Thursday, 13 August 2020
Doing business in North America: Tips from the US and Canada for East Midlands exporters
It’s the special relationship that both sides of the Atlantic seemingly want to make even more rewarding, which is why there’s never been a better time for companies in the East Midlands to turn the US into a formidable trading partner. Dan Robinson tunes into an East Midlands Chamber event to find out what it takes to do business in North America.
While much of the planet is still curled up under a table, head down and waiting for the coronavirus storm overhead to pass, business needs to raise its head and plan what happens next.
Brexit is coming sharply back into focus and a UK-US trade deal will again be back on the agenda too as the third round of talks begin alongside the gradual reopening of borders.
For the East Midlands, with its strengths in manufacturing and biosciences, looking beyond these shores will be vital to economic recovery and North America – which has 78-times the UK’s land mass, 5.5-times as many people and is already a £120bn importer of British goods – will be a key market.
Kevin D Malecek, an Ohio-based economist, tells the Chamber’s Doing Business in North America webinar: “Obviously, we’ve had that special relationship for many years, and there’s a lot of people on both sides of the pond that want to see this relationship move to the next level.
“We’re hopefully going to be in a much better position globally by next spring, with scientists working on a vaccine and hopefully better therapeutics, but the time to prepare is now.
“These economies aren’t going to shrink – we’re going to be in a place for a strong rebound and that’s going to be the time to be placing yourself to take advantage of the situation.”
US is largest export market for East Midlands
It was a century ago, during the Roaring Twenties of mass car adoption, commercial radio and bread-slicing machines, when America charged to the top of the world as its economic superpower.
And while China is catching up quickly, the US still boasts the world’s highest GDP – $20.49tn (£16.1tn) at the last count.
Given the existing economic ties, common language and shared culture, the US is already the largest single-nation trading partner – exporting £112bn worth of goods and services, as well as importing £70bn in 2019.
It is also the biggest market for the East Midlands, which exported £2.8bn to the States in 2019, a 13.4% increase on the previous year.
With Brexit set to complicate the relationship with the EU – Britain’s largest overall trading partner, exporting goods and services worth £274bn, although operating at a £67bn trade deficit – the UK is now aiming to sign a trade deal with its American ally.
Kevin is director of economic development and international trade at the City of Mentor, in Ohio – which, like the East Midlands, has industrial strengths in aerospace, advanced manufacturing, biotech and medtech.
While Donald Trump has adopted an “America First” insular approach to foreign policy, he is keen to sign a trade deal with the UK – and, although a final agreement looks set to be delayed until after the November presidential election, Kevin doesn’t believe Joe Biden displacing him in the White House will have a significant negative impact.
“Regardless of the election, conditions are going to remain favourable,” says Kevin. “We want you to come here and we’re going to make it as easy for you to do that and navigate the regulations.”
While it can take less than a week to set up a business in the US, there is a lot to consider before launching head-first into a land of 50 states and 330 million people.
UK businesses may decide to export directly or use distributors, while some go down the route of entering partnerships and alliances when taking those first steps.
Kevin recommends using stateside advisors for aspects such as accounting, HR, property, intellectual property and regulation.
Steven Roth, an attorney in Ohio, believes hiring local legal counsel is critical as laws can differ between states and counties – while he says handshake deals in the US are a “recipe for disaster” and stresses the need to get any agreement in writing.
He says: “Just establishing the entity is a really quick process but there’s a lot of other things that you need to keep in mind.
“What type of entity are you going to select and how is that going to relate to the established business in the UK? And how is that going to affect tax considerations?
“There’s tonnes of different ways to handle recruitment. You might want to hire independent contractors based in the US or bring in staff from the UK – but all those choices determine which steps you will take.”
Canada: The entry point for doing business in North America
While Canada’s economic significance to the UK may pale in comparison to the US – its GDP is relatively small at $1.71tn – it could be the ideal entry point for companies wanting to trade in North America.
A member of the Commonwealth, it shares a Queen with Britain and uses the same parliamentary system.
It’s also a tolerant and far less politically divisive country, while it only has ten provinces to contend with.
Andrew Penny calls its “effectively half-British, half-American” and, importantly for exporters, a “very friendly and stable place to do business”.
The president of Ottawa-based business advisory group Kingsford Consulting, who is originally from Sutton-in-Ashfield, says: “Canada is a great place to use as a safe landing and to test the North American market.
“Companies might want to try selling to the five million people in the greater Toronto area, for example. Once they’ve built an expertise in Canada, then absolutely move into the US market.”
Andrew believes there are three key steps any business must take before selling into North America – research the market, find someone to do a deal with and then invest in growing a market presence.
Addressing risk is also important, as Andrew says: “How deep a hole can you dig and then bail out from?
“What’s your risk tolerance? It’s like going into a casino and knowing how much money you can gamble.
“You also want to be cash-positive. It’s going to take months of work to build your business and make contacts, so you should understand what impact this will have on cash flow.”
Identifying the difference between a company’s current business model and their market entry model will also enable it to focus effectively.
Andrew, who believes almost all this preparatory work can be done remotely, adds: “You can’t come into a new market with your entire package – you need to think about which one product or service you’re going to come in with a laser-like focus and have a precise targeted offering.”
Case study: How Bloc Digital is breaking the US
Ever since leaving Rolls-Royce to set up his own digital visualisation services business in 2000, Keith Cox hasn’t found it too difficult to find new clients.
In fact, his old employer – for which he had created 3D versions of its aerospace engines – was one of Bloc Digital’s first customers and he would later add blue-chips names like GSK, Shell and Jaguar Land Rover to his roster.
Industry has flocked to take advantage of the augmented and virtual reality tools it has created to make workplace training more realistic and interactive, while its knowledge of other emerging technologies like the internet of things has enabled it to retrofit sensors to machinery that can produce valuable data for predictive maintenance and performance analysis.
“We had quite an accelerated expansion in the UK but most of it was quite reactive and we haven’t gone looking for growth,” says director Keith.
“We hadn’t even done any marketing for 10 years and weren’t actually thinking of going to the US until it snuck up behind us, but it was something we couldn’t ignore.”
It was 2018 when Bloc made its first American deal worth about $20,000. Steadily, the orders grew in frequency and value as his UK clients passed on referrals to their US divisions, and research showed they were mostly based in a fairly tight area in the north-east of the country.
“We were kind of getting dragged on this journey but had companies like Lockheed Martin and those in the space industry coming to us, so when we saw where they were based we decided to get some boots on the ground,” says Keith.
“We hired someone who would be on US time to manage those relationships, because it seems like such an obvious area for us to target and the opportunity is very large.
“We’re now looking at getting a branch in the US and going fully incorporated with a bank account there because with what we do, it’s easier to physically show how it works.”
How can East Midlands Chamber help you do business in North America?
Lucy Granger, international trade and customs adviser at East Midlands Chamber, explains:
The Chamber can help you in producing certificates of origin for exports to North America, along with any attested documents you may require. If you do not know which documents you need for export, I would advise using a tool such as the UK Trade Tariff, or speaking with your customer.
We also issue ATA Carnets, a "passport for goods" that can be used for temporary exports to the US and Canada. If you are taking commercial samples, professional equipment or visiting an international trade show or exhibition, an ATA Carnet can be used to move those goods without the need for customs duty and VAT.
For more information, visit emc-dnl.co.uk/enabling-international-trade/export-documentation-services/.
This article appeared in the August/September issue of the Business Network magazine. Click here to read the online edition.Back