A BASIC GUIDE TOEXPORTINGThe Official U.S. Government Resource for Small and Medium-Sized BusinessesU.S. Department of Commerce International Trade Administration U.S. Commercial Service

A BasicGuide toExporting11th EditionDoug Barry, EditorU.S. Commercial ServiceU.S. Commercial Service—Connecting you to global markets.A Publication by the U.S. Department of Commerce Washington, DC of Congress Cataloging-in-Publication DataA basic guide to exporting / Doug Barry, editor. -- 11th edition.pages cm“A publication by the U.S. Department of Commerce.”Includes bibliographical references and index.ISBN 978-0-16-092095-0 (alk. paper)1. Export marketing--United States. 2. Exports--United States.(Business editor) II. United States. Department of Commerce.I. Barry, DougHF1416.5.B37 2015658.8’40973--dc232015010057Interviews, success story photos (excluding stock images), and other third-party content provided by and copyright theirrespective owners; used with permission. Under U.S. copyright law, may not be reproduced, in whole or in part, withoutwritten permission from their respective owners.Stock images acquired from Thinkstock by Getty Images; used with permission. Under U.S. copyright law, may not bereproduced, in whole or in part, without written permission from Getty Images, Inc.Selected forms in Appendix D appear courtesy of Unz & Co., a division of WTS Corporation.All type is set in the Myriad Pro family, with the exception of the main cover and spine titles, which are set in variations ofGrotesque MT, and the above Catalogue-in-Publication data, which is set in Share TechMono.This edition was created using Adobe Creative Cloud 2014 software, including InDesign, Photoshop, and Illustrator. Workwas performed on an Apple iMac 2009 and a Microsoft Surface Pro.Published by the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230.First printing, 2015.Federal Recycling Program.Printed on recycled paper.Printed in the United States of America.This book is intended to provide general guidance for businesses and practitioners in better understanding the basicconcepts of international trade. It is distributed with the understanding that the authors, editors, and publisher are notengaged in rendering legal, accounting, or other professional services. Where legal or other expert assistance is required,the services of a competent professional should be sought. This book contains information on exporting that was currentas of the date of publication. While every effort has been made to make it as complete and accurate as possible, readersshould be aware that all information that is contained herein is subject to change without notice.

Exporting for the first time?Exported before, but things have changed?Need answers, but not sure how or where to get them?This is the book you need.For more than 70 years, A Basic Guide to Exporting has given companies the information they needto establish and grow their business in international markets.Whether you’re new to exporting or just want to learn the latest ideas and techniques, andwhether your product is a good or a service, this new 11th Edition—completely rewritten, revised,and updated—will give you the nuts-and-bolts information you need.Here are just some of the topics we’ll cover: How to identify markets for your company’s products (Chapters 3 and 6) How to create an export plan (Chapter 2) How to finance your export transactions (Chapter 15) The best methods of handling orders and shipments (Chapters 12 and 13) Sources of free or low-cost export counseling (Chapter 4)In addition, this book also includes: Real-life success stories from companies we’ve counseled on exporting Sample forms and letters Details on how to get free or low-cost U.S. government export supportTurn the page, and let’s begin . . .iii

