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TRANSCRIPT
The Insider’s Guide To Starting
Starting an Import / Export Business
By Timothy Smith
Legal Notices
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While all attempts have been made to verify the information provided in this publication, neither the author nor the publisher assumes any responsibility for errors, omissions, or contrary interpretations of the subject matter herein.
This publication is not intended for use as any source of advice
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Adherence to all applicable laws and regulations, including
international, federal, state and local governing professional licensing, business practices, advertising, and all other aspects of doing business in the US, Canada or any other jurisdiction is the sole responsibility of the purchaser or reader. Neither the author nor the publisher assume any responsibility or liability whatsoever on the behalf of the purchaser or reader of these materials.
Any perceived slight of any individual or organization is purely
unintentional.
One last thing before we begin. You do not have reprint rights to this manual. You may not give
this manual away. You paid for it, and only you should be reading it. Caroline Silver has worked hard on this material, so please respect this copyright by keeping these materials to yourself. Introduction..............................................................................................................................5
Why start an Export Import Business? ..................................................................................5
Types of Export/Import Entities ............................................................................................5 Are you cut out for International Trade? ...............................................................................7 Researching your Target Market ...........................................................................................7
Starting an Import/Export Business ......................................................................................9
The Business Structure ..........................................................................................................9 Deciding on a Business Name .............................................................................................12 Legal Requirements and Business Know-How ...................................................................12 Start-Up Costs......................................................................................................................16 The Market Research Plan...................................................................................................17 Is your company ready to Import/Export.............................................................................19
Employing Different Methods and Channels ......................................................................22
Handling Distribution in Foreign Countries ........................................................................22 Types of Export....................................................................................................................23 Seeking Foreign Representatives.........................................................................................24 Negotiation and Agreements with Foreign Representatives................................................25 Approaching International trade consultants and advisors ..................................................26
Legal Issues - A Detailed View..............................................................................................28
Export Regulations ..............................................................................................................28 General Prohibitions ........................................................................................................29 License Exceptions ..........................................................................................................29 Applying for a License and Application Processing .......................................................29 Export Clearance..............................................................................................................30
Import Regulations ..............................................................................................................31 Drawback of Customs Duties ..............................................................................................31
Foreign Corrupt Practices Act .............................................................................................33
Food and Drug Administration and Environmental Protection Agency Requirements (FDA-EPA) ..........................................................................................................................35 The implications of North American Free Trade Agreement (NAFTA).............................38 U.S. Customs Bonded Warehouse .......................................................................................40
Establishing Your Import/Export Products and Services .................................................43
What you can import............................................................................................................43 What you can export ............................................................................................................44 Exporting U.S. based services .............................................................................................45
Sales.........................................................................................................................................47
Deciding your pricing Models .............................................................................................47 Invoicing and billing............................................................................................................48 Commission on products / Having a flat retainer ................................................................49 Terms of sale........................................................................................................................50 Handling different modes of Payment .................................................................................52
Marketing your Import/Export Business ............................................................................54
Establishing contacts with organizations.............................................................................54 Developing a marketing plan ...............................................................................................55
Selling yourself ....................................................................................................................55 Marketing through direct mail .............................................................................................56 Cold calling potential clients ...............................................................................................57 Traveling Abroad.................................................................................................................57
Proper documentation ......................................................................................................58 Planning an itinerary........................................................................................................59 Considering cultural factors and practises .......................................................................60
Understanding Potential Client Requirements ...................................................................62
Dealing with inquiries..........................................................................................................62 Communicating effectively with clients ..............................................................................63 Maintaining a good working relationship............................................................................64
Project Management..............................................................................................................65
Handling all Operations .......................................................................................................65 Building and Managing your inventory...............................................................................67 Branding and Packaging your product for export................................................................68 Establishing Warranties and Service Agreements ...............................................................69 Shipping your Products........................................................................................................70
Managing Your Import/Export Business ............................................................................71
Managing Cash Flow ...........................................................................................................71 Book-keeping and Documentation ......................................................................................72 Financing for Imports and Exports ......................................................................................73 Accounting & Billing...........................................................................................................75
Growing Your Import/Export Business ..............................................................................77
Defining your Business Goals .............................................................................................77 Devising Growth Strategies .................................................................................................78 Getting Customer Feedback.................................................................................................78 Building your credibility......................................................................................................79 Ensuring the credibility of foreign representatives and buyers ...........................................80
Appendix.................................................................................................................................83
The Import/Export Business Directory................................................................................83
Introduction
Why start an Export Import Business?
What business can be started with little financial investment and yet gets you rich dividends
along with a distinction of being connected globally? The answer lies in the Import Export
sector.
A home-grown business of import/export exemplifies the evergreen business mantra of
thinking globally and acting locally. The most important factors that act as a catalyst in the
success of the business are also the simplest - paying attention to minute details, good
organizational skills and determination to make it work.
Most manufacturers based in the United States supply goods in North America. Those who
have managed to find markets for their produce in foreign shores constitute a small
percentage of entrepreneurs who are exporters. Herein, lays a great opportunity that can work
wonders, if fully exploited.
Your role will be that of a bridge between domestic manufacturers and foreign shores or even
foreign manufactures and the United States market. As an importer/exporter your earnings
can be extremely lucrative at 10 per cent of the deal. Whether you are looking at an
export/import market for machinery, raw materials or computers the 10 per cent can well be
around $500,000 or even a million U.S. dollars.
Types of Export/Import Entities
Broadly, there are three categories that you need educate yourself about before going into this
form of entrepreneurial venture.
Export Management Company (EMC) that represents a package deal where the domestic
manufacturer participates only with his/her desire to sell produce in foreign markets. EMC’s
responsibilities are many:
• Advertising and promotion of the product in the target market
• Hiring dealers, distributors and marketing executives
• Supervising marking and packaging
• Shipping arrangements
(Financial necessities of domestic manufacturers are also looked after by EMCs)
Selection of EMC type is need and ability based. EMCs can be found in different variations -
from specialist firms dealing in a particular product or a particular market to ‘general
practitioner’ EMCs that deal in a variety of goods in different markets across the globe.
It depends on the EMC and its client on the mode of payment - be it salary, commission or
retainer fee with commission, the earnings are usually very good.
Export trading company (ETC) is focussed on gauging the demands of a foreign buyer.
This requires a good deal of knowledge of market conditions, consumer demands and
changes in foreign markets.
The ETC has to know the pulse of the foreign consumers and which products make them feel
like spending money. Once this initial market survey is complete, ETC concentrates its
energies on identifying domestic manufacturers who can fulfill this demand and are willing to
export.
This type of export oriented companies sometimes adopt the distributor’s role in selling
goods in foreign markets, while the same set up is equally viable for commission-based
services.
Import/Export merchant is an international entrepreneur who works as a freelancer. There
are no limitations or specifications usually associated with an import/export merchant when it
comes to describing his/her client base.
Versatility is the essence of the merchant. An import/export merchant first purchases goods
from a domestic or a foreign manufacturer. The merchant relies on himself for packing and
shipping of the goods. His final job is to sell the products.
In this form of import/export business the risk factor is quite high, but so is the profit margin.
Are you cut out for International Trade?
Do you think you have the capabilities that are so essential for International Trade? Here are
some points to consider - do you know some local manufacturers who are looking for greener
pastures to sell their products, do you have the ability to convince and sell products with a
diplomatic approach?
If your answers to these queries are in the affirmative, then you certainly have got a new
horizon awaiting you in the import/export business at U.S. In the span of a very short time
you can start making good money with minimum overhead expenditures.
Researching your Target Market
Your target clientele will be domestic or foreign companies that are hampered by their
limitations in reach, abilities and scope. The opportunities are plenty with hundreds of
manufacturers looking for a distribution network in foreign countries.
Electronic gadgets, radios, sporting goods, house wares, clothes, clocks, even tools for that
matter can be imported and exported. The only two pre-conditions that need to be considered
are - whether there is a demand for the goods in the target country and if you are able to get
the goods to the market through the right channels.
Setting up an export oriented enterprise in the United States will be aided by helpful
government agencies. Not surprising, since the United States Government encourages exports
which helps keep balance of payments with expenditures incurred in import of goods.
The export/import field is largely unexplored. According to the U.S. Department of
Commerce 96 percent of the U.S. export market is untapped and wide open for the
enterprising entrepreneur. One of the key requirements of achieving success, however, is
sound market research before you zero-in on a product. This is critical and should be carried
out meticulously.
Simply put, an Import/Export Business can be extremely lucrative. The key is to apply the
right skills and strategies. The guidelines given in this guide are based on proven strategies
that have worked for many. Most dream of establishing their own business but only a few
succeed! In this guide, I’ll show you how to turn your dreams into reality.
So let's get started!
Starting an Import/Export Business
The Business Structure
A business is a legal entity that has rights and responsibilities. Starting a new business
requires immense effort and planning. There is a considerable amount of paperwork
involved. One of the first tasks of setting up a business is to determine the business or legal
structure. Rules and policies governing these legal structures depend on the state you live in.
In general, there are three main types of Legal Structures. These are:
• Sole Proprietorship
• Partnership
• Corporation
Sole Proprietorship
Sole Proprietorship is a business run by one person. There is not much distinction between
the person and the business in case of sole proprietorship. For instance, all profits are
considered to be your own profits, and thus all business income is considered as personal
income. Similarly, business losses are considered to be personal losses as well. The business
stops operating as soon as you stop working.
To start as a sole proprietorship, you must contact your federal and local regulatory boards.
Information on these boards can be obtained by simply searching on the Internet.
These boards lay out all rules and regulations pertaining to such a business structure.
Although, rules may differ from state-to-state, there are some common requirements for
starting a sole proprietorship. Firstly, you may require a Business License as per your state
policy. Some businesses are exempt from obtaining a business license. The local regulatory
board would be the best source to verify whether your business requires a Business License.
Secondly you must register your DBA or Fictitious Business Name. This is crucial in
preventing frauds. Finally, if you decide to run your Import /Export business from home, you
may require a Zone Permit from the local authorities. The Department of Zoning controls
what type of businesses can be run from residential places. Apart from these, there are other
legal considerations for International Trade. These are discussed in detail in subsequent
sections of this book.
Sole Proprietorships are the most common and simplest forms of businesses, especially in the
case of small businesses. These are easy to set up and operate. Besides, the initial costs
involved in setting up a sole proprietorship are quite low. There are, however, some major
drawbacks. The most prominent disadvantage is that if your company suffers a loss, you pay
out of your own pocket. This can be extremely substantial. Moreover, if you intend to grow
in the future, sole proprietorship may not be the best option.
Partnership
Partnership is very similar to the above business structure. Unlike, in the case of sole
proprietorship, partnership can be considered to be a proprietorship business run by two or
more people. Most of the legal requirements and documents required to establish a
partnership (such as Business License, DBA, and so on) are similar to sole proprietorship.
However, there is one additional requirement which can also termed to be the most important
legal requirement of Partnerships – The Partnership Agreement.
The Partnership Agreement is essential for any business. It delineates in legal terms what role
each partner plays in the business. It lays out the job assignments, responsibilities, profit
sharing, and expense sharing. Besides, it also presents a roadmap to resolve disputes,
resignation, and death of any of the partners.
Remember, you would be starting your website design business to make profits and grow.
Even if you have friends or family as your partners you MUST enter into a Partnership
Agreement with all of them.
Partnership businesses have all the benefits of a sole proprietorship structure. In addition, it
helps you share the burden of your work, provides additional experience that is so crucial in
the success of a business, and helps in raising more funds.
Like the sole proprietorship structure, partnership also has similar disadvantages. All partners
bear the brunt of losses themselves. Besides, in case of partnerships any partner is liable for
100% of the business debt. In other words, if your partner is responsible for the entire
business debt, you would have to accept equal responsibility and pay out of your own pocket.
This is certainly not a good thing. It is thus imperative that if you decide to enter into a
partnership, you have partners that are completely trustworthy.
Corporation
This is the most legally sound business structure. Corporation by itself is a legal entity which
is distinct from you. Unlike in the cases of proprietorships and partnerships, the corporation
(and not you) makes profits, pays taxes, and is sued. This way your personal assets are safe
even if your corporation experiences losses. In a nutshell, you are the representative of the
corporation but not the corporation itself. This provides much higher legal stability as
compared to the options discussed above.
Moreover, you can grow to no bounds if you form a corporation. However, forming
corporations requires more time and money.
What is the best option when it comes to Import/Export? There are many factors such as
location, business goals, target market, number of employees, and so on that must be taken
into account before deciding on the structure. Forming a corporation would not be such a bad
idea, even if it means higher expenses. The legal stability you get with corporations is
unmatched and can propel you to grow your business very well.
Deciding on a Business Name
The name of your business should represent everything you are within a few words. These
words should be few but very powerful! It is extremely important that you pick a name that
people can easily pronounce and remember. Avoid using geographical areas unless you plan
on working in one geographical area for the rest of your life, which is highly unlikely. One
great myth is that the more elaborate the name, the better! The key is that you want a name
that is catchy, but easy to remember. Many times your name is the only information a
customer will see. Therefore, the name of your business should clearly identify the services
you provide.
Give some special time and consideration when choosing your business name. Once you’ve
decided on a name, make sure you are happy with it because it will stick with you. It is
difficult to change your name once you have already begun to establish your business. You
will have to change it on your web site, stationary, business cards, billing statements and
advertisements, which can cost hundreds of dollars.
