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EXPORT GUIDE Written by: Rwandan Investment & Export Promotion Agency November,

EXPORT GUIDE Written by: Rwandan Investment & Export Promotion Agency November, 2006 www.rwandainvest.com Table of Contents Foreword…………………………………………………………….....4 Executive Summary……………………………………………………5 I. Structuring Export Sales to Foreign Markets……………………..........7 A. Buying Agents and Foreign Brokers………………………………...........8 B. Foreign Sales Representative………………………………………..........8 C. Foreign Distributors………………………………………………............9 D. Foreign Subsidiaries………………………………………………..........10 E. Joint Venture………………………………………………………..........10 F. Successful Export Strategy……………………………………………….11 II. INCOTERMS 2000 and Risk of loss...………...………………………13 A. EX Works… ……………………………………………………………..14 B. F Group……………………………………………………………….......14 C. C Group……………………………………………………………….......16 D. D Group……………………………………………………………….. …18 III. Freight Forwarders and Insurance….…………………………………..23 A. Freight Forwarders………………………………………………..............23 B. Insurance………………………………………………………………….25 IV. Types of Payment……………………………………………………….27 A. Open Account……………………………………………………..............27 B. Cash or Payment in Advance……………………………………………...28 C. Letters of Credit…………………………………………………………...28 D. Special Letters of Credit…………………………………………..............29 E. Letter of Credit Application……………………………………………....29 V. Trade Agreements, Export documentation & Controls…………………36 A. Preferential Trade Agreements……………………………………………36 B. Bill of Lading……………………………………………………………...39 C. Commercial Invoice………………………………………………….........42 D. AGOA, COMESA, GSP Certificate of Origin…………………………….44 E. Export Quality Control (Rwandan Bureau Standards)…………………….48 VI. Export Sector Review…………………………………………………...54 A. Coffee Sector Overview…………………………………………………...54 B. Tea Sector Overview………………………………………………………56 C. Horticulture Sector Overview………………………………………..........58 D. Tourism Sector Overview……………………………………………........60 E. Mining Sector Overview…………………………………………………..62 2 F. Crafts Sector Overview………………………………………………..64 G. Hides & Skins………………………………………………………….66 H. Free Trade Zone & Incentives…………………………………………69 I. Exports Constraints Summary………………………………………....70 Final Observation………………………………………………..............71 Appendix…………………………………………………………….......72 a) Foreign Trade Regulations……………………………………72 b) Rwandan Exporter’s Profile…………………………………..94 c) List of Freight Forwarders and Clearing agencies……….......108 3 FOREWORD This guide on exporting was developed as a means of supporting existing and prospective entrepreneurs get access to information regarding exports. Many potential entrepreneurs in Rwanda face difficulties accessing information on various issues relating to exports. Knowledge of export procedures, regulations, and documentation requirements in Rwanda is still minimal. In this context, RIEPA took the initiative to produce this export guide to enhance the export knowledge of all relevant stakeholders. This guide on mechanisms, options, conditions and regulation for exporting will be regularly updated to echo the changes of an ever evolving domestic, regional and international marketplace. We feel that this document will provide useful and timely information to individuals, associations, cooperatives and organizations on the different facets of exporting. Ultimately, we hope it will help support economic and social development in Rwanda. Done in Kigali, on 10th November 2006 NKURUNZIZA Williams General Director, RIEPA 4 EXECUTIVE SUMMARY Chapter I: Structuring Export Sales to Foreign Markets This chapter discusses the pros and cons of the different market entry strategies available to Rwandan exporters. Indirect sales methods such as buying agents, foreign sales representatives, foreign distributors and subsidiary foreign companies are explained in depth. These different options are defined from the perspective of the exporter’s cost and control over the export process. The information in this Chapter may help you: 1. Decide whether another option provides a better way for to sell your goods abroad 2. Set the stage for your evaluation of possible duty-saving and market entry strategies. Chapter II: Incoterms 2000 and Risk of Loss A key factor in calculating your sales price, and negotiating your contract, is the allocation of responsibility and costs between seller and buyer. This chapter explains with instructive tables all Incoterms as well as when risks transfer, who pays which costs, who is responsible for forwarder and carrier selection and who prepares documents. Chapter III: Freight Forwarders and Insurance Negotiation of freight rates and additional charges for ancillary services is dependent upon several factors. This chapter includes best practices when negotiating with freight forwarders or clearing agencies. A full list of all freight forwarding and clearing agencies registered in Kigali can be found on the Appendix. The chapter also provides a short summary on ways of obtaining insurance for goods exported from Rwanda. Chapter IV: Types of Payment This chapter summarizes the different procedures available for payment and notes several practical points Rwandan exporters should keep in mind. We pay particular attention to letters of credit as the optimal means of payment to protect the interest of both exporters and buyers. A list of all commercial banks as well as their areas of financing can be found on this chapter Chapter V: Trade Agreements, Documentation & Controls This chapter gives a brief description of the different preferential trade agreements available to Rwandan Exporters. Numerous useful web links on GSP, EBA, AGOA, and ACP-EU are also included in this chapter. In addition, we elaborate on regulations, documentations (certificates of origin, bill of lading, commercial invoices etc...) and quality control requirements for most exports in Rwanda. 