Теги: CUTIS
Building trust is the most important thing in cooperation with Canadian partners

Vitalina Darnopykh, Director, Lviv branch of Taurus Quadra, spoke about the major challenges for the Ukrainian IT-businesses in the Canadian market

The Canadian market is rather conservative, until recently, not so many companies have been seeking partners for outsourcing services. However, the situation is changing now. Canadian businesses develop rapidly and the need for qualified professionals and quality services is growing faster than the domestic market potential. Therefore, a growing number of companies are now ready to strengthen their business by engaging an outside pool of talented and experienced people through outsourcing. Canada and Ukraine have good relations in the political sphere, besides Canada has a large Ukrainian diaspora. This may play into the hands of Ukrainian hi-tech industry opening good opportunities for it.

Meanwhile, operating in the Canadian market also holds a number of challenges.

Ukrainian companies often have to overcome a stereotypical view of Ukraine as a third world country. Businesses have to prove that, despite the corruption of the government machine, they can become reliable partners.

Also, we have to prove that tomorrow we will not disappear as a company due to a hostile business environment, including external aggression, legislative novelties or changing political course.

Building trust is the most important thing in cooperation with Canadian partners. And this cannot be accomplished at one meeting. The main thing is to identify your role and place in the Canadian market and understand the needs and expectations of Canadian companies. It is also of utmost importance to rationally evaluate your own capabilities and offer potential partners what is important to them and what they need.

Don’t be afraid to offer your services if you are confident in their quality and market demand for them. It would be helpful to demonstrate that your company not only wants to take something from the Canadian market, but is ready to strengthen the Canadian partner with its own experience and professional level of its specialists, and contribute to developing customer portfolio.

Experience in the US market would also be a significant advantage. At the same time, you shouldn’t forget that the Canadian market is not the American market. If your product has been designed for the American market, it will not necessarily be in demand in the more conservative Canadian market.

This year, our company, Taurus Quadra, has become a member of the ICT mission to Canada organized by the CUTIS project. We received invaluable support and a wealth of new information: from specific tips on developing a marketing strategy and articulating your competitive advantages to actual advice on how to behave and communicate with potential partners.

During the mission, we learnt that much more attention needs to be paid to the formal signs of success, i.e. certifying experts, describing and publishing completed projects, etc.

We need to build a system of relationships with partners, who will be able to trust us because we gained other people’s trust.

Huge assistance on the part of consultants was the arrangement of B2B meetings with companies that could potentially become our partners in Canada. It would be extremely difficult to do it on our own, without a project supported by the Government of Canada.

It is important that we’ve acquired a set of new tools for carrying out market research, developing an export plan, and searching for potential customers and a target segment. Consultants’ tips for providing content for our corporate website and formulating key messages targeted at potential customers were particularly useful.

Such a systematic approach helped us focus on the most important issues and develop a future action plan within a short span of time.

Investor looks for a project on top of trends

Beehive is a leading Ukrainian producer and exporter of honey. The geography of the company’s sales is very broad and includes such advanced markets as the USA, Germany, Denmark and Canada. In November last year, Beehive took part in the first investment forum – CUTIS Investment Roadshow

Ihor Liski, co-founder of the Ukrainian Institute for the Future (UIF), chairman of the board of directors of the Effective Investments Holding (of which Beehive is a part) explained why Canadians are cautious about implementing investment projects in Ukraine

Currently, all challenges create more opportunities for us than during all previous years of independence. Like never before, we need to prove our ability to work within the international business community.

Professional teams, ambitious projects and bold decisions spring up in Ukraine but nowadays this is rather an exception. The country is changing, people are looking where to apply their talents, and many think that the system of rating has not changed. If we want to compete with the rest of the world, we do not have to be afraid to surprise it with our knowledge, skills and ideas.

At least, some reforms have helped to intensify work with investors in Ukraine. There are investment forums at the regional level and legislative drafts to increase the country’s investment attractiveness. I’m sure that investors see this. That is why we are witnessing a new wave of interest in domestic projects. The main thing, however, is that Ukrainian entrepreneurs can realize their own ambitions. Still, you have to understand whether you have them. Successful projects do exist, but they are created mainly by young entrepreneurs oriented to exports and international trends.

The main thing has changed: investors are looking for a project that follows the calls of time. Thus, when creating a modern honey plant, we understood that it was in demand. High-quality food from environmentally friendly regions is a global trend, and we follow it. When Beehive understands its own significance for the whole industry and the country in general, the entire company moves forward. Only a combination of technology, teamwork and long-term trend analysis can provide solutions for narrow-focused tasks and make investors interested.

If we talk about the interest of international investors 10 years ago, one could say that money would flow like a river.

However, investors are changing, they are interested in new areas and become much more demanding, while Ukrainians in the meantime may have little to offer. Canadian investors know and understand our country very well. Having experience of work with domestic projects and knowing all the risks of such cooperation they invest with caution.

It’s hard to find a worthwhile project with real efficiency rather than drawn up in a business plan. I myself reject a lot of such projects almost every day. Ukrainian businesspeople should be more courageous and aggressive, learn to do international business. We must satisfy our hunger for knowledge, find new production technologies, learn to present our achievements. In addition to this, the world is changing, trendy global solutions become promising: green energy, circular economy projects, creative industry will be getting investments from now on.

Investors are now very demanding about Ukrainian projects because there are high risk factors: war, corruption and slow reforms.

A mere lack of trust in both the country and the principles of doing business in it. Entrepreneurs can change this attitude only with their own example and honest projects. In our company, we have been doing this for many years. Only the desire to live and work in Ukraine forces us to return to this endless work again and again. To create investment attractive business, to implement ideas that are crazy at first glance – this is the task of my company. No one can convince me that it is impossible to make a successful project now and attract investors from all over the world to Ukraine.

