Export University Inc. Export 101

Export University Inc.Export 101

[Instructor Name/Location]

ExportUniversity.com

What is Export University®?• Export University is a “branded” approach to conducting trade

education and training which is offered by District Export Councils nationwide in partnership and with the full support of the U.S. Department of Commerce.

What are District Export Councils?• District Export Councils (DECs) contribute leadership and

international trade expertise to complement the U.S. Commercial Service's export promotion efforts through counseling businesses on the exporting process and conducting trade education to promote exports by companies in their local region.

About the Export University Program


National Sponsors

Supporting Sponsors

Local Sponsors[Use this slide area to recognize your sponsors]


Export 101™Export 101 is an introductory course designed by exporting experts for exporters to provide the confidence you need to explore exporting as a strategy for business growth.

Learning the basics will lower your anxiety, enabling eye opening possibilities to surface which will motivate you to want to learn more – ask more questions.

Today, through learning some basics, you will uncover business areas for focus, and meet key resources to mentor you through the growth process.


Getting Ready to Export



Connectivity

Trade Regulations

& Legal

Building Infrastructure

International Logistics

Managing Payments & Financing

Getting Ready

Growth

Developing Relationships

Export 101 Agenda

1. Getting Ready to Export

2. Developing Customer Relationships

3. Building a Global Infrastructure

4. International Logistics

5. Managing Payments & Financing

6. Trade Regulations & Legal Issues


This section is designed to help you understand and learn the benefits of exporting.• This section will:

– Show the exporting business opportunities– Sets the stage for learning about the basic elements for

exporting– Get you excited about exporting

• Following this section, you will be better positioned to:– Begin or expand exporting– Determine if you want to further pursue business growth

through exporting


Agenda1. Why Export?

2. Organizational Readiness

3. Building an Export Plan

4. Resources and Tools




Getting Ready Know Your

CustomerLearn Culture

Build Your Export TeamBusiness ModelMarket Entry

Trade Regulations

& Legal


Compliance PlanExport LicensesCountry Requirements

Payment TermsLoan OptionsExpansion Needs

Tariff BarriersNon-Tariff BarriersDistributor ContractsIPR

Why Export?

Why would a company consider exporting its products and/or services?• It’s where the money is• It’s where the people are• It’s where the growth will be• Value of the U.S. dollar

4%

96%

Percentage of World Population

USRest of World

Reasons for Exporting

There are many good reasons you should be exporting.• Increased revenue and profit • Increased productivity • Spread risk base of business • Offset lack of demand for seasonal products • New product ideas • Additional markets • Tax advantages

Organizational Readiness

Some important questions to ask yourself about your organization’s readiness to export.• Does your company have a product for export sales?• Does your company have an export plan?• Can your company commit sufficient production capacity?• Does your company have the financial resources?• Is your company willing and able to dedicate resources?

Product Readiness for Export

Some important questions to ask yourself about you’re the readiness of your product or service for export.• How successful are your products domestically? • What are the unique features of your products? • Are you losing market share to more technically advanced

products on the domestic market?

Exporting Requires Commitment

Expanding or starting your export operations requires commitment in a number of areas.• Sacrifice short-term profits• Increased travel and administrative costs• Hire additional staff• Develop appropriate marketing materials• Comply with international standards• Obtain the necessary export licenses and import permits• Foreign currency exchange fluctuations• Seek out additional financing

The Importance of Market Research for Exporting

Your company MAY begin exporting without any market research if it

receives unsolicited orders.

Businesses that invest time in market research INCREASE their chances of

succeeding.

The Importance of Market Research for Exporting

Researching potential markets can help you company in multiple ways.• Finding where your products are most likely to sell • Identifying market segments and niches • Determining both domestic and international competitors • Discovering how to overcome barriers to market entry • Understanding customers' needs and accommodating as

appropriate• Identifying new trends• Determining your price competitiveness

Conducting Market Research

When conducting market research there are some factors to consider.• Demographics and the distribution of population by age and

income• Per capita income, rate of economic growth, stages o• economic development• Political stability, rule of law, regulations, ease of doing

business• Culture and business practices• Market entry, taxes, duties, import license, inspections, etc.• Infrastructure, ease of moving products, communication,

roads, ports and airports

Market Research Sources

Export.gov - Market Research Library

Why Write an Export Plan?

