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International Trade Orientation 2013


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This presentation will provide new-to-export clients with information on getting started in international trade. Export and import basics will be provided as we walk through the four international trade development stages and are introduced to trade assistance resources on the federal, state and local level.

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International Trade Orientation 2013

  1. 1. INTRO TO EXPORTING & IMPORTING ORIENTATION SEMINAR FOR NEW CLIENTS Center for International Trade Development Hosted by El Camino College
  2. 2. 2011 LEADING U.S. STATES IN EXPORTING 2 Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC
  3. 3. 2011 CALIFORNIA’S TOP EXPORT MARKETS 3 Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC
  4. 4. 2011 CALIFORNIA TOP EXPORT INDUSTRIES 4 Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC
  5. 5. 2011 U.S. MERCHANDISE TRADE BALANCE 5 Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC
  6. 6. 2011 U.S. MERCHANDISE TRADE BALANCE 6 Source: TradeStats Express™ International Trade Administration, USDOC and Foreign Trade Division, U.S Census Bureau, USDOC
  7. 7. CALIFORNIA’S EXPORT OPPORTUNITY •  95.54% of the world’s consumers live outside the U.S.•  70% of the world’s purchasing power is located outside the U.S. Many Companies Make Exportable Products•  Less than 1% of America’s 30 million companies export •  58% of companies export to only one country•  98% of U.S. exporters are SMEs (but represent less than one-third of the known export value of U.S. goods’ exports); 96% of California exporters are SMEs (Total 59,543 in 2010) Many Companies Have New-to-Market Export Potential•  5.1% of Californias total private-sector employment is supported by manufacturing exports•  22.4% of manufacturing workers in California depend on exports for their jobs•  SMEs generated over two-fifths (46%) of Californias total exports•  Foreign investment in California supported 4.7% private-industry employment (567,000 jobs in 2010) California Depends on International Trade and Investment for Jobs
  8. 8. EXPORT FEARS •  Too Small•  Too Complicated•  Too Risky•  Too Expensive I’m too•  Cannot Compete small It’s too It’s too complicated Risky I Can’t Compete I can’t afford it Export Fears
  9. 9. TRADE BENEFITS TRADE AND INVESTMENT = JOBS•  Export Jobs Receive Higher Wages•  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
  10. 10. EXPORT DEVELOPMENT STAGES Build Export Capacity Develop Export Markets Make Sales & Get Paid Deliver the Goods 10
  11. 11. INTERNATIONAL TRADE GROWTH PLAN •  Company Goals , Financial Resources , Non-financial Resources , Current Trends and Practices, Production Capacity, and SWOT 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
  12. 12. DOMESTIC BUSINESS REGISTRATION Review all Federal, State, County, City and Municipal licenses, permits and other registrationsapplicable to your business.
  13. 13. EXPORT READINESS INDICATORS ACCESS YOUR EXPORT READINESS•  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?
