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July/August 2007 — Vol. 85, No. 6

COVER STORY

Where to find help with

Getting into exporting

Related articles:

 

Interested in exporting but intimidated by the logistics? No need to be daunted, say exporting experts.

“Don’t shy away from exporting — it’s getting easier and easier to do,” says Jim Kask, a partner at Glastonbury-based Haggett Longobardi, a division of J.H. Cohn LLP, the largest accounting and consulting firm in the Northeast. “The way the global community has opened up, it’s really possible for even very small companies to export.”

In fact, more than two-thirds of all U.S. exporters have fewer than 20 employees, and small and midsize firms account for 97% of our nation’s exporting businesses, according to export.gov, the federal government’s international trade portal.

Exporting is “becoming logistically simple because of the Internet and other technologies,” says Kask, adding that “free trade agreements in Asia, Europe and North America have been helping,” too.

That’s not to say exporting is no different from selling products or services domestically. You do need to heed trade regulations of the United States and the destination country, and use somewhat different approaches to selling and getting paid in overseas markets. But there are many resources you can tap for help with getting into exporting.

A variety of private-sector businesses, such as consultants, financial advisers, law firms, banks and freight forwarders, offer export services. A listing of companies supporting international trade appears on CBIA’s Web site.

“Connecticut businesses can also access a wide array of state and federal programs to help them become more effective and competitive globally,” says CBIA Vice President and Economist Peter Gioia.

The U.S. Department of Commerce (USDOC) and the Connecticut Department of Economic and Community Development (DECD) collaborate with each other to link their client companies to appropriate assistance.

CBIA is working with both agencies to let state businesses know about these programs. A survey CBIA conducted last January showed that 59% of the responding companies were unaware of the state and federal export services available to small-to-midsize firms. In the survey, sponsored by the DECD and Haggett Longobardi, respondents said the type of services that would most help them enter foreign markets would be manufacturing-specific market research (38%) and international market research (33%).

Researching your markets

Market research, in fact, is how a business should begin exploring the possibility of exporting.

Kask says, “First, they need to understand the market their product has. Can they compete on pricing or innovation? Where in the world can they export?”

Carl Jacobsen, director of the USDOC’s Export Assistance Center in Middletown, advises, “If you’re just starting out with exporting, it’s best to start with Canada, where language isn’t a problem and regulations are fairly straightforward. The same goes for England, Ireland, Australia and New Zealand.”

The following resources can help you pinpoint appropriate foreign markets:

Export.gov — Besides providing an overview of export basics, this site gives you market research and trade leads from the U.S. Commercial Service. Through the site, you can access a market research library of more than 100,000 industry- and country-specific reports. The library includes country commercial guides, industry overviews, market updates, reports on Multilateral Development Banks (institutions that provide financial support and professional advice for economic and social development activities in developing countries), best markets, and industry/regional reports.

WISERTrade — This online database of detailed statistics on international markets is compiled by the World Institute for Strategic Economic Research, the leading provider of international trade statistics in the United States. WISERTrade provides companies with information on trade flows throughout the world by tracking and monitoring more than 10,000 specific products every month. Through a partnership with CBIA, the database is available on CBIA’s Web site exclusively for member companies by subscription.

WISERTrade can evaluate products at six-digit or 10-digit commodity or industry codes. This can enable you to target your product for sale in countries where that specific product is in demand. “The WISERTrade database takes much of the risk out of the marketing of products, because companies know ahead of time which markets are indeed seeking to purchase their products,” says Dr. Stephen P. Coelen, managing partner of WISER LLC.

WISERTrade also has data on exports of all U.S. states, which can help you understand where your domestic competitors are exporting their products. The database can give you information to determine whether you are in the right markets compared with your national counterparts, or whether you have competitive prices, quality and sales mechanisms.

USDOC’s Middletown Export Assistance Center — The center provides a variety of services to help Connecticut exporters. Jacobsen, the center’s director, recommends contacting his office by phone at 860-638-6950, rather than by e-mail. “When [people] e-mail, they invariably ask a question we can’t answer until we first ask them, ‘What are you trying to do?’ Our office mostly helps companies market — for example, finding a distributor in a foreign market who can handle their products long term,” he says.

