U.S-Korea Trade Agreement. Whats in it for you?

Last fall news of Free Trade Agreements appeared in the media for a brief period. The U.S. had finally signed three different FTAs; one being with South Korea. The news quickly faded more "pressing" matters like politics or the newest movie in Hollywood. But if you are a business owner, what does these news mean for you?

This morning I was reading my daily newsletters when I came across a brief article from the International trade Administration on the U.S. - Korea Free Trade Agreement. If you are a business planning on dealing these following points might be of interest to you:

1. The agreement comes into effect on March 15, 2012 (yes, in about a week!)
2.Almost 80% of exports from the U.S to Korea can be imported duty free, this is good news for both companies doing business there and those planning to do business there. You can use the FTA tariff tool, http://export.gov/FTA/ftatarifftool/index.asp , to see if your product qualifies.
3. Nearly 2/3 of all U.S. Agricultural exports to South Korea become duty free starting on March 15.
4. Commitments concerning intellectual property rights and the opening of Korea's enormous service market will also come into effect on March 15, 2012.

As most government regulations, if you do not claim the benefits of this agreement on your import/export activities you will simply not get them, you must explicitly claim them in order to take advantage.

FTAs are a great incentive for exporting, knowing the details and how they can benefit your operations is key. If you want to read more about this particular FTA go to http://blog.trade.gov/2012/03/06/how-u-s-companies-can-start-taking-advantage-of-the-u-s-korea-trade-agreement/

Look forward to your comments

The competitiveness and innovative capacity of the US. Any good info in there?

The U.S. Department of Commerce was tasked, in consultation with the National Economic Council, by the President of the United States to create a report about the current state of innovation in the U.S. " The competitiveness and innovative capacity of the U.S." is the result. Although a standard government report, by this i mean dry and not too exciting, it consists of about 160 pages, many of which are graphs and cover pages so your reading might be close to a hundred. The weather in the Washington D.C. area is not that great today, so i sat down this morning and read it.

Most of the report is standard, a document used by the administration to support its policies. It identifies three area or "pillars" in which government investments are essential; federal support of basic research, education and infrastructure. The report focuses on how the federal government needs to invest in basic research as private companies are not inclined to do so, how STEM education investments are essential and how improving infrastructure will benefit commerce. The benefits of these investments are rarely debated, the debate occurs when deciding who has to pay for them. This post will focus on two area that were presented, but not discussed in depth, in the report; Regional Innovation Centers and Trade agreements.

Regional Innovation Centers (RICs) are geographic areas around the U.S. in which particular industries are clustered. Some examples include the Institute for Advanced Learning and Research in the Dan River Region of Virginia focusing on research and STEM education and the Joint venture Silicon Valley Network, focusing on IT.   RIC are important because its a mutually supportive environment, companies in the area depend on each other for growth and the success of one can mean future growth for other companies in the area. The link for small businesses to RICs can occur in the SBDCs. Most land grant public universities have some sort of relationship with a RIC, and most of the innovations created at the university are funneled directly into the RIC for commercialization. Having a good relationship with your SBDC could help you understand two things; if your area is a RIC and what are the terms of entry into the regional community. Small start ups and small businesses struggle with R&D since it is expensive, tapping into a whole network who help its members with these costs might enhance your business.

The second area that i noticed were the trade agreements. The report, in its entirety, only devotes about 1.5 pages to trade agreements. it mentions the signing of the Colombia, South Korea and Panama agreements and the ongoing negotiations for the Trans-Pacific  Partnership (negotiations currently include Australia, Chile, Peru, Singapore, Brunei Darussalam, Malaysia, New Zealand and Vietnam) This is not enough. Mentioning trade agreements that have already been signed and the negotiations for another is not enough to help our small businesses export their products. Program from the U.S Commercial Services should be discussed, as well as the SBA and the Export-Import Bank. Signing FTAs with other countries is just one of the answers, more avenues for our business to learn and follow trade leads are necessary.

The whole report can be found here 

http://www.commerce.gov/sites/default/files/documents/2012/january/competes_010511_0.pdf 

What do you think? Can RICs help your business grow? Is assisting companies in their export endeavors really a priority or not? 

I look forward to reading your comments.

Exporting: Organizing your research and ideas

So you have a product that you wish to export. But what do you do now? There are several key things that you need to do to organize your research. In this series of blog posts I will explain a method, there are plenty of ways to doing this, for conducting your research.  The initial stages are very simple and you should focus on two research areas.  How is the product exported from your nation? Where can I export it to?