There are several benefits to writing an export plan.• It becomes a selling tool to management • It becomes a tool to measure progress and adhere to an

assigned export marketing budget• Keeps focus on objectives or goals• Written plans are not forgotten• Clearly written plans are easy to understand and follow

Steps for Creating an Export Plan

1. Analysis• Research and Analysis Needs• Identify Data Sources

2. Target Markets• Prioritize Countries – Where do you want to go?• Identify target markets within those countries

3. Country Strategy• Identify marketing strategy for each country

4. Logistics• Shipping• Financing • Other resource requirements (i.e. repairs, warranty)

5. Monitor Results• Measure strategy success and focus areas• Get the most from your distributor

Export Plan Content

Export Plan

Executive Summary

Export Policy

Commitment

Background Analysis

Market Analysis

and Implement Strategy

Financial Analysis

Addenda

U.S. Department of Commerce Resources

The U.S. Commercial Service is part of the U.S. Department of Commerce, and agency of the United States government.• Mission of the agency

– To promote the export of goods & services from the United States, particularly by small- and medium-sized businesses

– To represent U.S. business interests internationally– To help U.S. businesses find qualified international partners

Our Network & What It Can Do For You

The Commercial Service has Trade Specialists in over 100 U.S. cities and in 83 countries worldwide.• We can:

– Locate international buyers, distributors and agents– Provide expert help at every stage of the export process – Help you to enter new markets faster and more profitably

• Gold Key Service• International Partner Search• International Company Profile• Commercial News USA

Business Matchmaking

• Catalog Exhibitions• International Buyer Programs• Trade Missions/US Pavilions

Trade Promotion

Events

• Advocacy• Single Company Promotions• Business Consulting• FUSE (Post-Web Promotion)

Tailor-Made Programs

• Market Research Library• Customized Market Research• China Commercial Brief

Market Research

U.S. Commercial Service

www.export.gov - country and industry specific reports from the U.S. Commercial Servicewww.buyusa.gov/eme - Industry specialized reports and bulletins from the U.S. Commercial Servicewww.strategis.ic.gc.ca - U.S. and Canadian statistical trade informationwww.census.govwww.tradestatsexpress.govwww.bna.com/itr/custom.htmwww.buyusa.govwww.comtrade.un.orgwww.gtis.com/gtawww.usatradeonline.govwww.thinkglobal.us/ Commercial News USA

Other Tools and Resources

Next Steps

Successful business growth incorporates exporting.

Ensure Exportability of Products Identify

Strong Target

Markets

Gain Organizational Commitment

Use US&FCS

Gold Keys& TPPs

Frequently Asked Questions

• What country should I start with, to begin exporting?• If my product does not sell well here, should I turn to

exporting?• Should I just buy a plane ticket and fly to the foreign

country and make cold calls?• Should I just get started selling if I have a contact in the

foreign country?• My customer is asking for free samples, what should I

do?• How can I find out if my foreign customer is reliable?

What Questions Do You Have?

Developing Customer Relationships



Export 101 Agenda








This section is designed to provide techniques to build and manage lasting relationships with international customers.• This section will:

– Demonstrate that business outside of the U.S. have different cultural practices, thus different needs

– Show you that managing customer relationships is critical to increasing your sales

• Following this section, you will be better positioned to:– Work with a culturally diverse customer base– Manage your customers’ expectations


Agenda1. Establishing Credibility

2. Building Your Network

3. Leveraging the Web

4. Challenges of International Markets





Getting ReadyPartner Due Diligence

Avoid Legal Battles

Building Trust = PayEasier Terms

Proactive Planning

Builds Global Network

Win-Win PlansCompetitive RatesGood Service Levels

Trade Regulations

& Legal

Establishing Credibility

There are some key concepts to remember when working to establish your international credibility.• Under promise, but over perform• Follow up in a timely manner and do so thoroughly • Offer high quality, competitive products and services• Take care of problems – it is how we deal with them that

makes us different • “The customer is always right” – this is true internationally!

To be successful in domestic and global markets you must offer the customer A REASON TO BUY FROM YOU VERSUS THE COMPETITOR.

