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Svalson: Free Trade Agreement Important for Smaller Companies in Rural Areas

Svalson manufactures sliding windows in the small town of Öjebyn outside Piteå and feels the full force of duties, customs bureaucracy and different certification systems when trying to export to the US. Managing Director Maud Spencer is convinced that a free trade agreement (TTIP) between the EU and the US would enable the company to increase its exports significantly.

Svalson was founded 35 years ago and has manufactured sliding windows ever since. The company’s products include wind screening for restaurants and balconies, and electrically operated sliding windows. They are used in applications such as reception desks, pharmacies, police stations and metro ticket offices. Five thousand sliding windows are manufactured each year by around 40 employees in Öjebyn, outside Piteå. 

 

The company has annual net sales of approximately SEK 50 million and half of its production is exported. The EU is its largest market, but Svalson sells also to countries such as Japan and Australia. “We do sell some products in the US, but it’s a difficult country to export to,” says Managing Director Maud Spencer.

 

“We can sell all of our products in the same way all over the world, except for the US and Canada. These countries require, among other things, that we have a special insurance policy not required by other countries.”

 

In order to export sliding windows to the US, Svalson has now taken out this special insurance. But much of their export still goes through Canada. This is a way to avoid the duty of 8% that would otherwise be applied. Goods that are sent to Canada are not subject to duty, and they can be exported from there onwards to the US without duty.

 

“Folk in Canada have found out that this method can be used. They import quite a bit from Europe in order to send the goods onwards to the US, and in this way avoid duties. But it slows down delivery, of course, and it’s more expensive and more harmful to the environment. From the point of view of bureaucracy, however, it’s surprisingly easier to do it this way.”

 

It is Maud Spencer’s experience that the trickiest part for an American importer is not the duty itself, but the bureaucracy involved.

 

“We are a small company, and we sell to other small companies. Small companies in Europe are familiar with managing export and import, but this is not the case in the US. So the duties are a major bureaucratic problem for them. I’m sure that the bureaucracy involved is a larger problem for them than the actual duties. This is why we send first to Canada. The US companies can then import from there, which they are more used to doing.”

 

In addition to the duties, Svalson is also affected by non-tariff barriers to trade when it wants to export to the US. One of its products is the world’s only aluminium fire-rated sliding window, which can be used in fire-resistant walls, etc. The development of such a specialised product is expensive, and a further estimated SEK 150,000 must be paid to have the window tested and certified.

 

“This window resists a fire for 30 or 60 minutes without transmitting heat to the other side. Testing the window destroys it. But this gives us certification that is valid in the EU and the rest of the world. Except the US. So in order to be able to sell it in the US, we would have to have it certified there as well, which is an added expense. In addition, there are the costs of travel, and the need for inspectors to visit our company in order to check that we satisfy this standard.”

 

Maud Spencer estimates that it would cost between SEK 300,000 and 500,000 to have the window fire-rated in the US, even though it satisfies the standards that apply in the EU and the rest of the world.

 

“This is a lot of money for a small company such as Svalson, and it means that we will not do it, which in turn means that this product is not available in the US. And it’s not the case that we would force anyone else off the market there, because this product is so specialised. It ends up with American companies simply not having access to this product.”

 

It also means, of course, that there would be good opportunities for Svalson to sell the window in the US if an expensive certification process were not required.

 

“And this is just one example. We have other products that have received security classification for bullet resistance, for example, and this classification is valid in the whole world except for the US.”

 

All products that are to withstand fire, resist bullets, or in any other way are related to safety require certification and expensive testing. Furthermore, annual inspections are to be carried out to ensure that the factory follows the requirements placed on the manufacturing process.

 

“They would have to come from the US to carry out the inspections, which would involve heavy costs. We do, however, have products that do not require safety classification, and these are the products that we sell through Canada.”

 

In other words, Svalson would benefit greatly from the TTIP free trade agreement between the US and Europe. Maud Spencer believes that the company could increase its exports significantly.

 

“I’m sure that we could sell as many of these safety-classified products in the US as in Europe. Annual sales could increase by SEK 5-10 million.”

 

This would mean that the company could employ more people in Öjebyn. “It would mean a lot for the community,” says Maud Spencer, who points out that the free trade agreement is particularly important for small and medium-sized enterprises in rural areas.

 

“Since we are active in small towns, we have already established working methods based on e‑mail and telephone, which makes it natural for us to export our products. It’s easier for small companies located in larger towns and cities to depend more on finding customers close by.

 

Large companies can employ someone to look after the paperwork that trade barriers give rise to, and smaller companies in a large town or city may be able to join together and collaborate in the work. Those who stand to really benefit from a free trade agreement are those in rural areas,” concludes Maud Spencer. 

Tags: SMEs

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