Can I export my product?

One of the first things you should figure out is if there are any restrictions on exporting your product. The Bureau of Industrial Security might be an initial stop for your research. The Department of Homeland Security and the Department of Commerce can further help you determine if your product can be exported or if there are restrictions on it. Most of the restrictions arise from dual-use items (those that have both civilian and military uses) but restrictions vary.  It is important to do this, you don't want to have your shipment of exports stopped at the port because of export restrictions, you will lose money and will probably not be able to complete your export transaction. The second step  would be to look for any assistance that the government might be providing for exports of your particular product. The Small Business Administration, U.S. Commercial Services and many other government agencies have programs specifically tailored to certain products, if yours falls under this it might make your exporting endeavors a lot easier. This forms the basis of your research, determine what you need to do to get your product through the port and out of the country and determine if the government is willing to help you do this.

Where are my exports headed?

Shipping requires a destination, your products must reach a buyer who is willing to pay a favorable price in order for you to make a profit. The first step is determining the places that you can't export to. The Department of State can be of assistance in determining places where U.S. companies cannot export. Finding a buyer is a little bit trickier. Visiting places such as your local SBDC, trade.gov, U.S Commercial Services Offices, local Chamber of Commerce, foreign trade promotion agencies, etc. are just various ways of finding that essential buyer. The key here is to diversify and use any assistance available.  This requires extensive research and is by far the most difficult part of an export endeavor.  How can I trust the buyer? Will he pay? Do I need to visit the buyer in person before making the deal? Is it a scam? These are just a few of the questions that immediately arise, and these are the questions that your research must answer.  There is always a risk in exporting, as in many business deals, the intent of doing research is not to eliminate risk but to lower its probability by being prepared. Do you want to make sure your buyer pays? Then determine a payment method that will ensure that he pays either up front or when the goods at are the importing port. There are plenty out there, you just need to find one that suits you.

The next entrance in this blog will explain the first step, how to determine if your product can be exported from the U.S

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Please share your comments and opinions,

Thanks for reading

How do I get trade leads?

This is a question that every owner who wishes to export its products asks. How do I find out who wants to buy my product? It’s a simple question with a complex answer. There are numerous options that a company can take to find out who wants to buy their products in the international market.

1. Export Management Company

This is the easiest, and probably the most expensive, option.  There are numerous export management companies in the U.S. and abroad, whose sole purpose is to help you export your product, obviously at a price.  Some of these companies include Amex International Sales Outsourcing (www.amexinc.com), Tradewinds (www.tradwinds-global.com) and Sefco (www.sefco-export.com) .The advantage of using thess companies is that it’s almost a ready-made service. Many of these companies will not only find someone who wants to buy your product but will also provide shipping services and customs brokerage services.  Furthermore many of these companies already have distributors overseas in place to distribute your product. These companies are excellent; however the greatest drawback is the price tag. Although many large and some medium sized business can pay for this service, many small business simply can’t. Researching and comparing prices will help you in determining if this is the right option for you.

2. Federal/ State government Agencies

There are many government agencies that encourage export and attempt to provide export assistance to US companies.  The Department of Commerce (export.gov), the Export-Import Bank, the U.S. Commercial Services and even the Small Business Administration have programs to help you in your exports. The advantages are numerous.  Many of these agencies can help you in conducting the necessary research and finding a buyer. Some even provide capital for you to export. Most of these services are very affordable and many small businesses could easily use them. The greatest drawback of these services is that they are government services, many are subject to current political conditions, and some bureaucracies aren’t exactly “customer friendly”. Furthermore you have to take the first step and although they can help in several ways many of the actions necessary to complete a transaction will ultimately rely on your research, planning and coordination. Understanding your need and your willingness to devote time to engage a government bureaucracy will help you determine if this is the right option for you.

3. Export Brokers

These are specialized service providers.  In full disclosure I belong to this group, but there are advantages and drawbacks to using brokers. Some of the export brokers include my own company Il Esportatore, LLC (www.ilesportatore.com) and Export Trade Brokers (www.exporttradebrokers.com). It is important not to confuse customs brokers with export brokers. Customs brokers are mostly involved with the documentation and freight arrangements necessary to get your product overseas once a deal has been reached, the export broker specializes in getting you the deal.  The advantage is that many of these services are very affordable as many export brokers work on commission (usually no more than 10% of the total value of the deal) and depending on your industry specialization many of these brokers can get you deals that the larger export management companies can’t (either due to contacts in the industry or a better understanding of your product and market). The drawback is that it’s a loose group; the standards of professionalism and expertise that you pay for vary. Some will take the interest of your company to heart, ensuring that you not only export one sale and they get their commission but actually helping you establish a relationship with a foreign buyer that might generate further sales for you, even if it means no commission for the broker. Others will simply take their commission and run, even if your product ends in the wrong port of the wrong nation.  The nature of your product and your willingness to devote time to get to know the broker will help you determine if this is the right option for you.

