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International Trade Orientation Short Version
 

International Trade Orientation Short Version

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Introduction to International Trade (exporting and importing)

Introduction to International Trade (exporting and importing)

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  • Myths about Exporting I'm too small to export ; only large firms with name recognition, ample resources, and export departments can export successfully. False! Most of the world’s exporters are SMEs. I can't afford to export; I don't have the money to hire people, market abroad, or expand production if I get new export business. Not true! There are low-cost ways to market and promote abroad, handle new export orders, and finance receivables. These don't require hiring new staff or setting up an export department. I can' t compete overseas; my products are unknown and my prices too high for foreign markets. Not necessarily. The world is large, with varied needs and interests. If your product is selling well in the domestic market, it might well be wanted somewhere else in the world. What makes your product sell in the home market can help it sell abroad. Exporting is too risky; I might not get paid. I might get cheated. I might break a law I didn't know about. Not likely! Selling anywhere has risks, but they can be reduced with reasonable precautions. Exporting is too complicated; I don't know how. Wrong! You don't need to be an expert to export. You can use outside experts to deal with the complications, hire your own expert, Or, become more knowledgeable yourself with training like ours.
  • EXPORT WORKING CAPITAL The Small Business Administration (SBA) Export Working Capital Program (EWCP) and the Working Capital Guarantee (WCG) of the Export-Import Bank of the United States (Ex-Im Bank) assist U.S. Exporters to obtain loans to produce goods or services for export by guaranteeing repayment to the lending institution. The loans can be either transaction specific or revolving and there is no minimum or maximum transaction amount. The U.S exporting company should normally have one-year operating history and the current financials of the company should reflect a positive net worth. EXPORT CREDIT INSURANCE Ex-Im Bank’s Export Credit Insurance enables U.S. exporters to confidently extend credit terms to their international buyers. Export Credit Insurance covers export receivables against commercial risk, if the foreign buyer should default, and political risk coverage, in the case of war, inconvertibility of currency etc. The policy can be a single-buyer policy or it can be a multi-buyer policy. The Ex-Im Bank offers both short and medium-term insurance policies. With short-term policies, the typical terms are 180 days or less, exceptionally 360 days. Medium term insurance covers capital equipment, projects and related services with repayment terms up to 5 years (exceptionally 7 years) with financing up to $10 million. The importer would make cash payment of at least 15 percent. LOAN GUARANTEE The Ex-Im Bank's Loan Guarantee is a very useful program for exporters. Under this program, the Ex-Im Bank provides loan guarantees that allow lenders to offer financing to exporters' foreign customers with fixed or floating competitive rates. This program reduces payment risks to exporters as they are paid upfront for their exports. Foreign buyers are enabled to overcome financing problems and can buy US. goods and services. Banks with delegated authority from the Ex-Im Bank participate in the loan guarantee program and would do due diligence on foreign buyers to ensure that there is reasonable assurance for repayment before granting the loan. UNITED STATES DEPARTMENT OF AGRICULTURE (USDA) FOREIGN AGRICULTUREAL SERVICES (FAS) PROGRAMS United States Department of Agriculture (USDA) – Foreign Agricultural Services (FAS) export finance programs. If the product of the U.S. exporter is agricultural, i.e. the “3Fs” food, feed and fiber, programs offered by the FAS of the USDA could assist exporters to expand their international trade. There are basically three programs: the Supplier Credit Guarantee Program (SCGP), the GSM-102 and GSM-103 programs. The SCGP provides 65 percent guarantee on the principal receivable for credit terms of up to 180 days. Importers must issue Promissory Notes to cover payment. The GSM-102 and GSM-103 are bank driven programs where Dollar denominated Letters of Credit must be issued by the importer from USDA approved foreign banks. GSM-102 program covers credit terms up to three years and GSM-103 programs covers credit term up from 3 to 10 years.

