Topics: The Process, The Opportunity, The Investment

Fundamental Questions:

  • How do you know when you’re ready to export?
  • How do you access yourself?
  • How do you find markets?

Panel Discussion: (Life Experiences)

  • J. Agnew – President / AGI International, LLC – working a lot in India, moving into Africa second quarter 2015
  • Sam Yadav – President / Quest Environmental and Safety Products, LLC – growing in China and Singapore
  • Tim Harris, II – Harris and Ford, LLC – working in over 40 countries including UK, fell afoul of Value Added Tax (VAT)

These gentlemen all have had to keep an amount of money in the county where they are working as an insurance/cushion to pay off workers etc. if the business fails! Often there are huge tax implications to get money out. So careful consideration and negotiation required as to the amount and sometimes having a third party manage it.

Advise obtaining a good lawyer, good accountant, and best in class status in USA before looking to export. Do research on culture of country for business and social customs. A connection in the country is a huge bonus; a current customer may drive the business to exporting.

Export Assistance Resources (panel discussion):

  • S. Department of Commerce
  • Mark Klein – Reg. Director Export-Import Bank of the U.S. (not really a bank, make over $1 billion profit, referred to as negative subsidiary). Big supporters of exporters, providing 50% of the works material etc. is done in the USA as this typically creates jobs, which is positive net gain for Government and country

Advises that companies sell in local currency to avoid unnecessary disadvantages because of working with our “arm tied behind our back.”

They work with the banks on behalf of the small business to ensure that 90% of the principle interest on loans is guaranteed by the government…keeps the banks happy.

Interest-Charge Domestic International Sales Corporation [IC-DISC]- is a tremendous tax break for small and medium businesses (including architects and engineers) who export products overseas.

The tax laws provide an opportunity for a company to use an IC-DISC to have the tax on 50% of its export income reduced by more than 50%.  Profits are taxed at the dividend rate (currently 15%) as opposed to ordinary income tax rates (top rate currently 35%).  Dan Zerbe

Mark Klein recommends U.S. Commercial Service which helps companies find distributors and customers

The U.S. Commercial Service is the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration. U.S. Commercial Service trade professionals in over 100 U.S. cities and in more than 75 countries help U.S. companies get started in exporting or increase sales to new global markets.

Mark also works with Export Credit Insurance. Outside of the USA very few people operate with a Letter of Credit. Most work with Open Account Terms. (Can be lengthy, over 45-60 days and with only a small down payment, can be hard for company shipping product, in good faith waiting for payment.)

This is a method of settling payment for trade transactions. The supplier ships required goods to the buyer who, after receiving and checking the related shipping documents, credits the supplier’s account in their books with the invoice amount. The account is then settled periodically, say monthly, by the buyer sending a bank draft, or arranging through their bank an air mail or telegraphic remittance in favor of the exporter.

The EX IM bank ensures that the company will receive 95% of payment from their customer through the Export Credit Insurance. Company passes cost to customer. Can be 60-90-100 day terms, for example an order for product of $100,000 may be a .5% fee (i.e.  $500 to company), so they may add on 1% fee to customer.

Can be a multi buyer policy or an individual buyer.

There is a county limitation schedule; they do not support in Cuba, Venezuela, or Argentina.

Mark Klein also deals with foreign buyer financing. Money is cheap in USA.  For example, one could borrow at 6% for 5 years in USA through EX IM. In Brazil borrowing can be at an interest rate of 20% over only 2-3 years, as they have liquidity issues.

EX IM does the due diligence (trade certification/ credit reports/ corporate history) to ensure that there is reasonable assurance that the customer will pay; thus the promise to ensure the company receives 95% of payment.