Doing Business Outside The United States


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This talk describes different ways of getting into international markets. It provides information on US government and international loan guarantee and political risk insurance, legal issues for exporters and importers, and business questions you should explore as you seek international customers. Trade finance methods and letters of credit, arbitration, and other ways to be sure you get paid are also described.

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Doing Business Outside The United States

  1. 1. Illinois Exports, 2007-2014 • 284 Exporters, of whom 187 were small businesses • $39 Billion in transactions • Top Destinations Netherlands,Kazakhstan,Mexico
  2. 2. Illinois Exporters, Local Examples Exporter City Navistar International Corp Warrenville JoemChem LLC Elburn District Product Total Disbursements Total Export Sales Supported 14 Motor Vehicle and Parts Manufacturing and Sales $360,000,000 $0 14 Chemical Manufacturing and Sales $22,242 $22,242 $2,307,996 $2,307,996 $2,768,238 $3,193,673 Miner Enterprises Inc Geneva 14 Transportation Equipment Manufacturing and Sales Weiler Engineering Inc. Elgin 14 Machinery Manufacturing and Sales
  3. 3. International Sales Options • Sell to or make things for customers that come here, online or in person • Find an agent or distributor to recruit customers or international partners • License technologies or products or services to international partners • Provide international credit, product or service support, or traveling project people • Set up joint ventures • Own local stores, sales operations, or manufacturing plants
  4. 4. International Supplier Options • Phone, text chat, or speaker staff from international call centers for US conversations • China, Korea, and other printers or manufacturers • “Outsourced” services elements for law, medical transcription, software development • “E-lance” or other freelance services bids and projects Friedman: The World Is Flat
  5. 5. International Partners or Customers
  6. 6. Everyone Is Online, Now
  7. 7. More Customer Finding Options • Be visible in every directory you can find • Buy Google and international search engine (e.g. Baidu, in China) ads, adwords (with proper translations, not just Google Translate) • Advertise in trade journals/sites that have high world market visibility (e.g. Allured Publications, Carol Stream, for personal care products) • Go on state, federal, or association trade missions (e.g. Alliance of Merger and Acquisitions Germany meeting, October 2013)
  8. 8. More Supplier Finding Options • International network directories (e.g. Hieros Gamos, for lawyers, or local equivalents for • Ask your competitors who they use (e.g. China manufacturer for Kitsune: of Foxes and Fools card game) • Get referrals from professional association colleagues with international networks (e.g. Mauritius counsel, from a Baker & McKenzie predecessor at the ISBA)
  9. 9. We’re From The Government
  10. 10. Federal Trade Assistance • International Trade Administration Services: • Small Business Administration Export Advice: • US Embassy Based Trade & Commercial Officers
  11. 11. Avoid Red Ink At Light Speed
  12. 12. International Payments • Letters of Credit: Banks guarantee payment after your or customer payment conditions met (clears customs, passes inspection, accepted by customer, etc..: Available from banks involved in international trade, correspondent banks abroad • NOT routine Visa/Mastercard: MANY fraudulent transactions • “Wire Transfers” to your or customer bank accounts are routine, but KNOW YOUR CUSTOMER OR SUPPLIER BEFORE YOU TRUST THEM WITH YOUR ACCOUNT NUMBER
  13. 13. Private Financing Sources • Purchase Order Financing: 75% (at most) available from the P.O. your customer gives you, 1.5% per month plus factor fees • Accounts Receivable Financing: 90% availability possible once your invoice is due, same factor fees and percentage • Your customer’s credit counts, not yours deals with funds with billions of $$ available
  14. 14. Public Financing Sources (Export) • “SBA Express”: Your bank issues, same as SBA Express (75% of transaction available), short form to apply • SBA 7(a): Your bank issues, same as domestic 7(a) in fees, rates up to 2% over prime but negotiable Tip: Get a bank familiar with international trade, not just local retail as your SBA lender, and beware of random reductions in % of deal available on a/r finance
  15. 15. Public Financing II: Export Banks • Export Loans Above SBA Limits: Export-Import Bank of The United States: • Project Financing: The World Bank World Bank Credit Guarantees Available • Political Risk Insurance: OPIC Overseas Private Investment Corporation
  16. 16. Are We There Yet?
  17. 17. Stage One: Romance • Identify the International Customer/Provider/Partner • Negotiate a Noncompete/Noncircumvent Agreement • Get Or Provide A Fair Market Price Quote
  18. 18. Stage Two: Specifications • International Sales Or Project Contracts: No UCC to supplement terms agreed by the parties • “Incoterms” like “FOB” (ship to or from where, who pays freight and customs costs, other import and export taxes) • Deal elements different for manufacturers representative, or merchant buyer, or local manufacturing, or sale of equipment or services
  19. 19. Stage Three: Arguments • Multiple Shipments Means More Chances To Mess Up: Identify quality, quantity, currency risks and deal with in agreements (or later, at more cost) • International Arbitration: 7 years for Caterpillar in Spain, since inherited contract and lack of rules in a merger • “Guilt Is The Gift That Keeps On Giving”: Relationships matter more than rules or process • Springing Foreclosures, Credit Guarantees, Risk Insurance, Limited Commitments If No Agreement
  20. 20. How Did THAT Happen?
  21. 21. International Payment Risks • Currency Values Change: Dollar vs. Yen or Renimbi or Forint Different Values Different Years • Hedge Transactions Can Limit Risks • Repricing Of Deals Annually Or By Shipping Cycle Can Limit Risks • Be Aware Of Currency Markets As You Negotiate Terms of Trade
  22. 22. International Shipping • Fast By DHL, And Very Expensive • Slow By Ship: 6 months to a year? But CHEAP • 10 X Difference to ship by Container, By Pallet, or By SKU: Aggregate Your Shipments • Ports/Regions Can Close: Vary Your Routes And Providers, Or Have Local Cover
  23. 23. Systems Are “Wonderful” • SAP Initiation For Vietnam Production: Hathaway lost Christmas • “The Check Is In The Mail”: Kenya and Other Corrupt Local Post Offices • “Shipment? What Shipment?” Use experienced freight forwarders and shippers, make sure all paperwork for transfers is complete before you ship: and track all movements
  24. 24. Any Questions? William A. Price (Bill) Attorney at Law Phone/Fax 1-800-630-4780