Opportunities for Successful Exporting

1. Opportunities for
Successful Exporting
Presented by:
Scott Smithhisler
Global Trade Consultant

2. Agenda:
Successful export growth is
 Welcome & Introductions
more about plans, people,
 International Sales – The Opportunity process & tools, and less about
chance
 Export Strategy
 Customer Relationships
 People, Process & Tools
 Policies & Procedures
 Trade Risks
 Payment Terms Options
 Benefits of Strategic Partners
 Q&A

3. Opportunity…
Today:
 70% of the world’s purchasing power is
located outside of the U.S.
 95% of customers are outside the U.S.
 Less that 1% of American companies
export – typically to only one country
Tomorrow:
 Nearly 87% of economic growth
over the next five years will take
place outside of the U.S.
Source: National Export Initiative, International Monetary Fund, US Department of Commerce

4. Benefits of Going Global
 Diversify business & expand market share
 Increase customer base
 Increase top line sales and bottom
line profits
 Reduce fixed costs
 Optimize production capacity
 Reduce seasonal market fluctuations

5. Exports as Part of Growth Strategy
Product & Market Assessment: Leverage success in the US to
support export opportunities
 Assess demand for product
or service
 Competition
 Pricing & market trends
 Product or packing modification
 Regulatory & legal requirements
 Country risk
Internal Assessment:
 Impact on our business
 Export plan serves as roadmap
& gauge to measure success

6. Sales Channel
 Distributor:
Has exclusive rights to sell your
product in one or more countries
 Export Trading Company (ETC):
Deal with multiple manufacturers;
handle all aspects of sales &
marketing in a given territory
 Licensee:
Has the right to use your trademark
and manufacture products under
certain restrictions
 Retailer:
Buys directly from you and sells to
consumers
 Affiliate:
An operation fully owned by your
company

7. Distributor Selection
 Selecting the right partner is crucial
to long term business success
 Strong relationship with distributor
is key
 Does your product fit into their long
term strategy?
 How much of your product can
they sell?
 Agreement structure
 Exclusive vs. non-exclusive
 Territory
 Pricing & terms
 Sales expectations
 Contingency plan

8. The Team
Maintaining a highly skilled, passionate cross functional team working together to
ensure overall success is fundamental for international growth.
 Working environment with open
communication & shared
accountability
 Hire people with international
business, logistics or trade
finance experience
 Invest in ongoing training across
your organization
 3rd party Partners are part of the
team (i.e. banks, forwarders,
specialty providers)

9. High Level Export Process & Team
1. Customer Relationship
Sales / Legal
• Customer selection
• Legal agreement 2. Pricing
• Credit terms according to Sales / Finance
risks & policy • Product offering 3. Order Fulfillment
• Prices consider INCO terms Int’l Customer Service / Credit
• Quote to Customers
• Customer purchase order
• Collaboration & changes
• Credit check
• Proforma Invoice (includes
4. Credit Check required LC specifics)
Credit
• L/C Review
• Credit decision 5. Shipping
• Release product for shipment Customer Service / Logistics
• Shipment Planning
• Shipment 6. Payment & Delivery
• Transport & other documents Credit / Finance / Customer
• Draw on LC & monitor
• Documents to Customer
• Payment to seller
• Customs clearance at destination
• Happiness! Let’s do more of this!

10. Standard Operating Procedures
Clear procedures for the cross functional team supporting exports.
Main Elements:
 Approval by Sr. Leadership in
Sales, Finance & Operations
 End-to-end process steps and
supporting job functions
 Delineation of roles and
responsibilities
 Metrics and reporting
 Guidelines for on-going training

11. International Trade Risks – Inform the approach…
Commercial
 Buyer history
 Credit reporting limited
 Financial standards may differ
 Potential for loss during transit
Geopolitical
 Government stability and consistency
Economic
 Foreign exchange rate fluctuations
 Foreign Bank solvency
 Sovereign risk
Legal
 Contract enforceability
 Goods recoverable
 Customs & Tax regulations change

12. Export Credit Policy
Competing in international markets requires companies to take SMART RISKS.
Main Elements:
 Approval by Sr. Leadership in
Finance, Sales & Operations
 Customer credit application &
approval
 Credit limits and terms to be
assigned against criteria
 Customer credit strength
 Customer history & performance
 Geopolitical risk rating
 Order value
 Override approvers & limits

