Technology, Clothing Among Hot Exports in Growing Market
Joseph F. Sachs is director of the U.S. Export Assistance Center in Long Beach. Representatives from four federal agencies--the Small Business Administration, the Export-Import Bank of the United States, the Commerce Department and the Agency for International Development--work out of the center and provide assistance to exporters.
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What are the hot industries for exporting these days?
Obviously high tech is big, computerized information, computerized software and hardware, particularly digital technology, bringing television to the Internet. That’s the next big thing, and American exporters are becoming more and more involved in that. Right behind that is American, California-style clothing, particularly in Japan, but throughout Asia as well. Avionics, which includes airplane parts, is also big, as are food products, typical American packaged foods and grocery items that are not available in other countries.
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In what areas of the world do you see the most potential for exporting?
China is just starting to open up, so that’s a hot topic. Because of human rights issues, China has been opened and closed. It’s been kind of like a yo-yo over the last year, but recently things have opened up again. We’re also seeing a lot of business in Indonesia, India, most of South America, Canada, Mexico, and we’re doing a lot of deals in Korea and Thailand.
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What areas of the world should exporters avoid?
I would rather not specify a specific country. But you need to know who you’re dealing with and you need to have a commercial banking system in place. Every month, the Export-Import Bank of the United States updates its list of countries we will not do business with. This includes such countries as Iran, Iraq and Vietnam.
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How would an entrepreneur go about identifying what products would sell in a particular country?
The National Trade Database by the U.S. Department of Commerce is the perfect place to do that. It’s available by subscription through CD-ROM and on the Internet. All you have to do is punch in the name of the country and the database will identify competitors, what the market is like, how a specific product has done in a specific country and what type of volume of sales a product has had. It will also identify trade leads. For more information on how to subscribe to the database, call (202) 482-1986.
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What are the best resources for doing market research?
The Department of Commerce again can help. If you have an existing company that’s already been in business a year, you’re a perfect candidate for assistance. You can request assistance on how to do business in whatever country you want. The Commerce Department can help identify markets, and, through its Gold Key program, you can use the embassy staff at any country to help with translations, to be introduced to buyers, etc. The Commerce Department has a whole host of programs to help.
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Who is eligible for the SBA’s Export Working Capital loans?
You have to be an existing business. You have to have made a sale, but it can be a domestic sale. The owner has to be a U.S. citizen or a resident alien. You have to have been in business for at least a year. And you have to have a potential deal, which means you must provide us with a contract, letter of credit or purchase order. If you meet all those criteria, you should go to a lender and the SBA will offer a 90% guarantee for up to $750,000 for up to a year. Our typical deal is $360,000 and runs for four or five months. We either do individual transactions or revolving-line-of-credit loans. If you’re interested and need a lender, the U.S. Export Assistance Center can provide you with a list of 73 lenders who’ve already worked with us.
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What other funding sources are available from the federal government?
The Export-Import Bank makes term loans, while the SBA makes transactional or short-term loans. The Export-Import Bank will make loans in excess of $750,000. But because they make loans for higher amounts and over longer periods of time, they require a whole lot more information than the SBA. The Export-Import Bank also offers different types of insurance.
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What are the most common pitfalls for exporters as they try to sell in a foreign market?
First of all, you want to make sure the deal is in writing to ensure that you get paid. You must also deal with reputable lending institutions here and in foreign countries. When you bring your letter of credit here, we’ll take a look at it to make sure it’s a real deal. That’s the only way we’ll finance it. We have vast resources to call upon to make that determination. Also, do the deal in U.S. dollars. That’s what we require.
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Why is there such a high failure rate for export companies?
I would argue otherwise. We’ve done 179 deals from this Long Beach office and we’ve had one failure, and that was due to fraud. We’re dealing with most of our small businesses in good faith.
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What types of things should an exporter look for when selecting distributors in foreign countries?
They need to know who they’re dealing with. When a distributor advertises on the Internet, that’s not a good way to assess their reputation. That’s where the Commerce Department programs can be invaluable. You can contact the U.S. Embassy in any country and check them out. Or for a fee, a commerce officer can find potential distributors and hand the list to you.
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If you are defrauded by a foreign distributor, can the U.S. help you get your money back?
Not really.
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How much of an initial investment does it take to launch an exporting business?
There’s a tremendous range. For example, if you’re selling automobiles, you’re talking about a considerable amount of money. But if you’re exporting groceries to Thailand, the amount could be as small as $20,000 to $25,000. You don’t need a lot of cash; you just need a good deal. You need a letter of credit, contract or purchase order that is valid. We ask three major questions when we’re assessing a company: Can the exporter perform? If the exporter does perform, can he get paid? And can the exporter meet all the requirements of a contract in a reasonable time frame?
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How is technology changing the way exporting is done?
The advent of the Internet and Web sites have made it much easier to get involved in the international marketplace, because you can communicate worldwide by making a local telephone call.
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What are some of the best exporting Web sites?
https://www.sba.gov (Small Business Administration)
https://www.tradeport.org https://www.exim.gov (Export-Import Bank of the United States)
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Why is exporting worth the risk?
There is so much profit to be made and there is general demand for American products and services. It will take time and money to get started and get developed. But once you’re established, you will make a pile of money. In 10 years, you won’t be able to start a company in this country without considering the worldwide market.
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What is the most important piece of advice you can give to potential exporters?
You should never get involved in exporting without doing research. Otherwise, it could be disastrous.
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For more information on the U.S. Export Assistance Center in Long Beach, call (562) 980-4550.