  14. 14. IDENTIFY TRADE ASSISTANCE RESOURCES FEDERAL, STATE, COUNTY, CITY, NON-PROFIT•  U.S. Department of Commerce, ExIm, SBA•  State Trade Office•  California Centers for International Trade Development•  Manufacturing Extension Partnerships•  District Export Councils•  World Trade Centers•  Chambers of Commerce•  Foreign Consulates and Trade Commissioners•  LARExC, FTA, LACBFFA, WIT-LA, NASBITE, AAEI•  Service Providers (legal, finance, insurance, shipping)•  Plus many more…
  15. 15. INTERNATIONAL TRADE INTERMEDIARIES INDIRECT EXPORTING•  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 ü  Market research/planning/promotion ü  Present purchase orders ü  Find customers abroad ü  Handle export paperwork ü  Respond to inquires/Issue quotes ü  Arrange shipping and financing•  Main Issues ü  Exclusive/Non-exclusive ü  Duration ü  Territory ü  Non-Circumvention
  16. 16. TARGET A FEW SPECIFIC MARKETS IDENTIFY BEST MARKETS WITH HIGHEST POTENTIAL FOR RETURN•  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)
  17. 17. 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
  18. 18. CULTURAL CONSTRUCT VARIANCES •  Cause for Negotiation Breakdown•  Cultural Etiquette –  Conversation –  Dress –  Entertaining –  Negotiating •  Context –  High –  Low•  Cultural Dimensions –  Power Distance –  Individualism vs. Collectivism –  Masculinity vs. Femininity –  Uncertainty avoidance –  Long-term Orientation
  20. 20. MARKET ENTRY STRATEGY •  Indirect Exporting –  Hire an EMC/ETC (outsource your export department) –  Technology exchange/license agreement (royalties for technology sharing and use)•  Direct Exporting –  Sell directly to end-users –  Sell to a foreign distributor or agent with POA (contractual)•  Foreign Investment –  Hire staff overseas (manufacture representative) –  Establish joint venture (JV)/strategic alliance –  Establish a branch/subsidiary overseas –  Acquisition
  21. 21. U.S. COMMERCIAL SERVICE INTERNATIONAL BUSINESS MARKETING, PROMOTION, AND MATCHMAKING•  Trade Information Center: 1-800-USA-TRAD(e)•  On-line: Featured U.S. Exporter (FUSE), •  Media Advertisements: Commercial News USA and USA Export Expo•  Marketing Events: Trade Shows and Mission •  Business Matching Services: International Partner Search and Gold Key Service and•  Advocacy: Support with public tenders
  22. 22. QUALIFICATION CHECKLISTS FOREIGN PARTNER SCREENING MECHANISM•  Sales Force•  Sales Performance Example:•  Territorial Coverage Tire repair•  Companies/Products Represented company best•  Customer Profile served by•  Facilities and Equipment distributor already representing and•  Localization Capabilities distributing tires•  Market Development Capabilities (complementary).•  Industry Knowledge – Supply Chains,   Distribution Channels•  ALWAYS do your due diligence and get a credit report and check references on serious partners
  23. 23. INTERNATIONAL TRADE PAYMENT METHODS •  Methods of Payment in International Trade•  Cash-in-Advance•  Letters of Credit •  Documentary Collections •  Open Account•  Consignment •  Export Working Capital Financing •  Government-Guaranteed Export Working Capital Loan Programs •  Export Credit Insurance •  Export Factoring •  Forfaiting •  Government-Assisted Foreign Buyer Financing•  Government-Backed Agricultural Export Financing•  Foreign Exchange Risk Management
  25. 25. LETTER OF CREDIT (L/C) Exporter   1.  Contract  Signed   Importer   (Seller)   (Buyer)     5.  Ship  the  Goods     6.  Submit  Documents   11.  Release  Documents   10.  Make  Payment   2.  Apply  for  L/C   9.  Make  Payment   4.  Advise  L/C   Seller’s  Bank   8.  Payment  /  Acceptance      Buyer’s  Bank        (Advising  Bank)   7.  Send  the  Documents      (Issuing  Bank)   (Confirms  L/C)   3.  Issue  the  L/C  
  27. 27. International Commercial Terms
  28. 28. International Commercial TermsHTTP://WWW.SEARATES.COM/REFERENCE/INCOTERMS/
  29. 29. REGIONAL TRADE AGREEMENTS OF THE U.S. The United States has free trade agreements in force with 19 countries: Australia; Bahrain;Canada; Chile; Colombia; Costa Rica; Dominican Republic; El Salvador; Guatemala; Honduras;Israel; Jordan; S. Korea; Mexico; Morocco; Nicaragua; Oman; Panama; Peru; and Singapore.The United States is also in negotiations of a regional, Asia-Pacific trade agreement, known asthe Trans-Pacific Partnership (TPP) Agreement with the objective of shaping a high-standard,broad-based regional pact.
