Traditionally, we look to grow our U.S. balance of trade by expanding the exporting-base, meaning we get more companies to export–those companies are called “new-to-export”, or by helping companies who already export to grow their export markets and expand business–those companies are called “new-to-market”. However, the statistics remain that the large majority of U.S. manufacturers do not export and of those that do, over half only sell within North America. Exporting is a process and there is a learning curve. It takes time to develop international sales and results may not always be immediate.
Businesses compete by honing in on their core competency and specializing on what they do best. Exporting and importing should be no-different. If a company does not have in-house expertise, an international trade intermediary (basically an outsourced export/import department) is a faster solution to growing global sales. The trade-off is less control of the international trade sales process for your business but the gain is less risk, faster access to new markets, and allows businesses to continue focus on their domestic business while not loosing out in the world market.
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.
Service Area Outcomes (SAO)
- This course provides an overview for the startup of an international trading business with focus given to indirect exports.
- Upon successful completion of the course, students will have a working knowledge of export/import trading companies, including:
- A practical understanding of the export/import processes;
- Comprehending export and import terms, concepts, and theories;
- Understanding the roles of intermediaries and global trade service providers;
- Knowledge of payment terms and conditions;
- Introduction to basic documentation, and its importance in the trade process; and
- Understanding of practical on-the-ground issues, and how to handle them.
The textbook preferred for this course in Import/Export: How to Take Your Business Across Borders (4th Edition) by Carl Nelson. Handouts (referenced within the CITD training modules) are also distributed.
Name: Import/Export: How to Take Your Business Across Borders (4th Edition)
Authors: Carl Nelson
Publication Date: December 18, 2008
Download Textbook in PDF
Introduction to Trade Intermediaries
A trade intermediary works as an agent between the manufacturer of a good and the end user of the product or service. As an intermediary, your job is to make the export process as easy and seamless as possible for the products/services you represent.
As the export department or authorized export representative, you seek exclusive rights to represent a company/product line in specified markets for X years, with an option to renew. You will seek to develop markets, screen and qualify potential buyers and distributors, and present the manufacturer/wholesaler with confirmed purchase orders backed by guaranteed payments. You handle all documentation, payment and delivery arrangements. In return, you expect to receive a commission on the value of the export sale.
Typically the percent ranges from 5% on low-margin commodities up to 15% on more elastic goods. As needs arise, you may also offer to purchase the products for export. In that event, you will arrange to pay directly, take title to the goods and sell them to the overseas customer. If you take title of the goods, you may charge more of a commission to cover the finance risk and invoicing. Your role is negotiable, but many intermediaries offer the following services:
- Assess your/your client’s export readiness and market potential
- Identify best markets for the products you represent
- Assess the product’s competitiveness in each market
- Develop effective market entry strategies
- Find overseas buyers and distributors
- Promote the products in target markets
- Respond to overseas inquires
- Issue price quotes [for the products you represent]
- Present purchase orders to you with delivery terms
- Arrange secure financing and payment terms
- Complete all export documents
- Arrange delivery of the products
The question, “Which comes first, the chicken or the egg” presents a similar dilemma for the new EMC—should you seek buyers first (search for trade leads, etc.) then try to find matching suppliers? OR, should you try to find suppliers to represent, then try to find matching buyers? No matter where you start, you must convince your “client” – the buyer or the seller – that you have the expertise to effectively do the job. Establishing credibility for a newcomer is not easy.
A second problem is, how to avoid direct contact between the supplier and buyer you brought together (bypassing you).
A third problem is a buyer’s perception that dealing through middlemen raises the cost of the product (commission add-on). This is often a false perception, because your modest commission is probably much lower than the cost if the supplier had to maintain an in-house export function.
- Establish credibility: You need some kind of literature about you and your company to answer the question: “who are you?” and “what can you do for me?” This could be a flyer, brochure and/or a webpage.
- Product Focus: It is best to focus on products you know most about, rather than any or all products that come across your radar screen. At some point, your prospective supplier or buyer will ask how this product stacks up against the competition (why should I buy yours instead of X; or how well can you explain why a customer should buy product instead of brand X). You should ideally be able to converse persuasively about any product you handle.