5 Chapter VI: Export Sector Review In this section, we give a brief overview of Rwanda’s major export sectors. The chapter covers coffee, tea, tourism, horticulture, hides & skins, mining and crafts. In addition, we identify opportunities for prospective exporters and discuss the different incentives available to exporters in the up and coming Kigali Free Trade Zone. A brief summary on constraints facing exporters in Rwanda is included at the end of this chapter. 6 CHAPTER I: Structuring Export Sales to Foreign Markets Before a Rwandan company begins exporting, it faces the initial problem of how to obtain customers in foreign countries and distribute products to them. Exporters may think of direct sales, or dealing directly with the buyer, as their best method of obtaining sales. The advantages of direct exporting for a Rwandan company include more control over the export process, potentially higher profits, and a closer relationship to the overseas buyer and the marketplace. These advantages can be hard to come by, and there is a cost to achieving the direct sales, whether in real dollars or time allocated by a firm’s personnel. However, there are a number of options besides direct sales under a category headed indirect sales. Rwandan companies that produce or market exported goods do not need to be exporters themselves; instead they can use indirect sales methods. The indirect sales category includes sales through purchasers buying agents, retention of foreign sales agents, using foreign distributors, or establishing subsidiary foreign companies. These options are characterized by a tradeoff between the extent of your company’s commitment, financial and otherwise, and the degree of control you maintain over the export process: the greater your commitment, the greater the control you can exercise. The following diagram reflects the cost and control relationship for Rwandan companies who are investigating new options to forge forward in the export marketplace. Exporters who use agents or brokers are using the lowest cost and control method while those who have opened a wholly owned subsidiary have the highest cost and control structure. Table 1 Strategic options: Market Entry Methods Related to Control vs. Cost Degree of control High Foreign Subsidiary Joint Venture Branch office Foreign Distributor Licensee Foreign Sales Rep Buying Agent Low Broker High Low Cost of entry 7 A. Buying Agents and Foreign Brokers Foreign purchasers may retain buying agents to assist in the purchasing process. Buying agents typically are located in the country of exportation, and provide such services as identifying and selecting vendors, reviewing samples, consulting with respect to design work, negotiating prices, and inspecting goods prior to exportation to insure that they meet the terms of contract. They also may arrange on the purchaser’s behalf, relieving the Rwandan seller of some or all these tasks. Buying agents generally are compensated by the purchaser through commissions based on the value of volume of the merchandise purchased. Buying agents offer a tariff advantage to the foreign purchaser because their commissions typically are not included in the dutiable value of the merchandise upon importation into the foreign country. This option may provide several opportunities to reduce customs tariffs on your goods and thereby make them more competitive when imported into another country. B. Foreign Sales Representatives A foreign sales representative is a person or company located abroad that seeks customers for a prospective Rwandan exporter by providing such marketing efforts as making products samples available, distributing catalogs and other literature, and answering inquiries. In order to fill this role, the representative should be familiar with the local business and marketing practices in the country of importation. A sales representative often acts as an agent for the Rwandan Exporter, and may have authority to accept offers to buy on the exporter’s behalf, and may even have the authority to conduct contract negotiations with prospective purchasers. Typically the sales reps are paid on a commission based on the percentage of the value of orders generated. As a general rule, the representative does not take possession of or title to the merchandise in the foreign country, and does not get involved in the mechanics of exporting from Rwanda or importing into the foreign market (although it may provide some assistance in importing). Sales Representatives provide a relatively low-cost commitment marketing partner abroad. Compensation by commission means that the exporter pays only for successful results, and avoids a large up-front financial commitment or the need to independently develop expertise in a new market. Also, because the sales representatives does not get involved in the exporting or importing process, the Rwandan exporter maintains a great deal of control over the contractual terms of the transaction and the actual movement of goods. The exporter contracts with the purchaser, rather than with the sales representative. uploads/s1/ export-guide.pdf