International Trade Orientation Short Version International Trade Orientation Short Version Presentation Transcript

  • El Camino College Business Training Center INTERNATIONAL TRADE ORIENTATION OVERVIEW OF EXPORTING AND IMPORTING Bronwen Madden, Deputy Director Center for International Trade Development El Camino College Business Training Center
  • NEW GRANT FUNDED CITD INITIATIVES
      • International Trade Compliance Institute (ITCI)
        • Information and Training on all Aspects of International Trade Regulations
        • Seminars/workshops on EAR, ITAR, AES, ACE & more
        • ITCI Website www.tradecomplianceinstitute.org
      • “ Green” Export Enabler Program (GEEP)
        • Increase Calif. Green Technologies Exports to China
        • Free competitiveness and export readiness assessments
        • Export training and market research/planning for China market entry
        • Subsidized trade event and matchmaking assistance
        • GEEP Website www.greenexport.org
  • CALIFORNIA EXPORT PROFILE EXPORTS  GROWTH  JOBS Total Exports by States California’s Top Export Markets California’s Top Exports Total Value: $120,142,219,999 Total % Texas Mexico Computers & Electronic Prod. 35,182,767,377 29.3 % California Canada Transportation Equipment 12,826,967,941 10.7 % New York Japan Machinery Manufactures 10,709,240,936 8.9 % Washington China Chemical Manufactures 10,233,994,524 8.5 % Florida South Korea Misc. Manufactures 9,130,040,605 7.6 % Illinois Hong Kong Crop Production 7,848,804,565 6.5 %
  • U.S. SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) STATISTICS
      • U.S. Employment (99%)
      • Private Sector Employment (50%)
      • Net New Jobs (66%)
      • Exporting Firms (97%)
      • U.S. Export Value (30%)
  • CALIFORNIA [UNREALIZED] EXPORT GROWTH POTENTIAL
      • 96% of the World’s Consumers Live Outside the U.S.
      • 66% of the World’s Purchasing Power is Outside the U.S.
      • 85% of California’s Manufactures do Not Export
      • Many Make Exportable Products
      • 60% Sell Only to Canada and Mexico (w/in NAFTA)
      • Many have New-to-Market Export Potential
  • EXCUSES (MYTHS AND FEARS) FOR NOT EXPORTING
      • Too Small
      • Too Complicated
      • Too Risky
      • Too Expensive
      • Cannot Compete
    It’s too Risky I’m too small I can’t afford it Export Myths It’s too complicated I Can’t Compete
  • WHY TRADE?
      • 1 in 5 U.S. Manufacturing Jobs (20%) Depend on Exports
      • Export Jobs Receive Higher Wages
      • Each Additional $1B in Exports Creates 15,000 New Jobs
      • 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
  • STAGES OF EXPORT DEVELOPMENT FOR NEW-TO-EXPORT SMES CLIENT NEEDS FOR ASSISTANCE AT EACH STAGE © Maurice Kogon, Director, El Camino College Center for International Trade Development
  • REGISTER YOUR BUSINESS COMPLY WITH DOMESTIC BUSINESS REGULATIONS
      • CalGold
      • Click on “All Business Types”
      • Check your Business Type (For example )
      • Click on your County and City
      • Review all Federal, State, County, City and Municipal licenses, permits and other registrations applicable to your business
  • INTERNATIONAL EXPORT (IMPORT) PLAN NEED TO ADDRESS THE FOLLOWING TOPICS
      • Company
        • Goals , Financial Resources , Non-financial Resources , Current Trends and Practices, Production Capacity, and SWOTT 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 EXPORT (IMPORT) PLAN TEMPLATES
      • USDOC Template
      • Canadian Template
      • Identify action items and responsible person
      • Threats include the Five-Forces (part of SWOTT)
  • EXPORT READINESS (STEPS TO TAKE)
      • Increase Efficiency & Competitiveness
      • Product Readiness
      • Company Readiness
      • Identify Resources* Available to Help You Export
        • On-line Export Readiness Assessment (ERA)
        • California Centers for International Trade Development
      • Identify Few Markets with Highest Export Potential
      • Identify Entry Strategy for Each Market (Desired Partnership Arrangement)
      • Export Promotion & Prompt Follow-up
    • *Resources on federal and state level, public and private. See the WTW info guide.
