INTERNATIONAL TRADE
Getting Started In International Trade
International trade is a serious business and this short report is only a brief introduction to this ever changing industry. You should consider this international trade report as a jumping off point for your career. International trade should not be entered into without a thorough understanding of the industry.
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You must always remember that every situation in an international trade transaction is going to be different. The rights, obligations and liabilities of any company or individuals participating in import-export transactions vary widely according to many factors including the products or services being sold and the target market. You should seek professional advice before committing to any major transaction.
INTERNATIONAL TRADE IS DOORWAY TO WORLDWIDE PROFITS
First thing you should ask? Is this business really right for me? There's no need to ask the man who brokered a deal for $100,000 of concrete to be shipped to France. When he collected a $10,000 commission he was grinning from ear too ear.
And don't bother asking the Illinois export management company owner who was trying (without success) to sell a locally-produced steak sauce to overseas buyers. He was wondering if anyone wanted to buy the stuff when
he implemented what he learned in one of our courses and bottles started flying out the door (and the cash started pouring in) at a German
commercial fair where he sent some cases almost on a whim.
Importing and Exporting is full of incredible opportunities for the small and mid-sized company that is not now exporting.
U.S. exports sell! And they sell big in overseas markets. Amazingly, many of these companies are not
involved in exporting because they believe it is to "too hard" or "too complicated."
It is this attitude that has provided many worldwide opportunities for the one-person exporting company. Many of these new exporters work part time out of their homes. After making one or two sales, they turn to exporting full time.
Maybe you think exporting is selling automobiles, airplanes, oil, lumber and food to foreign countries. It's true that these products are exported from the U.S. every day.
But the export merchant or export management company owner doesn't have to sell big ticket items to make big profits. I know exporters who have done very well exporting everything from jet skis to cigarettes.
Today I spoke with a man who is looking for suppliers of rags and waste paper. He wants to ship these
products to eager buyers in India. I have no idea what these items are used for but this is just one example of the wide range of products exporters seek and sell successfully. One of my newsletter subscribers recently told me he was looking to export scrap metal to Greece and Turkey. When it comes to exporting, even material we normally think of as trash or leftovers can often be exported successfully.
INTERNATIONAL TRADE BRINGS NEW SALES FROM EVERY CORNER OF THE WORLD
Today there are opportunities in just about every country of the world. The trick is to identify the market, locate the supplier, make the connection and collect the commission after the sale.
A home-based exporting company can have you start out working on a commission basis or a buy-and-sell basis.
We recommend that you start out on a commission basis because it requires no capital investment, no inventory and no involvement with after-sales service. As a result there is practically no risk.
Exporters often "graduate" to buy-and-sell (where the profit margin is usually better) after they get their feet wet exporting on commission.
One way to get into exporting is by establishing your own export management company.
An export management company or EMC acts as the export department for other companies, usually small or
medium sized manufacturers that are not currently exporting or
those that would like to expand their export market.
An EMC sells a company's products overseas and frequently similar, non-competitive product lines as well. This does not mean the EMC owner must travel overseas although many frequently decide to do so
and then deduct the cost of the trip from their taxes as an expense.
Export management companies provide many services such as conducting market research, selecting overseas distributors or representatives, arranging shipping and ensuring proper documentation. This means the U.S. manufacturer simply fills the orders and takes payment.
Since many small U.S. companies are intimidated by the prospect of entering the
world marketplace and are ignorant of the opportunities, an EMC is an attractive choice for them. The EMC makes the opportunities known to the manufacturer and explains how he can expand his market
throughout the world at no risk.
Start Your Own Import Export Business Training
The following are the basic steps in starting your own home-based exporting company
1) Create a professional image. While it's true that you do not have to be a big company to be successful in exporting, it's important that you look professional. Since you are not dealing directly with
clients in your office, you can save money by working out of your home and you can earn a tax deduction too. Your personal credibility is your most important asset as an exporter.
This means you should have professional-looking stationery, a good answering machine and a fax machine in your home
office.
