FAQ Topics
Q: Where can I go to learn the basics about exporting?
Q: What agencies and organizations can be a resource to me?
Q: Where can I receive information on foreign markets?
Q: How do I get started in a particular region or country?
A: Prior to exporting to a new region, it is wise to research the market to determine:
- Is there an export market for the products and services?
- What are the barriers to entry to a particular market?
- Which are the best markets and their size?
- Which products or services are best suited for export?
- What is the most effective method for entering a market?
- Who are the major participants in the market?
- What is the nature of the products and services offered in the market?
- Do the customers in the market demand special support for products or services?
- Are any of your major customers a force in any of the target markets?
- Do the products, services, packaging, advertising, or literature require modification to meet market needs?
Q: What are the most common mistakes made by exporters?
A: Most companies that have not succeeded in exporting, regardless of their target market, product or service, have made one, or possibly several of the following ten mistakes:
- Failed to develop an international marketing plan before beginning to export
- Lacked total commitment of top management in the initial stages of exporting
- Selected overseas representatives too quickly without thorough investigation
- Chased orders around the world instead of using a systematic marketing plan
- Neglected new export customers when their domestic market was booming
- Failed to treat international and domestic representatives on an equal basis
- Refused to modify products to meet foreign regulations and local preferences
- Did not print sales, service and warranty messages in local languages
- Refused to use export management companies (EMC) in less promising markets
- Failed to consider licensing or joint venture agreements in more restrictive markets
Q: Should I translate advertising and promotional materials into the local language?
A: It will almost always be more effective if you advertise and promote your products in the language of the export market. If translators are not familiar with the current idioms and word usage in the export market, words and phrases with multiple meanings could seriously damage the image of your company and products.
For further information and tips on translation services please click here.
Q: What are the major reasons of U.S. export regulations?
A: Administered by the U. S. Department of Commerce and other government agencies, the export regulations of the United States are designed to accomplish the following three objectives:
- Support national security: prohibits the export of items that could affect the military potential of countries unfriendly or hostile to the United States.
- Support foreign policy: prohibits the export of items that could affect the execution of declared international obligations, i.e., trade embargoes.
- Protect resources in short supply: prohibits the export of natural resources that could affect national military potential or create inflationary pressures.
Penalties for violation of U. S. Export Regulations are severe. For companies, they range from fines up to $1,000,000 or five times the value of the exports involved - whichever is greater. For individuals, they can be as high as $250,000 in fines, or imprisonment for up to ten years - or both.
Other penalties that may apply are seizure of goods and suspension of exporting privileges. Another negative factor is the adverse publicity that may result when the news media and government agencies report and publicize court decisions and settlements of Export Regulations violations.
Q: What are Harmonized System Codes (HSC)?
A: The Harmonized System is an international method of classifying products for trading purposes. This classification is used by customs officials around the world to determine the duties, taxes and regulations that apply to the product. Under the Harmonized System, products are assigned a six-digit identifying number: The first two digits of this number identify the chapter into which the product falls. The second two digits identify the heading within that chapter. The final two digits identify a specific class of products. Each country may further expand the Harmonized System by adding additional digits. The U.S. Census Bureau website provides a search engine to find the correct code for your products. If you need additional assistance to find the correct code, please call 1-800-TRADE.
Q: What export forms do I need to fill out?
A: Some of the common government-required forms of documentation are listed below. The seller normally prepares his or her own commercial documents and the freight forwarder normally prepares the transportation documents. Some freight forwarders will do all the paperwork for you.
Automated Export System:On June 2, 2008, the U.S. Census Bureau made the filing of export information through the Automated Export System mandatory for all shipments where a Shipper’s Export Declaration was previously required.
The Automated Export System (AES) is a collaboration of federal agencies, such as the U.S. Customs and Border Protection and the Foreign Trade Division, and the U.S. export trade community.
Export information is collected electronically, edited immediately, and errors are detected and corrected at the time of filing. AES is a nationwide system operational at all ports and for all methods of transportation. It was designed to assure compliance with and enforcement of laws relating to exporting, improve trade statistics, reduce duplicate reporting to multiple agencies, and improve customer service.
For more detailed information, please visit:
http://www.cbp.gov/xp/cgov/trade/automated/aes/easy_steps.xmlhttp://www.aesdirect.gov/
The following facts can be used to determine whether or not the AES is needed for shipment:
- The AES must be filled out for any shipment valued at $2,500 or above (If the shipment is valued at over $2,500 but is made up of various commodities falling under several Schedule B numbers none of which is valued at $2,500 or higher, no AES is required.)
- The AES is required for any shipment to particular countries, such as Cuba, Libya, and North Korea, and for any shipment requiring a validated export license [call the Trade Information Center 800-USA-TRAD(E) for more information].
- An AES is required for shipments to Puerto Rico, the U.S. Virgin Islands and the former Pacific Trust Territories even though they are not considered exports (unless each Schedule B item is under $2,500).
- Shipments to Canada do not require an AES. (Shipments to third countries passing through Canada do need an AES.)
