By: Melissa Proctor (Polsinelli, PC)
Before diving into the proven export “best practices” and tips, the first question that needs to be answered is, “Why should Arizona companies consider exporting?” For small and medium-sized businesses, the benefits of exporting can be substantial. Consider the following—
- The majority of the world’s consumers are located outside of the United States, and exporting can increase sales and help Arizona companies expand into new markets.
- Orders from foreign customers tend to be larger than the average domestic order as overseas buyers often prefer to purchase goods by the container instead of by the pallet.
- Exports can yield greater profit margins for Arizona companies by virtue of the fact that U.S.-origin merchandise is perceived around the world as being unique, innovative, and of higher quality than similar items domestically sourced in foreign markets.
- Arizona companies are already competing internationally whether they realize it or not. Foreign competitors are likely already selling their wares in the United States. Exporting will enable Arizona businesses to become more savvy and competitive at home by giving them a greater understanding of their foreign competitors’ markets, as well as an awareness of new marketing strategies for their products.
- Exporting allows Arizona companies to reduce economic risk and enjoy a more sustained growth by diversifying their markets—that is, they can free themselves from dependency on the up’s and down’s of a single market for success.
- Arizona companies may increase their perceived competitive position through exporting, as compared to competitors selling only to the domestic market.
- Exporting may allow companies to achieve longer and more sustainable sales patterns for their products—this is especially the case for businesses dealing in seasonal goods as they can increase sales to markets that have cycles that are opposite to those of the United States (i.e., countries in the Southern Hemisphere).
- Exporting allows Arizona companies to extend the life cycles of more mature product lines sold in the United States—these items may enjoy a newly discovered life in foreign markets.
Greater access to government financing opportunities for U.S. exporters, increased changes for selling merchandise over the internet, and the growing number of Free Trade Agreements have dramatically increased access to foreign markets and have made exporting easier for Arizona companies. Exporting is also no longer viewed as an onerous or overwhelming prospect. Rather, with the number of resources that are available today from the U.S. Government agencies charged with promoting U.S. exports, and the numerous private organizations and firms that specialize in assisting U.S. companies, Arizona businesses have a unique opportunity to become familiar with the rules of the game at rapid speed, and to roll out the necessary internal processes to ensure their success.
Given the benefits and opportunities afforded by exporting, interested Arizona companies should first develop a solid plan and business strategy in place for assessing their capital resource needs, selecting potential markets to enter, connecting with foreign customers, and engaging qualified supply chain partners, such as customs brokers, forwarders, couriers, and distributors.
What Arizona companies have already mastered in connection with their domestic sales operations can and should be applied to international sales transactions as well. That is, even though export sales will involve foreign buyers and deliveries to foreign destinations, U.S. sellers will still be dealing in their own, familiar industry sectors, exercising their honed negotiation skills, and pinning down issues that are common to all sales contracts, such as terms of sale, transfers of title and risk, effecting delivery of the goods, determining how and when payments are to be made, methods for resolving disputes, etc. The areas that are unique to international sales represent only small (but equally important) part of the overall picture. New exporters should learn about the foreign market’s specific cultural requirements and nuances, as well as product-specific mandates of the target market, such as product import registration and licensing rules, marking and labeling requirements, currency, language requirements, avenues for protecting intellectual property rights, etc. These new areas should not be brushed off as being overly complex or “game-stoppers”; rather, each of these issues can easily be identified, understood, and addressed using the various tools and resources that are accessible to Arizona companies.
Exporting also involves certain U.S. government requirements, and exporters are expected to roll out processes for ensuring their compliance in areas such as:
- Obtaining the appropriate authorizations, when required, for exports of certain sensitive items—but, companies should keep in mind that: (1) the vast majority of products that are exported from the United States do not require any export licenses; and, (2) securing licenses is not generally an onerous or difficult practice, but merely requires additional lead time;
- Timely filing the necessary export documentation (i.e., Electronic Export Information filings) via the Automated Export System for certain physical shipments from the United States—a task that is typically performed by the exporter’s freight forwarder or courier;
- Screening parties to an international sales transaction to prevent inadvertent dealings with end-users designated on published restricted parties lists, embargoed or sanctioned countries, and end-uses that involve proliferation activities—note that there are online tools available, as well as a wide variety of automated screening solutions, that exporters can utilize for swiftly and easily performing this type of due diligence;
- Regularly monitoring export operations and transactions to confirm ongoing compliance;
- Periodically reviewing international sales transactions to identify ways to improve efficiencies in process flows, explore additional cost and duty savings opportunities (e.g., through Free Trade Agreements, duty drawback, foreign trade zones, etc.), and increasing the speed through which shipments clear customs at the point of export—all of which will be attractive to a growing client base in foreign markets.
As mentioned earlier, there are numerous organizations and highly experienced professionals located here in Arizona that are dedicated to assisting new exporters in the design and launch of successful export strategies. Please contact MPEXA to learn more and to be connected with these resources. Quite simply, exporting can enable Arizona companies to boost their bottom lines and take them to the next level.
Melissa Proctor is a Shareholder with Polsinelli, P.C. with significant experience in the customs laws and regulations, export controls, economic sanctions, and international trade. She may be reached at (602) 650-2002 or via e-mail at firstname.lastname@example.org.