Preparing to Sell Overseas
Looking to export? Find out how with this simple guide.
Selling overseas is similar to expanding into a new marketdomestically in that your success depends on research planning, andtiming. If you have the right offering, pinpoint a high-potentialcustomer base and then find the right partners to help you roll outyour plan, then tapping consumer or business markets overseas hasthe potential to benefit your business tremendously.
Use the steps below to prepare your business to startexporting.
In order to export, you may need to develop new promotionalmaterial, translate existing documents, modify products orpackaging, travel internationally, or obtain additional financing.Given the necessary commitment, exporting is not something toundertake if your company is struggling with the task of managingits US operations.
Before you get started, talk to business owners who havesuccessfully entered foreign markets to gain insight into what liesahead. Their input will be most valuable if their products aresimilar to yours. Your chamber of commerce or trade group may beable to connect you with these business owners.
Before you can send products overseas, you need to determine theirclassification, for two reasons. First, it will help you locate therelevant U.S. and overseas government data that can help youunderstand potential market demand. Second, it will help youdetermine what tariffs apply to your products once you beginselling overseas.
In the U.S., products and services are classified using StandardIndustrial Classification (SIC) or the newer NorthAmerican Industry Classification System (NAICS). Outside theU.S., businesses and products are classified using the StandardInternational Trade Classification (SITC) system, or the HarmonizedCommodity Description and Coding System, a.k.a. the Harmonized System (HS).
Locate Potential OverseasMarkets
The largest markets for U.S. products are currently Canada, Japan,and Mexico, but these countries may not necessarily be the bestmarkets for what you have to sell. To determine the best exportmarkets for your business, use the following resources to learnabout the full range of possibilities:
The U.S. government: The U.S. Department of Commerceoffers invaluable advice and information to new small businessexporters, much of it free. The Trade Information Center lets you connectdirectly with export experts who specialize in specific regions orcountries throughout the world. If you're not yet ready tospeak with someone directly, the Trade Information Center's Website has a database of reports on the business and politicalclimates of different countries, as well as industry-specificreports and economic trends. You can reach the Trade InformationCenter online, or by calling 800-USA-TRADE (800-872-8723).
State and local governments: Nearly every state has itsown export or international trade office that offers countryspecialists, libraries, finance programs, and export counseling.They are often associated with the state's department ofcommerce, economic development, or industry, and can be located byconsulting the government pages in your local phone directory. Inaddition, local port authorities and trade centers also may offerexport training programs and foreign market researchassistance.
Foreign government offices: The U.S. embassies andconsulates of foreign governments often have economic developmentofficers on staff who assist American companies that want to dobusiness in their countries. Embassies are generally located in theWashington D.C. area, while regional consulates are often in largercities (such as New York, Chicago, Atlanta, San Francisco, and LosAngeles). Independent international trade groups (such as theBelgian-American Chamber of Commerce, Japanese Chamber of Commerceof New York, or the Peruvian American Association) also may havelow-cost research and information available. Many of these groupsbelong to the Federation of International Trade Associations.
After locating potential markets for your products, you'll needto verify whether your product would sell in those locations. Thereare a number of issues to consider, including the quality of youroffering compared to what people in that country already use, theprice your product or service could fetch in that market, and theavailability of customers.
One way to gather more information on your potential markets isto participate in a federal-or state-sponsored trade event or trademission. These shows are matchmaking sessions that allow you tomeet with foreign business prospects. Some events are helddomestically and attended by overseas agents and distributors.Trade missions, on the other hand, are essentiallygovernment-sponsored road shows, where owners of small andmedium-sized businesses can meet with pre-screened prospects inpromising export markets. The Commerce Department also regularlyexhibits at overseas trade shows, and it may be possible forrepresentatives to distribute your brochures or marketingmaterials. Full information on U.S. Department of Commerce tradeevents is available on the Trade Information Center Web site.
Determine Your SalesStrategy
Once you have zeroed in on target markets, you need to determinehow you will sell your products or services overseas. While it ispossible to sell directly to end users, this is often not acost-effective option for small businesses, since it requiresunderstanding the target market, the culture, local regulations,and the like. Instead, many smaller companies use intermediarieswho are familiar with overseas markets. These options include:
Commissioned agents or sales representatives: Agents andreps act as "brokers," finding specific foreign buyersfor your product or service in return for a commission. While theydo the selling, they often will not fulfill the orders or handledetails such as collections or shipping.
Export Management Companies (EMCs): EMCs act as anoutsourced export department, both representing your product tooverseas buyers and taking care of all aspects of the exporttransaction. Among the functions EMCs perform are:
- Conducting market research to determine the best foreignmarkets for your product
- Attending trade shows and promoting your products overseas
- Assessing distribution channels
- Arranging export financing
- Handling export logistics, such as invoicing, insurance,customers documentation, etc.
- Advising on legal issues such as compliance issues and traderegulations
EMCs tend to work on a commission basis and represent productsof many companies. However, a growing number of EMCs now take titleto the goods they sell, making a profit on the markup. This carriesthe possibility that your products may be priced incorrectly, whichcan affect your competitive position in the market. Be sure todiscuss issues related to pricing at the outset of anynegotiation.
Export Trading Companies (ETCs): ETCs perform many of thesame functions as EMCs, but they tend to be demand-driven, simplyfulfilling orders instead of actively marketing a product orservice. Most ETCs will take title to your goods for export andwill pay your company directly while handling shipping andinvoicing. While you may give up control over how your product ispriced and serviced, this arrangement does eliminate many of thepotential risks associated with exporting.
The viewsand opinions contained herein are not necessarily those of AmericanExpress and are intended as a reference and for informationalpurposes only. Please contact your attorney, accountant or otherbusiness professional for advice specific to yourbusiness.
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