Export 101 is a bi-weekly free resource to help business owners learn about international trade and export their products. Check back often for the next segment.
Determining if you’re ready to export
So you want to export? But are you ready to sell your good or service to international customers? Maybe the first question is do you have a good or service ready to sell or is your business still in the planning stages? You can’t sell what you don’t have.
Exporting is easier than you think but it does take time and resources. Before you leap into exporting, ask yourself: a) Can I dedicate extra time to exporting and/or have staff to do so? b) Do I have the resources to dedicate to exporting? c) Am I willing to sacrifice financially short term for the long term increased profits by growing my customer base through international customers? Click here to check your export readiness.
Where should I export? (Market Analysis)
Maybe you’re such a good salesperson you can sell space heaters to Arizonans, but let’s make life easier–know your markets. Where will there be a demand for your goods or services? Where are the growth areas for your product? Which countries have a growing consumer base and one especially suited for your product? Are there domestic competitors in these markets? These can be tough questions to answer but there is help available to obtain such information, much of it free. With some diligence and work, you can find answers sooner than you think.
Does my product face any export restrictions? (U.S. Export Regulations)
There are rules for everything in life and exporting is no different. There are export regulations which restrict in some cases what can be exported and in other cases to where they can be exported. The responsibility for knowing these laws and regulations rest with you, the exporter.
So, you will need to determine whether you need a license to export your product. The good news is that 95% of all items don’t require an export license. So, odds are yours doesn’t either. But we’re not here to gamble, and even if you don’t need a license there are still prohibitions for exporting to certain countries. Knowing if your product or services falls under U.S. export restrictions is crucial before attempting to export.
There are lawyers who specialize in such laws and shipping and distribution firms who can help, but there is also plenty of free help from the U.S. government to determine whether and how you can export your product under U.S. law. Most export control regulations are administered by the Bureau of Industry and Security. They’re website contains lists of which items require licenses, advice on how to comport to export regulations and ways to contact them with questions. https://www.bis.doc.gov/
How do I get my product or service to market? (Shipping and Distribution)
You’ve found your customer, you’ve made your sale, but how do you get the good to the customer? It depends on the product, of course, on how best to get it from point A to point B, but some factors affect all products. For example, you’ll want to make sure you’ve packed, labeled, documented and insured your shipment correctly.
As is always the case, language specific to the topic and acronyms have developed in the world of shipping your exports. But don’t worry, there are not too many and they aren’t too complicated. For example, a bill of lading is a receipt for goods shipped. FOB means “free on board”—that is, the seller is assuming the costs of delivering the goods to their destination, including insurance. For a list of shipping terms and definitions, click here: http://www.foreign-trade.com/reference/incoterms.htm
Exporters often use a freight forwarder–a person or company that organizes your shipments to get them to your customer. But how do you find a good one? Check that they’re licensed by the Federal Maritime Commission or for air shipments by the Air Cargo Commission. You can also ask if they are a member of one of the freight forwarder organizations.
Interview your freight forwarder and ask questions like you would when contracting out for any other service. For example, do they have an export compliance program? Who at the company will be handling your account? What is that person’s experience? Have they shipped goods similar to yours before? To the country you’re shipping to?
For more information on shipping your goods, here’s a link to a video on the U.S. Department of Commerce website with a video, Q&A and Powerpoint presentation.
How do I get paid? (Financing your Exports and Receiving Payment)
Show me the money, right? You need to get paid for the sale of your good or service. There are a number of ways to structure payment: a) Your customer pays before he receives the shipment; b) the seller ships the product and is paid upon receipt; c) Use of a Letter of Credit where a financial institution provides a guarantee that the exporter will receive payment in full as long as they meet their obligations.
Of course, there are other financial issues such as foreign exchange, credit insurance and others. And to expand your company’s efforts to export, you may also need additional financing. For example, you may need to buy more materials, increase your labor force or expand your inventory. Or, it might be necessary to modify your product for different international markets. Perhaps you will need to travel to meet your customers or you might have to create new marketing materials localized for that market.
It can seem overwhelming but don’t worry, there is help and resources available here too. Of course, your first stop may be to the commercial bank you are already doing business with. But there are also government programs available to help you with export financing. For example, the U.S. government has export capital guarantee programs. Both the Export-Import Bank and Small Business Administration have programs to help finance needs such as marketing materials, international travel to trade shows and other factors to help you export. You can apply for these credit programs through your local bank.
In addition, the Export Import Bank can provide export credit insurance to reduce the risk of non-payment by your customer. If you are exporting agricultural products, there is export financing available through the U.S. Department of Agriculture. The Export Finance Assistance Center of Washington provides free export finance advice and counseling assistance to Washington state-based exporters.
These agencies and others can help you determine how to best finance individual transactions or a series of revolving transactions, obtain export credit insurance and find capital to expand your business into exporting. Here is a link to more information and resources. Watch this video: https://www.export.gov/article?id=Export-Financing
They have a Different Word for Everything (Navigating Different Business Cultures)
Your cousins on the East Coast are different. They grew up in a different culture with different norms. So too are your customers overseas. They have different expectations, and negotiate differently. But there are lots of ways to become aware of these differences and learn about them. You can easily do your homework through websites about the country you are selling to, organizations in town with expertise in the market and local export assistance organizations.
You can learn the unwritten rules and find ways to successfully navigate your customers’ international market. You will find out whether and what type of gift you can provide to your potential customers, what is proper etiquette in a country, different cultures of communication and more. A firm handshake in business meetings here may or may not be appropriate in the country you’re doing business in. Even colors can take on significance in certain countries which can affect how you market and produce your product for that market.
You can’t do that here (International Laws and Regulations)
The U.S. has rules and so do other countries. If you have a medical product, for example, just as there are approvals here through the Federal Drug Administration, there is a regulatory process in the country you are selling to.
Before you can export your product or service to an international market you need to make sure it conforms to standards, regulations and certifications in that market. The European Union may require a certification but China may require a separate one with different requirements. What is okay in Brazil may not be in Botswana. You may need to label your product differently for certain countries to meet their regulatory requirements. You can research these laws, regulations and certifications through a variety of resources.