NJ District Export Council

Expert Insight

EXPERT INSIGHT

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Exporting Can Be Trying, But It Can Be Fruitful

By: Peter Fleischmann – Outreach Coordinator, Global Trade Network

In 2012 the Global Trade Network/GTN (www.usgtn.net ) was retained by Zeigler Bros. (www.zeiglerfeed.com), a Pennsylvania company that formulates and produces high-quality feed for fish farmers, to locate them potential partners in Western Africa. The reason is, that in addition to producing high quality feed and exporting  it to approximately 50 countries (they were named the “Exporter of the Year” in 2012), they also have a franchise program where entrepreneurs in foreign countries are encouraged to build a mill, using U.S. equipment and Zeigler technology, to produce the Zeigler feed locally in their country. Zeigler has a number of these franchises operating in Central and South America, and wanted to expand into West Africa, where fish-farming is a large and vibrant industry.

Working through USAID, the Commercial Staff at the U.S. Embassy in Ghana, the Ghana American Chamber of Commerce, and Ghana Government Agencies, GTN was able to locate candidates, but it took several attempts to locate the properly qualified one. After two failed attempts (and five years of trying ) the contract for the Ghana company, Vester Oil Mills, to build, own and operate the fish-feed mill, was signed on July 11, 2017. This represents and export of over $2-million dollars of U.S. equipment, coming from Engineering Systems & Equipment in Overland Park, Kansas, and a business that will be using Pennsylvania-based Zeigler formulations and technology to produce the feed locally in Ghana.  What has all this to do with New Jersey? GTN is a member of the NJDEC.


IC-DISC:  Tax Advantages for Exporters

By: Kenneth Bagner, Firm Member of Sobel & Co

With the rapidly growing global demand for US exports, many of you may have heard of the “Interest Charge Domestic International Sales Corp” which is more commonly known by the highly recognized abbreviation, IC-DISC. But you may not be clear on what an IC-DISC is, how it operates and what advantages it brings to your company.  With that in mind, here is an executive summary of IC-DISC that can address your frequently asked questions.

Created by Congress in 1971 as a means to subsidize US exports, an IC-DISC is set up as a subsidiary of the export company, reducing the tax liability by converting a portion of its net export income into qualified dividend income. In essence, an IC-DISC is a separate “C” corporation that is tax exempt for federal tax purposes, acting as a sales commission agent for a US manufacturers/exporters, resulting in a permanent tax savings for the exporter.

Important Benefits

There are good reasons for establishing an IC-DISC, including:

  • The right to earn commission on export sales manufactured in the US which is deducted as ordinary income at a 39.6% tax rate
  • Income distributed to individual shareholders is treated as a qualified dividend at a 15% rate
  • Performing key services that enhance the company – such as promoting the company’s export activities through advertising, general and administrative expenses, freight and shipping, packaging, designing and labeling that can be reimbursed by the company at cost plus 10%
  • Being utilized as an estate planning tool since there are no requirements that the IC-DISC shareholders are the same as the exporting company’s shareholders
  • Deferring commissions related to $10 million of export sales per year by making annual interest payments to the IRS

Having seen the advantages, you will need to follow the process for establishing an IC-DISC, which is not complicated. Election is accomplished by completing Form 4876-A, preparing an annual financial statement and filing an annual tax return. The final piece of paper work required is a signed commission agreement.

Criteria for IC-DISC

You may think this seems like a great idea that is easy to execute, but you may still be unsure if your company qualifies to establish an IC-DISC.  You qualify if:

  • The company is incorporated in one of the states in the US or in DC
  • The company must maintain a separate set of books and records and bank account
  • The company files and election with and receives approval from the IRS to be treated as an IC-DISC for federal tax purpose
  • The company maintains $2,500 of capital
  • The company has one class of stock
  • The company meets an annual qualifies exporters receipt test and qualified export assets test
  • 95% of the company’s gross receipts and assets must be related to the export of property whose value is at least 50% attributable to US produced content
  • At the close of the tax year, the adjusted basis of the company’s qualified export assets must be at least 95% of the sum of the adjusted basis of all the company’s assets at the close of the tax year

What’s Different About an IC-DISC? 

