- change ups
A cornucopia of help
Food processing businesses in West Michigan that haven’t already tried exporting need not plunge into it blindly. A recent seminar in Grand Rapids reveals that a wide range of help is available from both the public and private sectors.
According to the Michigan Department of Agriculture and Rural Development, Michigan is second in the nation for agricultural diversity, with more than 200 commodities produced on a commercial basis. One-third of Michigan commodities are exported, with an annual value of $1.55 billion and providing employment to more than 12,000 Michigan residents.
Taken together, all aspects of Michigan’s food and agriculture industries are valued at more than $71 billion; the food processing industry alone has a total economic impact of nearly $25 billion and employs nearly 134,000 people.
Two of the state’s most successful food exporters — Zeeland Farm Services and Cherry Central — were represented at the “Why to Export Seminar” put on in mid-December at Grand Valley State University’s Van Andel Global Trade Center. The seminar was put together by the Food Export Association of the Midwest USA and the MDARD, with help from Varnum Law and Comerica Bank.
Zeeland Farm Services, the Michigan ag exporter of the year in 2010, began exporting soybean products in 2001 and is now a major supplier to Japan, South Korea, Vietnam, Central America, South America, Taiwan, Indonesia, Malaysia, the Philippines and China. In 2009, ZFS president Cliff Meeuwsen said ZFS was a $300 million family-owned business.
Traverse City’s Cherry Central, the current ag exporter of the year, began exporting in 1973 and now ships to Antigua, Australia, Austria, Belgium, Brazil, British Virgin Islands, Canada, Czech Republic, Chile, Croatia, France, Germany, India, Israel, Italy, Jamaica, Japan, Korea, Malaysia, Mexico, Republic of China, Slovakia, Singapore, Switzerland, The Netherlands, Ukraine and the United Kingdom. In 2010, Cherry Central saw an increase of more than 20 percent in its exports of products made from Michigan apples, blueberries, cherries, asparagus and cranberries.
“Increasingly, Cherry Central and other Michigan businesses are shipping their quality agricultural products to new areas and at higher volumes. They are a prime example of how Michigan's agri-food industry is making its mark in the global economy,” said Keith Creagh, MDARD director.
Jamie Zmitko-Somers, international marketing program manager at MDARD, said the department works to develop international trade opportunities for producers and processors by showcasing Michigan-based companies at export seminars, during buyers’ visits here, at trade missions overseas and at Michigan pavilions at selected domestic and international trade shows.
Michigan’s top export markets are Canada, China, Japan, Mexico, South Korea and Taiwan, according to Zmitko-Somers. The state’s overall agricultural exports in 2010 grew just over 10 percent from 2009. She said estimated value of the top products exported in 2010 were soybeans and related products, $588 million; animal feed grains, $276 million; wheat, $194 million; and vegetable products, $158 million.
The state’s International Marketing Program partners with the Food Export Association of the Midwest, a nonprofit cooperative effort between the 12 Midwest states and the U.S. Department of Agriculture’s Foreign Agricultural Service.
In 2010, 53 Michigan companies participated in 144 Food Export Association programs and services, yielding an actual increase in export sales of $95,188,356, plus an additional projected increase of $12,901,848. The Michigan companies participating in export activities added 20 new employees, and reported 22 first-time export sales in a new market, according to Zmitko-Somers.
Prof. Tomas M. Hult, director of the Eli Broad International Business Center at Michigan State University, gave an overview at the seminar, noting there were almost 12,000 businesses in Michigan exporting in 2008 and more than 90 percent of them were classified as small and medium-size companies. He said a wide range of assistance is available to small businesses getting into exporting, beginning with the four Regional Export Networks in Michigan that coordinate the State Trade Export Promotion Program offered by the MEDC and its strategic export partners. The West Michigan REN is headquartered at the Van Andel Global Trade Center.
STEP is a new program for companies with fewer than 500 employees, and provides financial assistance for export-related activities. It opened Oct. 1, launched by the U.S. Small Business Administration to rapidly grow Michigan exports by increasing the number of exporters and introducing existing exporters to new foreign markets and buyers.
STEP provides direct reimbursements to qualified small and medium-sized companies that invest in developing or expanding exports. Up to 50 percent of some activities may be covered, with a company receiving up to a total of $25,000 in assistance. The funding can support:
**Overseas trade mission and trade show participation;
**A foreign market sales trip;
**Subscription to U.S. Department of Commerce services;
**Foreign language translation services for marketing materials and websites.
Application can be made at www.michiganadvantage.org/STEP
At the seminar, Hult cited some of the oft-heard assumptions that stop some businesses from considering exporting, such as “too risky.”
“Exporting to some markets, such as Canada, is no more risky than selling in the United States,” said Hult. Trade finance and global banking have evolved to the point where buying and selling things internationally is “routine, safe and efficient,” he said.
Nor is exporting too complicated, according to Hult. Most requires minimal paperwork; and the necessary research by the exporter can, in many cases, be done online from free or low-cost sources of information.
Hult said no company is too small to go global. In fact, nearly 42 percent of all U.S. exporters in the last year had fewer than 19 employees.
Steve Kluting, an attorney who co-chairs the Food Law Group at Varnum Law in Grand Rapids, said one of the biggest legal issues in exporting is “making sure you’ve got the right sort of international contracts in place,” adding that “the practical world of international trade presents a bunch more risks than does domestic trade.”
Some issues in international trade, he said, would never be an issue within the U.S., such as, “where are we going to duke it out, if we duke it out” in court?
“I often get involved — once there is a dispute — in trying to bring about some sort of resolution that’s good for my clients,” he said. “It’s helping them weave their way through what is oftentimes a much more confusing and risky world in the global sphere than it is here.”
The risk is bigger abroad “just because a lot of folks won’t have trusted partners on the ground in South Korea or China or in Colombia or Brazil …”
Another major issue is: “Who is going to be responsible for the transportation? That’s a much bigger issue when you’re crossing an ocean,” said Kluting.
Much of Michigan’s food exports go to Canada and Mexico, but take those out of the equation, and it is clear that most will “much more likely end up in an Asian country than in a European country. That may be a surprise, but the numbers prove that to be the case,” he said.
“Japan, China, South Korea are all bigger trading partners than any of the individual EU countries, and may even be bigger than the EU countries combined,” said Kluting.
There are two reasons for that: One is because of the import duties and tariffs in place in Europe. The other is because European markets have a “number of restrictions that they impose on foods that are genetically modified. That might not be the case in some of the Asian countries.”
“A lot of food here is deemed genetically modified,” he said mentioning companies such as Monsanto, which genetically modifies plants to increase productivity and enhance certain traits. In mid-December, in fact, the U.S. Department of Agriculture announced it had “deregulated the biotech trait, MON 87705,” in a particular brand of soybean developed by Monsanto. The soybeans yield oil with increased levels of mono-unsaturated fat while significantly lowering saturated fat.
In the U.S., most of the sugar beets and corn has been genetically modified, said Kluting, and if used in products to be shipped to Europe, typically “must meet certain standards that are oftentimes tough to meet.”
Currency fluctuations and unanticipated changes in shipping costs are other issues best addressed in the contract to avoid disputes, according to Kluting.
But just the fact that there are differences between here and there is attractive to some companies. A company may have “a presence in the U.S. — a good market — and then they will think of exporting, in part to not only grow their bottom line but to diversify the risk of something bad happening here,” said Kluting.
Some of the larger law firms have established connections in other countries, which can help exporters, according to Kluting. “If you get into one of those fights and you need to hire South Korean counsel, where do you even start? We’ve got a network of those folks, too, which is not uncommon for a firm our size,” he said.