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Exporting for Growth & Profit
- 1. Exporting for Growth& Profit An Introduction for Small & Mid-Size Businesses Shelley Smith, Esq. 20 S. Clark St. Suite 300 Chicago, IL 60603 Copyright © Sept. 10, 2012
- 2. The Case forExporting • 2011 U.S. Exports: $2 Trillion • 2010-2011: 500,000 New jobs paying 20% more. • NATO/Other FTAs eliminate tariffs and non- tariffs trade barriers. • 95% of World’s Customers are outside the U.S.
- 3. Exports from Chicago •Chicago is 7th in exporting • Only 5,000 of Chicago’s almost 100,000 small businesses export their products overseas. • Of these, less than half, about 2,000 export to more than one country.
- 4. Getting Started • Preparea Business Plan • Identify a Target Market • Find a Buyer • Obtain Financing
- 5. The Business Plan 1.Business Plan should include selected products or services, target markets, sales forecasts, method of transport, estimated transportation costs, possible use of freight forwarder and financing options. 2. For market research, consult Dept. of Commerce, ITA’s Commercial Service Market Research Reports. 3. For export statistics, go to the Census Bureau’s Foreign Trade Division.
- 6. Meet with theExperts 1. U.S. Dept. of Commerce, ITA, Chicago 2. Illinois DCEO, OTI: Trade Specialists in Asia, Latin America, ; Offices in Toronto, Mexico City, Japan, Hong Kong, 3.Illinois SBDC, ITC, 8 in Illinois, AON Bldg.
- 7. Top Illinois ExportIndustries – 2011 Top 5 Industries for export in 2011 Machinery, Except Electrical $17.78 Billion Chemicals $ 8.49 Billion Transportation Equipment $17.78 Billion All Agricultural and related products $17.78 Billion Computer and Electronic Products $17.78 Billion
- 8. Choose your Market Selecta Target Market
- 9. Top 5 Countriesfor Illinois Exports 2011 Canada $19.17 Billion Mexico $ 5.72 Billion China $ 3.89 Billion Australia $ 3.69 Billion Brazil $2.55 Billion
- 10. Identifying Target Markets •After considering standard factors such as demand, also research: –Free Trade Agreements –Low Tariff Countries –Product Restrictions
- 11. Finding FTA Countries •Use the “FTA Tariff Tool” at export.gov, a site that identifies tariffs by product for each of the 17 FTA countries. • Consult alphabetical list of countries that describes their trade status in export.gov/logistics.
- 12. Finding Low TariffCountries • Resources for finding foreign tariffs on U.S. exports include: – WTO Tariff Database; – Customs Info Database; – Economic and Monetary Community of Central Africa’s Common External Tariff.
- 13. How to Finda Foreign Buyer • Attend Trade Shows/Missions (U.S. & Foreign) • Contact the U.S. Dept. of Commerce for pre- screened potential buyers • Contact Illinois DCEO’S Office of Trade & Investment for customized lists of potential foreign buyers, agents and distributors.
- 14. Export Financing How doI convince my lender to finance sales to a foreign buyer?
- 15. Private Financing • Convincethe buyer to provide: – cash in advance and/or – a letter of credit. • When these options are unavailable, the Small Business Administration (“SMA”) and U.S. Export Import Bank (“Ex-Im Bank”) have export financing programs.
- 16. SBA Export Financing(1) • Export Express Program: Financing up to $500,000 using the lender’s forms if the borrower has been in business for at least one year and the loan proceeds will be used for export-related activities.
- 17. SBA Export Financing(2) • International Trade Loan: a loan of up to $5 million with a 90% guarantee to lenders for businesses modernizing or expanding facilities in order to meet growing export demand.
- 18. The United StatesExport-Import Bank • Working Capital Guarantee Program: • Export Credit Insurance: protects against the political and commercial risks of a foreign buyer defaulting on payment.
- 19. Ex-Im Bank -Foreign-Buyer Guarantees 1. Medium and long-term guaranties of commercial loans made to foreign buyers. 1. Guaranties cover 85% of the contract price (100% of the financed portion). 1. The foreign buyer must pay 15% of the purchase price in cash.
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- 21. U.S. Filing Systemfor Exports 1. Electronic Export Information (“EEI”) is used by the U.S. Census and Customs Departments for statistical and export control purposes. 1. The Shipper’s Export Declaration (“SED”) has been replaced with the Automated Export System (“AES”).
- 22. Country & TerritoryCodes Found on Annex A, Schedule C of the HTS.
- 23. Where Do IFind Export Codes? • Codes for classifying goods for import tariffs are in the Harmonized Trade Schedule, available on the U.S. Census Dept. web site. • HTS’s “Notice to Exporters” says HTS’ codes from Schedule B can be used for the SED/AED.
- 24. Do Other Countries UseSchedule B Codes? • Almost all countries use tariff classification systems based on the International Harmonized Tariff System (HTS). • The HTS is defined to the six-digit level, so foreign tariff schedules will be identical to the HTS up to the six-digit level but may include more digits for finer levels of detail.
- 25. What if I’mExporting Green Peas?
- 26. HTS Schedule BCode for Green Peas Code Definition Example 07 2‐digit chapter in which a commodity is classified Chapter 7, "Edible Vegetables and Certain Roots and Tubers" 0713 4‐digit heading within the chapter "Dried leguminous vegetables, shelled, whether or not skinned or split" 0713.10 6‐digit HS code or subheading International Harmonized code for "Peas (Pisum sativum)" 0713.10.4020 10‐digit statistical classification Commodity code for "Green peas"
- 27. Help with Findingthe Correct Codes 1.Read the Definitions and General Interpretation Guidelines in the HTS; 2.Use the Schedule B Search Engine at www.export.gov.; and 3.Consult reported decisions of the Customs & Border Protection Dept. on the CROSS database using HTS codes.
