INTRO TO EXPORTING & IMPORTING

ORIENTATION SEMINAR FOR NEW CLIENTS

Center for International Trade Development Hosted by El Camino College

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2011 LEADING U.S. STATES IN EXPORTING

Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC

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2011 CALIFORNIA’S TOP EXPORT MARKETS

Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC

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2011 CALIFORNIA TOP EXPORT INDUSTRIES

Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC

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2011 U.S. MERCHANDISE TRADE BALANCE

Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC

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2011 U.S. MERCHANDISE TRADE BALANCE

Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC

•  95.54% of the world’s consumers live outside the U.S. •  70% of the world’s purchasing power is located outside the U.S.

Many Companies Make Exportable Products

•  Less than 1% of America’s 30 million companies export •  58% of companies export to only one country •  98% of U.S. exporters are SMEs (but represent less than one-third of the

known export value of U.S. goods’ exports); 96% of California exporters are SMEs (Total 59,543 in 2010) Many Companies Have New-to-Market Export Potential

•  5.1% of California's total private-sector employment is supported by manufacturing exports

•  22.4% of manufacturing workers in California depend on exports for their jobs •  SMEs generated over two-fifths (46%) of California's total exports •  Foreign investment in California supported 4.7% private-industry employment

(567,000 jobs in 2010) California Depends on International Trade and Investment for Jobs

CALIFORNIA’S EXPORT OPPORTUNITY

•  Too Small •  Too Complicated •  Too Risky •  Too Expensive •  Cannot Compete It’s

too Risky

I’m too small

I can’t afford it

Export Fears

It’s too complicated

I Can’t Compete

EXPORT FEARS

•  Export Jobs Receive Higher Wages •  Exporting Increases your Sales to More Markets •  Exporting Reduces Dependence on the U.S. Market •  Source Products Unavailable Domestically •  Increase Sales Volume / Profits •  Adjust for Seasonal Availability •  Source at Lower Cost; More Price Competitive

TRADE BENEFITS

TRADE AND INVESTMENT = JOBS

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EXPORT DEVELOPMENT STAGES

Build Export Capacity Develop Export Markets Make Sales & Get Paid Deliver the Goods

•  Company Goals , Financial Resources , Non-financial Resources , Current Trends and Practices, Production Capacity, and SWOT Analysis

•  Target Market Product Characteristics , Product Packaging, and Product Handling

•  Product Potential Markets, Market Assessments, Your Target Market, and Industry Analysis

•  Pricing Market Price , Pricing Strategy, Unit Price, and Profit

•  Market Entry General Strategies and Promotional Strategies

•  Action Plan Objectives, Tasks, Priorities, Resources , Schedule, and Evaluation

INTERNATIONAL TRADE GROWTH PLAN

Review all Federal, State, County, City and Municipal licenses, permits and other registrations applicable to your business.

DOMESTIC BUSINESS REGISTRATION

•  Has your company received any unsolicited inquiries from foreign firms?

•  Are domestic sales of your product doing reasonably well?

•  Do you have a relatively strong share of the domestic market?

•  Is your product price-competitive in the domestic market?

•  Does your product compare favorably with domestic competitors in features and benefits?

EXPORT READINESS INDICATORS

ACCESS YOUR EXPORT READINESS

•  U.S. Department of Commerce, ExIm, SBA •  State Trade Office •  California Centers for International Trade Development •  Manufacturing Extension Partnerships •  District Export Councils •  World Trade Centers •  Chambers of Commerce •  Foreign Consulates and Trade Commissioners •  LARExC, FTA, LACBFFA, WIT-LA, NASBITE, AAEI •  Service Providers (legal, finance, insurance, shipping) •  Plus many more…

IDENTIFY TRADE ASSISTANCE RESOURCES

FEDERAL, STATE, COUNTY, CITY, NON-PROFIT

•  Export Management Company (EMC) An independent firm which acts as the exclusive export sales department for manufacturers. Income is usually made on commission or retainer basis, however, title of the goods may also be taken whereas a price mark-up is made.

