In honor of U.S. National Small Business Week 2015, this post shares steps for getting started as a global business.
You are a small business or solopreneur going along your merry way, when a business lead that could take your business overseas drops into your lap. What do you do? Where do you start?
Here are some key things you should know to be prepared to respond to that call or email and get started as a global business:
- Will I need a license to export my product or service?
Certain products require a license before they can be exported. Some of these products are regulated by export control laws that carry stiff penalties if they are violated. A license may be required depending on the intended destination or end-user of the product. A few countries and individuals are sanctioned and/or placed on a list of Specially-Designated Nationals. A license is required to do business with these countries or individuals. The receiving country may also have its separate standards and requirements for the product to cross its borders. These will vary depending on the importing country. Being aware of this possibility will allow you to have this conversation very early in your negotiations to help you determine whether or not to move forward without losing too much time and cost.
- What steps can I take to ensure that I get paid?
Getting paid when dealing with a foreign buyer starts with a signed contract that clearly states:
- When and how will you be paid?
- When and where will you receive your goods?
- Who bears the risk of loss from unforeseen events?
- Who bears the loss for damaged goods?
- Where can you sue or be sued if there is a dispute?
Open lines of credit are very risky when dealing with an unknown buyer. Safer options include the use of letters of credit and/or of export credit insurance issued by a bank such as U.S. Ex-Im Bank. If none of these options are available or feasible, start with small orders. Limit the payment terms to no more than 15 or 30 days until an element of trust has been established.
- What kind of support services will I need?
An international trade attorney helps you find the right approaches and solutions to the questions discussed above. If you are shipping goods overseas, a freight forwarder will assist you with organizing your shipment from pick-up to delivery overseas. The importer will be working with a customs broker to get the goods cleared through the foreign customs. You may also want your own broker or agent on that end, particularly when shipping produce.
Nearly 96 percent of the world’s consumers and two-thirds of the world’s purchasing power lie beyond the borders of the United States. For businesses willing to aggressively explore these markets, here are some additional considerations:
- Are there agreements that provide a preferred market for my goods or services?
A country with which your government has negotiated a trade agreement makes a logical destination for your first international transactions. Trade agreements reduce or remove import tariffs and taxes. They also eliminate such non-tariff barriers as quotas that limit amount you can import into a country and unnecessary licensing requirements. The result is lower costs and a more competitive price for your goods. If you are a service provider, trade agreements can remove limitations on setting up your firm overseas. They may include provisions that assist with getting your professional credentials recognized in partnering countries, or that allow you/your company to participate in tenders by foreign governments. The United States has concluded trade agreements with 20 countries and is currently negotiating the Trans-Pacific Partnership (TTP) and the US-EU Transatlantic Trade and Investment Partnership (T-TIP).
- Are there other rules that I need to know?
Along with the opportunities to be found in global markets comes the need to comply with the legal requirements of doing business internationally. Rules of origin requirements tell you which of your goods qualify for preferential entry into the foreign market. There are strict restrictions on payments and gifts to avoid violating anti-bribery prohibitions when soliciting business. It is important to take steps to protect your brand. It pays to be proactive by developing a corporate culture of compliance to keep you on top of the requirements that govern your transactions.
Contact us to learn more about how to take advantage of trade agreements and for support in developing a culture of compliance.