Sometimes going international can be not only interesting, but lucrative. »

GETTInG PAIDfOr TrADE:CHAMBERS AND CERTIFICATES OF ORIGIN

22 chamber executive Fall 2010

chamber executive Fall 2010 23

by Chris mead

On a visit to several chambers in Great Britain last year, I was surprised to find that for most

of them, their biggest source of non-dues revenue was certificates of origin (COOs). A couple of chambers reported making close to $1 million per year on these simple export stamps and related documents and services. I thought to myself, what in the world are we doing

in North America? Can we ever hope to approach the revenue that local chambers in Britain are receiving?

Since my trip, ACCE and many of its members have taken a closer look at this arcane corner of the chamber world. And it appears that some, although not all, ACCE members have the opportunity to earn a good deal of revenue from COOs and related business. While a million might be a stretch, it is likely that some chambers should be able to boost their revenues by $10,000 to $100,000 or more by implementing a wise strategy on these export stamps.

WhAt’s it ALL About?What are certificates of origin? These are documents, verified by chambers of commerce or similar business associations (maritime organizations, commercial groups, etc.), that indi-cate where a product was made. Exporting companies or their agents (freight forwarders) fill out these documents.

The chamber’s main mark on these documents is its stamp — but that picture is worth a thousand words. The chamber does not, contrary to popular opinion, verify the percentage of local (U.S.-made) content that is in the product. That is the responsi-bility of the company. The stamp says (and means) the following:1. The company exists and you (the chamber professional)

know of it.2. The information on the commercial invoice is accurately

reflected on the certificate of origin.3. You know who is authorized to perform these shipments

and can verify that the person from the exporting com-pany or freight forwarder who signed the documents is an authorized person.

4. You are ready and available to answer inquiries from cus-toms officers in importing countries if questions come up.

So stamping one of these documents takes some thought and training to do right, and there are potential consequences

if it’s done wrong. Thus, it’s not going to be a viable option for every chamber.

thE purposE of CErtifiCAtEs of originMost importing countries have varying tariff rates for content produced in different countries. They want to know where prod-ucts originated in order to charge the appropriate tariff. The companies are the only entities that can say specifically what percentage of content came from which country. But authorities in most importing countries want somebody else to verify some basic facts about the export, including that it was filled out cor-rectly and that the company is not just a post office box passing on goods that were really made in China or Bolivia or some other place. Hence the independent role of the chamber in verification.

All this is the theory — but the practice is where things become complicated. There are thousands and thousands of chambers in the United States, and there are no rules as to which chambers get to process these COO documents. So it’s more or less a free-for-all. A typical chamber might process only 5–100 COOs per year — not enough to become expert in the process, or to make much money at it. Most chambers simply stamp the documents at no charge to members, and perhaps charge a fee to non-members, varying from $5 to $50 or more.

Thus there are two factors that lower the quality of the work that chambers of commerce perform on COOs: 1) few chambers process enough COOs to have adequate experience and training to know they are doing the job right, and 2) chambers aren’t getting paid enough to be motivated to perform this job at a professional level. As a result, there is a wide variety of legally questionable practices in this industry, with the most common problem being untrained people merrily stamping forms they don’t understand. That problem gets worse when companies create their own hard-to-verify forms and expect the chamber to stamp them. But there’s more: some chambers (even reputable ones) actually give out or rent out their stamps to exporters or freight forwarders, in direct violation of the international agreements set up for certificates of origin. This opens such chambers up to a whole range of potential legal problems.

Some chambers throw up their hands and simply refuse to handle COOs. But it’s hard to say no to an exporter who pays hefty annual dues and sees this as the most valuable service the chamber provides. So most chambers dutifully stamp the certificate when a member drops by, and maybe even when a non-member comes in. It’s easier than saying “no” and usually, even if done incorrectly, doesn’t result in trouble.

fOr TrADE:

More than membership. Real growth and retention.

2009 Stonecourt DriveBedford TX 76021

Office 800.584.0321Cellular 817.247.9677

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24 chamber executive Fall 2010

eCErtify’s roLEUntil late in 2009, this was the situation in the United States. But then ACCE began working with a company, eCertify, that is providing an electronic means for processing and stamping cer-tificates of origin. Electronic processing, fully accepted in other countries (many of which are far ahead of the United States in this area), makes possible much higher quality and account-ability. Only standard United Nations forms are used, and train-ing and online FAQ assistance is available to all who are in the system. eCertify has a successful track record of setting up such systems in Australia, New Zealand and Norway.

