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EXPORTING GUIDE Powered By Docstoc
US Export Assistance Center

Southern Ohio District Export Council

Compiled by Mark P. Evans
August 2004
Exporting Overview
   Market Potential
   Company Resources
   Marketing Plan
   Distribution Methods
   International Standards
   International Legal Considerations
   Shipping
   Quotation
   Pricing
   Payment Terms
   Customer Service
Market Potential

   US Product Life Cycle vis a vis
    International Product Life Cycle
   Uniqueness of your product
   Competitive Position Outside the US
   Ease of Substitution
   Cultural Acceptance of your
    Brand/Product Name
Company Resources
   Top Management Support
   Relative Ease in Supporting Export
    Sales Activity by Sales, Marketing,
    Finance and Manufacturing
   Will the personnel view exporting as
    a thorn or a rose?
   Management Decision Making Style;
    Centralized or Decentralized and
    Impact Upon Negotiations
Marketing Plan
   Select countries of interest
   Research US export statistics of common
    commodities (NTDB)
   Determine fastest growing markets for US
   Assess which of your US competitors are
    exporting and where
   Internet research for competitive local
Marketing Plan (continued)
   Are product modifications needed?
   What import technical barriers exist; CE
    mark, CCC, etc.
   What price levels exist? Remember price
    in international markets is usually lower
    than US markets as price is more
    important than features, quality, service,
    etc. Your specific product may not require
    the lowest price if it has a distinct
    competitive advantage.
Sources of Market Information
   US Government Export Portal
   National Trade Data Bank (NTDB)
   UN Statistics Yearbook
   World Fact Book
General Industry Information

   Culturgram www.culturegrams.com/
   Country Commercial Guides
   Trade Information Center
US Government Resources
   Trade Information Center (TIC)
   Export Assistance Center Cincinnati
     Gold Key Service; locate potential
      distribution and arrange local
      introductory appointments
     Platinum Key Service; long term
      sustained assistance from overseas
      Commercial Service posts
Distribution Methods

   Direct Sales
       Highly engineered products
       OEM sales
       Key account sales
       Currency fluctuations do not impact
        sales because of competitive advantage
       Few competitors or highly concentrated
Distribution Methods         (Continued)

   Distributor Network
       More important to have local
        representation where engineered
        competitive advantage does not exist
       Local connections sell the product when
        barriers exist to direct selling
Distribution Methods             (Continued)

   Distributor Criteria
       Must be sales people, not order takers.
       Must be marketing/selling to your target
        market/customer now.
       Must possess the capital base to advertise,
        promote, hold inventory and support their
        customers credit terms.
       Must possess the infrastructure to run the
        business and have the experience to handle all
        import administration.
Distribution Methods         (Continued)

   Joint Venture
       Local connections very important
       Cost disadvantage to pure export
       Retains some marketing and
        price/profit control
       Extremely difficult to maintain “fair”
       Legal systems and conventions operate
        differently compared with the USA
Distribution Methods              (Continued)

   Foreign Direct Investment
       Buy a company and the existing customers
       Useful to buy a competitor or fend off
        additional competitors
       Allows fragmentation/differentiation of markets
        to reduce risk of attack by competitors
       Provides greater control of market, products,
        sales and profits
       Does not eliminate management culture issues
Distribution Methods          (Continued)

   License
       Useful when capital and management
        resources are limited.
       Increases risk of creating a competitor
        as the licensee is out of sight and out
        of mind
       May be important to include royalty
        and cross licensing provisions for any
Distribution Methods –
   Must have sales people, not order takers.
   Must have access to your target
    market/customer base immediately.
   Must possess the capital base to
    advertise, promote, hold inventory and
    support your customers’ credit terms.
   Must invest in the infrastructure to run
    the business and have the experience to
    handle all import administration.
Department of Commerce –
US Commercial Service Resources
   Market Research
       Trade Information Center (TIC)
       Country Commercial Guides;                               market conditions, best
        export prospects, financing, finding distributors, legal and cultural issues

       International Market Insights;                           analyze conditions in
        specific markets
       Industry Sector Analysis;                      details about an industry to
        estimate market potential, market size and foreign competitors
       Video Market Briefings;                      discuss market conditions, regulations,
        key players and competitors

       Export Assistance Centers;                          111 offices throughout the 50
        US States
Department of Commerce –
US Commercial Service Resources

   Trade Events
       Trade Missions;              arrange personal meetings with pre-
        screened business partners

       Int’l Buyer Program;                 brings foreign buyers to US
        Trade shows

       Certified Trade Fairs; place you in the best
        international trade shows with targeted matching

       Catalog Exhibitions; showcase your product and
        service and have leads sent back to you.