Footwear manufacturer KaDar: We have successfully fulfilled our first order for the Canadian market

The history of KaDar, the largest footwear manufacturer in Western Ukraine, began back in 1999. At the moment, the production capacity enables the company to produce about 500 pairs of shoes per day. KaDar is actively entering new markets including the Canadian market. Halyna Panas, KaDar Export Development Manager, tells about the company’s preparation for the international exhibition – Toronto Shoe Show and its first results.    

KaDar has been successfully operating in the Ukrainian market for over 20 years and exporting its products to EU countries for more than 5 years.

The Free Trade Agreement between Canada and Ukraine gave us an excellent opportunity to supply footwear to Canadian consumers at zero import duty rate.

Due to our cooperation with the CUTIS project, we were able to participate in the Toronto Shoe Show, as it is a good opportunity to showcase our products to key players in the Canadian market. The first exhibition was held in late August 2018, the next one – on 20-22 February this year.

When preparing for the first exhibition, we did not understand exactly what shoes should be shown to Canadian clients. After all, Ukraine and Canada have their own specific tastes, preferences, and trends. Not always trendy models of footwear in Ukraine will be in demand in Canada, and vice versa. Therefore, it was not easy for us to prepare for the August exhibition and decide on the product mix.

We are now much better aware of what Canadian consumers need. The first exhibition and meeting with potential customers, talks with importers helped us understand the needs and requirements of the Canadian market.

That is why, when preparing for the second exhibition (February 2019), we were quite savvy in terms of mix, requirements and product quality. We brought exactly the products that might be of interest to potential consumers in Canada.

We see good prospects of exporting KaDar shoes to Canada as we got positive feedback on our products. Expectations are positive, we want to find a good business partner for long-term and mutually beneficial cooperation.

We already have our first order that we successfully completed. We work on further orders, prepare a collection in accordance with the requirements of the Canadian market.

We hope for successful exports to Canada. We want Canadian consumers to appreciate the high quality of shoes by the Ukrainian manufacturer and believe in the potential successful cooperation with our company. The most important reward for us will be the customer’s appreciation and recognition of the company as a reliable business partner.

Find out more about the success of Ukrainian producers at Toronto Shoe Show by following the link

Stepan Kubiv: Ukraine and Canada’s extraordinary business relationship is just getting started

Stepan Kubiv, First Vice Prime Minister and Minister of Economic Development and Trade for Ukraine, special for Financial Post (Canada) 

Ukraine is a trusted friend and partner for Canada. Our relationship spans more than a century of shared family, cultural and political connections. The next step in our ongoing journey together is in expanding our business relationships.

While Ukraine gained its formal independence in 1991, our country is just three years into the rebirth that resulted from the Revolution of Dignity in 2014. Since the Euromaidan, we have set out to build a new European state. We signed a Deep and Comprehensive Free Trade Area agreement with the European Union in 2016, and the Canada-Ukraine Free Trade Agreement (CUFTA) last year — deals that effectively create an uninterrupted duty-free trade zone comprising almost 600 million consumers.

Starting in 2016, our economy has rebounded with 10 consecutive quarters of positive economic growth, including growth of up to 3.8 per cent in the second quarter of 2018.

Even though CUFTA took effect only in August 2017, total Canada-Ukraine goods trade in 2017 grew by 42 per cent to US$349.6 million. A further year-over-year increase of 2.7 per cent was recorded in the first seven months of 2018.

Our trade strategy is combined with an ambitious economic reform program to make Ukraine more attractive to western investment. Since 2014, we have achieved more reforms than at any time since independence. We have deregulated sectors of the economy, streamlined business regulations and undertaken privatization of state-owned enterprises. Reforms are underway to improve creditors’ rights and intellectual property rights. As of July 1, 2018, the total volume of direct foreign investment amounted to US$40.7 billion.

Ukraine is committed to fighting corruption through new legislation, government systems and institutions. The centrepiece of our commitment is the High Anti-Corruption Court, which began in June. International bodies, such as the G7 and the International Monetary Fund, have endorsed the court as a significant step in achieving our anti-corruption objectives.

The next step is expanding our business relationships

These initiatives to improve the investment climate are paying off. Canadian investment in Ukraine increased 20.9 per cent in 2017, and was up 21.6 per cent in the first half of 2018 compared to the same period one year earlier. We are focusing on four sectors: agro-industry, information technology, infrastructure and natural resources. Canadian firms have expertise in each of these sectors and opportunities are opening in Ukraine for potentially lucrative investments. Our trade and investment promotion efforts are therefore concentrated in these business sectors.

Ukraine’s IT industry has transformed rapidly from a fringe economic player to to the country’s third-largest export sector in only five years. In 2017, IT services grew by 20 per cent and exports are estimated to double in the next five years. The IT sector comprised about 61 per cent of Ukraine’s services exports to Canada in 2017.

Our geographic location gives us the potential to be a trade and transportation hub for Europe, the Middle East and Asia. Our road, rail, aviation and marine infrastructure is well developed, but much of it needs renovation, upgrades and modernization, creating opportunities for Canadian investors.

Ukraine is pursuing a goal of energy independence by 2020, opening up opportunities for Canadian companies to help by investing and building infrastructure in both traditional energy segments and for renewables, such as solar, wind and bioenergy. In June, Canada and Ukraine signed a letter of intent on energy co-operation with the International Centre of Regulatory Excellence (ICORE), a not-for-profit organization founded by the Alberta Energy Regulator, to bolster transparency and regulatory excellence.

While it is still early days for new investments, the shovels already in the ground provide an indication that opportunities abound. TIU Canada is constructing a new solar power plant near the village of Kalinovka in the Mykolaiv region. Brookfield Asset Management is a backer of the Innovation District IT Park now under construction in Lviv. Fairfax Financial Holdings Ltd. is a significant investor in Astarta Holding, an agroindustrial holding company. And investment is flowing the other direction as well: Ukrainian investors broke ground in September for the Canada Meat Group Inc. meat-processing plant and cold storage facility in North Bay, Ont.

