exporting guide us export assistance center
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EXPORTING GUIDE
US Export Assistance Center
Southern Ohio District Export Council
Compiled by Mark P. EvansAugust 2004
Exporting Overview
Market Potential Company Resources Marketing Plan Distribution Methods International Standards International Legal Considerations Shipping Quotation Pricing Payment Terms Customer Service
Market Potential
US Product Life Cycle vis a vis International Product Life Cycle
Uniqueness of your product Competitive Position Outside the US Ease of Substitution Cultural Acceptance of your
Brand/Product Name
Company Resources
Top Management Support Relative Ease in Supporting Export
Sales Activity by Sales, Marketing, Finance and Manufacturing
Will the personnel view exporting as a thorn or a rose?
Management Decision Making Style; Centralized or Decentralized and Impact Upon Negotiations
Marketing Plan
Select countries of interest Research US export statistics of common
commodities (NTDB) Determine fastest growing markets for US
exporters Assess which of your US competitors are
exporting and where Internet research for competitive local
products
Marketing Plan (continued)
Are product modifications needed? What import technical barriers exist; CE
mark, CCC, etc. What price levels exist? Remember price
in international markets is usually lower than US markets as price is more important than features, quality, service, etc. Your specific product may not require the lowest price if it has a distinct competitive advantage.
Sources of Market Information
US Government Export Portal www.export.gov
National Trade Data Bank (NTDB) www.stat-usa.gov
TRADESTAT www.ita.doc.gov/td/industry/otea/
UN Statistics Yearbook http://unstats.un.org/unsd/CIA
World Fact Book www.cia.gov/cia/publications/factbook/
General Industry Information
Culturgram www.culturegrams.com/ Country Commercial Guides
www.export.gov/OneStopConsumer/OneStop/mrllogin.jsp
Trade Information Center www.ita.doc.gov/td/tic
US Government Resources
Trade Information Center (TIC) www.ita.doc.gov/td/tic
Export Assistance Center Cincinnati www.buyusa.gov/greatlakes/services.html Gold Key Service; locate potential
distribution and arrange local introductory appointments
Platinum Key Service; long term sustained assistance from overseas Commercial Service posts
Distribution Methods
Direct Sales Highly engineered products OEM sales Key account sales Currency fluctuations do not impact
sales because of competitive advantage
Few competitors or highly concentrated industry
Distribution Methods (Continued)
Distributor Network More important to have local
representation where engineered competitive advantage does not exist
Local connections sell the product when barriers exist to direct selling
Distribution Methods (Continued)
Distributor Criteria Must be sales people, not order takers. Must be marketing/selling to your target
market/customer now. Must possess the capital base to advertise,
promote, hold inventory and support their customers credit terms.
Must possess the infrastructure to run the business and have the experience to handle all import administration.
Distribution Methods (Continued)
Joint Venture Local connections very important Cost disadvantage to pure export Retains some marketing and
price/profit control Extremely difficult to maintain “fair”
relationships Legal systems and conventions operate
differently compared with the USA
Distribution Methods (Continued)
Foreign Direct Investment Buy a company and the existing customers Useful to buy a competitor or fend off
additional competitors Allows fragmentation/differentiation of markets
to reduce risk of attack by competitors Provides greater control of market, products,
sales and profits Does not eliminate management culture issues
Distribution Methods (Continued)
License Useful when capital and management
resources are limited. Increases risk of creating a competitor
as the licensee is out of sight and out of mind
May be important to include royalty and cross licensing provisions for any improvements
Distribution Methods – 4 Criteria EMPHASIZED
Must have sales people, not order takers. Must have access to your target
market/customer base immediately. Must possess the capital base to
advertise, promote, hold inventory and support your customers’ credit terms.
Must invest in the infrastructure to run the business and have the experience to handle all import administration.