       Single Company Promotions; provide meeting
        space and pre-screened invitations to help you successfully present
        product or service seminars
Department of Commerce –
US Commercial Service Resources

   International Partners
       Export Assistance Center Cincinnati
             Platinum Key Service; long term sustained assistance f rom overseas
              Commercial Service Posts

             Gold Key Service; arrange personal appointments                  with pre-screened
              business contacts at the US embassy of your designated country

       BuyUSA.com; matches international buyers with US suppliers online
       Virtual Trade Missions; let you explore promising markets via
        video conferencing

       Int’l Partner Searches;                  deliver details on potential partners that
        have expressed interest in your product or service
       Commercial News USA;                       promotes your product or service to
        more than 40,000 international buyers trough a free monthly catalog
Department of Commerce –
US Commercial Service Resources

   International Partners                        (continued)

       Int’l Company Profiles;                  offers low cost quick credit
        checks and due diligence reports on buyers and distributors

       The Trade Opportunity Program;                             provides
        daily trade leads from foreign buyers
Department of Commerce –
US Commercial Service Resources

   Consulting and Advocacy
       Counseling; assists in the development of an export strategy and
        obtaining financing

       Consulting; helps resolve regulatory hurdles and recover payment
       Platinum Key Service; provides customized, long-term support to
        achieve your business goals

       ShowTime;            offers in-depth counseling at major trade shows from market
        and industry specialists

       Multilateral Development Bank (MDB);
        representatives provide access to project opportunities funded by MDB’s

       Advocacy; through US Diplomats and other officials to give you the edge.
Department of Commerce –
US Commercial Service Resources

   Where to start?
       1-800-USA-TRADE to find your local
        export assistance center
       www.export.gov
       www.buyUSA.com
International Standards
   Product Adaptation;                       to meet foreign government
    regulations, buyer preferences, technological differences.

   Engineering and Redesign;
        voltage differences 120 vac vs 230 vac 1 phase,
        480 vac vs 400 vac 3 phase,
        soft metric vs hard metric dimensions
        sae vs metric fasteners

   Branding, Labeling and Packaging;
        are local or international brand names important to the
         customers and do you need trademark protection
        does the name translate well in the foreign markets
        are OSHA warning labels sufficient or do you need
         international warning labels
        does the package need US or metric weights and dimensions
International Standards (continued)

   Safety Standards;                 what local or country safety
    standards are required for the product to pass through customs

   United States; UL label is required on electrical
    products, toys, medical devices, etc.

   European Union; CE Mark is required an any
    product which can be used “as is”, otherwise a Declaration of
    Incorporation (DOI) is required so the buyer of the product can
    place the CE Mark on the final product.

   CE Mark; is a safety analysis and documentation
    requirement (placed on the product by the manufacturer), unlike
    the UL label which is a performance specific regulation. The CE
    Mark is required for end use products, see the CE Directives.
International Legal Considerations
   Export Administration Regulations
       Small percentage of exports require a license
        or are prohibited for export to certain countries
       First check the web site www.ustreas.gov/ofac
        which details prohibited countries based upon
        the type of product or service
       Second, verify your product or service is not a
        “dual use” (military and commercial) which
        would require an export license. If the end use
        of the product is in a military or nuclear
        application, and export license is required
       Review the restricted product list at the
        USDOC Bureau of Industry and Security
International Legal Considerations

   Export Administration Regulations
       Third, it is the exporters responsibility to
        ensure the product is not diverted to prohibited
        countries. Severe penalties apply
       Fourth, Foreign corporations which are more
        than 50% owned by a US company or are
        substantially directed in their daily activities by
        the US company, are subject to similar trade
        restrictions as the US parent
       Get legal advice before allowing a foreign
        subsidiary to sell in a way that could not be
        done by a US parent
International Legal Considerations

