing date. At that instant, it is considered public knowledge. You could theoretically file a corresponding application overseas after that, but it would be automatically rejected on the grounds of being known in Japan. Applications are only examined in Japan upon a request and payment of fees from their applicants. However, applications are laid open in Japan regardless of whether or not the applicants request the examinations.Therefore, applicants cannot argue against rejections of their foreign applications on the grounds that they didn't request examinations of the Japanese counterparts.

<< International Applications Based on the Patent Cooperate Treaty (PCT) >>
This system enables an applicant to file a single application and gain the effect of simultaneously having filed applications in all countries party to the PCT which it designates.

A. A patent application filed in Japan can be used as the basis for a PCT application within one year from its filing date.
B. A patent application filed under the PCT can be transferred to the desired national stages anytime within 30 months from the above filing date. A patent right can be effective for as long as one year (in Japan) plus 30 months (abroad).

It is important to note that even if a third party produces products utilizing technology disclosed in Japanese patent applications laid open 18 months after filing, it is impossible to stop it outside Japan unless patents have been filed for and obtained in those countries. Fortunately, most technology is not easy to practically apply without specific knowhow, so while it might no longer be possible to file for patents in China, the transfer of specific knowhow can be used as the basis of licensing agreements.

Laid open patent applications in Japan may be viewed on line at the Industrial
Property Digital Library (IPDL)

Note that the biggest users of the IPDL are South Korea and China. I thought" oh my gosh, we're in trouble". If you file for patents only in Japan, there is a good chance that valuable technology disclosed in the patent applications will be copied. Probably the IPDL is often accessed for such a reason.

Considering this, if planning to expand overseas, you should at the very least file a PCT application designating other countries. In other cases, it might be wiser not to file any applications from the start. I have heard criticism that Japanese patent specifications are unclear and hard to understand, but ironically this difficulty in understanding may help prevent technology from being copied.

When Negotiating With Foreigners, Using English With Its Clear "Yes" and "No" is Convenient
Print this articleJun.2006
When Negotiating With Foreigners, Using English With Its Clear "Yes" and "No" is Convenient

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

What language should one use when negotiating business with overseas partners? When selecting a business partner, should the ability to speak Japanese be a priority? It is true that Japanese, most of whom have a hard time with foreign languages, appreciate the ability of the other party to understand their language. They don't have to hire an outside interpreter or translator, so this also leads to reduced costs.

However, seduced by the ease of communication, I have heard of cases where people forget to check whether the other party will provide goods and services of the quality they desire and end up failing. Conversely, the same can be said when overseas companies select places to do business with in Japan. Sometimes businesses select Japanese companies because they give the highest priority to being able to communicate in their own language, but find that the business itself does not go well and end up stalled.

When I myself negotiate with foreigners, even if the other party has a considerable understanding of the Japanese language, I use English. There are several reasons, but the first of these is that English has more direct expressions and has the clear "Yes" and "No", so enables people to clearly convey their intent.

The Japanese language includes numerous finely nuanced expressions. In particular, "No" is never clearly said. The Japanese "Let me think about it a while", "I will pass this time", and other vague expressions are used instead. The former expression sometimes means a simple refusal and sometimes means the matter will actually be thought about. This difference can only be discerned, even by Japanese, by the background and the atmosphere at that time. The latter expression can be understood as a rejection by other Japanese, but foreigners might err and think that the timing was bad, but the next time would be OK. Further, the expression in Japanese "It's all right" sometimes means the speaker doesn't want what is offered and sometimes means he wants it (evaluates it highly).

Second, if dealing in the Japanese language, there is the danger of misunderstanding that the other party gets everything on the level of a native Japanese. Even if starting out using easy-to-understand Japanese, finally one will end up using Japanese expressions seeking to confirm the other party's intent such as "It looks xxx, doesn't it?", "It is xxx, isn't it?", "how about it?", etc. and simultaneously expressing one's own opinion. The foreigners will therefore end up being confused. Even if a foreigner says he can speak Japanese, he can't continue saying "sorry, I don't understand you".

As a result, sometimes you will think that you have asked for something, but the other party will not have understood it. Or sometimes you will use an indirect polite expression to turn down a request, but the other party will become angry about never having received a reply. When having no choice but to use the Japanese language for business discussions, it is important to use clear expressions and simultaneously constantly confirm that the other party has understood everything.

To avoid this type of trouble, use English. One of the merits of this is that people not speaking English as a native language will speak English as a foreign language and therefore, whether fluent or not, will work to confirm that each other understands them. Further, if considering English as a standard language, it is possible to objectively compare and study offers of other companies.

There are foreigners who don't reveal they are adept at the Japanese language and foreigners who are better at the Japanese language than English. When I speak with these foreigners, I use English for our business discussions and Japanese for general conversations. Even when using the Japanese language to speak, I make it a practice to check intent in English.

Further, when getting to know a specific country, I try to study that country's language as much as possible. This leads to an understanding and respect of that country's culture. People use language when thinking, so I sometimes can pick up on differences in thinking and culture from the differences in language. Also, if you can speak just a few words in another country's language like "Hello" or "Thank you", everyone will be friendlier to you and business discussions will go better.

Timely and Speedy Claim Handling
Print this articleSep.2005
Timely and Speedy Claim Handling

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

International delivery services are extremely convenient for importing and exporting small quantities, sending samples, and delivering important and urgent documents. Recently, these services have been assigning tracking numbers to each shipment. These numbers are bar coded and scanned every time passing through points determined by the services. The results are fed back to the Internet and available for viewing by any interested party.

In the past, since there was no detailed information available, it was uncertain whether the sender was late in making arrangements, the receiver was not there to receive the package, the shipment got lost somewhere, etc., i.e., where the responsibility lay for problems. The bar coding of shipments in international delivery services has enabled all the parties to track the shipments by time and simultaneously has make fudging of responsibility impossible.

The other day, I sent a sample to Hong Kong by an international delivery service. I always notify the receiver of the tracking number at the same time as when sending a shipment and keep on checking the whereabouts of the shipment until received. Normally, shipments arrive the next day, but this time the package arrived at Hong Kong airport, but for some reason was transferred to Shenzhen over in inland China and got stuck at customs there. While finally returned to Hong Kong, delivery was not possible on Saturday or Sunday, so it ended up taking close to one week for the shipment to arrive. The value (merit) of the international delivery service - where speed is the sales point - was halved in this instance.

I immediately asked the customer service agent of the international delivery service to investigate the cause of the delay. I didn't get angry and complain about the delay, but asked the reason for it. International logistics is something like an international relay race. A single shipment actually goes through several hands. Not only are there mistakes on the part of local handlers, but also natural disasters and sudden trouble at airport facilities and transport services. If the cause can be pinpointed, countermeasures could be taken against future occurrence. In some cases, there would also be the option of changing the local handlers.

This international delivery service was one of the American ones. When I asked it to investigate the cause of the delay, the agent called back within one hour to report the results of the investigation, apologize about the delay, and cancel the charge. It was really a good faith, clear-cut response. Japanese companies sometimes tend to take the attitude of trying to "apologize away" the problem or spending time thinking about how to apologize rather than investigating the problem. In such cases, both for the side making the complaint and the side receiving it, timely and speedy handling is crucial. As time passes, people start forgetting details and more time is taken for finding data - resulting in the claim handling interfering with regular work. The longer the time taken, further, the angrier people get. While depending on the size of the shipment, the smartest approach when learning you are wrong is to make a clean admission and provide suitable compensation so as to end the matter as fast as possible.

How to Improve Negotiating Skills
Print this articleAug.2005
How to Improve Negotiating Skills

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

I recently had an interesting experience involving negotiating skills.I usually negotiate with Tokyo companies, but had the rare opportunity to stay over in Osaka for about four days during which I met with several companies every day. Osaka is historically speaking a commercial city. Some unique business practices and the humorous undercurrents of the Osaka dialect make negotiations interesting and dynamic. On the other hand, negotiations in Tokyo are extremely business-like with little room, I feel, for negotiations; you either accept the initially set terms or don't. With such a big difference between business practices between even two cities in the same country, it is only natural that international business be even more different.

I worked at a general trading company for a long time and was able to study negotiating practices on a daily basis by watching my bosses and colleagues. In particular, with large sized deals, I carefully consider in advance my negotiating stance. In the same way as trying to discern your opponent's future moves in a chess game, it is necessary to think about your moves in negotiations so that you can make a profit or decrease your risks. You have to prepare several tactics for possible responses of the other side.

Recently, Internet communications and e-commerce have been booming. I get the feeling that the very idea of "negotiating" is disappearing from an increasing number of businessmen. There are also some businessmen who don't consider the other side's position and confuse arguing terms benefiting only themselves with "negotiating". Good business can only be sustained through a balance of the interests of the seller and buyer. Business where one side profits disproportionately will always end up causing a problem in the future.

To find room for negotiation, not only theoretical aspects such as discussions over contract violations, but also analytical ability, the power of observation, and psychological factors are in play. In particular, even if Japanese sign a contract, they tend to forget about what it means for them. On the other hand, when the other side violates a contract, they tend to become angry and have a difficult time negotiating rationally (especially in other languages).

I know of several cases where even without that superior language skills, the extensive working abilities and experience of the negotiator or his attitude in negotiations or personal character enabled the hurdles to be overcome. Even if negotiations should end in failure, you should consider this valuable experience for future success and work daily to improve your negotiating skills. This is the first step to becoming a successful international businessman.

Tip When Starting Exports
Print this articleDec.2005
Tips When Starting Exports

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

Recently, an increasing number of Japanese have become interested in small sized imports as means for starting up full-time or side businesses. We often are asked "what about small sized exports?" It is true that Japan's imports range from natural resources to small lots and personal imports, i.e., are broad in scope, while exports are limited to specific industries and products.

The number one point in exports is to "sell to trustworthy customers and safely collect the payments". Unless having staff or a business partner on site, it is impossible to determine if a foreign company making an inquiry is reliable and whether it would be able to effectively increase sale of one's own products. Further, without knowing the local situation, claims can arise in ways inconceivable in Japan.

Only naturally, at the destinations, imports become more expensive due to duties and the costs of import. When exporting, therefore, in setting local sales prices, it would be wise to investigate in advance the level of need and competitiveness in the local market. Failing that, one might spend money providing samples and engaging in advertising and PR and actually end up not selling anything - an oft heard tale. If considering the need for such advance market surveys, for clearing the hurdle of legal regulations in Japan and overseas, for preparing export packaging and shipping documents and the country risk and risk in collection of payment, exports are considerablydifficult to start up.

Let us describe one case study close to that of small sized exports. A small manufacturer of inspection equipment has set up an English language Internet sales site. That company's products can be judged from just their specificationsand are of sizes able to be shipped by international package services. Each unit costs several hundred dollars, so payment by credit card is required. Since not many units can be expected to be sold overseas, the company has decided to continue exports in this easy going way in its spare time while engaging in domestic business. This kind of method probably can be used to establish a successful export business in only a very limited number of products.

When targeting a specific market, participating in local trade fairs etc. to get people to see one's products and meeting as many buyers as possible is also a good method. However, many Japanese businesses are uneasy over and overly burdened by the need to apply to the local sponsors by themselves and the need to interface with the sponsors in a foreign language from the preparatory stage to the end of the trade fair. In this case, one option would be to participate in exhibitions sponsored overseas by trade promotion organizations such as JETRO.

https://www.jetro.go.jp/en/matching/j-messe/

In particular, in consumer goods and other products with strong trendiness, products well known in one's own country may not necessary go over well overseas. Further, cultural differences may force one to undergo unexpected hardships. In the medium and long term, business might peter out or remain stagnant. Tackling exports jointly through industrial organizations, associations, etc. would be another effective means for dealing with this problem. Even if companies are not that large, if banding together, they could offer extensive product lineups and engage in effective advertising and PR. Risks too heavy for single companies to bear could be dispersed. Lackluster performance or pullouts by single companies could also lead to a decline in the image of products of a specific country or the industry as a whole. Aggressive export activities at the level of industrial organization or associations are sought in the age of internationalization of business.

Cutting Import / Export Cost and Getting Through Red Tape Faster Also Require Ingenuity (Basic Know-how)
Print this articleJul.2005
Cutting Import / Export Cost and Getting Through Red Tape Faster Also Require Ingenuity (Basic Knowhow)

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

Along with changes in society and the economy, many companies probably find that while not originally intending to engage in trade as a business, they have somewhere along the way started importing (or exporting) on their own and realize that they are now dealing in considerable volumes. I recommend that such companies review the costs of their imports and exports and their procedures to see if they can increase their profit margins.

Usually, for example, with both domestic and overseas shipping costs, the larger the volume and more constant the business, the cheaper the charge. Even if dealing in single container lots, if constantly shipping, there is plenty of room for negotiating a discount. In addition, there are different ways of shipment. You have to routinely collect information to enable you to select the means of shipping best suited to the TPO and enabling reduction of costs. I recently had this experience: I was going to charter a truck to transport some export goods to a warehouse, but then negotiated with a delivery firm and got them to lower the unit price for each box instead. As a result, I was able to reduce my cost to about half of what it would have taken if chartering a truck.

Also, many of you probably go through shipping agents to reserve freighter space, load the containers, and deliver the goods. Overseas freight charges differ with each shipping company. Further, some agents are able to obtain discounts from the shipping companies, while others are not. It is important to know the shipping process and the strengths and abilities of shipping agents and focus on specific points when negotiating with them. You should also not just demand a discount. You should be sure to pay the bills from the shipping agents on time and establish an image of being a "good customer". This is also a secret to smooth negotiations for discounts.

In the case of imports, recently products have become more and more complicated in applications and materials. This makes it hard to determine the right duties for them. If you prepare samples, catalogs, etc. in advance and give them to the shipping agents, they will be able to get through the procedures faster and more accurately. If you just leave everything to the shipping agents, when faced with products with uncertain duties, they will sometimes fill out the import declarations for the higher duty. This is not to avoid complaints from the Customs officials by paying the higher rates. It is rather that the agents don't like the trouble involved in having to revise their declarations and pay additional duties later after once declaring lower duties and later learning they made a mistake and to prevent the risk of their action being deemed malicious and being hit with penalties. Still, having goods repeatedly declared at high duties means wasted money to the importer. You should make it a practice to find the right duty for your goods.