Establishing Credibility

• Offer greater benefits to your customers than the competitors

Differentiation

• Over the long-term, requires lower cost or greater efficiency

Competitive Price

Building Your Network

Things that will make your customers smile: • Timely, hassle-free shipments• Proper documentation• Products arrive without freight damage – pay attention to

packaging• Correct specifications – pay attention to electric, gas,

plumbing, steam and other requirements • Products have required approvals such as UL, NSF, CE,

CCC, CB, etc. • Avoid “Dead on Arrival” – ensure your products work out of

the box! • Warranty with parts and service support

Adaptation of cultural business practices is a best practice.• Cultural sensitivities are best handled by being humble and

sincere• Be a student of the world – show an eagerness and

willingness to learn their culture and history• A few spoken words in a different language go a long way• Small talk is important – connect with your customers on a

personal basis (i.e. families, kids, sorts, hobbies)


Consider using additional helpful hints for success.• Study well each market you believe has opportunities, large

and small• Modify approaches to accommodate local conditions• Make trips – do not be afraid to ask for the order! We have

more similarities than differences• Once getting an order, move on to the next one• Ensure you have your team in place – both internal and

external to provide a quality transaction• Enhance your reputation at each step of the process


Leverage the Web

Once you have a website you are already “out there” and open to global exposure whether you want it or not.• Asia and Europe have more web users than North America

and the number in Africa, Middle East, and Latin America is rapidly increasing

• Try a “phased” approach with continual improvements– Simple enhancements to your site– Internationalization– Localization– Translating your website– Proactive promotion

Domestic Controllable

• Prices• Promotion• Product • Distribution

DomesticUncontrollable

• Political & Legal Forces

• Economic Climate

• Competitive Structure

Foreign Environment Uncontrollable• Political &

Legal Forces

• Cultural Forces

• Competitive Forces

• Economic Forces

• Structure & Distribution

• Level of Technology

• Geography & Infrastructure

Environment Uncontrollable Elements



Country A

Country B

Country C

Scope and Challenges of International Markets

Next Steps

Take the time to build a lasting relationship with your customer.

Consider Product

Differentiation

Research Product

Approvals

Establish Pricing Matrix

Gain Some Basic Language

Skills

Search the Web for

Customers


• What kinds of products or services are in demand overseas?

• How do I build relationships with my customers?• Should I be concerned about civil unrest and anti-

American tendencies? • What sort of things should I bring with me? Are gifts

appropriate? • How can I protect my company against foreign

disruptions?• Is E-Commerce popular overseas?

Building a Global Infrastructure



Export 101 Agenda







This section is designed to help you understand and learn how to build and expand your international operations.• This section will:

– Teach you that exporting is not overly complicated– Give you the confidence and knowledge to export and believe

you can do it• Following this section, you will be better positioned to:

– Grow your business and create value for yourself and your customers

– Craft an actionable sales and marketing plan to achieve your goals and expand globally



Agenda1. Organizing for Export

2. Methods of Exporting

3. Channels to Market

4. After Sales Service Networks



Getting Ready

Sales ContractsLoyalty

CultureQualityTrust


Customs ClearanceFrameworkNetwork

Financial RiskGetting PaidCash Cycle

Market Entry Logistics PlanMode ChoicesService Options


Trade Regulations

& Legal

Getting Ready

Ways to Organize for Exporting

Firms have several ways to organize their exports.

• Do not treat your exports the same as domestic sales• Separate the domestic and international sales functions

within your business

By Product Line

By TerritorySuited to Marketing

Efforts

Organizing for Export

Ensure you have a solid export foundation.• Well defined and passionate export team• Export plan and strategy everyone buys-in to• Owner commitment for staff, travel and other resources • Competitive and quality product or service• Willingness to stick it out


You will need to invest time and effort into building your export team.• Required characteristics of team members:

Flexibility

Committed to Travel

Work Independently Emotional

Stability

Good Company

Ambassador

Good Communicator Technologically

Proficient

Culturally Sensitive


Building your export team requires positioning both internal and external resources.

INTERNAL

Administration

Sales

Credit

Production

Shipping

EXTERNAL

Federal Resources

State/Local Resources

Banker

Logistics

Legal

Methods of Exporting

1. Passively filling orders

from domestic buyers, who

then export the product

2. Seeking out domestic

buyers who represent

foreign end users or

distributors

3. Exporting indirectly through

intermediaries

4. Exporting Directly

INDIRECT

Indirect selling – exporting through an intermediary (i.e. Export Management Company, etc.).• Advantages

– The intermediary assumes responsibility for finding buyers, getting the product shipped and for collecting payments

– Immediate access to markets– Access to expertise and trade contacts, lowering risk– Your company can still learn about competitors, technology and

opportunities• Disadvantages

– Reliant on an outside company for market information and sales– Less control– Minimum buyer contact



Direct selling – your company deals directly with the foreign buyer.• Advantages

– Best way to achieve maximum profits and long term growth– Closer relationship with the overseas buyers– Control in the export process

• Disadvantages– Significant commitment of management and financial resources

to achieve desired results

Channels to Market

Finding a solid partner will help ensure success.• Once you have organized your company to handle exporting,

you now need to identify your channel to overseas markets

Distributors

Retailers

End Users

Sales Representative

Channels to Market: Choosing a Partner

DO NOT partner with the first company to “walk in the door”. Do your due diligence!