•  Export Trading Company (ETC) An independent agent that takes title of the goods for export and pays the manufacturer directly. Payment is made on a price mark-up, usually 10-15%. This is attractive for the manufacturer as they

avoid risks associated with exporting. •  Job Function

ü  Market research/planning/promotion ü  Find customers abroad ü  Respond to inquires/Issue quotes

•  Main Issues ü  Exclusive/Non-exclusive ü  Territory

ü  Present purchase orders ü  Handle export paperwork

ü  Arrange shipping and financing

ü  Duration

ü  Non-Circumvention

INTERNATIONAL TRADE INTERMEDIARIES

INDIRECT EXPORTING

•  Product/Service Demand (Significant Market Segment) –  Highest Import Volume over past 5 years –  Highest Import Growth over past 5 years

•  No Significant Barriers to Entry •  No or Little Domestic Competition •  Strong U.S. Market Share •  High Receptivity •  Comfort Market •  Infrastructure Available to Finance and Deliver Goods •  Market Research

–  Best Market Reports –  Country Commercial Guides (Chapter Four)

TARGET A FEW SPECIFIC MARKETS

IDENTIFY BEST MARKETS WITH HIGHEST POTENTIAL FOR RETURN

•  Differences That Make A Difference –  Language –  Religion –  Tastes –  Business Practices –  Income Levels –  Product Standards –  Physical Environments –  Legal Requirements

•  Adaptations Worth Considering –  To The Product –  To The Promotional Materials –  To The Packaging

MARKET CONSIDERATIONS

•  Cause for Negotiation Breakdown •  Cultural Etiquette

–  Conversation –  Dress –  Entertaining –  Negotiating

•  Context –  High –  Low

•  Cultural Dimensions –  Power Distance –  Individualism vs. Collectivism –  Masculinity vs. Femininity –  Uncertainty avoidance –  Long-term Orientation

CULTURAL CONSTRUCT VARIANCES

CULTURAL COMPARISON

•  Indirect Exporting –  Hire an EMC/ETC (outsource your export department) –  Technology exchange/license agreement (royalties for

technology sharing and use)

•  Direct Exporting –  Sell directly to end-users –  Sell to a foreign distributor or agent with POA (contractual)

•  Foreign Investment –  Hire staff overseas (manufacture representative) –  Establish joint venture (JV)/strategic alliance –  Establish a branch/subsidiary overseas –  Acquisition

MARKET ENTRY STRATEGY

U.S. COMMERCIAL SERVICE

INTERNATIONAL BUSINESS MARKETING, PROMOTION, AND MATCHMAKING

•  Trade Information Center: 1-800-USA-TRAD(e) •  On-line: Featured U.S. Exporter (FUSE), •  Media Advertisements: Commercial News USA and USA

Export Expo •  Marketing Events: Trade Shows and Mission •  Business Matching Services: International Partner Search

and Gold Key Service and •  Advocacy: Support with public tenders

•  Sales Force •  Sales Performance •  Territorial Coverage •  Companies/Products Represented •  Customer Profile •  Facilities and Equipment •  Localization Capabilities •  Market Development Capabilities •  Industry Knowledge – Supply Chains,

Distribution Channels •  ALWAYS do your due diligence and get a credit report and

check references on serious partners

QUALIFICATION CHECKLISTS

FOREIGN PARTNER SCREENING MECHANISM

Example: Tire repair company best served by distributor already representing and distributing tires (complementary).

 

•  Methods of Payment in International Trade •  Cash-in-Advance •  Letters of Credit •  Documentary Collections •  Open Account •  Consignment •  Export Working Capital Financing •  Government-Guaranteed Export Working Capital

Loan Programs •  Export Credit Insurance •  Export Factoring •  Forfaiting •  Government-Assisted Foreign Buyer Financing •  Government-Backed Agricultural Export Financing •  Foreign Exchange Risk Management

INTERNATIONAL TRADE PAYMENT METHODS

PAYMENT RISK DIAGRAM

FROM THE TRADE FINANCE GUIDE (PAGE THREE)

LETTER OF CREDIT (L/C)

5.  Ship  the  Goods  

1.  Contract  Signed  

   Buyer’s  Bank            (Issuing  Bank)  

11.  R

elease  Docum

ents  

10.  M

ake  Paym

ent  

2.  App

ly  fo

r  L/C  

Importer  (Buyer)  

 

4.  Advise

 L/C  

6.  Sub

mit  Do

cumen

ts  

Seller’s  Bank  (Advising  Bank)  (Confirms  L/C)  

Exporter  (Seller)  

 

8.  Payment  /  Acceptance  7.  Send  the  Documents  

9.  M

ake  Paym

ent  

3.  Issue  the  L/C  

COUNTRY LIMITATION SCHEDULE

HTTP://WWW.EXIM.GOV/TOOLS/COUNTRYLIMITATIONSCHEDULE

International Commercial Terms

International Commercial Terms HTTP://WWW.SEARATES.COM/REFERENCE/INCOTERMS/

REGIONAL TRADE AGREEMENTS OF THE U.S.