Perhaps most significantly for chambers, electronic pro-cessing permits a reappraisal of the pricing for COOs. With electronic processing, companies get a clear benefit: not only better quality and searchability, but the freedom from having to move a hard-copy certificate physically around the world. A typical exporter will save $70 or more with electronic pro-cessing — a courier to the chamber ($10), a courier from the chamber ($10), and a courier to take the document overseas ($50). Moreover, exporters can sleep better, knowing their $1 million or $10 million shipment won’t be held up at the dock because a piece of paper was misplaced and needs to be re-couriered overseas.

All of a sudden, a $20 or $30 or $50 charge for processing a certificate of origin is something that can be explained to an exporter — and most of them, sooner or later, accept the idea. In Australia and New Zealand, the percentage of COOs that are handled electronically has been inexorably rising and has surpassed 50 percent. Just as email is trumping “snail mail,” so electronic COOs are quietly and slowly eclipsing paper, hand-stamped COOs.

hoW to mAkE Coos Work for your ChAmbErThis doesn’t mean that adopting the electronic COO system means instant riches. Chambers need to explain it, demon-strate it, sell it, and sell it again to exporters. But those that do are likely to do well. In just a month, one ACCE member, Jim Kirkos, chief executive officer of the Meadowlands (NJ) Regional Chamber, managed to convert all his hard-copy COO customers — who were previously receiving the ser-vice for free — to electronic paying customers. As a result, the Chamber’s COO revenue increased from zero to nearly $1,000 per month.

Chambers in the ACCE/eCertify system pay a transaction-based fee per COO for electronic stamping performed for a member. For example, if a chamber charges an exporter $25 for the certificate, it will make a net profit of $20 on that document.

The bigger picture on COOs is fascinating. We estimate that there are at least four million of these processed per year in the United States, with about 90 percent of them handled by cham-bers of commerce. If that 90 percent (3.6 million COOs) were

Chambers that can explain, demonstrate and sell the electronic COO system to exporters are likely to make money.

chamber executive Fall 2010 25

processed by chambers at an average price of $25 each, that would create a $90 million potential market. And of course, this doesn’t include the amount of membership dues that exporters and freight forwarders pay, or could pay, to chambers of commerce. The nation has about 250,000 exporters and 50,000 freight for-warders, and if half of these were to join a local chamber paying $300 each, that’s another potential market of $45 million.

Chambers that process small numbers of certificates per year may not have the incentive to go through a couple of days’ training (and possible retraining if staff turns over) to switch to an electronic system. These chambers have the option of continuing with paper or recommending that exporters use “specialist” chambers that can handle the electronic COOs. Since electronic COOs don’t require physical proximity, export-ers can now be stamped by a chamber that’s 5, 50, or even 500 miles away.

And that is what makes things especially interesting. If, as expected, electronic processing gradually overtakes paper pro-cessing, and more chambers get paid for their COO work, then there will be more competition for exporters. A chamber that has gone electronic may start picking up COO customers in other cities or even in nearby states.

A “specialist” chamber that handles 1,000 or more COOs per year electronically will have the data and, soon, the

expertise to begin offering other services to exporters. Examples of this fuller package of services include: assistance with other kinds of certificates (such as NAFTA certificates), export education services, documentation seminars, trade seminars, trade fairs, and trade missions. Such activities could be a nice complement to existing programs involving international tourism.

Historically, local chambers of commerce have been among the leading facilitators of international trade. A renewed focus on better, and better paid, COO service could herald a new period of international trade activity by chambers. As many chambers have seen in the case of tourism, sometimes going international can be not only interesting, but lucrative.

Chris Mead is senior vice president of the American Chamber of Commerce Executives. He is responsible for membership, sponsorship, advertising and development, and also manages the Metro Cities group of 150 large-city chamber CEOs. He can be reached at (703) 998-3545 or cmead@acce.org.

For further information, click on the eCertify logo from ACCE’s homepage, www.acce.org.

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