Opportunities for Successful Exporting
Scott Smithhisler Global Trade Consultant
Presented by:
Agenda:
Welcome & Introductions
International Sales – The Opportunity
Export Strategy
Customer Relationships
People, Process & Tools
Policies & Procedures
Trade Risks
Payment Terms Options
Benefits of Strategic Partners
Q & A
Successful export growth is more about plans, people, process & tools, and less about chance
Opportunity…
Tomorrow: Nearly 87% of economic growth over the next five years will take place outside of the U.S.
Today: 70% of the world’s purchasing power is located outside of the U.S.
95% of customers are outside the U.S.
Less that 1% of American companies export – typically to only one country
Source: National Export Initiative, International Monetary Fund, US Department of Commerce
Benefits of Going Global
Diversify business & expand market share
Increase customer base
Increase top line sales and bottom line profits
Reduce fixed costs
Optimize production capacity
Reduce seasonal market fluctuations
Exports as Part of Growth Strategy
Product & Market Assessment:
Assess demand for product or service
Competition
Pricing & market trends
Product or packing modification
Regulatory & legal requirements
Country risk
Internal Assessment: Impact on our business
Export plan serves as roadmap & gauge to measure success
Leverage success in the US to support export opportunities
Sales Channel
Distributor: Has exclusive rights to sell your
product in one or more countries
Export Trading Company (ETC): Deal with multiple manufacturers;
handle all aspects of sales & marketing in a given territory
Licensee: Has the right to use your trademark
and manufacture products under certain restrictions
Retailer: Buys directly from you and sells to
consumers
Affiliate: An operation fully owned by your
company
Distributor Selection
Selecting the right partner is crucial to long term business success
Strong relationship with distributor is key
Does your product fit into their long term strategy?
How much of your product can they sell?
Agreement structure Exclusive vs. non-exclusive Territory Pricing & terms Sales expectations
Contingency plan
The Team
Working environment with open communication & shared accountability
Hire people with international business, logistics or trade finance experience
Invest in ongoing training across your organization
3rd party Partners are part of the team (i.e. banks, forwarders, specialty providers)
Maintaining a highly skilled, passionate cross functional team working together to ensure overall success is fundamental for international growth.
High Level Export Process & Team
1. Customer Relationship Sales / Legal
• Customer selection • Legal agreement • Credit terms according to risks & policy
4. Credit Check Credit • L/C Review • Credit decision • Release product for shipment
2. Pricing Sales / Finance
• Product offering • Prices consider INCO terms • Quote to Customers
5. Shipping Customer Service / Logistics • Shipment Planning • Shipment • Transport & other documents
6. Payment & Delivery Credit / Finance / Customer
• Draw on LC & monitor • Documents to Customer • Payment to seller • Customs clearance at destination • Happiness! Let’s do more of this!
3. Order Fulfillment Int’l Customer Service / Credit
• Customer purchase order • Collaboration & changes • Credit check • Proforma Invoice (includes required LC specifics)
Standard Operating Procedures
Main Elements:
Approval by Sr. Leadership in Sales, Finance & Operations
End-to-end process steps and supporting job functions
Delineation of roles and responsibilities
Metrics and reporting
Guidelines for on-going training
Clear procedures for the cross functional team supporting exports.
International Trade Risks – Inform the approach…
Commercial Buyer history Credit reporting limited Financial standards may differ Potential for loss during transit
Geopolitical Government stability and consistency
Economic Foreign exchange rate fluctuations Foreign Bank solvency Sovereign risk
Legal Contract enforceability Goods recoverable Customs & Tax regulations change
Export Credit Policy
Main Elements:
Approval by Sr. Leadership in Finance, Sales & Operations
Customer credit application & approval
Credit limits and terms to be assigned against criteria Customer credit strength Customer history & performance Geopolitical risk rating Order value
Override approvers & limits
Competing in international markets requires companies to take SMART RISKS.
