Investing In Norway

Market Entry Strategy

• U.S. exporters seeking general export information and assistance or countryspecific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce's website .www.export.gov
• Information about services offered by the U.S. Commercial Service in Oslo can be found at http://www.buyusa.gov/norway.
• Please also see: Chapter 3: Selling U.S. Products and Services For More Information Contact the U.S. Commercial Service in Oslo, Norway, via E-mail: Vidar.Keyn@mail.doc.gov, Tel: + (47) 21308834, Fax: +(47) 22558803, or its Website http://www.buyusa.gov/norway.

Using an Agent or Distributor

The U.S. Commercial Service at the U.S. Embassy in Oslo receives many inquiries about agents and consultants in Norway wishing to secure government defense contracts. The query is usually about the payment of commissions/fees and the Norwegian laws, regulations or informal policies regarding such payments. There are no prohibitions (under Norwegian law, regulations or informal policy) against using sales agents to make sales of defense-related products to Norwegian government agencies. Most foreign suppliers of defense systems and equipment are represented in Norway through agents. U.S. defense contractors seeking to do business in the Norwegian defense market will also get valuable information and assistance from the Office of Defense Cooperation at
the U.S. Embassy in Oslo (http://www.usa.no/embassy/odc/index.html).

U.S. exporters often ask the Commercial Service about their rights and obligations regarding agreements with Norwegian commercial representatives. In most cases, there is no legal requirement for U.S. exporters to have a local representative. However, the Commercial Service recommends that U.S. companies wishing to export goods or services to Norway find local representatives. Representatives can help U.S. firms adapt their exports to conform to cultural, technical and legal conditions in the Norwegian market. They can also introduce the product or service to extensive networks of customers, and if necessary, provide after-sales service and support. Even if local representation is not a statutory requirement, it may be a practical necessity. This report briefly outlines the rights and obligations of both parties (principal and agent) in an agency agreement. The report should not be considered definitive or comprehensive, and any company considering entering into an agreement governed by Norwegian law should obtain professional legal assistance. On request, the Commercial Service (see Contacts below) can send a copy of the English language text of the Act on
Commercial Agents and Commercial Travelers (Agency Act), no. 56 of 19 June 1992. The Norwegian Import and Export Agents’ Association (see Contacts below) can also provide information about agents’ rights.

Each agency agreement is a legally binding agreement between two parties, where the parties are mutually obliged and entitled to certain compensations. There are no requirements stipulating the form or content of an agency agreement. For this reason, the Norwegian Agent’s Association has worked to establish standard agency contracts on a Nordic basis. These are based on the Norwegian Agency Law and EU directives governing agency agreements.

Most countries in Western Europe have legislation governing agency agreements. In December 1986, an EU directive was approved legislating agency agreements in all EU countries. On January 1, 1993, Norway implemented this directive through the Agency Act. Perhaps one of the most important issues to settle when negotiating an agency agreement is which country’s law will be used to settle any eventual disputes over the content of the contract. Section 3 of the Agency Act states that a provision which pursuant to the act is invariable may not be set aside to the detriment of a commercial agent or a commercial traveler through an agreement that the agency relationship shall be regulated by foreign law, if in the absence of such agreement the relationship would be subject to Norwegian law.

In performing his/her activities, a commercial agent shall look after the principal’s interests and specifically:

1. Make proper efforts to procure orders and, where it is part of the agency contract, conclude transactions,
2. Inform the principal of orders procured and transactions concluded and of other matters of which the agent is aware that are of significance for the performance of the agency contract, and
3. Comply with reasonable instructions given by the principal.

A commercial agent shall take proper care of goods and other items belonging to the principal that the agent has in his charge. The agent shall have such insurance as is customary in the circumstances. The principal’s goods shall be kept separate from other goods. Where a commercial agent is entitled to receive payment for sold goods, he or she shall keep the amounts received separate from other monies. The agent shall give the principal an account of all amounts received.

A principal shall act dutifully and in good faith towards the commercial agent, and in particular:

1. Provide the agent with samples, descriptions, price lists and other necessary documentation relating to the goods concerned,
2. Obtain for the agent the information necessary for the performance of the agency contract, and
3. Inform the agent without undue delay of acceptance, refusal and of any non-execution of a commercial transaction that the agent has procured. Where the principal anticipates that the volume of transactions will be significantly lower than that which the commercial agent could normally have expected, he or she shall inform the agent accordingly without undue delay.