• Be patient• Be thorough


You can use a variety of promotion techniques to help identify and select potential partners.• Tap into foreign visitors at domestic tradeshows• Exhibit at key foreign tradeshows and Foreign Publications• Determine how your competitors are entering markets• Network through key international trade associations• Ask for leads and referrals from your network• Tap into overseas American Chambers of Commerce• Utilize U.S. Commercial Service assistance (i.e. Gold Key)• Participate in Trade Missions through the U.S. Commercial

Service

• E-mail, telephone, or letters• Could be a WEAK form of contactTraditional

• Register with global search engine• Translate your website, if necessary• Utilize online marketing firm

Online

• ATTEND• Design your exhibit around market• Bring literature, samples, etc

Trade Shows

Channels to Market: Choosing a PartnerYou can use a variety of promotion techniques to contact potential partners.


VISITING a variety of foreign markets can be very useful in the partner selection process.• Knock on doors• Foreign buyers are impressed most when visiting their

offices• Important personal relations are established• Seeing is believing• Best way to continuously educate yourself

Share your core values (e.g. long-term growth)

Strong relationships in your target markets

History/Background

Trade/Bank References

SME Needs (sales force, marketing, product mix, etc.)

When considering potential partners, there are many important factors to evaluate.



The U.S. Commercial Service can provide a number of valuable tools to help you select a partner:

• Commercial News USA Magazine

Trade Leads

• Gold Key Service

Business Matchmaking

• International Company Profile

Business Screening

Channels to Market: Negotiating a Partner Agreement

In the process of negotiating a partner agreement, there are a variety of provisions that can be included.• Non-compete clauses• Non-disclosure of confidential information• No entry into agreements with other parties that bind your

company• Inquiry referrals to your company outside the partner’s

territory• Requirement that utmost skill and ability be applied in

representing your product• Escape clause/non-performance• Automatic renewal clause

Channels to Market: Managing Your Overseas Partners

Invest in your

Global Success

Provide Volume

Discounts

Offer Freight Assistance

Consider Consolidation

Provide Awards

Cooperative Advertising

Social Recognition

Incentive Structures

Multiple steps exist. Think creatively.

Establishing an After-Sales Service Network

There are several ways to set up an after-sales service network.• First Party

– Exporter provides local service• Second Party

– Importer/Distributer provides local service• Third Party

– Independent service company provides local service

Next Steps

Focus on your global infrastructure and stay engaged.

Evaluate Your

Teams Often

EstablishBudget

Fill the Void with Outside

Resources

ConsiderDistribution &

Service Method

Go Out and Sell

Something


• Where do I start?• Which markets do I go to first?• Where can I find government help?• How do I ship product overseas?• How do I finance my transaction?

Export 101 Agenda








This section is designed to provide you with basic information relative to the logistics of moving goods across international borders.• This section will:

– Teach you that the logistics choices you make affect your profit margins

• Following this section, you will be better positioned to:– Select your transportation mode– Identify needed resources– Complete documentation– Identify physical risk


Agenda1. Comprehensive Plan Components

2. Logistics Providers

3. Costs of Choices

4. Terms of Sales - INCOTERMS

5. International Documentation





Getting Ready

Regulatory ComplianceDenied Parties

Profit ProjectionsLetters of Credit

Proactive Planning

IntegrityLoyalty, TrustPartnerships

GoodsInformationMoney

Trade Regulations

& Legal

Understanding the movement of these facets of trade will help you develop your program.

The Movement of Information, Money and Goods

Designing Your Program

Plan Source Make Sell Fulfill Ship Service

Resource review to manage your logistics• Inbound supply chain• Production and fulfillment capacity• Returns policy and process

Options For ConsiderationSimplify Your Logistics Program

Manage In-House 3rd Party Freight

Forwarder Integrator Combo

Reputation

Customer Service

Mode Choices

Global Coverage

Visibility

Cost

Which Items are Most

Important To You?