While reviewing the criteria for forming an IC-DISC is key, a clear understanding what the IC-DISC does not require is equally important. For an IC-DISC to function:

  • No employees are needed
  • No office space is needed
  • No services need be performed
  • No participation in any sales is needed to earn a commission

Although any type of entity or individual can own an IC-DISC, or form it as a subsidiary, in most situations it should be held by an individual or be formed as a flow-through entity like an S Corporation, an LLC or a partnership to achieve the most significant tax benefits.

If you are an exporter and your company meets the criteria, please feel free to schedule a call to discuss your tax planning strategies and the impact of an IC-DISC on your entity. I can be reached at 973-994-9494 or by email at Kenneth.bagner@sobel-cpa.com.

 

Exporting Basics Video Series

By: Brian Beams – Senior International Trade Specialist with the U.S. Commercial Service, Northern NJ Office

On December, 2016, the U.S. Commercial Service (USCS) released Finding Foreign Buyers videos on export.gov.  This third set of six in the Exporting Basics video series focuses on how the U.S. Commercial Service can help U.S. SMEs identify, contact, and connect with foreign buyers.  We encourage you to check them out and use them in your outreach efforts.  The first video in this 5-part set is on Sales Channels and is followed by pieces on USCS Customized Services, Trade Shows, Trade Missions, and eCommerce, along with their release on www.export.gov.

 

Channel Management – Stimulating Sales from International Distributors and Resellers (Part 1)

By: Carrie Brooks – Senior International Trade Specialist with the U.S. Commercial Service

It’s not enough just to appoint an international reseller or distributor. It’s what you do to select the right partner and then support that partner that will determine success or failure.