The parties are completely free to determine additional content in the agency contract, including size of commission and commission settlement. Where the parties have not agreed on the level of remuneration, a commercial agent shall be entitled to such remuneration as is customarily allowed in the area where the agent carries on his duties. If there is no such customary practice, remuneration shall be fixed at a level deemed reasonable taking into account all the aspects of the agency contract. U.S. exporters should refer to sections 10 to 17 of the Agency Act for a detailed explanation of when an agent has the right to collect commission.

There are three elements in the Agency Law that give the agent some form of protection. These concern notice of termination, right to payment for termination and compensation for loss. These three elements are compulsory, meaning that the parties cannot exempt themselves from these rights. The agent is not protected against termination of the contract itself, only against untimely termination. Every agency contract should be able to be mutually terminated in a purely businesslike manner.

Should the commercial agent or the principal fail to fulfill their obligations pursuant to the agency contract or pursuant to the Agency Act, the counterpart is entitled to claim compensation for any resulting losses. This shall not apply if the other party can prove that such failure is not due to error or negligence on his/her part.

According to the Agency Act, section 25, the agent has the right to a maximum of six months termination notice. Notice is one month for the first year, and can be extended by one month for each year the agency agreement has been in effect, up to a maximum of six months notice. Termination notice is calculated in whole months from the following month. The right to notice of termination should be understood such that termination can occur with immediate effect, but that the agent has the right to compensation for reduced notice. The agent has the right to usual commission for all orders brought in during the period of notice, in addition to orders scheduled for delivery after expiration of the notice.

When an agency contract is terminated, the commercial agent is entitled to an indemnity if and to the extent that:

1. The agent has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal will continue to derive substantial benefits from the business with such customers, and
2. The indemnity is equitable having regard to all the circumstances, including the commission lost by the commercial agent on contracts with customers. The amount of the indemnity due with regard to points one or two will not exceed a figure equivalent to one year’s commission. This amount shall be calculated on the basis of the commercial agent’s average annual remuneration over the preceding five years. If the contract goes back less than five years the indemnity shall be calculated on the basis of the average for the period in question.

There are many other provisions governing the Principal/Agent relationship in the Agency Act. Any U.S. exporter considering signing an agreement with a Norwegian representative should acquaint themselves with their rights and obligations under this law, and if necessary, seek professional legal advice for assistance in drafting the agreement. U.S. exporters can obtain an English language version of the law text from the American Embassy in Oslo upon request.

Establishing an Office

On behalf of the Norwegian Ministry of Trade and Industry, the Norwegian consultancy institute VINN has recently established the Bedin web portal aimed at simplifying the process of establishing and running business enterprises in Norway. The information is aimed to be relevant, reliable and non-biased. Bedin addresses two target groups; 1) Entrepreneurs looking for information needed to start his/her own business, incl. forms and brochures, all free of charge, 2) Enterprises that need answers to most of the questions arising during regular business activities: Taxes, VAT, bookkeeping, employer employee relations, legislation, etc. Bedin provides useful information in an abbreviated format, together with links to sources and useful sites.

Bedin
How to Start and Run an Enterprise in Norway
Tel; 011 (47) 800 33 840
Website: http://www.bedin.no/php/startside_eng/cf/hDKey_2

The process of establishing a Norwegian company is relatively simple and generally free of restrictions. A subsidiary may be wholly-owned and a branch may conduct full business transactions. A private limited liability company (aksjeselskap-AS) must have NOK 100,000 (USD 15,800) minimum capital, half of that initially and the other half by the end of the first year of operations. At least 50% of the board of directors must be Norwegian nationals or have lived in Norway for the last two years. A public limited liability company (allmennaksjeselskap-ASA) must have a share capital of at least NOK 1 million (USD 158,000).