  • EXPORT READINESS INDICATORS
      • 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?
  • TRADE INTERMEDIARIES MANAGEMENT COMPANIES & TRADING COMPANIES
      • 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 (see handout)
        • Market research/planning/promotion
        • Find customers abroad
        • Respond to inquires/Issue quotes
      • Main Issues (sample agreement in Exporting Basics )
        • Exclusive/Non-exclusive
        • Territory
      • Duration
      • Non-Circumvention
      • Present purchase orders
      • Handle export paperwork
      • Arrange shipping and financing
  • IDENTIFYING BEST MARKETS
      • 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)
  • MARKET CONSIDERATIONS
      • 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
  • CULTURAL DIFFERENCES CAN CREATE MISCOMMUNICATION
      • Main reason for negotiation breakdown
      • Be Culturally Aware
        • Foreign Corrupt Practices Act
        • Conversation / Dress / Entertaining / Negotiating
      • Executive Planet and CultureGrams®
      • High Context vs. Low Context
      • Cultural Dimensions
        • Power Distance
        • Individualism vs. Collectivism
        • Masculinity vs. Femininity
        • Uncertainty avoidance
        • Long-term Orientation
  • ENTRY STRATEGY / CHANNELS OF DISTRIBUTION
      • Acquisition
      • Sell Through an Intermediary (an Agent or Distributor); Contractual
      • Technology Exchange
      • License Agreement
      • Establish Joint Venture (JV) / Strategic Alliance
      • Hire Staff Overseas (Manufacture Representative)
      • Establish a Branch / Subsidiary Office Overseas (Foreign Direct Investment)
      • Sell Directly to End-Users
  • INTERNATIONAL BUSINESS MARKETING, PROMOTION, AND MATCHMAKING
      • On-line: Website, Featured U.S. Exporter (FUSE),
    • CITD Trade Directory, Exporters Yellow-Pages
      • Direct Mail: Buy industry lists from respective industry chamber or industry magazines
      • Media Advertisements: Commercial News USA , Industry Magazines, Local TV, Newspapers, Yellow-pages
      • Events: Catalog Show / Trade Show / Trade Mission
      • USDOC Trade Promotion Services
        • Gold Key Service
        • International Partner Search
  • AGENT / DISTRIBUTOR QUALIFICATION CHECKLIST
      • Sales Force
      • Sales Performance
      • Territorial Coverage
      • Companies/Products Represented
      • Customer Profile
      • Facilities and Equipment
      • Localization Capabilities
      • Market Development Capabilities
      • Industry Knowledge – Supply Chains, Distrib. Channels
      • And ALWAYS do your due diligence and get a background check (credit report) on serious partners
    Example: Tire repair company best served by distributor already representing and distributing tires / complementary automotive parts.
  • FINANCE SALES & GET PAID
      • Trade Finance Guide
      • Getting Paid by Your Latin American Buyer
      • Due Diligence (International Credit Report)
      • U.S. Government Programs (SBA, Ex-Im Bank, FAS)
        • Export Working Capital Guarantee
        • Export Credit Insurance
        • Loan Guarantee
        • Resources:
          • Country Limitation Schedule
          • Lenders
          • Ins. Brokers
  • METHODS OF PAYMENT IN INTERNATIONAL TRADE
      • Cash-in-Advance
      • Letters of Credit
      • Documentary Collections
      • Open Account
      • Export Working Capital Financing
      • Government-Guaranteed Export Working Capital Loan Programs
      • Export Credit Insurance
      • Export Factoring
      • Forfaiting
      • Government Assisted Foreign Buyer Financing
      • Foreign Exchange Risk Management
  • INTERNATIONAL COMMERCIAL TERMS (INCOTERMS)
  • INTERNATIONAL ECONOMIC LIBERALIZATION FOUR LEVELS OF INTEGRATION
      • Free Trade Area
      • Customs Union
      • Common Market
      • Economic Union
      • World Trade Organization Regional Trade Agreements Information System (RTA-IS)
  • OFFICE OF THE U.S. TRADE REPRESENTATIVE
      • Increased levels of trade and investment = more jobs
      • The U.S. has FTAs in force with 17 countries.