To get through customs more smoothly, there is what is called an "advance classification ruling system" in Japan. If you know beforehand that you are going to import a large volume of products with uncertain customs classifications, you should take advantage of this system to get their classifications set in advance. Further, if utilizing the "later payment system" for duties, you don't have to pay the duties at the time of each shipment. This makes faster movement of goods possible. For details, see the homepage of the Japan Customs Office

When importing or exporting on a continuous basis in Japan, acquiring a "standard exporter/importer code" would help speed customs clearance procedures and be otherwise advantageous. For more details, see the homepage of the Japan Association for Simplification of International Trade Procedures.

Trade Pilots - Trade Consultants
Print this articleJun.2005
Trade Pilots - Trade Consultants

When hearing the word "pilot", most people will probably think of the men and women flying aircraft. Its original meaning however was a person guiding a ship through unknown waters. That is, the pilot would climb aboard a ship arriving from a distant location and provide instructions on how to steer through the harbor. This was to prevent the ship from running aground on the shallows of the harbor and to avoid locations with quick running currents so as to prevent trouble in the passage.

Trade consultants are simply speaking like "trade pilots". They point out shallows where their clients would run aground and fast currents so as to help ensure safe passage. If there were no pilot, the clients would have to gather information through sea charts etc. on their own and proceed with unease over shoals while leaving things half to luck.

On the other hand, while a pilot is on board and instructing steering, the crew of the ship can concentrate on their own assigned tasks. Getting a pilot on board is therefore a very efficient way to ensure safe passage of the ship.

When a company sets out into the unknown territory of a new overseas market,it comes face to face with risks different from those of domestic business. When risks are known, advance steps can be taken against them, but dealing with unknown risks is very difficult. Further, compared with companies wary about their own lack of knowledge regarding overseas trade, companies overly confident about their limited knowledge often fall into major difficulties. A little knowledge is a dangerous thing as is often said.

I have been involved as a trade consultant in projects of various companies for 20 years now. The biggest things I have learned are that no project ever fits into a stereotype and no two projects are ever the same. That is, overseas trade requires a case-by-case approach. No actual deal ever goes as described in business manuals or guides.
Each deal should be considered custom made.

Trade consultants began to become active in Japan right about when business began changing from indirect to direct deals, that is, probably around 1990. Companies trying to deal directly with overseas partners found they needed to tap different types of service providers in order to meet their needs.

As a practical problem, in order to provide sufficient consultations for a business deal, a broad micro to macro perspective of trade is required. A consultant has to be sensitive to coming changes in the law and market trends and must have a measure of common sense in business. Therefore, to continue working as a trade consultant, considerable effort is required in a fairly wide area. However, for companies trying to start direct trade and companies desiring to expand their overseas trade, trade consultants are very reassuring presences in that they serve like tax accountants in tax matters and lawyers in legal matters.

Business is only going to become more internationalized. Different companies will have different motives and reasons for internationalizing such as internal factors, external factors, the entry of other industries into their fields, etc., but I would hope that if they are going to do business overseas, they proceed efficiently and safely. Further, the approach taken by overseas partners will not necessarily always be suitable or efficient either. Be wary about leaving things to the other side in business negotiations. Companies about to set sail for overseas markets should consider getting a "trade pilot" on board to help guide them through the hazardous waters of international trade.

International Business: Country Risk and Risk Hedging
Print this articleMay.2005
International Business: Country Risk and Risk Hedging

Prof. Yukimitsu Sanada, Faculty of Business, Aichi Shukutoku University in Japan

When embarking upon international business, one hopes that there will be a return over the risk which more than makes up for the differences in currency, laws, production and environment standards, accounting standards, etc. Checking these factors is the basic principle in international business. Therefore, international business generally can be considered higher in risk than domestic business. One starts by examining where those risks lie. This is the first step in analysis of country risk.

As large factors in country risk, war, the collapse of the local government and government systems, the confiscation of foreign company's assets by the local government, and other risks can be mentioned. However, even when a country is stable, if the institutions and standards of that country differ, it is again necessary to coolly and carefully analyze the country risk.

In the case of foreign direct investment, it is difficult to analyze the risk versus return, so it is necessary to keep the risk analysis to the minimum necessary extent as I have long said in the past. Still, this presumes that when the populace runs riot and endangers the assets and lives of well intentioned foreign nationals, the government will take steps to protect them. This is an unspoken international rule. The lack of a guarantee of protection of the lives or assets of foreign nationals falls under the category of extreme risks in country risk analysis.

From the media reports of the recent string of anti-Japanese demonstrations in China, I painfully feel the need for reassessing the level of risk envisioned up to now in direct investment in China and coming up with ways to spread and hedge the risk. I have had many opportunities to talk about this, from the standpoint of a researcher, with businessmen engaged in overseas projects aimed at generating profit overcoming the numerous inherent risks.

Japanese companies with considerable experience in doing business with China could for example take the following action. They could list themselves on the Shenzhen, Shanghai, and other Chinese stock markets to raise local capital so as to avoid the country risk and make effective use of Chinese capital for expanding their businesses. That is, this is a good means for avoiding the risk of bringing in capital from Japan and making effective use of local business resources. Even Japanese companies not listed on Japanese stock markets can list their local affiliates (subsidiaries) with experience in China on the Chinese stock markets to raise local funds for expanding operations.

If asking about the situation to various companies, one learns that there are various methods of hedging risks. These reflect the differences in management knowhow. I have been asked to serve as a consultant not only by Japanese companies, but also economic institutes and organizations in East Asia and Southeast Asia. In providing such consultation, there are times when one starts by providing advice on the basic laws and business practices required for international business and times when one starts by questioning in depth the objectives and strategy envisioned in the case of projects with many vague points to them. Only naturally, the information sought, the methods of hedging risks, etc. differ for each country, each company, and each project. The fact is that it is impossible to provide systematic advice.

* The contents and opinions expressed in these columns reflect the views of the individual contributors and do not represent the official opinions of JETRO.

* The information in these columns is for use under the user's own judgment and responsibility. JETRO is not responsible for any problems arising due to information in the columns.

How to Best Use a Consultant (Part 2)
Print this articleApr.2005
How to Best Use a Consultant (Part 2)

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

In the usual process of starting up a new business overseas, a company has to first analyze its management resources (manpower, materials, money, and marketing knowhow) and take a hard look at whether the business idea is both reasonable and realistic. Next, it has to marshal all of the necessary information and draw up a detailed business plan.

Having gotten to this point, it will be clear what a consultant has to be asked to do. However, there are also complete novices, which don't have a clue as to what to do and require the help of consultants from the stage of drawing up their business plans. In such a case, the client has to bear in mind that it alone is responsible for its business and be ready to study on its own. Fortunately, general information is available free of charge from different media, and public organizations and commercial organizations host many free seminars and consultation meetings.

Sometimes a company will fail (or be swindled) if doing everything a consultant says. Conversely, sometimes a company will be too distrustful of the consultant and won't be able to get work done efficiently. In such cases, often the client's lack of awareness of its own responsibilities or lack of study proves to be the problem.

In particular, when using a consultant to help promote a large new business, the client and the consultant will have to establish a relationship of mutual respect and trust and the consultant will have to be delegated a certain extent of authority and responsibility so that the proper environment can be created for the work.

Even if the project is not a large one, a consultant can be made good use of. For example, when commissioning a consultant to help find new products or customers, the right consultant will have the experience and knowhow in finding developing new business overseas. Even if a company has outstanding employees, they have to spend much of their time in maintaining and expanding the firm's existing business and therefore cannot help but being less than thorough in developing new business.

Further, developing new business is not a usual type of job taking a usual amount of work, so employees assigned to the task will be unable to obtain assistance from their colleagues or their companies will find it hard to evaluate their work. In such a case, a good solution would be to commission a consultant to start the work involved in developing new business and pass it on to the firm's employees when the business is on track.

Further, companies, which used to receive a dozen or more inquiries from abroad every year, but left them unanswered, now want to investigate them more thoroughly. This is not enough of a job to warrant assigning a particular employee to handle it. Small businesses would further often be uneasy about hiring and paying someone with the required specialized knowledge and experience. In such a case, a consultant could be used as an outsourcing staff. When the amount of work increases, it can continue to be commissioned to the consultant or else switched to one's own employees. In the latter case, it would be possible to hire a new employee or change the job of an existing employee and have the consultant train the employee so as to enable the work to be smoothly transferred to the firm.

Nowadays, many firms complain that they not have any leeway in terms of human resources and cannot aggressively chase after new business. They would be well advised to make use of consultants to seize opportunities for expanding their lines of business.

How to Best Use a Consultant (Part 1)
Print this articleMar.2005
How to Best Use a Consultant (Part 1)

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

Along with the globalization of production and markets, many companies have decided to launch new businesses not only for trading materials and products, but also for shifting technology and factories offshore and for licensing technology overseas. When lacking the manpower with experience and knowhow regarding international business, they hire consultants.

A consultant functions to provide advice from an expert standpoint and act as a proxy in actual work so as to achieve the goals of its customer. However, the principle in this is naturally the customer, so all final decisions must rest in the customer's hands. Trouble sometimes occurs when the customer lacks specialized knowledge, leaves everything to its consultant, and places the blame on the consultant when things go wrong.

When hiring a consultant, the first question to ask if whether the knowledge and experience required is "shallow and broad" or "specialized and deep". A typical example of "shallow and broad" is small sized imports - the area in which most people are interested. In this case, the consultant has to provide a wide spectrum of information such as the ABC's of trade, the local distribution system, marketing, communication between different cultures, etc. Conversely, examples of "specialized and deep" are overseas technology transfers and license contracts.

A consultant considers its service provided when it spends time for work and transfers knowhow. Some customers want to pay for the services on a contingency basis, but consultants have no real power to make decisions and it is unreasonable to expect them to continue providing high quality work free of charge until a deal goes through. That is, consultancy services are billed when they are provided.

When requesting consultancy services, if the end period and the nature of the job are clear, a project-based contract is best. On the other hand, if the amount of work is not certain or it is not known how long the job will continue, a monthly or hourly rate-based contract would be recommended. In general, a consultant charges based on the difficulty of the work or the time consumed.

Considering this, it would be helpful for a customer to first decide on the content of the work, the scope of the consultant's responsibility, the type of the work, the time schedule, budget, and other information and desires of the job in order to find a consultant or choose from a number of candidates.

When selecting a consultant, it is necessary to check how much practical experience the consultant has relating to the nature of the job and how much knowledge and information it has relating to international business. If giving priority to cost,the customer has to be prepared to suffer from a slow speed of work, a loose attitude in reporting, liaison, and discussions with the customer, and insufficient knowledge of the requested work.

Next, if selecting a consultant from a general perspective, it is important for both the customer and the consultant to agree on the nature of the job and the conditions. The contract should clarify the nature of the consultancy, the authority delegated, and the conditions attached and should not forget a confidentiality clause. The customer has to divulge confidential matter such as internal information and details of business plans in order to enable the consultancy service to be provided more efficiently and effectively. On the other hand, the customer shouldn't forget to maintain a suitable grasp over the state of progress of the work and the content of the actual work.

Note that the TTPP provides a page of providers of business support services. Use it to help you find contacts.

Risk Analysis and Trade Insurance System
Print this articleFeb.2005
Risk Analysis and Trade Insurance System

Ms. Yoko Kawaguchi, President , Y's Worth Corporation

When a partner in a business transaction is a foreign company and the shipment time for the products is long, there is greater risk compared with domestic business. To provide a hedge against damages to shipped cargo due to the dangers accompanying ocean shipment, private insurance companies offer various maritime insurance systems.

However, sometimes risks arise not due to the responsibility of the parties involved, but due to irresistible force such as import and export bans due to war, internal strife, revolutions, etc., hiking of tariffs, strikes, and also delays in remittances due to restrictions or bans on foreign exchange transactions. In particular, such political and economic country risks occur in developing countries.

Further, there is commercial risk such as bankruptcy of the business partner and delays in payment of debts. To defend against and avoid these two risks, there is the trade insurance system of the Nippon Export and Investment Insurance (NEXI) as an independent administrative institution in Japan. For details, click here

There are various types of trade insurance, so first let's analyze what kind of risks there are in one's own business and check which insurance to apply and whether the business deal is commensurate with the terms undertaken. Do not forget to factor the insurance premiums into the costs and check the application deadlines and the documents required at the time of submitting claims.

In the past, transactions with developing countries in Japan were limited to general trading companies, specialized trading companies, etc. Today, with the advances made in communications, anyone can engage in such transactions. The more developing countries are, the more eager they are to sell products in order to secure hard currency and the more attractive the prices. Conversely, they suffer from shortages of merchandise, so want to purchase many goods. They are therefore interesting to companies desiring to find new markets.

I sometimes hear tales about companies finding no problem with obtaining free samples or small transactions, but learning the conditions in the partner country prevent the any transactions the minute it tried to start up real business. It is important to not only investigate the other party, but also the other country.

Things to Watch When Using Information of Public Organizations
Print this articleNov.2004
Things to Watch When Using Information of Public Organizations

When looking for a new product or business contact or someone to provide support to one's own business, it is recommended that information of public organizations first be used. This is because the same information is given fairly to everyone. Simple advice or searches are provided free or relatively inexpensively along with this.

In particular, TTPP has the merits of making use of the medium of the Internet and of allowing a user to utilize the information anywhere at any time if facing a PC. The features of the Internet are made available predicated on all users using the net in good faith.

JETRO has its staff check the content of all registered proposals and believes that it can suppress misuse or crime much more than other automatic registration sites. The TTPP system is not configurated to reject any registrations only for the reason that they are dubious from the standpoint of opening the door wide.