All companies establishing a presence in Norway are subject to mandatory registration through a central government agency, which also maintains open annual accounts on all Norwegian companies. A fee of about USD 1,000 is paid to cover handling and the cost of publication in the official Norwegian Gazette. The name and address of this agency is:

Bronnoysundregistrene
Tel: 011 (47) 75 00 75 00
E-mail: firmapost@brreg.no
Website: http://www.brreg.no

The Norwegian Competition Act requires that concentrations (mergers, acquisitions, etc.) be notified to the Norwegian Competition Authority by way of a standardized notification. The Ministry of Government Administration and Reform has amended the Regulation on the notification of concentrations. The amendments entered into force on 1 January 2007. Following the changed rules, more concentrations will be exempted from the obligation to submit a standardized notification. Concentrations where the undertakings concerned have a combined annual turnover in Norway exceeding NOK 50 million (about USD 8 million) shall be notified to the Competition Authority. However, if only one of the undertakings concerned has an annual turnover in Norway exceeding NOK 20 million (about USD 3.2 million), notification is not required. The former thresholds were NOK 20 million and NOK 5 million, respectively. Guidelines and other relevant documents in Norwegian have been updated according to the amendments. The English versions of the documents will be updated during the first quarter of 2007.

Franchising

Franchising has become popular in Norway after a relatively slow start. There are several examples of American chains active in Norway, such as McDonalds, Avis and 7-Eleven. However, most franchising systems operating in Norway are based on concepts developed in Norway. In fact, franchise systems of Norwegian origin account for about 75% of the franchise systems, followed by the U.S. with 10%, Sweden 4%, Denmark 4%, and the U.K. 2%. There are about 300 franchise systems operating in Norway.

All franchise systems in Norway are required to act in accordance with the Norwegian legal framework for business enterprises. They also have to operate in line with the framework of the EEA, which is harmonized with EU legislation. Here franchising is exempted from the competition act through directive 4087/88. In Norway, franchising is regulated by the Ministry of Trade and Industry. There are no major obstacles for starting a franchise chain in the country.

In Norway, public knowledge about the franchise concept is relatively poor. There have been attempts to establish franchise conferences and trade shows in Norway to better educate the public and potential franchisees, but like in Sweden and Denmark, these
attempts have failed. There are very few central marketplaces for potential franchisees to meet, so most of the business opportunities are presented through newspaper and magazine advertisements, the Internet, or facilitated meetings. It has also been relatively difficult for potential franchisers to find financing in Norway. There have been limited offers of specific franchising loan agreements in Norwegian banks. Most of the financing has been provided through leasing through the major Norwegian commercial banks.

A significant challenge when setting up a franchise system in Norway compared to the U.S. is the limited size of the market. Norway has a small population of 4.6 million, which often forces the franchise concepts to be broader than what is typically the case in the U.S. It would be difficult for niche products or services to succeed it in Norway. It is also more critical that all of the franchisees succeed. If one fails, the odds for the rest of the chain are considerably lower.

Another major challenge for franchise systems in Norway is the high overhead costs of for example labor and property rental and a tight labor market. However, the price levels and per capita consumption in Norway are significantly higher than in most other countries. Given a prudent balance, this creates potential opportunities for higher margins and volumes despite a small market. It is highly recommended for a foreign franchise system to get a local partner, either as a master franchisee or as a business partner.

The master franchise fee in Norway depends on the terms set by the master franchise contract. Since Norway is a small market with a population of only 4.6 million, combined with the fact a concept might not already be established in the Norwegian market, often requiring the master franchisee to make significant investments, the franchise fees often end up being lower than in most other countries in Europe. A useful resource on franchising in Norway is the local consulting firm Effectum

Direct Marketing

There are plenty of options for companies wishing to use direct marketing in Norway, despite the fact that privacy issues and protection of personal data has been moved higher on the agenda by Norwegian consumers and authorities, particularly the Norwegian Data  spectorate. Norwegian consumers now have an option to reserve the right to refuse receiving direct marketing. A national register for this purpose has recently been established by the Bronnoysund Register Center, the administrative agency responsible for a number of national control and registration schemes for business and industry.

Joint Ventures & Licensing

Joint ventures and licensing agreements are common in Norway. Joint ventures may not have a name of its own, and its existence cannot be raised as a defense against claims made by third parties. Joint ventures may not be registered and have no independent legal identity. Bookkeeping and audit requirements do not exist for joint ventures, except when specified in the joint venture agreement. With regard to licensing agreements, it is not mandatory to record these in the official patent office (Styret for det Industriale Rettsvern) in Norway. However, submitting a record may be recommended. A recorded licensee has the statutory right to be notified of any third parties filing cancellation actions etc. and can thereby be more prepared to enforce his rights under the license agreement. There are a number of local consulting firms that provide assistance in connection with license agreements adapted to the Norwegian market and in accordance with Norwegian intellectual property law.