Bill of Lading:
A bill of lading is a contract between the owner of the goods and the carrier. There are two types: a straight bill of lading, which is non-negotiable, and the negotiable/shipper’s order bill of lading, which can be bought, sold or traded while goods are in transit and is used for letter-of-credit transactions. The customer usually needs a copy as proof of ownership to take possession of the goods.
Certificate of Origin:
The Certificate of Origin is only required by some countries. In many cases, a statement of origin printed on company letterhead will suffice (download generic certificate or see Sample with explanation). Special certificates are needed for countries with which the United States has special trade agreements, such as Mexico, Canada and Israel.
Commercial Invoice:
A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by governments to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, number of copies, language to be used, and other characteristics (see Sample).
Consular Invoice:
A consular invoice is required in some countries; it describes the shipment of goods and shows information such as the consignor, consignee, and value of the shipment. If required, copies are available from the destination country's Embassy or Consulate in the U.S.
Destination Control Statement:
This statement appears on the commercial invoice, ocean or airway bill of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to certain destinations.
Export Packing List:
An export packing list itemizes the material in each individual package, and shows the individual net, legal, tare and gross weights in U.S. and metric values. Package markings should be shown along with the shipper’s and buyer’s references. The packing list is attached to the outside of the package in a clearly marked waterproof envelope. The list can be used to determine the total shipment weight and whether the correct cargo is being shipped. Customs officials may use it to check the cargo at inspection points.
Inspection Certificate:
Some purchasers and countries may require a certificate of inspection attesting to the specifications of the goods shipped, usually performed by a third party and obtained from independent testing organizations.
Insurance Certificate:
Used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit (see Sample). These can be obtained from your freight forwarder.
Q: What services can I expect from my freight forwarder?
A: A freight forwarder will make arrangements for and expedite shipments to overseas destinations. Your freight forwarder should perform these services on your behalf:
- Act as your agent per your power of attorney to transport your products to the foreign port of import and, if requested by you, directly to the importer’s location in the foreign market.
- Prepare and examine shipping documents for accuracy, completeness and compliance with the legal requirements of importing countries.
- Distribute international shipping documents and, if requested by you, submit them directly to your bank for collection and deposit to your account.
- Act as your "Customhouse Broker" per your power of attorney and arrange for clearance of your import shipments through the designated port of entry.
Q: How do I choose a good freight forwarder?
A: Many exporters fail because they are unable to deliver their products in a timely and reliable manner. We recommend that you consider the following factors before selecting your freight forwarder:
- Location and operating hours of their local office. Visit their office often. If they are located nearby, you will save on communication and travel expenses. Make certain that they will be accessible evenings and weekends in case of emergencies.
- Location of branch offices. This will be especially important if you have to locate an export shipment quickly. If they have worldwide branches and affiliates, they will be able to trace your misrouted or delayed shipments from both ends of the transaction without involving third parties.
- Make sure they are a full-service forwarder. Can they handle ocean shipments, air shipments and container consolidation to reduce transport costs? Could they handle importing? Check their references to make certain they can process your shipping documents correctly and efficiently.
- Check our directory of Freight Forwarders and Shippers in Idaho
Q: How can I take samples into countries without paying duties?
A: An ATA Carnet (a. k. a. "Merchandise Passport") is a document that facilitates the temporary importation of products into foreign countries by eliminating tariffs and value-added taxes (VAT) or the posting of a security deposit normally required at the time of importation.
Q: What are Incoterms and how are they used in exporting?
A: Incoterms are 13 standardized definitions of commonly used shipping and trade terms that cover issues such as control of goods and financial responsibilities such as payment of cargo insurance and freight. Incoterms provide traders with a common set of rules outlining each party’s obligations, thus reducing misunderstandings. The International Chamber of Commerce (ICC) establishes and publishes the Incoterms. To use the terms correctly, trade practitioners should consult the ICC for the complete, authorized Incoterm definitions.
For helpful documents concerning Incoterms, see the Incoterms Chart of Responsibility & Definitions and Wallchart List of Incoterms.
Q: How do I get an export license? Do I need an export license to ship my product to a particular market?
A: Not all exports require a license. In fact, a relatively small percentage of all U.S. export transactions require licenses from the U.S. government. Licensing determinations are made on individual transactions, not just the product. However, the characteristics of your product will determine if you need a license for a particular transaction.
The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce is responsible for licensing products that are “dual-use,” or have both commercial and military or proliferation applications. The first step to establishing whether a dual-use product requires a license is to find the product’s Export Control Classification Number (ECCN) on the Commerce Control List (CCL).
If the commodities fall under the U.S. Munitions List the manufacturer, the exporter or the broker of these articles has to register with the U.S. Department of State. In order to export defense articles, exporters also need to obtain a license from the U.S. Department of State Directorate of Defense Trade Controls. Click here for the U.S. Immigration and Customs Enforcement’s A Guide to Export Enforcement to better understand licensing requirements for dual-use and defense articles.
Q: What is the Foreign Corrupt Practices Act (FCPA) and how does it affect my business?