With connecting with the entire world, some users may be lurking utilizing the site with malicious intent. When starting business with a partner found on the site, it is necessary to recheck whether the partner can be trusted or whether the deal involves one-sided risks.

If falling victim to a scam or suffering other damage or if there seems to be something odd with a deal, please first contact the TTPP staff. The TTPP staff will take steps such as checking the facts, issuing cautions and warnings, canceling registrations, and rejecting repeat registration by the perpetrators to prevent the increase or reoccurrence of trouble.

Print all articlesAbout scam

Warning against business frauds through TTPP
- From TTPP Users' Recent Report -
Print this articleMay.2014
Warning against business frauds through TTPP
- From TTPP Users' Recent Report -

Recently, JETRO has received the following reports from TTPP users regarding troubles in business transaction through TTPP.

Please pay attention to any similar contact mails.

« A Report about Business Fraud related to the Government's bid »
We have sent an inquiry to the "Offer to Buy" business proposal for LED bulbs on TTPP.The user asked us to send samples for a quality test because the user planned to participate in the government's bid for the procurement of LED bulbs that would be used in governmental facilities.
After we sent the samples, the user asked us to share the half of US$10,000 commission that the user had to pay for the participation in the bid.
We trusted the user because the user sent an ID certificate to us, so we transfered US$5,000. Since then, we have not been able to contact the user.

« A Report about Fraud to steal passport data »
We have received a contact mail from a TTPP user saying "We are thinking the possibility of investing in your company because we have an interest in your company." After we replied, we received a mail with his passport copy attached. He requested that we send our passport copy to start legal procedures.

He said in the mail that he served as vice president for a leading corporation and he was prominent since he had appeared on TV. We viewed the user's website using the URL which was available in the mail. The website was splendid with detailed contents on the company's investment programs. We found, however, that the website was very suspicious because there are many similarities with a site of another leading company. We came to a conclusion that the mail was intended to steal our passport data, making us believe that he was an executive of a major company that really existed.

Scams Involving Visas for Entry to Japan, Registration Fees and Investments
Print this articleMay.2009
Scams Involving Visas for Entry to Japan, Registration Fees and Investments

Mr. Hiroyuki SAWADA, Managing Director, SAWADA INDUSTRY LTD.

In the April 2009 issue of the TTPP Newsletter, a case study of a scam involving visas was described. I am involved as an agent for international trade in goods and patented technologies and have learned about the careful examination of visa applications at overseas Japanese embassies and scams involving visas. I will explain some of my personal experiences with these in the hope they will be of value to other TTPP users.

1. Careful Examination of Visa Applications for Visiting Japan
On one occasion, I was inviting three Chinese engineers to Japan for training in production technology at a mold-making plant so as to facilitate consignment production of plastic molds in China. At the time of applying for the visas, I submitted invitation letters, but was asked by the Japanese Ministry of Foreign Affairs to further submit order slips, customs clearance records, and other documents proving the business of my company. I was just starting up my business at the time, however, so could not obtain the documents demanded. I therefore explained the background of my business.

After that, visas were immediately issued for two of the three engineers involved. The visa for the remaining engineer was rejected. I asked the local Japanese embassy about it and was told to reapply. The visa was declined again.The person in question had visited Japan for sightseeing several years before during which he went off on his own from his group. He was denied a visa for that reason.

From this, I learned that the Ministry of Foreign Affairs and overseas Japanese embassies were indeed carefully examining visa applications.

2. Scam Involving Registration Fee - If Suspicious, Send Contract by Mail I registered a proposal at TTPP website for sale of materials for antibiotics for optical catalysts for medical institutions and received an inquiry from Africa. The letterhead of the African email read the hNational XXXXX Commissionh. Below it was the country's flag. It truly seemed to be from a government organization. After that, I received a document like a contract. The terms were in admirable English.

The contract was worth US$1.34 million, the equivalent of 160 million yen at the time, or a high amount, so the manufacturer of the optical catalysts proposed to visit the buyer to explain the product. The African side said that it was a government organization, so getting the visas would be easy.

I sent the originals and copies of the contract by separate mail for safety. Later, I received a phone call from the African side reminding me to send the contract. I was asked to send it by email because of the rush.

When I sent the contract by email, I was told that I had to immediately send a "registration fee" (of about 350,000 yen) to close the deal. The registration documents were attached. The remittance account listed there was for a bank I had never heard about, so I asked about this bank in a Japanese bank. As a result, I learned the account was for a private individual. Further, when I asked about the registration fee, someone else answered.

I thought that the registration fee was low compared with the contract value, so for safety's sake investigated how much the registration fee was worth in terms of the yearly income in the region. As a result, it corresponded to over 30 million yen - an amount enough to live on without working further for decades over there. At that time, the contracts I had mailed earlier came back as undeliverable.

In addition to these suspicious points, the African side's email address did not enable the country of origin to be identified. The sudden appearance of documents not allowing us any time for consideration was also strange. I concluded this was all a scam. The problem was what then to do. I did not know what would happen if we suddenly broke off all discussions. I informed the African side that our mail had been returned, and did not reply immediately. After one or two weeks, our correspondence naturally ended.

To report this to TTPP, I tried to review the history of the emails with the African side, but found that all of the emails had been deleted.

3. Case Study of Investment Scam - Be Suspicious of Impossible Amounts I received an inquiry from a (supposedly) ethnic Indian British citizen through a business site other than TTPP website about possible investment in the development of automobile engines in Japan. He said he wanted my assistance and would pay me 15 percent of the investment value. He planned to put up US$3 million of his own funds for the investment, then the equivalent of about 400 million yen, and promised to remit it from London to Shanghai by BL. I was supposed to bring 1 million yen to Shanghai and would get the investment funds after some paperwork. The entire proposal was ridiculous.

I refused to play along any further and would not respond, whereupon I started getting frequent calls at 3 am in the morning. I was also flooded with emails. I could not stand it and demanded that he stop the harassing phone calls, but I continued getting phone calls. I could not determine the actual country of origin from his email address. Finally, I sent an email quoting the Japanese saying that "If you do something wrong, you will get punished". The response was "I am not in Japan" (did he understand Japanese?). In this case as well, all of the emails from the other party were deleted.

Case Study of Scam in Used Car Trade (Visa Scam)
Print this articleApr.2009
Case Study of Scam in Used Car Trade (Visa Scam)
- If Suspicious, Contact Local Japanese Embassy -

(Anonymous)

I work at a company exporting used Japanese cars. We mainly ship to Europe. At the present time, despite the global recession, many used cars are being exported to Africa. My firm had been thinking of exporting to Africa in order to open up a new market and was almost caught up in a visa scam. With information and help from a local Japanese embassy in Africa, we were thankfully able to avoid being tricked. I would like to explain the mechanism of the scam for the benefit of other TTPP users.

1. Initial Contact to Procedures for Visa

We were contacted by an Africa businessman in early December 2008 who said he saw our business proposal at the TTPP website and was interested in buying used Japanese cars. He said he would immediately prepare a list of cars he wanted and send it to us by email. He said that he wanted to see the cars first before buying them and to set up long-term business relations, so wanted to meet with us in person for negotiations.

Accordingly, in December, we received from the African side a sample of another company's invitation letter, copies of passports of two individuals scheduled to visit Japan, a transcript of the firm's business registration, and a copy of the passport of the president. On our part, we sent documents required for the visa applications and our corporate registration, certificate of seal, certificate of payment of taxes in duplicate.

2. Strange Attitude of African Side After Request for Advance Deposit

We asked the African side for a deposit of US$5000 to 10,000 for purchases of the cars. The African side immediately replied that it would remit the deposit,but stopped replying to us in January and never sent the deposit. The designated telephone and fax numbers did not work either. We were finally able to get the other party by the mobile phone number in the initial email.

After that, the African side said it was changing its travel schedule and the persons scheduled to visit us, so wanted us to send the invitation letter and revised documents again by international post. After one month, I asked by email about the visas and was told by the African side that the local Japanese embassy was busy with many visa applications and the company could not get the visas. Later as well, the Africa side told us it was delaying its travel plans and requested changed documents two times for the same reasons.

3. Inquiry at Local Japanese Embassy and Assistance in Dealing with Visa Scam

In the middle of all of this, I began to become suspicious. Right at that moment, I received a warning email from TTPP about scams involving trucks sent to Africa through the U.S. I immediately telephoned the local Japanese embassy, gave it the name of my company and explained the events up to then, informed it of the names of the African company and scheduled invitees, and asked it to investigate.

The local Japanese embassy replied that the African company I was inquiring about was suspicious and that the embassy would reject any visa applications received from it. The embassy told that it had received visa applications for the African company's two persons through another Japanese firm as well, but it had rejected the applications.

The local Japanese embassy was worried about our invitation letter and guarantee letter being further forged and our business registration and certificate of seal being used for illicit purposes, so I asked the embassy to hold those documents. Later, the local Japanese embassy telephoned me to say that the African company had indeed forged a copy of my company's seal and was using it for visa applications. At the present time, we have not sustained any actual damages due to illegal entry, but are very concerned in that a forged seal of our company is held by the African firm.

How not to be Tricked by Numerous International Scam
Print this articleDec.2008
How not to be Tricked by Numerous International Scam
- Final Responsibility Rests with You - Study Examples of Scams and Take Countermeasures -

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

TTPP has been issuing strong warnings against international scams. I would like to add my own advice from my own knowledge and experience on how to avoid being tricked.

Eight years have passed since I started working as an independent trade consultant, leveraging my earlier experience I gained working for 24 years in a general trading company. During that time, I have heard of numerous cases of scams. Male victims were scammed because they were over confident and bullish, so lacked the necessary caution. On the other hand, female victims were scammed because they lacked sufficient social experience and knowledge or, when the other party was male, lowered their guard due to personal feelings.

Further, new companies established less than two years were easily scammed. This is because they were eager to build up a customer base too quickly, to create a record for themselves and to establish their credit. Small businesses weak in legal know-how, businesses without enough of a international communication skill to deal logically with scams and female managers were easily scammed.

1. Why Aren't Incidences of International Scams Being Reduced? Why aren't incidences of international scams being reduced? Let's look at the background and the situation.

1) Scams are becoming increasingly tricky. It is hard for victims to notice that they are being scammed.
2) The scams are being run from overseas, so it is difficult to obtain information on the opposing parties.
3) There are few business people who are so well versed in overseas business that they can provide you with proper advice.
4) Even when the other party behaves suspiciously, victims tend to convince themselves this is due to differences in culture or business practices.
5) It is difficult to get a grasp of the situation due to language barriers and differences in local practices, so victims tend to lower their guard.

2. Basic Cautions When Starting New Business
In today's world, new types of businesses are being born all the time and are expanding in scope of activity along with internationalization. It is important to realize that scams are not by any means something which "other people" are tricked by. You may be tricked yourself someday.

When major companies start doing new business, they investigate the credit of the other party, set ceilings on sales receivables, draw up contracts, have legal experts check them, check the business model and analyze the risks. These are obligatory basic cautions. Medium sized businesses also should institute similar cautions and be sure to objectively collect and analyze information. Small businesses and individual entrepreneurs should find a reliable consultant to protect themselves from scams.

I run a search over the Internet as part of my effort to collect information. Information on websites of companies generally exaggerates their strong points.If running a search over the Internet using the companies' names and the names of their CEOs as keywords, you should be able to collect considerable third party information. Further, don't forget to check up on the latest information regarding the other country's political and economic situation.

3. Precautions for Safety There may indeed have been cases of successfully negotiating with parties with only e-mail addresses and without actual addresses or telephone numbers, but, still, let's be sure to obtain information enabling the other party to be identified. If the same party appears to be using several e-mail addresses, including free mail addresses, try asking it why.

Further, if you investigate how the other party is doing business (for example,working full time at a company), or if you call the telephone number given to see if the other party immediately answers, it will prove helpful later when emergency contact is required.

JETRO and the chambers of commerce have free trade consultation desks, so if you are uncertain or suspicious about something, try using these organizations. Further, get ready for when you will need professional help to solve a problem by drawing up a list of available lawyers and consultants, and determining their fields of expertise and fees. This alone will keep you from wasting time in emergencies and allow you to deal with them calmly.

4. Examples of Scams and Countermeasures Analyzing how people become scammed and how to prevent this, I can say the following:

1) Project you find yourself turns out to be scam
The points to watch out for have already been explained repeatedly in the "Advice for International Biz" in TTPP website, so please see the same. If you are careful, you have a very good chance of avoiding scams.
There are limits to the capability of JETRO to check suspicious or false contents in TTPP registered proposals. I recommend that TTPP users themselves carefully study proposals before starting to do business. If unfortunately being scammed (or if you strongly suspect you were scammed), contact JETRO. It will investigate the case to prevent other users from being victimized. As an action to deal with the case, it will also delete the suspicious user's registration or provide warnings to other users.

*Advice for International Biz

2) Intermediary brings you scam
Sometimes the intermediary will itself be involved from the start, but other times it also will not realize it is being scammed. In the end, you are responsible for yourself. No matter how reliable the intermediary, don't take its proposal at face value. Research it carefully. Further, Japanese tend to start doing business based on mutual trust without bothering to exchange contracts. This may lead to later trouble, so clarify the rights and obligations of the intermediaries from the start.

3) Scam artist directly contacts you by phone, fax or e-mail
Sometimes you can clearly tell when you are being scammed, but sometimes you will not notice at all. Scam artists are good at talk to drum up interest, so it is important to set aside time to view proposals calmly. Recently, you can find detailed information on scams over the Internet. I recommend you study examples of scams and prepare thoroughly to institute internal or personal business controls and anti-scam measures.

Continually Increasing International Scams
Print this articleSep.2008
Continually Increasing International Scams
- First, investigate and analyze all possible risks; then do all you can to avoid any risks carefully in real businesses -

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

In the same way as the never-ending string of bank remittance scams (*) in Japan - despite all sorts of warnings from the media and financial institutions, there has been an increasing incidence of international scams in the business world. In this corner of the TTPP, many of us have given advice on how to avoid such scams. Here, I will explain some checkpoints and share some know-how on how to avoid such scams.