Selling to the Government

The annual value of Norwegian Government procurements is estimated to total USD 40 billion. Norway is party to the Agreement on the European Economic Area (EEA), which extends, in most respects, to the internal market of the EU, as well as to the European Free Trade Agreement (EFTA) countries Norway, Iceland and Liechtenstein. These EFTA members and all the member states of the EU are party to the EEA Agreement. As part of the EEA Agreement, Norway, Iceland and Liechtenstein have adopted relevant EU legislation with respect to public procurement. Through the signature of the WTO Government Procurement Act (GPA), Norway's public procurement market opened to more countries, so signatory states outside the European Union may also participate. Norway's international commitments through both the EEA and GPA agreements are incorporated into Norwegian legislation. All public tender notices are required to be published in the Norwegian Gazette, Norsk Lysingsblad and the public procurement database DOFFIN. Through the EEA
Agreement, public entities in Norway are required to announce tenders above certain threshold values in the EU database, Tender Electronic Daily (TED) http://ted.europa.eu.

Because of the GPA, purchases covered by the GPA are also announced the Doffin database that automatically forward received tenders above the threshold value to the TED. DOFFIN Database www.doffin.no. Most tenders from European public contracting authorities for public supplies whose value is above the agreed thresholds are open to U.S.-based companies by virtue of the WTO Government Procurement Agreement (GPA). The GPA allows U.S. firms to bid on all supplies and services and some construction works contracts above thresholds contracted by EU central public contracting authorities. However, there are restrictions for U.S. suppliers in the utilities sector both in the EU Utilities Directive and in the EU coverage of the GPA. The Utilities Directive allows EU contracting authorities in these sectors to either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50% of the total value of the goods constituting the tender, or are entitled to apply a 3% price difference to non-EU bids in order to give preference to the EU bid. These restrictions are applied when no reciprocal access for EU companies in the U.S. market is offered. Legal complaints regarding public procurement in Norway should be directed to the Norwegian courts, or to the EFTA Surveillance Authority (ESA).

EFTA Surveillance Authority (ESA)
Tel: 011 (32) 2 286 18 11
Website: http://www.eftasurv.int/

The website of the U.S. Mission to the EU also has a database of all European public procurement tenders that are open to U.S.-based firms by virtue of the GPA. This database is free of charge, contains on average 6,000 to 10,000 tenders and is updated twice per week. For more information, please see the website of the U.S. Commercial Service at the U.S. Mission to the European Union dedicated to procurement and the market research page which contains a handful of reports on EU tendering and government procurement.

Distribution & Sales Channels

Although some 250 U.S. companies have subsidiaries in Norway, the most common way of doing business is through agents/distributors. It is estimated that Norwegian agents/distributors directly represent more than 4,000 U.S. companies with a unique, practical, and necessary sales network. Three-quarters of Norway's 4.6 million people reside in southern Norway. Most major importers and distributors are headquartered in the Oslo region; some have sub-agents or sales offices in other major Norwegian cities. The rest of the country is made up of widely dispersed, small population centers that are expensive to serve due to long distances and high freight expenses. There are few countrywide, multi-store chains outside the apparel, sporting goods, and grocery sectors, and most retailers and distributors are small by U.S. standards. As a result, sub-agents and secondary distribution are the standard, workable method of handling Norway's scattered northern markets. With proper market promotion and support, a good local business partner and/or an astute local office, U.S. companies have unusually good prospects in this small but affluent market. Moreover, U.S. companies may find some licensing and joint venture agreements and full Norwegian subsidiaries to be excellentvehicles for tapping upscale markets beyond Norway (e.g., through Scandinavia and the Baltic states).

