Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
business builder exporting
by David Noah
It wasn’t too long ago that before a company could begin exporting, they had to make a concerted effort to identify potential international markets and prospective foreign customers. In order to succeed in the international marketplace, they had to make a substantial investment in international marketing and sales.
Today, however, the broad reach of the Internet and the increasing number of foreign visitors at even the smallest trade show make it easier than ever for a company of any size and budget to promote their products to hundreds or thousands of prospective international customers.
That isn’t to say that anyone can become a successful exporter. It still takes a commitment from the upper levels of management to focus on the entire export process before a company can generate the kind of revenue that will make an impact on the bottom line.
International sales are a great way to grow a company, especially during slow economic times in the United States. Companies of all sizes can benefit from export sales.
According to the most recent statistics published by the U.S. Census, 97 percent of U.S. exporters in 2001 employed fewer than 500 people. In fact, the single largest group of exporters — representing nearly 40 percent of U.S. export companies — had fewer than 20 employees.
Because more exports help grow our economy, national, state and even some local governments actively encourage businesses to export. They provide export counseling, lead international trade missions, and help promote U.S. products through a variety of printed and electronic means.
The Minnesota Trade Office (www.exportminnesota.com, 651.297.4222) employs several trade specialists focusing on specific industries or specific regions of the world. The U.S. Export Assistance Center (www.exportassistance.com, 612.348.1638) in Minneapolis provides services to exporters from the upper-Midwest region.
Export responsibilities
Like many aspects of citizenship, exporting is a privilege and not a right. Done properly, it is an excellent opportunity to increase your company’s revenue and profits. Done incorrectly or with disregard to international business practices and U.S. export regulations, you could not only lose a lot of money, you and your company could also be found criminally negligent and face financial penalties, loss of export privileges, and even jail time.
Before you plunge too deep into exporting, you and your company should review and answer the following five questions:
1. Have you properly classified your products?
Before you can export, you must first determine if any of your products require an export license. Although only a small percentage of items do require an export license, you must make this determination or face substantial civil and criminal penalties for violating U.S. Export Administration Regulations (EAR). The EAR bases license requirements on the technical specifications of your products, where you are exporting, to whom, and how they will be used.
Export regulations also require that all exporters classify their products based on the Schedule B Commodity Classification Codes or the Harmonized Tariff Schedule. This classification affects the amount of tariff your customers must pay to import the goods into their country.
2. Do you know your customer?
You are responsible for the final destination and use of your products. A variety of U.S. departments including Commerce, State and Treasury publish lists of countries and individuals (called restricted parties) that U.S. companies cannot export to either directly or indirectly. It is your responsibility as an exporter to check each and every shipment against these lists.
Your responsibility doesn’t end when your goods reach their initial destination. You must be reasonably assured that your customer won’t forward the goods to another person or country that is a member of these lists. The U.S. Bureau of Industry and Security publishes a list of “red flags” that will help achieve this threshold of assuredness.
After the United States entered Iraq, U.S. investigators examining Iraqi bank and government records found that at least 30 U.S. companies had sold high-tech hardware to Iraq despite the United Nations embargo and U.S. export regulations banning such exports.
It doesn’t matter whether these shipments were made directly to Iraq. If these U.S. exporters knew — or should have known — that the goods were going to be forwarded to Iraq from another country, they will face substantial criminal and civil penalties.
3. How will you get paid?
What’s the point of making a sale if you don’t get the money? International transactions bring up a host of new payment issues. Talk to the international department of your local bank to investigate the various international payment options.
4. Are you using the right Incoterms?
International terms of sale are different from the domestic terms of sale. The International Chamber of Commerce has created an internationally recognized set of terms called Incoterms that determine who is responsible for the cost of shipping and insuring your goods and up to what point.
Most U.S. companies understand their responsibilities when they use “FOB factory” for their domestic shipments. But use FOB for your international shipments, and you may be surprised about the additional freight and insurance costs your company is responsible for.
5. Have you completed the appropriate export documents?
Depending on what you are shipping, its value, the mode of transport, and its final destination, you must supply the proper documentation along with your goods. Your freight forwarder can help you determine what these documents are and even, for a fee, prepare the documents for you.
Don’t take the documentation requirements lightly. The U.S. Census Bureau has announced a 10-fold increase in civil and criminal penalties for incorrect documentation that could cost you or your company $10,000 per violation. That’s why many exporters keep the documentation responsibilities in-house. Even if you rely on your freight forwarder to complete your documents, your company is legally liable for the accuracy of the information that appears on these documents.
Export rewards
It doesn’t matter if your company has made a conscious decision to enter international markets in a strategic manner or if you are simply responding to unsolicited inquiries for your company’s products. Before you dive into the export waters it’s important that everyone at your company — from the top level of management to your sales people to your shipping department — understands their obligations as exporters.
By taking the time to familiarize yourself with U.S. export regulations, international sales procedures, and your potential customers, you can make exporting an enriching — and profitable — part of your company’s business.
[contact] David Noah is the president and founder of Shipping Solutions in Eagan, a developer of export software that automates the export document and compliance procedures: 888.890.7447; da***@***********nc.com; www.shipsolutions.com