Department of Commerce – US Commercial Service Resources
Market Research Trade Information Center (TIC)
www.ita.doc.gov/td/tic Country Commercial Guides; market conditions, best
export prospects, financing, finding distributors, legal and cultural issues International Market Insights; analyze conditions in
specific markets Industry Sector Analysis; details about an industry to estimate
market potential, market size and foreign competitors Video Market Briefings; discuss market conditions, regulations,
key players and competitors Export Assistance Centers; 111 offices throughout the 50 US
States
Department of Commerce – US Commercial Service Resources (continued)
Trade Events Trade Missions; arrange personal meetings with pre-
screened business partners
Int’l Buyer Program; brings foreign buyers to US Trade shows
Certified Trade Fairs; place you in the best international trade shows with targeted matching
Catalog Exhibitions; showcase your product and service and have leads sent back to you.
Single Company Promotions; provide meeting space and pre-screened invitations to help you successfully present product or service seminars
Department of Commerce – US Commercial Service Resources (continued)
International Partners Export Assistance Center Cincinnati
www.buyusa.gov/greatlakes/services.html Platinum Key Service; long term sustained assistance from overseas
Commercial Service Posts
Gold Key Service; arrange personal appointments with pre-screened business contacts at the US embassy of your designated country
BuyUSA.com; matches international buyers with US suppliers online
Virtual Trade Missions; let you explore promising markets via video conferencing
Int’l Partner Searches; deliver details on potential partners that have expressed interest in your product or service
Commercial News USA; promotes your product or service to more than 40,000 international buyers trough a free monthly catalog
Department of Commerce – US Commercial Service Resources (continued)
International Partners (continued)
Int’l Company Profiles; offers low cost quick credit checks and due diligence reports on buyers and distributors
The Trade Opportunity Program; provides daily trade leads from foreign buyers
Department of Commerce – US Commercial Service Resources (continued)
Consulting and Advocacy Counseling; assists in the development of an export strategy and
obtaining financing
Consulting; helps resolve regulatory hurdles and recover payment
Platinum Key Service; provides customized, long-term support to achieve your business goals
ShowTime; offers in-depth counseling at major trade shows from market and industry specialists
Multilateral Development Bank (MDB); representatives provide access to project opportunities funded by MDB’s worldwide
Advocacy; through US Diplomats and other officials to give you the edge.
Department of Commerce – US Commercial Service Resources (continued)
Where to start? 1-800-USA-TRADE to find your local
export assistance center www.export.gov www.buyUSA.com
International Standards
Product Adaptation; to meet foreign government regulations, buyer preferences, technological differences.
Engineering and Redesign; voltage differences 120 vac vs 230 vac 1 phase, 480 vac vs 400 vac 3 phase, soft metric vs hard metric dimensions sae vs metric fasteners
Branding, Labeling and Packaging; are local or international brand names important to the
customers and do you need trademark protection does the name translate well in the foreign markets are OSHA warning labels sufficient or do you need
international warning labels does the package need US or metric weights and dimensions
International Standards (continued)
Safety Standards; what local or country safety standards are required for the product to pass through customs
United States; UL label is required on electrical products, toys, medical devices, etc.
European Union; CE Mark is required an any product which can be used “as is”, otherwise a Declaration of Incorporation (DOI) is required so the buyer of the product can place the CE Mark on the final product.
CE Mark; is a safety analysis and documentation requirement (placed on the product by the manufacturer), unlike the UL label which is a performance specific regulation. The CE Mark is required for end use products, see the CE Directives.