Ukraine greatly values the support that Canada provides — as a partner for peace, a provider of development assistance through the Canada-Ukraine Trade & Investment Support Project, and shared deep cultural connections. Canada has graciously offered to host the annual Ukraine Reform Conference in June 2019 , and we will welcome the opportunity to describe additional positive momentum.

Ukrainians want a democratic, reliable, and economically strong country. With Canada’s help, we will continue our efforts to deliver it for our mutual benefit.

Source: Financial Post

Canadian Ambassador: IT-services is the future of Ukraine’s export to Canada

Free-trade area (FTA) regime between Ukraine and Canada was established August 1, 2017. This is the 16th free trade regime coming into effect within the period of Ukrainian independence. But the situation with Canada is a specific one. This is because the North American partner opened 98% of its market for the Ukrainian commodities, having set to zero import duties for the majority of commodity groups. The influence of FTA introduction on commodity circulation between the states, the level of increase of the Ukrainian companies’ presence on the Canada’s market, the most promising sectors of the national economy from the perspective of Canada – all these and many more issues in the interview with Roman Waschuk, Ambassador of Canada to Ukraine.

Mr. Ambassador, how has the dynamics of Ukraine-Canada commodity circulation changed within the period after FTA introduction between our countries?

The two-month statistics we have does not give grounds for commodity turnover analysis. Though, it is positive from both sides. I will explain. The thing is that statistics of our countries are a bit different. The Canadian party demonstrates boost of commodity turnover within the first nine months of 2017 up to USD 65 million, i.e. 13,5% more comparing to the same period of 2016. The Ukrainian statistics for the period of three quarters of 2017 estimates USD 33,9 million which is 65% more comparing to the same period of 2016. As you see, the difference is twice bigger. This is due to peculiarities of declaration practice of exporters or statistical systems the adjustment of which will be ensured by the group we are currently establishing.

In fact, the states better maintain import than export statistics. That is why, let’s say, Canada works with the USA in the following way: their import statistics is used as our export ones and vice versa.  If we speak about trade between Ukraine and Canada, we talk about export to Ukraine at a rate of USD 179 million. The Ukrainian data shows that import from Canada equals to USD 196 million. According to our statistics trade balance deficit in Ukraine is less than the one estimated in the Ukrainian statistics.

Could you tell us what kind of commodities make our countries attractive for each other?

I would like to point out that the agreement between Canada and Ukraine has fueled the mutual trade. In 2016 the top-6 commodities of Ukraine’s export to Canada included:  1 — ferrosilicon manganese, 2 — colorants of titanium oxide, 3 — soybeans, 4 — cars, 5 — television and radio equipment, 6 — coffee makers. In our turn, we supply to Ukraine:  1 — coal, 2 — fish (in particular, hake), 3 — shrimps, 4 — pet feed, 5 — medicine, 6 — human or animal blood.

What other sectors benefit from Ukraine-Canada trade liberalization? 

The most promising sectors include, first of all, IT-area, clothes, footwear, furniture, chocolate and confectionary. In particular, there was established a support program for exporters «U CAN Export» aimed at fostering promotion of these goods on the Canadian market. It is important that the project is aimed not at Ukrainian “giants”, but at support of small and medium businesses. We are sure that the companies experienced in export can do a good job on the Canada’s market themselves.

In what way did FTA regime benefit your companies? To what extent does the Ukrainian business exploit opportunities to reach the market of Canada?

The agreement is an asymmetric one. Canada has immediately opened 98% of its market for Ukrainian producers, having reduced customs duties to 0% for almost all commodity groups, except for cars the duty on which will be cancelled within seven years. Also, there are specific restrictions on some agricultural products, which are exported on a duty-free basis only within established quotas. In particular, this is about milk, poultry, eggs, etc.

In case with Canada’s export, Ukraine has opened almost 80% of its market. Duties on some commodities from Canada will be cancelled systematically based on three, five and seven-year long transition periods. And there have been imposed restrictions on importing pork and lard. By the way, talking about lard, the Ukrainian producers persuaded me that it has not only economic but also a symbolic meaning.

Talking about agricultural products, significant dynamics was demonstrated by honey export of which has doubled. This means that there emerge new companies which take up the slacks.  

Analysis of export statistics of Ukraine shows significant leaps of some commodities. Let’s say that export growth of coffee makers within nine months of 2017 estimates 1 500 %, glass containers for transportation and packing of goods – 2 450 %, equipment for seed cleaning, sorting or calibration — more than 3 000 %. Talking about agricultural products, significant dynamics was demonstrated by honey export of which has doubled. This means that there emerge new companies which take up the slacks. Canada’s experience in free-trade areas proves that export grows broad first, and then – deep. To put it in other words, first of all, the range of commodities is increased, and then its volumes of supply are ramped up. Commodity producers which reach a new market explore tastes and demands of consumers and then concentrate upon promotion of commodities. It does not mean that traditional sectors do not face any increase. We, in particular, observe a significant growth related to agricultural equipment. Here, our companies have “overslept” the first phase of large-scale investments into agricultural equipment and are trying to сatch up.

Each market has its own specific features. What kind of difficulties do Ukrainian exporters happen to overcome?

We took into consideration specific features of each market and along with the agreement we have launched Canada-Ukraine Trade and Investment Support Project. Trade means exporting from Ukraine to Canada, and investments mean Canada’s investing to Ukraine. Expert advice is provided to your exporters who are eager to open Canada’s market for themselves. A detailed explanation is provided in relation to market specificities, requirements, ways of adjustment, types of certification required and geographical, palatability and other traits of a consumer.

Are there differences between Ukraine-Canada and Ukraine-EU FTAs?

