Why Exporting Is Easier Than Ever
By Patty Brewer
As the U.S. Commercial Service states in “A Basic Guide to Exporting” (Guide_To_Exporting.pdf (trade.gov), its easier than ever for a small exporter to sell its goods around the world. The challenge is mitigating the risk of entering the international market. Luck favors the prepared, so take a few preparatory steps to understand exporting: begin a self-assessment, investigate export regulations, start market research, determine packaging and documentation, review logistics, know the numbers, and write the plan. Most importantly, there is a network of support to provide guidance through each step.
Step 1: Conduct a Self-Assessment
Begin by conducting a self-assessment to gauge if the small business is ready. Is the company ownership committed and do they recognize the investment required? What is the expected return on investment? Are changes to product or packaging needed? A complete export readiness assessment can be found here: Exporter Assessments (trade.gov). Honest answers to these questions will help the small business evaluate if they are ready to capitalize on the export market.
Step 2: Confirm Export Regulations and Licensing
After the assessment, confirm that the product can be exported and decide if an export license is needed. Connect with the Bureau of Industry and Security (BIS Website (doc.gov) and watch this video about export controls and regulations (https://youtu.be/Ihy5wPTITOM).
Step 3: Conduct Market Research
Next, do some market research and answer the four W’s – who, what, when, and where. Who and where are your customers, what do they want, and when do they want it? If the product is sunscreen or skis, product seasonality mandates timing on store shelves. The U.S. Commercial Service can help analyze market data, research foreign companies, and schedule introductory meetings through their Gold Key Service (Gold Key Service (trade.gov).
Step 4: Evaluate Packaging and Documentation Requirements
Now that market research is underway, look at packaging and documentation. Will packaging need to be translated or adhere to foreign labeling requirements? Will packaging be durable enough for several weeks in transit? Does your package protect against moisture, temperature, and impact? Are the packaging materials allowed in the buyer’s country?
Step 5: Manage Documentation and Logistics
The small business needs to collect various documents including invoices and shipping documents. The invoice defines payment terms such as cash-in-advance, partial payments and milestones for payment, payment at invoice, or payment upon receipt of goods. Shipping documents include bills of lading, inspection certificates, and dock receipts. The buyer’s country might also require certificates of origin or conformity.
At this point, consider working with a freight forwarder. The documentation and logistics of moving goods from the U.S. to a foreign port can be intricate and demand accuracy. Some freight forwarders offer a spectrum of services from arranging transportation to coordinating door-to-door shipment details. Your freight forwarder should be licensed by the U.S. government.
Step 6: Understand Incoterms
Regardless of whether the small business uses a freight forwarder or coordinates shipment, knowledge of incoterms is key. Incoterms are internationally accepted terms that spell out responsibilities for various shipment costs and details. Two examples of incoterms are Delivery Duty Paid (DDP) and Ex Works (EXW). DDP states that it’s the seller’s obligation to clear goods in the buyer’s country and pay any taxes. For EXW, the seller will provide goods at a specific location; the buyer is responsible for all other obligations, risks, and costs beyond the specific location.
Step 7: Develop Financial Projections
The next step is developing financial projections and comparing those projection to the previous 12-months of activity. Understanding exporting revenue, expenses, and potential profit will help the small business quantify the value of selling to overseas buyers. Furthermore, if financing is needed, projections will be the lender’s first request.
Step 8: Create an Export Business Plan
Finally, the Export Business Plan should include projections. The plan should also include a narrative that describes the business, the goods exported, and the buyers’ countries. A new exporter should review of the competition, show market analysis, discuss trade barriers, product or packaging modifications needed, and any distribution agreements or on-going negotiations.
With 96% of the world’s consumers outside the U.S., exporting can be very rewarding but there are risks. Do the research and face the challenges head-on.
Patty Brewer is an Export Finance Manager with the SBA’s Office of International Trade. Her territory includes Colorado, Montana, Utah, and Wyoming. She can be reached at 720-556-4664 or [email protected].