Q: Why should I export?
Answer: The vast majority of the world’s consumers live outside your country. If you want to grow your business, exporting may be the best way to do it.
There are however numerous other reasons to consider exporting beyond reaching new markets and increasing sales and profits:
To enable business growth: Exporting as a process is in many ways easier than it has ever been, enabling you to grow without placing undue strain on your management capabilities.
To protect against foreign competitive forces: As trade policies in the USA, Ireland and Canada are liberal, this means it is relatively easy for foreign competitors to move into your territory. In this case the best defense is a good offense: because the competition now or one day will be in your backyard, you need to be in theirs.
To make full use of your production capacity: When your domestic market is in recession, usually there is growth in some other part of the world, providing you with opportunities when conditions are difficult at home. Under certain conditions this can increase gross margins over what you receive in your home market.
To increase competitiveness: Exporting can make your company and its products and services more competitive in every market where you do business.
To help improve product and service quality: Exporting can improve product and service quality by delivering to you a rich stream of information, knowledge and experience that will make you a better leader and marketer.
Q: What should I consider when making the decision to begin exporting and how do I begin?
Answer: To answer this question in an objective manner, an SME firstly needs to ask itself the following practical questions:
What kind of commitment is reasonable to assess whether exporting is right for me? Time is a precious commodity for all of us and developing international sales will take time, and that means time away from doing other things within the business.
How much time will depend on whether your focus is:
- generating more international sales through your website
- selling to an intermediary in your country who then sells your product to the ultimate buyer
- finding distributors in another country
- attending trade shows
- or some combination of these and other possible strategies
Time is a function of persistence and patience and you will need both to be a successful exporter, however success is defined. International sales won’t happen overnight. It will take time to develop the procedural expertise within your company, and World Port Global and other resources can make the acquisition of this expertise as efficient as possible. It is important to remember that when it comes to the time commitments related to exporting:
- It will take time to find buyers
- It will take time to modify your product and packaging if needed for access to some markets
- It will take time to manage relationships with customers from other countries and cultures
If you are not willing to expend this effort, then exporting, aside from passively filling the random occasional order, is probably not for you.
Q: Am I prepared to make the commitment needed to become a successful exporter?
Answer: Starting out, a company may aim to make a small number of sales to one country and then expand as experience is gained. If you are already making sales to a buyer in one county because that buyer contacted you, then you might aim to find additional buyers in that country, or find new buyers in a second country.
If you are willing to expend time, effort, and funds to get started, it is recommended to
Write a short written plan: A good first step is to prepare a short written plan that includes
- your goals
- a statement of why your product and service will appeal to foreign buyers
- the expertise you have and that which you will need to acquire
- a list of action steps you will take within a certain timeframe
- any estimated costs associated with the steps
Q: What is involved in a typical export process?
(a) Feasibility study:
- Review performance in the domestic market
- Appraise your companies’ capabilities and resources
- Evaluate the demographics and social and economic environments in the target markets
- Make a decision on target markets
(b) Plan to enter the foreign market:
- Ensure correct market research of the market/industry
- Formulate strategy to enter the target market
- Ensure compliance with the licensing laws, standards and certification obligations of the new market
- Become aware of tariffs, taxes, quotas, duties and other non-tariff barriers
- (c) Implementation:
- Establish what form of distribution is to be used
- Determine the international marketing plan
- Identify sales reps or other sales methods
- Agree on payment terms and currency for transactions
- Ensure paperwork is up to date
- Ensure you have a transit insurance policy and one for credit insurance if required
For the above process it is assumed that a price for your goods has been settled on
Note also that export licenses are required for a small percentage of all goods traded, usually involving very sophisticated technology and products that can be used for military purposes.
Q: What do buyers look for when determining the purchase of a product?