13. Terms Options - Balancing Risk, Cost & Timing
OPEN ACCOUNT
DOCUMENTARY
COLLECTION
LETTER OF CREDIT
CASH IN ADVANCE

14. Letters of Credit Explained
 Buyer’s Bank substitutes its credit Letters of credit work through a
worthiness for that of the buyer series of formal agreements
 Guarantee is contingent on strict • Contract
• Purchase Order
compliance with terms & conditions Seller • Confirmation Buyer
 Typically goods cannot be
obtained by buyer until payment is
made
 Credit risk is with buyer’s bank
and country of domicile • LC Application
• FX & Export Financing • Loan / Collateral
• LC Advice / Confirmation • Documents & Payment
 Works well for higher risk • Documents & Payment • FX & Trade Financing
transactions
Seller’s Bank • Correspondents
• Credit Line for
Buyer’s Bank
confirmations

15. Outsource Providers
External providers act as an extension of your operation and help optimize results.
Freight Forwarders: Specialty Providers:
 Serve as travel agents for  Minimize risk by providing
international goods expertise & software
 Key partner on product flow,  Reduce costs by accelerating
problem solving, and cost payments & increasing document
containment accuracy
 Need to ensure services fit your
needs and compare prices
Other Resources for Exporters:
 US Export Assistance Center
 Business Oregon
 Small Business Administration

16. Questions?
Thank you for coming today!
Scott Smithhisler
Global Trade Consultant
Orinoco International LLC
ssmithhisler@orinocointl.com
LinkedIn/in/scottsmithhisler
+503-816-3647

17. Appendix
More on Payment Terms Options
INCO Terms & Examples
Key Procedural Points

18. Cash in Advance, Open Account & Documentary Collections
Cash In Advance & Open Account Documentary Collections
 One party has all the leverage  Buyers Bank holds documents
required for Customs clearance until
 Mitigate risk using a combination of payment is made
steps and/or timing
 Credit risk related to buyer
 Buyer decides whether to pay
 Works best with trusted customers
and when geopolitical risk is low

19. Letter of Credit Process Flow Freight Forwarder
Applicant / Buyer 6 Shipment
Goods 7 Transport Docs
START HERE 1 & 2 Seller / Beneficiary
Purchase Order & Confirmation
12
3 L/C Documents
Application to Buyer 9 5
L/C
Claim
Reimbursing Bank 10
Payment
11
Export Documents
8 LC &
Letter of Credit
Documents
Issuing Bank 4
Advising Bank

20. Letter of Credit – Additional Pro’s & Con’s
Pros Cons
 Eliminates buyer credit risk and  Order fulfillment systems may not
ensures prompt payment support LC or trade documentation
requirements, so automation may be
 High degree of Exporter control limited
 Confirmations eliminate bank/  Heavy reliance on carriers,
country risk forwarders and other 3rd parties for
LC compliance
 Rules are well defined and
predictable (e.g. subject to UCP600)  Complexity of LCs and related rules
require high degree of expertise
 Usance (term) LCs offer cost effective
trade financing option; could be  Visibility limited and monitoring is
competitive advantage time consuming
 “Irrevocable” means terms and
conditions can only change if buyer,
seller and bank agree.

21. International Commercial (INCO) Terms
INCO terms: Examples:
 Define Buyer & Seller’s
liabilities & responsibilities Any Mode of Transport
 Indicate a named place EXW, Named Place of Delivery
(EXW = Ex Works)
 Depict what the selling price  Seller is responsible for warehouse
includes services and export packing
 Are specific to either sea/  Buyer arranges for loading at point of
inland waterway transport origin through delivery to final
destination
or other modes
Ocean Transport
CIF, Port of Destination
CIF = Cost, Insurance & Freight
 Seller is responsible for transport to
destination port and insurance
 Buyer arranges for pick up at local dock,
arranges clearance and pays duty

22. Key SOP Topics – Title Passage & Consignment of Goods
Certain elements of the SOP are tied 1. How legal title passes from seller to
to managing export risks & product buyer
flow.  Physical movement of goods
 Transport documents (e.g. cargo
As such, they should be considered receipt, waybill, bill of lading)
in the export policies & procedures.
2. Transport Documents
 Bill of Lading (B/L) = Negotiable Title
 Cargo Receipts, Truck Bills & Waybills
= Non-Negotiable Receipts
3. Consignment of the Goods
 Open Consignment = “To Order”
Title passes via endorsement
 Straight Consignment = “To”
No endorsement required; can help
expedite delivery

23. Monitoring
Visibility to key process steps can enable the team to address problems and
continuously improve the process.
Process: Tools:
 Document end-to-end process & timing  Automate wherever possible
 Make adjustments based on experience utilizing third party websites
 Maintain & monitor credit limits
and terms systematically
 Systematic tracking
 Order receipt & confirmation
 Accounts receivable
 Letter of credit monitoring
• Balances
• Expiration dates
• Payment status