The United States has free trade agreements in force with 19 countries: Australia; Bahrain; Canada; Chile; Colombia; Costa Rica; Dominican Republic; El Salvador; Guatemala; Honduras; Israel; Jordan; S. Korea; Mexico; Morocco; Nicaragua; Oman; Panama; Peru; and Singapore.

The United States is also in negotiations of a regional, Asia-Pacific trade agreement, known as the Trans-Pacific Partnership (TPP) Agreement with the objective of shaping a high-standard, broad-based regional pact.

•  Standard Industry Classification (SIC) replaced by NAICS •  North American Industrial Classification System (NAICS) •  U.S. exports codes (Schedule B) are administered by the

U.S. Census Bureau •  U.S. import codes (HTS) are administered by the U.S.

International Trade Commission (USITC) •  First 6 digits are the same worldwide (WTO members);

the last 4 vary

INDUSTRY CLASSIFICATION SYSTEMS

•  28 Chapter •  2801 Heading •  2801.30 Subheading •  2801.30.10 Subheading for Duties (tariff, CVD, ADD) •  2801.30.10.00 Subheading for Statistical Data

THE HARMONIZED SCHEDULE (HS)

•  Export Administration Regulations (EAR), Bureau of Industry & Security, U.S. Department of Commerce –  Deemed Exports –  Anti-boycott –  The Wassenaar Arrangement (Dual Use) –  ECCNs listed in the CCL (EAR99=NLR)

•  International Traffic in Arms Regulations (ITAR), U.S. State Department –  Country Embargos –  United States Munitions List (USML)

•  OFAC Sanctions, U.S. Treasury

•  Foreign Corrupt Practices Act (FCPA), U.S Department of Justice

U.S. EXPORT CONTROLS

HTTP://WWW.BIS.DOC.GOV

CONSOLIDATED SCREENING LIST

HTTP://EXPORT.GOV/ECR/EG_MAIN_023148.ASP

Denied Persons List A list of individuals and entities that have been denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order is prohibited.

Unverified List A list of parties where BIS has been unable to verify the end-user in prior transactions. The presence of a party on this list in a transaction is a “Red Flag” that should be resolved before proceeding with the transaction.

Entity List A list of parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations. The list specifies the license requirements that apply to each listed party. These license requirements are in addition to any license requirements imposed on the transaction by other provisions of the Export Administration Regulations.

Specially Designated Nationals List A list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC). OFAC’s regulations may prohibit a transaction if a party on this list is involved. In addition, the Export Administration Regulations require a license for exports or reexports to any party in any entry on this list that contains any of the suffixes "SDGT", "SDT", "FTO", "IRAQ2" or "NPWMD".

Debarred List A list compiled by the State Department of parties who are barred by §127.7 of the International Traffic in Arms Regulations (ITAR) (22 CFR §127.7) from participating directly or indirectly in the export of defense articles, including technical data or in the furnishing of defense services for which a license or approval is required by the ITAR.

Nonproliferation Sanctions Several lists compiled by the State Department of parties that have been sanctioned under various statutes. The Federal Register notice imposing sanctions on a party states the sanctions that apply to that party. Some of these sanctioned parties are subject to BIS’s license application denial policy described in §744.19 of the EAR (15 CFR §744.19).

COMMON EXPORT DOCUMENTS: Commercial Invoice; Export Packing List; Pro Forma Invoice TRANSPORTATION DOCUMENTS: Airway Bill or Bill of Lading; Electronic Export Information Filing (formerly known as the Shipper’s Export Declaration) EXPORT COMPLIANCE DOCUMENTS: Export Licenses; Destination Control Statement CERTIFICATES OF ORGIN: Generic Certificate of Origin; Certificate of Origin for claiming benefits under Free Trade Agreements; Certificate of Origin for goods not manufactured in the United States http://export.gov/logistics/eg_main_018121.asp