Truck/Rail

• Station to Station

• Door to Door• FTL• LTL

Ocean

• Port to Port• Door to Door• CGR• Full

Container• Partial or

Consolidated

Air

• Air• Door to Door• Cargo• Full Position• Full

Container• Palletized• Multi-Pieces

Multi-Modal

• Any combination

Modes of Transportation

Providers have the ability to provide quotes with various options for your consideration.• Required information consists of all physical shipment details

– Ask yourself – What else do I need to know?– Ask for several quotes outlining multiple options

Obtaining a Rate Quote

Factoring in Cost of Choices

Products• Value• Competitio

n• Shelf life• Seasonality• Product

integrity

Terms• D/T Payer• Freight

Payer• Country

D/T rates• Quantities

Movement • Mode• Speed• Size• Resources

Landed Cost

Choices always have a cost element and have a direct effect on your landed cost and ultimate profit margins.

Export Documentation

Documentation• Intl Waybill (IAWB)• Commercial Invoice (CI)• Electronic Export Info (EEI)• Cert. of Origin (NAFTA)• Bill of Lading• Export Declaration• Packing List• Letter of Credit

Information• Importer of record • Full commodity description with

value of the goods• Harmonized Tariff Code• Terms of Sale• Payer for Duties and Taxes

Describes a number of things – product, importer of record, terms of sale, freight/duty/tax payer, etc.

Multi-purpose international goods classification systems used in classifying goods moving in the process of international trade.• Classification has a direct impact on your duty/tax rates and

documentation requirements– Harmonized System (HS) numbers– Harmonized Tariff Schedule of the United States (HTS or

HTSUS)– Schedule B

Commodity Classification

Securing cargo insurance protects your financial interests. Carriers are not responsible for losses beyond their control.• Know the differences between freight insurance and declared

value to ensure you make the best choice• Protects against the risk of physical loss/damage in transit • Law or tariff restrictions limit liability

Freight Insurance and Declared Value

Terms of Sale

INternational COmmercial TERMS (INCOTERMS®) are published by the International Chamber of Commerce.• Most commonly accepted terms of sale• INCOTERMS

– 11 terms of shipment and delivery, available worldwide– Written to reflect, not dictate trade practice– Always abbreviated - three character, accompanied with

geographic place• http://www.iccwbo.org/incoterms/

– 2010 (current version)

Labeling & Packaging

When you focus on the product itself and the packaging needed for shipping, your products will be market ready and arrive safely.• Pack to Protect• Help buyer to identify the shipment• Requirements change across countries• Use strong containers• Do not over pack, even out weight distribution• Use pallets, outer containers if needed• Avoid product and brand names on outside of boxes

Tools and Resources• U.S. Commercial Service website

– Export.gov – Free• U.S. Census Harmonized Code Lookup

– uscensus.prod.3ceonline.com/#/p=0 • A Basic Guide to Exporting – 11th Edition

– Available online at amazon.com – Approx. $20• Dictionary of International Trade – Approx. $65

– Available online at worldtradepress.com/Dictionary_of_International_Trade.php

• Incoterms– iccwbo.org/incoterms/

Next Steps

Incorporate logistics before setting sales prices.

Learn Country Import Rules

Identify Packaging

Needs

Identify Required

Documents & HS

Codes

Select the Best

Transportation Mode


• Where can I locate the correct tariff code for my commodity/product?

• Why should I use a harmonized code?• Why does the information about the commodity as

written on the waybill need to be repeated on a commercial invoice?

• Are electronic documents acceptable?• When should I consider a multiple piece shipment versus

a palletized shipment?

Appendix

Items For Use As Handouts

Solutions Are Available

Clearance

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http://www.fedexbrand.com/PageGenerator.asmx/PageGen?MasterXPath=portal/preview&hidID=1&hidName=Browse+Photos&hidPath=/PortalName/Download+Assets/Photos&ItemsPerPage63=64&CampaignID63=&CategoryID63=775














Export Documentation

Correct documents ensure shipments are cleared through customs timely, efficiently and correctly

Bad Descriptions Good Descriptions

Samples Wood screws (samples)

Parts Guide, part for printing press

Promotional items Golf balls, ballpoint pens, key chains (for promotional use only, not for sale)

See Commercial Invoiceor see invoice

Desktop computer system (see Commercial Invoice for breakdown)

Part #Tf123 USB computer cable

Gift Man’s 100% cotton T-shirt (gift)

No description Business letter

Obtaining a Rate Quote

• Required Information– Commodity– Volume– Weight / Measure– Containerize/Break Bulk– Hazardous (MSDS)– Terms of Sale– Point of origin (city zip code)– Port of destination– Available ship date– Destination delivery date

Questions to AskHow long to get a rate?