   Foreign Government Regulations
       Consular Invoices
       Certificates of Inspection
       Health Certification
       Certificates of Origin
       Chamber of Commerce Verification
       Safety Certification
International Legal Considerations

   Customs Benefits for Exporters
       Duty Drawback
       NAFTA Reduced Local Import Duties
       FTA’s Reduced Local Import Duties
           Completed; Israel, Jordan, NAFTA, Chile,
           Pending; Australia, CAFTA, Morocco,
            Dominican Republic
       Foreign Sales Corporation (FSC); Exemption
        from Income Tax (Banned by WTO - to be
        modified by Congress)
International Legal Considerations

   Intellectual Property Considerations
       Patents;
          US Patents based upon first to invent

          International patents based upon first to file for a
          After initial filing you have one year to file in Paris
           treaty countries
          In US you have one year to file after disclosure or
           sale of the product
          International patents must apply before disclosure
           or sale of the technology otherwise the technology
           becomes part of the public domain, or within 1 year
           of the US patent application
International Legal Considerations

   Intellectual Property Considerations
       Trademarks;
          US trademark or service mark based upon
           first to use or apply for foreign
           trademark/service mark protection
          International trademark or service mark based
           upon first to apply
          Some countries do not allow registration of
           service marks
          MADRID PROTOCOL allows common
           application with individual country
   General Requirements
       Packed so it arrives in good condition
       Labeled correctly to ensure the goods are
        handled properly, arrive on time and at the
        right place
       Documented to meet US and foreign gov’t
        requirements and collection standards
       Insured against damage, loss, pilferage and
   Freight Forwarder’s role is to supply
Shipping (continued)

   Packing LCL and CL
       Pack in strong containers adequately
        sealed and filled
       Provide proper bracing and weight
       Goods should be palletized
       Packing material moisture resistant
       Wooden boxes for LCL shipments
        properly treated for insects
Shipping (continued)
   Labeling
       Shippers Mark
       Country of Origin
       Weight in pounds and kilograms
       Number of cases and dimension of
        cases in inches and centimeters
       Special handling marks (fragile, this
        side up, no hooks)
       Port of Entry
       Labels for hazardous materials
Shipping (continued)
   Common Documentation
      Airfreight shipments require non-
       negotiable air waybills
      Bill of Lading; contract between owner
       of goods and carrier
      Commercial Invoice; used by importing
       country customs officers (caution many
       customers will ask this value be
       reduced to reduce duties)
      Consular Invoice; used by customs
       officials in some countries
Shipping (continued)
   Common Documentation           (continued)
       Certificate of Origin; some countries require
        plus a stamp from the local chamber of
       NAFTA Certificate of Origin; required for trade
        between the NAFTA countries if a US shipper
        wants to claim 0% duty. (Ex. US company re-
        sell goods in Canada made in Japan 6 months
       Inspection Certification; usually a third party
        inspection required by importing customer or
        government (Philippines)
Shipping (continued)

   Common Documentation (continued)
       Shippers Export Declaration (SED)
          Required when shipping goods valued
           over $2500 through the US Postal Service
          Required when shipping goods valued
           over $2500 under Schedule B
          Prepared by freight forwarder and
           electronically filed with US Customs
          Not required for exports to Canada unless
           export license required
Shipping (continued)
   Common Documentation           (continued)

       Export License for controlled goods
       Export Packing List is more detailed than a
        domestic packing list and requires;
          Itemizes material in each package

          Lists individual gross and net weights in
           English and Metric
          Shippers and buyers references

       Insurance Certificate to assure the consignee
        the goods are insured
   State the Seller and Buyer
   Detail Price and Currency
   Validity Period
   Terms and Conditions Sheet
   Warranty Period
   Shipment terms per INCOTERMS 2000 (Ex-Works and CIF
    most common)
   Ex-Works shipment schedules and estimated arrival
   Payment & Banking Details; Account #, Sort Code, Swift
   Pro Forma Invoice typically required with quotation as a
    means for the customer to assure what they are buying
   Market Based Pricing                                     Domestic Sale    Export Sale
       Requires accurate survey   Factory Cost
        of market prices at your        Unburdened           $        10.00   $     10.00
        level in the value chain   Domestic Freight          $         0.70   $      0.70
   Cost Based Pricing                                       $        10.70   $     10.70
       Requires Calculation of
        direct costs through the   Export Documentation                       $      0.50
        value chain
       Example:                                                              $     11.20