Once you have decided on a business name that works for you, it’s a good idea to check with
your state business licensing department or Secretary of State to make sure you’re not using a
name that is already being used or trademarked. You can check for trademarked names online
by visiting the Patent and Trademark online Web site located at http://www.uspto.gov.
Legal Requirements and Business Know-How
The Legal Requirements
The Department of Commerce’s Bureau of Export Administration (BXA) has simplified the
official procedure to get a clearance to export domestic products. Newly drafted regulations
make it easy for you to determine whether you require a licence for the export.
To ascertain whether you require a licence you need to classify the products you wish to
export. The country which you chose to export is also crucial for licensing. A product
classification can be easily carried out according to the rules set by the BXA. You would then
have to compare these with a chart to determine if you require applying for a licence to
export goods to your target country.
Export Administration Regulations (EAR) control transactions of export-oriented products.
Lending an ear to the needs of the exporting community, BXA has moulded EAR in a
manner beneficial to the exporting units, especially for those new to this trade. Export
controls have also been liberalized on products manufactured by U.S. companies that are
popular in foreign markets.
EAR puts forth a list of 10 categories for export items, such as commodities, software and
technology. Each category has several entries that have Export Control Classification
Numbers. The Commerce Control List and the Country Chart define export items that are
subject to export control norms.
The control norms are based on technical characteristics of the product and the destination
country. The items that do not require a licence can be easily spotted on the CCL, bearing
three alphabets - NLR (no licence required).
Some products require a licence because EAR is not the same for all countries in context with
issues that are important for United States at large. These issues include national security,
non-proliferation and foreign policy considerations.
Another point to remember is that service is a very important part of many types of
representation agreements. Quality of after-sales services in a foreign country affects the U.S.
manufacturer's reputation there. Employing a representative supervising sale and distribution
in a foreign market is also possible. However agreements with any representative for your
company at a foreign shore should be very clear on the nature of repair and service facility
that is available in the target market.
Keeping an eye out for details is essential for this aspect too - like knowing about the staff
strength at repair-cum-service centres, inspection provisions, training facilities and cost
associated with maintenance of such the support network.
Your credibility depends on delivering what you promise. Therefore, the nature of warranty
will keep changing for different countries in keeping with available service facilities there.
Your agreement with the foreign representative should also detail the training you will
provide to him. This detail should be specific on frequency of training, nature of trainees,
where the training is to be provided, and which party absorbs travel and per diem costs.
Business Know-How - A primer!
International trading requires that you be an enthusiastic sales executive who can make his
sales pitches in a diplomatic fashion. If you cannot make a convincing sales pitch, or sales
talks make you blanch, then this is not your trade.
For being a good international trader, you have to develop excellent organizational skills. An
eye for detail is a critical factor for any export/import trader. You have to put your energies to
tracking down invoices and shipping receipts, if you cannot stomach this chase then better
keep away.
For an enthusiastic international trader the impetus to stretch out to the horizon comes from
the desire to gain valuable experience while dealing with people of diverse cultures. Of
course, it always helps if you already have a background in import/export. But, this has not
prevented new entrepreneurs from joining the U.S. international traders’ list.
This trade is largely based on a very simple logic - meeting the demand for merchandise
produced by U.S. companies in foreign countries. The rewards of being part of this
international trading arena are growing by leaps and bounds. If the world is getting smaller
by the day, cash registers of export/import business are ringing ever louder.
Import/Export is big business in U.S. According to the U.S. Department of Commerce the
import sector accounts for more than $870 billion in goods and services. Exporting is equally
big with American companies exporting $349 billion worth of merchandise to 226 foreign
countries.
Right from beverages to any other commodity, export possibilities are plenty. A savvy trader
is easily able to track down foreign markets transform domestic products into global
merchandise. A very large portion (96 per cent according to U.S. Department of Commerce)
of the export sector remains untapped, and thus open to an entrepreneur.
There are three reasons that contribute to the growth of International Trade in the U.S.
(a) There are many popular products that are not grown or produced in the domestic market,
and subsequently have to be imported. For example bananas have to be imported in Alaska.
(b) Certain other cachet items are imported because it makes the goods more appealing for
the consumers. For instance, champagne and caviar are more acceptable within the domestic
market if they are imported. This is owing to the “image” associated with such goods.
Imported German beer or French perfumes are always considered classier in comparison to
the home grown variety.
(c) Certain goods like Korean toys and Mexican clothing are cheaper when imported. These
products represent that group which costs far less if manufactured and assembled at factories
in foreign countries.
A thumb rule that is often associated with this trade is, apart from cachet items, those goods
and services that are inexpensive to manufacture in the domestic circuit are fit to be exported.
While services and goods that can be produced more efficiently elsewhere and have a
demand in domestic market are imported.
Resources and technology are the two factors that decide whether manufacture of a particular
product will be inexpensive enough to export. For instance, a company with abundance of oil
resources may need to import clothing.
Developing contacts is the most important step in this trade. A person who is well informed
about global business can take a very lucrative ride on the crest of worldwide trends.
Relatives in a foreign country can easily become a starting point for building contacts. Even
an idea about what product could sell in a particular market will set you going.
Foreign consulates in the United States are a good place to start your search. Unites States
embassies across the globe are other potential information points to begin finding contacts for
commercial distribution. These government departments can also help you research a
company's solvency and reputation before striking a deal.
The Chambers of Commerce and Industry of any city is another avenue for locating good
contacts for international trade. The trick is to start small. Usually researching about what
American goods can sell in other countries, or what countries have the merchandise you want
to import is critical. Studying demand patterns in various countries is very helpful before
taking a plunge.
The next step is to start mailing letters to different addresses. Using a tool that is equipped to
produce the same letter with different address each time is worth the money. To every
potential contact write a letter introducing your company, explaining your necessity and then
requesting for names and addresses of firms that would qualify as your target clientele.
When interacting with the target clients, using an easy-to-fill questionnaire, usually gets
quick and good response. Basic issues to be addressed in this interaction are goods they want
to import, what different kinds of products are imported at present, how strong are the
distribution network. History of the organisation, details of its activities can be learnt in this
process. If the contact company is a manufacturer then it is only fair for you to ask for
samples/catalog, details of existing foreign distribution and demand for products in the target
country.
In a nutshell, you should do considerable research to learn the know-how before you venture
into this business. The above mentioned tips are elaborated in further detail throughout the
course of this book.
Start-Up Costs
A classy letterhead and a telephone at home can get you started on your export/import
business venture. The other requirements too are easily fulfilled with a file system, business
cards, and an answering machine. Soon as you start trading you might require a cable address
or telex connection
If you are wondering about the “classy letter head” part, then it has proved to be a very
practical and rewarding move. Till you have managed to get going and establish personal
contacts it is your letter head that creates an impression about your company in the minds of
your clients.
Lending a professional touch to the letter head is recommended -- embossed, two colour,
gold leafed are different styles that are adopted frequently.
Determination to achieve your goal is one factor that is absolutely essential for success.
Going is bound to be slow at first, as is in many business ventures.
In order to optimise your resources and contacts a planned and organised approach is needed
for making good contacts and also for selling yourself to the international and domestic
players. All this perspiration will be well rewarded soon enough. Make a few sales and clinch
some exclusive contracts and you will find that the labours are well paying.
The other expenditure and effort you need to make is keeping in touch with trade
publications, international newspapers, magazines and financial reports. Keeping yourself
updated about demands in foreign markets and the players in the arena.
We would not go too much into detail about the cost of your inventory. This is something
that is covered later. Simply put, the cost can be kept minimal by starting with only a few
products. You may buy these at wholesale prices and import them. Besides, with only a few
items you can easily store them in your own cellar or spare room.
With the right contacts, you may be able to start your Import/Export Business for as low as
$1000.
The Market Research Plan
Market research for export/import traders starts from climatic, environmental considerations,
social and cultural factors, easy availability of raw materials, lower salary structure, different
degrees of purchasing power and the local government’s restrictions on import.
Testing the potential of foreign markets for domestic products sums up the ‘market research’.
The idea is to identify prospective buyers and opportunities in foreign countries while
keeping an eye on the government-imposed constraints.
You can conduct your research using primary and secondary data sources. Primary market
research can be defined as a company collecting data directly from the foreign market
through interviews and surveys. This method is apt for tailor-made products and needs of the
exporter. However, the process is time consuming and often expensive too.
Secondary market research is all about collecting data from various sources like trade
statistics of a foreign market or a particular product. While this method is less expensive, it
also allows you to focus your energies on marketing the products.
The catch in this mode of market research is data available from trade or government sources
is often found to be more than a couple of years old. While statistics could be distorted due to
inefficient data-collection techniques, in many foreign markets such statistical trade data is
not available. Yet, secondary research is found to be more effective and practical.
Market research is used to determine which foreign markets have the best potential for U.S.
products. Valuable information is procured about which are the largest markets for the
selected produce or which are the fastest growing markets, market trends and outlook, market
conditions and practices. Knowing about other firms and products with whom the U.S.
exporter will compete with are also part of this research.
You can also approach the U.S. Department of Commerce and other government agencies to
obtain experts’ advice. Attending seminars, workshops and international trade shows is also
recommended. Hiring an international trade and marketing consultant and speaking to other
exporters of similar products are other practical approaches to know the nuances of trading in
foreign markets chosen by you.
To screening potential export markets will need you to obtain export statistics that will
indicate where U.S. products are headed to. The U.S. Census Bureau can help exporters in
this regard. Trade statistics are also available at the National Trade Data Bank (NTDB).
The final word on this strategy is to have it in black and white after arriving at a decision.
Strengths and weaknesses of a particular strategy are more evident when you write it,
enabling you to work to strengthen the weak links. Easy to remember, hard to overlook are
just a few of the other benefits of having a written marketing strategy.
Is your company ready to Import/Export
As stated earlier, evaluating the export potential for a particular product is very important. If
your product has unique features that have not been duplicated elsewhere then your product
is likely to record good sales in the overseas’ markets. Such a product will have little
competition while the demand could be high due to its type and quality.
To gauge whether your company is ready to export its products, you can ask yourself these
questions:
• What amount of profit does the company want to make from exporting?
• Will exporting be consistent with other company goals?
• Exporting produce will mean additional demand. What kind of pressure will this put
on your company’s resources and production capacity? Are you ready to cope with
these factors?
• Finally you should evaluate if the additional expenditure is worth incurring as
compared to the profits or whether if you should focus on developing new domestic
business.
If you are decided on exporting then the next step is to balance your company’s goals by
optimising capabilities and reducing constraints. Viability of an export plan is also rooted to
the consent of the real executors of your plan -- people working for you.
Before you take the plunge, be sure to go through this checklist:
• List of products selected for export development
• List containing selling price of the products chosen for export
• Modifications to be made to adapt the firm’s product-quality for overseas markets
• List of target foreign markets for sales promotion
• Customer profile of each market
• List supply channels used to reach your products to the foreign consumers
• Unique factors (like competitors, import restrictions) associated with each market and
strategy to act accordingly
• Number of personnel and list of company resources dedicated to exporting
• Expenditure incurred to implement each phase of your export and sale plans
• When to evaluate the results of your enterprise should also be premeditated so that
modifications are made in plans to improve performance.
For beginners, the export plan can be simple with considerable clarity of thought. As you
learn more about exporting and the needs of foreign markets, you keep adding to the basic
plan.
Remember! Do not start your export activities without market screening and research. You
may take this liberty, but only if your product has already got orders from suppliers in a
foreign market.
While this process could make or break an exporter, what is more important is that even if
you are experiencing a degree of success, you should still aim at improving on your profits.
By not researching and applying your mind to minute details you might be passing up on
more lucrative export opportunities.
To form a practical export-strategy base, your efforts on gathering reliable information.
Proper assessment of this data base is also extremely essential. These rather commonsensical
management techniques help you in the long run by pointing towards the right way to
optimise use of resources. Right planning is the best way to success.
You are now familiar with the basics of International Trade. We would now get into the
specifics of this industry. In the next chapter, we take a look at some of the different methods
that can be employed for effective trade.
Employing Different Methods and Channels
Handling Distribution in Foreign Countries
For an export company to succeed it is very important to handle distribution in foreign
countries efficiently. An export company can distribute its products in foreign markets in a
number of ways by hiring representatives of the company in the foreign country. These
include (a) Sales Representatives (b) Agents/Representatives (c) Distributors and (d) Foreign
Retailers
Sales Representatives:
Overseas, a sales representative is the equivalent of a manufacturer's representative in the
United States. The representative uses the company's product literature and samples to
present the product to potential buyers. A representative usually handles many
complementary lines that do not conflict and usually works on a commission basis.
Agents:
The widely misunderstood term "agent" means a representative who normally has authority,
perhaps even a power of attorney, to make commitments on behalf of the firm he or she
represents. It is important that any contract state whether the representative or agent does or
does not have legal authority to obligate the firm.
Distributors:
The foreign distributor is a merchant who purchases goods from a U.S. exporter and resells it
for a profit. The foreign distributor generally provides support and service for the product.
The distributor usually carries an inventory of products and a sufficient supply of spare parts
and also maintains adequate facilities and personnel for normal servicing operations.
