Online Exclusive: Small Business Exporting: Navigating a Bold New World
Imagine you have a product that's been wildly successful in the United States. As with many products, when your market gets oversaturated, you need to find a way to expand your target consumer. With today's global marketplace, do you dare enter the bold new world of international commerce?
Surprisingly, many American companies are shy about taking that global commerce leap. According to the U.S. Small Business Administration, slightly more than 200,000 companies engage in international trade, but that's just a fraction of the 12 million firms that have products or services deemed exportable.
Forrester Research found that 85 percent of small- and medium-size companies with an online presence can't fulfill orders internationally, citing shipping as the number one hurdle. So what's a small business to do?
Without attempting to over-simplify the challenges -- and there certainly are challenges -- "Exporting 101" can actually be broken down into steps and easily conquered for today's small business owner.
Getting in the Game
Some small business owners have a built-in head start in that they already have a network of global contacts. But for those without good business buddies spread around the world, entering a new sales market can be intimidating. The first step is to find the countries with the fastest growing market for your product. The U.S. Network Export Assistance Center can be a good place to start. It's a one-stop shop for small and medium-size companies with an office in nearly every major U.S. market.
You then have to let people know you're there. The Web site at www.export.gov has listings of partners and trade leads to explore. From there, you will want to narrow down your choices. Start with one country as a test and then expand. Canada and Mexico are often good starting choices because of their proximity. Focusing on regional clusters as you grow is also a good idea, as it's more cost-effective when planning trips or marketing events.
Once a market is selected, visit it. Why? Just think about the differences between Atlanta and Barcelona. I can't recall when I last heard a U.S. co-worker say, "Time for my siesta! See you in two hours." Plus, you need to understand your competitive landscape.
Knowing what "matching" services are available that can pre-arrange meetings for you with screened business and government contacts is also helpful. You also may need to take out advertisements in local publications and attend trade shows.
This may seem obvious, but presenting a contract in the correct language is a good start. Why even mention this? Because in Panama, for instance, a contract written solely in English is not recognized because judicial processes are conducted in Spanish. So have your contract prepared in both English and the local language.
Sending a sample of your product, if appropriate, along with the contract is also a wise idea. With the product in hand, the consumer knows exactly what she/he is signing their name to purchasing.
With currency exchange wire transfers, the financial side of global business can be worrisome. Be sure to qualify potential buyers by obtaining as much information from the company itself in terms of the company's history and the background of its management, current sales volume, length of time in the business, what types of customers they serve, and if they do business with other foreign companies. Credit reports are a must as well, and you can also check online services that can provide in-depth reports and conduct the due diligence.
Should a problem with payment arise, and the sum of the debt is large enough to warrant the effort, assistance from your bank and legal counsel may be needed. Often, it will result in contacting the U.S. Council of the International Chamber of Commerce, which handles the majority of international arbitration and is usually acceptable to foreign companies because it is not affiliated with any single country.
Getting the Order to the Buyer
With a completed contract and order in place, all you must do is deliver. Unfortunately, on the global playing field this is not always as easy as it sounds. The question is, how do you get the product to market in a timely, safe, and cost-effective manner? And how do you avoid having it returned to you?
As a rule of thumb, land transportation is preferred if you're exporting to Mexico and Canada. If you're going further, air and ocean freight are your other choices. Going by ocean freight is almost always less expensive than going by air, but there are a number of additional charges that need to be factored.
If you're on the coast, it won't be difficult to get your product to the port, but a Midwestern company is going to have to pay the shipping cost to first get their product to the coast. And, as the old saying goes, time is money. In some cases you may not get paid until your product reaches the recipient, and air is vastly faster than ocean shipping. The cost of the shipment, the delivery schedule and the accessibility to the product by the foreign buyer are all factors to consider when determining the method of international shipping.
It's also wise to check with the buyer about the destination of the goods. Buyers often want goods to be shipped to a free-trade zone or a free port where they are exempt from import duties. Hiring a freight forwarder or customs broker, who works as an agent for the exporter and is an expert with the rules and regulations of shipping internationally, is often a good idea. They can handle the details from the start, including freight, port, and consular fees; as well as advise the safest way to package your product for shipping.
Filing the Paperwork
While we talk about paperless office environments, we're not quite there yet. And where there's something going over the border there is always a line of paper trailing behind. The exporter needs to prepare a commercial invoice that proves ownership, payment, and an exact description of the goods. A shipper's export declaration is also needed on all single commodities valued at more than $2,500 or when a license or license exemption is required -- this is only required for origin U.S. and Puerto Rico exports. These can be filed online and are a way for the government to track statistically what is being exported from the country and allows U.S. Customs and Border Protection to enforce exports. An export packing list details exact weights and descriptions to itemize each package. A certificate of origin is also generally needed by importers to avoid paying import tariffs on goods that have been negotiated as free trade.
Once the product has made it, an inland bill of lading is needed to document movement of goods between inland points and the port where the product was introduced.
Receipt on Delivery
When the product arrives on international ground, shipper's instructions will determine how it is moved. The more specific your instructions, the better chance your product has to move without delay. Delivery instructions are also needed so the goods can be sent on their way by railroad, truck, or plane to their final destination. Finally, a dock receipt will transfer obligations from the domestic to the international carrier as the goods reach their destination. When using a shipper that provides tracking, you will be able to tell the instant you product is delivered.
While New York Times scribe Tom Friedman may write about a flat world, that doesn't mean it's not scary and without potholes. Global business represents a bold new world of opportunities, and if navigated carefully, the means to seize those opportunities are out there. Just be careful to do the proper due diligence, and go find that same wild success in a land far, far away.