Buyers internationally look at the 3 ‘P’s, namely “Product”, “Price” and “Performance”
- Guarantees and Quality Assurance
- Technical Specifications
- Drawings and Design
- Intellectual Property considerations
- Environmental aspects
- Labeling, marking and packaging
- Escalation clause, if any
- Terms of Payment
- Delivery schedules
- Continuity of supplies
- Transportation arrangements
- Spares and after sales service
Q: What is a freight forwarder and how should an export/importer select one?
Freight forwarders are agents that organise the land, sea and air transportation of goods. They ensure all the documentation and procedural formalities involved in custom and post clearance are completed on behalf of the shipper and they may arrange for warehousing of cargo before shipment of export cargo also.
Freight forwarders also assist the exporter in selecting economic shipping routes, arranging packaging and marking of shipments, preparing shipping and regulatory documents, delivery of goods to carriers, collecting transport documents, arranging insurance and processing claims, booking shipping space and providing advice on the relative costing of sending goods by sea and air.
There are different ways of selecting a freight forwarder to assist you with your international shipments, either importing or exporting. You can call the local World Trade Centre for references and you can speak with other companies that you know to be active exporters or importers.
In the U.S., there is an Association of Custom Brokers and Freight Forwarders of America, and they will be glad to give you referrals from their membership base of over 800 companies. They also have regional chapters. http://www.ncbfaa.org/
In Ireland, the Irish International Freight Forwarders Association (IIFA) represents over 100 forwarders and may give you referrals from their membership base.
The International Federation of Freight Forwarders Associations (FIATA) is an international resource with an online membership directory where you can find freight forwarders and customs brokers worldwide. http://fiata.com/
Q: What is the best way to ship products?
This depends on what you are shipping, your needs and your preferences. All the transportation methods have some advantages and disadvantages. Price, delivery deadlines and special needs of the product are factors to bear in mind. The main transportation methods are:
– Maritime transportation:
This is slow and sometimes it is not the most convenient method when transporting perishable goods, goods that have a high value relative to weight and/or volume, or if it is an urgent delivery. Rates will vary depending on whether refrigeration is required or whether time is not a factor and you can choose slower, less direct transit times at lower cost.
– Air transportation:
This is a secure and very fast method which usually needs little packaging, yet is usually the most expensive method. Airfreight is usually reserved for high value, time sensitive products and important documents. By weight it is the most expensive mode of transport. Although many SME’s do not even consider air freight as it is more expensive, it often can be highly cost effective for transporting high value/low volume goods or technology-based products, including software.
– Road transportation:
Trucking may be the best option when moving from market to market within a large landmass where road links are good, such as within North America and Europe. Road transportation allows direct transportation from the supplier’s to the buyer’s warehouses, heightens security and assures the greatest degree of flexibility. Road Transportation is usually understood as fast and safe. However, transport from Ireland to mainland Europe by truck will usually be containerised and grouped and include a ferry crossing.
– Rail transportation:
Slow and flexible, and requires certain number of containers before shipping, but this method is also safe and secure, allowing an exporter to ship large quantities of relatively inexpensive rates. However, rail services for exporting from Ireland are obviously very limited.
– Postal transportation:
Your postal service is a good, thrifty option for documents and small packages weighing 70 pounds or less. Some products go by air with delivery between three and five days, sometimes at a savings of 50 percent or more over non-government competitors. Package tracking is now more widely available, but not for all countries. However please note that most postal services will not pay customs duties and bill you or your customer. The recipient must pay in order to take possession of the goods.
Your freight forwarder and customs broker is a good source of advice on everything shipping. There is a fee structure for their services, which you can generally fold into your selling price; but it can be well worth the cost.
Q: How do I pack goods for international shipping?
Your freight forwarder can advise you on packing materials and methods, and can arrange the packing for you. Smaller boxes and packages are packed in much the same way as for domestic shipments. Hazardous materials require special handling, and your carrier should be consulted from the outset. Wooden containers generally need to be fumigated, and proof of fumigation certification with be added to the other shipping documents. For additional information and considerations, click on this link. http://www.export.gov/logistics/eg_main_018124.asp
Q: What type of packaging does the product require?