I know a broker who lives in a small town, travels all over the world and puts together deals worth millions on a regular basis. He likes the small town life and his considerable income goes much further there. His office? A desk, credenza, file cabinets, telephone, computer and fax machine. He doesn't even have a secretary. He talks to people on the phone (or travels) and send documents through the fax. This exporter is one of the exporters featured in the video tape/workbook "The Export Connection - Exporting Business Course."
One of the most important tools you can have is the personal computer. Your computer is the way you can keep track of your enterprise. You can monitor sales and expenses with accounting programs. You can predict future profits and calculate expenses easily and quickly with a spreadsheet. You can draft letters with your word processing program and develop sales material with a desktop publishing program. Your modem is the key that unlocks a host of resources.
Through the Internet, you can locate and develop important worldwide contacts. Just as importantly, you can reach experts in all areas of import-export and access libraries of information on tactics, tips, contacts, methods that have worked and not worked and just about every other aspect of exporting.
You can use your Internet
connection to identify and contact suppliers. Your modem and computer also serve as a mailbox. You can
talk instantly with potential contacts, information sources, other
importers/exporters
like yourself, buyers and overseas representatives. And it doesn't matter if the person your talking to is in the next room or the next continent.
Online communication is not only fast, it's cheap and brings the
world to your doorstep.
You can use your Internet connection to scan libraries of information about your product, trading practices and maybe download sample letters and agreements you will use to set up your first sale.
Perhaps you sent a public message asking for help in finding a representative or questioning the value of a letter of intent. If you did, you surely received a response from some of the thousands of others in your forum and you may have started a heated discussion on some aspect of
importing or exporting that enlightened you and many more. Or maybe you're the shy type and you decided to send a private e-mail message to a potential supplier or buyer whom you identified on the net.
When you are serious about starting your exporting company and
using the Internet, then order
The Exporter’s Master Package - Exporting Training Course.
This course package is the best
export business training resource we have found since entering this
business in 1988 and is the most comprehensive source of information about using your computer
and the Internet in this type of business.
2) Evaluate your strengths. Or put another way: What is your edge?
By that I mean, what do you bring to exporting that will make a manufacturer want to take you on as his exporting representative?
What is your particular experience, talent or skill? One man I know ran a grocery store.
He approached food processing companies saying he wanted to expand his food marketing efforts into the
world marketplace. He ended up selling groceries to Nigeria.
Another new exporter told potential clients he didn't have exporting experience but had contacts in Mexico and spoke fluent Spanish. This made him attractive to U.S. companies that wanted to expand into the booming Mexican market. Some new exporters take advantage of a
relationship they may have with a company owner. The goal is to establish credibility with the potential supplier. This is the most important step in starting out as an exporter.
For the intermediary in indirect exporting, finding a company with products or services that can be sold for a profit overseas is the biggest challenge you will face.
Manufacturing and service companies are often reluctant to move into
the world market and hire the necessary export middlemen because they are intimidated by everything involved in the exporting process. Some companies are satisfied with the domestic exporting process.
Others are unaware of the profit potential in overseas markets. Whatever the reason, you as the
exporting intermediary will show these companies that their product will sell overseas and that you are the one to sell it.
Here's an important word to remember as you put your exporting
company together. That word is specialize. Early on, you must determine how you will slice up your share of this huge market.
People who are looking for one big sale as the way to make their fortune in exporting are usually disappointed.
Instead, stick to a general product line such as electronic parts, books or sporting goods.
Become familiar with your product line and work on establishing a good reputation.
Before long, this will translate into more clientele as more manufacturers seek you out to represent them.
A highly successful export management company in Mobile, Alabama (featured in
The
Export
Connection) has more requests from U.S. companies in their specialty than they can handle. They are able to pick and choose the companies to represent.
They earned this enviable position thanks to hard-won reputation for excellence. Their criteria for selecting a company to represent
in the worldwide arena?
Product quality.
3) Research, research, research. These are three most important words for the exporter. This means identifying the product and the country with the greatest trading potential. Take into account your own strengths in making this determination. If you're a shoe salesman with contacts in the shoe industry, you may want to narrow your focus on products that country imports from the U.S. You can spend a lot of money on research. I recommend starting at your local public library. It's free. It's close. And it's full of valuable data that will help you define a market and sell to it. Ask your librarian for the best publications and directories that will assist you in your search.