The most important difference is that Canada’s market is more open for the Ukrainian goods than the EU market. And here there are much less restrictions, and if there are any, they are not really tough. In other words, ship as much as you wish. On the other side, our agreement deals, first of all, with commodities, but talking about trade in services, it is not that much diversified comparing to the agreement between Ukraine and the EU. In that respect, everything is still ahead for us.

Establishment of Canada-EU free-trade area is planned soon. What will this triangle change?

First of all, it is important to harmonize certification of commodities for export with due consideration of all the rules, requirements, qualifications, titles and other aspects. Soon we hope to form a positive free-trade area triangle “Ukraine – Canada – EU”. Then, producers from each side will have a better opportunity to see where inside this triangle there are advantages for their production and choose the most beneficial options for cooperation.

More intensive cooperation is planned in the IT-sphere. As of today, export of IT-services is two-three times the commodity export.

Is Canada involved into investment projects in Ukraine? What projects are the most attractive for investing?

On the part of Canadian investors there is some interest towards Ukraine. During the last two years, most funds were invested into agro-industrial sector. Therefore, one large Canadian fund has already purchased one third of shares belonging to the Ukrainian agro-industrial holding. In future, significant investments are planned to be made into the IT area and everything related to it, for example, infrastructure for information technologies. These are the spheres where I can see potential in the short-term outlook.

Mr. Ambassador, could you please share your predictions as to development of trading relations between our states?

In addition to the commodity market, service market will also grow, in particular, more intensive cooperation is planned in the IT sphere. Export of IT-services is difficult to encompass, but as of today it is two-three times broader than the commodity one. Only one big contract of a Canadian retailer with Ukrainian IT-professionals costs about USD 50 million. Besides, nearly 2 thousand programmers in Ukraine work for Canada. IT-services market belongs to invisible export, but at the same time it is economically sound for your country. And, considering geographical distance between our countries, it can play a huge role.

Export. New Opportunities in Canada

A few months ago, the Canada – Ukraine Free Trade Agreement (CUFTA) entered into force, which effectively opens Canada’s huge market to a great number of Ukrainian companies. Ninety eight percent of customs duties for Ukrainian goods have been eliminated. The region’s needs are significant and diverse. Let’s discuss how to enter the Canadian market and what are the market needs?

Trade volumes with Canada fall far short of their potential capacity: this year, exports of Ukrainian goods to Canada amounted to approximately 0.5% of total Ukrainian exports. Meanwhile, Ukraine imported 7 times as much of Canadian goods, although in actual figures it is just as negligible.

Ukrainian apparel manufacturers (-17.2% of customs duties) and footwear manufacturers (-9.7%), as well as Ukrainian farmers (-4.5% of customs duties for vegetables and fruits) will benefit the most from the customs duties elimination. Moreover, the Agreement opens Canadian public procurement market (its volume is $ 12 billion) on the same terms as for local companies, and specific sections of the Agreement protect e-commerce and intellectual property.

According to the Ministry of Economic Development and Trade of Ukraine, implementation of the Agreement will facilitate a fivefold increase in the turnover of goods between Ukraine and Canada. ‘Each export case is unique. Should you find a partner in Canada, which has allocated quotas, then you will be able to export your goods not having to pay import duties. I would rather not overemphasized priority products, because this may discourage some exporters of so-called ‘non-priority’ products. The Canadian market is very diverse: buyers’ needs in one province may differ significantly from those in other provinces. Therefore, consumers’ needs in each and every province should be studied in detail. It’s quite possible that priority products in different regions may vary.’ – says Oleksandra Brovko, CUTIS Senior Trade and Investment Policy Expert.

However, it should be understood that the Agreement includes certain exceptions for a range of products that can be exported without customs duties only within Canadian quotas (e.g. customs duties for poultry, dairy products, eggs and egg products, cheeses and sugar, when exported in quantities exceeding the quotas, may reach 150-300%). So, as we may see, the list of exceptions largely includes processed agricultural products, which are Ukrainian export priority.

‘Maple’ needs

The structure of Ukrainian exports to Canada is mainly comprised of ferrous metals and their products, fats and oils of vegetable or animal origin, oilseeds and oleaginous fruits, machinery, apparatus and mechanical devices, wood and wooden products, milk and dairy products, eggs and honey. The Canada – Ukraine Trade and Investment Support Project (CUTIS) has identified the following sectors of Ukrainian SMEs as priority ones for further export to Canada.

1. ІТ-services.
2. Apparel.
3. Footwear.
4. Furniture.
5. Chocolate and confectionery.

Moreover, some experts believe that frozen fruits and berries, juices, peppers, cabbage, soybeans, legumes, corn, mineral water, ceramic tiles and sports equipment may also be in a high demand.

However, there are also other assessments of the Canadian demand. According to analysts of the Allbiz International Center of Internet Commerce, requests received from Canadian counterparts had completely changed their focus and structure over the first six months of 2017 compared to the same period of 2016. The Top-3 list included orders submitted to breeding nurseries that breed various types of dogs, orders for tobacco for pipes and hookahs, as well as classic cigarettes.

It is notable that in 2016 orders that prevailed on the Allbiz were those from medium-size businesses for gift and souvenir products, ice hockey equipment for various educational institutions and sports facilities, industrial containers, safe boxes, as well as products made of flexible and tempered steel sheets.

Standards First and Foremost

To be exported to Canada some Ukrainian products should undergo compliance assessment. ‘For instance, some manufactured goods (clothes dryers, washing machines, dishwashers, freezers, electric cookers) are subject to mandatory certification. Meanwhile, apparel and footwear do not require certification (except special workwear, which should comply with established technical regulations). In any case, before entering the Canadian market, one needs to study regulatory requirements for a particular product (quality and safety requirements, standards and technical regulations, etc.)’- says Oleksandra Brovko.

