White-in-article.jpgWhether you wish to export your own products or import the goods of foreign manufacturers, make sure you understand the basics of doing business overseas

 

By Christopher Freeburn

 

Most entrepreneurs dream of founding a great business. Many hope to create businesses with global reach, sending their brand into markets not only across town, but across the world. While the Internet and the rise of a more intricately connected global economy has made it possible for many small businesses to sell abroad, many owners want to do more than simply mail products overseas, they want to import foreign products, or see their products actively sold in foreign markets. And though recent Commerce Department tracking reports found that less than one percent of small and medium-sized businesses export goods outside the U.S., there has never been a more opportune time to extend your small business’s international reach.

 

“In the past, opportunities for many small businesses ended within the borders of their own country, and international trade was only for large multinational corporations,” says John J. Capela, author of Import/Export for Dummies. “Today, the global marketplace provides opportunities not just for the multinational corporation, but for small upstart companies. The Internet, affordable changes in technology, and increased access to information have all made it easier for firms of all sizes to engage in international trade.”

 

Trading abroad: export basics

Sending your company’s products overseas for sale in foreign markets requires a considerable amount of planning and education. If you decide to export your products directly, you will need to find a partner in the target country who can receive the goods and put them in the right marketplace. There are two main ways of doing this. First, you can pay someone to act as an agent for your products in the target country. The agent will negotiate for you with vendors in that country’s marketplace to secure placement or sales of your products. Alternately, you can locate a local distributor in the target country who will take possession of your products as they arrive and send them to the right markets.

 

These forms of direct exporting require making contacts in the target country and successfully negotiating sometimes complex and expensive agent and distribution agreements. Relatively few small businesses attempt this. Most opt for less onerous indirect exporting arrangements, using export management companies (EMCs) or piggyback exporting.

 

EMCs are U.S.-based companies that provide exporting services for multiple U.S. clients. “EMCs normally take title to the goods and assume all the risks associated with doing business in other countries,” Capela says. EMCs handle distribution and legal negotiations inside the target company and are popular with small exporters for exactly that reason.

 

In “piggyback exporting” a small business that wishes to export goods to a given market partners with a larger domestic exporter of complementary—but noncompetitive—products headed to that country. Capela uses the example of a small maker of hairbrushes that would like to sell its products in Italy. The brush maker approaches a shampoo maker that exports to the Italian market and offers that company the right to market its brushes in Italy. “Why would the shampoo company be interested in such a deal? Because this enables the shampoo company to offer a more complete line of products to its distributors with little or no additional investment,” Capela explains.

 

Forming an overseas partnership: import basics

U.S. businesses looking to import products from abroad have an astonishing array of opportunities to choose from. Many foreign governments, particularly countries in Asia, are eager to arrange partnerships between U.S. importers and their domestic suppliers and manufacturers. If you know where the product you wish to import—or wish to have manufactured outside the U.S.—is made, contact that nation’s embassy or consulate. The embassy or consulate can put you in contact with the appropriate trade agencies that will facilitate contact with that country’s available manufacturers.

 

Forming an overseas partnership is a step that must be taken with great care. Since you and your potential business partner live in different countries likely possessing greatly different business laws and regulations, separated by vast distances, the first step would be to consult business law attorneys in both countries to determine what sort of partnerships are permitted in each country and exactly how the business would have to be structured in order to best adhere to both local jurisprudences. Different nations have specific laws governing international partnerships, employment, and investment, the intricacies of which are too great to be answered comprehensively here. Any partnership you form will have to accommodate itself to those rules, and you will almost certainly require professional legal advice to determine how those differing rules apply to this enterprise.

 

“Prior to finalizing any purchase or sales agreement, make sure that you understand the warranties and service included,” Capela advises. “Confirm who will register trademarks, copyrights, and patents, if applicable, and in whose name it will be. Finally make sure that any agreement includes a provision for termination and settlement of disputes.”

 

Building long-distance trust

As for maintaining a trustful relationship with a partner who resides and works in another country, frequent communication and independent verification of financial data are probably the best means. Internet-based approaches allow for instant communication between widely separate parts of the world, and it means that any data that your partner has access to, you should as well. You should be able to communicate with your business partner easily and as often as necessary. You should also insist that your partner retain a chartered financial analyst (CFA) or accredited accountant or accounting firm (equivalent to a CPA in the United States) to audit all financial statements generated by the partnership in the area where your partner is based on a continuing basis, and provide copies of that analysis to you. If your partner objects to granting you access to the business’s operational data, or permitting an independent review of the web site’s financial data, you would be well advised to strongly reconsider any partnership deal.

 

 

Import/Export online resources:

To see how well your business and its products match up with those that are typically successful overseas, take a quick, nine-question “export readiness assessment” found at the federal government’s helpful Export.gov website, here: http://www.export.gov/begin/assessment.asp

 

To decide whether or not your small business needs an EMC and for tips on finding the right one if you do, check out this how-to page on the Federation of International Trade Association’s website: http://www.fita.org/aotm/0499.html

 

TradePort, a non-profit alliance of California-based trade associations, offers a handy series of tutorials on the basics of business importing and exporting here: http://www.tradeport.org/index.php/trade-toutorials

 

The Small Business Administration’s International Trade webpage, which includes import and export tutorials, videos, podcasts, financing tips, and other information, can be found here:

http://www.sba.gov/aboutsba/sbaprograms/internationaltrade/index.html

 

For more personalized import/export business assistance, contact one of the SBA’s local Export Assistance Program offices. The SBA’s EAP directory can be found here:

http://www.sba.gov/aboutsba/sbaprograms/internationaltrade/useac/index.html