AcknowledgmentsNone of the people responsible for this newest 11thEdition of A Basic Guide to Exporting was alive when thefirst one came off the printing press in 1936. At that timeand for years after, exporting was dominated by verylarge companies. That may be why over the next 73 yearsthere were only nine editions—the audience was limited.Not anymore. More than 40,000 copies of the 10thEdition and 10th Revised Edition have been printedsince 2011. But since then, much has changed on theworld economic scene, including a record 300,000 U.S.exporting companies in 2013.This completely updated and rewritten 11th Edition isdedicated to and a practical reference for the thousandsof additional companies, mostly small and medium-size,that, in the coming years, will export for the first time orexpand into additional export markets.A new generation of export enablers is responsible forthe book you are holding, or are viewing on your mobiledevice—a technology that wasn’t even science fictionin 1936! Among the many contributors to this book areAnand Basu and Antwaun Griffin of the senior leadershipteam of the U.S. Commercial Service, who early onsupported the need for a new edition. Budget analystCarolyn McNeill made sure commitments were kept.Making important editorial contributions were CurtCultice and Roza Pace, a whiz at explaining free tradeagreements. Student interns Brian Gerrard and SaraAbu-Odeh kept track of hundreds of text changes andcrunched innumerable bits of data for the charts.Doug Barry, EditorWashington, D.C. 2015ivCredit for the look and feel of the book goes to ourdesigner Jason Scheiner. It was no small feat to integrateall the photos, charts, samples, stories, text pullouts,and changes. He also made sure that the print shop wasfaithful to the design.This book contains many new facts, figures, and analyses.Dozens of experts from different government tradepromotion agencies reviewed sections of the book andsuggested changes. Special thanks to Jamie Rose of theU.S. Department of the Treasury for coordinating inputon the export controls section and to Yuki Fujiyama fromthe U.S. Department of Commerce’s Office of Financialand Insurance Industries for expanding the TradeFinance section.Our colleague April Miller served as business manager forthe project, and her knowledge of how our system worksensured that the book appeared while topics and trendsare fresh.Lastly, thanks to Progressive Publishing Services whoprovided text editing services and the index. Our friendsat the Government Printing Office helped us find them,then later selected the print shop and arranged for bookdistribution through their commercial sales program.To you, the reader, we hope this book challengesyour assumptions about engaging in the world ofinternational business and gives you the confidence tobecome an even greater success. Like the businesspeoplefeatured in the pages that follow, we hope you will notonly sell to the world—we hope you’ll help make it abetter place.

Table of ContentsChapter 1: IntroductionChapter 11The World Is Open for Your Business. 1Going Online: E-Exporting Tools forSmall Businesses.121Success Story: DeFeet International.8Chapter 2Success Story: NuStep.132Developing an Export Strategy. 11Chapter 12Sample Outline of an Export Plan. 22Sample Elements of an Export Plan. 23Success Story: Urban Planet Mobile. 28Success Story: Bassetts Ice Cream Company.144Chapter 3Developing a Marketing Plan. 31Success Story: Zeigler Brothers. 42Chapter 4Export Advice. 45Success Story: Advanced Superabrasives. 56Chapter 5Methods and Channels. 59Choosing a Foreign Representative or Distributor. 70Success Story: Infinity Air. 72Chapter 6Finding Qualified Buyers. 75Who Is the “Ideal” International Buyer?. 83Chapter 7Tech Licensing and Joint Ventures. 85Success Story: Spancrete Machinery Corporation. 88Chapter 8Preparing Your Product for Export. 91Success Story: Avazzia. 96Chapter 9Exporting Services. 99Success Story: Home Instead Senior Care.104Chapter 10International Legal Considerations.107Intellectual Property.116Shipping Your Product.135Chapter 13Pricing, Quotations, and Terms.147Success Story: Alignment Simple Solutions.154Chapter 14Methods of Payment.157Success Story: Giant Loop.166Chapter 15Financing Export Transactions.169Success Story: Patton Electronics Company.180Chapter 16Business Travel Abroad.183Business Culture Tips.187Success Story: Lightning Eliminators.190Chapter 17Selling Overseas and After-Sales Service.193Chapter 18Rules of Origin for FTAs.201Example Rules of Origin.207Success Story: Jet Incorporated.214Chapter 19Conclusion.217AppendicesA: Glossary of Terms.218B: Definitions of Abbreviations.224C: Free Trade Agreements Chart.225D: Forms.226Index.244About the U.S. Commercial Service.249U.S. Commercial Service A Basic Guide to Exportingv

