At first glance, becoming an exporter seems easy enough. Research and development needs to know how to create new products. Sales and marketing need to know how to market and sell them. And the export department needs to know how to export them.
If only it were that easy.
Building a successful export operation involves harnessing the talents of many people in all areas of your company. And because exporting involves some challenges that you may not face in your domestic operations, it requires that all these people in all these different areas understand how their piece of the puzzle fits into the final picture.
With that in mind, here are six areas of your company that need to know about exporting along with the type of information they need to understand.
Your Sales Team
Your sales team is undoubtedly a crucial part of making your business run, but if they aren’t educated on exporting, they may be making promises to customers they may not be able to keep. There are certain export-related topics they need to understand.
Your sales team needs to understand the specs of the products you’re exporting. For example, does the product you’re selling in the U.S. even work in the country you’re shipping to? Is it 110-volt or 220-volt? Details like this are technical limitations that will limit the products sold in certain countries.
Incoterms determine if the exporter or importer is responsible for specific parts of the export journey, including who is paying for what and when does liability for the goods transfer. If your sales team doesn’t understand Incoterms, they could agree to a sales term that will erase any profits you might have made.
Your sales team should know Harmonized System (HS) codes for the items you’re exporting. Depending on the Incoterms they are using (see above), ignoring the HS code could cost you money if your company is responsible for customs clearance in the country of import. And even if you aren’t paying duties and taxes, misclassified products could cause them to be held up in customs, delaying delivery of the goods as well as payment for the goods.
Not every product made in the U.S. can be exported without restrictions. While items with specific military application are the most obvious examples, even some goods manufactured for commercial purposes can be controlled. These are called dual-use items, and the Export Administration Regulations may restrict their export depending on where the goods are being shipped. At the very least, your sales team needs to understand the fundamentals of export compliance as outlined in our free white paper, What You Need to Know About Export Compliance.
Your Management Team
Like all areas of your business, it’s the people at the top of the company who set the priorities and model the attitude your company’s employees will develop toward exporting. If the top executives are not fully behind an export initiative, it will not have the time or resources necessary for success.
Likewise, if the CEO, president or other top managers don’t make export compliance a priority, no one else will. The Office of Export Enforcement starts almost every one of their presentations with a slide about companies that failed to take compliance seriously and ended up paying substantial penalties—and saw their reputations suffer—because of neglect. Your management team needs to understand the risks of exporting.
The Foreign Corrupt Practices Act
In the mythology of exporting, there is an almost romantic notion of the guy who can bypass the hurdles and frustrations of international trade by greasing a few wheels, buddying up to the right people and making problems disappear. While this idyllic figure might once have been admired, today such people are putting your company in harm’s way.
Starting with the very top of the company, everyone involved in international trade needs to be aware of the Foreign Corrupt Practices Act (FCPA), which restricts payments or favors to foreign government officials. Investigations into and penalties for FCPA are at an all-time high and include not only employees of companies, but also their agents, partners and affiliates located within or outside the United States.
Potential Export Liabilities
In exporting, you can do everything yourself, you can hire vendors like freight forwarders to take care of parts of the process for you, or you can do a combination of both. No matter how you do it, you have to actively manage all the pieces of the process—especially export compliance. If your managers are not making export compliance an important part of your exporting process, you’re risking a lot. For examples of potential risks and the penalties for each, download the Bureau of Industry and Security’s guide, Don’t Let This Happen to You!
According to U.S. export regulations, an export is any item sent from the United States to a foreign destination, organization or individual. The item may or may not be a physical good; it could include technology or software. An export also includes the transfer or disclosure (visually, electronically or in any other medium) of technologies or technical data, as well as consulting, instruction, training or lectures, concerning export-controlled equipment, materials or items to a foreign entity or individual within the U.S.
That’s right. You can be an exporter without shipping goods outside the country. Management needs to understand this concept and ensure your company has the proper procedures and controls in place so this doesn’t happen.
Your Accounting Department
Starting or growing your company’s export efforts adds additional challenges for your accounting department. The standard ways of doing business domestically become inadequate or simply won’t work when dealing with international markets.
Trade terms that you use in the United States aren’t recognized and won’t work when doing business internationally. Determining how to get paid and in what currency add new variables to your operations. And most accounting or ERP systems are biased toward domestic business and may need modifications or upgrades to handle international transactions.
Your chief financial officer, controller and accounting department need to understand important differences in international trade.
Incoterms facilitate the conduct of international business by defining the risks and responsibilities of participants, and as such, are an important thing for your accounting department, CFO and controller to know about and understand. They define distinct obligations and responsibilities between buyers and sellers, and by definition, they have implications for other services needed to perform the transaction, such as contracts of carriage, insurance and payment.
