Posted with permission from the Indiana Manufacturers Association

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June 2011
Exporting May Be Untapped Opportunity
The following article was contributed by Wayne T. Hoeing, CPA, JD, a tax partner
with Clifton Gunderson LLP in Indianapolis. Wayne can be reached at
wayne.hoeing@cliftoncpa.com. For a copy of the survey or more information about
accounting services, please contact karen.hupe@cliftoncpa.com.
A new U.S. manufacturing survey shows
that large manufacturers are experiencing
increases in profits from exporting, yet 49
percent of companies surveyed say they do
not export and have no plans to export. According to Manufacturing Outlook:
Findings of a National Survey of the Manufacturing and Distribution Industries,
untapped exporting opportunities await companies that want to increase profits and
diversify revenue streams.
The Manufacturing Outlook survey covers large, medium and small businesses in
manufacturing, metal fabrication, distribution, industrial and commercial machinery,
agriculture supply/production, and food and beverage. It was completed by Clifton
Gunderson LLP in late 2010.
Of the more than 200 respondents to the survey, 49 percent say they do not export
and have no plans to do so, while 45 percent currently export. Only 6 percent of
companies say they plan to export in the next two years. Current exporters say they
plan to focus on Canada (56 percent), Mexico (37 percent), and the United Kingdom
or China (21 percent combined).
The U.S. Census Bureau’s current report on State Exports for Indiana indicates that
exports in Indiana have held constant over the past four years, holding at 2.2
percent of total U.S. exports (http://www.census.gov/foreign-trade/
statistics/state/data/in.html). Canada accounted for 37.2 percent of Indiana exports
in 2010; Mexico accounted for 9.1 percent. Germany was next, at 6.4 percent,
followed by the UK, at 5.1 percent. And although the automotive industry has
struggled in recent years, exports of gear boxes, transmissions, engines, and trailers
remain at the top of products exported from our state.
For companies that have already entered the international market, chances are they
began exporting when one of more of these factors provided greater opportunities to
sell products that have the potential to increase overseas sales:
• Public incentives
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• Private capital
• Demand
The North American Free Trade Agreement (NAFTA) is an example of a public
incentive. NAFTA and transportation-cost containment within North America are
among the reasons manufacturers have expanded to Canada and Mexico.
Companies will have better opportunities for exporting in general when both the
domestic and international economies improve and more capital becomes available.
Regardless of geographical targets, products or incentives, exporters need to work
with accredited professionals who have experience reconciling the differences
between U.S. tax and international auditing and accounting standards. Efforts are
underway to adopt a set of global accounting standards and practices that will
eventually improve accounting efficiencies.
Many additional government and private resources exist to help with exporting.
Oftentimes, business advisors have ongoing relationships with overseas partners
who can help companies navigate legal and financial matters. For example, networks
like HLB International have large groups of independent business advisors in more
than 100 countries. The professional members of these networks have thousands of
peers who call on each other to handle multi-national assignments varying widely in
size and complexity.
Companies need to consider the following when expanding their businesses
internationally:
• International structuring
• Effects of tax treaties
• Foreign tax credits
• Transfer pricing
• Expense apportionment
• Foreign withholding taxes
• International tax compliance
• Holding companies
• IC-DISC export incentive
IC-DISCs (Interest Charge – Domestic International Sales Corporations) benefits are
available to any qualified producer or distributor that is directly involved in
exporting, or that sells products to a distributor or wholesaler who then resells them
outside the United States. An IC-DISC allows companies to lower their tax liabilities
on profits from qualified export sales. It can be established as a subsidiary or as a
brother-sister corporation owned by the exporter’s shareholders or owners.
While exporting can appear to be daunting at first, the assistance provided by trade
organizations, state and federal government experts, and business advisors can help
make this lucrative market pay off.
What's in a Name? Including a
City Name in a Trademark
The following article was contributed by William Kaiser and Matt Schantz, attorneys
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