  30. 30. INDUSTRY CLASSIFICATION SYSTEMS •  Standard Industry Classification (SIC) replaced by NAICS•  North American Industrial Classification System (NAICS) •  U.S. exports codes (Schedule B) are administered by the U.S. Census Bureau•  U.S. import codes (HTS) are administered by the U.S. International Trade Commission (USITC)•  First 6 digits are the same worldwide (WTO members); the last 4 vary
  31. 31. THE HARMONIZED SCHEDULE (HS) •  28 Chapter•  2801 Heading•  2801.30 Subheading•  2801.30.10 Subheading for Duties (tariff, CVD, ADD)•  2801.30.10.00 Subheading for Statistical Data
  32. 32. U.S. EXPORT CONTROLS HTTP://WWW.BIS.DOC.GOV•  Export Administration Regulations (EAR), Bureau of Industry & Security, U.S. Department of Commerce –  Deemed Exports –  Anti-boycott –  The Wassenaar Arrangement (Dual Use) –  ECCNs listed in the CCL (EAR99=NLR)•  International Traffic in Arms Regulations (ITAR), U.S. State Department –  Country Embargos –  United States Munitions List (USML)•  OFAC Sanctions, U.S. Treasury•  Foreign Corrupt Practices Act (FCPA), U.S Department of Justice
  33. 33. CONSOLIDATED SCREENING LIST HTTP://EXPORT.GOV/ECR/EG_MAIN_023148.ASPDenied Persons List A list of individuals and entities that have been denied export privileges. Any dealings with aparty on this list that would violate the terms of its denial order is prohibited.Unverified List A list of parties where BIS has been unable to verify the end-user in prior transactions. The presence of aparty on this list in a transaction is a “Red Flag” that should be resolved before proceeding with the transaction.Entity List A list of parties whose presence in a transaction can trigger a license requirement under the Export AdministrationRegulations. The list specifies the license requirements that apply to each listed party. These license requirements are in addition toany license requirements imposed on the transaction by other provisions of the Export Administration Regulations.Specially Designated Nationals List A list compiled by the Treasury Department, Office of Foreign AssetsControl (OFAC). OFAC’s regulations may prohibit a transaction if a party on this list is involved. In addition, the Export AdministrationRegulations require a license for exports or reexports to any party in any entry on this list that contains any of the suffixes "SDGT","SDT", "FTO", "IRAQ2" or "NPWMD".Debarred List A list compiled by the State Department of parties who are barred by §127.7 of the International Traffic inArms Regulations (ITAR) (22 CFR §127.7) from participating directly or indirectly in the export of defense articles, including technicaldata or in the furnishing of defense services for which a license or approval is required by the ITAR.Nonproliferation Sanctions Several lists compiled by the State Department of parties that have been sanctionedunder various statutes. The Federal Register notice imposing sanctions on a party states the sanctions that apply to that party. Someof these sanctioned parties are subject to BIS’s license application denial policy described in §744.19 of the EAR (15 CFR §744.19).
  34. 34. INTERNATIONAL TRADE DOCUMENTATION OTHER CERTIFICATES FOR SHIPMENTS OFCOMMON EXPORT DOCUMENTS: CommercialInvoice; Export Packing List; Pro Forma Invoice SPECIFIC GOODS: ATA CARNET/Temporary shipment certificate; Certificate of Analysis; Certificate of Free Sale; Dangerous GoodsTRANSPORTATION DOCUMENTS: Airway Bill or Bill Certificate; Fisheries Certificate; Fumigationof Lading; Electronic Export Information Filing Certificate; Halal Certificate; Health Certificate;(formerly known as the Shipper’s Export Declaration) Ingredients Certificate; Inspection Certificate; Pre- Shipment Inspections; Insurance Certificate;EXPORT COMPLIANCE DOCUMENTS: Export Phytosanitary Certificate; Radiation