Many exporters fail because they are unable to deliver their products in a timely and reliable manner. We recommend that you consider the following factors before selecting your freight forwarder:
- Location and operating hours of their local office. Visit their office often. If they are located nearby, you will save on communication and travel expenses. Make certain that they will be accessible evenings and weekends in case of emergencies.
- Location of branch offices. This will be especially important if you have to locate an export shipment quickly. If they have worldwide branches and affiliates, they will be able to trace your misrouted or delayed shipments from both ends of the transaction without involving third parties.
- Make sure they are a full-service forwarder. Can they handle ocean shipments, air shipments and container consolidation to reduce transport costs? Could they handle importing? Check their references to make certain they can process your shipping documents correctly and efficiently.
- Check our directory of Freight Forwarders and Shippers in Idaho.
The U.S. Commercial Service keeps and updated list of FTA’s HERE.
As of January 1, 2008, all tariffs and quotas were eliminated on U.S. exports to Mexico and Canada under the North American Free Trade Agreement (NAFTA).
The NAFTA provides coverage to services with the exception of aviation transport, maritime, and basic telecommunications. The agreement also provides intellectual property rights protection in a variety of areas including patent, trademark, and copyrighted material.
The government procurement provisions of the NAFTA apply not only to goods but to contracts for services and construction at the federal level. Additionally, U.S. investors are guaranteed equal treatment to domestic investors in Mexico and Canada. Mexico and Canada have very strong ties to the U.S.and they are great markets to start exporting due to their relative stability and familiarity. More information HERE.
While circumstances vary by product, price and level of expertise, it would be unusual for a U.S. company to earn a profit after one year of exporting. Most U.S. companies do not make a profit until they have been exporting for at least three years. There is an unavoidable learning curve involved in exporting. If a company does earn profits in the first or second year, we recommend that they reinvest the money to increase future export sales, profits and local market share. Few companies, in the United States or elsewhere, can become successful exporters and moneymakers unless they are in the international market for the long term.
The U.S. Foreign Corrupt Practices Act of 1977 ("FCPA" or the "Act") prohibits U.S. companies, their subsidiaries, as well as their officers, directors, employees, and agents from bribing "foreign officials" and also requires U.S. companies that issue debt or equity to maintain internal accounting controls and to keep books and records that accurately reflect all transactions.
Most companies that have not succeeded in exporting, regardless of their target market, product or service, have made one, or possibly several of the following ten mistakes:
- Failed to develop an international marketing plan before beginning to export
- Lacked total commitment from top management in the initial stages of exporting
- Selected overseas representatives too quickly without thorough investigation
- Chased orders around the world instead of using a systematic marketing plan
- Neglected new export customers when their domestic market was booming
- Failed to treat international and domestic representatives on an equal basis
- Refused to modify products to meet foreign regulations and local preferences
- Did not print sales, service and warranty messages in local languages
- Refused to use export management companies (EMC) in less promising markets
- Failed to consider licensing or joint venture agreements in more restrictive markets
Unless your products are highly technical, unique or modified at your customer's request, eliminate as many domestic costs as you can from your export ex factory (works) price and then add on your estimated costs to export and your profit margin.
One of the most common mistakes made in export pricing is the inclusion of domestic costs that do not apply to the foreign buyer. A prime example of inflated export pricing is the inclusion of domestic sales and marketing costs for advertising, promotion, commissions, company vehicles, expense accounts, etc. If you were the foreign buyer, would you want to pay the seller a second time for costs that have nothing to do with your transaction, or doing business in your country?
Once you have eliminated as many domestic costs as you can from your standard ex factory (works) price, then add on estimated costs for product modifications, special packaging, export administration, international market research, foreign travel, training, etc. Remember that your standard export ex factory (works) price will be increased by your customer's costs for transport, insurance, import duties, and a mark-up percentage for their cost of doing business and their profit margin.
There are four basic types of export sales representatives:
- Commissioned Export Sales Agents (often referred to as export brokers)
- Export Management Companies (EMCs)
- Export Trading Companies (ETCs)
- Full Stocking Distributors.
Before you decide which types of export sales representatives you will use, we suggest that you ask yourself the following five questions:
- Through what channels are similar products being sold in your export markets?
- How much capital do you have and what financial risks are you willing to assume?
- What degree of control do you want to retain over the marketing of your products?
- When do you want your representatives to take title and physical possession of your products?
- When, how and from who do you want to receive payment for your export sales?
**Please note that there are no regulations for export management companies, so before hiring someone be sure to check their credentials and get advice before signing legal contracts.
While trade barriers and unfair practices take many forms, the most common examples are listed below:
- Intellectual property infringement - including copyright, patent and trademarks.
- Customs procedures that are not uniformly applied.
- Lack of competitive bidding for foreign government tenders.
- The application of direct or indirect subsidies by a foreign government in favor of domestic suppliers.
- Burdensome certification and testing requirements that are not required by domestic manufacturers.
- Influence peddling - A corporate entity or country is interfering with fair trade practices at your expense.
- Bribery, corruption and requests for payoffs - When foreign bribery prevents you from competing fairly on the basis of price, quality or service.