Legalities and technicalities

Once you have decided where you would like to export, you will need to consider certain financial, legal and logistical issues for which you will probably want to consult with appropriate experts.

For example, “We’ll walk [a client] through the process from documentation through getting registered with the government if necessary,” says Haggett Longobardi’s Kask. The financial consulting firm also helps exporters determine how profits can be generated; understand what kind of tax, or “duty,” applies; and file the proper tax forms.

Other issues a consultant or attorney can help you with include:

Government regulations — “Commercial products are regulated under the Commerce Department, and defense products under the Defense Department. If it’s a defense product, you may need an export license,” says attorney Donald Borod, a partner with the law firm McCarter & English in Hartford. And some government rules bar exports to certain countries, such as Cuba. Country restrictions would also apply to service exports, he says.

How you will sell overseas — “A company might want to set up a different internal structure to handle their export business,” says Kask. “For example, let’s say a country has a different standard than the U.S. for a particular product. You might need to design the product differently, and you might not want to do that through your domestic business.”

You will need a different sales approach, too. According to attorney Borod, companies just getting into exporting may be tempted to use their existing salespeople to sell internationally. “But that usually is not practical,” he says. “It’s better to use a sales representative or distributor in the country you’re exporting to. A sales representative is an independent company that looks for potential customers for you. They contact the prospects and if any are interested, they bring that information to you, and you decide if you want to sell to them. The sales rep is paid by a commission if you sell to the prospect. A distributor buys your product, usually at a discount off the retail price, and then resells the product at whatever price it decides to set.”

Overseas customers might also contact you directly through your Web site. In that case, the USDOC’s Jacobsen recommends having them contact you via fax or First Class mail, rather than by e-mail. A spam blocker (assuming you have one) could winnow out foreign e-mail messages that might be from potential customers, he points out.

The contract, or sales agreement — Certain types of provisions would be different for exports than for domestic sales, Borod says.

Intellectual property issues — To sell a trademarked product in a foreign country, you might want to register the trademark there, Borod advises. And if your product is patented, consider getting a patent in the foreign country. Patents are territorial, and a U.S. patent applies only in the United States, he says.

Expanding existing exports — For companies that want to expand their exports, law firms like McCarter & English also help with strategic issues, such as licensing their products to a foreign company, entering into a joint venture with a foreign company, acquiring a foreign company, or setting up overseas offices, says Borod. For these types of issues, you would need an attorney here as well as in the foreign country. “We have established relationships with several foreign counsels,” he says.

Financing foreign trade

The USDOC’s Jacobsen says, “Typically, the two biggest questions companies calling us want to know are: ‘How do we get paid?’ and ‘Where can I get financing?’”
Both topics are discussed in the article Get the payment terms and the cash you need to go global.

To obtain financing, Jacobsen suggests contacting one of the Connecticut banks that have full-service export divisions: Bank of America, JPMorgan, People’s United Bank (formerly People’s Bank), Sovereign, TD Banknorth, Wachovia and Webster. He also notes that “Many local banks have relationships with one of the full-service banks,” he adds.

Getting your goods from here to there

To ship your products outside the country, Jacobsen recommends dealing with a fully licensed international freight forwarder. “There are a number of them located near Bradley Airport,” he says, noting that “most exports from Connecticut go by air.”

Large freight-forwarding companies, he says, “can offer everything from picking up your goods, packing them for transport, shipping them and preparing necessary documentation. They see your goods through customs on the other side so you, the seller, can get paid. The last thing you want is to find out your goods are stuck in customs or have been seized.”

Competitive necessity

Considering the benefits of exporting, the fact that it’s becoming easier to do, and the availability of helpful resources, there seems little reason to hold back.

As CBIA’s Gioia notes, “International trade has become a vital part of the success of many Connecticut companies. In many cases it’s a competitive necessity, as businesses follow their clients overseas and generate new sales opportunities.”
Kask agrees, saying, “To be competitive today, you have to look outside your neighborhood to market your products or services. It’s nothing to be afraid of.”

 

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