        • Australia
        • Bahrain
        • Canada
        • Chile
        • Costa Rica
        • Dominican Republic
        • El Salvador
        • Guatemala
        • Honduras
      • Congress must enact legislation to approve and implement each individual agreement (Colombia, Korea, and Panama) in order for them to go into effect.
      • Israel
      • Jordan
      • Mexico
      • Morocco
      • Nicaragua
      • Oman
      • Peru
      • Singapore
  • GOVERNMENT TAXES TARIFFS, DUTIES, AV, CVD, AND PENALTIES
      • Each Country has a Customs Authority and a Tariff Schedule
  • INDUSTRY CLASSIFICATION CODES SIC, NAICS, AND THE HARMONIZED SCHEDULE
      • Standard Industry Classification (SIC)
        • The SIC has been replaced by the NAICS
      • North American Industrial Classification System (NAICS)
      • Harmonized Schedule (HS)
        • Linked to the Tariff Schedule
      • Schedule B (For U.S. Exports)
  • HARMONIZED SCHEDULE VERSUS THE SCHEDULE B CODES
      • Exports codes (which the U.S. calls Schedule B) are administered by the U.S. Census Bureau.
      • Import codes are administered by the U.S. International Trade Commission (USITC)
      • First 6 digits are the same worldwide; the last 4 vary
  • INTERNATIONAL TRADE REGULATIONS: U.S. TRADE CONTROL AND FOREIGN TRADE REQUIREMENTS
      • Export Administration Regulations (EAR), Bureau of Industry & Security, U.S. Department of Commerce
        • Commerce Control List (CCL)
        • Deemed Exports
        • Anti-boycott
      • International Traffic in Arms Regulations (ITAR), U.S. State Department
        • Country Embargos
        • United States Munitions List (USML)
      • OFAC Sanctions , U.S. Treasury
      • Examples of Foreign Marks:
      • Denied Persons List
      • Entity List
      • Unverified List
  • RESTRICTIVE MERCHANDISE TO THE U.S. (IMPORTING); RESTRICTIVE IS A RED FLAG FOR POSSIBLE LICENSE
      • Alcoholic beverages
      • Animal and animal products
      • Certain drugs
      • Firearms and ammunition
      • Fruit, nuts
      • Meat and meat products
      • Milk, dairy, and cheese products
      • Plants and plant products
      • Poultry and poultry products
      • Petroleum and petroleum products
      • Vegetables
      • Certain trademarked and copyrighted articles
    • Not Always, But Usually:
      • art material
      • cultural property
      • hazardous/toxic/flammable materials
      • household appliances
      • some electronics products
      • toys and children’s articles
  •  
  • INTERNATIONAL TRADE DOCUMENTATION
      • Bill of Lading/Airway Bill/Carrier’s Cert. (naming Consignee)
      • Electronic Export Information (Shippers Export Declaration)
      • Commercial Invoice from seller, showing value and description
      • Packing List
      • Entry manifest or Entry/Immediate Delivery
      • Export/Import License
      • Certificate of Origin
      • Certificate of Insurance
      • Inspection Certificate
      • Apostille/Consular Certificate
      • Weight Certificates
      • Phytosanitary/Health Certificates
      • Other
    When Applicable
  • EX: AUTOMATED EXPORT SYSTEM (AES) IM: AUTOMATED COMMERCIAL ENVIRONMENT (ACE)
      • Ensure Export Compliance
      • Correct Errors & Decrease Costs
      • Eliminate Paper Review of Licenses
      • Provides Accurate Trade Data
      • Shippers Export Declaration (SED) changed to Electronic Export Information (EEI)
      • Importer of Record is the person who benefits (exporter)
  • FREIGHT FORWARDERS AND CUSTOMS BROKERS
      • Freight Forwarders (Transport Architect)
    • Freight forwarders act on behalf of exporters in arranging transportation services. Most freight forwarders handle both ocean and air transportation, but usually in separate departments. They are familiar with the import rules and regulations of foreign countries, methods of shipping, U.S. Government export regulations, and documents connected with foreign trade. Services include providing quotations on freight costs, port charges, consular fees, cost of special documentation, insurance costs and freight forwarder's fees.
