Setting Up an Export Business
Setting Up an Export Business in the U.S.
Setting up an export business is not difficult and is an excellent way for companies to increase their profits and gain market share. However, there is a learning curve, and exporters need a high level of attention to detail to be successful.
Export Law
It is important to understand export legal requirements, as exporters are subject to audit and fines by U.S. Customs. Exporters need to know anti-boycott regulations, current embargoes and screen all customers for Denied Parties status. Some products require a government license to be exported. In addition, export files must be retained for a period of five years, and special export paperwork called a Shipper's Export Declaration (SED) must be submitted prior to the export of goods.
Freight Forwarders
Behind every good exporter is a great forwarder. Forwarders are third-party transportation companies that coordinate movement of goods around the world. Forwarders are also great sources of information and can guide fledgling exporters. Some of the larger forwarding companies are Schenker, Expeditors, Kintetsu, Panalpina and BDP Logistics. These companies have offices in almost every major city. Size, however, does not equal service. Even ISO 9000 certification is not a good predictor of service. The best way to evaluate service is to meet the ocean and air managers of a forwarder and give them a small test shipment. Companies must sign a power of attorney for each forwarder because they act on the exporter's behalf.
Export Documents
Export documents are an integral part of international shipments. Without proper documentation, goods can't be exported or imported. A proforma invoice confirms product ordered, pricing, payment terms and incoterms before goods ship. Customers use proforma invoices to obtain financing and import licenses making accuracy important. Upon shipment, every export will require at least a commercial invoice, a packing list and a shipper's export declaration (SED). Additional documents may include a certificate of origin, air or ocean bills of lading, material safety data sheets, wood pallet certification or hazardous materials paperwork. Each country has its own documentation requirements. For example, Brazil has the strictest documentation requirements and zero tolerance for errors, while exporting to China is not as difficult. Good customer service entails asking customers what their import requirements are in advance and sending accurate documents to the customer before goods arrive in port.
Required Skills and Knowledge
The following skills and knowledge will help exporters be successful:
-Knowledge of harmonization codes to classify goods for the SED.
-A basic understanding of how ocean and air freight work, as well as their time lines.
-Knowledge of international dialing codes for making phone calls and sending faxes.
-Know world geography, including major ports around the world.
-Ability to select appropriate incoterms.
-Be able to determine if goods are hazardous when shipped via air or ocean.
-Evaluate products to be sure they meet electrical or other usage requirements in overseas markets.
-Know whether or not goods require an export license.
Getting Paid for Exports
There are four different payment methods in export and each has a different level of risk.
1.Open terms have the highest risk to the seller as goods are shipped in good faith that the customer will pay.
2.Prepayment is the safest term for the seller, but the riskiest for the customer as the customer is parting with its money before goods are shipped.
3.Sight drafts and time drafts are payment terms similar to C.O.D and offer moderate protection to the buyer and seller. They allow goods to be shipped without prepayment, but ownership does not transfer until payment is made.
4.Letters of credit are financial contracts with a bank mediating transfer of and payment for goods. They are considered to be the safest payment method for exports, but exporters should seek training for letters of credit to avoid fraud and discrepancy fees.