INTERNATIONAL TRADE DOCUMENTATION

OTHER CERTIFICATES FOR SHIPMENTS OF SPECIFIC GOODS: ATA CARNET/Temporary shipment certificate; Certificate of Analysis; Certificate of Free Sale; Dangerous Goods Certificate; Fisheries Certificate; Fumigation Certificate; Halal Certificate; Health Certificate; Ingredients Certificate; Inspection Certificate; Pre-Shipment Inspections; Insurance Certificate; Phytosanitary Certificate; Radiation Certificate; Other (Product-Specific) Certificates; Weight Certificate OTHER EXPORT-RELATED DOCUMENTS: Consular Invoice; Canadian Customs Invoice; Dock Receipt and Warehouse Receipt; Import License; ISPM 15 (Wood Packaging) Marking; Shipper’s Letter of Instruction TEMPORARY SHIPMENT DOCUMENTS: ATA CARNET/Temporary shipment certificate; Customs Certificate of Registration; Transporting Goods by Truck to Canada

•  Freight Forwarder vs. Customs Broker •  Modes of Transportation

–  Electronic –  Land (Truck or Rail) –  Water

•  Lower cost, slow movement •  Majority of trade

–  Air •  Higher cost, fast movement •  Higher value goods

•  Insure Cargo •  Book, Track, & Trace Cargo •  Customs Clearance

TRANSPORTING THE GOODS

REASONABLE CARE CHECKLIST

HTTP://WWW.CBP.GOV/LINKHANDLER/CGOV/TRADE/LEGAL/INFORMED_COMPLIANCE_PUBS/ICP021.CTT/ICP021.PDF

•  Established reliable procedures to ensure you provide a correct description of your merchandise to Customs?

•  Established reliable procedures to ensure you provide a correct tariff classification of your merchandise to Customs?

•  Established reliable procedures to ensure you provide a correct valuation of your merchandise to Customs?

•  Consulted a Customs "expert" (eg., customs broker, lawyer, or accountant) to assist in description, classification, and valuation? Have you given them full, complete, and accurate information on all the facts and circumstances surrounding the import?

•  Consulted the Harmonized Tariff Schedule, the Explanatory Notes, Customs publications, court cases, and Customs rulings to assist in description, classification, and valuation?

•  Obtained a Customs ruling on your merchandise, and, if so, have you established reliable procedures to ensure you have followed that ruling?

•  Established reliable procedures to ensure that errors are found, corrected, Customs is apprised in a timely manner?

FOREIGN TRADE ZONES

HTTP://IA.ITA.DOC.GOV/FTZPAGE/LETTERS/FTZLIST-MAP.HTML#CALIFORNIA

•  Cost savings (tax relief, lower wage costs) •  Add value to meet Rules of Origin regulations •  Tariff shifts can reduce customs duties (inverted tariffs) •  Duty exemption on re-exports (don’t have to file duty

drawbacks) •  Duty elimination on unused merchandise (waste, scrap,

and yield loss) •  Weekly entry filing (vs. transactional filings) to save on

merchandise processing fees •  Defer customs duties (use as a warehouse) until you have

a buyer

NAFTA Regional Value Content (RVC) Formulas

HTTP://IA.ITA.DOC.GOV/FTZPAGE/LETTERS/FTZLIST-MAP.HTML#CALIFORNIA

Transaction Value: 60% minimum

RVC = [(TV – VNM) / TV] x 100

Net Cost: 50% minimum

RVC = [(NC – VNM) / NC] x 100

TV=Transaction Value (amount paid or payable for a good) NC=Net Cost (amount to produce a good) VNM=Value of Non‐Originating Material

Los Angeles/Long Beach Seaport (Port Code: 2704) 301 E. Ocean Blvd., Suite 1400 Long Beach, CA 90802 General Phone: (562) 366-5555 Public Information Line: (562) 366-5454 HTTP://WWW.CBP.GOV A Service Port is a CBP location that has a full range of cargo processing functions, including inspections, entry, collections, and verification (19 CFR 101.1).

CUSTOMS AND BORDER PROTECTION

http://www.cbp.gov/xp/cgov/toolbox/contacts/ports/ca/2704.xml

Los Angeles International Airport-Cargo Operations (Port Code: 2720) 11099 South La Cienega Blvd. Los Angeles, CA 90045 General Phone: (310) 215-2618

Bronwen E. Madden Acting Director

13430 Hawthorne Boulevard Hawthorne, CA 90250 USA Appointment Line: (310) 973-3177 Phone: (310) 973-3173 Fax: (310) 973-3132 bmadden@elcamino.edu http://elcaminocitd.org

CENTER FOR INTERNATIONAL TRADE DEVELOPMENT

HOSTED BY EL CAMINO COLLEGE DIVISION OF COMMUNITY ADVANCEMENT