      • Customs Brokers (Import Specialist)
    • Licensed by the U.S. Department of the Treasury, the customs broker must possess thorough knowledge of tariff schedules and Customs regulations and keep abreast of the amendments made through constant changes in the law and administrative regulations. The broker must be well-versed in determining proper classifications and dutiable value, and be fully aware of the vast number of commodities subject to quotas. Many brokers help clients choose modes of transportation and appropriate carriers, which require analyses of a vast body of data. They also provide assistance to importers in assigning shipments the best routes. There are estimates for landed costs, payments of goods through draft, letters of credit insurance, and re-delivery of cargo if there is more than one port of destination.
  • DELIVER THE GOODS
      • Electronic
      • Land (Truck or Train)
      • Water (lower cost, slow movement, majority of trade)
      • Air (higher cost, fast movement, higher value goods)
      • Insure Cargo
      • Book, Track, & Trace Cargo
      • Customs Clearance
        • Importing to the U.S. (informal = less that $2,000 excluding textiles and footwear)
        • Exporting from the U.S. (informal = less that $2,500)
  • FOREIGN TRADE ZONES
      • Cost savings (tax relief, lower wage costs)
      • Tariff shifts can reduce customs duties
      • Add value to reach 51% domestic content
      • Defer customs fees
      • Five Foreign Trade Zones in Los Angeles Area
        • Foreign Trade Zone No. 50
        • Foreign Trade Zone No. 50-1
        • Foreign Trade Zone No. 202
        • Foreign Trade Zone No. 205
        • Foreign Trade Zone No. 205A
  • DUTY DRAWBACK
      • Drawback is a refund of duty paid on imported merchandise that is linked to an exportation (or destruction) of an article.
      • Permitted on the exportation of imported merchandise (and the exchange, or tradeoff, of domestic merchandise) with unchanged condition (substitution) and not used in the U.S.
      • Categories of drawback
        • Manufacturing drawback
        • Unused merchandise drawback
        • Rejected merchandise drawback
  • U.S. CUSTOMS & BORDER PROTECTION DEPARTMENT OF HOMELAND SECURITY US CUSTOMS AND BORDER PROTECTION PUBLIC INFORMATION SECTION 301 OCEAN BLVD, SUITE 1400 LONG BEACH, CA 90802 562.366.5555 MAIN LINE 562.628.7900 FAX HTTP://WWW.CBP.GOV CALL: (562) 366-5454 PRESS "0" TO TALK WITH AN OPERATOR AND TRANSFER TO A COMMODITY SPECIALIST
      • International Trade Guides and Publications
  • EL CAMINO COLLEGE CENTER FOR INTERNATIONAL TRADE DEVELOPMENT
      • Maurice Kogon, Director
      • Bronwen Madden, Deputy Director
      • Kerry Bonner, GEEP Project Manager
      • Darling Garcia, Administrative Assistant
    • 13430 Hawthorne Blvd., Hawthorne, CA 90250 USA
    • Phone: (310) 973-3173 Fax: (310) 973-3132
    • http://ElCamino.CITD.org
    • http://TradeComplianceInstitute.org
    • http://GreenExport.org