Foreign Retailers:
A company may also sell directly to foreign retailers, although in such transactions, products
are generally limited to consumer lines. The growth of major retail chains in markets such as
Canada and Japan has created new opportunities for this type of direct sale. This method
relies mainly on traveling sales representatives who directly contact foreign retailers,
although results might also be achieved by mailing catalogs, brochures, or other literature.
Types of Export
The most common types of exporting are indirect selling and direct selling In indirect selling,
an export intermediary such as an export management company (EMC) or an export trading
company (ETC) normally assumes responsibility for finding overseas buyers, shipping
products, and getting paid. In direct selling, the U.S. producer deals directly with a foreign
buyer.
The way your company chooses to export its products can have a significant effect on its
export plan and specific marketing strategies. There are at least four approaches, which may
be used alone or in combination:
Passively filling orders from domestic buyers who then export the product
These sales are indistinguishable from other domestic sales as far as the original seller is
concerned. Someone else has decided that the product in question meets foreign demand.
That party takes all the risk and handles all of the exporting details, in some cases without
even the awareness of the original seller.
Seeking out domestic buyers who represent foreign end users or customers
Many U.S. and foreign corporations, general contractors, foreign trading companies, foreign
government agencies, foreign distributors and retailers, and others in the United States
purchase for export. These buyers are a large market for a wide variety of goods and services.
In this case a company may know its product is being exported, but it is still the buyer who
assumes the risk and handles the details of exporting.
Exporting indirectly through intermediaries
With this approach, a company engages the services of an intermediary firm capable of
finding foreign markets and buyers for its products. EMCs, ETCs, international trade
consultants, and other intermediaries can give the exporter access to well-established
expertise and trade contacts.
Exporting directly
This approach is the most ambitious and difficult, since the exporter personally handles every
aspect of the exporting process from market research and planning to foreign distribution and
collections. Consequently, a significant commitment of management time and attention is
required to achieve good results. However, this approach may also be the best way to achieve
maximum profits and long-term growth.
Seeking Foreign Representatives
When taking the route of going through foreign representatives for export, it is very
important that you find the right kind of representatives. Once your company has identified a
number of potential representatives in the selected market, you should write and/or fax
directly to each providing detailed information on your company and its products.
Ideally, you should investigate potential representatives carefully before entering into an
agreement. Much of this information can be obtained from business associates who currently
work with foreign representatives. However, U.S. exporters should not hesitate to ask
potential representatives or distributors detailed and specific questions. Your company should
also consider other private-sector sources for credit checks of potential business partners.
In addition, you may wish to obtain at least two supporting businesses and credit reports to
ensure that the representative is reputable. Reports from a number of companies are available
from commercial firms and from the Department of Commerce's International Company
Profiles. Commercial firms and banks are also sources of credit information on overseas
representatives. If your firm has the necessary information, you may wish to contact a few of
the foreign firm's existing U.S. clients to obtain an evaluation of the prospective
representative. To protect itself against possible conflicts of interest, it is also important for
your firm to learn about other product lines that the foreign firm represents.
Once your company has pre-qualified some foreign representatives, you may travel to the
foreign country to observe the size, condition, and location of offices and warehouses. In
addition, you should meet the sales force and try to assess its strength in the marketplace. If
traveling to each distributor or representative is difficult, you should plan on meeting each of
them at trade shows in the U.S. or other countries.
Negotiation and Agreements with Foreign Representatives
After your company has found a prospective representative that meets its requirements, the
next step is to negotiate a foreign sales agreement. The agreement may contain provisions
such as
The foreign representative:
• Not have business dealings with competing firms (because of anti-trust laws, this
provision may cause problems in some European countries);
• Not reveal any confidential information in a way that would prove injurious,
detrimental, or competitive to the U.S. firm;
• Not enter into agreements binding to the U.S. firm; and,
• Refer all inquiries received from outside the designated sales territory to the U.S. firm
for action.
To ensure a conscientious sales effort from the foreign representative, the agreement should
include a requirement that it apply the utmost skill and ability to the sale of the product for
the compensation named in the contract. It may be appropriate to include performance
requirements such as a minimum sales volume and an expected rate of increase.
In the drafting of the agreement, special attention must be paid to safeguarding the supplier's
interests (you, the exporter) in cases where the representative proves less than satisfactory. It
is vital to include an escape clause in the agreement, allowing the supplier to end the
relationship safely and cleanly if the representative does not fulfill the firm's expectations.
Some contracts specify that either party may terminate the agreement with written notice 30,
60, or 90 days in advance. The contract may also spell out exactly what constitutes just cause
for ending the agreement (i.e., failure to meet specified performance levels). Other contracts
specify a certain term for the agreement (usually one year), but arrange for automatic annual
renewal unless either party gives written notice of its intention not to renew.
In all cases, escape clauses and other provisions to safeguard the supplier may be limited by
the laws of the country in which the representative is located. For this reason, you should
learn as much as it can about the legal requirements of the representative's country and obtain
qualified legal counsel in preparing the contract.
Approaching International trade consultants and advisors
When you work towards building a network in place to set up an import-export unit, you
must explore and establish as many methods and channels. Besides finding foreign
representatives and entering into formal negotiation and agreement with them, you can also
approach international trade consultants and advisors.
The international trade consultants and advisors can be the best source to establish networks
as they know the market thoroughly and their knowledge can be of immense use to a new-
entrant in the market.
Shortlist a couple of reputed international trade consultants and advisors, meet up with them
and tell them about the kind of import-export you want to get into, the products you want to
deal with and the countries you plan on targeting. It would be better if you chose trade
consultants or advisors who have specific hold over the business know-how in the country
you are interested in. Ask them how they can be of value in facilitating the work and if they
seem to fit the bill, you can think of hiring them.
International trade consultants and advisors will charge you a fee and will help you by
advising you about whether importing/exporting a particular product in a particular country
would be a profitable venture or not. They can also help by throwing open the business
options of a country to you enabling you to make a better decision about the kind of products
you would import/export to a particular country. With a foreign representative to work on the
ground for you, and an international trade consultant or advisor to advise, there are greater
chances of you making the right decisions and executing them perfectly.
There are a number of avenues you may avail for better managing your business. Next, we
look at the most critical aspect of an Import/Export business - the all important legal issues
and their implications on the way you do your business.
Legal Issues - A Detailed View
The process of exporting domestic products from the U.S. has been made relatively easy by
the Department of Commerce’s Bureau of Export Administration (BXA), especially in terms
of the legal barriers. Road blocks have been removed by the department by implementing
numerous export control liberalizations. Here are some legal issues to consider.
License requirements for export products are linked to its technical characteristics,
destination, end use and the user. Newly drafted regulations make it easy for determining
whether you require a licence for exporting your product(s).
The exporter-friendly regulations as specified by the BXA include answers to frequently
asked queries along with a detailed guide to finding out if your type of export goods is
subject to regulations and also how to apply for a license.
Given below is an overview of most of these regulations, and their implications to trade.
Export Regulations
The Export Administration Regulations (EAR) regulate export and re-export of items for a
number of reasons namely, national security, non-proliferation, foreign policy, and short
supply reasons. Besides, only a relatively small percentage of exports and re-exports require
the submission of a license application to BXA.
Under the EAR the treatment differs from country to country because different countries
present different national security, non-proliferation, or foreign policy considerations for the
United States. Also, the EAR covers more than exports. Normally, items subject to the EAR
are controlled for re-export from one foreign country to another.
Many items may require a license only to a limited number of countries. Other transactions
may be covered by one or more License Exceptions in the EAR, part 740. However, a license
is required for virtually all exports to embargoed destinations such as Cuba. Part 746 of the
EAR describes embargoed destinations and refers to certain additional controls imposed by
the Office of Foreign Assets Controls of the Treasury Department.
At times, EAR are referred to as “dual use” regulations — something that can be used for
both military and other strategic uses and commercial applications. It’s also used to
distinguish the scope of the EAR from items covered by the regulations of other agencies.
General Prohibitions
The general prohibitions describe certain exports, re-exports, and other conduct, subject to
the scope of the EAR, wherein you may not engage unless you have a license from BXA or
qualify under part 740 of the EAR for a license exception from each applicable general
prohibition paragraph.
License Exceptions
License exception is an authorization for the export or re-export of some commodities,
technology, or software under certain conditions. This authorizes you to ship certain items
subject to the EAR that would otherwise require a license. Eligibility for license exceptions
depends on issues like items to be exported or re-exported, the country of ultimate
destination, the end use of the item, or the end user.
Applying for a License and Application Processing
If an export license is required, you must prepare a Form BXA-748P, “Mulipurpose
Application Form,” and submit it to BXA. Forms can be obtained by sending requests on fax
202-219-9179 or by phone on 202-482-3332.
A complete analysis of license application along with all documentation submitted in support
of the application will be conducted by BXA in reviewing specific license applications. BXA
will consider the reliability of each party to the transaction and review any available
intelligence information.
The BXA can be contacted for knowing status of your pending certification request, advisory
opinion, or license application. For advisory opinion requests, telephone 202-482-4905 or
send a fax to 202-219-9179. For license applications and classification requests, telephone
BXA's System for Tracking Export License Applications (STELA) at 202-482-2752.
STELA is an automated voice response system that, upon request via any standard touch-tone
telephone, will provide you with up-to-the-minute status on any license application pending
at BXA. Requests for status may be made only by the applicant or the applicant's agent.
In an emergency, the Department of Commerce may consider expediting the processing of an
export license application, but this procedure cannot be used as a substitute for filing of an
application. If you feel you qualify for emergency handling, you should contact the Exporter
Counseling Division at 202-482-4811 or by mail to the:
U.S. Department of Commerce
Bureau of Export Administration
Office of Exporter Services
Exporter Counseling Division
14th Street and Constitution Avenue, NW, Room 2706
Washington, D.C. 20230
Export Clearance
If you are issued a BXA license, or you rely on a license exception described in part 740 of
the EAR, you are responsible for the proper use of that license (or license exception) and for
the performance of all its terms and conditions.
Import Regulations
It is important for exporters to know the regulations that apply to their own operations and
transactions as import documentation requirements and other regulations of foreign
governments differ from country to country. A detailed explanation of the Import Regulations
may be obtained by contacting the BXA.
Drawback of Customs Duties
Drawback (not to be confused with drawbacks or disadvantages of Customs Duties) is meant
to enable a manufacturer (or exporter) to compete in foreign markets. Prior to making
contractual commitments you must know that you will be entitled to drawback on your
exports. The procedure has been designed assure the exporter and protect him/her. Simply
put, if you do not get paid for your exports, you may avail compensation by applying for a
Drawback.
Drawback was initially authorized by the first tariff act of the United States in 1789 to
encourage American commerce or manufacturers to compete in foreign markets. Despite
changes from time to time in the conditions under which it is payable, it has been a part of the
law. There are several types of drawback authorized under section 1313, Title 19, United
States Code.
Given below is a list of processes associated with claiming a drawback.
Getting a drawback
If you want to get a drawback, prepare a drawback proposal (statement) and
submit it before a Regional Commissioner of Customs for section 1313 (a)
drawback and with the Entry Rulings Branch, Customs headquarters, for other
types of drawback, including combination 1313(a) and (b) drawback. At present,
there are several general drawback contracts — published in the Customs
Bulletin and Decisions — like orange juice, steel, sugar, component parts
available that eliminate any need for submitting a proposal.
An ordinary model drawback proposal may be obtained from regional
commissioners for section 1313(a) drawback. For other types of drawback you
can write to:
U.S. Customs Service, Entry Rulings Branch, 1301 Constitution Ave., NW,
Franklin Court, Washington, D.C., 20229, or call 202-482-7040.
The U.S. Customs Service also maintains an Internet site at
http://www.customs.ustreas.gov.
The approval
Before you start Exporting/Importing, you need to file an application of
Approval with the U.S. Customs. There are two kinds of Approval.
Approval of section 1313(a) proposal is a letter from a Regional Commissioner
of Customs to the applicant (you), whereas, approval of a section 1313(b)
drawback proposal is a letter from U.S. Customs Service headquarters to the
Regional Commissioner of Customs where you will file claims. You receive a
copy of this letter. Synopses of all contracts are published in the Customs
Bulletin and Decisions. The proposal and approval together are called a
drawback contract or drawback rate.
In case you desire to have your contract (rate) changed in any way, you have to
file a new proposal (statement). However, the procedure is the same.
Export Procedure
A drawback claimant has to establish one thing: The articles on which the
drawback is being claimed were exported within five years after importation of
the imported merchandise, which is the basis for the drawback.
The Payment
After filing all required documents, the entry will be liquidated by the Regional
Commissioner of Customs to decide on the amount of drawback due. Drawback
can be paid to you - the exporter, unless the manufacturer of the product reserves
to itself the right to claim the drawback.
Accelerated Payment
Under certain conditions accelerated payment of drawback is authorized.
Accelerated payments ensure that you receive your drawback no later than two
months after filing the claim. Accelerated drawback currently applies to same
condition drawback.
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act has been incorporated by the U.S. Government to stem
any unlawful practices in foreign trade. Here is a brief description of this act in laymen terms.
The law prohibits a U.S. firm — this includes any officer, directors employee, agent, or agent
of a firm or any stockholder acting on behalf of the firm — from offering, paying, or
promising to pay (or to allow any such promise or payment) money or anything valuable to
any foreign official (or foreign political party or candidate for foreign political office) to get
or retain business.