*Bank remittance scams: In Japan, elderly people often become victims of so-called "bank remittance scams". They have a phone call from someone pretending to be their child, their childfs friend or a police officer, who claims that their child has got involved in a crime or an accident. They receive request for bank remittance of a large amount of money for out-of-court settlement. Some of them rush off to the bank to pay the amount requested, becoming victims of bank remittance scams.

1. Investment Scams
Some typical cases of investment scams are below:
1) You hear of a new overseas project open for investment and promising high dividends. You jump at the chance, but the company invested in actually has no such project and just takes your money.
2) You are promised an introduction to a local VIP who can be very helpful to your business. You are told to bring a large sum of cash that is then merely pocketed by the "VIP".
3) You are planning to start up a joint venture overseas. You are told by the local partner that it will handle all the procedures for setting up the firm.The local partner runs off with the investment funds.

I recommend your avoiding these by asking yourself "why should I trust the other party?". For example, 1) you have run a credit check and failed to find any problems, 2) the other side is a reputable firm with a good record, 3) the other side have a position in society making it impossible for it to pull off a scam, 4) you know someone or some organization who can intervene if some problem arises.

You should also think in advance about what kind of problems might arise and run simulations on ways to solve them. Fundamentally, you should never invest in a field overseas outside your own expertise for the purpose of dividends without the advice of experts. When setting up a company overseas, the first thing to do is to obtain an investment license from the host country's central government. In some case, a license from the local government would be required for small investments. So there should be no rush about sending funds. Each country government has its own related legal codes and investment manuals, so study these carefully and proceed cautiously.

2. Trouble and Scams in Trade
In the case of trade transactions, settlement problems account for the overwhelmingly percentage of trouble and scams. In exports, the key point is how you collect your charge. I often hear of cases where the other party paid exactly on time for the first one or two small transactions to make the exporter trust it, then placed a large order and disappeared along with the shipment. With one or two small transactions, the other side will almost always send the payment to settle the bill. If the exporter starts trusting the other side just because of that, it may become lax in scrutinizing settlement and other terms even with a large order. Sometimes it may not even require a contract or other document setting down detailed terms. In addition, the other side may come up with complaints unheard of in Japan and refuse to make payment.

In imports, when making small sized imports for obtaining samples or test marketing, you may go ahead and make payment in advance with just an oral agreement and find the shipment never arrives or may start full-scale transactions, then find unexplained "service charges" or other costs added to the bill and end up paying them without looking into the bill in more detail.

It is sometimes difficult to discern whether these cases were attempted for the purpose of a scam from the beginning or they occurred as a result of a lack of knowledge or inexperience with trade business practices on your side. However, even in the latter case, the other party may be taking advantage of your being a novice in trade or not being picky enough about contract terms, so this may also be said to be a type of scam.

Due to the advances made in the means of communications and shipment, people tend to mistakenly think that anyone can start trading. International transactions require basic knowledge and practical experience. In particular, people tend to relax when finding that the other party can speak their language fluently and go along with whatever is suggested.

In Japan, most business people believe that "if we act in good faith, the other side will always reciprocate". The same is probably true throughout the world. However, scam artists do not operate on that basis. In the same way as the bank remittance scams, the tricks used in the scams are becoming increasingly clever and utilize human greed (for money or honor) and pride. Pressed to boost sales or profits, unwilling to lose out to competitors, business people sometimes lose their temper and make wrong judgments. Alternatively, there are people who become lulled by sweet words and overconfident and no longer listen to advice form others.

For new transactions, apply caution over caution and 1) clear up any uncertain points with the other side, 2) get advice from experience persons or experts, 3) do all you can to avoid any risks carefully even when dealing with someone you have dealt with before. This will prevent you from being scammed.

We hear of stories about Japanese business people who became victims of scams by a Japanese counterpart. They trusted the counterpart because the counterpart was living in the country for a long time. There are stories about foreigners cheated by Japanese because they thought Japanese are so honest that they can trust. There are good people and bad people in all countries. It is best to shed all preconceptions.

You can find previous articles at the TTPP about scams and ways to avoid them from the following URL.

How to Use TTPP: Advice for International Business

Beware of Scam Mail

Two Ways to Identify Scams
- Check Up on Company and Learn Trade Practices -
Print this articleMar.2007
Two Ways to Identify Scams
- Check Up on Company and Learn Trade Practices -

Mr. Yasuo Nagano, JETRO Certified Trade Advisor

Scams are continuing to infest us. Recently, they have become more difficult to differentiate from real business. For example, in the case of scams offering full advance payment for products, the scam artist starts out by saying he learned of your product through your company homepage or a trade fair, finds them extremely attractive, and wants to buy them at all cost. Up to this point, this might be a real business deal, so detecting the scam is impossible.

If you then give some sort of answer, the scam artist contacts you saying he will pay the entire amount due before loading. Believing this to be a great deal, if you get further involved, the scam artist then claims that a remittance fee is required or revenue stamps are needed for setting the remittance limit. Japanese accomplices are sometimes involved, so you will sometimes be approached from Japan in the Japanese language. Beware.

How then can you identify such scams? Here, I will focus on two points.

First, look for the other side's company homepage by KOMPASS or another business directory site or by the Yahoo or Google search engines. If you can find the company from these databases, you can check it out. However, just because you can't find the company, you can't flat out conclude that it is a scam.
Sometimes, it may be impossible to search company information in the case of small businesses or young companies that have been just recently established. In this case, there is the second checkpoint.

Second, you should clearly set down in a draft contract in advance what kind of conditions must be met before you will conclude a contract and hand over the goods. It is important that you can immediately present such a draft contract whenever there is an inquiry. In the case of exports, only naturally you should not ship your products unless receiving payment for the products in advance or receiving a letter of credit. On the other hand, even if a potential customer says he will pay the entire amount for yours products in advance, you have to keep in mind there is no guarantee he will ever make that payment.

Normally, you will be using one of CIF, CFR, or FOB among the terms of trade set down by Incoterms. In none of these cases is the exporter responsible for any remittance fees or revenue stamps required at the destination.

Scam artists are not targeting companies well versed in trade. They target new entrants to the field not aware of the above two points or persons with little trade experience. They are professionals, so have special knowhow in finding such novices.

What the targeted side should watch out for is when newly establishing a homepage, when first participating in a trade air, or when making public its E-MAIL address. Further, I must say that exporting without fully understanding the Incoterms itself is extremely dangerous.

For Incoterms, see "How to Use TTPP <Lesson for International Biz>"
(TTPP Newsletter April 2006).

Example of International Remittance Scam
Print this articleJan.2006
Example of International Remittance Scam
- Don't Forget to Check Receipt of Funds! -

Mr. Hisashi Suzuki, President, Work-Labs Corp.

A Chinese friend of mine fell prey to the Nigerian international remittance scam. You have all heard of the scam. Be careful about this type of thing.

A certain overseas bank has a same day remittance service. In this service, the sender obtains a remittance number and password when sending money and informs the other party of these by e-mail. The receiver then presents the number and password at a correspondent bank in his country and can obtain the funds the same day. (For more details, use the search engine and type in the keywords "international remittance").

There is apparently a time lag in investigating this remittance number on the Internet. The scam artist informs the receiver of this fake remittance number. The ploy is "the remittance number and password are XXXXXXX. I am also faxing the remittance slip. Please send the products immediately". They get you to send out samples, then disappear.

It is apparently possible however to check remittance numbers by phone in real time. You can find out if a number is fake. If you only send out samples after confirming the remittance number or actual receipt of funds, you can avoid any problems. My friend said that he is not going to be fooled again.

This kind of scam works because people are not careful enough. Most people are not familiar with this remittance service, so are easily tricked. Be aware!

Tip When Starting Exports
Print this articleDec.2005
Tips When Starting Exports

Ms.Yoko Kawaguchi, President, Y's Worth Corporation

Recently, an increasing number of Japanese have become interested in small sized imports as means for starting up full-time or side businesses. We often are asked "what about small sized exports?" It is true that Japan's imports range from natural resources to small lots and personal imports, i.e., are broad in scope, while exports are limited to specific industries and products.

The number one point in exports is to "sell to trustworthy customers and safely collect the payments". Unless having staff or a business partner on site, it is impossible to determine if a foreign company making an inquiry is reliable and whether it would be able to effectively increase sale of one's own products. Further, without knowing the local situation, claims can arise in ways inconceivable in Japan.

Only naturally, at the destinations, imports become more expensive due to duties and the costs of import. When exporting, therefore, in setting local sales prices, it would be wise to investigate in advance the level of need and competitiveness in the local market. Failing that, one might spend money providing samples and engaging in advertising and PR and actually end up not selling anything - an oft heard tale. If considering the need for such advance market surveys, for clearing the hurdle of legal regulations in Japan and overseas, for preparing export packaging and shipping documents and the country risk and risk in collection of payment, exports are considerablydifficult to start up.

Let us describe one case study close to that of small sized exports. A small manufacturer of inspection equipment has set up an English language Internet sales site. That company's products can be judged from just their specificationsand are of sizes able to be shipped by international package services. Each unit costs several hundred dollars, so payment by credit card is required. Since not many units can be expected to be sold overseas, the company has decided to continue exports in this easy going way in its spare time while engaging in domestic business. This kind of method probably can be used to establish a successful export business in only a very limited number of products.

When targeting a specific market, participating in local trade fairs etc. to get people to see one's products and meeting as many buyers as possible is also a good method. However, many Japanese businesses are uneasy over and overly burdened by the need to apply to the local sponsors by themselves and the need to interface with the sponsors in a foreign language from the preparatory stage to the end of the trade fair. In this case, one option would be to participate in exhibitions sponsored overseas by trade promotion organizations such as JETRO.

https://www.jetro.go.jp/en/matching/j-messe/

In particular, in consumer goods and other products with strong trendiness, products well known in one's own country may not necessary go over well overseas. Further, cultural differences may force one to undergo unexpected hardships. In the medium and long term, business might peter out or remain stagnant. Tackling exports jointly through industrial organizations, associations, etc. would be another effective means for dealing with this problem. Even if companies are not that large, if banding together, they could offer extensive product lineups and engage in effective advertising and PR. Risks too heavy for single companies to bear could be dispersed. Lackluster performance or pullouts by single companies could also lead to a decline in the image of products of a specific country or the industry as a whole. Aggressive export activities at the level of industrial organization or associations are sought in the age of internationalization of business.

Never Ending Fraud
Print this articleJan.2005
Never Ending Fraud

Ms. Yoko Kawaguchi, President of Y's Worth Corporation

West Africa has become the origin of many cases of fraud. In these cases, the perpetrators pose as members of the royal family, former high government officials, their widows, or other VIPs and promise to pay you huge sums as thanks for holding millions of dollars of their hidden assets for them. First, however, they ask you to remit a guarantee or remittance charge. They then disappear after receiving the funds. In one famous case, a victim went to visit West Africa with the guarantee money and was killed.

The con games used to be characterized by patently absurd tales, but recently have become increasingly clever. They are also appearing from other parts of the world. Some typical examples are described below:

The perpetrators said they want to talk with you directly, so ask you to inform them of your home telephone number or mobile phone number (Is there anyone who asks for your private telephone number right off when talking about business?)

The perpetrators claim to be members of the royal family or former high government officials and ask you to hold hidden assets for them (Is there anyone who would entrust (loan) unknown foreign nationals with huge sums of money?)

The perpetrators pretend they have business deals, get you to send large amounts of samples, then disappear or pay you with a fake check (Let's remember to investigate potential business partners and check the type of deal and the risk involved!)

The perpetrators invite you to invest in fake projects or organizations (Even large corporations get tricked. If interested in something, be sure to consult with an expert!)

To avoid being victimized, first of all rationally consider whether what the other party is saying makes sense. This is the first step to avoiding risk. E-mail is a convenient and inexpensive means of communication, but you can't see the other parties' faces or hear their voices. It is therefore easy for a person to pretend to be someone else. There is no such thing in the business world as easy money. It seems however that many people who would be suspicious when dealing with people locally think that improbable deals are possible in other countries. Let's not forget the basics - investigation and consultation.

Here is what I always do myself. To find out contact information for a party registering a proposal in the current TTPP system, the viewer also has to register at the TTPP. Therefore, if receiving contact mail through the TTPP, be sure to first check the registration information of the other party. Assuming the information is not fake, you can learn what kind of company the other party is or what kind of person he or she is. This provides one source of information for making a judgment.

Further, be careful about brief mail to the effect that "we are interested, please contact us" - despite your having provided a certain degree of details in your registered proposal. It is strange that even when you have provided all sorts of information, the other side does not say anything about itself, its products, or its services and does not ask for a price list or terms of business or pose other detailed questions.
* About the "4-1-9" Scam
http://home.rica.net/alphae/419coal/
* About Internet scams
http://www.scambusters.org/NigerianFee.html

Be Careful About Visa Scams
Print this articleDec.2004
Be Careful About Visa Scams

Ms. Yoko Kawaguchi, President of Y's Worth Corporation

Recently, several cases of scams have occurred aiming at obtaining entry visas to Japan. This type of scam has a foreigner requesting a Japanese firm to prepare the documentation required for obtaining a visa in order for him or her to make a visit for business talks. When obtaining the visa, suddenly the foreigner can no longer be contacted. Usually, the Japanese firm has never met the foreigner and has never done business by e-mail before. That is, the foreigner pretends to want to meet for a business discussion for the sole purpose of obtaining the visa.

Normally, if a foreigner has already done business somewhere in Japan or another industrialized country, he or she should ask that place to prepare the documentation. The documentation for a visa requires clear indication of the location stayed at, schedule, etc. For a foreigner to travel to another country to do business, advance preparations have to be made such as arrangements as of the hotel, length of stay, business meetings, etc. Considerable trouble can result if preparing visa documents as requested without caution for someone one has never seen and finding later that one has been used or some crime has occurred.