A federal depository library - - at least one is located in every congressional district - - can become your most valuable resource. Before spending money on market research, check to see if needed information is available through the federal depository. That way, your expenses can be limited to the cost of transportation and making copies. Review Dun and Bradstreet's Exporter's Encyclopedia
and then branch out to more select publications to find out about your potential market products to sell there.
While the U.S. Department of Commerce ITA is a valuable resource (particularly for its research material and access to government-sponsored programs), you may have to convince them that you're representing a company seriously interested in exporting before they will make some of their resources available to you.
What are you looking for in your research? You want to determine which countries are buying what products. This isn't the time to break any new ground. If Venezuela is buying U.S.
made widgets, then it's likely you can sell widgets there too or at least widget-related accessories and equipment. What you won't know right away is whether or not the widget you want to sell is competitive. You'll find that out when you approach the supplier (see step 5).
Read the newspapers (The Wall Street Journal and New York Times are two good ones) and watch the news. Be looking for political and economic changes around the world that could open your product to new markets. Review
economic statistics. These are compiled by country and by product category. They can tell a potential exporter what kinds of shipments are going to which countries.. Look at demographics for your selected nation. Check the population size, per capita income, and competition. Much of this information can be found in a good World Almanac or the CIA Fact Book.
Consult with the experts including your banker, freight forwarder, other exporting companies or agents,
associations, and government officials.
Attend seminars, workshops and anything that will broaden your understanding and knowledge of the exporting process, especially in your target country and product. Many more specifics about the important role of research are
contained in the Export
Business Course.
4) Line up your assistants. One of the reasons small and mid-sized companies are afraid of exporting is because of concerns over payment, currency, language, customs, paperwork and shipping. You don't want to be bogged down with all these problems either. But you know something they probably don't know. There are people willing - - even eager - - to help you. Look for a good bank that offers services such as processing letters of credit and doing credit checks on potential overseas buyers and representatives.
If your not sure where to start your research for a good bank, check with a local freight forwarder (although some are reluctant to recommend any one bank since they may work with all of them), or other
importers or exporters you meet at association meetings. The local chamber of commerce can help too. My experience is that it's beneficial to have a full service bank in your hometown, but it's not likely unless you live in a big city. Many new exporters find they are getting more attention from a local bank anyway. The big-time banks are often busy brokering big-time deals and don't want to spend a lot of time with inexperienced exporters. The officer at the correspondent bank who is in charge of
worldwide banking frequently visits his smaller branch offices on a regular basis.
A freight forwarder will handle just about all the paperwork involved in an export transaction. Your life as an exporter will be a lot easier when you make friends with a good
freight forwarder. The freight forwarder is both a resource and a helper who is familiar with export regulations and just about everything involved with shipping. He will help you put together accurate figures on freight, port charges, miscellaneous fees and other costs you'll need to prepare your price quote. He does all this for a small fee which should be included (just like your commission) in the final price of the merchandise.
Ask fellow exporters about freight forwarders they recommend. Other considerations in finding a good freight forwarder include their location.
Are they close to you (or the company you are representing)? Sometimes you may be hand-delivered documents and proximity will be a real plus. Does he provide a full range of services including both air and surface transportation?
This may not be a consideration if you plan to ship exclusively by air (for small or perishable shipments) or by ship (for large shipments or when speed is not important).
What about specialization in products or countries? Does he have affiliate offices in other parts of the U.S. or overseas (this can result in better freight rates)?
Finally, the U.S. Department of Commerce has district offices around the country that offer a range of services to exporters.
Be sure to check them and to discover exactly what services they
provide to exporters.
Some of my clients have difficulty dealing directly with ITA district offices as export management companies. These district offices are very busy and
representatives are more inclined to spend the most time with clients who have a serious exporting commitment and a product to export, and preferably a large quantity of that product.