- Market Focus: Although you may receive unsolicited inquiries from time to time, you’re better to determine and systematically pursue the most promising markets for the product. This requires investigation – talking to others in the industry, market research, contact lists of buyers/distributors, etc.
- Protecting against direct buyer/seller contact: This is a contractual issue. If you undertake any contacts in behalf of any buyer/seller client, you obviously do not want to disclose names of your “interested” contacts until you have a written agreement with your client that protects your interests in a specified time frame. If the agreement is properly worded, even if one or the other party attempts to bypass you at some point within the time frame, you are legally entitled to the commission they attempted to avoid. An attorney can help you draw up agreements that cover single or multiple transactions with any named parties or broadly, with exclusive or non-exclusive rights in specified territories.
- Avoiding “middleman” stigma: Once you have contractual “rights” to represent a supplier, you should attempt to present yourself as much as possible as if you were the supplier’s export manager or department in communication with overseas buyers or distributors, with you as their contact.
Session I: Getting Started
It is advisable to lead every class session with a review or discussion of international trade current events, news and/or activities.
- Where Will Your Next Customer Come From
- International Trade Career Pathways video series
- National Export Initiative
- A Business of Details
- NASBITE International
- 20 Keys to Import/Export Success
(Chapter 16; Pages 341–346)
- Commonly Used Trade Terms
(Glossary; Pages: 351–385)
- Where Will Your Next Customer Come From
Session 2: Product Standards, Export Controls, Documentation and Terms of Sale
- Product Standards
- Export Controls
- Incoterms – terms of sale
- Winning the Trade Game
(Chapter 1; Pages 13–14)
- Launching a Profitable Transaction
(Chapter 2; Pages 15–36)
Session 3: International Partner Searches, Negotiation and the Foreign Trade Regulations (FTR)
- Selecting the Right Business Partner
- Virtual Wine Tasting
- FTR–Who is the Principle Party in Interest?
- U.S. Census Bureau Foreign Trade Training Videos
- Planning and Negotiating to Win
(Chapter 3; Pages 37–71)
Session 4: Costing, Profitable Transactions, Trade Finance and Getting Paid
- Costing Methods
- Calculating landed cost for profitable transactions
- Payment Risk and Methods for Intermediaries
- Federal Export Finance Programs and Assistance
- Completing a Successful Transaction
(Chapter 5; Pages 93–166)
Session 5: Importing into the United States
- Tropical Transport: Importing Fresh Fruit Through the Port
- Current import topics (www.cbp.gov); See the Trade Trends semi-annual report
- U.S. Customs and Border Protection, Department of Homeland Security (www.cbp.gov)
- CBP Info Center
- Logistics Service Providers
How to Import into the United States
(Chapter 8; Pages 193–236)
Manufacturing abroad may not be your most cost-effective option. Unforeseen costs and time delays (flights, meetings with legal counsel and business matching companies, issues with production and quality concerns, testing fees, minimum order quantities) are all factors to seriously consider. At a minimum, consider making your prototype domestically. The CACT can connect inventors with California-based manufacturers.
If you still want to pursue contract manufacturing, note that you must be able to provide the following:
- Multiple product samples. Samples are self-explanatory and will help source multiple factories.
- Products specifications such as drawings and quality standards. Ideally he will have 3D designs and know what quality/test standards (Example: UL mark, CE mark) are required for his product’s safety for seamless entry into the U.S.
- Order quantity. The higher quantity the better pricing he can negotiate. How many units will fill a 40 foot container? What is the total weight? He needs to know the CBM.
- Target cost or budget. This will help him negotiate with factories. Also factories normally have minimum order quantity required.
- Packaging requirements. Packaging is also part of the product cost.
- Shipping destination. This help determine the shipping cost from China to the final destination.