How long does the rate apply?

Shipment lead time?

Discount opportunities

Cost breakdown – what does the rate include?

What extra costs are there?

FedEx Resources• Global Trade Manager - fedex.com

– Denied parties list and country requirements– Duty & Tax Estimator and document templates– Harmonized Tariff Code look up

• EEI Filing Guide - fedex.com/us/software/support.html • FedEx Export AgentFile Tool – fedex.com/eei• FedEx Global Regulatory Services

– 1.800.851.3336 and email [email protected] • FedEx International Customer Service

– 1.800.GoFedEx 1.800.463.3339 (say “International Services")• Export Education Programs – FedEx Know and Grow

Program fedex.com/knowandgrow

FedEx Export Program

FedEx has aligned with the US Commercial Service to support the National Export Initiative.

– Business matchmaking (to include funded Gold Key Services for qualified FedEx customers)

– Trade counseling– Market research– Advocacy support for major bids

• Visit - www.export.gov/fedex

Options For ConsiderationSimplify Your Logistics Program

Manage In-House 3rd Party Freight

Forwarder Integrator Combo

Reputation

Customer Service

Mode Choices

Global Coverage

Visibility

Cost

Export 101 Agenda







Managing Payments and Financing

This section is designed to provide a broad explanation of payment risk mitigation, trade finance strategies and best practices.• This section will:

– Show you that prudent transaction management minimizes risk and stimulates growth

– Demonstrate that companies are more competitive when they can secure payments with competitive terms

• Following this section, you will be better positioned to:– Develop an export financing and risk mitigation strategy utilizing

external resources and programs– Develop a strategy to access working capital for export growth

Managing Payments and Financing

Agenda1. International Payment Methods

2. Trade Credit Insurance

3. Working Capital Financing Programs

4. Foreign Exchange Markets

Trade Regulations

& LegalDeveloping

Relationships



Managing Payments

& Financing

Getting Ready

Regulatory ComplianceDenied Parties

DocumentationProof of Deliveries

Working CapitolFinance TermsCash Cycles

IntegrityLoyalty, TrustPartnerships

Sales ContractsLoyalty

Getting Paid and Managing Risk

Considerations when setting payment terms.• Prudent transaction management minimizes risk and

stimulates growth– Demonstrate that companies are more competitive when they

can secure payments with competitive terms– Buyers financial condition – can they pay?– Buyers business practices – will they pay?– Industry practices – what is customary?– Type of merchandise – is it customized?– Externals – are there political risks?– My cash needs – when do I need the money? – My risk tolerance

Methods of Payment

Cash

Confirmed L/C

Letter of Credit

Documentary Collection – Acceptance/Payment

Open Account

Sellers Advantage

Buyers Advantage

Methods of Payment

Cash in Advance is a commonly used method.• Difficult to get buyers to accept this method• Best payment method for custom-made or specialty goods• Best payment method when buyer and/or buyers country has

poor credit rating• Payment can be by credit card, check or electronic funds

transfer (EFT)

Methods of Payment

Letters of Credit have several options.• Instrument issued by a bank on behalf of a buyer (importer) in

favor of a seller (exporter), promising payment upon presentation of documents in compliance with the letter of credit– Sight vs. Time – Advised vs. Confirmed– Transferable LCs

Advising / Confirming Bank

Appl

icat

ion Beneficiary

SellerExporter

Doc

umen

ts

Contract

Goods

Docum

e nts

Letter of Credit (Sight/Time)

Documents

Applicant / BuyerImporter

L/CIssuing/Opening Bank

Export Letter of Credit Process

Letters of Credit

There are risks and benefits of using Letters of Credit.• Importer

– Assurance that the shipped goods are as ordered– Payment is made after the shipment is out of exporters control

• Exporter– Assurance that the payment will be made if documents are in

order– Retains control of title document until payment is made– Banks are in the middle of the process

Documentary Collections

There are risks and benefits of Collections.• Importer

– Relies on the exporter to ship goods as ordered– Payment is made before goods can be inspected