Chapter 1: IntroductionThe World Is Openfor Your BusinessIn this chapter . . . Selling globally is easier than ever. More help than ever is available. Your assumptions may not be accurate. Transform your business—and yourself.The World Is Open for Business—Your BusinessToday, it’s easier than ever for a company like yours, regardless of size, to sell goods and servicesacross the globe. Small and medium-sized companies in the United States are exporting morethan ever before. In 2013, more than 300,000 small and medium-sized U.S. companies exported toat least one international market—nearly 28 percent more than in 2005, the year in which the10th Edition of this book was first published. In 2013, the value of goods and services exports wasan impressive 2.28 trillion, nearly a 25 percent increase since 2010. And 2014 topped theprevious year, with exports valued at 2.34 trillion.Additional Reasons to Explore or Expand ExportingGlobal trade in goods and services is likely to grow in the future.The new World Trade Agreement on trade facilitation that wasintroduced at the end of 2013 and renegotiated in 2014 willreportedly add 1 trillion to the global gross domestic product (GDP)once it is fully implemented. This agreement compels the WorldTrade Organization (WTO) members to improve customs proceduresand cut regulatory red tape, speeding the flow of goods and servicesacross borders and reducing the costs involved. The U.S. governmentwill create a “single window” system that has some of the samebenefits and efficiencies as the WTO effort.U.S. Total Annual Exports(USD Trillions, 2010–14)YearValueIncrease .3720132.2802.8920142.3452.85Source: U.S. Census Bureau.When this edition of A Basic Guide to Exporting went to press, the United States was in anadvanced stage of negotiating trade agreements with the European Union and countries in theAsia-Pacific region, including the large market of Japan. Together, these markets represent 50U.S. Commercial Service A Basic Guide to Exporting1

percent of total global GDP and 30 percent of global trade. These agreements, ifratified, will join agreements already in place, including the North American FreeTrade Agreement (NAFTA) and the Central America and Dominican Republic FreeTrade Agreement (CAFTA-DR). More than reducing the duties on imported goodsby member countries and thus making these products cheaper for consumers,the agreements also generate additional business opportunities by strengtheningintellectual property protections, simplifying regulations, opening up the servicesectors and government contracting procedures, and generally treating foreigncompanies the same as domestic companies. For more information on free tradeagreements see our publication Free Trade Agreements: 20 Ways to Grow Your Business(International Trade Administration, 2013).If you have a web presence, you have a global marketing and order-taking platform.For a few more dollars, you can process credit card payments for buyers in Australiaor translate key pages into Spanish and other languages to further your reach. Duringthe next few years, worldwide B2C e-commerce is projected to nearly double to 2.2 trillion with the fastest growth in the Asia-Pacific. You’ll want to be in the gameas sales soar.Do You Want More Sales Channels?Online B2B and B2C marketplaces offer virtual storefronts and a ready-made globalarmy of shoppers. They also offer payment solutions, and you can choose a shipperthat will take care of the required documentation for you. The shippers want tohelp make things easier too, and many offer international business advice, freightforwarding and customs brokerage services, cost calculators, and in some cases,financing. Plus, they’ll pick up goods and documents from your back door anddeliver them to almost any address in the world. And you can track everything ontheir website. Some e-commerce platforms will arrange to ship your goods to one ormore of their fulfillment warehouses located in major commercial centers around theworld. As items are sold and shipped quickly to buyers, you can restock the goodsby sending larger quantities to the fulfillment centers, generally at less cost thanshipping one item at a time from your place of business in the United States.Want even more sales channels? If web-based marketing and sales are insufficientto meet your sales growth appetite, you can attend trade shows in the United Stateswhere buyers from around the world come to purchase U.S. goods and services.Show organizers will facilitate introductions to the buyers, working with agenciesof the U.S. government to provide matchmaking services on the show floor. Thesesame government agencies can arrange for you to attend shows in other countries,where the connections and influence of your embassy network can save you timeand money generating new business. Government agencies can find buyers for youand arrange introductions in more than 100 countries. Call this service “customizedbusiness matchmaking.”2U.S. Commercial Service A Basic Guide to Exporting