It is against the law to pay any person while knowing that all (or a portion of) the payment
will be offered, given, or promised — directly or indirectly — to any foreign official, foreign
political party or candidate for foreign political office, to assist the firm in getting or retaining
business. The term “knowing” here, also means “conscious disregard” and “willful
blindness.”
There’s an exception to the anti-bribery provisions for “facilitating payments for routine
governmental action.” The statute lists a number of examples and actions similar to those
listed are also covered by this exception.
A person accused of violating the anti-bribery provisions of the Federal Corrupt Practices Act
(FCPA) may defend his/her case on the grounds that the payment was legal as per the laws
and regulations of the foreign country. He/she may also argue that the payment was
associated with demonstrating a product or performing a contractual obligation.
As per the rulebook, firms may be fined up to $ 2 million. Officers, directors, employees,
agents and stockholders are subject to a fine of up to $ 100,000 and five years’ imprisonment.
The Attorney General is authorised to initiate a civil action against a domestic concern (and
the Securities and Exchange Commission against an issuer) for a fine of up to $ 10,000 as
well as any officer, director employee, or agent of an issuer, or stockholder acting on behalf
of the firm, who deliberately breaks the anti-bribery provisions.
As per other federal criminal laws individuals may be fined up to $ 250,000 or double the
amount of gross gain or gross loss if the defendant derives pecuniary gain from the
wrongdoing or causes a pecuniary loss to other. The Attorney General may also initiate civil
action to enjoin any act or practice of a domestic concern (and the SEC with respect to an
issuer) whenever it seems the domestic concern or issuer (or an officer, director, employee,
agent, or stockholder acting on behalf of the domestic concern or issuer) is in violation (or
about to be) of the anti-bribery provisions.
Violation of the FCPA may result in barring a firm or person from doing business with the
federal government. Also, indictment alone can invite suspension of the right to business with
the U.S. Government.
Foreign Corrupt Practices Act Opinion Procedure was established by Department of Justice
— the details are found at 28 CFR Part 77. As per the procedure, a party may seek a
statement of Justice Department’s present enforcement intentions under the anti-bribery
provisions of the FCPA as far as any proposed business conduct is concerned.
For any further queries, you can contact:
Deputy Chief, Fraud Section, Criminal Division, U.S. Department of Justice, Room 2424,
Bond Building, 1400 New York Avenue, NW, Washington, D.C.20530, 202-514-0651 (FTS)
202-368-0651.
Besides this, the Department of Commerce gives general information to U.S. exporters about
the FCPA and international developments related to the FCPA and international bribery.
For further information from the Department of Commerce about the FCPA, you may get in
touch with:
Chief Counsel for International Commerce or the Senior Counsel for International Finance
and Trade, Office of the Chief Counsel for International Commerce, U.S. Department of
Commerce, Room 5882, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230,
202-482-0937.
Food and Drug Administration and Environmental Protection Agency
Requirements (FDA-EPA)
In case, you plan on importing/exporting food products (or drugs), you must ensure
conformation to guidelines and rules set by the FDA and EPA. Here’s an explanation of some
of the relevant rules.
The Food and Drug Administration enforces U.S. laws meant to ensure that consumer gets
pure food and that drugs, devices and cosmetics are safe and effective. FDA has promulgated
a lot of regulations. Exporters of products covered by FDA’s regulations are affected as
follows:
• The item is intended for export only
• Meets the specifications of the foreign purchaser
• Is not in conflict with the laws of the country to which it is to be shipped
• Is properly labeled.
• It is exempt from the adulteration and misbranding provisions of the Federal Food,
Drug, and Cosmetic Act
This exemption does not apply to “new drugs” that have not been approved as safe and
effective, or to certain devices and biologics. Additional requirements apply to these
products. Banned new animal drugs may not be exported.
If you think that your export product may be covered by FDA, it is important to contact the
nearest FDA field office or the Food and Drug Administration.
You can make inquiries by writing to the FDA at 5600 Fishers Lane, Rockville, MD 20857,
calling 1-800-532-4440, or visit the FDA Web site at: http:/www.fda.gov.
The Environmental Protection Agency or the EPA regulates the export of hazardous waste,
pesticides, toxic chemicals, and ozone depleted substances.
A number of statutory notification systems design are there to inform receiving foreign
governments about the fact that materials of possible human health or environmental concern
will be entering their countries. In some cases, it allows the foreign governments to object to
such shipments.
Under the Resource Conservation and Recovery Act (RCRA), there are two different sets of
export regulations. One is meant for exports of hazardous wastes moving for recycling within
the Organization for Economic Cooperation and Development (OECD) (40 CFR 262 subpart
H). The other for non-OECD hazardous waste exports, as well as for hazardous wastes
exported for treatment and disposal, both within and outside the OECD (40 CFR 262 subpart
E).
In some cases, the written consent of the importing government is required before the
shipment may commence; in other cases, consent is considered “tacit” if there is no response
from the importing government after 30 days.
Exporters should also know about the Basel Convention on the Control of Trans-boundary
Movements of Hazardous Wastes and their Disposal. This treaty bans trade in hazardous
wastes between parties and nonparties without a Basel-consistent bilateral agreement in
place.
Approximately 110 — except the U.S. countries — have ratified the Basel Convention.
Exporters should be aware of potential trade restrictions. Exporters of hazardous waste
should contact the EPA's Office of Compliance, Import/Export Program at 202-564-2290, or
the RCRA/Superfund Hotline at 800-424-9346 or 703-412-9810.
For pesticides and other toxic chemicals, neither the federal Insecticide, Fungicide,
Rodenticide Act (FIFRA), nor the Toxic Substances Control Act (TSCA) require exporters of
banned or severely restricted chemicals to obtain written consent before shipping. However,
exporters of unregistered pesticides or other chemicals subject to regulatory control actions
must comply with certain notification requirements. Under TSCA importing countries are
notified of the export or the intended export of many industrial chemicals or mixtures (40
CFR 707 subpart D).
These chemicals or mixtures are subject to certain regulator actions taken under the act.
Exporters send to EPA, for each affected chemical or mixture, a notice for each country to
which the chemical or mixture is exported. The notice is sent annually or only once,
depending on the regulatory action controlling the chemical or mixture. The agency then
informs the importing country of the regulatory action taken. These notices are also used to
satisfy the information exchange provisions of the Prior Informed Consent (PIC) procedures,
which are under the United Nations Environment Programme.
For chemicals banned or severely restricted in the U.S. and subject to the PIC procedures,
EPA forwards to the designated national authority of the importing country information on
the chemical's regulatory controls. In addition, TSCA also prohibits the export of
polychlorinated biphenyls (PCBs) and PCB-containing items in concentrations greater than
or equal to 50 ppm, unless an exemption was granted. The TSCA hotline, 202-554-1404, can
provide general information on these export requirements.
You may not export class I ozone-depleting substances, including chlorofluorcarbons
(CFCs), to any country that is not a signatory to the international treaty entitled the Montreal
Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol). The United States
is a signatory to the Montreal Protocol. Under authority of the Clean Air Act Amendations of
1990, the EPA published regulations prohibiting the export of bulk shipments of CFCs,
halons, methyl chloroform, carbon tetrachloride, and hydrobromoflurocarbons (HBFCs) to
any country not a party to the protocol (40 CFR Part 82 subpart A).
Currently, there are 162 nations that are signatories to the Montreal Protocol. The U.S.
Customs Service and EPA coordinate to monitor and enforce import and export restrictions
on ozone-depleting substances. To obtain an up-to-date list of signatories to Montreal
Protocol to export class I ozone-depleting substances contact EPA's Stratospheric Protection
Division at 202-233-9410.
The implications of North American Free Trade Agreement (NAFTA)
The U.S. has signed the NAFTA with other countries to facilitate trade. Here's a brief
description of this treaty and its implications.
Provisions of the North American Free Trade Agreement (NAFTA) on drawback is
applicable to items imported into the U.S. and eventually exported to Canada on or after
January 1, 1996. The provisions as per the agreement will also apply to goods brought in
from abroad into the U.S. and then exported to Mexico on or after January 1, 2001.
As per the agreement, the refunded, reduced or waived off customs duties is the lesser of the
total amount of custom duty paid or owed on the finished good in the NAFTA country where
it is exported.
Also, no NAFTA country, on condition of export, will refund, reduce, or waive the
following: “antidumping or countervailing duties, premiums offered or collected pursuant to
any tendering system with respect to the administration of quantitative import restrictions,
tariff rate quotas or trade preference levels, or a fee pursuant to section 22 of the U.S.
Agricultural Adjustment Act”. The same condition substitution drawback was removed as of
January 1, 1994.
The U.S. foreign-trade zones privileges as far as customs is concerned should be considered
by exporters. The zones — domestic U.S. sites — are believed to be outside U.S. customs
territory. They are available for activities that might in other circumstances be carried on
overseas for customs reasons. As far as export operations are concerned, these zones provide
accelerated export status for excise tax rebates and customs drawback.
For import as well as re-export, no customs duties, federal excise taxes (or state / local ad
valorem taxes) are charged on foreign goods moved into zones unless and until the goods or
the products made from them are moved into the customs territory. The implication of this is
simple: use of zones can be profitable for operations which have foreign dutiable materials
and components and are assembled or manufactured in the U.S. for re-export. Besides,
normally no quota restrictions apply to export activity.
Around 217 approved foreign-trade zones in port communities exist across the U.S. More
than 356 sub-zones are associated with these projects. The facilities are available for
operations involving storage, repacking, inspection, exhibition, assembly, manufacturing and
other processing.
Over 2,800 business firms used foreign-trade zones in the fiscal year 1995. While the value
of merchandise that moved in and out of the zones during the year crossed the $143 billion
mark, export shipments from zones and sub-zones touched $ 17 billion.
For further information about the zones, one can contact: The zone manager from local
Commerce Export Assistance Centers, or
The Executive Secretary, Foreign-Trade Zones Board, International Trade Administration,
U.S. Department of Commerce, Washington, D.C. 20230.
With a view to encouraging and facilitating international trade, over 300 free ports, free trade
zones and similar customs-privileged facilities are made available in around 75 foreign
countries. These are normally in or near seaports or airports. A number of U.S. based
manufacturers as well as their distributors make use of free ports or free trade zones in order
to receive goods shipments which are reshipped in smaller lots to customers in surrounding
areas.
For any further queries, one can contact your local Department of Commerce Export
Assistance Center or the Trade Information Center (1-800-872-8723).
U.S. Customs Bonded Warehouse
Most Import/Export companies have to apply for a Custom Bonded Warehouse certificate
before they can start trading.
In simple terms, a building or a secured area where dutiable goods can be stored, manipulated
or manufactured without paying duty is known as Customs Bonded Warehouse. The powers
for establishing such a warehouse is set forth in Title 19. United States Code (USC) section
1555. There are nearly nine different types of Customs Bonded Warehouses.
Among the various advantages of using a bonded warehouse are:
- No duty until merchandise is withdrawn for consumption;
- Control of an importer over use of money until duty is paid upon withdrawal
Also, in case of no domestic buyer being found for the imported articles, an importer can sell
merchandise for exportation and cancel his obligation to pay duty.
The importer and warehouse proprietor may incur liability as per the bond upon entry of good
into the warehouse.
For establishing a warehouse, an owner or leaseholder who wants to establish a bonded
warehouse, should firstly, give a written application to the local customs port director
describing the premises and giving the location. You also have to state the class of warehouse
to be established.
Save for a class 2 or 7 type warehouse, it has to be made clear in the application itself
whether the warehouse shall be operated only for the purpose of storage or treatment of
merchandise which belongs to you (the owner), or it is to be operated as a public bonded
warehouse.
Also, if the warehouse is expected to be used as a private bonded warehouse, the application
must also state what the general character of the merchandise to be stored therein is, with a
rough valuation of the maximum duties and taxes that will be due on the merchandise at any
one time.
Among the other requirements, you must have:
- A certificate signed by the president or a secretary of a board of fire underwriters
stating that the building is a suitable warehouse and acceptable for fire insurance
purposes. Also, ports do not have a board of fire underwriters, and hence certificates
signed by officers or agents of two or more insurance companies have to be obtained.
- You also have to produce a blueprint which shows measurements of the warehouse to
be bonded. Moreover, if the warehouse is a tank then the blueprint is also expected to
display all outlets, inlets as well as pipelines and should be certified as proper by the
proprietor of the tank. The gauge table showing the capacity of the tank in U.S.
gallons per inch or fraction of an inch in height should be included and certified by
the proprietor. Also, when a part (or parts) of a building are to be utilised as a
warehouse, an elaborate description of the materials and construction of all partitions
must be incorporated. This is applicable if you intend converting a part of your house
into a warehouse.
- Lastly, there are some Bonds required for this purpose. Bonds for each class of
warehouse shall be executed on Customs Form 301. Duty-free shops (class 9) have
specific requirements governing their establishment. These requirements include
location, exit ports, record-keeping systems, and the approval of local governments.
The U.S. Customs Service has more than 300 ports of entry in the United States, Puerto Rico,
and the U.S. Virgin Islands. Please consult your local telephone directory under "U.S.
Treasury Department, Customs Service."