In particular, the procedures for traveling from a developing country to an industrialized country are complicated. The costs are also high. Unless the contract is considerably large in amount and long term, it is unlikely that someone would make the trip. If an export deal, for the purpose of investigating credit, caution is required such as visiting the importer to check on it rather than waiting for it to make a visit. Even in the case of import, there is a possibility of non-delivery or trouble in quality control. Other than when doing business with acquaintance for whom there is no problem or when dealing with a well known company, let's make a trip and check up on the company, factory, and manager, then proceed.

In addition, if contacted by a company saying it has been introduced by a trade promotion organization like JETRO, an embassy, a chamber of commerce, etc., we recommend to ask about the company and the background leading up to the introduction at the organization in question. At that point of time, it is possible to uncover any lies if a scam and avoid any further contact.

Print all articlesAbout Export

Pitfalls in Export Negotiations (PART 4)
Print this articleApr.2014
Pitfalls in Export Negotiations (PART 4)
- Advance Package Order Placement and Long-Term Contract May Cause Exchange Losses -

<<Case Study of Failure>>
The first order from an overseas importer was small in size. Three orders were received, then, due to strong local sales, the importer asked for a long term one-year contract for the next year (shipment of 10,000 units on even number months, total 60,000 units).

The exporter found the requested sales price a bit tight in profit margin, but its production facilities would be operating at full capacity, so judged that the order would be useful in cutting the costs of other products and signed the contract. The contract terms were shipment of 10,000 units at the end of every even month for a total of 60,000 units a year. The two sides agreed on the U.S. dollar as the settlement currency.

The exporter shipped out 10,000 units as contracted for the initial February delivery, but for the April delivery, there was a delay in opening the letter of credit due to one-sided reasons and the exporter was asked to ship only 5,000 units and to ship the remaining 5,000 units as the June delivery. Furthermore, it was requested to skip the shipments for the June and August deliveries and delay them to October.

During that time, the exchange rate shifted with the yen falling in value. The importer demanded a reduction in price corresponding to the depreciation of the yen for the 20,000 units of the December delivery. The exporter responded by discounting the price by 4 percent, but when shipping the remaining half, the yen conversely rose in value. This time the exporter requested return of the price, but the importer refused.

The exporter had to greatly revise its production plans, was squeezed in profits by the discount, and incurred unexpected warehousing fees and other expenses. As a result, the deal ended up very different from the initial sales contract.

<<Lesson to be Learned>>
When importers find themselves making a certain profit with a small initial transaction, they will sometimes deliberately place large orders with the intent of securing further profit and purchasing at a lower price. The importers press the exporters to provide discounts due to the large order, and the exporters accede. Next, the importers reduce the size of their orders on some excuse and try to revert to small size contracts.

In this case, while maintaining the total size of the transaction, perhaps the importer never intended from the start to open the letters of credit along with the scheduled shipments. The actual state of sales at the destination will hardly ever be the same as the volumes of the initial plans and are inherently irregular. Recently, the global markets have been sharply fluctuating due to unforeseen factors and regardless of the results of the previous years.

Further, in the case of long term contracts, there will always be fluctuations in the exchange rate until the contract ends. There are limits to how far the export prices can be fixed. The way the importers handle this is by so-called "block booking". Exporters should see through this when receiving inquiries. Even if drawing up a sales agreement, they limit the unit sales prices to the practical amounts of shipments and designate that the unit prices of the remaining amounts may fluctuate. In that case, the above exporter could have drawn up separate documents for 60,000 units in which it set unit prices for each amount of transaction.

Further, from a separate viewpoint, the importer might have demanded sole import rights based on its large order of 60,000 units with the intention of shutting out imports by others through other routes. Exporters are recommended to be wary.

Pitfalls in Export Negotiations (PART 3)
Print this articleMar.2014
Pitfalls in Export Negotiations (PART 3)
- Be Careful about "Pay after Delivery" Contract for Big Orders -

<<Case Study of Failure>>
A manufacturer first received an order for 3000 units from an overseas buyer (importer) and received orders for 2000 units each the next month and the month after next. In each instance, the manufacturer received payment for the products before shipment as promised. However, at the time of the fourth order, the manufacturer received a request that "we would like to place an order for 20,000 units for the busy sales season before New Year's, but we only have sold an initial 5,000 units. We do not have the funds. We will remit half the amount, so would like to pay the balance after 60 days."

The manufacturer (exporter) had placed an order for the raw materials in anticipation of production, so had no choice but to accept this request and shipped out the units before full payment. Three months after shipment, the balance had still not been paid. The account was delinquent and the debt was going to be marked as bad. When visiting to the overseas buyer to push for payment, the manufacturer obtained agreement for payment after 30 days if discounting the balance by 50 percent.

<<Lesson to be Learned>>
The manufacturer had worked hard to start up exports and finally succeeded in securing its first order. The larger the market and the greater the future promise, the more one tends to get ahead of oneself in procuring raw materials and setting up new production facilities in anticipation of future business.

Smart purchasing managers explain their firms' future purchasing plans and negotiate for discounts in price. Even if promising future business, however, personnel changes can result in the managers being switched midway. There are also managers who just give lip service. The manufacturer side has no guarantee at all that promises will be kept. When a manager changes, the new manager will often dump the approach of his predecessor and fail to live up to his promises.

Keep your cool when dealing with large anticipated orders. Regardless of it being the busy sales season in the destination country, it is important to export only an amount commensurate with the incoming funds.

Furthermore, if agreeing to payment after delivery of products, sales credit is generated. Even if selling domestically to a place which can be visited any time, there is a risk with selling on credit. Engaging in overseas business across national borders and extending credit to some place where not even a credit check can be run would be highly reckless.

Pitfalls in Export Negotiations (PART 2)
Print this articleFeb.2014
Pitfalls in Export Negotiations (PART 2)
- Don't Forget to Clearly Set Down Settlement Terms in Contract -

<<Case Study of Failure>>
An exporter (Company A) received the following e-mail from an importer (Company B).
"We remitted the required amount through our Bank already. Meantime please air our cargo immediately due our clients pushing so hard."

The Company A thought favorably that the Company B was in a hurry to receive the products due to repeated requests by its customers, so it expected the remittance to arrive soon. The Company A took a quick action to ship the products by airfreight. The Company A was concerned about a disadvantageous position when it fails to meet the contractual delivery date.

However, the Company A's bank had never notified the Company A of the arrival of the remittance. When pressing the Company B about the remittance, the response was "checking! checking!" Eventually, the cargo was picked up by a local shipping company. It was at that time that the Company A realized the initial e-mail had been a ruse. After that, when calling the Company B, it was never able to get through.

<<Lesson to be Learned>>
If no sales contract had ever been exchanged, you are dead at the start of course. Even with a contract, in the process of business negotiations, the Company A failed to insist that it would airfreight the contracted cargo only after confirming receipt of the entire payment at its bank. Further, it failed to clearly indicate this in the settlement terms in the sales contract. Both of these were problems.

Responses from the other side like "already remitted," "already paid," "sending soon," "checking," and "negotiating with our Bank" are commonly used excuses meant to buy time. If getting such a response from the other side, immediately reexamine the credibility of the other party in the contract. The Company in the case study should have immediately visited the destination country and begun proceedings for recovery of its products.

We propose inserting the following phrases into sales contract as terms of settlement. Further, in the process of negotiations in inquiries as well, these should be asserted as terms of trade.

1. Terms of Remittance
1) By T/T Remittance for the full contract amount in Japanese Yen (in case of settlement in yen) to the Sellers Bank Account No. XXXXXXXX of ###### Bank, OOOOO Branch before the shipment.
2) If desiring further safety, the following is also added:
The shipment to be executed after Sellers confirmation of the receipt in Sellers' bank account.

2. Terms of L/C
Shipment: Within 90 days after receipt of L/C to be opened latest by Month dd, yyyy.

Pitfalls in Export Negotiations (PART 1)
Print this articleJan.2014
Pitfalls in Export Negotiations (PART 1)
- Don't Accept Invitations until after Signing Contracts -

To help those who are unfamiliar with export transactions, we have edited extracts from JETRO's survey report "Pitfalls in Trade Practices - Export Practices -" (Japanese language edition only, issued in 2010) and introduce case studies of failures in business negotiations and lessons to be learned in a four part series.

Part 1. Don't Accept Invitations until after Signing Contracts
Part 2. Don't Forget to Clearly Set Down Settlement Terms in Contract
Part 3. Be Careful about "Pay after Delivery" Contract for Big Orders
Part 4. Advance Package Order Placement and Long-Term Contract May Cause Exchange Losses

<<Case Study of Failure>>
The president of an export company (Company B) visited the office of an overseas import company (Company A) to directly promote exports and sales of his products. When arriving at his hotel in the evening, he accepted an invitation for dinner at a fancy local restaurant from the president of the Company A. The president of the Company B was highly impressed by the invitation of the Company A and was placed in a good mood.

The next morning, he was picked up at his hotel by the Company A and began negotiations at the offices of the Company A. At the time of the business talks, at the Company A side, the secretary and staff in charge were present and appeared to be well informed of the discussions. During the business talks, agreement was reached on the unit prices, but no concessions could be obtained from the Company A on the settlement terms. The president of the Company A repeatedly said "Trust me! For settlement, we will pay half in advance and the balance 90 days after arrival of the goods."

Having been invited out for dinner and trusting the character of the president of the Company A, the president of the Company B said to himself that this time he would allow special treatment and accepted the terms of the Company A. After receiving the half in advance, the Company B sent the products by airfreight, but at the stage of the final payment, the Company A raised complaints against the products. The Company A sent an arbitrary note that "since we incurred great losses this time, we are deducting 25 percent from our remittance". At that point of time, the president of the Company B realized that in the final analysis he had paid for the initial dinner himself.

The staff of the Company A who attended the meeting may have been props to bolster the image of their company president and apply pressure on the president of the Company B. If considering this, the dinner invitation was also a staged event.

<<Lesson to be Learned>>
Even if the other side says "Trust me!," remember that this is business. Trust in business is built up through a history of accurate and timely payment or payment in full in advance several times. Basically, the president of the Company B should have replied in response to the request for special settlement that "I will think about it after reviewing the results after 10 or so orders and payments."

For trust to be extended, something is required in return. In this transaction, there was nothing counterbalancing the remaining half of the payment to be made later. Even in domestic transactions, one has to think long and hard and conduct surveys before accepting such terms. In transactions spanning different countries, should one really so easily accept such terms?

Inviting the other side out to establish a personal bond and thereby getting products at a lower cost and higher profit margin is probably an integral part of the business tactics of the Company A. The approach which the Company B should have taken was to think of some other means for returning the favor of the dinner. It should have made clear to the Company A that unless its settlement terms were met, the deal would fall apart.

There is no reason why an exporter should accept a personal invitation before business negotiations have been concluded. If the importer presses hard, the exporter should propose putting off the dinner to after the negotiations are finished so as to avoid the above such situation. Be careful not to be euphoric before the start of negotiations. Keep your mind focused so as to be able to make common sense judgments and avoid risks.

Overseas Sales Using TTPP
Print this articleFeb.2009
Overseas Sales Using TTPP
- Registering Effective "Sell" Proposals -

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

Registering more effective business proposals at TTPP website was covered in my November 2008 issue for "buy" proposals. This time I will explain about "sell" proposals.
In "sell" proposals as well, how to make your own business proposal stand out among the vast number of proposals from around the world is crucial.

First, let us consider what kind of information buyers are seeking.
- Are the products ones the buyers want (including design and specifications)?
- Does the seller meet their desired terms on lot size, price range, payment method, lead-time, and other terms of trade?
- Is the seller one that can provide the detailed information required for clearing import controls and regulations?
- Does the seller have the right to sell the products? Further, is it well acquainted with the products?
- Are there clear rules relating to quality such as product warranties, complaint procedures, and return policies?
- Does the seller have a reliable record (customers, sales quantities and total sales)?
- Can the seller be worked with over the medium and long term based on a relationship of trust?

In registering a "sell" proposal, it is crucial to present specific products and terms of business while considering typical demands of buyers and incorporate information easing the fears of the buyers over whether the seller can be trusted to complete the deal without problems. Let's look at the points to watch at the time of registration for different product categories.


- General Consumer Goods
For general consumer goods, the appearance of the products (image) is a major factor. Therefore, it would be effective to provide digital images of the highest resolution allowed on TTPP website and to have a professional take them. Further, samples are usually requested, so it would be best to list terms for sending samples (for a fee/for free, quantity and any shipping charges) In the same way for other product categories as well, you should clearly describe minimum lots, prices, currencies, payment terms, delivery dates, product warranties, complaint procedures, return policies and other business terms in as much detail as possible.

- Brand name Consumer Goods
In the case of brand name goods, you can raise your credibility by showing that you actually have the right to export and sell the products (for example, that it is your own original brand or that you have concluded an export and sale agreement with the manufacturer). If you do not indicate anything regarding the export and sales rights, the buyers will be uneasy over whether you are selling unauthorized exports or fakes.

- Cosmetics and Health Foods
Many countries have legal regulations corresponding to Japan's Pharmaceutical Affairs Law and Food Sanitation Law. Usually, the buyers ask for submission of data on ingredients, data on test results and manufacturing/quality control process charts to meet with their domestic regulations. When registering a sell proposal, you can put your buyers at ease by clearly indicating you are ready to provide such data.


- Industrial Parts
In the case of auto parts and accessories, there are generic parts and genuine parts. In the case of genuine parts, like with brand name consumer goods, you should clearly show that you have the right for export and sale.

In the case of generic parts, the buyers will want to examine the quality and suitability for use in repair, so the country of origin, factory quality control system (such as ISO certification), warranty periods/contents, complaint procedures, return policy and past shipments will be checked. Quality related information should also be clearly indicated.

Further, you should also be prepared to present or forward an overview of your firm (including main experience, QC processes/certifications and overview of factories), and an overview and specifications of the products in English. Further, creation and maintenance of an English language website would also be effective in raising your credibility by complementing your self-introduction and proposal information.

