December 5, 2011
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FedEx Global Brand Management Director Monica Skipper shares a cost-effective way to build a bigger brand for your small business.
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For some small companies, international trade can seem overwhelming. The U.S. Commercial Service (USCS) can help.
The USCS is the trade promotion arm of the U.S. Department of Commerce's International Trade Administration and helps companies get started in exporting or increase sales to new global markets. Most services are provided at no cost or for a nominal fee—an exceptional value compared with commercial international consulting services.
Whatever your industry, wherever you want to trade, you can use USCS services to successfully develop your total market strategy. With the USCS acting as your international consultant, you'll be guided every step of the way.
FedEx interviewed Dan Swart, director of the North Texas U.S. Export Assistance Center, to find out the top five questions small businesses ask about trading internationally.
Q: How can we make sure we're in compliance with the countries we're trading with?
A: We advise these companies to check their product against the restrictions in the country in which they are trading. If they have an inkling that there could be some issues, I can't stress enough that they call 1-800-USA-TRADE (872-8723) or e-mail us at tic@trade.gov.
They also need to know their customers. Companies are always held responsible for knowing the product's final destination. A lot of countries do not have embargoes with Iran, Syria, Cuba or North Korea like we do. So if a U.S.-based company ships its product into one country, and that international customer turns around and ships it into a restricted country, the U.S.-based company will be in trouble.
Businesses need to do two things: One, they need to include export control statements in their documentation that indicate it's illegal to ship into a U.S.-sanctioned country. Two, they need to know who the end user is. They need to ask questions. If the person or company they're shipping it to isn't the final user, then where will the product end up? Who is the final user of the product? By doing these two things, they've done everything they can at that point to be in compliance.
Q: Should we ask to get paid cash in advance before shipping our product to a foreign country?
A: If a company has a product for which they can demand cash in advance, that's great. But how much business are they losing? There are other ways to protect themselves.
It depends on the product, but typically the best way for a company to protect themselves is to insure their receivables through Ex-Im [Export-Import] Bank [an independent federal government agency, which provides loan guarantees, export-credit insurance and direct loans]. That way, if the customer walks, or if there are issues within the country, the company will still get paid if they're insured. Additionally, prior to signing the deal, they should ask for 5 percent upfront and give the international customer specific terms of the agreement.
Bank letters of credit also work, but banks are charging fees for those, and they're expensive. So at the end of the day, they might be better off if they had bought an insurance policy from Ex-Im Bank to cover any losses.
Q: Is it safe to accept credit card payments?
A: The problem with credit cards is that somebody will give a credit card number, the company runs it and it all checks out. Then the company ships the product, and as it's going over the water, the customer calls the credit card company and cancels the card, but the product still gets delivered. It probably happens more than we hear about.
Q: What if we run out of working capital and can't take or complete an order?
A: That's when we bring in the U.S. Small Business Administration (SBA). The SBA has an export working capital program, and they can provide a guarantee to the company. If a bank knows the government will secure, or guarantee, the loan, then they're much more open to loaning working capital to the company.
Another situation is when a company has all of its working capital tied up making and marketing the product and another order comes through. Now the company doesn't have enough money to complete the incoming order. While the bank might not loan the company any more money, Ex-Im Bank and the SBA can provide some assistance.
A lot of businesses aren't aware of it, but working capital can also be used for sales, marketing and travel.
Q: How do we take our limited dollars and stretch them so we can expand in the international market?
A: The economy is tough, but companies realize they need to continue to market internationally. Most small and medium-size businesses would love to do international trade fairs, but they're going to be expensive. I recommend that three to five companies in the same industry—not competitors, but complementary folks—share the expenses of a booth. So now each company could participate in three shows for what one show might have cost.
More information
The FedEx alliance with the USCS can help make your international business objectives achievable. Learn more about how the USCS can assist your company in marketing globally.
Dan Swart is director of the North Texas U.S. Export Assistance Center.
Note: The opinions expressed in this article are those of the author and do not necessarily reflect the views of FedEx. FedEx is not responsible for the accuracy or completeness of Dan Swart's responses.
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