Establishing Your Import/Export Products and Services
In the previous section, we looked at critical legal issues governing International Trade. Now
that you are familiar with many of the intricacies associated with this business, let us define
products and services you could import and export.
What you can import
To key to success in importing is getting a product or service that is less expensive but better
made in other countries. The Made-in –other-country tag is an incentive for the seller, in
some cases.
Your home can be an ideal place to get ideas on what should you Import. Take a look at the
household items and equipment you have in your home. Clothing, shoes, leather wallet, you
car and even your stereo equipment may be manufactured someplace else.
The market is huge. The potential is immense. The options are many. There are a number of
firms looking for products that are cheaper than those available in the U.S., are better made
and have a made-in- foreign country appeal to the customers. You can cater to such
businessmen and make real good money.
Maybe, you have contacts with distributors looking for certain goods and you've already
made contacts in the foreign countries that produce these goods. Follow through and get
yourself an exclusive distribution agreement with those manufacturers.
Importing is easier as you have first-hand information about the things that the market needs
and will sell like hot cakes. It can be anything from exotic vegetables, fruits, woolens,
traditional apparel, to footwear and heavy machinery. The list is endless and so are your
options.
Do some homework by contacting people you know in other countries. The exporter is as
keen as you to export his stuff and earn his bread.
Keep in mind though that importing requires the same diligence and follow up as exporting.
You'll need a signed contract with the manufacturer to be a sole agent distributor to your
country. You'll also need to obtain firm price quotes from the manufacturer for the quantities
your distributor requests. Your commission will come through from the foreign
manufacturer. Have your bank investigate the solvency of that company and their reputation
of living up to agreements.
What you can export
What can one export? The answer, like in the case of Importing, is quite obvious. So many
countries, so many people, so many needs! The possibilities are endless. The key to this
question lies in your ability to identify the need of people in a particular country - items that
are rather cheap and easily available in the U.S.
In you look at the current market, almost everything can be exported for there is always a
need for a particular product in some country. Every country specializes in export of some
commodity. For instance, Swiss export chocolates, India exports tea, and Brazil coffee. But
these are just the core exports. If you do a micro-examination of the goods that are being
exported, you would realize the huge potential for exports, especially from the U.S. So go
ahead, identify a product or service that would sell and start exporting!
Currently, everything from vegetables, fruits to heavy-duty machinery is being exported.
Onions, coffee, spare auto parts, light machinery, heavy machinery, syringes, medical
equipment, medical services, lifestyle goods like leather apparel, woolen apparel….the list
could just go on and on.
It is wrong to assume that only tangible products can be exported. With globalization opening
the world markets, there is also a huge scope for marketing services such as expertise in
tourism, entertainment, banking, finance, building, architecture, design and more. These
services are being increasingly lapped by countries that would want to gain expertise in
certain areas. A more detailed explanation of exporting services is given in the next section.
Exporting U.S. based services
The U.S. being the global market leader asserts superiority in a variety of areas. For global
trade, many of the industries for which the United States maintains a strong competitive lead
are accompanied by sophisticated sales support. There are sectors that have grown most
rapidly due to technology development, and have particularly high export potential.
For those interested in exporting U.S. based services, there is immense potential in travel and
tourism. The industry is diverse and includes services in transportation, lodging, food and
beverage service, recreation, purchase of incidentals consumed while in transit, and traveling
on commercial airlines.
Another sector that has great export potential is transportation services. This sector includes
aviation, ocean shipping, inland waterways, railroads, trucking, pipelines, inter-modal
services, as well as ancillary and support services in ports, airports, rail-yards, and truck
terminals.
The U.S. firms also have a competitive edge in the architecture, construction, and engineering
industries thanks to special skills in operations, maintenance and management. Some U.S.
firms with expertise in specialized fields, such as electric power utilities, also export related
design, construction, and engineering services.
Education and training services such as management training, technical training, and English
language training are areas where U.S. expertise remains unchallenged. The export market
for this training is almost limitless, encompassing most industry sectors, both products and
services.
Financial institutions in the U.S. are very competitive internationally for offering account
management, credit card operations, and collection management.
Entertainment industry is yet another industry in the U.S. that has great potential. Likewise,
the information sector including companies that generate, process, and export electronic
commerce activities such as e-mail, funds transfer and data interchange, as well as data
processing and network services, electronic information services, and professional computer
services too have great export potential.
Once you have decided what products (and services) to import/export, you must then analyze
and define the various Sales components associated with each service. Next, we discuss some
of the most prominent sales issues.
Sales
Deciding your pricing Models
Determining how much to charge for your services, is entirely up to you, but there are many
things you must consider. First, determine whom you are marketing your business service to.
By doing so, you can establish a competitive price, while at the same time making it
affordable to the clients that you are catering to. One common mistake when opening a
business is setting prices to low, thinking that by attracting more clients you will be earning
more money, when instead you are depreciating the value of your service. The most
important thing is that you find a price in which you profit, at the same time you are
satisfying your clients by not overcharging. It is important to research and discover what
your competition is charging for similar services. When determining pricing it is good to ask
yourself what is it that sets your business, up and over that of the competitors.
As an international trader, you're an intermediary in the buying and selling, or importing and
exporting, transaction. Therefore, you have to determine not just the price of the product, but
the price of your services as well.
Import/export management companies usually operate on a commission basis ranging from
10 to 15 percent for consumer goods and 15 to 20 percent for industrial products. These fees
are based on the product cost from the manufacturer.
For instance, let's say you're working with English lawn chairs, which cost you $110 each.
Here's what you do: First, take the price the manufacturer is charging for the product: $110.
Now multiply $110 by 10 percent, which gives you a commission of $11 per chair.
So your product price at this point is $121 per chair ($110 + $11). To come up with the final
price, you'll need to add other costs to this figure: any special marking or packaging,
shipping, insurance and any representative or distributor commissions that you'll pay to
others in the trade channel, which we'll go over a little later. Once you've arrived at a final
price, you'll check it against your competitors' prices (you did do your market research,
right?). If your product's price is comparatively low, you can bump up your commission
percentage.
For now, however, you can see that for every chair you sell, you'll get $11. If you sell a
thousand chairs, that's $11,000 to you!
Consider following this commonly used pricing formula:
Direct Costs + Overhead + Profit = Your Price
Direct costs refer to costs you incur in doing your job: telephone calls, printing costs, and
your time. Calculate your salary -- including fringe benefits -- into your rates. Remember to
add enough to cover the hours of un-billable time you spend marketing and administering.
Overhead refers to the general costs of doing business: rent (in case of outside facility),
equipment (especially specialty equipment), utilities, office supplies, advertising and
marketing expenses, shipping expenses, and administrative costs. Most home businesses
multiply their hourly wage by two or three to cover overhead.
Profit is an amount calculated over and above direct and indirect expenses; many experts
advise adding 15 to 20 percent or more.
Invoicing and billing
Once the pricing model of your import-export commodities has been worked out, you should
focus on invoicing and billing. Export transactions, particularly initial export transactions,
begin with the receipt of an inquiry from abroad, which is followed by a request for a
quotation. The preferred method for export is a pro forma invoice - a quotation prepared in
invoice format.
A quotation specifically describes the product, the cost, fixes the time of shipment, and
specifies the terms of the sale and payment. The description of the product is generally more
elaborate in an overseas quotation compared to a domestic quotation. The description should
mainly include specific information, such as the sellers and buyers’ names and addresses, the
buyer's reference number, and date of inquiry. The price of each item, appropriate gross and
net shipping weight, delivery point, terms of sale, terms of payment, insurance and shipping
costs, validity period for quotation, total charges to be paid by customer and estimated
shipping date from the port or the airport should also be included.
The pro forma invoices are not used for payment purposes. A pro forma invoice should
include two statements. One that certifies the pro forma invoice is true and correct and
another that states the country of origin of the goods. The invoice should also be clearly
marked "pro forma invoice."
Since the pro forma invoice is not for payment, billing is done separately. This too should
include detailed information. The billing should be comprehensive and should be followed up
regularly with the client.
Commission on products / Having a flat retainer
The sales part is the most crucial aspect of running an import-export unit. Generally, the
pricing model would have taken care of most expenses related with the market and demand
of the product that is being traded. This will also include the non-market expenses.
Next, we discuss another critical component of sales - commission on the product or a flat
retainer. As an exporter, you have to choose between taking commission on the product that
you have exported and asking for a flat retainer.
If you opt for commission on the product, it would have to be carefully worked out. Though
importers are known to take advantage of the increasing competition within the import-export
field and would haggle about the commission, many agree to give a generous 10 per cent
commission on the amount of the order. If you are dealing with heavy machinery where a
single machine costs thousands of dollars, then a flat commission of 10 per cent may be a
good idea in this case.
Working on a commission basis does not seem ideal to many, and subsequently they end up
opting for a flat retainer. This is easy, convenient and the most preferred option by most
importers and exporters. In this case, you do not really have to worry about whether the
commission agreed upon will cover all costs and earn you the desired profit. Besides, if you
charge a flat retainer fee, you may ask for it in installments - a certain percentage upfront and
the balance after the work is completed.
Terms of sale
Prior to preparing a sales agreement, it is important that you acquire a common understanding
of the delivery terms. Any confusion over the terms may result in a lost sale or a loss on the
sale.
Terms generally used during international business transactions may often sound similar to
those used in domestic business, but they may have very different meanings. Knowing and
understanding these terms, is therefore, a must before you prepare a quotation or a pro forma
invoice.
The following are a few of the more frequently used terms in international trade:
• CIF (cost, insurance, freight) to a named overseas port where the seller quotes a
price for the goods (including insurance), all transportation, and miscellaneous
charges to the point of debarkation from the vessel. (Used only for ocean shipments)
• CFR (cost and freight) to a named overseas port where the seller quotes a price for
the goods that includes the cost of transportation to the named point of debarkation.
The buyer covers the cost of insurance. (Used only for ocean shipments)
• CPT (carriage paid to) and CIP (carriage and insurance paid to) a named place of
destination. These terms are used in place of CFR and CIF, respectively, for all modes
of transportation.
• EXW (ex works) at a named point of origin (e.g., ex factory, ex mill, ex warehouse)
where the price quoted applies only at the point of origin. The seller agrees to place
the goods at the buyer's disposal at the specified place within the fixed time period.
All other charges are put on the buyer's account.
• FAS (free alongside ship) at a named port of export where the seller quotes a price
for the goods that includes the charge for delivery of the goods alongside a vessel at
the port. Here, the buyer is accountable for the costs of loading, ocean transportation,
and insurance.
• FCA (free carrier) at a named place refers to designate the seller's responsibility for
handing over the goods to a named carrier at the named shipping point. It may also be
used for multimodal transport, container stations, or any mode of transport, including
air.
• FOB (free on board) at a named port of export where the seller quotes the buyer a
price that covers all costs up to and including the loading of goods aboard a vessel.
• Free In is a pricing term that indicates that the one who charters the vessel is
responsible for the cost of loading goods onto the vessel.
• Free In and Out is a pricing term that indicates that the charterer of the vessel is
responsible for the cost of loading and unloading goods from the vessel.
• Free Out is a pricing term that indicates that the quoted prices include the cost of
unloading goods from the vessel.
A complete list of important terms (including many new terms and abbreviations) and their
definitions is provided in "Incoterms 1990". This booklet is issued by ICC Publishing
Corporation.
Handling different modes of Payment
Efficient management of finances increases profit and reduces money worry. An experienced
exporting firm extends credit cautiously. It evaluates new customers with care and
continuously monitors old accounts. Such a firm may decline a customer's request for open
account credit if the risk is too great and propose instead payment on delivery terms through
a documentary sight draft or irrevocable confirmed letter of credit or even payment in
advance.
On the other hand, to a fully creditworthy customer, you may decide to allow a credit
spanning a month or two, even on open account. Other good credit practices include being
aware of any unfavorable changes in your customers' payment patterns, refraining from going
beyond normal commercial terms, and consulting with your international banker n how to
cope with unusual circumstances or in difficult markets.
Always check a buyer's credit (even with safest payment methods). A Department of
Commerce International Company Profile (ICP) provides useful information for credit
checks. For a fee, an ICP may be requested on foreign companies in many countries. It
contains financial information on the company and a discussion regarding its size,
capitalization, years in business, and other information such as citing some U.S. companies
that conduct business with the firm. The exporter can then contact the U.S. companies to find
out about their payment experience with the foreign firm.
ICPs are not available in every country, and in these instances, EACs can provide a list of
private credit reporting services. As being paid in full and on time is of the utmost concern to
exporters, the level of risk in extending credit is a major consideration. There are several
ways in which you can receive payment when selling your products abroad, depending on
how trustworthy you consider the buyer to be.
Listed in order from most secure for the exporter to the least secure, the basic methods of
payment are:
• Cash in advance;
• Documentary letter of credit;
• Documentary collection or draft;
• Open account; and
• Other payment mechanisms, such as consignment sales
Marketing your Import/Export Business
Even the best business will fail if its potential customers do not know it exists. For you to you
succeed, you will need to plan an effective marketing & advertising campaign to reach
prospective customers. Marketing your business on the Internet as well as offline can help
generate a large customer base. This section offers advice on cost-effective ways to reach
your market.