- Agricultural Products, Industrial Use Resource Products and Capital Goods
As explained in my October 2008 issue, transactions in metal/mineral resources and food resources are large in volume and value, are subject to market fluctuations, and involve numerous specialists, so deals are complicated and caution is required. In the case of resource products, you have to clearly describe the deal process and terms and make all effort not to cause any misunderstandings or unease on the part of the buyers.

In the case of deals involving large sized machinery, it is necessary to list not only the machine performance and price, but also information on machine installation, guidance on operating procedures and maintenance services. Clearly laying down the conditions for medium and long term transactions will lead to peace of mind and trust on the part of the buyers.

In TTPP website where neither the seller nor the buyer can see each other, when looking at the content of business proposals, the first impression is most important. Not only product PR, but also as detailed explanations as possible on the quality control system, terms of transactions, complaint procedures and return policy should be provided. This will be a step toward obtaining the trust of the buyers and building medium and long term business relations.

Advance Surveys and Analysis for Opening up New Market
Print this articleJul.2008
Advance Surveys and Analysis for Opening up New Market
What Are Features of Your Product? Do You Understand the Target Market?

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

Quite a few of you have registered proposals at the TTPP in order to open up new markets for your products, but feel you have not received the expected inquiries. On the other hand, "Outcomes of TTPP User Questionnaire Survey" *1 shows that many users have been actively utilizing the TTPP to win real contracts.

*1 How To Use TTPP: Outcomes of TTPP User Questionnaire Survey(2007 Dec. issue)

What is causing the difference? Various reasons may be considered - as many as the number of registered proposals. When opening up a new market, you will need some consideration. Here, I will explain about two important points that should be considered first; 1) determine the special features of your own products and 2) obtain a grasp of the environment surrounding the target market.

1. Determine Special Features of Your Own Products

First, why haven't you received any inquiries? Let's think of the reasons. Various reasons are possible. For example, there might just be problems in the way you have introduced your products and services on the TTPP, so their special features may not be conveyed well. There might not be sufficient demand in the target market. Alternatively, competing companies might already have secured overwhelmingly large sales shares, the strengths of your products may not translate to strengths in the target market with its different environment, and legal regulations or environmental regulations may impose in a huge cost burden on the importing side and make entry difficult.

Whatever the reason, you should first consider what special features your products offer and clarify what their strengths are. Do your products provide special technologies or solutions for solving certain specific problems or do they use special rare materials? Further, think about your products from different perspectives such as fame and value in design, brand and country of origin. Alternatively, are you strong in costs, delivery, or the distribution system?

In this way, it is important to objectively examine your own products to obtain a clear grasp of their strengths. If your products are already widely accepted in the domestic market, they are bound to have some strengths. At this time, please reevaluate the features and strengths of your products. On the TTPP, it is necessary to refer to other proposals including those of competing companies, compare your proposals with them, and redesign your proposals to promote your superior points. *2

*2 How To Use TTPP: Is your business proposal really attractive? (2005 Jan. issue)

2. Obtaining a Grasp of Environment Surrounding Target Market

Next, let's consider the environment surrounding the new market. The business environment includes the macroenvironment such as the political and economic situation, society and culture situation, technology, legal regulations, features of the products and services and various other factors. Among these,which factors have a large influence on your products will differ depending on the country or region. You will have to examine this on an individual basis.

As an example of potential social and cultural problems, there are the Japanese animation and related products beloved by young people and children around the world. In some countries, differences in religion and moral standards make certain animations unsuitable for their societies. Television broadcasts of some animations have even reportedly caused social problems. In the case of consumer products, you have to study at least the background history of the target market, its racial composition, religions, language, morals, and other general matters. You should then try to imagine how your products will be received in that society.

As an example of problems with legal regulations, there have recently been a string of scandals in Japan regarding tainted imports of food and false labeling of food (false labeling of place of origin and date of manufacture) This has led to hypersensitivity in food sanitation and may lead to tougher food health laws and other regulations. It would be helpful if you would make it a daily practice to keep up with international news, in particular information relating to the target market.

As factors having more direct effects, there are the features and trends in the target market and industry. The most important thing is "is there demand for your product in the market?"

If your products are industrial goods, is the market mature enough to handle your high technology? Further, in some countries of Asia, there might be a demand, but numerous other Japanese companies or affiliates may already be supplying products and competition may be tough. If your products use general technology, companies from cost competitive countries may already be supplying inexpensive products and entry may be difficult.

The main information regarding the market and industry:
- Size of market (volume and value of sales)
- Companies forming the market (competing companies and potential tie-ups/distributors)
- Degree of competition (number of competing companies and sales shares)
- Buyers (if B2C, consumers, while if B2B, business customers)
- Alternative products and services
- Industrial regulations

This sort of information can be obtained through various channels in the case of the domestic market. However, where can you get this information in the case of a new overseas market? You can use a local market research company to conduct a survey, but this is not cheap. Before commissioning such a survey, we recommend you investigate the market yourself through the Internet, media and exhibitions. This will enable you to focus on specific themes and keep down the survey costs or will enable you to give more details when requesting surveys.

1) Internet
You can check whether they are any competing companies or products through the TTPP and other matching sites and industry-wise directories of the target countries. Further, if the target country has an industrial organization (association) with its own website, you can use it to access lists of companies and industry news. There are various industrial organizations in the U.S. and Europe. Their English language websites are also put together considerably well. Like the "global links" of the TTPP, the websites of various embassies and organizations often have links to sites providing commercial information and sites of related organizations around the world. It is worthwhile to surf the Internet.

2) Media and Libraries
If a major field, there will be plenty of industrial newspapers and journals which will cover trends in the major global markets and technologies. There are also free e-mail newsletter services. In addition, JETRO Business Library allows you to view various survey reports and data on a wide range of countries and industries.

3) Exhibitions
The best way to use exhibitions has already been covered in the July 2007 issue of the TTPP Newsletter.*3 Exhibitions are treasure houses of information and chock full of primary information on the industry concerned. First of all, get over to any international exhibitions held in your country. If you think you want to make a full attempt at breaking into the market, it would be next worthwhile to visit related exhibitions in the target market. The "feel" of the industry you get there is information you cannot get from market surveys - no matter how detailed and how expensive.

*3 How To Use TTPP: Effective Use of Product Exhibitions (2007 July issue)

In this way, investigating and analyzing the environment surrounding the target market will help clarify the important points you should watch out for, the problems to be solved, and the roles and quality to be sought from partners. Please try to reassess the contents of your TTPP proposals.

Avoiding Risks in Export Business
Print this articleJun.2008
Avoiding Risks in Export Business
When Drawing Up Contract, Clarify Responsibility for Expenses.
Be Cautious of Changing Prices and Terms After Contract is signed. -

Mr. Hidemi Mori, Advisor in charge of Southwest Asia, Business Service Center, JETRO

I spent a total of nine years in India working for a trading company, then came over to JETRO to serve as an advisor for doing business with India. Based on this work experience, I would like to explain some of the trouble that often occurs and ways to avoid it to people with little or no experience in the export business.

Trouble in the trade business is quite often due to problems on the Japanese side such as poorly drafted contracts, excessive trust in the other party, and business naivety. In particular, it is not unusual to find buyers who will utilize omissions in a contract or mistakes on the Japanese side in implementing the contract to draw out more favorable terms to the full extent permitted by the law. Below, I will describe two examples of such trouble I have been consulted on.

(1) Inability to Recover Payment
The terms of settlement were partial advance payment and payment of the balance within 30 days after delivery of the products. The Japanese side shipped out the products after receiving the advance payment, but did not receive the balance even after 30 days from delivery. Even with repeated dunnings, only excuses were received. Finally, the importer went bankrupt, so the payment was never fully received.

This trouble was due to excessive trust in the other party. Particular care is required in doing business with India since agents with poor financial resources are often involved. When starting new business, be sure to use L/C's to get 100 percent of the payment before handling over the products.

(2) Expenses for Repair Services for Exported Machinery
The other party requested repair of the exported machinery. When arranging for the dispatch of experts and airfreight of replacement parts, the two sides concluded a contract on the method of approach and the burden of expenses. After completion of the repair, the other party requested a discount in the contracted price. The Japanese exporter accepted the request unwillingly. The actually remitted amount was the revised amounts minus further the local taxes and bank fees.

To avoid such trouble, first, clearly set down the grounds for calculation of the fees at the time of drawing up the contract. Second, do not agree to discounts after signing the contract. If you take too lenient attitude, a shrewd businessman will sometimes make unreasonable requests and try to see what happens. Unless there are special circumstances, just say "NO" to contract changes. This will rather raise your stature in the business. It is also important to clearly specify in the contract which side is responsible for paying local taxes and bank fees in the other country. Basically, have costs incurred locally paid by the local side.

In addition to the above, I will describe several other examples of potential trouble.

(3) Requests for Revision of Product Price
While similar to the trouble of the above (2), after signing the contract, sometimes the other party will request that you revise the price of the product due to the changing market prices or competitive situation. Once you accept such a request, be prepared to be asked to revise your prices every time. If the other party is one which shows reluctance in fulfilling the contract when you refuse its request to revise prices, it would be safest to cancel the contract.

i(4) Requests for Lowering Amount Stated on Invoice
] Sometimes the other party will request that you lower the amount stated on the invoice to allow it to save on local tariffs and will promise to pay the difference in installments. Complying with such a request would violate the foreign exchange laws. Further, it might fall under the scope of anti-dumping regulations. Even if the other party says it will separately pay the difference, it might not. Say "NO".

(5) Designation of Third Country for Remittance of Agent's Fees in Contract
If concluding a contract which designates an agent in a third country for remittance of agent fees, sometimes you will find that the agent is a relative of the contract partner and the fees will go directly into the pocket of the contract partner. In such a case, remittance to the third country would constitute complicity in tax evasion. It is essential to investigate the business of the designated agent (agency) and check that the fees are commensurate with the work performed.

Effective Email Offers by Export Companies
Print this articleDec.2007
Effective Email Offers by Export Companies
=Make Initial Contact with Simple Points, Provide Details through Website =

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

Many of you are probably of thinking of using the TTPP to introduce your company's products to the wider world in the hopes of this leading to increased exports. Here, I will provide some hints to help such export companies clinch successful deals.

As the first step in an export business utilizing the TTPP, first use the search function to look for partners who might be interested. Next, send an email introducing your company and products to whom you think might be future partners. Not only on business occasions, but when one person meets another, the first impression is important. In this way, the impression given by your first email offer to the other party is very important.

1. Good First Impression and Improvement of Credibility
Let's first consider how best to ensure your email offer gives a good impression to the receiving side, which speaks a different language and comes from a different culture. The receiving side will wonder:

* Is your company really reliable?
* How serious is the offer being made?
* Can you be clearly communicated with?
* Is your product quality OK?
* Is your firm one which will strictly observe delivery dates and other terms agreed on?

In this way, many questions may arise. The most important thing is your "credibility". For this reason, you should prepare your email offer to reduce these questions as much as possible and gain the other side's trust. Some point to note in order to improve your credibility are as follows:

* Don't use a free mail address or personal mail address. Use your company's own mail address.
* Keep the email simple and to the point.
* On the other hand, remember that too short an email will create questions as to your seriousness.
* Try to use polite English sentences. (In particular, beware of free automatic translations.)
* Respond to inquiries sincerely and swiftly and answer questions properly. * For detailed information, prepare separate files of corporate brochure and proposals in English.
* Don't push sales too much. First, just stop with an introduction.

Let me add something regarding the final point. People usually naturally react negatively when directly pushed to buy straight off. Therefore, in your first email offer, it is best to stop at a simple introduction of your company and products.

2. More Detailed Corporate and Product Information in Your Corporate Brochure and Website in English In any case, it is effective if you use your email offer to simply convey the main points and prepare an English language website and corporate brochure for reference for the details.

I sometimes see examples where companies put all information on their products in the email offer. The receiving side, however, has to spend quite a lot of effort to understand and judge such completely new content. Further, when busy, it will either put it off to later or eventually forget about it. First, to get your email offer read, let's prepare a your separate corporate brochure and website in English. Let me then mention some points to note when preparing your corporate brochure in English.

* Cover content which cannot be explained in detail in your email offer (company information etc.)
* Prepare it as an attachment to the email (WordiRj, PowerpointiRj, PDF, etc.)
* Design it to draw out the interest of the other party (show superiority of your technology, past delivery figures, awards, clippings from media, etc.)
* Use pictures and design presentation to a moderate extent.
* Keep things simple.

Once you prepare your language corporate brochure in English, you can use it as it is for your language website in English. Further, in the case of a website,you can give others the impression of your being an active firm by continually updating the content.

3. Exporters and Importers Must Mutually Benefit from Equal Standpoint
Finally, let me explain the most important basic stance to take in international business.When doing business in Japan domestically, I often see a vertical relationship where one side "does the other a favor" by selling or buying to or from the other. This attitude, which was born from the traditional Japanese distribution system and business practices, cannot be understood by others in international business. That is, one side does not unilaterally enjoy all of the benefits.Rather, through business, the exporting side and the importing side mutually benefit from equal standpoints, that is, "partnership" based on mutual trust is stressed.

This is often called a "win-win relationship" or "fair business". In international business, in order to build long-term good relationships, I strongly recommend you think what these terms mean and to put them into practice.

Export Transactions and Exemptions from Consumption Tax
Print this articleMar.2006
Export Transactions and Exemptions from Consumption Tax

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

Did you know that export transactions are exempt from the consumption tax? Sometimes people don't understand why import transactions are taxed, but export transactions are not. This is based on the idea that the domestic consumption tax should not be assessed on overseas consumption. If you consider that foreign consumers can't expect to receive anything in return even if paying this tax and therefore shouldn't have to pay it, you can easily understand the reason for the exemption.

"Export transactions" include not only the export of goods, but also international shipping, international phone calls, and provision of services to overseas customers. For a transaction to be recognized as relating to exports, in the case of exports of goods, an export license from the customs authorities and, in the case of service contracts, a copy of the contract clearly defining certain terms are required as proof.