Exporting is not easy, it requires consistent research, networking and the willingness to try new things, and sometimes fail at those new endeavors. Export Management Companies, Governmental organizations and Export Brokers are just some of the entities out there that can help you achieve your exporting goals. Deciding which one to use will require, once again, some research on your part.

I look forward to your comments,
V/R
Juan A. Salva

Exporting- Essential Market Research

Exporting, like everything in business, requires extensive research.  Selling your product/service in the international market can be a daunting task; it’s hard enough to get your product/service to be recognized at home, let alone in a foreign country with a different language and culture. As a business owner it is important to be organized, in order to be successful in exporting you need to be even more organized, and it starts at the market research phase.

Exporting requires capital, sometimes extensive capital, so before you go and spend your capital on a failing venture you need to know several things. Some of the questions you can ask yourself are:

1. Is there a market for my product/service in the region?

2. Do i target an area or a specific country?

3. What is my competition, both at home and the export destination?

4. Any government regulations concerning my potential exports?

The list of questions to be answered can be extensive, but it is important to spend the time and effort to do this. You are the small business owner and exporting could either create opportunities or put you out of business. I suggest a "business rhythm", this derived from my days in the Army doing "Battle Rhythms", for your research. The caveat is this is not a routine! It’s a framework, you a lot time to complete the research tasks that you need to get completed, on a weekly or monthly basis, and try to stick with those. If you can’t its fine, but you shouldn’t be exporting if you can’t put the time to do research. Some of the tasks that i do for my market research business rhythm include:

1. Read local news about the region/country that interests me

2. Go to export.gov and read market analysis for the region/country

3. Research the commerce department of the export destination

4. Research conferences or trade shows focused either on my product or on the region i want to export too.

These are just a few, just as the questions, the tasks associated with your business rhythm should be tailored to the amount of time you are willing to spend and you specific business needs.

 Conducting research is not glamorous, even an enjoyable part of being a business owner. In exporting though, it is essential to do so, and do it extensively. Market research will lay the foundation for a successful exporting venture.

Exporting CONOPS: a Business Operations Plan

By Juan A. Salva

                Exporting is usually touted as a possible solution to various economic problems in the United States. Small Businesses, actually business of all sizes, are encouraged by a plethora of government agencies to increase their exports. The US Commercial Services, the Export Import Bank and the SBA are just a few of those agencies. Yet, according to Jason Katzman in his "Basic Guide to Exporting", many businesses are simply not prepared to export, basically having no plan and stumbling unto exporting opportunities having to figure out how the business should operate.  With Ex-Secretary of Commerce Carlos M. Gutierrez stating that close to 70% of the purchasing power in the world resides outside the United States it is surprising that business are not better prepared for this.

                Proposed in this blog entry is a simple solution, small businesses should focus in developing different concepts of operations, or CONOPS, to lay the foundation for exporting. This is simple yet different from a business plan. In a CONOP the business would lay the foundation of how the business will operate if encountering an export opportunity in different regions of the world. A basic layout of a CONOP would include the following:

1. Which business services could potentially be developed in the region?

2. What permit, licensees or fees are involved with exporting to the region?

3. Applicable U.S. laws, regulations or restrictions

4. How will the business be structured if exporting occurs?

5. How will the business be staffed? recruiting strategy? overseas locations?

6. Possible courses of actions regarding the expansion of the exporting venture

                These are just a few of the questions that should be asked, and included in the CONOP, for exporting. The advantage of CONOPS is that businesses can take time to develop them. Exporting opportunities might not occur immediately, but with a basic plan in place, the business can at least not be completely surprised when the opportunity occurs. Secondly, the company can develop different CONOPS for different regions, so CONOPS do not need to be imbedded in the business plan, but could be shorter annexes to it that a business manager could refer to if the opportunity arises.

                CONOPS for exporting are a possible tool that business could exploit. The only caveat is that these, as the business plan should be, are living documents so they should continually revised and updated. What are your thoughts on developing these kind of documents?