Channels can include: Direct to end-user Distributors in country Supplier to the U.S. government in a foreign country Your e-commerce website A third-party e-commerce platform where you handle fulfillment A third-party e-commerce where they handle fulfillment Supplier to a large U.S. company with international sales Franchise your businessYou are not limited to one of these channels. Today’s global trading system is ideal for the smallercompany employing more than one marketing and sales channel to sell into multiple overseasmarkets. But most U.S. exporters currently sell to one country market—Canada, for example. Andthe smaller the company, the less likely it is to export to more than one country. For example,60 percent of all exporters with fewer than 19 employees sold to one country market in 2005.Imagine the boost in the bottom line if they could double the number of countries they sell to.Why Don’t More Small Companies Export to More than a Single Market?One reason is fear. It’s not very fear inducing to sell to a buyer in Canada who seems not sofar away, speaks the same language, and operates under a similar legal system. Croatia orMyanmar are perceived to be more risky. But are they? ManyU.S. companies are doing good business there now. In general,their “secret sauce” boils down to careful planning, relying onYour GEE Checklistassistance provided by government export promotion agencies, Local U.S. Commercial Service officegood basic business fundamentals including excellent customerservice, and a willingness if needed to get on a plane to visit a Regional Ex-Im Bank officeprospective customer. Freight forwarder/customs broker World Trade CenterThe opportunity for selling into a single region, such as Central Port AuthorityAmerica, and taking advantage of free trade agreements is Chamber of Commercesubstantial. The help available and discussed in this book can State office of international tradequickly expand your thinking—and your sales—from one market A university business schoolto many. Mayor’s office/Sister City program Small Business Development CenterIn choosing from among these channels, markets, and countries,what’s the best strategy for your business? There’s help for that International logistics companytoo—from private consultants, from your home state and local Other relevant companies or organizationsU.S. government sources, from the web, and from this book. Andmuch of the help is free or costs very little. It is easy to access,easy to use. Think of this help as your Global EntrepreneurshipEcosystem (GEE). According to The World Is Your Market: Exporting Made Easier for Small Businesses(Braddock Communications, 2013), your GEE is a social network of key contacts that can help yougrow your international sales.Chapter 1: Introduction—The World Is Open for Your Business3

Global Business AssumptionsOld AssumptionNew AssumptionExporting is too risky.Exporting to some markets, such as Canada, is no more risky thanselling in the United States. Different international markets havedifferent levels of risks. Almost any perceived risk can be identifiedand reduced by using the affordable export assistancenow available.Getting paid iscumbersome, and I’ll losemy shirt.Trade finance and global banking have evolved to the point wherebuying and selling things internationally is routine, safe, andefficient. Reliable payment collection methods are numerous andinclude letters of credit through banks, credit cards, and onlinepayments. Some delivery companies will even collect payment atthe buyer’s back door.Exporting is toocomplicated.Most exporting requires minimal paperwork. Researching marketsand finding buyers can in many instances be done from yourcomputer using free or low-cost information. Third-party exportfacilitators, such as e-commerce platforms, can remove much of thecomplexity and risk, real or assumed.My domestic market issecure. I don’t needto export.Globalization has made it easier to buy and sell goods in multiplemarkets. Few markets remain static, and new markets are constantlyopening to competition. Most U.S. businesses are involved in oraffected by international business, whether they realize it or not.More small and medium-size U.S. companies need an internationalstrategy that includes diversifying markets. It turns out thatexporting is often a tremendous learning experience for those whoare open to the lessons, resulting in better products and servicesand valuable experiences for the practitioners.I’m too small to go global.No company is too small to go global. In fact, nearly 30 percent of allU.S. exporters in 2005 had fewer than 19 employees, and many hadfewer than five.My product or serviceprobably won’t sell outsidethe United States.If your product or service sells well in the United States, there’s agood chance an overseas market can be found for it. What’s more,help is available to test acceptance of your service or productin more than 100 countries around the globe. In some markets,you may have to make some modifications because of cultural orregulatory differences, but by learning how to sell into anothermarket, you will become a better marketer, and your company willbe more successful in all markets in which it competes.I won’t be successfulbecause I don’t speakanother language and havenever been abroad.Cultural knowledge and business etiquette are always helpful, butyou can pick these things up as you go. The English language willtake you a very long way, and help is readily available for situationsin which interpreters and translators are necessary. We Americansregularly lampoon ourselves for being “ugly.” A level of introspectionand culturally specific knowledge can help prevent potentially dealbreaking faux pas, but a friendly disposition and willingness to learncan make up for a multitude of unintended mistakes.I have no idea where to turn There is plenty of help available, much of it free.for help.4U.S. Commercial Service A Basic Guide to Exporting