Selecting the Right Partner – The Twelve Most Common Mistakes

  • Choosing a reseller/distributor too quickly. Perhaps you met them at a trade show and their enthusiasm was overwhelming! They gave you an overview of the company, perhaps even filling out a reseller application and they look great on paper. In a perfect world, you would be able to visit their facility, meet their sales reps, and talk to their references. Since that is not always possible, you still need to do some major due diligence. There are many resources available to do that, among them, the U.S. Commercial Service. It is very common for companies just entering international sales to quickly appoint resellers, looking for those fast approaching orders, only to find later that the reseller/distributor was unsuited for the territory or sales position given. Cancellation of contracts is tricky, expensive and can mean the payment of compensation in some countries.
  • Giving the reseller/distributor too large a territory. Do they have sales reps geographically located in the areas they are going to cover? How do they reach all the potential customers in the area that they are requesting? Are their cultural issues between the home office of the reseller/distributor and where they say they can cover sales with their own staff?
  • Giving a reseller/distributor ALL the channels of distribution in a geographic area when they really only service one channel. For example, in the IT industry there are lots of mini-channels within one geographic area. Those could include retails stores, ecommerce, government sales, educational sales, mail order/catalog and even OEM sales (Original Equipment Manufacturers who may bundle your product with theirs). With a few exceptions worldwide of master distributors, few cover all of these channels well. You need to find out which channels of distribution your prospective reseller has strong relationships with already, and ask for examples. Many companies include this question on their reseller application. You may end up adding resellers that specialize in different channels of distribution.
  • Choosing a reseller/distributor that has too large a portfolio already. Sometimes it is better to have several resellers located across a territory than to have one big distributor whose product lines are so large that your products or services will be lost in the mix.
  • Choosing a reseller/distributor that has a history of “jumping products”. If your reseller goes from product/manufacturer to manufacturer, it may be a sign that they are only “margin hunters” or “fad hunters”, and won’t put the necessary resources into promoting your products. One of the most important questions you can ask a potential reseller/distributor is what products/manufacturers have they dropped over the last 3-5 years and why.
  • Choosing a reseller/distributor that used to sell your competitor’s product. Sometimes this can be a good thing, but you need to consider the reasons they dropped the competitor’s product (whose decision was it?) and also their potential loss of reputation for doing so. If your competitor dropped them for lack of sales, poor customer service, or slow payment, then they are no catch for you.
  • Being unclear as to your goals for the reseller/distributor and his for you. This all occurs during the negotiation and goals should be set together with the reseller/distributor. Know before you sign the contract what obstacles the reseller sees in the market for your product, what he feels an appropriate quota/goal per quarter might be, how long will the ramp-up to start to see good sales after the signing of the deal.
  • Pricing for international resellers/distributors being higher than for domestic resellers/distributors. Your international resellers/distributors will be paying transportation costs, perhaps duties, taxes, marketing and promotion costs, translation of advertising materials, trade show costs, etc. (All the things that your domestic marketing department within your company does for your domestic sales.) Your actual cost of goods sold (COGS) will be lower for your international channel sales than for your domestic sales, so profit will actually be higher, depending on how you organize your channels. Also, you want to avoid “grey marketing” at all costs. This occurs when companies charge more to their international resellers/distributors than their domestic resellers and those domestic resellers then sell into international territories, taking advantage of the marketing that the international distributors have done, but now won’t reap the benefits of. In many countries, the international reseller/distributor will be responsible for the warranty of that product even if they didn’t sell it! This is the fastest way to destroy your international sales channels.
  • Selling direct into a market where you have a reseller/distributor. One of the biggest complaints that resellers/distributors have about U.S. manufacturers is that they will sell direct into markets where they have appointed a reseller/distributor. This is basically the same as the grey market problem. There are some instances where you will do this such as you if you land a large OEM deal in that country. You should have been clear at the initial contract signing stage that this could occur and how you would plan to handle it. Some examples might be to: a) give the reseller a small percentage (5% is common) of the sales if it was completely and independently done by the manufacturer or b) give the reseller/distributor an amount slightly less than his usual margin discount justifying it by volume. In some cases this might cover several territories, so you’ll need to be sure that you don’t forget anyone.
  • Not understanding what motivates your reseller/distributor. You may have the most technologically advanced product in the world, but “geek speak” is not what will win over a potential reseller/distributor. In the IT world, a technician or engineer within the reseller/distributors company may evaluate the product, but it is the President or General Manager of the company that will sign the contract. That GM will want to know how many of these have you sold, where did you advertise in the U.S., how many resellers do you plan to have in my market, what is my discount off retail price (margin), how long are delivery times, what warranty is provided, how will you handle leads from my territory, will you sell direct into my territory, will you offer price protection and stock rotation, what incentives will you offer to my company and sales team, will you have 24/7 technical support or at least an internal FAQ technical page for use by us? He’s really asking what kind of investment am I going to have to make in your products and what kind of return on investment can I expect?
  • Giving an Exclusive Contract to a reseller/distributor. The one thing you can count on in any industry is change. Changes in the market, changes in competition, changes in sales people, changes in government policies, changes in how products are used and who uses them. An exclusive contract does not allow you to react to change or to be proactive in anticipating change. It can also prevent you from getting out of a bad reseller decision and make you subject to financial and legal obligations you did not anticipate. There are sometimes reasons to do exclusive contracts, but not often. Reasons might be the long sales cycle and expense of your product, modifications that the reseller/distributor needs to do to make it available for sale in that market, or extensive certifications that the reseller/distributor might do for you to comply with government regulations. In those cases, an attorney’s advice would be needed to determine who owns those modifications.
  • Not understanding cultural difference in contract negotiation style, communication style or adherence to contract terms. While American companies most often view contracts as “concrete agreements”, there are other cultures where contacts are considered a suggestion of the business agreement. Emphasis should be placed as well on the relationship between the manufacturer’s and the reseller’s relationship as a whole. The relationship between the individuals is what makes the international sales really happen. It is extremely important to not have one person negotiate the contract and then another person come in later to manage the relationship. A team approach from the manufacturer might work better.