• Exporter– Retains control of title to the goods until payment is made– Transaction is facilitated through banks– Collections are a simple and inexpensive payment method, but

less secure than letters of credit

Open Account Terms

There are expectations and options for using Open Account Terms.• Ship the goods and wait for the payment

– Expect delays– Risk tolerance for non-payment

• Options– Uninsured– Insured

Directing Methods of Payment

A best practice is to be proactive.• Take control of the transaction

– Decide what your best alternatives are and prioritize them– Be clear – name a payment method as basis for the transaction

• Letters of Credit– Use a letter of instruction and request a specimen copy of letter

of credit prior to issuance• Drafts/Collections

– Check out the collecting bank before shipment• Request a review from BOTH your banker and freight

forwarder prior to shipment

Credit Insurance

Many companies use Credit Insurance. Why should you consider it?

• Credit Insurance has flexibility– Allows for open account sales– Opens sales opportunities in new markets– Extended payment terms– Insures payment of delinquent accounts

• Public vs. Private Insurance• May open up financing options

Credit Insurance

Credit Insurance can help mitigate risks resulting from both commercial and political risks.• Key considerations

– Pricing– Structure– Underwriting– Loss Reserves

• Underwriters– U.S. Ex-Im Bank– Euler Hermes– COFACE– AIG, FCIA, Zurich, Atradius– Others

Commercial

Insolvency

Bankruptcy

Protracted Default

Political

Transfer Risk

War, Revolution

Insurrection

Cancellation of an import

Working Capital Cycles Review

CollectReceivable InvoiceShipMakeOrder

Pre-shipment finance

Post-shipment finance

Receivables finance

Liquidity Management

US exports are in excess of $1 trillion. 81% are on open account.• A growing percentage of U.S. exports are credit insured

– DSO for exports - 68 days– DSO for domestic - 40 days, depicting additional WC demands

to support export activity

Sample Progression of Financing Solutions

• Cash in Advance or Letter of Credit sales onlyStart Up

• Open Account with Export Credit InsuranceGrowth

• SBA Export Express (max. $500,000)Finance Start-Up Expenses

• SBA Export Working Capital (max. $5MM)Working Capital

• Ex-Im Bank Export Working Capital (larger loans okay – foreign content and military restrictions)

Working Capital

Foreign Exchange

Foreign exchange markets and fluctuations can affect your business.

Next Steps

A flexible financial structure is key.

Identify the

Political Risks

Understand Foreign

Exchange

Learn the Legal

Issues of Finance

Find a Financial Adviser

& Banker


• I have been asked to consider open account terms. Who do I talk to first about the payment risks?

• What is political risk? What is commercial risk?• Letters of credit have been suggested. How to I get an

explanation of what they are? The costs?• I have heard “terms of sale” affect my pricing. How do

open accounts terms & LCs impact my revenue?• Do I need to talk with a lawyer and/or accountant to

explain the legal risks in international finance?• Can I finance my insured receivables with a bank?

Trade Regulations & Legal Issues



Export 101 Agenda







Trade Regulations & Legal Issues

This section is designed provide you with an overview of the legal issues and regulations that affect exporting.• This section will:

– Make you aware of the legal and regulatory issues you have to consider in order to be a successful exporter

• Following this section, you will be better positioned to:– Identify and manage legal and regulatory risks in international

trade

Trade Regulations and Legal Issues

Agenda1. Export Legal Risks and Exposures

2. Export Sales Quotes & Contracts

3. Distribution Network Legal Issues

4. EEI Filing Requirements

5. U.S. Export Regulations

6. Foreign Regulations & Trade Barriers

Trade Regulations

& Legal Developing Relationships




Getting Ready

ComplianceProduct Standards

Solid Sales ContractsIPR

Distribution NetworkProduct Warranties

DocumentationComplianceDenied PartiesHS Codes

Claims, RiskLetters of Credit

Export Legal Risks and Exposures

External Legal Factors

• Different Legal Environments• Different Legal Cultures• Different Legal Behaviors

Government and Political Risk

• Currency Fluctuations• Political Instability• Regulatory Environment

Export Sales Quotes

The Pro Forma Invoice is used when buyers request quotes.• Results from a buyer’s request for a quote• Quotation is prepared in an invoice format• Used for terms of sale purposes only• Legally is an offer to sell with terms• Requirements exist