CUFTA regulates certain issues, which ensure the mutual access of goods to the markets of both countries. This had to be done in view of different requirements on product quality and safety, labeling and certification. CUFTA has also addressed the rules for identifying and confirming the country of origin. All products should be fully manufactured or sufficiently processed or recycled in accordance with the prescribed rules of origin. As for sanitary and phytosanitary regulations, the countries shall apply the appropriate WTO regulations. Compliance with countries’ obligations in accordance with provisions of the WTO Agreement on Technical Barriers to Trade has been upheld.

Entering the Market

Entering the Canadian market should follow a number of standard procedures, including studying the level, structure and nature of demand for a particular product, assessment of competition, identifying product distribution channels, etc.  Moreover, one should also understand the Canadian business mindset.

«Canadians take their time to carefully study their future partner. They need time to test their partner by matching words to deeds. That is to reach a certain level of trust. Ukrainian businessmen need to promptly and adequately respond to queries and address all these little issues that may arise before a real business relationship is established. Canadians are cautious when choosing a partner – they are interested in the transparency of business, compliance of manufacturing with the environmental norms, energy saving procedures and corporate social responsibility. Canadians value accuracy, when they negotiate they do so to reach an agreement and make a decision and not simply to ‘discuss an issue’ – says Dmytro Kozonak, entrepreneur, member of the Canadian Ukrainian Chamber of Commerce.

The best way to enter the Canadian market for different products may be different. ‘Some foodstuff manufacturers were able to quickly establish business relations with the Canadian importers having only visited a single trade exhibition, without any preliminary contacts. For apparel and gourmet foods manufacturers, an agency scheme works well, in which it would be good to involve a member of the Ukrainian diaspora. For the В2В segment, an appropriate scheme would be to work through importers, distributors and small retailers. With large retailers it may prove difficult to start the relationship from scratch, if an enterprise has no basic voluntary certification (e.g. ISO). Distributors are open for niche products designed for specific ethnic groups’, – says Oleksandra Brovko.

At the start, it would be better to enter the Canadian market through a local partner company. The fact that the Canadian importer takes responsibility for the compliance with all the requirements to the product will make it considerably easier to enter the market. Canadian distributors who work with the supermarkets and small shops usually have their own warehouses in all provinces. Distributors often work on both the Canadian and US markets, which may be helpful for expanding the geographical scope of sales.

Ukrainian exporters may also use the services of CUTIS project and Export Promotion Office – a consultative body under the Ministry of Economic Development, which may help raise awareness as regards the Canadian market, obtain Canadian market analytics and export consulting services as well as assistance in promoting Ukrainian goods and services in Canada and developing cooperation with the Canadian businesses.

The Ukrainian diaspora in Canada, which numbers about 1.3 million people, is also helpful for doing business there. Overall, Canada is a country of migrants, and consumers’ tastes are quite diverse, which creates good opportunities for selling goods to various ethnic groups of buyers. Everything associated with Ukraine is perceived very well.

Useful links for those who would like to enter the Canadian market

    1. Full text of the Agreement (CUFTA)
    2. Requirements for food products
    3. Automated system on requirements for food product exporters
    4. Dairy products requirements
    5. Product labeling requirements
    6. Export requirements for agricultural products
    7. State agencies, whose permissions may be required for the export of goods 
    8. Export and Import Permits Act (regulates the issuance of export permits, specifies the level of tariff quotas)
    9. State agency controlling compliance with the rules of food import (Canadian Food Inspection Agency)
    10. Canadian customs (Canada Border Services Agency) 
    11. Export requirements
    12. Export quotas

Source: Aval Bank

Zoia Pavlenko: 25% of Canadians are ready to pay more for environmentally-friendly goods

Canada-Ukraine Trade and Investment Support project environmental expert Zoia Pavlenko talked to the First Business Channel about the main environmental stereotypes Ukrainian businesses have and described the prospects for Ukrainian environmentally-friendly products exporters on the international markets.

Main highlights:

“The very notion of “ecological goods” is completely meaningless. Environmental protection is not about the quality of the consumer goods, it affects the environment on three stages: production, operation and utilization.”

“The more GDP per capita is, the greater is the demand for environmentally-friendly goods. Europe, the US and Canada have higher GDP and, consequently, demand for these products there is higher.”

“Organic goods market in Canada is about $ 5 billion, 60% of Canadians surveyed say they are ready to buy products that are manufactured without risks to the environment, and 25% of consumers are willing to pay more for them.”

See the full interview below (in Ukrainian):

Ihor Sanzharovskyi: Ukrainian producers should find their place on the Canadian market

Market analysis, certification, finding a partner in Canada and fluency in English are just a few of the key “must-haves” for the Ukrainian exporters to Canada. CUTIS project director Ihor Sanzharovskyi talked to UA TV about the crucial aspects of exporting to Canada.

The interview covers the structure of the Ukrainian exports to Canada, the main obstacles exporters face, free trade with Canada, and the prospects of bringing Canadian investments to Ukraine.

“The Canadian market is not empty, it does not simply wait for Ukrainian goods. Ukrainian producers need to find their place on the Canadian market and, let’s be honest, fight for the Canadian shelves,” said Mr Sanzharovsky.

Watch the full interview below:

Zoia Pavlenko: Clean or Rich? How Free Trade with Canada will Impact Environment in Ukraine

Developments of the recent years have dramatically changed the foreign trade of Ukraine: due to the loss of the Russian market Ukrainian manufacturers had to reorient their export trade from the East to the West. Due to the efforts of the Ukrainian government, in particular trade diplomacy of the Ukrainian Ministry of Economic Development and Trade, the free trade zone with the EU was introduced, implementation of Free Trade Agreement with Canada is nearing completion, and active negotiations with Turkey and Israel are currently under way. Every day we witness new success stories of Ukrainian goods on foreign markets.

