From The International Relations Committee: The “Money Side” Of Exporting

All businesses must protect their profits. This is even more critical as more and more enterprises participate in the global economy. Credit terms, methods of payment, currencies, taxes, fees, and other fiscal items must be considered. The easy part is selling the product, compared to the money side of international trade. Almost every country has its own protocols and if particular attention to these details are overlooked, the exporting enterprise may suffer significant losses.

Enterprises entering the export market for the first time should be aware of the downside risks regarding the money side of the transaction. There are several options available to exporters and each one requires investigation and study before deciding on the best method. One may find an overseas customer who is willing and capable to prepay for the product prior to shipment. Or, you may know the customer well and are willing to take the credit risk by offering terms similar to the domestic side of things.

But there may be a better way to meet the needs of your overseas customer (especially if it’s a new customer). Most banks today have excellent international services. Your commercial bank is probably your best source for seeking specific details regarding the “money side” of exporting. They will probably suggest a letter of credit be negotiated between you and your buyer overseas and let the banks handle the money transaction. This is a pretty popular method but it does generate additional expenses for both you and your customer and in some cases could be a deterrent to making your product attractive.

The country you are exporting into may have duties or penalties for the goods you are selling. This is not too unusual as many nations implement economic impediments to protect their indigenous enterprises. Your product may require a visa or it might require to be registered in the importing country or some other requirement. The best place to learn of these types of issues is from the nation’s consulate closest to your location. They might even have a resource or two for your product that you can capitalize on to grow your business.

The Federal Government is an excellent source to tap into to learn of programs that may offer services that diminish the credit risk in foreign trade. Also, there may be a program that your product is qualified to participate in that is sponsored by the U.S. for overseas development. In some cases, subsidies and partial payment by the U.S. are available to qualified manufacturers depending on the particular trade program. Even though it is a bit of “red tape”, the federal government can be a resource to assist you in your export strategy.

We hope your export efforts are going well and if you are not yet involved in exporting, perhaps consider it as a viable strategy to grow your enterprise.