Terms Options - Balancing Risk, Cost & Timing
OPEN ACCOUNT
DOCUMENTARY COLLECTION
LETTER OF CREDIT
CASH IN ADVANCE
Letters of Credit Explained
Letters of credit work through a series of formal agreements
Buyer’s Bank substitutes its credit worthiness for that of the buyer
Guarantee is contingent on strict compliance with terms & conditions
Typically goods cannot be obtained by buyer until payment is made
Credit risk is with buyer’s bank and country of domicile
Works well for higher risk transactions
Seller Buyer
Buyer’s Bank Seller’s Bank
• Contract • Purchase Order • Confirmation
• FX & Export Financing • LC Advice / Confirmation • Documents & Payment
• Correspondents • Credit Line for confirmations
• LC Application • Loan / Collateral • Documents & Payment • FX & Trade Financing
Outsource Providers
Freight Forwarders: Serve as travel agents for
international goods
Key partner on product flow, problem solving, and cost containment
Need to ensure services fit your needs and compare prices
Other Resources for Exporters:
US Export Assistance Center
Business Oregon
Small Business Administration
External providers act as an extension of your operation and help optimize results.
Specialty Providers: Minimize risk by providing
expertise & software
Reduce costs by accelerating payments & increasing document accuracy
Questions? Thank you for coming today!
Scott Smithhisler Global Trade Consultant Orinoco International LLC [email protected] LinkedIn/in/scottsmithhisler +503-816-3647
Appendix More on Payment Terms Options INCO Terms & Examples Key Procedural Points
Cash in Advance, Open Account & Documentary Collections
Cash In Advance & Open Account
One party has all the leverage
Mitigate risk using a combination of steps and/or timing
Documentary Collections
Buyers Bank holds documents required for Customs clearance until payment is made
Credit risk related to buyer
Buyer decides whether to pay
Works best with trusted customers and when geopolitical risk is low
Letter of Credit Process Flow
Seller / Beneficiary
Applicant / Buyer
Issuing Bank Advising Bank
Freight Forwarder
3 L/C Application
Reimbursing Bank
Purchase Order & Confirmation START HERE 1 & 2
Goods
6 Shipment
L/C
5
7 Transport Docs
Letter of Credit 4
Export Documents
11
12 Documents to Buyer
10 Payment
8 LC & Documents
9 Claim
Letter of Credit – Additional Pro’s & Con’s
Pros
Eliminates buyer credit risk and ensures prompt payment
High degree of Exporter control
Confirmations eliminate bank/country risk
Rules are well defined and predictable (e.g. subject to UCP600)
Usance (term) LCs offer cost effective trade financing option; could be competitive advantage
“Irrevocable” means terms and conditions can only change if buyer, seller and bank agree.
Cons
Order fulfillment systems may not support LC or trade documentation requirements, so automation may be limited
Heavy reliance on carriers, forwarders and other 3rd parties for LC compliance
Complexity of LCs and related rules require high degree of expertise
Visibility limited and monitoring is time consuming
International Commercial (INCO) Terms
INCO terms: Define Buyer & Seller’s liabilities & responsibilities
Indicate a named place
Depict what the selling price includes
Are specific to either sea/ inland waterway transport or other modes
Examples:
Any Mode of Transport EXW, Named Place of Delivery (EXW = Ex Works) Seller is responsible for warehouse
services and export packing Buyer arranges for loading at point of
origin through delivery to final destination
Ocean Transport CIF, Port of Destination CIF = Cost, Insurance & Freight Seller is responsible for transport to destination port and insurance Buyer arranges for pick up at local dock, arranges clearance and pays duty
Key SOP Topics – Title Passage & Consignment of Goods
1. How legal title passes from seller to buyer Physical movement of goods Transport documents (e.g. cargo
receipt, waybill, bill of lading)
2. Transport Documents Bill of Lading (B/L) = Negotiable Title
Cargo Receipts, Truck Bills & Waybills = Non-Negotiable Receipts
3. Consignment of the Goods Open Consignment = “To Order” Title passes via endorsement
Straight Consignment = “To” No endorsement required; can help expedite delivery
Certain elements of the SOP are tied to managing export risks & product flow.
As such, they should be considered in the export policies & procedures.
Monitoring
Tools:
Automate wherever possible utilizing third party websites
Maintain & monitor credit limits and terms systematically
Systematic tracking Order receipt & confirmation Accounts receivable Letter of credit monitoring
• Balances • Expiration dates • Payment status
Visibility to key process steps can enable the team to address problems and continuously improve the process.
Process: Document end-to-end process & timing
Make adjustments based on experience
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