 

INTERNATIONAL TRANSPARENCY IN TRADE: WHY IT’S IMPORTANT AND HOW IT AFFECTS YOUR BUSINESS

By Michele Stacey, Vice President, International Advisor, PNC Bank, NA

Are you exploring global opportunities? Or have existing international business? What is your risk appetite? Know all parties involved in any international transaction.

About 80% of illicit financial flows from developing countries are now channeled through trade-based money laundering (TBML) according to Global Financial Integrity (GFI), a research and advocacy organization.

As other methods of money laundering have become easier to detect, malicious actors have moved to TBML, involving commercial firms doing international business.

TBML is on the upswing.

WHAT IS TBML AND WHY IS IT IMPORTANT TO ADDRESS ITS DYNAMICS?

TBML is a criminal process that involves the misuse of trade channels to conceal the movement of “dirty money.” TBML uses trade goods in ways that facilitate illegal value transfers. Any firm that engages in business internationally is exposed to the risk of money-laundering schemes. It’s critical that companies do their part in maintaining the integrity of the trade supply chain. Does your company, along with your clients and suppliers, understand and manage it appropriately?

The consequences of your firm becoming an unwitting participant in TBML can be severe, including potential civil and criminal penalties as well as reputational damage.

TBML schemes and typologies vary. The most basic involve fraudulent trade practices like over- and under-invoicing, under-shipment of goods and services and falsely describing goods and services. More intricate schemes integrate these basic fraudulent practices into a complex web of transactions and movements of goods.

Protecting your company from fraud-based transactions is key.

IDENTIFYING POTENTIAL TBML RED FLAGS

Seven signs indicating that it’s probable that TBML may exist.

  1. Corporate Structure. Shell companies, which do not have business operations or significant assets are often used by money launderers and financers of terrorism. Information on the beneficial owners is not easily available.
  2. High-Risk Location. Countries with a higher incidence of drug trafficking, organized crime, terrorism and/or lax enforcement of anti-money laundering laws are particularly susceptible to TBML due to the lack of oversight and transparency. Trade transactions involving such countries bear and increased risk of TBML.
  3. Third Party Involvement. Payments for your products/services are coming from unrelated third parties.
  4. Payment by Monetary Instruments. Receipt of multiple cashier’s checks or of money orders or traveler’s checks as payment for goods or services.
  5. Carousel Transactions. Repeated importation and exportation of the same high-value commodity to create complexity via unusual shipping routes or transshipment points.
  6. Customs Misrepresentation. Falsely documenting goods, including the quantities, value and/or end destinations of the goods manipulates and threatens the credibility of the trade system, thereby pulling your firm into the money laundering scheme.
  7. Business Information Risk. Recognizing names of high-risk individuals, hard-to-value goods or riskier industries increases awareness of potential TBML situations.

Some activities that should raise suspicion also include:

  • High volume and/or frequency of orders given the size of business or geography
  • Urgency in submitting purchase orders
  • Customer not concerned about product quality or prices offered
  • Unusual payment methods
  • Pattern of prepaying orders, then returning products or canceling orders and requesting a refund check or wire
  • Aberrations from normal ordering history
  • Ordering a new line of products not consistent with customer’s line of business
  • Customer not knowledgeable about products, market trends or general business sense for the industry in which is working.

HOW TO MANAGE YOUR RISK

One key to combating the problem of TBML, is gaining cooperation among financial institutions, regulators and businesses.

Trade-related businesses now actively seek out anti-money laundering (AML) consulting services to develop robust compliance programs.

The consequences of not being aware of who you are doing business with and where the money is coming from can be serious. As an exporter or importer, it is paramount to manage the red flags listed above and implement systems to recognize when any one of these red flags comes into play and to respond appropriately. Training is an effective mechanism to raise awareness regarding TBML and trade finance issues within your company.

One of your goals should be to have all trade compliance data and processes on one platform that can be easily accessed across the organization and throughout the supply chain. Leveraging existing resources is the most cost-effective starting point.

