President Barack Obama's National Export Initiative (NEI), instituted in 2010 and designed to double U.S. exports within the next five years, has created quite a stir among American small businesses. Only4% of today's businesses, small and large, engage in international trade, and the 96% of those business not engaged in international trade feel that barrier to entry is high, especially since more risk would be involved with their already shrinking revenues. The idea behind the NEI is to give a shot in the economic arm of the U.S., and create a more export-focused economy.
The Small Business Administration (SBA) has created a campaign to educate small business owners on how to engage in exporting and create a growth strategy for their business. SBA has many U.S. Export Assistance Centers around the country which are ready to assist in providing the tools that the small business needs. However, before diving too deep in the international trade waters, there are some areas which small business owners should carefully consider.
- Parlez-vous? Speaking their language, and their culture, helps. Before entering any market, whatever the geography, you have to know the customer you are targeting. Knowing the customers' needs and wants for the product or service that is being sold is key to any revenue. Since the geography for your customer is global, it would be helpful to speak their language. No one HAS to be fluent in the official language of the target country. If someone wants to market to China, for example, having a basic understanding of some conversational Chinese would help create rapport between you and your potential client. Also,an understanding of the customs and being sensitive to the values of a country is helpful when meeting your potential client. For instance, when meeting with a Saudi Arabian business man, it is best not to offer him an alcoholic drink, since there is a high probability that he is Muslim and Islamic law prohibits consumption of alcohol.
- Learn about your potential markets, especially their politics. Knowing your customer is one thing, but knowing the political environment in your potential customer's country is equally important. Tariffs, quotas, and other trade policies would be something to investigate when looking into another market, so that you have a full picture of the pricing and logistics of products into that country. Political unrest, in some cases, could mean opportunity. The recent unrest in the Middle East has actually created an opportunity for the aluminum industry, by the Gulf State countries looking to build its railway infrastructure.
- Understand any regulations (U.S. or otherwise) that could hinder opportunity. Along with the barrier to trade, a knowledge of the legality of your product or service in your target market is key, and knowledge of those regulations could save you a great deal of "paperwork headaches" here in the U.S. Export controls of products is a way for the U.S. to create a system of national security and enhance foreign policy interests that would protect domestic interests. Industrial sectors, such as IT, would have to adhere to such policies, and even the sending of information via email could be covered by export controls.
- Terms, terms and more terms... documents, documents and more documents. Terms and documents are the unofficial language of the international business. Incoterms, the official terms that were adopted by the International Chamber of Commerce (ICC), are the standards of knowing who is responsible for what in the immediate details of a transaction. New Incoterms were enacted in January 2011, introducing new terms including Delivery at Terminal (DAT), where the seller pays for the delivery of the goods to the point of the destination terminal and the importer pays the rest including customs, inland transport, etc.; and Delivery at Place (DAP), where the seller pays for the delivery of the goods at an address, or place, and other costs such as customs and unloading are billed to the importer. Documents, including the commercial invoice, would need to spell out these terms and show exactly how each cost is broken down. Valuation is so important when creating the invoice. Also, additional documentation may be required, including a Certificate of Origin, Packing List and other inspection certificates. These would all depend on what the customer needs and what that particular country needs when clearing the goods through their customs.
- Get a respected broker or representative who knows their stuff. Having someone working with you who has experience in clearing goods through customs and exporting products into other markets would be key so that there is not many missteps when it comes to getting the job done right. There are many respected customs brokers and freight forwarders in the business who would help you in some of these steps of creating documents, setting up the logistics and arranging the clearances of your product. You can check out the National Customs Broker and Freight Forwarders Association website and find a registered broker/forwarder in your geographic area.
