Setting up for export success

Posted on Nov 12, 2019 :: Insight From
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Posted by Shirley Malski

In 2017, more than 8,600 Wisconsin companies generated sales revenue through exports of their goods and services. Of these, nearly 7,400 were small- and medium-sized enterprises, according to the U.S. Global Leadership Coalition. Companies from Northeast Wisconsin contributed more than 20 percent of the state’s total exports.

These companies all recognize the remarkable opportunity selling beyond the borders presents. In fact, 95 percent of the world’s purchasing power exists outside the United States. Exporters enjoy the benefits of a diversified customer base, increased market share and competitiveness, the potential to extend product life cycles and the ability to meet the challenges of product seasonality and geopolitical risks.

Exporting can be lucrative, but it is not without risks. Many companies begin exporting when they first gain interest from international buyers. Instinctively, it seems like a good idea to simply accept orders and ship product. Unfortunately, this reactionary exporting can be a risky endeavor. Exporting success ultimately depends on the development and execution of a comprehensive export strategic plan.

A documented export strategy is important to ensure export readiness. Strong export plans begin with leadership commitment. Leadership must demonstrate a commitment to growing the business through exports and provide the organization with clear expectations while assisting with creating a mission statement and setting objectives.

A thorough product evaluation is an important step in determining export readiness. The team should review domestic sales and identify those products in which international buyers have shown interest and then determine available capacity for these products.

Find out if any domestic customers are already shipping the product overseas and conduct research for product modifications that may be required for another market. This is also a good time to classify the product for export filing in line with U.S. Census Bureau requirements and to determine export controls and compliance issues such as licensing.

It’s also important to identify internal and external resources that have the bandwidth and/or expertise to support export activity. Keep in mind that many federal, state and local organizations offer export support.

From a federal level, the Department of Commerce offers expertise from the U.S. Commercial Service, U.S. Census Bureau and Bureau of Industry and Security. The Wisconsin Economic Development Corp. and Wisconsin Manufacturing Extension Program provide market intelligence, partner searches and trade missions to support export growth. The UW System’s Small Business Development Center offers no-cost consulting to all Wisconsin businesses and is a great place to start when developing a strategy.

Creating an export budget is key. Once businesses have identified resources, they can estimate new staff requirements. Set aside additional funding for obtaining market intelligence, contracting professional legal and accounting services, trade ventures, trade shows, and updating sales and marketing materials, including globalizing the website. Grants of $10,000 to $25,000 are available for Wisconsin businesses to enter or expand an export market.

Market selection is an obvious piece of the strategy, but determining the best markets for your products requires research. Many companies look to export to countries where a free trade agreement exists. The United States has 14 agreements with 20 countries. Other points to consider include demographics, gross domestic product, tax challenges and strategies, geopolitical risk, competitive analysis and distribution channel options.

It’s important to set standards for contract negotiation. You’ll need contractual agreements with the seller and potentially with a freight forwarder or other third parties. Establish clarity for pricing, payment terms, Incoterms and insurance upfront.

Establish a credit policy as part of your export plan. Cash may be king and provide the least risk for the seller, but over the long term, it is not a very competitive credit strategy. Ultimately, sales terms will need to be extended. Letters of Credit and Trade Finance Receivables Insurance are options to limit risk but do come with fees.

Define a policy for managing return issues including refunds, credits, product return or in-country disposal in advance.

It’s important to define shipping, but don’t wait until the last minute to set it up. Understand labeling and pallet requirements, Schedule B Classifications, AES Filings and any other regulatory issues that must be addressed in advance of shipment. Find a freight forwarder or parcel carrier that can manage the shipment from pickup to delivery. Prepare to provide export documents including a commercial invoice, bill of lading, packing list and certificate of origin.

The creation of an action register is the final step in developing an export plan. A strong project leader will hold the team accountable by documenting the plan with actionable items and target dates for completion.

For more information or a complimentary export readiness consultation, please reach out to Shirley Malski at the University of Wisconsin-Oshkosh Small Business Development Center by email at [email protected]

Malski is an international trade consultant with the UW System Small Business Development Center, where she serves as a statewide resource providing no-cost consulting to Wisconsin businesses. She is a Chrysler Corp. retiree, holds a master’s degree from the Thunderbird School of Global Management and is a Certified Global Business Professional and specializes in labor law poster compliance.