How Different is Exporting from Selling Domestically? Not So Much That You Can’t Handle It

In my first article, I tried to dispel the myths that many non-exporters cite as reasons to not export. Let me elaborate a bit more on one of those myths: Exporting is too complicated; I don't know how. Part of this owes to a false assumption that exporting is so much different from domestic selling that you couldn’t possibly adjust. Actually, domestic selling and exporting are alike in many ways, and the differences can be easily managed. If you simply apply to exporting what you’re already familiar with domestically, you can then learn to deal with the differences and do well as an exporter.

What are the similarities? Exporting, like domestic selling, is basic marketing first and foremost. For example:

• If the product or service for export is the same that you sell domestically, you already know what’s good about it and would tout it similarly to a foreign audience.
• If you sell domestically to a particular racial, religious, cultural, ethnic, or linguistic niche, you will find a comparable niche in any number of other countries. 
• If your domestic product is seasonal, you can sell it to countries with coinciding seasons or, better yet, whose seasons start when yours ends.
• If you already conduct market research domestically, you could apply the same familiar techniques to size up and assess potential foreign markets. A later article will point you to free web sources for international market research.
• The strategies and techniques you use to distribute, price, and promote your products domestically, including social media promotion and eCommerce sales, will likely make sense in export markets or could be readily adapted as needed.
• You could respond to inquiries and RFQs from foreign customers in the same way as domestically, adjusting as needed for translation and added transportation costs.
• The price, credit-and delivery terms you negotiate with domestic customers could also apply to export customers, although you would use more due diligence and a standard export payment method that assures you get paid.
• If your product is already compliant with any domestic health, safety or other regulations, it would likely also satisfy comparable foreign regulations, making it easier to obtain any needed permits or certifications.
• If you ship to your domestic customers by truck, rail, air or vessel, these are the same methods you would use to ship to some or most foreign countries.

Well, OK, but there must be some differences. Yes, there are but don’t worry. Help is available from many sources to facilitate the adjustment. Here are the main differences: 

Exports are still traditionally channeled through agents or distributors, notwithstanding the steady increase in direct eCommerce sales. If you already use sales reps domestically, you understand what they do to extend your outreach. These “partners” make even more sense for export, because they operate in territories unfamiliar to you. The Commerce Department has low-cost programs to help you find the right overseas agent or distributor. Consider these foreign intermediaries as assets, not extra layers. They know the market and have contacts with the end-users. As your in-country representatives, they develop and send you sales orders, arrange for payment, prepare required import documents, and clear the delivered goods through customs. Many are equipped to stock, install and service the goods. The end-users know and prefer to deal with them, rather than buy direct from you or other foreign suppliers. 

Exports involve an exchange of foreign currency into your preferred currency (e.g., US$). For example, a Mexican importer has Pesos, but you want to be paid in U.S. dollars. Assuming you quote your purchase price in U.S. dollars, the importer would put up the Peso equivalent at the then prevailing exchange rate. A foreign exchange bank would convert the Pesos into the U.S. dollar amount you quoted. You would get paid that amount in U.S. dollars, not the Pesos. Experienced exporters might use hedging techniques to protect against exchange rate fluctuations, but if you just want the dollar amount you specified, simply quote your selling price in U.S. dollars and let the importer deal with any exchange rate fluctuations.

Export sales use different payment methods. Except for smaller purchases, foreign buyers will likely not want to pay you upfront, as you might prefer. Rather, they mostly want to pay either when the goods arrive or at some agreed time thereafter (e.g., 30-60 days). You might think that’s too risky, but it can be fairly safe if you use payment methods routinely used by the banks. For example, to get paid on arrival (cash on delivery in effect), your commercial bank would typically use Letters of Credits (L/Cs) or Documentary Collections (D/Cs). Through a bank-to-bank “confirmation” process, L/Cs virtually guarantee payment to you by your own bank. D/Cs are also fairly secure, in that they at least assure that buyers cannot take title to the goods on arrival until they pay. Allowing buyers to pay after getting the goods (open account) is riskier, but you can guarantee payment even in these situations with low-cost export credit insurance from the U.S. Export-Import Bank.

Exporting involves more and different paperwork. Exports require a number of shipping and regulatory documents you would not need for domestic sales. However, that shouldn’t deter you, because your freight forwarder can handle all the needed export documentation. Freight forwarders not only know which documents you’ll need for each export transaction but will also fill them out and submit them using automated logistics software. Their modest fees are routinely factored into the export price. Unless you have your own in-house logistics department, you should not attempt to handle your own export documentation.

Exporting typically incurs added transportation and insurance costs to deliver the goods. However, the importer bears these costs, not you. You only need to know what costs to charge to deliver beyond your factory or warehouse – say, to the port of departure or to the buyer’s country. These delivery and pick-up points are specified by a set of 3-letter International Commercial Terms (Incoterms), such as FOB (Freight on Board -- cost to deliver the goods from your premises onto the departing carrier), or CIF (Cost, Insurance & Freight -- cost to deliver and ensure the cargo all the way to the importer’s port of entry). Here’s where the freight forwarders come in again. They will not only calculate these costs for you, but will also pick up the goods at your facility, obtain the cargo insurance if needed, and book the cargo. 

Exports are subject to import duties and taxes in the importing countries. Import duties range from zero to prohibitive, depending on the country and product. The importer typically pays the duties and taxes, not you. If the levies are too high, as in some protectionist countries, you would not have a market. However, duties are no longer a barrier in most countries and, in the 20+ countries with which the U.S. has Free Trade Agreements (FTAs), you would pay zero or very low duties. Freight forwarders can advise on the current import duties in any country. 

Other countries have widely differing laws and business practices that could affect what you need to do to gain access to the market. Although some pose obstacles and risks for exporters, many are business-friendly and relatively easy to comply with. It's best to research potential regulatory constraints in each country and seek counsel from your freight forwarder or an international law firm if needed. 

Linguistic, demographic, and environmental variations are more pronounced abroad. These differences can make or break your export sales. Take care not to offend your foreign customers in the words, symbols, and body language you use in your promotional material and business negotiations. In addition, your products must "fit" the market environment -- the climate, terrain, sizes of people and things, consumer tastes and preferences, etc. The Internet is a great, free source of cultural, economic, and demographic information. Your local Commerce Department field office also has relevant information on each country and can refer you to "localization" specialists to help you adapt your product or approach as needed. 

Maurice Kogon has over 60 years in the international business field. In 2012, he founded Kogon Trade Consulting to do mostly pro bono export mentoring and training. In 2018, he teamed up with the Milken Institute to develop and direct an export enabler initiative for new-to-export manufacturers. Maurice established and maintains the website International Trade Compliance Institute (ITCI), with links to extensive online resources on all aspects of international trade. His latest book – Roadmap to Export Success: Take your Company from Local to Global – was just published this month (May 2021). Maurice has a BA and MA in Foreign Affairs from George Washington University (GWU). Maurice is a past President of NASBITE (2008-09), is a longtime NASBITE Board member, and helped to develop NASBITE’s Certified Global Business Professional (CGBP) credential and exam.