A GEE might consist, for example, of your local Chamber of Commerce, your local World TradeCenter, a university with an international business department, some Small Business DevelopmentCenters, the U.S. Commercial Service, a bank with international experience, and your state’s officeof international trade. Just to name a few. Social networking websites, such as LinkedIn, also haveinternational trade groups and are worth considering.If what you read so far comes as a surprise—particularly that exporting is relatively easy, as isexpanding the markets you sell to from one to many, even for very small businesses, and thatthere are scores of local yet worldly folks ready to help you succeed—then you are not alone. Thepeople whom we interviewed for the case studies in this book—like many potential exporters—say that their number one need starting out was for more basic information on how to export. Thegreatest information needs are how to choose the best markets for their products and servicesand to meet people to purchase them.Surprised?Then you also might be surprised by the old global businessassumptions and the new ones replacing them.This book is mainly written for you, the millions of business owners,or their business development gurus, who could export or exportmore. You’ve asked to have spelled out in plain language how peoplebusy running their businesses can learn what they need to know togrow their sales globally. And here it is: A Basic Guide to Exporting.Reasons to ExportThe U.S. government andprivate companies have officesall over the world, all designedfor one purpose: to help getU.S. products and servicesout of the United States andinto the waiting hands ofinternational customers.If you purchased this book or received it from one of our corporatepartners, chances are you have already answered for yourself thisfundamental question: Why bother?Exporting can be one of the best ways to grow your business: Grow your bottom line (companies thatexport are 17 percent more profitable thanthose that don’t). Defend your domestic market. Smooth your business cycles, includingseasonal differences. Increase the value of your intellectualproperty should you choose to license it. Add management and interculturalexpertise. Increase the value of your business shouldyou choose to sell it (and start another). Increase your competitiveness in allmarkets. Use production capabilities fully.Chapter 1: Introduction—The World Is Open for Your Business5

Exporting Is Strategic in Another WayWith the volume of trade growing exponentially and barriers to trade falling,competition in a company’s domestic market is intensifying, particularly from foreigncompetitors. We need to compete in our own backyard while we simultaneously openmarkets for our products and services in other markets: Ninety-five percent of the world’s consumers live outside the United States. That’sa lot of potential customers to ignore. Foreign competition is increasing domestically. To be truly competitive,companies must consider opening markets abroad. Exporting is profitable. Exporting helps businesses learn how to compete more successfully.According to a World Bank report, Global Economic Prospects, trade in goods andservices is likely to more than triple by 2030. Over the same period, the globaleconomy will probably expand from 35 trillion in 2005 to 72 trillion. The numberof people considered “middle-class” will triple to 1.2 billion, enabling them to affordinternational travel, better education, and imported goods from the United States.Exports from the United States, according to the same report, are expected to growby nearly 10 percent per year for the next several years. Your product or service couldbe among them.With this significant projected growth in global trade, fueled in large part by newlyaffluent consumers in China, India, and other developing economies, the challengefor businesses of all sizes in the United States is how to dip into this incrediblerevenue torrent. A Basic Guide to Exporting aims to help prime your pump.As global trade grows, companies that engage in it report a shift in income derivedfrom their export sales compared with sales in their domestic markets. A study of U.S.exporters found that 60 percent of small companies in the survey derived 20 percentof annual earnings from exports, while 44 percent of medium-sized companies did.When asked whether export sales would grow at least 5 percent per year for thenext 3 years, 77 percent of the small companies and 83 percent of the medium-sizedcompanies said they would.You might reasonably respond by saying, “That’s all well and good, but do I have whata person in another country will buy?” As you delve further into this book, you’ll readabout companies of all sorts that produce an amazing array of products and servicesand have grown their businesses through exports. They include: Conversational English modules thatcan be downloaded from cell phones Garage doors Bicycle racing socks Lightning deflectors An exercise machine Previously owned mining machinery Bolts And a host of other interesting anduseful products and services A fish food6 SkylightsU.S. Commercial Service A Basic Guide to Exporting