Selling Factors & Techniques

Americans with business interests in Norway benefit from ease of communication as the vast majority of Norwegians (and nearly everyone under 60) speak English very well. American culture, including movies and TV series, is pervasive. Yet marketing and training materials in Norwegian will give companies a competitive advantage. Unfortunately, news about Norway in English is sparse, limited to a few Internet services that provide only brief summaries of major events. A few useful words on selling techniques in Norway: Norwegian companies are generally willing to pay for quality. They are also willing to switch suppliers to get better terms or better quality. Do not over promise, and make sure that you keep your deadline/schedule promises. Otherwise Norwegians quickly lose interest. To Norwegians “New” is not necessarily better. You need to present a convincing case – not based on emotions but on usefulness and technical quality. New concepts have to be proven as high quality, practical and already well tested. Hard selling techniques will get you nowhere in Norway. Avoid bragging and exaggerations and make a welldocumented presentation that gets your counterpart involved and lets him/her buy from you rather than you selling through one-way communication. Norwegians are normally not tactical negotiators. If they say your product is too expensive they probably mean it. If you have made a proposal you should stick to it. To your Norwegian counterpart trust is important. Turning around and changing or adding surprising new elements is generally not popular. It is also hard to renegotiate terms after an agreement has been made, even if circumstances have changed.

Electronic Commerce

The Norwegian Act on Certain Aspects of Electronic Commerce and Other Information Society Services entered into force on July 1, 2003. The act implements the Ecommerce Directive (2000/31/EC) into Norwegian law, and mirrors the directive in all essential features, except for the articles regulating the liability of intermediary service providers and some details of the information requirements.

Trade Promotion & Advertising

All major types of advertising media are available in Norway. With the exception of the state-controlled Norwegian Broadcasting Corporation’s (NRK) TV and radio stations, advertising on radio and television is now fully developed and a number of nationwide and local commercial radio stations compete in a growing market. City radio stations that broadcast during morning and evening commuter times are useful advertising vehicles.

The Norwegian television audience can now be reached via several commercial TV stations. TV2 is a national station with excellent coverage. TV3 and Norway-based TV Norge have additional popular advertising possibilities. Key Norwegian decision-makers can also be reached via CNN, CNBC, BBC World, and Sky News, which are available via cable in all major towns and satellite throughout the country.

Norway has extremely high newspaper readership, with circulation figures audited by the newspaper publishers' association. Extensive demographic information concerning readership is available. Distinctions are drawn between the four major metropolitan areas and other, so-called trade districts, which number about 100. Leading Oslo papers include Aftenposten, Dagbladet and Verdens Gang (VG). While these papers are available throughout the country, local papers like Bergens Tidende (Bergen), Adresseavisen (Trondheim), and Stavanger Aftenblad (Stavanger) dominate their local areas. The business dailies Dagens Naeringsliv and Finansavisen reach business and professional people, nationwide. A recent trend in Norwegian news has been the rise of neighborhood or regional tabloids. These are delivered free-of-charge to households and represent a new method of reaching consumers.

Pricing

Norwegian tariffs on industrial goods are relatively low, averaging 3-6%. Most of Norway’s trade with EU countries is conducted on a duty-free basis under the provisions of the EEA. About 70% of Norway’s exports go to the EU, which supplies three-quarters of Norway’s imports. Norway’s corporate tax rates are lower than the EU average. Both companies and branches are subject to income and capital tax. An income tax of 28% applies generally to all forms of income of corporate bodies and other entities liable to taxation. No tax allowances are provided.

The top personal income tax marginal rate is 47.8% (there is a two-step "surcharge" on higher incomes), and is applied at about USD 120,000. The lower step personal income tax marginal rate is 44.8% and is applied at such a relatively low level (about USD 63,000) that more than half of Norwegian workers are subject to it. The value-added tax is 25% on most goods and services, but is 14% on food items. There are also very high taxes on automobiles, gasoline, real estate, financial assets, and other items. Overall, government revenues equal half of GDP. Disposable income is much lower than apparent income per capita, but this is offset to some extent by generous state benefits such as mostly free health care, free tuition at public schools and universities, grants for children, high state pensions (social security), etc.

A revised convention for the avoidance of double taxation between the United States and Norway came into force in 1972. It applies to national income taxes in the United States and Norway as well as local income taxes in Norway. The law covers both individuals and corporations in the two countries. For Norwegian taxation purposes, the key is whether an American enterprise operates in Norway through a permanent establishment (article 4 of the convention), defined as a fixed place of business through which a resident of one of the contracting states engages in individual or commercial activity. If so, then all industrial and commercial profits made in Norway are taxable by the Norwegian government (and exempt from taxation by the United States). The identical rule applies to Norwegian-operated permanent establishments in the United States.