In the case of export transactions, the sales of the exporter are exempt from the consumption tax, but the purchases used for the same have already been taxed. These taxed purchases include not only the purchase price of the goods, but also the various expenses required for the export transactions [domestic communication costs, travel costs, cost of office supplies, entertainment costs, etc.] Therefore, when filing returns for payment of the consumption tax, it is possible to deduct the amount of the national consumption tax and local consumption tax included in purchases for export transactions from the total amount of consumption tax to be paid.

Businesses dealing exclusively with exports or businesses with high ratios of export transactions can also file for an early refund of consumption taxes. Japan has a special provision for declarations of consumption tax, which allow refunds to be filed for every three months or every month. Once selecting either option, the filing period cannot be changed again for two years, so think well before selecting one. If using this special provision and filing for refunds on a frequent basis, businesses with large refunds due them can use the refunds to augment their cash flow. However, the exact timing of refunds may differ somewhat depending on the tax jurisdiction, so we recommend you inquire about this with your local tax authorities in advance.

Our company files for refunds every three months. This has the following merits: The checking process is easier than with filing once a year, our company engages in many export transactions, so obtains a hefty refund in each case, and even when we engage in fewer export transactions and have to pay consumption tax for other sales, the amount doesn't become that large. Since you can't change the filing period for two years once selecting it, it is important to project which type of transaction will be more prevalent, how export transactions will trend in the next two years, and what effect the consumption taxes will have on your cash flow before filing.

Our company also provides consultation services to overseas customers, but when residing in Japan and providing such services from Japan, this is not recognized as an export transaction and is taxed. Therefore, when providing services to overseas customers, please consult with your local tax authorities to see whether the services will be taxed or not. Only the actually taxed business can claim exemption or obtain a refund. In Japan, businesses with annual sales of less than 10 million yen do not meet the bar for the consumption tax, so if desiring to obtain a refund, have to file to obtain status as taxed businesses.

We sometimes hear of businesses which tack on the consumption tax to their exports saying to their overseas customers that their internal accounting systems don't differentiate between domestic sales and exports and therefore they cannot process consumption tax exemptions. If the customers know anything about the consumption tax system, this tactic will immediately lead to a loss of trust. Further, when a Japanese manufacturer sells its products to a Japanese trading company, even if the trading company then exports them, the transaction between the manufacturer and the trading company is counted as a domestic transaction. There are sometimes businesses, which misunderstand this.

When first engaging in an export transaction, before the actual transaction, be sure to think about how to deal with the consumption tax. The consumption tax section of your local tax office will be happy to provide assistance.

Print all articlesAbout import

How to Reduce Import Costs
Print this articleSep.2010
How to Reduce Import Costs
- Review your ways of doing business, eliminate wastes, and improve negotiation skills -

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

For import businesses, a top priority is to challenge to find best ways for sales in the domestic market. Under the current tough business environment, it is also crucial to make efforts toward the reduction of purchasing costs to improve business efficiency, increase profit margins and enhance competitiveness for business survival.

Generally speaking, import businesses are easier to start than export businesses, which require additional efforts to sell goods to overseas companies and to collect bills securely. If you start import businesses, by necessity, without any careful consideration, however, you may experience a lot of waste in spending due to the lack of knowledge or experience. If you are not so cost-conscious, for example, you may not be able to notice that costs are swelling rapidly.

Cost consciousness is important, but this does not necessarily mean that you can take random approaches to reduce costs by taking every possible way. In the case of personal businesses or very small-sized businesses, cost reduction efforts sometimes may cause a huge increase in workloads, making them difficult to find enough time to do essential jobs for their import businesses. Even if cost reduction is possible, it may often result in higher risks. If you find negative effects of cost reduction, it is important to set priorities to determine what to do.

Here are steps for cost reduction.

Step 1. Analyze product costs.

First, analyze the current status of costs. List out recipients, amounts and purposes of your payments. Recipients include overseas suppliers, logistics/transportation service providers and customs offices. The step enables you to review the workflow of your import businesses.

If you do not have much experience with import businesses, you may experience troubles or errors listed below:
- Charged for a long period by overseas suppliers for unspecified and unreasonable fees.
- Continue to pay prices including extra costs such as agent commission without noticing the extra charges.
- Overcharged for long due to errors in invoices.
- Lack of knowledge about the availability of other less expensive services, or the lack of experience to use optimal services to meet varying needs depending on TPO (time, place, occasion).
- Lack of consideration about inspection costs for imported products
(Prior surveys are important because inspections are time-consuming and expensive procedures).

Any foreign currency-denominated import businesses always have their inherent exchange risks. For large volume import businesses, future exchange contracts are often used as a common way to avoid risks. For small import businesses, proper prices should be decided after simulating exchange risks carefully to avoid large exchange losses.

Step 2. Find your own unique ways for cost reduction and implementation.

Following Step 1, find your own ways for cost reduction. This step does not require any negotiations with your counterparts. So, the step is relatively easy to implement. In addition, this step contributes to building cost-effective business structure. Follows are points to be checked.

1.Ensure that neither unspecified costs nor required additional costs do exist, when you receive a cost estimate and before you place an order.
2.Check the details of the invoice you receive.
3.See it that charged costs are proper and adequate.
4.See it that charged costs are based on proper and adequate tariff rates.
5.Check if proper and adequate logistics and transportation means are selected.
6.Check if laws and regulations are properly and adequately understood and if actions are compliant with them.

Regarding the reasonability of charged costs in 3, Japanese importers usually get cost estimates from two or more different suppliers to check the reasonability of the prices as well as the quality of products and services, before deciding their suppliers.

Regarding tariff rates in 4, ask your customs agent to survey tariff rates by providing it with the information or contact customs office to inquire about the tariff rates.

Regarding laws and regulations in 6, ask your customs agent for advice (at least you can get the contact information from the agent). You can also visit JETRO's website to access its "Q&A" page regarding Japan's laws/regulations, standards and procedures for import and export transactions.

https://www.jetro.go.jp/world/japan/qa/ (Japanese only)

If necessary, you may ask overseas suppliers for the revision of specifications required to meet Japan's laws/regulations and standards.
In that case, it is necessary to get an agreement from your overseas supplier on the requirements for the change of specifications. At the same time, you need to get a cost estimate about extra charges required for the revision. If you make one request after another due
to the lack of knowledge or because of insufficient information, you may cause inconvenience on the side of your overseas supplier, resulting in loss of the supplier's confidence in you.

Step 3. Negotiate with overseas suppliers.

In any negotiations, you always have to take into account standpoints of your counterparts. In addition, it is necessary to pay extra attention to expressions and timing in the case of negotiations with counterparts in foreign countries where languages, cultural background and business practices are different from those of Japan. Some importers relentlessly insist on their unfounded demand for price reduction.
My long experience with import businesses shows that "give and take" is important for long-term business relations. "Only take" or "only give" relations do not last long. I believe that proposals for win-win relations are a key to success.

A main theme of my report is cost reduction, so I will focus on keys to negotiations for price reduction. It is important to think from standpoints of your counterparts and to provide them with business proposals that would encourage them to accept price reduction positively. For example:

1. Providing your counterparts with your future business plans to gain their understanding and cooperation. If you ask your counterparts to reduce prices only for lots of products you will immediately order, it is difficult to win a pleasant agreement because they cannot predict that their business with you will continue on a long-term basis or will show a rapid growth in the future. If you express your intention to continue and expand the business on a long-term basis, they would be more inclined to cooperate with you.

2. Offer proposals on a "give and take" basis.br>IIf you offer proposals for the increase in purchasing volume, you may often get an agreement on price reduction easily. An option is to offer proposals to buy other products together in order to persuade your counterparts to reduce prices.

3. Offer "fringe benefits" to counterparts. br>AAnother option is available to persuade your counterparts to reduce prices. It is to offer proposals for various types of "fringe benefits." For example, you can provide them with free-charged reporting services such as reports on test marketing results in Japanese market or reports on the trends of Japanese market. You may be able to persuade them, by emphasizing the advertising effect that sales of their products on online shopping sites would create in Japan. Not only words, but also enough knowledge and sincerity are required for your counterparts to recognize you as a reliable business partner.

4. Gain cost benefits and save time by selecting optimal terms of payments.
In export and import businesses, different standard terms of delivery and receipt can be used for price setting. For example, cost benefits may emerge on the side of importers if you opt for "ex-factory/ex-works price" (which is charged when goods are taken at the producing country's factory) or Free on Board (FOB) price (which is charged at the producing country's port of loading) when deciding the terms of payment. If you opt for CFR (Cost and Freight) price (which includes various costs and ocean freight to bring goods to the port of destination), a relatively higher price may be charged because exporters add extra costs in their cost estimate to hedge risks of fluctuation of ocean freight.br>DDespite the fact, some companies choose "CFR price" to keep their purchasing prices stable. For personal businesses or small-sized businesses, "CFR price" may provide a benefit from a standpoint of risk management, because the ownership right of goods is not transferred until goods arrive at the port of destination. Anyway, prices and the terms of transactions should be decided after weighing your experience, knowledge and allowable range of risks.

Some Japanese business people tend to change their attitudes depending on the their counterparts' company size, power relationship and their personal title. Many foreign business people, however, have a clear insight into the personal characters and competences of their negotiation counterparts, so I believe that a key to success in negotiations is to enhance your personal integrity in terms of courtesy, sensitivity to counterparts, diligence or sincerity.

Reference (July 2005 issue):br>Cutting Import / Export Cost and Getting Through Red Tape Faster Also Require Ingenuity (Basic Knowhow) https://www.jetro.go.jp/ttppoas/howto/index2.html

Buying from Abroad Using TTPP
Print this articleNov.2008
Buying from Abroad Using TTPP
- Registering Effective "Buy" Offers -

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

The TTPP is a database including about 30,000 business offers from all over the world. Making your offer stand out as most appealing among these is an effective way to use the TTPP. That is, it is not enough to just register a business proposal. You also have to provide (disclose) information keeping in mind whom you want to appeal to. This time, I will talk about "buy" offers in particular among the registered offers.

Whom you are appealing to in "buy" offers is of course the sellers. What do the sellers consider important in "buy" offers? The following may be mentioned:
* Whether the product is one which the seller wants to sell.
* Whether the desired lot size, price range, settlement method, and other terms of transaction match with the seller's requirements.
* Whether the buyer can be trusted to clear the import controls and regulations of the destination country (sometimes disclosure of confidential matters of the seller is sought)
* Whether the buyer can be trusted to pay.
* Whether the buyer has marketing and sales capabilities
* Whether the buyer could become a medium or long term business partner.

That is, when registering an offer, it is important how much of and how accurately you can provide the above information. Next, let's look at the content of the information more closely.

[Product]
Have you clearly indicated what you want to buy?

For example, if you register an offer to "buy something not yet introduced to Japan", the overseas sellers will probably not be that well acquainted with the Japanese market and will not know what has not yet been introduced. This kind of registration might be effective if a buyer were trying to build up a product line and establish a sales plan based on a large number of sell offers. On the other hand, while there will be firms which will make sales offers without any well-organized plans, serious sellers would be uneasy about doing business with such a buyer and would probably not make a serious offer. Considerable trouble and time are required for businesses to learn to trust each other and reach agreement on contracts.

When importing consumer products for sale, it is important to bear in mind sales advertising and select products for the target market (consumers, low end items, medium level items, luxury items, and other product lines) and study marketing strategies. If making such a study, you should be able to clearly indicate the features of products you require, the amount of the initial transaction, the price range, etc. If looking at the offers registered at the TTPP, some of the people interested in small transactions, including Internet sales, probably need to think a bit more about their marketing strategy and sales plans.

[Disclosing Terms of Transactions]
Clearly indicate as many of your desired terms of transactions as possible.

When you put together sales plans, you should first determine the product mix and price range, settlement terms, delivery requirements, and sales and distribution costs and other cash flow and earnings issues. When directly importing products from abroad, I recommend that the buyer clearly set down the desired terms of the deal after careful consideration of what to demand in terms of delivery dates, quality control, inspection, etc. and terms of settlement and risk management. If not that confident in negotiating in a foreign language, it would be wise to present as many of your desired terms as possible at the start. The negotiations will go smoother. Note that in the case of an agent, clearly indicating the authority you have to act as an agent and the range of your responsibilities is important in winning trust.

In international business, both the seller and the buyer should stand on an equal footing and approach negotiations fairly and in good faith. It is only when you realize this that you can build long term business partnerships. I personally have seen and experienced many things in international business. I have learned that, in all countries and at all times, success in introducing new products and opening up new markets depends on the trust you have with your business partners. I recommend that you keep this point in mind when registering an offer so as to make the most effective use of the TTPP.

Effectively Utilizing Buying Missions and Business Meetings for Import Business
Print this articleFeb.2008
Effectively Utilizing Buying Missions and Business Meetings for Import Business
=Expertise to Select Products, Business Plans, and Material Production and Dialogs to Facilitate Mutual Understanding =

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

I always give advice to people engaged in the import business: "You should keep on eye out for next products for your business." Even if you have a product which is making you a profit now, that situation is not going to continue forever in the future. If you start rushing around to find new products when you have to do so, you would not be able to easily find products matching your business.

The other day, I took part as a lecturer in seminars in Vietnam for local exporters on how to enter the Japanese market. I also attended business meetings for a buying mission from Japan organized by the Vietnamese Embassy in Japan. I would like to summarize my thoughts, based on those experiences, on how to make effective use of such buying missions and business meetings.

1. Consider in advance the sales channels, prices, and volumes of the products purchased
Beginning buyers in particular tend to end up spending all of their energy on finding and importing the products. They leave questions like how to sell the products at home and how to make a profit from them for later and therefore fail in many cases.

To order to determine if your firm can handle certain products, you have to think of who you are going to sell the imported products to. And in which way? Then you have to think at first about profit structure (purchasing prices, sales prices and volume, and resulting profits). A business which studies and plans for this in advance can make full use of the free time at the country visited to tour factories, uncover more new products, and return successfully.