Letters of Credit
Unless you are a charity or a government agency, getting paid is the most important part of exporting. If you’re not going to get paid, why bother? Understanding and evaluating the risks and rewards of using letters of credit or other payment options is crucial for your accounting department. We have published scores of articles on letters of credit and related payment terms that will help your company balance the risks and rewards of various payment options.
Your accounting department needs to understand risk in exporting—not just customer risk, but country risk and how it plays into the terms you’re willing to offer your international customer. Our white paper, Evaluating Export Markets: How to Assess Country and Customer Risks, walks you through how to properly evaluate potential export markets and customers so you don’t put your company at risk.
Your Shipping Department
While the shipping department isn’t usually overlooked when companies enter or expand their exporting, it doesn’t always get the additional influx of resources it may need. Your shipping department isn’t just going to start moving more goods out the door, they are going to face new challenges they will probably be unprepared without proper training.
While companies may have similar transportation options for their domestic and international shipments, the reality is that once your company starts exporting, you may use shipping methods you haven’t used before. That means your shipping department must not only understand the different options, but also the advantages and disadvantages of each and the best way to use those services. Check out the articles on transportation and logistics that we’ve written for the International Trade Blog.
While your shipping department might have some experience completing a bill of lading for your domestic shipments, export shipments require a variety of documents in order to get your goods out of the U.S. and cleared through customs in the country of import. In addition, you may need to file your electronic export information (EEI) through the Automated Export System (AES).
Download the free Beginner’s Guide to Export Forms to get an understanding of the various export documents that may be required. You also need to understand how time consuming it can be to accurately complete the paperwork without a software solution to help. Take a look at the eight-minute Getting Started with Shipping Solutions Export Software video to see how some of the most successful exporters meet this challenge.
Your shipping department needs to know how to work with freight forwarders, customs brokers and carriers. They also need to understand that insurance requirements may be different in each transaction. Don’t forget, just because a freight forwarder is a partner doesn’t mean that they’re wholly responsible for your export compliance. You can outsource responsibility, but you can’t outsource liability!
Your Customer Service Department
Depending on where in the world you plan to export, you may need to accommodate different time zones and different languages. While you may have addressed these issues with your international sales department, companies don’t always initially consider how it will impact their customer service representatives.
Pre- and Post-Sale Support
Depending on what you sell, you may need a plan for handling customer service issues for your international customers. Do your products require installation and regular maintenance? Do your products or their parts need to be regularly repaired or replaced? Do you typically provide phone support or other live support options for your customers?
Depending on how you answered these questions, your customer service representatives need to understand the culture of the people they will be supporting, the process for legally and affordably sending repaired goods and replacement parts to foreign customers and restrictions on sharing information and controlled technology with foreign nationals.
If your products typically require on-site installation and servicing, your service people need to know how to travel with the tools and equipment they need to use when visiting foreign customer locations.
In many companies that export, it’s the customer service department that creates the documents required for export shipments. If that’s the case in your company, your customer service reps need to understand how to determine what documents are required and how to complete them accurately. (For help with this, download the free white paper, The Beginner’s Guide to Export Forms.) Missing or inaccurate documents can slow the delivery of your goods or, worse yet, slow payment for your export shipments.
In order to prepare your documents correctly, the customer service reps need to know the correct Harmonized System (HS) codes for your goods and whether or not they require an export license. A basic understanding of Incoterms 2020 is important as well.
Everybody Else Who Touches Exports
OK, I admit it. The title of this article may be a bit deceiving. There really aren’t only six departments or areas of your company that need export training. Anyone and everyone who touches even the remotest part of the export process needs to understand how their jobs fit into the bigger picture of a successful export process.
What’s the best way to do that? Creating a written Export Compliance Program (ECP) for your company will help ensure you have written procedures in place for each of the departments that touch various parts of the export process. It will also help the people within each of those departments understand how their specific responsibilities impact the entire company.
But creating an ECP is only the beginning of the process. Companies need to document that the process is being followed for every export shipment, regularly review and audit their export shipments to see what’s being done correctly and what areas need more work, and provide regular training to all employees covered by the ECP so they stay current with their responsibilities and export regulations.
Most importantly, the president or CEO of the company must be committed to investing the resources required to create and maintain the ECP. Without regular and visual support by top executives of the process, your ECP will be just another written manual that gets filed away in the bottom desk drawer only to be pulled out when something goes wrong.
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This post was originally published in October 2016 and has been updated to include current information, links and formatting.