Certificate;Licenses; Destination Control Statement Other (Product-Specific) Certificates; Weight CertificateCERTIFICATES OF ORGIN: Generic Certificate of Origin; Certificate of Origin for claiming benefits OTHER EXPORT-RELATED DOCUMENTS: Consularunder Free Trade Agreements; Certificate of Origin Invoice; Canadian Customs Invoice; Dock Receiptfor goods not manufactured in the United States and Warehouse Receipt; Import License; ISPM 15 (Wood Packaging) Marking; Shipper’s Letter of Instruction TEMPORARY SHIPMENT DOCUMENTS: ATA CARNET/Temporary shipment certificate; Customs Certificate of Registration; Transporting Goods by Truck to Canada
  35. 35. TRANSPORTING THE GOODS •  Freight Forwarder vs. Customs Broker•  Modes of Transportation –  Electronic –  Land (Truck or Rail) –  Water •  Lower cost, slow movement •  Majority of trade –  Air •  Higher cost, fast movement •  Higher value goods•  Insure Cargo •  Book, Track, & Trace Cargo•  Customs Clearance
  36. 36. REASONABLE CARE CHECKLIST HTTP://WWW.CBP.GOV/LINKHANDLER/CGOV/TRADE/LEGAL/ INFORMED_COMPLIANCE_PUBS/ICP021.CTT/ICP021.PDF•  Established reliable procedures to ensure you provide a correct description of your merchandise to Customs?•  Established reliable procedures to ensure you provide a correct tariff classification of your merchandise to Customs?•  Established reliable procedures to ensure you provide a correct valuation of your merchandise to Customs?•  Consulted a Customs "expert" (eg., customs broker, lawyer, or accountant) to assist in description, classification, and valuation? Have you given them full, complete, and accurate information on all the facts and circumstances surrounding the import?•  Consulted the Harmonized Tariff Schedule, the Explanatory Notes, Customs publications, court cases, and Customs rulings to assist in description, classification, and valuation?•  Obtained a Customs ruling on your merchandise, and, if so, have you established reliable procedures to ensure you have followed that ruling?•  Established reliable procedures to ensure that errors are found, corrected, Customs is apprised in a timely manner?
  37. 37. FOREIGN TRADE ZONES HTTP://IA.ITA.DOC.GOV/FTZPAGE/LETTERS/FTZLIST-MAP.HTML#CALIFORNIA•  Cost savings (tax relief, lower wage costs)•  Add value to meet Rules of Origin regulations•  Tariff shifts can reduce customs duties (inverted tariffs) •  Duty exemption on re-exports (don’t have to file duty drawbacks)•  Duty elimination on unused merchandise (waste, scrap, and yield loss)•  Weekly entry filing (vs. transactional filings) to save on merchandise processing fees•  Defer customs duties (use as a warehouse) until you have a buyer
  38. 38. NAFTA Regional Value Content (RVC) Formulas HTTP://IA.ITA.DOC.GOV/FTZPAGE/LETTERS/FTZLIST-MAP.HTML#CALIFORNIA Transaction Value: 60% minimum RVC = [(TV – VNM) / TV] x 100 Net Cost: 50% minimum RVC = [(NC – VNM) / NC] x 100 TV=Transaction Value (amount paid or payable for a good) NC=Net Cost (amount to produce a good) VNM=Value of Non‐Originating Material
  39. 39. CUSTOMS AND BORDER PROTECTION Los Angeles/Long Beach Seaport Los Angeles International Airport- (Port Code: 2704) Cargo Operations (Port Code: 2720) 301 E. Ocean Blvd., Suite 1400 11099 South La Cienega Blvd. Long Beach, CA 90802 Los Angeles, CA 90045 General Phone: (562) 366-5555 General Phone: (310) 215-2618 Public Information Line: (562) 366-5454 HTTP://WWW.CBP.GOV A Service Port is a CBP location that has a full range of cargo processing functions, including inspections, entry, collections, and verification (19 CFR 101.1).
  40. 40. CENTER FOR INTERNATIONAL TRADE DEVELOPMENT HOSTED BY EL CAMINO COLLEGE DIVISION OF COMMUNITY ADVANCEMENT Bronwen E. Madden Acting Director 13430 Hawthorne Boulevard Hawthorne, CA 90250 USA Appointment Line: (310) 973-3177 Phone: (310) 973-3173 Fax: (310) 973-3132