                                   Ocean Freight and
                                       Insurance                              $      0.56

                                                                              $     11.76

                                   Import duty 4.65% of landed cost           $      0.55

                                                                              $     12.31

                                       Margin 15%            $         1.89   $      2.17

                                   Final User Price          $        12.59   $     14.48
Payment Terms
   Terms must be evaluated according to
    company and country credit risk. The
    Asian banking crisis of 1997 is a prime
    example of country risk.
   Typical payment terms
       Cash in advance: check, telegraphic transfer or
        credit card
       Irrevocable confirmed letter of credit; at sight
        or x days after ocean bill of lading. A confirmed
        L/C is a guarantee by the exporter’s bank it
        will pay the exporter even if the buyer’s bank
        does not pay the exporter’s bank.
Payment Terms (continued)
     Irrevocable confirmed letter of credit; mechanics
         Buyer opens L/C at buyer’s bank including
          language for documents required from exporter to
          effect payment (we recommend sending preferred
          L/C language to buyer before the L/C is opened).
         Buyer’s bank sends L/C via SWIFT to the
          advising/confirming bank in exporter’s country.
          SWIFT requires 3 days.
         Exporter’s banks sends letter of confirmation and
          L/C to exporter.
         Exporter reviews L/C carefully as all instructions
          must be carried out to the letter and all
          documentation must be provided without errors, or
          discrepancy fees will apply and payment may not
Payment Terms (continued)
     Irrevocable confirmed letter of credit; mechanics
         Exporter contacts freight forwarder who schedules
          the ocean or air shipment, and prepares all
         Once the goods are loaded, the ocean or air bill of
          lading is completed by the freight forwarder.
         Freight forwarder then sends bill of lading,
          commercial invoice, packing list, etc. to the
          advising/confirming bank in exporter’s country
         Exporter’s bank reviews all documents for
          discrepancies, send the documents to the buyer’s
          bank, who sends documents to the buyer.
         Buyer collects the goods.
         Exporter collects payment according to payment
          terms at sight or time draft.
Payment Terms (continued)
     Sight Draft: Mechanics
         Ocean bill of lading endorsed by exporter
         Exporter’s banks sends OBoL, sight draft, and
          other documents (packing list, commercial
          invoice, inspection certificate, insurance
          certificate) to buyer’s bank
         Buyer’s bank notifies buyer of document
         Buyer pays draft and buyer’s bank turns over
          ocean bill of lading to allow buyer to collect
          the goods.
         Note: Do not ship via air under sight draft as
          goods can be collected without an airway bill
          of lading
     Open Account is the most risky transaction, but is
      least expensive for both sides.
     L/C is the most expensive as banking fees are
      incurred by both the exporter and the buyer.
Customer Service
   Perhaps the most unanticipated and most important
    factor to succeeding in the international market.
   Customer service can be described as the manner,
    procedure and timeliness with which communication
    is conducted. Some examples:
       Send wrap up meeting notes within one business day
        of your return from abroad.
       Meet all deadlines
       Establish a communication policy for all personnel who
        will communicate with the customer, such as:
            Send an answer to all inquiries and questions within 24
            If an answer is not possible within 24 hours, send a
             schedule for answering the question within 24 hours.
            Ensure the final answer is not delayed longer than 6
             business days.
Customer Service (continued)
   Why? Fast communication ensures you
    are easy to do business with, and helps
    ensure you become the preferred
Summary: Global Market Cycle
                             5. New Product
        1. Market             Development
        Research                 Through
                          Global Customer Input

                                    4. Relationship
 2. Pricing

                    3. Customer

   US Export Assistance Center
    Dao Le - Director
    Phone 513-684-2944

   Southern Ohio District Export
    Dao Le – Executive Secretary
    Phone 513-684-2944