By taking the following steps, you can help your company improve compliance and reduce risk:

  1. Create a culture of compliance and high ethical standards.
  2. Develop an appropriate company-wide risk management program.
  3. Develop a comprehensive and risk-based “Know your Customer” due diligence program.
  4. Consider the following factors when dealing with potential customers, clients, vendors, business partners and outside sales representatives:
  • Who are the owners of the entity?
  • Is there any negative news about the individuals or the entity?
  • What is the entity’s source of funds?
  • What is the geographic risk?
  • What is the entity’s corporate structure?
  • What is the entity’s business model, sales volume and revenue?
  • Verify the entity’s existence by searching publically-available documentation and data bases.

ACT NOW Following the above guidelines can help your company avoid becoming a conduit for TBML. It is important to remember that no one activity by itself is a clear indication of TBML. Red flags should be considered in light of the normal transaction activity expected for the individual customer. Seek the assistance of outside counsel and third-party compliance experts as appropriate.

Financial institutions participate in trade finance by providing pre-export financing, issuing or confirming letters of credit, discounting drafts and acceptances or offering fee-based services such as documentary collections. Banks will ask you for information about transactions and counter-parties as part of greater due diligence based on the complexity of the transaction.

FOR MORE INFORMATION

To find out more, contact your bank’s client information center. Other resources include:

www.treasury.gov/resource-center

www.BIS.doc.gov

References

FATF (2006: 3) June 2006 report Trade-based Money Laundering

FATF’s (2008) Best Practices Paper highlights education and awareness of TBML as paramount to combating it, as an understanding of TBML is required to assess what information needs to be gathered about trade.

http://www.acfcs.org/hunting-trade-based-money-laundering-fincen-order-hones-in-on-miami-exporters/

Delston R S & Walls SC 2009. Reaching beyond banks: How to target trade-based money laundering and terrorist financing outside the financial sector. Case Western Reserve Journal of International Law 41 (8): 85–118EAG Working Group on Typologies 2009 International trade-based money laundering. http://eurasiangroup.org/ restricted/WGTYP_report_3_2009_62_eng.doc

Financial Crimes Enforcement Network (FinCEN) 2010. Advisory to financial institutions on filing suspicious activity reports regarding trade-based money laundering. http://www.fincen.gov/statutes_regs/guidance/pdf/ fin-2010-a001.pdf

Financial Action Task Force (FATF) 2011. The review of the standards — Preparation for the 4th Round of mutual evaluation: Second public consultation. http://www.fatf-gafi. org/dataoecd/27/49/48264473.pdf

http://www.acfcs.org/hunting-trade-based-money-laundering-fincen-order-hones-in-on-miami-exporters/

Trade-Based money laundering: Risks and regulatory responses by Clare Sullivan and Evan Smith (Australian Institute of Criminology [AIC] Reports)

www.accuity.com/compliance/dual-use-goods/trade-finance-screening

Jasper Liao, Arabinda Acharya, (2011) “Transshipment and trade-based money laundering,” Journal of Money Laundering Control, Vol. 14 Iss. 1, pp. 79–92

The article you read was prepared for general information purposes only and is not intended as legal, tax or accounting advice or as recommendations to engage in any specific transaction, including with respect to any securities of PNC, and do not purport to be comprehensive. This research is based on an assessment of a range of publically available resources from the internet, U.S. government agencies and academic research. These readings have formed the background to the research contained in this report, although all material reported on herein is taken from publicly available sources and is subject to change. Under no circumstances should any information contained in this article be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc. will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. The opinions expressed in this article are not necessarily the opinions of PNC Bank or any of its affiliates, directors, officers or employees. PNC is a registered mark of The PNC Financial Services Group, Inc.(“PNC”) ©2016 The PNC Financial Services Group, Inc. All rights reserved. PNC Bank, National Association, Member FDIC. (Member FDIC)
Globalization and International Trade Opportunities for US Companies

By Veronica (Vicky) Pellot – iDiverse Export Consultants

The United States of America (US) no longer pulls the world forward alone.  Thanks to four (4) decades of globalization, the US doesn’t carry as much weight in the world economy as it used to.  We see other countries depending more in China and emerging markets and less in the US.