- Register your IPR (review the IPR Toolkit)
- Consider CTPAT Certification
- Register with CBP IPRS: http://iprs.cbp.gov
- Identify your testing laboratory for pre-shipment inspection
- Work with a Customs Broker
- Association for Manufacturing Technologies
- Association for Operations Management (APICS)
- Council of Supply Chain Management Professionals (CSCMP)
- Electronic Components Industry Association (ECIA)
- Institute for Supply Management (ISM)
- National Association of Manufacturers (NAM)
- The National Council for Advanced Manufacturing
- Telecommunications Industry Association
- Tooling, Manufacturing & Technologies Association
- Best Manufacturing Practices Center for Excellence
- The International Trade Administration’s Manufacturing and Services Unit
- National Institute of Standards and Technology (NIST), Manufacturing Extension Partnership (MEP)
Session 6: Registering your Business and E-commerce
- Class Presentation
- Export Trading Company Act
- IC-DISC Tax Savings Program
- USA Export Expo
- USA Export Expo (location 2)
- How to set up your own Import/Export Business
(Chapter 6; Pages 145–166)
- Selling E– Commerce: Communications; Getting Paid; Keeping in Touch
(Chapter 4; Pages 87–93)
- E-Commerce Toolbox
Session 7: International Trade Business Plan Development
As an international trade intermediary, what will set you apart from your competitors? Some intermediaries offer the following trade facilitation services:
- Connecting U.S. manufactures to buyers overseas, and vice versa
- Supplies contacts
- Multi-lingual staff
- Product expertise, including foreign product registration assistance and/or maintenance
- Cross-cultural ability
- Satisfaction guarantee
- Pre-selected distributors and buyers in the foreign market(s) with national distribution
- Financial strength
- Financing options
- Cost savings through tax incentive programs
- Product sourcing at low prices
- Special product offerings and close-outs
- Marketing and promotional materials support
- Product localization assistance
- Midterm exam
- Class Presentation
- Life-plan Template and Elevator Pitch
- SBA Export Business Planner
- Business Model Canvas and video playlist (six short videos)
Session 8: Exporting form the United States
- Current export topics (www.export.gov)
- Federal Level Export Programs and Assistance
- U.S. Commercial Service, Department of Commerce
- FTA Tariff Tool
- Exporting from the United States
(Chapter 7; Pages 167–192)
Session 9: Cross-cultural Considerations and Elements for Success
- Discuss Export/Import Questions
- Exporter Checklist; Importer Checklist
- 20 Keys to Import/Export Success
(Chapter 16; Pages: 341–346)
- Discuss Export/Import Questions
Session 10: International Business Plan Presentations
Final Comprehensive Exam
Begin the Final Comprehensive Exam
Optional Group Project
Instructors who teach this course may assign a group project to their students to encourage practical application or simulation of the materials. Students should break into their groups (approximately three to five students per group), exchange contact information and begin reviewing their group project around class session number three to allow ample time for completion. The international business teams will present a business plan from the perspective on an international trade intermediary. Presentations should last not more than 20 minutes in length. The group project can be time-consuming so in addition to working in-class, students may need to connect outside of regular classroom hours. Group dynamics will vary and to assess student contribution, group feedback is important.
Helpful tips for instructors:
- Have students complete and submit a Group Project Peer Review form
- Have students review the presentation template in advance to ensure they touch on all key points
- Have students print one hard-copy of their final presentation to submit to you before they begin their group presentation in class so you can follow-along and take notes
- Have students save their presentation online (cloud) or on a USB drive for easy downloading to transfer to the computer connected to the A/V equipment for in-class presentation viewing
Optional Study Trip
For those within the Los Angeles geographic area, tours of the Port of Los Angeles–the largest Customs district in the U.S., are available. Free tours convene every Tuesday at 10:00 a.m. and Thursday at 2:00 p.m. Advance registration is required. Availability is subject to the number of spaces open at the time of registration. Many education institutions will require students to sign a waiver in advance of all study-trips; check with your school to review applicable policies and procedures.
Contacts: Jim MacLellan, Director of Trade Development (310-SEA-PORT); Michael Barnes, Rekief Captain (310−732−3840)
Address: Port of Los Angeles, 425 South Palos Verdes Street, San Pedro, California, 90731 USA (departure point is Berth 84 by the Maritime Museum)
PDF Map/Directions for Berth 84, Port of Los Angeles
- Submit the complete list of names participating in the tour to POLA in advance.
- Do not be late or the boat will leave without you.
- Bring a photo I.D.
- Wear sensible shoes that are flat and closed toe (avoid heals and sandals).
Handouts Tag: Indirect Export Curriculum