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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.
There are good reasons for establishing an IC-DISC, including:
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:
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:
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.email@example.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
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.
Some activities that should raise suspicion also include:
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:
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:
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.
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
Trade-Based money laundering: Risks and regulatory responses by Clare Sullivan and Evan Smith (Australian Institute of Criminology [AIC] Reports)
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:
-there is great need for innovation and solutions to challenges in agriculture
– Tools to prevent or detect public and private corruption
– terrorism needs unique set of tools and a worldwide communication system that will provide preventive measures.
– as a tool to improve lives of people everywhere
– Today’s world is more interconnected than ever before, and the need to protect the information is greater than ever.
– consumers around the world are getting more environmental conscious.
– tools to detect and prevent financial crisis
-while the population is more conscious in their spending, there is a great opportunity in servicing a growing middle class
– the unprecedented migration in Europe and conflicts in other countries need solutions.
-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
– solutions for Zika virus and other epidemics
– 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
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
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
firstname.lastname@example.org * (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 email@example.com or call (973) 353-1927.
© Roger S. Cohen, 2015.