International Legal Considerations
Export Administration Regulations Small percentage of exports require a license
or are prohibited for export to certain countries First check the web site www.ustreas.gov/ofac
which details prohibited countries based upon the type of product or service
Second, verify your product or service is not a “dual use” (military and commercial) which would require an export license. If the end use of the product is in a military or nuclear application, and export license is required
Review the restricted product list at the USDOC Bureau of Industry and Security http://www.bxa.doc.gov/licensing/exportingbasics.htm
International Legal Considerations (continued)
Export Administration Regulations Third, it is the exporters responsibility to
ensure the product is not diverted to prohibited countries. Severe penalties apply
Fourth, Foreign corporations which are more than 50% owned by a US company or are substantially directed in their daily activities by the US company, are subject to similar trade restrictions as the US parent
Get legal advice before allowing a foreign subsidiary to sell in a way that could not be done by a US parent
International Legal Considerations (continued)
Foreign Government Regulations Consular Invoices Certificates of Inspection Health Certification Certificates of Origin Chamber of Commerce Verification Safety Certification
International Legal Considerations (continued)
Customs Benefits for Exporters Duty Drawback NAFTA Reduced Local Import Duties
Canada/Mexico FTA’s Reduced Local Import Duties
Completed; Israel, Jordan, NAFTA, Chile, Singapore
Pending; Australia, CAFTA, Morocco, Dominican Republic
Foreign Sales Corporation (FSC); Exemption from Income Tax (Banned by WTO - to be modified by Congress)
International Legal Considerations (continued)
Intellectual Property Considerations Patents;
US Patents based upon first to invent International patents based upon first to file for a
patent. After initial filing you have one year to file in Paris
treaty countries In US you have one year to file after disclosure or
sale of the product International patents must apply before disclosure
or sale of the technology otherwise the technology becomes part of the public domain, or within 1 year of the US patent application
International Legal Considerations (continued)
Intellectual Property Considerations Trademarks;
US trademark or service mark based upon first to use or apply for foreign trademark/service mark protection
International trademark or service mark based upon first to apply
Some countries do not allow registration of service marks
MADRID PROTOCOL allows common application with individual country examinations
Shipping
General Requirements Packed so it arrives in good condition Labeled correctly to ensure the goods are
handled properly, arrive on time and at the right place
Documented to meet US and foreign gov’t requirements and collection standards
Insured against damage, loss, pilferage and delay
Freight Forwarder’s role is to supply above
Shipping (continued)
Packing LCL and CL Pack in strong containers adequately
sealed and filled Provide proper bracing and weight
distribution Goods should be palletized Packing material moisture resistant Wooden boxes for LCL shipments
properly treated for insects
Shipping (continued)
Labeling Shippers Mark Country of Origin Weight in pounds and kilograms Number of cases and dimension of
cases in inches and centimeters Special handling marks (fragile, this
side up, no hooks) Port of Entry Labels for hazardous materials
Shipping (continued)
Common Documentation Airfreight shipments require non-
negotiable air waybills Bill of Lading; contract between owner
of goods and carrier Commercial Invoice; used by importing
country customs officers (caution many customers will ask this value be reduced to reduce duties)
Consular Invoice; used by customs officials in some countries
Shipping (continued)
Common Documentation (continued)
Certificate of Origin; some countries require plus a stamp from the local chamber of commerce
NAFTA Certificate of Origin; required for trade between the NAFTA countries if a US shipper wants to claim 0% duty. (Ex. US company re-sell goods in Canada made in Japan 6 months earlier)
Inspection Certification; usually a third party inspection required by importing customer or government (Philippines)
Shipping (continued)
Common Documentation (continued)
Shippers Export Declaration (SED) Required when shipping goods valued
over $2500 through the US Postal Service Required when shipping goods valued
over $2500 under Schedule B Prepared by freight forwarder and
electronically filed with US Customs Not required for exports to Canada unless
export license required
Shipping (continued)
Common Documentation (continued)
Export License for controlled goods Export Packing List is more detailed than a
domestic packing list and requires; Itemizes material in each package Lists individual gross and net weights in
English and Metric Shippers and buyers references
Insurance Certificate to assure the consignee the goods are insured
Quotation
State the Seller and Buyer Detail Price and Currency Validity Period Terms and Conditions Sheet Warranty Period Shipment terms per INCOTERMS 2000 (Ex-Works and CIF
most common) Ex-Works shipment schedules and estimated arrival
schedule Payment & Banking Details; Account #, Sort Code, Swift
Code Pro Forma Invoice typically required with quotation as a
means for the customer to assure what they are buying
Pricing
Market Based Pricing Requires accurate survey
of market prices at your level in the value chain
Cost Based Pricing Requires Calculation of
direct costs through the value chain
Example:
Domestic Sale Export Sale
Factory Cost Unburdened $ 10.00 $ 10.00
Domestic Freight $ 0.70 $ 0.70
$ 10.70 $ 10.70
Export Documentation $ 0.50
$ 11.20
Ocean Freight and Insurance $ 0.56
$ 11.76
Import duty 4.65% of landed cost $ 0.55
$ 12.31
Importer/Distributor Margin 15% $ 1.89 $ 2.17
Final User Price $ 12.59 $ 14.48
Payment Terms
Terms must be evaluated according to company and country credit risk. The Asian banking crisis of 1997 is a prime example of country risk.
