Export Presentaton March2012
- 1. Opportunities for Successful Exporting Presented by: Scott Smithhisler Global Trade Consultant
- 2. Agenda: Successful export growth is Welcome & Introductions more about plans, people, International Sales – The Opportunity process & tools, and less about chance Export Strategy Customer Relationships People, Process & Tools Policies & Procedures Trade Risks Payment Terms Options Benefits of Strategic Partners Q&A
- 3. Opportunity… 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 Tomorrow: Nearly 87% of economic growth over the next five years will take place outside of the U.S. Source: National Export Initiative, International Monetary Fund, US Department of Commerce
- 4. 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
- 5. Exports as Part of Growth Strategy Product & Market Assessment: Leverage success in the US to support export opportunities 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
- 6. 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
- 7. 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
- 8. The Team Maintaining a highly skilled, passionate cross functional team working together to ensure overall success is fundamental for international growth. 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)
- 9. High Level Export Process & Team 1. Customer Relationship Sales / Legal • Customer selection • Legal agreement 2. Pricing • Credit terms according to Sales / Finance risks & policy • Product offering 3. Order Fulfillment • Prices consider INCO terms Int’l Customer Service / Credit • Quote to Customers • Customer purchase order • Collaboration & changes • Credit check • Proforma Invoice (includes 4. Credit Check required LC specifics) Credit • L/C Review • Credit decision 5. Shipping • Release product for shipment Customer Service / Logistics • Shipment Planning • Shipment 6. Payment & Delivery • Transport & other documents Credit / Finance / Customer • Draw on LC & monitor • Documents to Customer • Payment to seller • Customs clearance at destination • Happiness! Let’s do more of this!
- 10. Standard Operating Procedures Clear procedures for the cross functional team supporting exports. 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
- 11. 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
- 12. Export Credit Policy Competing in international markets requires companies to take SMART RISKS. 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
- 13. Terms Options - Balancing Risk, Cost & Timing OPEN ACCOUNT DOCUMENTARY COLLECTION LETTER OF CREDIT CASH IN ADVANCE
- 14. Letters of Credit Explained Buyer’s Bank substitutes its credit Letters of credit work through a worthiness for that of the buyer series of formal agreements Guarantee is contingent on strict • Contract • Purchase Order compliance with terms & conditions Seller • Confirmation Buyer Typically goods cannot be obtained by buyer until payment is made Credit risk is with buyer’s bank and country of domicile • LC Application • FX & Export Financing • Loan / Collateral • LC Advice / Confirmation • Documents & Payment Works well for higher risk • Documents & Payment • FX & Trade Financing transactions Seller’s Bank • Correspondents • Credit Line for Buyer’s Bank confirmations
- 15. Outsource Providers External providers act as an extension of your operation and help optimize results. Freight Forwarders: Specialty Providers: Serve as travel agents for Minimize risk by providing international goods expertise & software Key partner on product flow, Reduce costs by accelerating problem solving, and cost payments & increasing document containment accuracy Need to ensure services fit your needs and compare prices Other Resources for Exporters: US Export Assistance Center Business Oregon Small Business Administration
- 16. Questions? Thank you for coming today! Scott Smithhisler Global Trade Consultant Orinoco International LLC ssmithhisler@orinocointl.com LinkedIn/in/scottsmithhisler +503-816-3647
- 17. Appendix More on Payment Terms Options INCO Terms & Examples Key Procedural Points
- 18. Cash in Advance, Open Account & Documentary Collections Cash In Advance & Open Account Documentary Collections One party has all the leverage Buyers Bank holds documents required for Customs clearance until Mitigate risk using a combination of payment is made steps and/or timing Credit risk related to buyer Buyer decides whether to pay Works best with trusted customers and when geopolitical risk is low
- 19. Letter of Credit Process Flow Freight Forwarder Applicant / Buyer 6 Shipment Goods 7 Transport Docs START HERE 1 & 2 Seller / Beneficiary Purchase Order & Confirmation 12 3 L/C Documents Application to Buyer 9 5 L/C Claim Reimbursing Bank 10 Payment 11 Export Documents 8 LC & Letter of Credit Documents Issuing Bank 4 Advising Bank
- 20. Letter of Credit – Additional Pro’s & Con’s Pros Cons Eliminates buyer credit risk and Order fulfillment systems may not ensures prompt payment support LC or trade documentation requirements, so automation may be High degree of Exporter control limited Confirmations eliminate bank/ Heavy reliance on carriers, country risk forwarders and other 3rd parties for LC compliance Rules are well defined and predictable (e.g. subject to UCP600) Complexity of LCs and related rules require high degree of expertise Usance (term) LCs offer cost effective trade financing option; could be Visibility limited and monitoring is competitive advantage time consuming “Irrevocable” means terms and conditions can only change if buyer, seller and bank agree.
- 21. International Commercial (INCO) Terms INCO terms: Examples: Define Buyer & Seller’s liabilities & responsibilities Any Mode of Transport Indicate a named place EXW, Named Place of Delivery (EXW = Ex Works) Depict what the selling price Seller is responsible for warehouse includes services and export packing Are specific to either sea/ Buyer arranges for loading at point of inland waterway transport origin through delivery to final destination or other modes 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
- 22. Key SOP Topics – Title Passage & Consignment of Goods Certain elements of the SOP are tied 1. How legal title passes from seller to to managing export risks & product buyer flow. Physical movement of goods Transport documents (e.g. cargo As such, they should be considered receipt, waybill, bill of lading) in the export policies & procedures. 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
- 23. Monitoring Visibility to key process steps can enable the team to address problems and continuously improve the process. Process: Tools: Document end-to-end process & timing Automate wherever possible Make adjustments based on experience 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