2. Prepare materials introducing your business in advance to facilitate mutual understanding
When the potential business partner is from a developing country or a small business, some people take a condescending attitude to them. Do not forget that you can only do business if they supply their products to you. Further, it is not enough to just obtain information on the counterpart. It is important to introduce your own business by preparing corporate brochures in English,photographs and samples so as to accurately describe your business to the future business partner as well.

Without mutual understanding, good human relations cannot be built and good business will not result. A Vietnamese businessman I met the other day started as a craftsman in a small farm town but in a few years time grew to a manager of a business with annual sales of US$10 million. Anyone can succeed in that way, so it is important to be humble when talking with others.

3. Examine not only the products, but also the reliability and flexibility of the manager
I often see Japanese buyers who just look at the products offered by exporters and instantly repeat words such as "Yes, I will buy" or "No, I will not buy". In other cases they say only "Yes, the products would sell in Japan" or "No". How about asking the exporters questions like "Can you make this type of product?" or "Can you change the product in this way?"

This should be the natural consequence if observing the rule of the first point above.When I talk business, I always look at not only the product, but also whether the manager can be relied on and whether he is flexible enough to work positively with me by nature. This helps to avoid risks. Try it by all means.

4. Develop an "eye" for new products on a regular basis
Developing an "eye" for new products is a something that has to be worked on daily. Do not say it is too much trouble or that you will not find anything even if going somewhere. It is important to take every opportunity to go out and carefully examine new products in order to develop an eye for them.

Right before I left for Vietnam this time, I had a meeting in the Vietnamese Embassy in Japan and saw a product which I thought I could sell well in Japan. In Vietnam, I coincidentally found the manufacturer on one of my tours. I learned that he had received a US$5 million order from a large mass merchandiser chain in Europe and that the product was selling well in a branch of that chain in Japan.

The manufacturer told me that when he previously exhibited the products at an international trade fair in Japan, he failed to receive any inquiries from Japanese businesses. This is probably because in general the booths of developing countries lack refinement in display skills and the manufacturers have little information about the Japanese market, so fail to showcase the products suitable for the Japanese market.

5. Use "buying missions" and "business meetings" of official organizations and commerce and industry associations
Joining a "buying mission" organized by a public organization, foreign embassy in Japan and commerce and industry association offers you many merits over going on your own. Since these are package tours, the travel costs are lower and you do not have to arrange for flights or hotels. Reputable local firms are introduced. You can get support from the mission attendants. Highly skilled interpreters are arranged. All of this is convenient for private entrepreneurs and small businesses. The content of the mission will differ with each mission, but the other participants will all be professionals so even if the industry or the products handled differ, there will be much to learn from them.

Even if not traveling overseas, Japan hosts many international trade fairs and business meetings inviting exporters from overseas. Interestingly, you can sometimes learn from exporters about trends in Japanese industry which you cannot see while in Japan. Let's make positive use of buying missions and business meetings as places to meet new companies, find new products, and pick up new information!

Past columns covered content relating to this. Please refer to them at the same time.

** July 2007: Effective Use of Product Exhibitions

**February 2006: How to Contact Supplier When Starting Imports

Methods of Settlement of Charges for Small Imports
Print this articleNov.2007
Methods of Settlement of Charges for Small Imports
==Bank Remittance, Credit Card Settlement, International Remittance Service of Japan Post Bank ==

Mr. Tatsuya Oishi, President, Focus Business Produce, Inc..

The usual method for settling charges from overseas companies is telegraphic transfers (T/T) through banks. If the amount involved is high, letters of credit (L/C) are used for settlement. With T/T's, higher fees are required compared with domestic remittances of yen. With L/C's, bank examinations are required when opening the L/C's. In the case of settlement of small charges, credit cards may also be used or the international remittance service of the Japan Post Bank (former Japan Post Office) may also be utilized.

This time, we will explain three ways to pay charges for small imports and purchases of samples involving less than 1 million yen: bank remittance, credit card settlement, and the international remittance service of the Japan Post Bank.

1.Bank Remittance
The overseas remittance charge for ordinary handling in a certain commercial bank is 4,000 yen for remittance to another overseas bank. Further, a yen exchange and foreign currency handling fee of a minimum of 2,500 yen is incurred. When remitting U.S. dollar denominated funds overseas from your own usual yen fund account, the fee may appear to be just 4,000 yen, but a foreign exchange fee of the yen-dollar exchange rate is further imposed. Even in the case of yen-denominated overseas remittances, a total of 4,000 yen + minimum foreign exchange fee of 2,500 yen, that is, a total of 6,500 yen, is incurred. When desiring to keep down remittance costs, you should compare the international remittance charges and foreign exchange fees of different banks.

For bank remittances, in the past it was necessary to go to the foreign exchange counter of the bank. Recently, however, on-line banking is becoming possible. Of course, there are fees involved even with on-line banking.

Even with a T/T, it usually takes two or three days before the exporter (receiver) can confirm receipt of the funds. Therefore, when paying in advance, it is necessary to consider this time lag.

2.Credit Card Settlement
The simplest method of payment of import charges is credit card settlement. A foreign exchange handling fee (in one credit card company, 2 percent) and a foreign exchange fee are incurred.

In the case of small transactions, this may be cheaper compared with the international remittance fees of banks (including the Japan Post Bank). Further, there is usually a grace period of payment of about one month before the credit card charges must be settled. This can be said to be the easiest for settlement for purchases of small value samples. However, you have to be careful about the following:

1)To prevent being taken in by credit card fraud, be sure whoever you are remitting funds to is reliable.This is important of course in all sorts of transactions, but in the case of credit cards, particular care is required for security. To prevent the recentlyspreading cases of credit card fraud, the holder of the card is being checked more carefully.
2)Normally, your credit card is set with an upper limit in advance. The settlement amount must be within this limit.
3)Sometimes the exporter will not accept payment by a credit card. 4)For security reasons, there is a problem with sending credit card information by e-mail. Giving the information directly by phone or sending it by fax is relatively safe. However, be careful not to mistake the fax number.
5)The fees differ depending on the credit card company. Compare and check by yourself the total costs including the foreign exchange fee, and the cost of a bank transfer.

3.International Remittance Service of Japan Post Bank
When the exporter (receiver) will not accept a credit card or the amount involved is small, using the international remittance service of the Japan Post Bank can be more economical. There are two ways to remit money: remitting it to the other party's address and remitting it to a bank account. The charge is a flat 2,500 yen in both cases.

When remitting funds to an address in the U.S., you send foreign exchange certificates using Express Mail Service (EMS), registered mail, etc. In this case, the fee for preparing foreign exchange certificates is 2,000 yen. Postage is separate. It takes from five to 12 days for the funds to reach the U.S. addresses.

Note that when sending funds to an address, it is necessary to confirm if the other party has received the foreign exchange certificates. Further, it is necessary to confirm the remittable countries and currencies and upper limits on remittances at the counter. For U.S. remittances, only the U.S. dollar is possible. The upper limit is US $7,000/remittance. In the case of remittance in the name of a corporation, you will be asked to show a transcript of the corporate register.

Above, we introduced three settlement methods. Please be very careful in using them and check the fees involved by yourselves. Use them at your own risk.

Finally, the most important point is that it is necessary to check carefully the export company in advance to determine if it is reliable. In international transactions, we often hear of cases where the buyer sends the money, but the goods never arrive. Be careful.

How to Deal with Quality Issues in Overseas Products and Parts
Print this articleNov.2006
How to Deal with Quality Issues in Overseas Products and Parts

Mr.Toru Kamiya, Representative Senior Consultant, PQESZD CONSULTING.

When importing overseas products or parts for sale in Japan, you have to be careful with quality. According to an importer of certain luxury wristwatches, a defect rate of 10 to 15% is normal (including scratches and other defects in appearance). It takes time and money either to fix the problems itself or return the goods to the overseas manufacturer. If including lost opportunities due to delayed delivery to customers, the loss can run up to over 15% of annual sales.

How should one deal with such quality issues in overseas products? I will mention several approaches below:
1. Report the problems and provide feedback. Manufacturers harder if monitored.
2. Clarify the inspection standards.
3. Avoid double standards when reporting problems.
4. Continue to work for compliance with the standards.

1. Report the problems and provide feedback. The manufacturers harder if monitored.
In the above example, the imported reported the 10 to 15% defect to the overseas manufacturer. While are language issues and negotiating issues involved, you can expect considerable improvement by just providing the feedback. Overseas manufacturers and suppliers differ from manufacturers and suppliers in Japan in that they get little feedback about quality after shipment. The manufacturing divisions are also relatively laid back.

In overseas companies, however, the sales divisions and repair divisions are runas separate operations and have relatively well established systems for handling returns. The response to a complaint is therefore often a straight offer to replace the defective items. For this reason, by just reporting that "the products your company shipped had a xx% (for example, 10%) defect rate", an immediate improvement will be seen. In other words, the manufacturers will try harder if monitored.

However, if repeating this for several months, in almost all cases the speed ofresponse will slow. There are several reasons for this.
- The other side will have eliminated its initial simple errors and will start to require more skill and experience in order to make further improvements.
- The other side will start arguing that the inspection standards are different between the two sides.
- The other side will start doubting the Japanese findings and data and will start questioning the inspection methods.
- The other side will start arguing that Japanese are too sensitive.

2. Clarify the inspection standards.
The next thing which must be done is to clearly lay down inspection standards.The Japanese are particularly picky over scratches and other problems in appearance. If the other side starts arguing that its standards are different and that Japanese shouldn't treat very minor scratches as defects, the first thing to do is get the other side to show you its standards and check if they would be accepted by Japanese.

For example, in the case of scratches, you have to talk objectively and theoretically about the size, depth, number per unit area, etc. or else any discussions would be futile. If the other side's standards would be acceptable in Japan, then use those standards for inspection of the products in Japan.

3. Avoid double standards when reporting problems.
In the vast majority of cases, the other side's standards will not be of the level accepted in the Japanese market. Still, report products as being defective only when they don't pass the other side's standards. If returning or repairing products which pass the other side's standards but are not acceptable in Japan as being "defective", you will get some argument.

In particular, western companies making products by hand call this use of a "double standard". Argue back that "we find a 10% defect rate even when inspecting products by your standards. Are you actually on top of things over there?"

4. Continue to work for compliance with the standards.
Finally, continue to work to establish a single standard. The other side will in almost all cases work to meet the tougher standards of your company and the Japanese market, but it will take perseverance and time.

Rarely, but occasionally, you yourself will be using long outdated standards which demand what would now be considered excessive levels of quality. This is a good opportunity for all of us to review our own quality standards.

How to Contact Supplier When Starting Imports
Print this articleFeb.2006
How to Contact Supplier When Starting Imports
- Important to Take Care to Convey Requirements -

Ms.Yoko Kawaguchi, President, Y's Worth Corp.

When starting imports, one usually begins by obtaining catalogs and samples. We often hear complaints about the catalogs and samples requested never arriving. Of course, sometimes the supplier is completely at fault, but you have to reflect and consider if you are also partially to blame.

The points to watch when contacting a supplier overseas are:
[1] Did you explain your business plan in your request?
[2] Did you clearly indicate all information in your request for samples like with a real order (names and serial numbers of products, quantities, delivery date, sharing of expenses, etc.)?
[3] Did you confirm if your e-mail or fax reached the supplier?
[4] Did you contact the supplier to thank it and explain your future plans when the requested material arrived?
These are all basics of doing business in Japan and overseas.

First of all, did you write your request in a manner generating interest at the supplier? Beginners often will make the mistake of drafting their requests using standardized patterns taken from business English books. Did you write the request in a way making the supplier eager to do business with you? For example, you should attach any English language company brochures of yours or indicate your website to let the supplier know what kind of company you are and should explain the timing and quantity of planned imports or the reasons for wanting to handle the supplier's products. This sort of information would make it easier for the supplier to judge whether to answer you and take action.

Conversely, we have heard that there are companies and individual entrepreneurs who try to draw the interest of suppliers by providing false information in the belief that because the suppliers are overseas, they won't know anything about the companies' country or won't be able to read their home languages. Suppliers however will often inquire locally at related trade promotion organizations, chambers of commerce, embassies, etc. or ask their acquaintances or private organizations to investigate, so be sure to observe business morals in your behavior.

Next, as a frequent example, samples will sometimes not arrive when you want. In Japan, it is no exaggeration to say that almost all products have a seasonal nature. If you can't get your hands on the samples and complete business negotiations by a certain date, you will often lose your business opportunities. When you need several types of samples, confirm the product numbers and quantities and the delivery times and share of expenses just like with a real order.

Japanese sometimes will communicate only verbally or by e-mail documents. In this case, occasionally, due to changes in the process or the elapse of time, the exact content of the final order will become unclear. The consequent trouble can't be brushed off with a simple "sorry, there was a misunderstanding". You have to confirm the details in writing. Further, it's important to set check points in the process up to delivery and track the progress in the process each time.

Further, you will often hear of this in domestic business as well, but after you send a request by fax or e-mail, you have to check that the supplier has actually received it and if it will agree to it. In particular, when the supplier is in a developing country, trouble with the lines, the provider, or the receivers will sometimes prevent the request from being received. Before you get angry about the lack of reaction from the supplier, we recommend that you use the e-mail, fax, telephone, and other means of communication to contact it.

We do most of our business with Asian suppliers. We often hear complaints in turn that "even if we send catalogs and samples to Japan, we don't hear anything after that". You will probably sometimes be comparing products of several companies or collecting samples for reference. We believe that thanking the supplier after receiving the catalogs and samples and letting them know your future plans or results of your study constitute simple business manners. When doing business with overseas suppliers, you have to be far more specific in your explanations and confirmation than with domestic business. Often the tendency is to pass off business difficulties as being due to mistakes on the supplier's side or language difficulties, but first you have to consider if your own knowledge and care were sufficient. This will lead to improvements in the future.

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