Packaging may be a function of consumer taste or a regulatory requirement of foreign government. For consumer products, certain colors should be avoided because of negative connotations. Japanese consumers are in general highly conscious of product packaging and your packaging may need to be altered in order to sell there. The best thing to do is to consult your buyer or distributor.
The mode of shipment will also determine the type of packaging to use. To avoid pilferage in foreign ports it is advisable to use plain packaging devoid of logos and brand names advertising what is inside the package. This will avoid tempering.
It is also important to keep in mind that when products are being packaged their irregular characteristics must be kept in mind. Different treatment is needed for different products.
Product factors to consider when deciding upon the best type of packaging include:
- Resistance to abrasion
- Deterioration or shelf life
- Susceptibility to moisture
- Chemical reactions such as oxidation and corrosion
- Chemical stability
Here are some additional packaging considerations:
- Does your packaging require the use of the metric or some other system of weights and measures?
- Does information on product content and country of origin need to be provided?
- Must each item in a shipment be labeled individually? What is the language of labeling? There may be special labeling requirements for food, pharmaceuticals, and other products.
- Are the colors or illustrations used on labels and packages attractive or offensive to the foreign buyer?
- What kind of warranty and warranty information are required?
Q: Is there a tariff (duty) that applies to my product in a foreign country?
Yes, each country sets its own duty or tariff rates for imported products. Duties vary by product, while sales taxes are usually the same percentage regardless of the nature of the product.
Low Duties into USA: The U.S. is mostly alone in the world in not assessing a national sales tax on imported goods. Its duties are also generally among the lowest in the world, making it a very attractive market.
Normal Procedure for Buyers: Your buyers will often ask for price quotes that include duties, taxes and other fees applied by the importing country. Your freight forwarder can help with this information as can WebPort Global.
E-Commerce Best Practice: If you are engaged in e-commerce, a good business practice is to inform customers seeking to buy products on your site that they will be responsible for applicable duties, taxes and fees, which can exceed 25 percent of the purchase price.
VAT in the E.U.: The average VAT in the European Union is about 20 percent, not including duties.
No Duty in Certain Cases:
- Certain types of commodities such as information technology are largely duty-free or have very low duties in most countries.
- The U.S., Canada, members of the European Community and other countries have free trade agreements with trading partners in which products containing certain amounts of local content are imported duty-free.
- Products imported from one country entering a foreign trade zone or otherwise awaiting shipment in a second country to third country may also escape duties in the second country.
- If duties are assessed by the second country, they can be “drawn back,” by the owner of the goods after providing evidence of the transshipment to customs authorities.
Duties & Taxes reducing Globally: In general, duties and taxes worldwide have been reduced during the past 20 years as part of an international effort to increase trade and stimulate economic growth. But existing fees can still add substantial cost to the final consumer.
Q: How does the exporter assess if the export documentation is correct?
If you engage a freight forwarder and customs broker, part of his/her responsibility is to ensure that all documentation is properly prepared and filed with appropriate parties.
Your product and country of destination will in part determine the kinds of documents that must be prepared. If you are shipping items of smaller size by air, the carrier will generally be able to ensure you’ve prepared the correct documents and they can prepare them for you.
However at a minimum, the commercial invoice must contain information that is present in the bill of lading and/or other documents. It is important to ensure that the description of goods is the same as that in the Letter of Credit, if applicable. Also, to ensure that there is no conflict in the description, it would be good practice to keep the description as short and clear as possible.
In the majority of cases the exporter should make sure that the following documents are available:
- Commercial Invoice
- Customs Invoice
- Bill of Lading
- Air Consignment Notes or Airway Bills
- Insurance Policies or Certificates
In the U.S., good valued at more than U.S. $2,500 require a shipper’s export declaration or filing through the Automated Commercial Environment (ACE). New filers must register and submit the required Electronic Export Information to ACE at www.cbp.gov/ace.