Boatbuilder looks to sail into China

By Errol Kiong

New Zealand specialist boatbuilding company High Modulus hopes the upcoming free trade agreement with China will enable it develop its business in the world's fastest growing major economy.

The Albany-based company - whose notable projects include the K-Boat used in the America's Cup Challenge campaign in the late 1980s - has been in the Chinese market for the past four years.

This year it set up a representative office in Qingdao and a manufacturing plant with Chinese partner Sino Composites is expected to be operational next month.

The plant will make its B3 SmartPac solution - a kitset for boats of various makes and sizes - for sale to Chinese domestic boatbuilders.

But the design and manufacture of the prototype for these kitset boats, be it a catamaran or yacht, remains in New Zealand. This, said chief executive Richard Downs-Honey, allows the intellectual property to remain here.

"We're taking the plans, and turning them from 2D drawings into a complete package of pre-cut patterned glass. So they can use our design expertise, and they can use our experience, to build better boats by virtue of having to simply assemble the bits."

But the crucial first step, getting the New Zealand-built prototype - the first in the production run of any boat - to China, is a complicated process, no thanks to the onerous customs clearance process.

"That first one's the one that gets you going ... and we have had issues with the transactional costs of getting material from here in a box into China.

"In a large project like a 60-foot powerboat, you might have 4000 individually labelled pieces. If customs want to unpack and look at that, it's a nightmare because you're sure they won't put it back in the right order."

Chinese customs require every item to be listed in detail, including the country of origin of the raw materials.

"If there's 4000 pieces that might have six different countries of origin, they go through and they try and work out whether there's a tariff [or] duty. It just makes it difficult for our customers to import stuff. We're making it easier for them by making the facility in Qingdao to deliver to them. But to get to that we still have to do the prototype that comes out of here."

Downs-Honey said some components face tariffs of 18 to 20 per cent of their cost, although Chinese boatbuilders who export can typically claw back between 60 and 80 per cent of the tariff on re-export.

The company has sent six prototypes to China to date, including SmartPacs for boats of 18-21 metres and 8.5 metres yachts, with an average customs clearance time of four weeks. In Australia and Europe customs clearance takes a few days.

Downs-Honey hopes the free trade agreement will help get his kitsets quickly and cheaply into China.

"We think this will be a foot in the door, an advantage if nothing else in simply perception, that will enable us to make the best of the opportunities we've got in China."

* Icecream business New Zealand Natural hopes to see a cut in Chinese tariffs on imported dairy products. The company has more than 40 stores in China, and chief executive Shane Lamont hopes tariff reduction will give it a boost over rivals Haagen Daz and Movenpick. The company faces a 15 to 20 per cent tariff on the cost of each kilogram of icecream.

Lamont said: "Any advantage we can have on the cost-line has to have an advantage in the marketplace."

TRADE DEAL

* Securing preferential access to China's economy will provide increased access for New Zealand exporters.

* Prime Minister Helen Clark has said the deal would include the phasing out over time of tariffs on New Zealand's agricultural exports such as milk powder and wool.

* When fully implemented, the deal would likely benefit New Zealand by around $180 million to $280 million a year.

* China is our fourth largest trading partner, taking over $2.6 billion of New Zealand goods and services.

* When signed next Monday, it will be New Zealand's biggest bilateral trade agreement since the Closer Economic Relations (CER) deal with Australia in 1983.

- NZ Herald

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