Some Frequently Asked Questions About Exporting
How do I collect on foreign sales?
Generally, the best way to make sure you receive prompt payment for foreign receivables is to use secure payment terms and/ or export credit insurance. This is especially important since collecting bad debts overseas can be difficult and expensive.
(ref. webinars 8 and 9)
What international payment terms should I use?
With new overseas customers, you should require substantial or full advance payment, typically by wire transfer to your bank account. You can also use a secure payment mechanism, letter of credit, irrevocable and confirmed on a US bank. If extended payment terms are prerequisite to getting the business, you may need to obtain export credit insurance. With insurance, you can offer your customer extended payment terms of 30 - 120 days. And, if your receivable is secure, you may be able to borrow working capital against it. International credit card payments are not considered secure, as they are subject to fraud. If you must use credit cards, it is advisable to get the payment up-front, and then wait up to 72 hours before shipping. (ref. webinar 8)
How do I finance foreign receivables?
To finance foreign receivables, banks will require secure collateral, like commercial assets in the US, or a confirmed letter of credit secured with export credit insurance. If your bank is still reluctant to extend you credit, you can apply for an SBA working capital loan guarantee. This guarantee protects your bank against default, and thus encourages them to accept your business.
(ref. webinars 8 and 9)
What types of insurance are available for my product?
In most cases, it is prudent to obtain shipping insurance on your insurance are products and export credit insurance on your foreign receivables. Export credit insurance is available from both private and public sources. To obtain this insurance, your foreign buyer must be able to document credit-worthiness. Export Import Bank of the United States (EXIM) export credit insurance covers 95 percent of your goods’ value against buyer default and political risks, like foreign government expropriation and acts of terrorism. It usually costs slightly more than 1% of the shipment's value. Private insurance may also be available. It is usually cheaper, but typically covers only about 80% of your shipment's value, and does not cover political risks. The rates for export credit insurance vary from country to country based on its perceived risk. Insurance may not be available at all for some high-risk countries.
(ref. webinar 11)
How do I legally export goods from the US?
If you are planning to export products, you should consult with US Customs on licensing and inspection regulations. You should also check to make sure you comply with foreign government safety and performance standards. There are currently just three countries to which exporting is completely illegal: North Korea, Iran, and Cuba. There are several other countries where certain items are controlled, such as equipment that might be used for both civilian and military applications (e.g., China). If you are in doubt as to the legality of export shipment, we suggest that you contact the US Trade Information Center at 1-800-USA-TRADE. We strongly urge you to retain the services of a competent freight forwarder to manage your shipments and the associated documentation. Many freight forwarders are listed in the Yellow Pages of your local phone book.
How do I legally import goods into the US?
You can import goods into the US by land, sea or air, depending on the type of product and its value. To import commercial goods into the US, you must clear US Customs and pay any import duties on the products. For shipments larger than a small sample box, you probably need to employ the services of a customs house broker to receive the shipment and take care of the associated paperwork. Dozens of customs house brokers are listed in the phone book. You will be subject to special regulations if you are importing items like alcohol, firearms, explosives, cosmetics, pesticides, drugs or motor vehicles. Agricultural products are also subject to special health and insect control regulations by the US Department of Agriculture's Animal and Plant Health Inspection Service (APHIS). Products coming into the US must also meets American safety and performance standards. (e.g., UL certification for electrical devices).
Do I need an import or export license?
Generally, you don't need a special import or export license unless you are trading in regulated items like alcohol, firearms, explosives or drugs. You may also need a special permit if you are shipping to restricted countries.
Are there any restrictions on the product I want to export?
Yes, there are restrictions on the movement of some types of goods into overseas markets, including firearms, military equipment, drugs, cosmetics and food/ agricultural products. For example, Europe does not allow the importation of any genetically-modified food products, which include most foods sweetened with corn syrup. There are also other countries, like Cuba, where the US Government strictly limits the types of goods you may ship (e.g., only food and medicine.) The SBDC and your customs house brokers or freight forwarders can help you determine if such restrictions apply to you.
What taxes and duties apply to international shipments?
Most countries levy some customs duties and/ or taxes on incoming goods. These may range from a few percent to very high rates in protected markets, like Brazil. The US Customs Bureau assesses duties on products coming into the US, and foreign governments customs authorities assess duties on US exports. In addition to duties, special taxes may also be applied to protected industries, like textiles and steel. Some countries also levy a value added tax (VAT) which can range up to 20% or more. The best way to estimate your total tax and duty liability is to work with your freight forwarder or customs house broker. The SBDC can also help you perform some relevant on-line research. Finally, the US has special free trade agreements with Canada, Mexico and numerous other countries under which you may pay very low duty rates or no duty at all. (ref. webinar 4)
What is the best way to ship my products?
The preferred shipping method for your goods depends on their size, weight, value, and perishability, and on the required speed of delivery. Surface freight (truck, rail, and ship) is generally the cheapest option for heavy or bulky goods, but transit time can be up to 8 weeks depending on the route. The cheapest surface rates are for full container loads (20 foot or 40 foot containers.) Air freight is expensive, but may be a reasonable option for time-critical small, light, high-value items, and for perishables. To determine the best shipping method for your situation, we recommend consulting with a professional freight forwarder or customs house broker.
(ref. webinar 4)
How do I expand my sales overseas?
US Export Assistance Centers and SBDC International Trade Centers, across the US have professional trade staff can help you find and develop overseas business opportunities. Many states also provide some export assistance services. These organizations can help you identify new high-potential global markets for your product or service, and suggest effective marketing strategies. The staff can also help you locate the working capital you need to fulfill international orders. Often, this work is done in cooperation with other state and federal agencies that have overseas staff in your target markets. (ref. webinar 5)