– Statement that the invoice is “good and correct”– Statement of country of origin– Clear indication that invoice is “pro forma”– Include product, price, delivery and payment terms

Export Sales Contracts

Export sales contracts cover individual export shipments.• Equivalent to a bill of sale• Minimum terms

– Writing– Payment (including L/C terms if payment by L/C)– Detailed goods description, quality and quantity– Delivery method (e.g. INCOTERMS) and date– Warranties (express-disclaim all implied warranties)– Service/returns procedures– Governing law (recommend U.S. jurisdiction)

Export Distribution NetworkLegal Considerations

There are legal considerations to review for the distribution network choices.• Direct Exporter

– Sales to a direct exporter are domestic sales– Direct exporter is the exporter of record– Direct exporter bears export legal risks

• Foreign Sales Representative– Agent who does not take title to goods– Contractual express grant of authority – be precise– Exclusivity options– Foreign regulatory issues – term/termination– U.S. export compliance ultimate purchaser issues

Export Distribution NetworkLegal Considerations

• Foreign Distributor – Independent contractor who takes title to goods– Export sales contract– Foreign distribution contract– Exclusivity options– Foreign regulatory issues – term/termination/inventory– U.S. export compliance issues

• Foreign Sales Office/Branch– Foreign regulatory employee issues– Foreign regulatory approvals– Foreign customs issues

Electronic Export Information (EEI) Filing Requirements

It is important to implement an export compliance program.• When does EEI have to be filed?

– Independent contractor who takes title to goods– Individual shipments over $2500 in value– Values determined by HTS# classification, not by line item– Any controlled item has to be filed, despite its value– Other exceptions, see FTR § 30.2(d)(2)– Use the HTS # of your exported items on your EEI

• How to File EEI– Freight forwarder or agent files EEI through Automated Export

System (AES) for a small fee– File EEI yourself through AES

Overview of U.S. Export Regulations and Enforcement

U.S. exports are regulated by several entities.

U.S. Commerce Dept. Bureau of Industry & Security (BIS)• Export Administration Regulations

(EAR)

U.S. State Dept. Directorate of Defense Controls (DDTC)• International Traffic in Arms

Regulations (ITAR)

U.S. Treasury Dept. Office of Foreign Assets Control (OFAC)


EARMost common regulatory regime for U.S. exporters

ITARApplies to items mainly of a military nature and application

OFACProhibits shipments to certain countries, companies and individuals – such prohibited lists should always be consulted


EAR has jurisdiction over several items.

• All items (regardless of their country of origin) in the U.S.

• All U.S. origin items anywhere in the world

• Foreign products with U.S. content exceeding de minimis levels

• Certain foreign products produced directly from using U.S. technology or software


How to determine if your exports are controlled by EAR.


There are consequences to failure to comply with EAR.• Criminal Penalties (“willful violation”)

– Fine - $250,000 and/or 10 years imprisonment for individuals – $1 Million or 5 times the value of the exports involved for firms

• Civil Sanctions (administrative penalties)– Fines - $11,000 per violation– Denial of Export Privileges / Revocation of Export Licenses– Exclusion from practice

Complying with Foreign Regulations

Complying with foreign regulations is just as important as complying with domestic regulations.• Understand compliance issues which pertain to you

– Your industry, products, business model• Analyze specific countries from which your export products

are made– Determine particular compliance requirements

• As the exporter, are you also the importer of record?– Being the importer of record will add compliance obligations that

you would otherwise not have as merely an exporter– DDP INCOTERM shipments or shipments to a foreign branch or

sales office will make you the importer of record

Foreign Non-Tariff Barriers

Customs clearance & tariff classification

Trademark protection

Import licenses/quotas/special duties

Labeling/packaging/marking

Consumer product health & safety

Product & quality standards

Product warranty & specification

Most Common

Next Steps

Having an awareness of legal issues is the key.

Strategically Approach

Legal Issues Execute Solid

Contracts for Exporting

Manage Your Legal Risks

Be Compliant

with Export Regulations


• How do I decide between using a foreign sales representative or a distributor?

• Do agreements need to be in writing? If so, what kind of document is necessary?

• Do I need to review in detail legal documents such as bills of lading or letters of credit?

• Should I register my trademarks in my export markets?• Should I outsource export compliance?• When do I need to use an attorney?

Connectivity

Trade Regulations

& Legal




Getting Ready

Growth



Export University Inc. Export 101

Documents

Transcript of Export University Inc. Export 101