A: The U.S. Foreign Corrupt Practices Act of 1977 ("FCPA" or the "Act") prohibits U.S. companies, their subsidiaries, as well as their officers, directors, employees, and agents from bribing "foreign officials" and also requires U.S. companies that issue debt or equity to maintain internal accounting controls and to keep books and records that accurately reflect all transactions. For more information click here.
Q: What are some export finance options available for my business?
A: Many options are available depending on the annual sales, international market, type of financing structure and financial institution. International Trade Specialists are available through the Idaho Department of Commerce to identify the best options for your business and connect you with the appropriate lenders, brokers and financing professionals.
The following are export financing options available to companies:
Export-Import Bank of the United States
- If you need working capital above $1.1 Million then consider Ex-Im Bank’s working capital guarantee program. It enables U.S. exporters to obtain loans to produce or buy goods or services for export. These working capital loans, made by commercial lenders and backed by our guarantee, provide you with the liquidity to accept new business, grow your international sales and compete more effectively in the international marketplace.
- If your foreign customer needs financing, then consider Ex-Im Bank’s loan guarantee for international buyers. With it, international buyers are able to obtain competitive term financing from lenders when financing is otherwise not available or there are no economically viable interest rates on terms over one-to-two years
- If your foreign customer needs fixed rate financing to purchase U.S. goods and services then consider Ex-Im Bank’s Direct Loan program. This loan to an international buyer is generally used for financing purchases of U.S. capital equipment and services, and exports to large-scale projects.
- If your foreign customer of U.S. capital goods prefer lease financing as an alternative to traditional installment loans than you should consider Ex-Im Bank’s Finance Lease Guarantee program. Ex-Im Bank will guarantee lease financing to creditworthy international lessees, both private and public sector, when financing is otherwise not available or applicable interest rates are not economically viable.
Click here to go to the Export-Import Bank website
Small Business Administration options
- If you need working capital up to the $2.0 Million level, then consider SBA's Export Working Capital Program. It provides short-term, transaction-specific financing to small business exporters. Exporters may use this program for pre-export financing of labor and materials and post-shipment financing of the accounts receivable generated from these overseas sales.
- If you need to finance your export-related production activities, then consider SBA's Export Express loan program. It helps small businesses that have exporting potential, but need funds to buy or produce goods, and to provide services, for export.
- If you need to upgrade your facilities to be more competitive then consider the SBA's International Trade Loan Program. It helps small businesses seeking to expand their operations or help those adversely affected by competition from imports.
Click here for the Small Business Administration website
Overseas Private Investment Corporation
- The Overseas Private Investment Corporation (OPIC) Financing provides medium- to long-term funding through direct loans and loan guaranties to eligible investment projects in developing countries and emerging markets.
Click here for the Overseas Private Investment Corporation website
U.S. Department of Agriculture options
Click here for the U.S. Department of Agriculture website.
Q: How can we sell our products in foreign currencies?
A: Unless you have the expertise of an international currency trader, your primary objective as an exporter should be to sell your products in foreign markets at a predetermined profit margin. The easiest way for you to do that would be to require payment in dollars.
However, if this is not possible, we recommend that you "hedge" your profit margin against the devaluation of your customer’s currency. Establish a foreign currency account at your bank and arrange for a foreign exchange credit line. Your bank will then agree to purchase most of the foreign currencies that you receive from export sales at a fixed rate in dollars against future deliveries.
You can use hedging in export transactions involving letters of credit, documents against payment, consignment of goods, and open account. Hedging is also advantageous to importers because they can guarantee a firm purchase price in local currency when they sign the order.
Q: What are the different types of export representative for a new exporter?
A: There are four basic types of export sales representatives:
- Commissioned Export Sales Agents (often referred to as export brokers)
- Export Management Companies (EMCs)
- Export Trading Companies (ETCs)
- Full Stocking Distributors.
Before you decide which types of export sales representatives you will use, we suggest that you ask yourself the following five questions:
- Through what channels are similar products being sold in your export markets?
- How much capital do you have and what financial risks are you willing to assume?
- What degree of control do you want to retain over the marketing of your products?
- When do you want your representatives to take title and physical possession of your products?
- When, how and from whom do you want to receive payment for your export sales?
Q: Is it difficult to cancel a contract with a foreign sales representative?
A: The answer depends upon the laws of the country in which the cancellation takes place. In many countries, a representation contract can be terminated relatively easily. However, in other countries, it can be very costly and time-consuming to sever a business relationship with an agent or distributor.
You could be required by local law to compensate the representative for a portion of the original investment, promotional money spent in advance to secure future sales, and the projected income they would have earned during the remaining period of the contract.
Because business customs and laws vary in different countries, it is important you present your representation contracts to an international attorney who is knowledgeable of the laws and regulations of the country in which you will be selling your products. While doing so will be more expensive in the initial stages, it is a sound business investment which could save money fighting litigation in foreign courts.
Q: Where can I get information on importing?
A: The U.S. Customs and Border Protection website can provide you with information on import regulations, duties and fees, international agreements, etc.
Furthermore, the U.S. Customs and Border Protection publishes the Importing into the United States guide, which explains in detail the procedures and regulations that apply for importing in the United States.
Sources:
The Export Institute USA, Ask the Experts
The U.S. Commercial Service