Doing Business in Italy: 2014 Country Commercial Guide for U.S. Companies INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2013. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES. Chapter 1: Doing Business In Italy Chapter 2: Political and Economic Environment Chapter 3: Selling U.S. Products and Services Chapter 4: Leading Sectors for U.S. Export and Investment Chapter 5: Trade Regulations, Customs and Standards Chapter 6: Investment Climate Chapter 7: Trade and Project Financing Chapter 8: Business Travel Chapter 9: Contacts, Market Research and Trade Events Chapter 10: Guide to Our Services Return to table of contents Chapter 1: Doing Business In Italy Market Overview Market Challenges Market Opportunities Market Entry Strategy Market Overview Return to top Italy is the world’s 9th largest economy with a GDP of USD 2.06 trillion in 2013. Italy’s economy contracted by 2.6 percent in 2012 and 1.9 percent in 2013, still affected by the current global recession. Italy’s population is 61 million. In 2013 Italy was the 22th largest market for U.S. exports, which totaled approximately USD 16.5 billion. The U.S. is Italy’s 9th largest supplier. Germany, France, the United States, Spain, Switzerland, and the United Kingdom are Italy's most important trading partners, with China continuing to gain ground. U.S. imports from Italy totaled USD 38.7 billion in 2013. U.S. cumulative direct investment in Italy was USD 26.8 billion in 2012, ranking Italy 11th in Europe. U.S investment is concentrated in manufacturing, computer services and software, and energy, with significant industrial relationships in the aerospace and automotive sectors. Pharmaceuticals represent the second sector for U.S. investors in Italy in terms of sales (20%) and employment (14%). U.S. biopahramceutcial companies have an annual turnover of 4.7 billion euro (30% of the total industry). Tourism is an important source of external revenue, as are exports of engineering products, mechanical machinery, and textiles/fashion. Industrial activity is concentrated in the north in a swath that runs from Turin in the west through Milan to Venice in the east. This is one of the most industrialized and prosperous areas in Europe and accounts for more than 50 percent of national income. By contrast, Italy’s southern region, or “Mezzogiorno” is less developed. Italy is a founding member of the European Union (EU) and uses the Euro as its national currency. Italy’s current government came into being on February 22, 2014 when 39-year old Florence mayor and Democratic Party (PD) leader Matteo Renzi replaced Enrico Letta as Prime Minister. Renzi’s center left PD dominates his governing coalition, which is no longer a grand coalition but still includes the New Center Right party, the Civic Choice party, and the Union of the Center. Renzi’s goals extend the goals of the preceding Letta and Mario Monti governments: stimulating the Italian economy; reforming the electoral system; and streamlining Italy’s political institutions. As new regulations and laws are passed by the new government, new opportunities may arise. Market Challenges Return to top Italy is a mature and sophisticated market. U.S. entrants face strong competition from local and other EU companies in all market segments. Italy’s regulatory environment is complex and at times lacks the transparency, clarity, efficiency and certainty found in other developed economies. Products that involve health, safety, or environmental concerns are likely to be highly regulated. While EU-wide regulations often apply, Italian laws may go beyond the basic EU requirements. Italy’s economy is dominated by small and medium-sized firms (SMEs), many of which are family-owned, comprising 99.9 percent of Italian businesses and producing 68 percent of Italy’s GDP. Italy’s SME sector has a higher proportion of firms employing fewer than ten persons than the EU average. These companies contribute nearly half of total employment and one-third of value added to the economy. Market Opportunities Return to top U.S. firms enjoy good opportunities in sectors where new regulations or programs (often imposed or initiated at the EU level) are creating demand; with new products/services where there is little or no domestic competition; and/or where the U.S. product offers clear technological, design, or price advantages. Best prospects for U.S. exports include Airport and Ground Support Equipment, Automotive Parts and Equipment, Cosmetics and Toiletries, Cybersecurity, Energy Efficiency Technologies, Medical Devices and Technologies, Mobile Communications and Private Equity. Italy’s changing demographics and lifestyle also create opportunities. Italy’s birthrate is low and its population is aging. More women are entering and remaining in the workforce although their participation remains below EU averages. Italy hosts major trade shows that attract buyers from throughout Europe, the Mediterranean, and beyond. The Commercial Service offers on-site support for U.S. exporters at most of the major international shows, or by request. Shows where U.S. companies have obtained good results include Ecomondo and Mostra Convegno Expocomfort (MCE) (energy efficiency technologies), Cosmoprof (Cosmetics), Autopromotec (automotive), EICMA (motorcycles), Zoomark (Pet products) and Showcase USA-Italy (tourism). U.S. agricultural, fish and forestry exports to Italy in 2013 totaled approximately USD 1.2 million. The United States is, for Italy, primarily a supplier of high quality inputs for Italian food processing–wheat for pasta and confectionary, forest products for furniture and housing components, tree nuts for bakery products, seeds for planting, hides and skins, seafood for the restaurant sector, and tobacco. Market Entry Strategy Return to top The cultivation and maintenance of personal relationships are a vital part of doing business in Italy. Finding the right Italian agent, distributor, or business partner is therefore essential to enter the Italian market. It is usually not effective to rely on agents or distributors in neighboring markets, since despite the existence of the EU common market, the Italian market remains very individualized. The ideal candidate should already have a network of relationships that will open doors in the market. They should have a solid understanding of local business practices and regulations. For technical products, the potential partner should have the ability to provide Italian customers with after-sales service. Patience is essential as it may take two to three times longer than expected to establish a business. eCommerce remains relatively less developed in Italy due to factors such as a high level of credit card fraud, lack of trust in the postal system, and the traditionally less favorable return practices of Italian merchants. However, Italians do use the Internet for social networking and information. The U.S. Commercial Service helps U.S. firms connect with key individuals and organizations through customized solutions including one-to-one meetings, company promotion events targeting customers and partners, market insights and advice, and participation in U.S. Pavilions at leading trade exhibitions. We offer regional customized solutions as well as country-specific programs. Return to table of contents Return to table of contents Chapter 2: Political and Economic Environment For background information on the political and economic environment of the country, please click on the link below to the U.S. Department of State Background Notes for Italy. http://www.state.gov/r/pa/ei/bgn/4033.htm Return to table of contents Return to table of contents Chapter 3: Selling U.S. Products and Services Using an Agent or Distributor Establishing an Office Data Privacy and Protection Franchising Direct Marketing Joint Ventures/Licensing Selling to the Government Distribution and Sales Channels Selling Factors/Techniques Electronic Commerce Trade Promotion and Advertising Pricing Sales Service/Customer Support Protecting Your Intellectual Property Due Diligence Local Professional Services Web Resources Using an Agent or Distributor Return to top Companies wishing to use distribution, franchising and agency arrangements need to ensure that the agreements they put into place are in accordance with EU and member state national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. The Directive establishes the rights and obligations of the principal and its agents, the agent’s remuneration and the conclusion and termination of an agency contract. It also establishes the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies should be particularly aware that according to the Directive, parties may not derogate from certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts. Key Link: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31986L0653:EN:HTML The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of "vertical agreements." U.S. small- and medium-sized companies (SMEs) are exempt from these regulations because their agreements likely would qualify as "agreements