While US companies must expand beyond the borders to increase revenues and fuel performance, they need a global view to grow successfully.  That global view needs to be understanding and flexible to customers, conflict and constant changes.  International expansion is a necessity, so is the need for US companies to have an intimate knowledge of the countries/regions they want to export to.

A basic understanding about countries past, present and future will help us understand their consumers spending behavior, needs and wants.  US companies needs to build relationships in those regions.  While technology is of great help, global business is about building relationships.  Partnerships are critical to international growth.  They help better understand a market and facilitate connections with clients, service providers, and others.  US companies need to find partners that match their core values.

Another aspect to consider is that the dollar is rising but the rest of the world is still moving in the opposite direction.  There is a diversion.  People around the world are trying to figure out where to invest.  Insecurity in the economy increases people’s desire to save which reduces their spending.  After recent world financial crisis we see a new type of consumer whom is less willing and not as able to consume.  We are trying to find a way to serve customers in a new world.

Another aspect US companies need to understand is that the aging demographics and local economies in developing countries are changing the way people spend their money.  World population is getting older and people spend less as they get older.

In summary, international markets are getting more complex every single day.  We need to set standards for ease trade.

Here are some areas of opportunities around the world for US companies:

    Agriculture

-there is great need for innovation and solutions to challenges in agriculture

    Anti-corruption

– Tools to prevent or detect public and private corruption

    Anti-Terrorist, defense

– terrorism needs unique set of tools and a worldwide communication system that will provide preventive measures.

    Artificial intelligence

– as a tool to improve lives of people everywhere

    Cyber security

– Today’s world is more interconnected than ever before, and the need to protect the information is greater than ever.

    Environmental, renewable energy, sustainable development

– consumers around the world are getting more environmental conscious.

    Financial crisis

– tools to detect and prevent financial crisis

    Growth of the world middle class

-while the population is more conscious in their spending, there is a great opportunity in servicing a growing middle class

    Human Rights

– the unprecedented migration in Europe and conflicts in other countries need solutions.

    New age of aging

-the new population life expectancy offers unlimited opportunities.  Changes in world population demographics- 6% of the world population is in countries with fertility rates below replacement rates.

*Health and preventive care

*Flexible retirement concept – work part-time or volunteer to stay active.  Reason: need of resources to fund extra years of live, healthy life style and/or giving back to the community.

*Diet and prevention age-related diseases

    Public health

– solutions for Zika virus and other epidemics

    Healers

– playing small doesn’t serve the world.  We need to share our gifts and uplift humanity.

In summary, the business community, nonprofits and governments need to work together with best practices to avoid undesirable outcomes.  The world is a global village and we need to find ways to better serve with our products and services.

 

 

Fairleigh Dickinson University’s Global Enterprise Network – Inside the New Cuba: Business Trip

By Sarah Horn – Assistant Director of Global Learning, Fairleigh Dickinson University

In 2015 the United States and Cuba restored their diplomatic relations after over 50 years. Through the many challenges President Barack Obama and Cuban President Raul Castro have faced, they will continue to lift the restrictions imposed by the economic embargo between the U.S. and Cuba. On September 21, 2015, the Commerce and Treasury Departments took additional coordinated actions in support of the President’s Cuba policy. These actions included a rule, published by the Commerce Department’s Bureau of Industry and Security (BIS), that amended the terms of existing license exceptions that are available for Cuba, increased the number of license exception provisions that are available for Cuba, created a new Cuba licensing policy to help ensure the safety of civil aviation and the safe operation of commercial passenger aircraft, and made the deemed export and deemed re-export license requirements for Cuba consistent with other sanctioned destinations (U.S. Department of Commerce).