Typical payment terms Cash in advance: check, telegraphic transfer or
credit card Irrevocable confirmed letter of credit; at sight
or x days after ocean bill of lading. A confirmed L/C is a guarantee by the exporter’s bank it will pay the exporter even if the buyer’s bank does not pay the exporter’s bank.
Payment Terms (continued)
Irrevocable confirmed letter of credit; mechanics Buyer opens L/C at buyer’s bank including language
for documents required from exporter to effect payment (we recommend sending preferred L/C language to buyer before the L/C is opened).
Buyer’s bank sends L/C via SWIFT to the advising/confirming bank in exporter’s country. SWIFT requires 3 days.
Exporter’s banks sends letter of confirmation and L/C to exporter.
Exporter reviews L/C carefully as all instructions must be carried out to the letter and all documentation must be provided without errors, or discrepancy fees will apply and payment may not occur.
Payment Terms (continued)
Irrevocable confirmed letter of credit; mechanics continued
Exporter contacts freight forwarder who schedules the ocean or air shipment, and prepares all documentation
Once the goods are loaded, the ocean or air bill of lading is completed by the freight forwarder.
Freight forwarder then sends bill of lading, commercial invoice, packing list, etc. to the advising/confirming bank in exporter’s country
Exporter’s bank reviews all documents for discrepancies, send the documents to the buyer’s bank, who sends documents to the buyer.
Buyer collects the goods. Exporter collects payment according to payment
terms at sight or time draft.
Payment Terms (continued)
Sight Draft: Mechanics Ocean bill of lading endorsed by exporter Exporter’s banks sends OBoL, sight draft, and other
documents (packing list, commercial invoice, inspection certificate, insurance certificate) to buyer’s bank
Buyer’s bank notifies buyer of document arrival. Buyer pays draft and buyer’s bank turns over ocean
bill of lading to allow buyer to collect the goods. Note: Do not ship via air under sight draft as goods
can be collected without an airway bill of lading Open Account is the most risky transaction, but is least
expensive for both sides. L/C is the most expensive as banking fees are incurred
by both the exporter and the buyer.
Customer Service
Perhaps the most unanticipated and most important factor to succeeding in the international market.
Customer service can be described as the manner, procedure and timeliness with which communication is conducted. Some examples: Send wrap up meeting notes within one business day
of your return from abroad. Meet all deadlines Establish a communication policy for all personnel who
will communicate with the customer, such as: Send an answer to all inquiries and questions within 24
hours. If an answer is not possible within 24 hours, send a
schedule for answering the question within 24 hours. Ensure the final answer is not delayed longer than 6
business days.
Customer Service (continued)
Why? Fast communication ensures you are easy to do business with, and helps ensure you become the preferred supplier.
Summary: Global Market Cycle
3. CustomerService
5. New Product Development
Through Global Customer Input
4. RelationshipDevelopment2. Pricing
1. Market Research
CONTACT INFORMATION
US Export Assistance Centerwww.buyusa.gov/greatlakes Dao Le - DirectorPhone 513-684-2944
Southern Ohio District Export Councilwww.exportsouthernohio.orgDao Le – Executive SecretaryPhone 513-684-2944