Sales Service & Customer Support

Conscious of the discrepancies among EEA and EU Member States in product labeling, language use, legal guarantee, and liability, the redress of which inevitably frustrates consumers in cross-border shopping, the EU institutions have launched a number of initiatives aimed at harmonizing national legislation. Suppliers within and outside the EU should be aware of existing and upcoming legislation affecting sales, service, and customer support.

Under the 1985 Directive on liability of defective products, amended in 1999, the producer is liable for damage caused by a defect in his product. The victim must prove the existence of the defect and a causal link between defect and injury (bodily as well as material). A reduction of liability of the manufacturer is granted in cases of negligence on the part of the victim.

The 1992 General Product Safety Directive introduces a general safety requirement at the EU level to ensure that manufacturers only place safe products on the market. It was revised in 2001 to include an obligation on the producer and distributor to notify the Commission in case of a problem with a given product, provisions for its recall, the creation of a European Product Safety Network, and a ban on exports of products to third countries which are not deemed safe in the EU.

Under the 1999 Directive on the Sale of Consumer Goods and Associated Guarantees, professional sellers are required to provide a minimum two-year warranty on all consumer goods sold to consumers (natural persons acting for purposes outside their trade, businesses or professions), as defined by the Directive. The remedies available to consumers in case of non-compliance are:

• repair of the good(s);
• replacement of the good(s);
• a price reduction; or
• rescission of the sales contract.

Although it may not be required by law, marketing, sales service, customer support, user manuals, and training materials in Norwegian language will give a company a competitive advantage.

Protecting Your Intellectual Property

Norway generally adheres to key international agreements for the protection of property. It has notified its main intellectual property laws to the WTO. Norway's intellectual property statutes cover the major areas referred to in the TRIPS Agreement. The chief domestic statutes governing intellectual property rights include: the Patents Act of December 15, 1967, as amended; the Designs Act of March 14, 2003; the Copyrights Act of May 12, 1961, as amended; the Layout-design Act of June 15, 1990, as amended; the Marketing Act of June 16, 1972; and the Trademarks Act of March 3, 1961, as amended. The above legislation also protects trade secrets and industrial designs, including semiconductor chip layout design. As an EEA member, Norway has implemented the 2001 EU Copyright Directive. The patent office (Styret for det Industriale Rettsvern) grants patents for a period of 20 years (Acts of June 8, 1979, and May 4, 1985). All trademark applications for the Norwegian market must be registered with this GON agency:

Patentstyret - Styret for det Industrielle Rettsvern
Tel: 011 (47) 22 38 73 00
E-mail: mail@patentstyret.no
Website: www.patentstyret.no

This is Norway's official patent office, handling trademark registration, innovation protection, etc. Fees for national patent applications include a basic fee of NOK 1,000 (USD 158) and a search fee of NOK 3,000 (USD 476). Fees for granting a patent include a basic fee of NOK 1,000 (USD 158). Annual fees for patent applications and patents granted start at NOK 500 (USD 79) per year and gradually increase to NOK 5600 (USD 889) by the 20th year. However, a foreign company must go through a local agent or other intermediary with the application. This may be a friend, a company, a lawyer, an individual, or one of the many private patent offices. The latter offices normally charge fixed consulting fees in addition to the official registration charge. If the trademark application process should need comprehensive research and examination, or extensive contact/correspondence between the consultant, the agency, and the client, total expenses could perhaps run as high as USD 1,500.

Due Diligence

The U.S. Embassy in Oslo is well equipped to assist U.S. businesses with due diligence services. Comprised of offices of the U.S. Department of Commerce, Department of State, Department of Defense, and the Social Security Administration, the Embassy provides services and information for U.S. exporters, investors, and their Norwegian partners. Our trade specialists are available to counsel American companies, as well as Norwegian agents, importers and end-users. If you are interested in doing business in Norway and need an introduction to Norway’s business community or profiles on individual companies (e.g. our International Company Profile service), please contact our U.S. Export Assistance Centers in the U.S. or the Embassy commercial section for assistance http://www.buyusa.gov/norway.