Graph: The Economist

The aspect rarely mentioned in the discussions of the ‘new way’ of Ukrainian export trade is its environmental impact. In this article we will briefly analyze potential impacts of trade liberalization on the environment in Ukraine. Let’s take as an example the Free Trade Agreement between Ukraine and Canada recently ratified by the Ukrainian Parliament.

From Poor and Clean to Rich and Dirty?

The liberalization of foreign trade, in fact, means facilitating international movement of goods and services. It stimulates production in exporting countries. In theory, such growth leads to a greater consumption of natural resources and growing amounts of industrial waste. This may have both local impact (e.g. discharging of untreated sewage into small rivers) and global impact (increase in greenhouse gas emissions).

In 1955, Simon Kuznets (scientist) suggested the curve of correlation between environmental load level and economic activity (Picture 1). According to the scientist’s theory, growing of the GDP per capita, at first, leads to increase of environmental load, and then – to its reduction. The logic is clear – revitalization of economic activities and new financial resources are used to meet critical needs (filling the gaps), so to say – ‘patching the holes’. In a situation like that, no one worries about environment.

However, later on, when a country is already quite rich and environmental problems continue to accumulate, the environmental protection becomes a pressing matter. The country can invest in the upgrading of outdated production technologies and address negative environmental impacts.

Today, the twenty-fold difference in GDP per capita between Ukraine ($2155) and Canada ($43248) puts them at the different ends of the Kuznets curve. It is possible to assume that increase in the trade relations between the two countries threatens our particular state with environmental degradation. But is it really true?

Is a Leap to Cleanness Really Possible?

The particularity of our country’s participation in free trade agreements is the focus on the export of raw materials that requires considerable use of natural resources. However, even with the gradual shift of focus to the export of manufactured goods with higher added value, we should not forget about environmental impacts of the manufacturing processes themselves (energy and water consumption, emissions of air pollutants, wastewater discharges).

The desire to rapidly increase the economic growth rate and attract foreign investments leads to the loosening of environmental control in Ukraine. This includes a moratorium on environmental inspections of enterprises, formalization of environmental assessment process and delaying of the legislative system reboot with regard to environmental matters. Ukraine became an active participant of the ‘race to the bottom’, because the competition to cut a slice of an ‘international economic cake’ leads to a drop in environmental standards.

It would seem that the prospects are not particularly bright for the Ukrainian environment.  However, in the case of a deeper analysis of international agreements, one can see specific ‘win-win’ opportunities for all parties.

Environmental ‘Letter of the Agreement’

The emphasis on environmental aspects is common for the free trade agreements of the new generation. The Free Trade Agreement between Canada and Ukraine is no exception. The document contains direct links to the environmental conventions and protocols to be followed by the parties. These are, for example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (СITES Convention), the Montreal Protocol on Substances that Deplete the Ozone Layer, the Stockholm Convention on Persistent Organic Pollutants, etc.

In addition, often before signing a free trade agreement, countries conduct its environmental assessment. This helps each party to provide for possible negative impacts and, therefore, make an informed decision and properly plan appropriate countermeasures. In Canada this is stipulated by the legislation – Environmental Assessment Report of the Free Trade Agreement between Canada and Ukraine is available online.

In the terms of environmental regulation, Ukraine is in a better position than the developed countries at the beginning of their economic upturn

While analyzing the articles of the agreement, one can assume that in the terms of environmental regulation Ukraine is in a better position than the developed countries at the beginning of their economic upturn. Since even Canada, learning from its own mistakes, ended up with the need for introduction of more stringent environmental regulations and development of innovative and cost-effective production technologies. And Ukraine can simply adopt these ready-made tools that, in addition, will bring Ukrainian production closer to the European and international standards.

Let Consumers Choose by the Means of a Dollar

Ralph Fücks, the popular German author, in his book ‘The Green Revolution’ claims that, in the modern world, economic growth and environmental protection are not opposed, but become a single whole. So, the obvious solution of the environmental-economic dilemma would be a capital investment in the upgrading of Ukrainian production. Of course, in reality, such quick changes are not so easy to introduce. However, there is an obvious and environmentally-friendly winning approach for small and medium export businesses – let foreign customers support the investments in sustainable production of Ukrainian goods.

In Canada, more than 50 percent of the population identify themselves as responsible consumers.

Greater attention on the part of Ukrainian producers to the environmental protection issues may be rewarded in the markets of the developed countries, such as Canada. Here it has been long-established and growing trend of responsible consumption, when the consumer deliberately buys those goods that reduce the use of energy or water, contain recycled materials or can be recycled themselves, are non-toxic and biodegradable. For example, in Canada, about 58% of the population identify themselves as responsible consumers. Not to mention the global crush on organic products.

The ‘eco-friendly’ image is certainly not just the writing on the label. This is a strategic work, investment and brand development. In some cases, the claimed environmental benefits of the product must be approved by an independent third party in the form of an appropriate certificate. For example, in Canada, consumers very well know product certification according to the ISO 14001 “Environmental Management System” standard, organic certification of agricultural products according to the Canada Organic Regime, timber certification by Forest Stewardship Council (FSC), certification of energy efficiency of electrical appliances by Energy Star, etc.

It is also important to remember that unfounded marketing claims of environmental benefits of your products are the examples of so-called ‘greenwashing’ and involve administrative liability both in Canada and in Ukraine.

The real environmental benefits of goods have direct financial benefits: for example, the cost of the certified organic agricultural products in Canada, on the average, is 40% higher than of their conventional equivalents. So, there is a possibility to not only compensate the costs associated with certification and investments in the production, but also get the higher returns.

Special focus of the Free Trade Agreement between Canada and Ukraine and other international agreements on environmental aspects may create conditions for a quantum leap of domestic producers. Why do the same mistakes, which the developed countries has already made, and go through decades of the depletion of raw material resources, when it is possible to look forward, follow the global trends and get additional price advantages? It is environmental friendliness of Ukrainian goods that can be a part of the brand of Ukraine in international markets and, at the same time, the key to sustainable development of Ukrainian economy.

