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It has been a good year for businesses that are expanding the sale of their products and services to foreign markets. This past spring, the Export-Import Bank of the United States reported that U.S. exports rose 16.7% in the first quarter. Small business export loan authorizations increased by half a billion dollars to $2.3 billion during the first half of the fiscal year that began in October 2009, marking an increase of 28% over the first year of FY2009.
President Barack Obama has set a lofty goal of doubling U.S. exports in the next five years and the administration wants small- and medium-sized enterprises (SMEs) to play a significant role in that effort.
According to Christina Sevilla, director for Intergovernmental Affairs and Public Liaison at the Office of the U.S. Trade Representative (USTR), SMEs that export grow faster, add jobs faster, and pay higher wages than sectors that focus only on domestic opportunities. But a majority of SMEs that export goods and services are what USTR calls “three ones”– only one in 100 across the country export and they export only one product or service to only one foreign market.
“If we could get the other 99 thinking about how they can sell their goods and services overseas as well, and get the one currently involved in international trade to go from one product or service to two or three abroad, and if you can go from one foreign customer to two or more, it will make a big bottom line difference on Main Street,” Sevilla said.
So, where do businesses that want to expand their export operations begin? Exactly where they started in the first place, advises Sharon Freeman, president of the Washington, D.C.-based consulting firm, All American Small Business Exporting Association (AASBEA) and author of Exporting, Importing and E-Commerce: A ‘How To’ Guide for Minority, Immigrant, and Women-Owned Firms.
“It’s just a new cast of characters, which does require some vetting, but all of the processes involved are the same,” said Freeman. What’s most important, she adds, is having the necessary export working capital and insurance to make sure that the buyers are sound and don’t default on any sales.
Her most important advice to entrepreneurs wanting to expand their export efforts is to take advantage of the literally billions of dollars the government invests each year in helping them.
The Department of Commerce produces Country Commercial Guides that provide information about the best prospects for selling specific goods to certain markets. So, for example, a country that recently received a loan from the World Bank to retrofit its telecommunications system and is therefore in the market for buying a lot of related products, would be included as a good prospect.
“Utilize this free source where all of the market analysis has been done for you,” Freeman advises.
It’s also important to be aware of countries that pose a risk. The Export-Import Bank does analyses of public and private countries and won’t provide support or insurance for sales to countries that present high levels of risk.
“Let’s say you want to sell something to a country and the banks says it won’t provide coverage over the medium term, which is any time over 12 months, then it’s a risk,” said Freeman. The Country Limitation Schedule is published on the bank’s website.
The U.S. Commercial Service offers a Gold Key Matching Service, to help entrepreneurs locate and screen prospective trade partners, including agents, distributors and sales representatives. The services include customized market and industry briefings with trade specialists, market research, appointments with prospective trade partners in key industry sectors, post-meeting debriefing with trade specialists and assistance in developing appropriate follow-up strategies, and help with travel, accommodations, interpreter service, and clerical support.
Sevilla recommends contacting the U.S. embassies in foreign countries. “They have commercial officers who advocate for our companies, especially SMEs. It’s almost like having a foreign sales force to assist them,” she said. In addition, business owners should sign up for USTR’s electronic newsletter, Trade Talk, to learn about new market opportunities.
Top 10 Do’s and Don’ts of International Trade
- Take international trade classes at the college level
- Visit trade shows and trade missions. See http://www.tsnn.com
- Join an international trade association specializing in your business
- Personally visit your offshore suppliers (or customers)
- Take advantage of online resources such as http://www.sba.gov/oit
- Inspect and approve merchandise before it is shipped
- Consider hiring an international trade consultant
- Become personally familiar with all monetary transactions
- Use a trade lawyer for agent and distributor agreements and licensing requirements
- To begin, start on a very small scale
- Investigate the potential opportunities and benefits of international trade
- Rely on a single source of supply (or customer)
- Have an understanding of intellectual property rights
- Have an understanding of import/export financing
- Learn how your best competitors are handling international trade
- Provide dispute settlement provisions
- Make assumptions as to vendor’s compliance with your specifications
- Check out your suppliers/customers before establishing relationship
- Rely on handshake agreements
- Rely solely on others including employees for importing/exporting expertise