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Exporting Basics

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CHAPTER 1. Is Exporting for me?
  What Is Exporting?
  Similarities to Domestic Selling Exporting is like domestic selling in many ways. Itís basic marketing first and foremost. Whether you sell domestically or abroad:

  • You have a product or service to sell, either your own or a client's (if you're an intermediary)
  • Your customers vary in their racial, religious, ethnic, cultural and linguistic orientations
  • Your marketing territory includes areas with differing seasons and physical environments
  • You do market research to pinpoint, size-up, and assess your customer base
  • You develop a market plan to plot your distribution, pricing and promotion strategy
  • You market and promote through the Internet, direct E-mail and regular mail, Fax, phone, brochures, press releases, the ad media, trade shows, etc
  • You set up sales and distribution networks to cultivate and service customers
  • You respond to inquiries and issue price quotes on request
  • You invoice purchasers and get paid
Dissimilarities Here are the main dissimilarities between domestic sales and exporting:

  • Exports are more often channeled through intermediaries in each country, not directly to end-users. In most countries, imports are routinely handled by local agents on commission, or by importer-distributors who buy for their own account and resell to end users. These intermediaries know the market and have contacts with the end-users. They are assets for you, not extra layers. They develop and send you sales orders, arrange for payment, prepare required import documents, and clear the delivered goods through customs. Many are equipped to stock, install and service the goods. The end-users know and prefer to deal with these local agents and distributors, rather than buy direct from you or other foreign suppliers. As the exporter, your best bet is to find qualified agents or distributors to represent you abroad. To help you find them, consider ďrep-findĒ services available from a federal or state export assistance center in your area. Potential agent/distributor contacts can also be found in the CITD's Trade Information Database (Foreign Trade Directories).
  • Exports usually involve an exchange of currency to pay for the purchase. The importer pays your purchase price in his local currency, converted to your preferred currency (e.g. U.S. dollars) at the prevailing exchange rate. To protect against exchange rate fluctuations, you should quote your selling price in a strong currency, preferably your own. That way, you get the full amount you quoted, regardless of currency fluctuations.
  • Export sales use different payment methods. Exporters usually receive payment through a process handled by banks in your country and the importer's country. The most common method, an irrevocable, confirmed Letter of Credit (L/C), assures prompt payment with minimal free. The importer puts up the money or collateral in advance with his local bank. The importerís bank credits these funds to a cooperating bank in your country, which pays you, the exporter, when the goods are shipped or delivered. Other methods, such as "sight" or "time" drafts, are used for credit sales involving delayed payment terms. You can purchase export credit insurance to reduce risks of non-payment.
  • Exporting involves more and different paperwork. Exporters must prepare a number of specialized shipping and regulatory documents. The U.S. government, for example, requires a Shippers Export Declaration for most exports, and a U.S. export license for "controlled" goods. Foreign governments in the importerís country typically require a commercial invoice and, in some cases, a consular invoice, certificate of origin and possibly other documents. Various freight-related documents are needed for sea and air shipments, such as a packing list and bill of lading. Many exporters use professional freight forwarders to handle all their export documentation.
  • Exporting usually involves added costs to ship and insure the goods to the importing country. In most cases, the importer asks for a CIF price quote (cost of goods, insurance and freight) to the end destination. Some importers prefer to arrange their own transportation and insurance, either from the exporterís factory (Ex works price) or from the departure port or airport (Free On Board or FOB price). A freight forwarder can advise on shipping and insurance costs and handle all arrangements to transport the goods to their overseas destination.
  • Exports are subject to customs duties and taxes in the importing countries. If high enough, these costs could price your products out of the foreign market.
  • Widely differing laws and business practices exist in other countries. These encompass trade, monetary and fiscal policy; pricing, distribution and promotion; treatment of intellectual property; health, safety and technical standards, etc. These laws and practices affect what you're allowed to or should do to protect yourself in the market. Although many practices are business friendly and compatible with those in your country, some pose obstacles and risks for exporters. It's best to research potential problems in each country and seek counsel from an international law firm if needed.
  • Linguistic, demographic and environmental variations are more pronounced outside your country. These differences, if ignored, can make or break your sales efforts abroad. Take care not to offend your foreign customers in the words, symbols and body language you use in your promotional material and business negotiations. In addition, your products must "fit" the market environment -- the climate, terrain, sizes of people and things, consumer tastes and preferences, etc. Your local trade assistance organization has relevant information on each country and can refer you to "localization" specialists to help you adapt your product or approach as needed.
 
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