If you feel your company’s exports or foreign bids have been, or may be adversely affected by a trade barrier or unfair business practice, you may file a complaint electronically with the Trade Compliance Center within the International Trade Administration.
For more information click HERE
A freight forwarder will make arrangements for and expedite shipments to overseas destinations. Your freight forwarder should perform these services on your behalf:
- Act as your agent per your power of attorney to transport your products to the foreign port of import and, if requested by you, directly to the importer’s location in the foreign market.
- Prepare and examine shipping documents for accuracy, completeness and compliance with the legal requirements of importing countries.
- Distribute international shipping documents and, if requested by you, submit them directly to your bank for collection and deposit to your account.
- Act as your "Customhouse Broker" per your power of attorney and arrange for clearance of your import shipments through the designated port of entry.
It can be costly to appoint an export sales representative without visiting their country and observing their operation firsthand. It is not especially difficult to create a favorable (but false) impression during a well-planned overseas visit, but it is an entirely different matter to sustain that false image after you have had the opportunity to speak with their employees, customers, bankers and local suppliers.
Do not allow potential export sales representatives to select ALL of the people you will be meeting. This would be like allowing the used car salesman to select the mechanic who will be evaluating the vehicle you would like to buy. The outcome is predetermined. Select a few individuals and organizations yourself, and meet with them away from your host's facility, where discussions will tend to be more informal and candid.
Some exporters, especially those with limited funds, forgo regular visits to their export markets to conserve short-term operating capital. This is a potentially expensive policy. We strongly recommend that exporters spend the money to travel to their foreign markets on a systematic basis. The most important factor in successful exporting is developing and sustaining strong personal relationships with overseas representatives. Letters, faxes, and telephone calls are no substitute for personal contact in foreign trade, especially when you need a special favor or help in a difficult situation.
Not all exports require a license. In fact, a relatively small percentage of all U.S. export transactions require licenses from the U.S. government. Licensing determinations are made on individual transactions, not just the product. However, the characteristics of your product will determine if you need a license for a particular transaction.
The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce is responsible for licensing products that are “dual-use,” or have both commercial and military or proliferation applications. The first step to establishing whether a dual-use product requires a license is to find the product’s Export Control Classification Number (ECCN) on the Commerce Control List (CCL).
The Census Bureau sponsors a free online reference tool called the Schedule B Search Engine that can be used to classify your products.
Some of the common government-required forms of documentation are listed below. The seller normally prepares his or her own commercial documents and the freight forwarder normally prepares the transportation documents. Some freight forwarders will do all the paperwork for you.
Automated Export System:
The Automated Export System (AES) collects information electronically, edited immediately, and errors are detected and corrected at the time of filing. AES is a nationwide system operational at all ports and for all methods of transportation. It was designed to assure compliance with and enforcement of laws relating to exporting, improve trade statistics, reduce duplicate reporting to multiple agencies, and improve customer service. For more detailed information, please visit: www.cbp.gov/xp/cgov/trade/automated/aes/easy_steps.xml or www.aesdirect.gov.
Bill of Lading:
A bill of lading is a contract between the owner of the goods and the carrier. There are two types: a straight bill of lading, which is non-negotiable, and the negotiable/shipper’s order bill of lading, which can be bought, sold or traded while goods are in transit and is used for letter-of-credit transactions. The customer usually needs a copy as proof of ownership to take possession of the goods.
Certificate of Origin:
The Certificate of Origin is only required by some countries. In many cases, a statement of origin printed on company letterhead will suffice (download sample certificate or see Sample with explanation). Special certificates are needed for countries with which the United States has special trade agreements, such as Mexico, Canada and Israel.
A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by governments to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, number of copies, language to be used, and other characteristics (see Sample).
A consular invoice is required in some countries; it describes the shipment of goods and shows information such as the consignor, consignee, and value of the shipment. If required, copies are available from the destination country's Embassy or Consulate in the U.S.
Destination Control Statement:
This statement appears on the commercial invoice, ocean or airway bill of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to certain destinations.
Export Packing List:
An export packing list itemizes the material in each individual package, and shows the individual net, legal, tare and gross weights in U.S. and metric values. Package markings should be shown along with the shipper’s and buyer’s references. The packing list is attached to the outside of the package in a clearly marked waterproof envelope. The list can be used to determine the total shipment weight and whether the correct cargo is being shipped. Customs officials may use it to check the cargo at inspection points.
Some purchasers and countries may require a certificate of inspection attesting to the specifications of the goods shipped, usually performed by a third party and obtained from independent testing organizations.
Used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit (see Sample). These can be obtained from your freight forwarder.
Incoterms are 11 standardized definitions of commonly used shipping and trade terms that cover issues such as control of goods and financial responsibilities such as payment of cargo insurance and freight. Incoterms provide traders with a common set of rules outlining each party’s obligations and liability for the product, thus reducing misunderstandings. To use the terms correctly, trade practitioners should consult the ICC for the complete, authorized Incoterm definitions. For helpful documents concerning Incoterms, see the MIQ Logistics – Incoterms 2011. What they do:Incoterms inform the sales contract by defining the respective obligations, cost and risks involved in the delivery of goods from the seller to the buyer.