Information and support on environmental aspects of export to Canada are available at the government Export Promotion Office and Canada-Ukraine Trade & Investment Support project.

Author: Zoia Pavlenko, Ukrainian Environment Expert at CUTIS project

Olga Vergeles: Canadian Supermarkets are Interested in Ukrainian Goods

The Parliament of Ukraine ratified the Canada Free Trade agreement on March, 14.Now, in order to become effective, the Agreement must be signed by the President of Ukraine, ratified by the Senate and signed by the Governor General of Canada. In a month after the ratification procedures are over the Canada-Ukraine Free Trade Agreement becomes a reality. According to experts, it may happen in summer, 2017.

Last year a Canada-Ukraine project for trade and investment support (CUTIS) was launched in order to help Ukrainian companies to enter the Canadian market. The Project is financed by the Canadian government and aims at technical assistance to Ukrainian exporters. propozitsiya.com learned from CUTIS Project Manager Olha Vergeles, what preferences Ukrainian exporters are going to get after the markets are open and in what goods Canadian customers are interested the most.

Who and how will CUTIS assist?

— We have a very good cooperation with the Ministry of Economy of Ukraine, in particular, the team of the trade representative of Ukraine, Natalia Mykolska and Export Promotion Office at the ministry. Together we support small and medium Ukrainian businesses that plan to enter the markets of Canada. Big holdings are capable of hiring consultants and prepare themselves for entering the market while small businesses often lack knowledge and they don’t know what to start from.

A study is currently underway, on the basis of which five groups of goods and services will be selected, that are of the most interest to Canada as imports from Ukraine. CUTIS will be looking for the producers of these goods and invite them to participate in the project. We have planned seminars and information sessions covering the most important export issues. We will also provide technical assistance on packaging, labeling, certification and, most of all, assist in searching for partners, organize meetings. According to our plan, Ukrainian companies will participate in trade shows and exhibitions in Canada.

How will the 5 groups of priority goods be selected?

— The selection will be done in 2 phases. We have analyzed the dynamics of Ukrainian exports to Canada and Canadian imports in general, in order to find out, which goods are being actively imported by Canada with positive trends during the recent 5 years and in which of these groups Ukrainian producers can compete.

We also looked at export opportunities of Ukraine and excluded the categories that are inaccessible for small and medium businesses. At this point, we have already selected 9 groups of goods and one group of services. The next step is to define five priorities. However, keeping in mind the fast dynamics of export markets, we are prepared to reconsider the five priorities. Apart from that, we always support anyone who wants to export to Canada, even if the goods are not part of the five priorities.

Will there be the goods of the food industry included?

Chocolate and confectionaries, as well as processed and canned fruit and vegetables, food processing equipment (refrigerators, flouring mills, packaging equipment) are already on the top-10 list. The final data on the priority groups will be available in April 2017.

Has CUTIS been frequently approached?

— Yes, we are very active online and tell a lot about Canadian market, using all possible resources. I obtain 2-3 requests from various companies on a daily basis. We have been approached by vegetable and fruit producers and well as gardening businesses. Among the frequently asked questions are: how to find a partner, what Canadian customers are looking for, etc.

We plan a Ukrainian trade mission to Canada in April. The group has been joined by frozen fruit and vegetable producers. They have already got international certification and are prepared to meet with representatives of Canadian retail chains.

How can one start cooperating with the project?

— For the beginning I kindly ask to send a brief information on a company (titles, web page, the range of products, certificates available, the scope of production) – this enables us to collect a company profile, which is included in our database. The applications should be sent to the email address office@cutisproject.org.

We receive requests from Canadian chains occasionally. E.g. we have been approached by Canadian companies interested in leading Ukrainian producers of fresh vegetables and frozen fruit.

Have there been any success stories yet?

— CUTIS co-organized a Ukrainian-Canadian forum in June 2016. 93 meetings took place during the Forum, resulting in 4 signed contracts. A pilot office of one Ukrainian company has been opened in Canada. A Ukrainian producer of birch sap met with the representatives of the biggest Canadian chain of supermarkets. They entered into contractual negotiations, including discussions of insurance and the range of products.

Only 4 contracts have been signed as a follow-up of the Forum. Why so few?

— This is a very good number if you take into account high requirements and conservatism of Canadian market. There are some problems with communication and compliance to product requirements. A lot of Ukrainian companies are not ready to export: they seem to show interest, they write about the advantages of their products, send presentations. However, when asked if they are ready to modify their business for exports, the businessmen realize that they are not prepared for it so far.

What are the three major requirements for the products?

— Certification, the required volumes, and terms of delivery are the main ones.

Is this feasible for the products to get straight on the shelves of supermarkets?

— It is quite feasible. But one should have patience. We’ve been working with a number of powerful chains. They file their requests with product groups. Ukrainian companies also have to be prepared to produce under the private label, when goods, produced in Ukraine, are sold under Canadian brand. It is quite profitable for a Ukrainian producer, for Canadians have little knowledge of our brands, whereas launching ad campaigns is very expensive and doesn’t guarantee further sales.

Indeed, there is a powerful diaspora, who buy Ukrainian goods in small stores, but this isn’t a big Canadian market. End buyers don’t know a lot about Ukrainian goods. Apart from that, in order to supply branded products, there need to be large volumes delivered, which is not always affordable to small and medium-sized producers.

Which products are of demand in Canadian supermarkets?

— Primarily, frozen berries and vegetables. Processing companies are interested in fresh vegetables for further production of mixes, salads, sandwiches. Apples are potentially interesting, but it comes down to the price and logistics because Canada gets apples from nearer countries resulting in their relatively lower prices. We’ve been talking to a Ukrainian company, that wants to enter Canadian market with its fresh vegetables. They are aware that, in order to make this happen, they need to have a logistics center in Canada, where the vegetables are packaged and quickly distributed among relevant stores. This option is sensible from the exports stand point because small producers can be engaged in forming big batches to Canada if they are dictated the technology of growth or production.
What should one be prepared for when planning exports to Canada?