I've spoken with government representatives who admit that many small EMCs are more interested in picking specialist brains than in seeking export help for a manufacturer who is serious about exporting. That's why some EMC owners are frustrated when they can't even get their calls returned from
these specialists. My advice: work with a specialist when you have a commitment for a supplier. In the meantime, use the library and other resources at the ITA to uncover data and information about their export assistance programs. And freight forwarder as resources.
5) Approach the supplier. By now you've already determined a likely overseas market and the product to sell there. Since you've taken advantage of an edge you enjoy, you will have credibility with the suppliers you've targeted. Through a letter and follow-up phone call, set up a meeting with the supplier. With the facts and figures you've already researched, explain how you can increase their market at no risk to them if they hire you as their sole agent. When they provide you with figures on product cost, you can determine if their product will be competitive in the target market.
Look to manufacturers in your local area, if possible. After conducting some initial research on product attractiveness in the
world marketplace, send a letter to those companies you've determined have the greatest export potential. Write to a senior marketing officer such as the national sales manager or vice president of sales. Your letter should introduce your exporting company, address the exporting possibilities for the local company and how exporting will involve no risk to them while expanding their market. Invite them to give you to set up a meeting, then call them yourself if you hear nothing within a week. Don't misinterpret failure to call you as a company that is not interested in exporting.
This is the approach that has brought the most success for my clients. The intermediary (agent, EMC, etc.) identifies a strength like expertise in a particular field such as clothing, food, electronics or knowledge and familiarity with a particular foreign country or part of the world. This middleman then reviews manufacturer/supplier names in a directory, copies the names and phone numbers of the companies that interest him, then makes phone calls.
The purpose of the phone calls are to determine if the company is currently exporting. It is not necessary at this time to speak with a company officer. A secretary or even an operator can usually answer your question.
She may also provide additional information that will prove useful later ("my boss said exporting is too much of a hassle") .
The next step is writing a letter to the company official that outline the possibilities and focuses on the identified strength of the middleman. Approaches that have worked for my clients include:
"I have long experience in shoe marketing and an am now expanding my sales effort to the
world marketplace. I've done some preliminary research and believe there is a market for Murphy Sport Shoes in the Mexican market."
BEGINNING EXPORTERS with overseas connections have enjoyed success
Beginning exporters with overseas connections have enjoyed success with approaches like this:
"I speak Spanish fluently, understand the culture and have contacts in Mexico. I have already determined a market for Murphy Sport Shoes in that country and believe my new export management company can expand your market for shoes to Mexico with no risk to you."
Don't pretend to be a long-time exporter if you're not. But don't play up inexperience either. The exporters who have enjoyed the greatest success have been honest about their inexperience
while emphasizing their marketing strengths. This establishes credibility and reinforces your basic honesty.
Don't expect every manufacturer to jump at the chance to use your services. Be persistent. For more tips and strategies, review the "Export Business Training Course."
6)
Finding a foreign representative. Now that you have a commitment from the U.S. supplier and assurances that the product is
competitive, you must identify someone in the foreign country who will sell your product. You may already have contacts in the foreign country or you may have to search for one.
Having an agent or sales representative overseas gives the exporting company and the U.S. supplier more control over the marketing effort in the target country but requires more personnel and financial resources.
A distributor is a better choice if extensive inventory in the foreign country is necessary and if the U.S. company wants to delegate most of the service and credit matters.
In general, the margin allowed for a percentage allowed for distributor will be higher than the commission percentage allowed for agents.
Your foreign customers want to believe you are going to be around for the long haul. Their perception of American
companies (frequently accurate) is that we want to make one quick sale without leaving home and not worry about future sales or service support. The successful exporters do more than the minimum necessary. They hand-hold their foreign customers because they understand that word of mouth overseas can make or break their product. Service is important. This is especially important when working through overseas representatives. Make sure they share your commitment to service excellence.
Once you have a manufacturer contract giving you authority to seek an agent on their behalf, visit the closest ITA district office. They have a number of resources to help you locate overseas buyers for nominal cost. they will verify your product's marketability and help you prepare product literature packages.
Many new exporters already have reliable contacts overseas -- friend, associate or relative. Invariably, this gives the new exporter a definite advantage both in making sales and in enhances credibility with potential suppliers in this country.
