As we close out the month of May – widely celebrated across the United States as “World Trade Month” – this seems an appropriate time to highlight some of the resources that are available to support companies to do business internationally.
Knowing Your Market
In addition to doing your market research to determine whether your products or services can be successful in an international destination, to fully understand your costs and risks it is essential to get answers to other key considerations. What is the cultural and business climate – how does one actually conduct business there? What are the regulatory requirements for doing business generally and specifically for providing your goods or services in that country? Are there political or foreign currency risks to entering that market and how easy will it be to repatriate your profits? What kind(s) of support might be available to assist you in getting started? Here are some resources to help you find answers to these and other important questions:
U.S. Country Commercial Guides prepared by the US Commercial Service to assist US businesses are excellent places to start. Reporting on market conditions, opportunities, regulations, and business customs, they provide a good overview for anyone, anywhere who is interested in a particular country. There is a guide for every country – from Afghanistan to Zimbabwe, except the United States.
U.S. State Department Investment Climate Statements provide country-specific information on the business climates of over 170 economies, analyzing potential markets for business of all sizes. Again, no statements are prepared for the United States.
Investment Promotion or Investment Support agencies are available in most countries, even the poorest, to attract and support investments into the country. Their purpose is to tell you why you should do business in that country, so they will tend to focus on the country’s most positive attributes. However, this will be a good source of information about incentive programs that may be available to you. The World Association of Investment Promotion Agencies provides a listing with links to its member agencies. For those interested in doing business in the United States, that information is available at the level of the states.
Entering the U.S. market can be challenging because of its size and complexity. It is best to begin by determining the state in which you wish to initiate operations. SelectUSA.gov provides a useful link to a listing of each state’s designated investment officials and websites. Some states also maintain their own overseas presence in key countries. The US embassy in your country could also be a good place to start. BBC Country Profiles provide a more general but important overview of most countries, including the United States.
Accessing Finance for Trade
Some countries, notably the developed and emerging economies, have dedicated resources to support exporters. This is not surprising as the export of goods and services generates the revenue that a country needs to pay for its imports. Broadly speaking, access to finance supports a company’s performance and enhances capacity, allowing it to grow. However, because of the risks inherent to operating globally, commercial banks and financial entities traditionally shy away from providing financing for trade. Export credit agencies (ECAs) have evolved to fill that gap.
Often known as export-import banks, these entities provide or guarantee access to the following types of capital:
Export Working Capital programs typically provide the working capital that allow companies to expand capacity in order to deliver on a specific international contract or transaction. Along with export factoring programs – where the financier advances cash by purchasing a company’s receivables for a fee – this type of credit supports global expansion without tying up the company’s cash reserves.
Export Credit Insurance policies provide exporters with the guarantee of payment in the event that their foreign buyer defaults. With accounts receivables insured against non-payment an exporter is able to offer buyers flexible credit terms that can help to make its offerings more attractive than those of its competitors.
Loan Guarantees provided by ECAs can help companies operating globally to obtain a letter of credit, providing needed assurances to sellers that they will be paid. Such guarantees can significantly reduce the risk of transacting with a first-time buyer.
Political Risk Insurance policies are provided by some ECAs to minimize the risk of non-payment due to political or foreign currency instability. These assurances can reduce the risk of operating in commercially attractive but politically risky markets.
The OECD has compiled a list of export credit agencies which provides a good starting place to explore these agencies and their solutions. Not a comprehensive list, you should do your own research to explore what options may be available to you.
Importing & Exporting
Traders of goods need guidance that is very specific to the product, its country of origin, and intended destination. For that you need a customs broker and/or customs attorney. Increasingly countries are also offering a one-stop-shop to facilitate the ease with which traders of goods and of services can obtain the necessary information and required documentation and permits. Also known as “single windows” these may be available electronically or still require an in-person visit. As these entities become more widely available be sure to explore what services are available in your country of interest.
We enjoy helping companies and entrepreneurs to find business-oriented, workable solutions to the challenges they may face in doing business globally. Contact us to schedule a consultation.