- 28. U.S. District andPort Codes
- 29. Finding U.S. Districtand Port Codes • U.S. District and Port codes are also required for foreign trade statistical reporting purposes. • Find them in Statistical Annex D to the HTS. • The U.S. District and Port code for Chicago is 39.01.
- 30. How to FileExport Information Export information must be filed in the form of EEI through AES or through AESDirect, a free on-line filing site, if: 1. an export shipment is made by a U.S. principal party in interest (“USPPI”) to a foreign buyer on a single day that is valued at over $2,500, or requires a license, and 2. the shipment previously required a Shipper’s Export Declaration.
- 31. Deadlines for AESFiling 1. Vessel: 24 hours before loading; 2. Truck: 1 hour before reaching U.S. border; 3. Air: 2 hours before scheduled departure; 4. Rail: 2 hours before reaching the U.S. border; 5. Mail: 2 hours before export.
- 32. Resolving Trade Barriers •The Trade Agreements Compliance Program is designed to resolve foreign government trade barriers. • The International Trade Commission (ITC) has a Trade Remedy Assistance Office that accepts Trade Complaint Forms to aid small businesses with trade difficulties. 19 C.F.R. 213.1. • Office of the U.S. Trade Representative (USTR) has an enforcement division to handle FTA violations.
Editor's Notes
- #2 Exporting is a great way to increase your sales and competitiveness! Did you know that in 2011 U.S. exports surpassed $2 trillion? Small businesses like yours account for much of the growth. In 2002, small businesses accounted for 27 percent of the overall value of exports. In 2010 that share rose to 34 percent. United States goods and services are the gold standard of innovation, quality, and safety abroad— and foreign demand is growing. Living outside the United States are 95 percent of your potential customers, and most foreign markets are growing from 4 to 10 percent each year!
- #4 Lots of room to grow – Illinois is the 5th largest exporting state, with $65 billion in 2011, $8 billion of which was in agricultural products. 90% of these exporters are small and mid-sized businesses; they make up one-fifth of the exports in volume, and $34 billion of the $65 billion in sales. (Small business is defined as having 500 or fewer employees)
- #6 Chose products/services, identify target markets, understand your financing options, and calculate your sales forecasts. (www.sba.gov/exportbusinessplanner) Study the export statistics on your products that are available from the Census Bureau’s Foreign Trade Division, which provides export/import statistics on 18,000 commodities. (www.usatradeonline.gov) 3. For conducting market research, consult the Commercial Service Market Research Reports at www.export.gov/mrktresearch.
- #7 ITA – International Trade Administration (USDOC Dept. of Commerce) Illinois Dept. of Commerce & Economic Opportunity, Office of Trade, Adam Pollet & Trade Specialists on Illinois Small Business Development Centers, International Trade Centers, Chicagoland Chamber of Commerce, 200 E. Randolph, Suite 2200. .
- #11 Free Trade Agreements: No tariffs are charged when you export to countries that are party to a FTA. Low tariff countries – Use FTA Tariff Tool to efficiently research tariff information on your goods in 20 FTA partner countries. (www. export.gov/fta/ftatarifftool). Country Product Restrictions, i.e. USDA Export Library (no beef to Saudi Arabia during Ramadan).
- #12 Use a site that lists countries alphabetically with taxes and resources for finding additional information: http://export.gov/logistics/eg_main_018142.asp Mayor Rahm Emmanuel has a Chicago Sister City program where 28 Sister Cities will submit export reports in Aug. 2012.
- #13 http://export.gov/logistics/eg_main_018142.asp -- This site list countries alphabetically with taxes and resources for finding additional information. Uses UCC shipping terms like FOB, CIF, etc. One resource for finding foreign tariffs on U.S. exports is the WTO Tariff Database; Customs Info Database; Economic and Monetary Community of Central Africa’s Common External Tariff;
- #14 Contact the Trade Specialists jat the Dept. of Commerce U.S. Dept. of Commerce’s Commercial Service will find pre-screened potential buyers for youhttp://export.gov/illinois/ U.S. Dept. of Commerce’s Commercial Service will find pre-screened potential buyers for youhttp://export.gov/illinois/ Find trade specialists for your industry at the Dept. of Commerce: http://export.gov/eac/dom_staff_list.asp?PostName=Chicago
- #17 Web site: www.sba.gov/content/us-export-assistance-centers
- #19 Working Capital Guarantee Program. : must be in business at least one year and have a positive net worth; products must be shipped from the U.S. and have at least 50% U.S. content; services must be performed by U.S. based personnel. (see Air Tractor, Inc.’s video on Youtube). Export Credit Insurance: protects against the political and commercial risks of a foreign buyer defaulting on payment. Insurance can be purchased for single or repetitive export sales. Short-term policies generally cover 90 percent of the principal for political and commercial risks.
- #28 CROSS stands for Customs Rulings Online Search System. Products of Mixed Composition – apply the “Essential Nature” Test Deciding Close Cases – Review rulings made by the CBP (Bureau of Customs Border Protection) in response to letter requests concerning which classifications particular products fall under in the HTS system.
- #31 The Census Bureau’s Foreign Trade Division offers training to help you understand the AES filing requirements.