In some countries -- particularly Mexico with the passage of NAFTA -- you will find no shortage of enthusiastic individuals who want to represent your product. Be careful. Check out each representative applicant carefully. Biggest problem: some of these representatives will represent so many different industries or products that they will not give our product the attention it deserves.
If you have a computer, you may be able to identify overseas representatives and exchange information about your requirements for marketing your product overseas and his requirements for product support via
Email. This discussion can be carried out much more rapidly than it can through the postal system and at much lower cost.
Answering inquiries. When you receive a query from an overseas buyer, you will use pricing figures developed in your research to develop a pro forma invoice. The pro forma invoice describes the product, states the prices, sets a time for shipment and specifies terms of payment such as letter of credit. This is a binding price quote.
Do not add costs to an export sale that are included in the domestic price such as some administrative and factory overhead costs or domestic marketing costs. Suppliers should be counseled to add their customary domestic profit margin only to costs that are relevant to an export sale. That will provide the true export price.
Do not forget that you may incur additional costs when selling to foreign countries. Some of these costs include special packaging and other product preparation costs, post - sales service as well as research and
commercial show costs. You many discover that none of these apply in your case or you may determine that these and even others apply. The important thing is to evaluate your own situation, then factor these figures into your final pricing calculation.
This is an example of how to calculate costs to ship a fictional product (widgets) to Venezuela.
SHIPPING 100 DZ WIDGETS TO VENEZUELA 100 DZ Widgets $50,000
Export Agent Fee (10%) 5,000
Foreign Rep Commission (5%) 2,500
Export Packing 300
Inland Freight (to port) 100
Shipping 2,500
Insurance 100
Customs Clearance 80
CIF to Caracas, Venezuela $60,680
Tariffs/ Taxes 7,500
TOTAL $68,180
7) Getting Paid. For most new exporters the first transaction will be paid for by a letter of credit.
Although it is a complex transaction (let your banker handle the details), basically it insures both buyer and seller are protected. If your export is of low value, however, you may discover that costs associated with preparing a letter of credit are simply not worth it and you may decide on another payment option. With all the amendment and confirmation fees, using a letter of credit can be prohibitively expensive for shipments less than $10,000 in value.
Except for cash in advance, the letter of credit (L/C) offers the exporter the highest degree of protection from loss.
It is a bank's promise that the exporter will be paid when he has complied with the terms and conditions of the letter of credit.
Banks are willing to assume the risk of an L/C transaction because they are more familiar with each other than the buyer and seller are likely to be.
As a result, they can more easily evaluate each other's creditworthiness.
A full description of a typical letter of credit transaction is contained in the video tape
"How to Make $100,000 a Year With Your Own Export Management
Company."
which is part of the "Exporting
Business Training Course."
In simplest terms the buyer's interests are protected with a letter of credit because payment is not made until the shipment is on the way. The exporter is protected because he is assured of payment once the goods are shipped.
As a rule, you should insist on trading in U.S. currency since there's always the potential for difficulties when converting foreign currency to U.S. dollars. Usually this is not a problem since the dollar is one of the most accepted currencies in the world.
Once payment is made on the letter of credit, you will receive your commission check. In the meantime, you have probably been working on marketing other non-competitive product lines and may already have another sale in the works. Congratulations. You're an exporter!
Hundreds of part time entrepreneurs are showing small and mid-sized U.S. companies how
they can help them open up new and profitable markets around the world.
These fledgling home based exporting companies are receiving big commission checks while taking part in
this exciting and challenging field.
Their only investment is their time.
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Original Copyright by Spyglass Point Productions. All rights reserved. No part of this report may be reproduced or transmitted in any form or by any means without permission.
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The original format of this report included the New Export Intermediary's Biggest Mistake which we have posted as a separate report which you can access using the above link. You are encouraged to read this report as well as the other free reports that are listed below before making a decision about starting your own import-export business.
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Frequently Asked Questions - Starting a Home-Based Exporting Company
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How to Use the Internet to Perform Due Diligence (Check Out Companies and Individuals)
Click Here To Start Your Own Import Export Business
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