— There is a false impression that, once the meeting took place, the contract can be signed in a month. Developed markets don’t work this way. Negotiations often last up to one year. Canadians are very conservative. They want to contact one specific person. They build relationships and communications slowly. To be honest, nobody is looking forward to seeing us in Canada. Therefore, we have to promote our products.

What are other main mistakes of new exporters?

— If a company visited a conference or a forum, it doesn’t mean that they are going to get a flow of clients and contracts right after. This will not happen. They have to visit a few more forums. And not just they visit but also fix appointments beforehand. Because, by the way, big Canadian chains will not pay attention to the proposal sent to a general office address, even if all relevant certificates are available.

Exports take time, resources and energy. The main mistakes are a lack of strategy and financial calculations. For example, juice producers, we have been taking care of, lower the price for the sake of entering the Canadian market. However, they do not guarantee exclusive terms. The common issue and the major factor of entering the Canadian market are the search of a partner and building mutual understanding.

What are the specificities of Canadian business culture?

— Conservatism. Digital tools commonly used here are not so widespread there. And not because they cannot afford them, but because a telephone is a tool for conversation and nothing more. Therefore, during a business meeting, people don’t exchange email addresses to make things faster. Rather, a Canadian businessman comes back to his office, opens his mailbox and gets to your message, probably, the next day. If the information isn’t given in appropriate format, he will not open the file at all.

There are specific standards involved. Thus, you either follow them or you’re out. If a company has certain proposal review procedure, it will not make any exceptions. These are the things Ukrainians do not understand, because they think, “hey, they are Ukrainians too, so we always find common ground”. It all goes in a profound and consistent way, step by step, as it is supposed to be. This is a major difference and the first thing that needs to be considered. Nobody is going to meet with you without preliminary arrangements made, without company information and presentation.

Why is it worth to export to Canada

— This country depends on its imports, which comprise 31% of Canada’s GDP. The National diversity of Canada is also an advantage. Every 5th citizen of Canada was born outside the country. On top of that, Canada is a regional hub, from which one can enter the markets of the US and Mexico.

What advantages is the Free Trade Agreement going to bring?

— Canada provides full and instant access to its markets, which is zero custom rate for most of the goods. However, some of the goods will be subject to quotas. Ukraine will go through gradual liberalization process – 3 to 7 years. Ukraine will also use tariff quotas for some goods, in particular, for frozen pork and lard. Sugar is excluded from the terms of the Agreement.

The Agreement provides for the Parties to work towards mutual recognition of accreditation authorities. In medium terms this means that Canada acknowledges Ukrainian accreditation authority (National Accreditation Agency of Ukraine) and a Ukrainian producer doesn’t need to go through more expensive certification in Canada.

The Agreement contains provisions on public procurement. Canada spends almost CAD 15 billion on procurement and Ukrainian companies will become eligible to participate.

How will the quotas be administered?

— Limitations are applied to wheat, barley, poultry, dairy produce, eggs, cheese, and sugar. It applies to all countries, not just Ukraine, though. Some quotas are not taken up. For instance, only 54% of dry milk whey quota was taken up in 2015 marketing year. Within the quota, 0% duty rate is applied. The specificity of Canada is the responsibility for imports, including the quality of goods, getting a license to supply within the tariff quota, taken by the importer. Even if the goods are shipped with violations or don’t comply with customs regulations, all the fines and penalties will be charged on the importer. Therefore, when a Ukrainian importer finds a partner in Canada, the latter will tell him about all the details because he is primarily interested in having the goods complied with all the requirements and no violations. Administering quotas is also a responsibility of an importer.

As far as margarine, wheat and barley are concerned, it works on “first come – first served” basis. For other goods limited by quotas, a preliminary distribution principle applies, i.e. one need to get the right to supply product within the quota by filing a respective application. This is within the authority of the Ministry of Foreign Affairs of Canada.

Do European exporters use the resource of the Еxport help desk. Is there any similar resource in Canada?

— Using the resource of Automatic Importing Reference System, by the code of goods (4 digits) you can get all the compliance requirements for agricultural produce. It is worth pointing out the purpose of imports: participation in trade shows, sales. All this information is available on the web pages of Canadian state control authorities.

Are there any special requirements to packaging and labeling?

— They frequently forget that food product should be labeled in two languages, with none of the language given the priority, i.e. fonts and lay-outs should be equal. An interesting detail: an expiry date is put in a “reverse” order as for Ukraine: year, month and date. There is a list of acronyms of months – the mix of English and French. As far as the indication of the country of origin, there is a list of produce (wine, dairy produce, honey, fish, meat, eggs, fruit, and vegetables) which must contain this indication.

— Developed countries practice responsible consumption. Is this relevant to Canada too?

— 60% of Canadians consider themselves responsible consumers and over quarter of them are prepared to pay for additional environmental and social benefits, such as: equal employment opportunities for women, equal pay, no adverse environmental impact. Right environmental labeling can inform the consumer of the advantages.

Is organic produce also popular?

Canadian organic market is the world’s top fifth – around $5 billion. The best-sold produce are fresh fruit and vegetables. The volumes of Canadian organic imports are constantly growing. Thus, 20 million Canadians report buying organic food on a weekly basis. They are prepared to pay a higher price for organic produce. The margin may reach 90-300%. The biggest margins can be obtained on organic juices and yogurts. It is important to note, that American organic certificate is also valid in Canada.

How much will the exports grow after the market is open?

— We will not see the instant growth of exports in 2017 because of the specificity of Canadian business mentality and unpreparedness of Ukrainian companies to supply big volumes. Ukrainian counterparts will most likely become more active. At least a year is required to have a substantial shift.