Establishing contacts with organizations
Establishing contacts is one of the most important steps towards setting up a successful
import-export unit. You can start with your personal contacts such as relatives and friends
settled abroad. Amongst other tips, run through newspapers, business journals and other
works to keep yourself abreast with the market trends abroad. Make mental notes and check
with your friends abroad if the particular product has a future there.
Next, contact official sources such as the Consulates. Foreign consulates located in the U.S.
have detailed information on entities who seek to establish outlets in the U.S. These
consulates can help find indices of their own import/export enterprises. The Unites States
embassies abroad too should be tapped as a potential place to find contacts for commercial
distribution. As stated earlier, keeping in touch with these organisations can help you find
about a company's solvency and reputation. Another effective avenue to be tapped is the
Chambers of Commerce. The COC of every city is a great place to network with potential
clients and associates.
Once you have identified the contacts, devise a plan to use the contacts effectively. The
mantra of success, especially in this case, is bulk mailing. Formalize a good structure and
replicate letters for different addresses. You may also include a questionnaire with key
queries for the prospective client targeted to gather as much information about their
company. Direct Mailing is discussed in detail later.
Developing a marketing plan
Developing a marketing plan is central to a successful import-export venture. As an
international trader, your mission is sales in two different but overlapping arenas.
Your job is not only selling yourself and your company to clients but also selling the products
themselves to representatives and distributors. If you fail with regards to one aspect, your
success in marketing the other component will also suffer. The two have to be marketed
mutually for your benefit.
Work out a plan where you are effectively marketing both yourself and the product. Lay
stress on the quality of the product as well as your service (responsiveness, shipping etc.)
Once you've established a favourable relationship with at least one client, you'll have a track
record with which to attract other clients. Success brings more success! Each successful
venture will contribute to your own self-confidence, which will, in turn, prepare you for
better negotiation with new prospects.
Selling yourself
Exporting is all about selling your company and products. To any overseas client, doing
business with you should sound like a good deal. Methods of selling yourself may vary. You
may sell yourself through word of mouth, advertisement, or making calls yourself. But your
goal should be focussed. The clients should find your firm attractive enough, and your
services good enough, to do business with you.
You can sell yourself by using the direct mail method or making cold calls. These are
explained in further detail in subsequent sections. It does not really matter if you are starting
with imports or exports. The modus operandi will mostly remain the same.
Most companies while selling themselves to potential clients make the mistake of focusing
too much on the superiority of their products or services, rather than addressing the needs of
the client. The objective of marketing your services is to convince the potential clients that
your product could be extremely useful for them. Apart from this, your presentation should
also instill a sense of professionalism.
Marketing through direct mail
Quite simply, Direct Mail is the best way to directly approach a potential client. Initiate your
direct mail campaign by approaching one or two target manufactures. The email you write
should be unique and yet entice the reader. Most executives get thousands of emails every
day. It is practically impossible for them to read all mails. Besides, in all probability, your
target potential is likely to spend not more than 5 seconds reading the mail. Your mail should
arouse enough interest in the potential client, for him/her to read the entire mail.
One of the most important aspects of a Direct Mail campaign is that each mail you send
should be personalized. Remember, simply inserting the name of the targeted officer within
the target company does not make the mail personalized. You should explain how your
products would be particularly useful for the target company. Apart from this, here are some
other pointers on devising the email.
First and foremost, introduce yourself and your company. Briefly outline the potential of the
overseas market. Outline the product's potential within that market. Also take the opportunity
to explain why and how your company, out of all others, will be able to position the product
best. Make sure to highlight your experience in marketing the product. If you are a new
entrant, highlight your other strengths.
If you already have contacts with foreign distributors, explain that you have foreign
representatives for overseas sales. Ask for a personal meeting to further discuss the
possibilities.
Give the potential client some time to reply back (maybe around 7 days). If he/she does not
reply, it may be a good idea to call his/her office and set up a phone appointment, if possible.
Initially, it may be difficult to set up an appointment. However, marketing is all about being
aggressive. You know you have a great product! Keep selling yourself.
Cold calling potential clients
Cold calling is another proven, effective method of marketing yourself to the potential
clients.
The marketing term Cold Calling implies that you call a client "cold" without prior notice.
This is an alternative to the direct-mail approach.
Cold Calling has a few advantages. If carried out correctly, a cold call can be much more
effective than direct mail. If you can hold the prospective client’s interest for long enough,
you have saved yourself the trouble of making calls to get he address, write a letter and then
wait for the reply. Cold Calling can shorten the marketing process.
The bad news, however, is that requires considerable more perseverance to be effective.
People generally don’t like firms calling up out of the blue, interrupting them in their work
and trying to desperately seek their attention. The key is to gauge the response when you call.
You should be very sensitive to the kind of vibes the client is giving. If the client gives
positive vibes, carry on. If the vibes are negative, politely hang up and resort to the more
conservative method of direct mailing.
Before you make your first call, be sure you know what you want to say and how you would
present yourself. However, do not blindly stick to the script. Flow with the drift, follow your
instincts and be politely aggressive. Take care not to give the client a feeling that you are
being pushy. That would certainly not work.
Traveling Abroad
For a successful export venture, a visit to the country where you are panning to sell your
products will prove to be one sensible investment. The visit abroad will give you first hand
information about cultural nuances of the particular country which may impact the design,
packaging or advertising of the product.
Traveling abroad would not only help in developing new relationships but also enhance your
association with existing clients, foreign representatives, and associates.
There are certain aspects you need to take care of when planning your trip. These are
discussed in detail below.
Proper documentation
Proper documentation is a must for all people traveling overseas. It is always better to be well
prepared than get caught on the wrong foot in a foreign country. Here are some documents
you need to carry while traveling.
Carnets: The "Admission Temporaire Carnet" or the ATA Carnet is a standard international
customs document used to obtain duty-free temporary admission of certain goods into
countries that are signatories to the ATA Convention. Commercial and professional travelers
are allowed to take commercial samples, tools of the trade, promotional material, audio-
visual, and medical, scientific or other professional equipment into member countries
temporarily without paying customs duties, taxes or posting a bond at the border
To get further detail, you may avail the services of the U.S. Council for International
Business. Carnets are generally valid for 12 months.
Passports: It goes with saying that a valid passport is required for all travel outside the
country. Passports can be obtained through passport agencies, certain local post offices, and
U.S. district courts. The usual processing time for a passport is three weeks, but you should
apply as early as possible, particularly to have enough time on hand to obtain visas,
international drivers licenses, or other documents. If you have a current passport, ensure that
it will not expire during the trip.
Visas: Visa is a significant document for travel and is given by the foreign country's
embassy. A current passport is a must to obtain the visa. Getting a Visa may take several
weeks, so plan accordingly. You may contact the Export Assistance Centre to learn more
about Visa documentation requirements for the countries where you would be travelling.
Vaccinations: Various countries require travelers to take specific vaccinations before
travelling to their country. Vaccinations against typhus, typhoid, and other diseases are
advisable even if they are not required. You may contact the Centre for Disease Control
(CDC) for latest guidelines. Proper documentation certifying the fact that you have taken
specific vaccines should be carried along.
Foreign Customs: It is always better to learn the foreign customs regulations in advance as it
may vary widely with each country. Many countries require an import duty for certain
samples you may be carrying. In certain cases, you may be exempt from import duty. Ensure
that you carry documents that show that your products (samples) are entitled to exemptions.
Planning an itinerary
Planning and itinerary is vital before leaving for foreign shores for a business trip. Ensure
that you take appointments in advance and confirm the same before leaving.
It is advisable to take the help of travel agents who can get you the best travel rates, hotel
rates and also give you important tips on visa and other valuable services. If your itinerary is
well planned, you would make the most of your visit abroad. Please space your meetings for
a productive trip. Don’t overload your schedule, it may prove to be counter-productive.
Foreign holidays should also be taken into consideration. You can avail a schedule titled
"World Commercial Holidays”, from the local Export Assistance Centre. This lists holidays
in most countries around the world.
The following checklist will help you plan your itinerary.
• Prepare new business cards in proper languages. Exchanging business cards is an
accepted formality and it is best to carry cards printed in both English and the
language of the country you are visiting.
• Prepare for adverse weather as you would not like to pack warm suits only to discover
on landing that the temperature is a sizzling 48 degrees.
• Plan appropriately for prescription drugs, health insurance, vaccinations, diet, and
other matters.
• Know about ATMs, exchange rates, and traveller checks that will work overseas.
• Familiarize yourself with basic cultural traits such as hand signals, street signs, and
basic courtesy such as tipping.
Considering cultural factors and practises
Understanding and being sensitive for foreign cultures and practices is critical in this
business. Knowing the cultural and social customs can actually make or break the success of
your trip abroad. Keep in mind that the business manners, religious customs, dietary
practices, humor, and acceptable dress code vary widely from country to country. Travel
Guides usually provide useful tips on these.
Some of most significant cultural distinctions people face include differences in business
styles, attitudes toward development of business relationships, attitudes toward punctuality,
negotiating styles, gift-giving customs, greetings, significance of gestures, meanings of
colours and numbers, and customs regarding titles. For instance, number 7 is considered bad
luck in Kenya and good luck in the Czech Republic and has magical connotations in Benin.
The number 10 signifies bad luck in Korea and 4 means death in Japan.
In Bulgaria a nod means no, and shaking the head from side to side means yes! The
commonly used "okay" sign means zero in France, is a symbol for money in Japan, and
carries a vulgar connotation in Brazil. You must pay close attention to different styles of
doing business and the degree of importance placed on developing business relationships. In
some countries, businesspeople have a very direct style, while in others, like the Middle East,
engaging in small talk before getting down to business is standard practice.
The same is true for punctuality as well. Romanians, Japanese, and Germans are very
punctual. The Japanese consider it rude to be late for a business meeting. In Guatemala, it is
acceptable to arrive any time from ten minutes early to 45 minutes late for a luncheon
appointment.
Proper use of names and titles is often a source of confusion in international business
relations. In many countries including the United Kingdom, France, and Denmark, it is
appropriate to use titles until use of first names is suggested. First names are seldom used
when doing business in Germany. Thais address one other by first names and reserve last
names for very formal occasions and written communications. In Belgium it is important to
address French-speaking business contacts as "Monsieur" or "Madame," while Flemish-
speaking contacts should be addressed as "Mr." or "Mrs." To confuse the two is a great insult.
Pay attention to the custom of gifts as well. It is an important part of doing business in Japan,
where gifts are usually exchanged at the first meeting. In sharp contrast, gifts are rarely
exchanged in Germany and are usually not appropriate. Gift giving is not a normal custom in
Belgium or the United Kingdom either.
Customs concerning the exchange of business cards also vary. In Japan, the Western practice
of accepting a business card and pocketing it immediately is considered rude. The proper
approach is to carefully look at the card, acknowledge with a nod, perhaps make a relevant
comment or ask a polite question.
Understanding Potential Client Requirements
You now know how to be a success at marketing your business. Attracting new customers is
crucial to the success and growth of any business. However, it is equally important satisfy
existing customers by providing them services of the highest quality. In the next two
chapters, we would be looking at various issues associated with work execution.
Work Execution can be divided into two phases – Phase 1 – Understanding and Analyzing all
requirements and specifications of the client, and Phase 2 – Exporting/Importing the products
as per the specifications (Project Management). Let us try and understand Phase 1 in further
detail.
Dealing with inquiries
Responding to an inquiry effectively could be your first step towards winning a client. In
fact, many successful exporters first started selling internationally by responding to an
inquiry from a foreign firm successfully.
Inquiries are generally written in English so you should not have a problem. If the inquirer is
satisfied with the reply you send back, you have moved a step forward in clinching the deal!
Typically, a foreign firm will request product specifications, information, and price. The
inquiries may come directly from the end user or from distributors and agents who wish to
sell the product in their market. A few foreign firms may already be familiar with the product
and wish to immediately place an order.
Honor these inquiries immediately. Give all information that is sought. If there is some extra
information about the product, your services or the price factor which you think will help you
win the client, make a mention in the response to the inquiry.
It should be your company policy to deal with the inquiries effectively. Please do not treat
one inquiry as important and the other one not so important. Drill in your mind and in the
minds of those working for you that all inquiries are to be treated like an opportunity
knocking on the door and that opportunity has to be lapped up.
Communicating effectively with clients
Once you generate a prospective lead, closing the deal depends entirely on how well you
communicate with this prospective client. This is where most companies fail – they try to
convince the prospective client that they offer the best products, instead of actually
convincing them that they understand the client’s requirements and have suitable products.
The initial communication with a prospective client plays a crucial role in the success of your
marketing and sales campaign. You must clearly communicate to the client that you have
understood the requirements and present a solution (in this case product) as to how these
requirements would be fulfilled.
In case of larger orders, it is always a good practice to jot down the main points of every
meeting (either in person or by telephone) with the prospective client. In other words, you
should have a “Minutes of the Meeting” document or a follow-up Email that outlines all
issues discussed within the meeting as well as the plan of action. It should also state names of
all people present in the meeting, along with the duration. Send a copy to the prospective
client as well. Such a document will keep you better prepared for any additional meetings,
besides the fact that these can be used as a complete documentation for future reference by
both you and your potential client.
All communication through Email should be saved in specific folders for later use. If you
have saved all communication in writing (in the form of Email or the Minutes document),
you are more likely to address all issues and present a better proposal.