Now is the time for US companies and business people to scout out Cuba and to learn about the trade possibilities. FDU’s Global Enterprise Network is partnering with Marazul Charters, Inc., the industry leader in professional, educational, and cultural travel to

    Cuba

for a

    ‘Business and Cultural Familiarization Tour for US Companies’

in May 2016. Fairleigh Dickinson University professor William (Pat) Schuber, former Bergen County Executive, will lead this unique seven-day exploration of Cuban business, economics, law, and entrepreneurship. Designed for community and business leaders, the program will provide participants with superior insight into and understanding of Cuba at this pivotal moment in the evolution of U.S.-Cuban relations. The program also includes cultural activities, such as visits to the legendary Tropicana nightclub, the Havana Club Museum of Rum, a cigar factory, a classic car repair shop, and Ernest Hemingway’s house. Please find more information on our website: www.fdu.edu/cuba

Fairleigh Dickinson University’s Global Enterprise Network, run by Herb Ouida, is designed to help your business grow by seizing the opportunity in the growing international market. The goal of the Global Enterprise Network is to coordinate the many resources available for regional business development while providing “real world” experience and connecting businesses to FDU students for internships and employment opportunities.

FDU’s business breakfast seminars provide up to date information on government programs designed to help local businesses grow by seizing the opportunity in the growing international market. Our programs cover a broad range of subjects, from how to obtain qualified market leads to a program that is designed to provide financial and technical support for those companies adversely impacted by imports and exports. The seminars provide an overview of the economic situation in the country, export/ import and trade information, practical advice from experienced exporters, federal and state resources for New Jersey exporters, and advice from different local businesses.

Fairleigh Dickinson University’s Global Enterprise Network next business seminar will be on March 4

    “Doing Business in Canada”.

Please find more information on our website: http://view2.fdu.edu/global-education/global-enterprise-network/doing-business-in-canada-2016/

 

Keys to Export Marketing

By Roger S. Cohen – Lead International Trade Consultant, NJSBDC
roger@njsbdc.com * (973) 353-1927

Companies can significantly increase their market shares and revenues by expanding into global markets.  Over 92% of the world’s population resides outside the United States. Why not access some of those potential customers?

Before export sales begin, companies should commence their export marketing efforts. Export marketing helps companies reach customers, and to eventually close new sales in those markets.  However, achieving success in global markets can be challenging.  Here are some of the factors to consider.

*           Be an established business. Export marketing and sales take a commitment of time, talent, management and money. These resources will come from your existing operations.

*           Have a specific product or service to sell that you are already selling in your domestic market. It’s great to have relationships and connections with potential customers in the overseas market, but you will also need an agreement with a domestic supplier for the exact product that you will be exporting, at specific prices and terms. Know how to calculate your selling price based on your expenses.  You must include costs such as markup, shipping, warehousing, agent and distributor commissions, technical service, and visiting your foreign customers.

*           Appreciate the cultural differences between domestic and foreign markets. The methods and standards of doing business in the United States may be quite different from those abroad.  Consider having your product literature translated into the language of your customers. When warranted, make a plan to visit your potential customers before closing the deal.

*           Know about the demand for the product or service in the target markets. Don’t overestimate your prospects, saying, “They’re going to buy tons of this stuff.”  You need to know the actual market demand, and who your competitors are.  What are they selling, at what prices? How do they access the market? Who are their sales reps, agents and distributors?

*           Establish a sales channel in the target market. Can you service the foreign market directly from home, or do you need to engage a foreign agent or distributor? Consider going to the foreign market to meet with the prospective agent or distributor, and to meet potential customers together. Think about going to trade shows, either as a visitor, or as an exhibitor.

*           Develop a written business plan including projections of costs and pricing.  Your business plan will tell you if you are on-track to meet your goals. It serves as a roadmap for your business development activities.  It’s OK to change your map and destination, but you need to have an idea of your starting point and ending goal.

The NJ Small Business Development Centers – NJSBDC can be an important resource to help NJ companies achieve these goals. We provide classroom training and one-to-one counseling to help companies expand their business into global markets. For more information and assistance, please contact Roger S. Cohen at roger@njsbdc.com or call (973) 353-1927.

© Roger S. Cohen, 2015.