Explaining the The Export Market Development Grant (EMDG)

The Export Market Development Grant (EMDG) can help your marketing spend go further. With the EMDG, you can get back up to 50% of your marketing dollars, which can strengthen your marketing efforts when targeting the world.

The Australian Government’s principal financial assistance program for aspiring and developing exporters is the EMDG. It is arguably Australia’s most successful grant program due to its longevity and support in helping Australian businesses grow offshore sales.

Since its inception, the EMDG has not been a grant program for the purposes of the Commonwealth Grant Guidelines, and consequently, it does not encompass the competitive, merit-based process that other grant programs offer. Rather, the EMDG is a benefit underpinned by legislation, the Export Market Development Grants Act 1997.

Eligibility to the Grant

Any Australian entity or individual is considered an eligible applicant. Applicants must not earn over $50m in the grant year or have received grants for eight or more previous years. This ensures that after 8 years of support, SMEs can develop export markets independently.

Eligible Expenses

Expenses eligible for reimbursement are those incurred by the applicant for specific promotional activities aimed at marketing eligible products in foreign countries (excluding New Zealand, North Korea, and Iran). Expenses must be in respect of eligible products, as the rationale behind this is that the products are substantially of Australian origin.

The types of eligible products listed in the legislation include goods, services (tourism and non-tourism), events, intellectual property, and know-how. Eligible expenses are broken down into the following 9 categories, some of which have specific caps:

1. Overseas representatives:
   • All reasonable costs that an applicant pays to have an overseas representative act on its behalf on a long-term basis to market/promote the product.
   • A maximum of $200,000 per application was claimable.

2. Marketing consultants:
   • The cost of engaging an arms-length consultant to undertake export market research or marketing activities.
   • A maximum of $50,000 per application was claimable under this category.

3. Marketing visits:
   • The cost of air travel during the marketing visit, pro rated based on the number of days spent overseas conducting export market development activities.
   • An allowance of $350 per day is added to help cover entertainment, living, and ground transport costs (capped at 21 days).

4. Free samples:
   • The cost of providing free samples of the product.
   • A maximum of $15,000 per application is claimable under this category.

5. Trade fairs, seminars, in-store promotions:
   • External costs directly related to participating in an international trade fair, seminar, etc.

6. Promotional literature and advertising:
   • External costs of promotional material, such as brochures, advertising and website development.

7. Overseas buyers:
   • The cost of bringing potential buyers who are non-residents to Australia for an eligible export promotion purpose.
   • A total of $7,500 per buyer per visit, totalling $45,000 per application.

8. IP registration:
   • The cost of granting, registering or extending rights under foreign laws in relation to eligible IP.

9. IP insurance:
   • The cost of obtaining insurance to protect these rights.

How The EMDG Grant Amount Was Calculated

The grant amount paid calculated as follows: We calculated the total EMDG amount and then reduced it by $5,000. From this point, we would pay out up to 50% of the remaining expenses as a grant.

For example, if a company had a total of $105,000 of EMDG expenses, we would first reduce it to $100,000, then pay out up to $50,000.

Typically, we would pay out the $50,000 in 2 tranches. Traditionally, the first tranche payment is $40,000, which we pay out once we substantiate the claim. From here, we distribute the remaining $10,000 in the second tranche pending sufficient government funds being available, which depends on the number of applications submitted.

From Retrospective to Prospective

Effective as of 1 July 2021, the EMDG changed from being retrospective to prospective. Claimants now have to submit their EMDG application in advance and forecast the quantum of EMDG expenditure they would incur. The aim of this shift is to provide certainty to claimants by giving them an EMDG funding agreement that lasts 2 or 3 years, and it helps increase cash flow as we pay out grant amounts during the income year in which the expenses are incurred.

Three Claimant Categories

1. Tier 1: Ready to Export, for SME exporters who:
   • Are ready to export in the grant year.
   • Have not exported before.
   • Have appropriate skills in marketing eligible products in a foreign country.

Under Tier 1, grant agreements are offered up to 2 years. Originally slated to provide grant funding up to $40,000 per year, it has since decreased to $15,000 due to increase in take up of the new EMDG scheme.

2. Tier 2: Exporting and Expanding, for SME exporters who:
   • Are exporting eligible products.
   • Seeking to expand export promotion activity for eligible products.

Under Tier 2, grant agreements are for up to 3 years and require the completion of a “Plan to Market.” Originally slated to provide grant funding up to $100,000 per year, it has since decreased to $24,600 due to increase in take up of the new EMDG scheme.

3. Tier 3: Exporting, Expanding and Strategic Shift, for SME exporters who:
   • Are exporting eligible products.
   • Seeking to expand export promotion activity.
   • Ready to make a strategic shift in the marketing of eligible products in a foreign country.

Under Tier 3, grant agreements are for up to 3 years and require the completion of a Plan to Market. Originally slated to provide grant funding up to $150,000 per year, it has since decreased to $36,600 due to increase in take up of the new EMDG scheme.

Grants for Representative Bodies

Grants for representative bodies include industry bodies and alliances. Representative bodies are able to access a grant to:

• Enable them to undertake promotional activities on behalf of its members in international markets.
• Provide training to help its members become export literate.

Representative bodies have no limit on the number of time they can apply for a grant and can receive up to $90,000 of grant funding per year.

How It Works

The EMDG program is based on eligibility. The process is as follows:

1. The entity applies for a grant for promotional activities for the upcoming financial year. The Tier of grant funding for which it applies depends on the business’s current placement. Unless the business applies for Tier 1, it must complete a Plan to Market document outlining milestones, objectives, metrics, budget, etc.
2. After assessing all applications, Austrade offers a grant agreement to each eligible applicant.
3. The eligible applicant generally has a few weeks to review the proposed grant funding agreement and must accept it if they wish to participate in the EMDG program. The grant funding agreement outlines the framework, including milestones that the business must accomplish, documentation it must provide to substantiate costs incurred, and timing for when it will receive the agreed grant amount.
4. If accepted, the claimant entity must adhere to the grant funding agreement, ensuring that they provide milestone reports, invoices, etc. by the agreed-upon timeframe for Austrade to pay the grant funding by the agreed-upon date.

If you need any advice, reach to Alan Baghdasaryan to utilise his expertise and experience in securing the Export Market Development Grant (EMDG) for Australian businesses with global ambitions.