If you discuss an issue through Email, ensure that you do it professionally. For instance, in
the case of Phone conversations and face-to-face meetings, you might crack a joke, which is
likely to be taken as a joke by the prospective client. However, if you communicate through
Email, your joke is more likely to be misunderstood as there are no visual cues or voice tone
involved. Thus, casual comments and jokes are best avoided, at least initially.
Alternatively, in the case of personal meetings, you should also present a professional look.
The way you dress, the way you talk, your hand gestures, all form an impression on the
prospective client. Ensure that your body language is professional and positive.
Maintaining a good working relationship
Once you have developed a healthy and successful business relationship with the client
abroad, don’t stop there. Keep working at improving and building that relationship.
Your business should be dictated by common courtesy. Your aim should be to communicate
well and present yourself well. You should keep in mind that a foreign contact should be
treated and served as well as a domestic contact. This is critical to maintaining a professional
relationship with your clients. Make it a point to keep customers and contacts notified of all
changes, including price, personnel, address, and phone numbers.
Don’t let distance come in between developing a good, lasting relationship. Distance can age
relationships quickly and cease to be useful unless communication is maintained. Keep the
communication channels open.
For many companies, monthly or quarterly visits should be made to customers or distributors.
This may not be absolutely necessary but will ensure that both the company and the product
maintain high visibility in the marketplace. If your firm cannot afford such frequent travel,
you keep in touch with fax, e-mail and telephone to keep the working relationship active and
up to date.
This completes Phase I of the Import/Export Trade process. We now look at how best to
smoothen the process of importing/exporting your products.
Project Management
Handling all Operations
There are two ways of approaching the import/export trade. You can act only as a sales
representative who finds buyers and takes commissions from the manufacturers, but steers
clear of shipping, documentation and financing aspects of the deal.
There are others who offer a full line of services, buying directly from the manufacturer and
taking on all the responsibilities of transactions from shipping to marketing. These traders
often specialize in either import or export and stick to the merchandise industry they know
best. No matter how prosperous you want to get, your most basic tasks will be obtaining
merchandise, selling it, transporting it and getting paid for it.
If you chose the Export path then here are a few of your responsibilities in terms of handling
your operations effectively:
1. Generate the pro forma invoice--give the importer a quote on your merchandise;
negotiate if necessary.
2. Receive the letter of credit from your bank.
3. Fulfill terms of the letter of credit: Have the merchandise manufactured if necessary;
make shipping and insurance arrangements; pack the merchandise; and have the
merchandise transported.
4. Collect shipping documents.
5. Present shipping documents to your bank.
If being an importer is what you dream about and have identified the merchandise that you
want to buy and then resell there here are some pointers:
1. Receive the pro forma invoice, the exporter's quote on the merchandise; negotiate if
necessary.
2. Open a letter of credit at your bank.
3. Verify that the merchandise has been shipped.
4. Receive documents from the exporter.
5. See merchandise through customs.
6. Pass Go. Collect your merchandise and give yourself a pat on the back!
The kind of profit you wish to make in your business is entirely up to you. The more you
expand, better are your chances to boost your gains. The Annual gross revenue for this
industry ranges from $30,000 to $200,000 and beyond. Some traders work from home,
supplementing existing income sources with their trading expertise. Others have launched
full-time businesses that demand constant care and feeding.
As an import/export merchant, you act as an intermediary in the importing and exporting
transaction. You have to determine not just the price of the product, but the price of your
services as well. The price of your services has to be added on to the product price, and that
can affect its competitiveness in the marketplace. Since the fee for your services will impact
the success of the product, you may ultimately decide to change your pricing structure. You
have to strike a balance between undercharging your client (thus unable to make a profit) and
over charging for your services that would reduce the competitiveness of your company and
the merchandise you represent.
Import/export management companies use two basic methods to price their services:
commission and retainer. If you think the product will be easy to sell, you should work on the
commission method. If you feel it's going to be an upstream swim, difficult to sell and require
a lot of market research, you'll ask for a retainer fee.
A third method is to purchase the product outright and sell it abroad. This is a common
scenario when you're dealing with manufacturers who would rather use you as a distributor
than as a representative. You'll still market the product under the manufacturer's name, but
your income will come from the profit generated by sales rather than by commission.
Import/export management companies usually operate on a commission basis ranging from
10 to 15 percent for consumer goods and 15 to 20 percent for industrial products. These fees
are based on the product cost from the manufacturer.
Overhead: This variable comprises all the non-labor, indirect expenses required to operate
your business. To determine your overhead rate, add up all your expenses for one year,
except for labor and materials. Divide this figure by your total cost of labor and materials to
determine your overhead rate. Or use a rate of 35 percent to 42 percent of your labor and
materials.
Profit: And the end result is: After all labor, materials and overhead expenses are deducted,
profit can be determined by applying a percentage profit factor to the combined costs of labor
and materials and overhead.
Building and Managing your inventory
To start with you should always invest in limited inventory. It is recommended that if you
start small, you import/export only a few items. As you progress and with increase in sales
you can gradually enhance your trade.
Ideally, export items should be bought from wholesalers. There are many such dealers who
would offer extremely attractive rates if you buy in bulk. During the early stages of your
business you should avoid too many retail products. In some cases, retailers also offer huge
discounts if you buy products in bulk. This is something you should always be on the lookout
for.
Simply put, there are two main issues to consider when building and managing your
inventory for exports. Firstly, how well you shop for different items. As mentioned above, try
and buy as much (without compromising on quality) from wholesale dealers. The rest can be
bought from retail stores. This process requires considerable research. Secondly, space is a
critical consideration when stocking your inventory. Thus, if you start small, always stock up
less. Do not buy too many products to begin with.
The key is to build your inventory as you grow.
Branding and Packaging your product for export
Creating a brand name that grows a reputation of its own is essential for exporters as is
ensuring excellent packaging. Let’s pay some attention to this factor. As far as consumers are
concerned, both the product and the product's supplementary features, such as packaging,
warranties, and service are very important features.
Branding and labeling products and readying them for export markets often raise new
considerations for U.S. companies. These are a few questions that you need to ponder upon
before selection of a particular style or method of branding and packaging:
• Are international brand names important to promote and distinguish a product?
Conversely, should local brands or private labels be employed to heighten local
interest?
• Are the colors used on labels and packages offensive or attractive to the foreign
buyer? For example, in some countries certain colors are associated with death.
• Can labels be produced in official or customary languages if required by law or
practice?
• Does information on product content and country of origin have to be provided?
• Are weights and measures stated in the local unit?
• Must each item be labeled individually?
• Are local tastes and knowledge considered? For instance, a dry cereal box picturing
an U.S. athlete may not be as attractive to overseas consumers, whereas, if you
replace the athlete’s photograph with the picture of a local sports hero, your product
could be better advertised.
Experiences of similar export-oriented companies have proved that building international
recognition for a brand is an expensive process. Protection norms for brand names vary from
one country to another. In some developing countries, barriers to the use of foreign brands or
trademarks may exist. In other countries, piracy of a company’s brands and counterfeiting of
its products are widespread. To protect its products and brand names, a company must
comply with local laws on patents, copyrights, and trademarks.
Establishing Warranties and Service Agreements
Your product is your representative at the foreign consumers’ homes so it is critical to have a
very specific warranty on your product. The overseas’ buyer expects a specific level of
quality and performance which is often found to be higher than in U.S. Duration or even
levels of warranty differ by the country – depending upon the level of development, activism
in consumer groups and other actors.
Having a very competitive warranty level and advertising about your product’s warranty is a
good way to make it stand out among other products that might prove to be a competition to
your export. Strong warranties are often used to break into a new market, especially if the
company is an unknown supplier.
Experiences of export companies and merchants have proved that a strong warranty may be
instrumental in making good sale and also prove to be a major element in sale negotiations.
However while on the warranty topic one should bear a word of caution in mind: By
providing an unnecessary warranty, the cost of the product may jump higher than the
competitors' costs. Considering this point, exporters should keep in mind that servicing
warranties would probably be more expensive and troublesome in foreign markets. It is
therefore desirable to arrange warranty service locally with the assistance of a representative
or distributor.
Servicing
After-sale service provided by a U.S. Company is a source for special concern for foreign
consumers. Service after sale is critical for some products. Generally, the more complex the
product's technology the greater the demand for pre-sale and post-sale service. Therefore,
there is pressure to offer simpler, more robust products overseas thereby reducing the need
for maintenance and repairs. U.S. suppliers who rely on foreign distributors or agents to
provide service backup must take steps to ensure an adequate level of service infrastructure.
These steps include training, periodically checking service quality, and monitoring
inventories of spare parts.
Shipping your Products
After going through a number of differences between domestic and foreign trade, here’s one
aspect of export trade that is almost similar – Shipping your products.
Export marks are added to the standard information on a domestic bill of lading. These marks
show the name of the exporting carrier and the latest allowed arrival date at the port of
export. Instructions for the inland carrier, like notifying the international freight forwarder by
telephone upon arrival of the shipment, should also be included.
Consulting a freight-forwarder would prove to be useful for exporters. When determining the
method of international shipping this interaction would be very important. Since carriers are
often used for large and bulky shipments, the exporter should reserve space on the carrier
well before actual shipment date. This reservation is called the booking contract.
International shipments are increasingly being made on a through bill of lading under a multi-
modal contract. The multi-modal transit operator (frequently one of the transporters) takes
charge of and responsibility for the entire movement from factory to final destination.
Factors to consider when deciding what methods of international shipping to employ, are:
Cost of the shipment, delivery schedules, and accessibility to the shipped product by the
foreign buyer. Although air carriers may seem more expensive, their cost may be offset by
lower domestic shipping costs at the foreign market. For example, using a local airport
instead of a coastal seaport is not only economical, it also ensures quicker delivery of goods.
These factors could give you an edge over other competitors.
You should always check with the foreign buyer on the destination of goods before shipping.
Practical experiences have proved that buyers often want the goods to be shipped to a free-
trade zone or a free port where they are exempt from import duties.
Managing Your Import/Export Business
In the previous sections, we discussed strategies to grow your business and attract new
customers. We also analyzed various challenges and issues involved in managing the process
of importing and exporting. However, before you grow your business, or even execute orders,
you must be well equipped to manage your business successfully. I would not talk about
client management in this section. Here, I would talk about strategies to effectively manage
various administrative aspects of your business.
The success of your business will depend a lot on how well you can manage it. Without
proper management, you are not likely to succeed. Amongst other things, it is important to
establish a system where you can keep track of all of your financial and tax records.
Managing Cash Flow
One of the most critical aspects of effectively managing any business is to effectively handle
cash. You need to maintain positive cash flow at all times. The better your cash flow, more
are your chances of efficiently managing your business.
The key is to minimize your expenses and in turn increase your cash flow. In other words, if
you can have enough cash at all times to cover for your outgoing cash (expenses) you are
doing a good job.
To manage your cash flow better, you must have an effective Billing System in place. A good
billing system ensures that there are no discrepancies in billing, especially for bigger orders.
Finally, it is important that you track and minimize your expenses in order to have a better
cash flow, and indeed better profits. Here are some tips:
• Track and analyze your expenses every month and find out ways to save on these (of
course, without compromising on quality). There are bound to be better deals on
everyday supplies and other useful material. These can translate into substantial
savings.
• Whatever you do, do not rent computers. Buying these may be a bit stressful initially
but remember it is only a one-time charge. By renting computers and other hardware,
you would end up paying much higher over a period of time.
• Do not pay bills early. Obviously, you must ensure that bills are paid on time, but this
does not imply that you pay them way too early. Such a tactic is only going to mess
up your cash flow. Keep a track of deadlines as far as payments are concerned and
pay them on time.
• Pay by credit card as much as possible. This helps in maintaining a healthy cash flow.
Besides, credit card payments when done within interest free period result in zero
interest. Thus, you pay late and without any added interest.
Book-keeping and Documentation
Book-keeping and documentation in an export business can best be handled by the foreign
representatives. But in order to smoothen your business transactions here are a few tips:
A bill of lading is a contract between the owner of the goods and the carrier (as with domestic
shipments). For vessels, there are two types: a straight bill of lading which is nonnegotiable
and a negotiable or shipper's order bill of lading. The latter can be bought, sold, or traded
while the goods are in transit. The customer usually needs an original as proof of ownership
to take possession of the goods.
A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are
often used by governments to determine the true value of goods when assessing customs
duties. Governments that use the commercial invoice to control imports will often specify its
form, content, number of copies, language to be used, and other characteristics.
A consular invoice is a document that is required in some countries. It describes the shipment
of goods and shows information such as the consignor, consignee, and value of the shipment.
Certified by the consular official of the foreign country stationed here, it is used by the
country's customs officials to verify the value, quantity, and nature of the shipment.
A certificate of origin is a document that is required in certain nations. It is a signed statement
as to the origin of the export item. Certificate of origin are usually signed through a
semiofficial organization, such as a local chamber of commerce. A certificate may still be
required even if the commercial invoice contains the information.
A NAFTA certificate of origin is required for products traded among the NAFTA countries
(Canada, the United States, and Mexico).
A dock receipt and a warehouse receipt are used to transfer accountability when the export
item is moved by the domestic carrier to the port of embarkation and left with the ship line
for export.