Some of what’s sold is unique, but most is not, relying on other factors such as superior customerservice or marketing to close the deal. The businesses and businesspeople behind them areexcellent at business fundamentals and passionate about expanding globally. One businessfeatured in this book calls itself a “micro-multinational”; it has 40 employees but sells to60 different countries.Even Companies That Don’t Make Anything Are Flourishing AbroadThese companies make money by providing wholesale and distribution services. And there arethousands of them—many of them small.Another answer to “Why bother to export?” is that exporting adds to the knowledge and skills ofeveryone in a company who does it. Doing business in a market that’s beyond one’s borders canhave a transformational effect on its practitioners. The experience of forming new relationships,getting up close and personal with another culture, figuring out how to meet the needs of others,and learning how to be inventive in addressing new business challenges not only is personallyrewarding; it also leads to improvements in products and makes companies stronger in whatevermarket they compete.As one small exporter interviewed for this book put it, “Exporting is easier than we imagined.Exporting opens your horizons to what’s going on in the world economy. We need to take thatstep outside ourselves and develop relationships and open doors. It may start out small. It did forus. But it’s growing. We are a better company and better managers. Maybe even better persons.And to me that’s what success is all about.”Chapter 1: Introduction—The World Is Open for Your Business7

Success StoryPedaling Through Trialsto Reach Global MarketsDeFeet InternationalAt the end of each chapter you’ll find a smallbusiness case study that describes how a businessbegan exporting and developed that aspect ofthe business over time. As you read the storieskeep in mind some of the themes from Chapter1: importance of exporting to growth; exportingto multiple international markets; solid businessfundamentals; dealing with challenges; andseeking expertise and assistance from governmentand other sources.The CompanyShane Cooper is president of DeFeet International,a maker of socks for cyclists. Over the years anddespite substantial adversity, he has built thebusiness that now includes distributors in 35countries. He and his wife were bike racers backin the early 1990s. During summers, she wassupplementing her income by racing bikes as anamateur and, as Cooper puts it, he was spendingher supplemental income as an amateur on hisbike racing. His father was a sock knitting machinetechnician and sold the machine’s parts. One day,Cooper the younger decided to make socks to pay8for his bike racing hobby. “It just kind of happenedfrom there,” he recalls. “We made the world’s bestsock for cycling and that was 20 years ago.”The ChallengeCooper’s factory burned to the ground in 2006.There was no production for 9 months. Luckily,there was insurance, but it took a lawsuit and 3years to receive everything owed. And so whenhe finally got the check, he had to pay taxes outof that money because it’s considered businessincome. “We had 7 years where we made nomoney after the fire,” said Cooper. “We becameprofitable again and started winning the businessback.” That was just in time for the great recessionof 2008. Just when things were at their bleakestpeople started pulling bikes down from garagerafters and riding them to save money. Bicycleshops became flush with cash, and the Euro soaredagainst the dollar. “So all of a sudden, after 7 yearsof st

A Basic Guide to Exporting 11th Edition Doug Barry, Editor U.S. Commercial Service U.S. Commercial Service—Connecting you to global markets. A Publication by the U.S.