Expanding Your Business Internationally

Get Started with Importing or Exporting

The world market is no longer just for big business. The smallest mom and pop store can now reach customers internationally as easy as those down the street. Trade has become an essential part of small business.

Deep Sengupta has advised the President on international business. He has shaped the current export reforms for businesses in the United States. Deep learned his trade from the University of Washington and Harvard University. He will answer the burning questions that small businesses have about expanding their business overseas and taking advantage of the booming international market.

Q:

What role do US-based small businesses play in today’s global marketplace?

US-based small businesses play a huge role in the global marketplace. 

According to the Small Business Administration, small firms account for 99.7 percent of all employers, comprise 97.5 percent of all identified exporters, and account for 31 percent of export value.

Q:

How can a small business benefit from getting involved in overseas markets?

The main benefit for small business in expanding overseas is a tremendous increase in your marketplace and the volume of your customer base.  In addition, having the ability to source products from overseas, allows small businesses to minimize the cost of acquisition.

Q:

What obstacles and regulatory hurdles do small businesses normally face in international trade?  

The main obstacle that small businesses face is in getting paid.  In addition, protection of one’s intellectual property rights (IPR) is a major concern.  Further, lack of confidence or trust in the partners or agents in the local country is another obstacle. 

From an international trade regulatory perspective, it is important to know the destination country’s rules, restrictions or license requirements before shipping your products to the end destination to avoid logistical delays and unexpected costs.

Q:

What are the key steps in preparing to do business and ship their products internationally?

I always advise my customers to identify the country, identify their partners and research the country-specific regulations, before shipping their products internationally.  

Q:

Similarly, what are some considerations for importing materials and products from overseas suppliers?

When a US-based company imports any products from overseas, they would have the responsibility of ensuring compliance with the rules of the Bureau of Customs and Border Protection (CBP) if they are the importer of record (IOR).

As the IOR, they should ensure that the commercial invoice values, Harmonized Tariff classification numbers and the country of origin are properly declared to CBP. Since violations of customs laws may lead to delays, inspections, increased scrutiny and potential penalties, the US-based company should also try to educate their foreign suppliers on US customs requirements. 

Q:

Many small businesses benefit from having a local distributor/partner in the regions where they want to do business. What are some considerations for evaluating and selecting someone you can trust?

Selecting a partner in a foreign country (either as a distributor, agent, joint-venture partner etc.) is a very important decision.  If you do not have a prior history dealing with any specific company or do not have any referrals from other companies you trust, I would recommend using the “Gold Key Matching Service” offered by the US Commercial Service.  Here, the US Commercial Service will conduct market research, identify and screen prospective business partners for the US company.  For more information about this service, please see this website: http://export.gov/salesandmarketing/eg_main_018195.asp

Q:

What are the fees, charges, other expenses involved in shipping products globally?

In addition to the sales price of your goods, there are various other cost components that add up to the “landed cost”, which can be defined as the total cost of the products when it arrives at your customer’s doorstep.  Apart from the cost of your product with your profit margin, the landed cost will also include Customs duties, import taxes, Customs brokerage charges, freight forwarding or transportation company fees, shipping charges, and insurance.  There may also be some miscellaneous items such as loading unloading charges, foreign exchange conversion fees etc. 

Q:

How can small businesses legally reduce their customs duty burden?

Small businesses can legally reduce their customs duty burden by correctly selecting the customs valuation method so they do not overpay Customs duty.  In addition, they should select the correct Harmonized Tariff Schedule number for their destination country to avail of the lowest correct duty rate.  They can do such research on www.worldtariff.com In addition, small business should investigate if any free trade agreements are in effect between the USA and the countries that they do business with to ensure duty-free treatment for their products.

Q:

How does the current “export control reform” affect small businesses?

The current export control reform initiative rebuilds the two primary export controls lists, and moves less sensitive items from the State department’s USML to the Department of Commerce’s Commerce Control List (CCL) which primarily controls dual-use items, i.e., commercial items with possible military applications, and some military items of lesser sensitivity. 

This reform will help reduce the compliance burden for smaller American firms and also allow them to participate in foreign markets and provide after-market support to Allies who purchase U.S. systems, ultimately maintaining and expanding US jobs.

Q:

Why is it important to consult with a SCORE small business mentor when considering a step into the international market?

SCORE’s small business mentors have a lot of experience with international trade concerns germane to small businesses, and can help you navigate these potential problems before they occur.  International trade presents major opportunities, but at the same time presents challenges, such as customs duty and import tax costs, IPR violations, problems with customs clearance etc. 

For these reasons, it is advisable to consult with a SCORE mentor before taking the plunge into international business.

Q:

What are the best sources of information to familiarize oneself with both the culture and business climate of your target markets?

The US Commercial Service of the US Department of Commerce has an excellent resource in its website www.export.gov.  In addition, the country links on this website contain customized guides to doing business in each country.  This is a very helpful resource before contacting the US Commercial Service resources within each country for further assistance.

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About the Author

Deep Sengupta - TCAS Principal at FedEx Trade Networks Trade Services Inc.

Chiradeep (commonly referred to as Deep) is a TCAS Principal at FedEx Trade Networks Trade Services Inc.  Deep is responsible for relationships with international governments, international trade promotion agencies and trade associations. Deep obtained his basic legal training (LL.B) in India and then obtained a Masters in Law-Taxation (LL.M) from the University of Washington - School of Law (2001) in Seattle, WA where he won the Graduate Tax program Merit Scholarship.  Deep has also received executive education on International Trade from Harvard University’s Kennedy School. In February 2011, Deep was appointed by the U.S Secretary of Commerce to the President’s Export Council Subcommittee on Export administration (PECSEA) to advise the Obama administration on its export control reform efforts.