An export packing list is considerably more detailed and informative than a standard
domestic packing list. It lists out the materials in each individual package and indicates the
type of package. It also shows the individual net, legal, tare, and gross weights and
measurements for each package (in both U.S. and metric systems).
Financing for Imports and Exports
It all boils down to earning money. Your company must get paid. In export business
financing is often a key factor for a successful sale.
Exporters naturally want to get paid as quickly as possible, while importers usually prefer to
delay payment until they have received or resold the goods. Because of the intense
competition for export markets, being able to offer attractive payment terms customary in the
trade is often necessary to make a sale. Exporters should be aware of the many financing
options open to them so that they choose the most acceptable one to both the buyer and the
seller.
Government assistance in export financing for small and medium-sized businesses can
increase a firm's options. Some factors that should be considered before making decisions
about financing:
• In some cases, favorable payment terms make a product more competitive. If the
competition offers better terms and has a similar product, a sale can be lost. In other
cases, the buyer may have preference for buying from a particular exporter, but might
buy your product because of shorter or more secure credit terms.
• The length of time the product is being financed determines how long the exporter
will have to wait before payment is received and also influences the choice of how the
transaction is financed.
• Interest rates and fees vary. Where an exporter can expect to assume some or all of
the financing costs, the effect on price and profit should be well understood before a
pro forma invoice is submitted to the buyer.
• Production for an unusually large order, or for a surge of orders, may present
unexpected and severe strains on the exporter's working capital. Even during normal
periods, inadequate working capital may curb an exporter's growth. However,
assistance is available through public and private sector resources discussed in this
chapter.
For help in determining what financing options may be available or the most beneficial to
your exporting endeavors, the following sources may be consulted:
The people who can advice you on how to make your exporting endeavours more profitable
are your banker; local Department of Commerce Export Assistance Center (EAC); local
Small Business Administration office; The Export-Import Bank in Washington, D.C. and
selected cities; and the state export promotion or export finance office.
Accounting & Billing
For every business, including international trade, a good billing system in such cases has a
two-fold advantage. It builds your credibility and also ensures that you receive proper
payment. In order to facilitate the process of receiving payments, your bills and invoices
should be as clear as possible. This will help avoid any confusion later.
All customer bills should include a bill number, payment amount, products exported,
payment mode and other details. Information on how to contact a customer representative in
case of discrepancy should also be provided. You may use appropriate packaged software for
such customer billing and account management, or you may need some custom development
to achieve efficient management.
There are also some other tips to consider while sending an invoice for bigger orders. These
will help in maintaining a better payment collection process. As stated earlier, such
methodologies not only help in faster payment collection but also boost your company’s
credibility.
• Always accompany your invoice with a covering letter thanking the client for the
work and reminding them of other products you offer.
• Have a clear policy that mentions your terms as to how many days are given to the
client to make the payment once the invoice is sent. Generally, most firms have a 15
day policy. Payment terms, such as these should be clearly defined in your legal
service agreement.
• At the end of this period, if you do not receive the payment, send a polite reminder
through Email, to remind the client of your payment terms and request immediate
payment.
• If the client still fails to respond, call him/her and request for an immediate payment.
If the client can not do so, ask him to specify a date when you could expect a
payment.
Following the above mentioned guidelines should help you reduce the number of bad debts.
Do not ever think that you would annoy a client by asking him/her for a payment that is due.
Most people do not want to look desperate when seeking payments. Remember, if you have
provided your client with quality products, if they have agreed to pay you within a certain
time frame, you have every right to seek your rightful payment.
Growing Your Import/Export Business
Once your business is operating, you should prepare for its growth in an orderly way. If you
let your business grow too fast without laying the necessary ground work, things can easily
get out of control.
In this chapter, we will discuss some ways to expand your business. We will also see how to
overcome various challenges associated with growing any business.
Defining your Business Goals
You cannot grow if you do not have an idea of how much you intend to grow. In other words,
you must define your growth goals before you set out to achieve them. It is important that
you have realistic, yet aggressive goals. For instance, if you are the sole-operator of your
Import/Export Business, your first goal may be to grow into a company with at least 5
employees. This is a realistic, yet significant goal. If you can achieve this, you are certainly
making great progress. The next goal would be to enhance your client base in a particular
country. Do not focus on exporting/importing from many countries to start with. Try and
build your company by focusing on a single country.
However, achieving this is easier said than done. To accomplish substantial growth you must
learn different skills. You must acquire new skills such as Financial Analysis, Marketing and
Promoting your business, Legal skills, Managing employees as well as representatives
efficiently, and managing your business effectively. The key is to identify and analyze skills
that would be required to expand your business. Initially, you may be doing everything –
Finding clients, communicating with them, preparing agreements and proposals, and so on.
Once you decide to grow, you would realize that some of these skills need to be handled by
other people so that you can concentrate on what you do best.
Devising Growth Strategies
In most cases, the profit of any import/export business is proportional to the volume of the
goods traded. Higher the cost of the merchandise more is the profit from your percentage.
Since you need to go through all the steps for each transaction, having additional sales on a
continual basis adds to profit.
Mailing regularly to your list of contacts and following-up leads is a good way to start. You
could do well to develop a sales approach. As you develop your client base, you can convince
the bigger companies of your reputation. The benefits will be - you arriving at an
arrangement with someone to work in certain country for a commission. Or, you might want
to take a business trip there to personally meet with the various companies.
Detailed information on the products selling in that particular foreign market and why certain
products are successful is a must for new exporters. Maybe you can get into the same market
with more competitive product. Inquire and navigate your way to sell more. Find out if the
products need to be improved, or does the price need to be reduced.
Import/export is a high profit enterprise. Low overhead ensures that most of the money you
make on commission is yours. But building a truly profitable business requires dedication
and a good knowledge of the business.
As mentioned earlier, you need good contacts, agents in U.S. and abroad for effective follow
through on the delivery of the goods. A good working relationship with your own bank and
possibly the others that letters of credit come into as branch transfers from foreign offices is
recommended.
Getting Customer Feedback
Foreign Service Facility is a major contact point for exporters and buyers. This is an excellent
way to keep the end-users happy and also keep getting their feedbacks. To a large extent,
your reputation is made by the overseas after-sales service facilities that the products offer.
Hiring experienced service representatives can help reinforcing sales and service encounters.
Service personnel can also be trained adequately to take advantage of the situation. Service
personnel can help the customer make the right decisions that would facilitate efficient
operation of the product, how to update it for cost-effective operation and when to replace it.
Each service contact is an opportunity to expand the exporter's sales opportunities by
educating the customer.
After-sales service is as important as the product features itself. Service capability enables
customers to complete their jobs more efficiently with the exporter's product. Training
service managers and personnel in this type of thinking vitalizes service facilities and
generates new sales opportunities.
A unique opportunity awaits you in each foreign market. Care and attention to the
development of in-country sales and distribution capabilities is very important. After-sales
services are critical to the success of the company and getting the all important positive
feedback.
Senior personnel should pay regular visits to each foreign market and meet with the
company's representatives, clients, and others who are important to the success of the firm in
that market. Among those persons would be the commercial officer at the Commercial
Service's post and representatives of the American Chamber of Commerce and the local
chamber of commerce or business association.
In this process executive management learns more about foreign market rules and the firm's
capabilities. The in-country representative also gets s chance to take a close look at the
importance of the foreign market in the exporter's long-term plans. As a result, such visits
help build a strong, productive relationship.
Building your credibility
Having an effective mode of communication is essential for developing a good working
relationship which has a direct impact on your credibility. Most foreign letters of inquiry are
in English. You can look to certain service providers (such as banks or freight forwarders) for
assistance in translating a letter of inquiry in a foreign language. Colleges and universities are
also an excellent source for translation. Most large cities have commercial translators who are
hired on a fee-basis.
Learning about potential clients is equally important. A U.S. firm can used many modes of
research to gauge a foreign company before conducting any formal business. A U.S.
company can save time and money by conducting basic research at business libraries, private
sector publications listing and qualifying international firms.
International bankers have access to vast amounts of information on foreign firms and are
usually very willing to assist corporate customers. Foreign embassies located in Washington,
D.C. with consulates in other major cities have directories of firms located in their countries.
Companies should be aware of basic business practices paramount to successful international
selling. Because cultures vary, there is no single code by which to conduct business. These
practices transcend culture barriers and will help the U.S. company conduct business
overseas.
Keep promises. The biggest complaint from foreign importers about U.S. suppliers is failure
to ship as promised. A first order is particularly important because it shapes the customer's
image of a firm as a dependable or an undependable supplier.
Be polite, courteous, and friendly. However, it is important to avoid undue familiarity or
slang. Some overseas firms feel that the usual brief U.S. business letter is lacking in courtesy.
Personally sign all letters. Form letters are not satisfactory.
Ensuring the credibility of foreign representatives and buyers
Career records of a potential foreign representative or supplier/distributor should be properly
investigated before entering into an agreement. The U.S. firm needs to know the current
status and history, including background on principal officers.
The potential foreign suppliers’ view of the in-country market potential for the U.S. firm's
products is not only useful in gauging how much the representative knows about the
exporter's industry, it is valuable market research in its own right.
You can obtain this information from business associates who currently work with foreign
representatives. U.S. exporters should not hesitate to ask potential representatives or
distributors detailed and specific questions. Suppliers have the right to explore the
qualifications of those who propose to represent them overseas. Well-qualified
representatives will gladly answer questions that help distinguish them from less-qualified
competitors. Your company should also consider other private-sector sources for credit
checks of potential business partners.
A U.S. company may also obtain at least two supporting business and credit reports to ensure
that the distributor or representative is reputable. Once the foreign representatives have been
chosen, you may wish to travel to the foreign country to observe the size, condition, and
location of offices and warehouses. In addition, the U.S. company officials should meet the
sales force and try to assess its strength in the marketplace.
The next step is to negotiate a foreign sales agreement. EACs can provide counseling to firms
planning to negotiate foreign sales agreements with representatives and distributors. The
International Chamber of Commerce also provides useful guidelines. More on sales
agreement is discussed earlier in this book.
Don't be hasty for orders. Investigate the manufacturers and distributors to be sure the
products and sales methods are reputable. Check out the particulars of shipping and
manufacturers from the foreign country. Each culture works in a specific manner. When you
make the proper contacts and follow through completely with reputable manufacturers,
reliable shipping companies, and responsible distributors, you have it made.
Final Thoughts
Congratulations! This brings us to the end of the course. You are now ready to start your own
Import/Export business and if you follow the strategies mentioned in this book, I do not see
any reason why you should not succeed in your endeavor. I have also provided a few useful
resources and samples in the Appendix. You may use these for your own purpose.
In conclusion, I would like to say that every new venture has its ups and downs. The key is to
stay positive and motivated. Do not get discouraged by failures – these are part of every
business. To be successful in the long run, you must stay focused on your goals.
Good Luck!
Appendix
The Import/Export Business Directory
Given here is a comprehensive of worldwide listings of Import/Export Directories. These are
a great source for finding additional information about products to import from / export to
various countries, assistance resources, legal formalities, foreign companies, culture, and
practices.
• Africa Product Digest
• African Business Guide - Importers, Exporters, Trade Fairs & Exhibitions In Africa
• Argentina ExportBiz
• Beauty Products Export Import Directory
• Belgian Exports
• BizFinder Japan
• Brighsun Int'l Trading Co., Ltd.
• Business directory of Hong Kong
• China Exporter Net
• China Exporter Online
• China Sources Online
• Chinese Business Directory
• Customs Clearance Directory
• DanishExport.com
• Directory for Volume Buyers
• Disposable Diaper Industry Directory
• e Big China
• Export61 - Australian Export Online
• The Export Buyers Guide
• Export Directory of Portugal
• Exporters India - Indian Exporters, Importers Directory
• The Exporter's Website
• Exports Directory USA
• Exports from Canada
• Exports-Greece
• EZTEL
• FOB Online (Panama)
• Footwear business
• Foreign Trade Online
• ForExport
• The Georgian Export Promotion Agency (GEPA)
• Global Car-trader Directory
• Global Trade Networks
• Greek Exporters
• Guia Export Online
• Hairyape Co
• Holland Exports
• Icelandic Export
• Idealpoint
• Indian Business Directory
• Indian Export Register
• Indian Exporters Yellow Pages
• Indian Garmet Exporters
• Indian Gifts & Handicrafts
• Indonesian Trading Zone
• International Business Directory (IBD)
• International Pages
• Israeli Exporters Catalog
• Korean Manufacturers Sources
• Lithuania Import/Export Directory
• Made in Belgium
• Made in Vicenza - Exporters of Vicenza Province
• Malaysia Market Place
• Manufacturers import export directory
• Marketz.com
• Mexporta, The Mexican Exporter Directory
• Minasexporta - Exportrs of Minas Gerais, Brazil.
• Ningbo Commodities
• PlanetLiquor.com Directory
• Poland Export
• Sediss
• South African Export-Import Center
• South-West Scotland Export Directory
• Spain Exports Portal
• Swedelinks Business Directory
• Swiss buyer's directory - the firm-databank of Switzerland
• Thailand Export Guide
• Thailand Exporters's Directory
• Thomas Global Register
• UK Centre of Exporting Excellence
• USA Autoparts Export Directory
• USA Exports
• Venezuela Export Directory
• WorldtradeAA.com