International Trade

Our world is getting smaller, and that opens up virtually infinite opportunities for businesses in the import/export field. The U.S. Department of Commerce reported that large companies are responsible for 4 percent of all exports. Simple subtraction would indicate that the vast majority of export business is being handled by smaller businesses.

What motivates international trade?

Price is a significant driver, probably the most important. Also, consumers develop a taste for certain imports—German beer, for instance—and some items just cannot be found in the United States.

What countries are the biggest trade partners of the United States?

In order of size, the U.S. Census Bureau reports the top ten are: Canada, Japan, Mexico, United Kingdom, Germany, China, Taiwan, France, South Korea and Singapore.

With all the concern about terrorism since 9/11, are importers not finding it more difficult to bring goods into the United States?

Some goods are getting a more intense look by the U.S. Customs Service. As you might expect, these are products that could be tools of terrorism, such as chemicals or biological materials. Most importers reported delays right after 9/11 but have not experienced severe problems since then.

Who are some of the international trade participants?

As with any industry, there are countless variations in the way a business can participate. Following are a few kinds of players.

1. Export management company (EMC)

An EMC is a full-service manager hired by a U.S. company to sell its products overseas. Functions of the EMC include hiring and overseeing dealers, distribution, sales functions and shipping. You might find an EMC that specializes in certain products or parts of the world.

2. Export trading company (ETC)

An ETC works for foreign buyers who want to purchase U.S. products. The ETC finds suppliers who will export their goods.

3. Import/export merchant

The international merchant may be more opportunistic (and takes on more risk) as the merchant does not work as an agent for others. In this business, the merchant purchases goods (either U.S. or foreign), then takes responsibility for shipping and selling them.

4. Freight forwarders and customs brokers

Freight forwarders and customs brokers handle different sides of the same coin. A freight forwarder has the knowledge to move your products to their overseas destination. This takes more than simply a working knowledge of plane schedules. Freight forwarders know the best mode of transport for your particular goods, and they can get the proper paperwork handled for you.

A good freight forwarder can help with packaging, warehousing and even financial details. He or she knows the important restrictions peculiar to each country.

On the other side, a customs broker will help get the goods into this country. It will pay off in the long run to work with a full-service broker who understands the intricacies of dealing with the many federal agencies who have an interest in the products that enter the United States. This is in addition to the countless laws that govern imports.

How is a letter of credit used in international trade?

A letter of credit is often used to facilitate international trade. Once you have established credit with a bank, you can ask them to issue a letter of credit on your behalf. This will guarantee that the bank will pay your seller on the agreed-upon terms.

SIDEBAR: There is an international standard for letters of credit known as Uniform Customs and Practice for Commercial Documentary Credits which governs the details in transactions using letters of credit.

Are there any government programs that provide funding for someone who wants to get into the import/export business?

The SBA has several programs to support businesses engaging in international trade. One is the International Trade Loan Program which goes to businesses that will help expand existing export markets or develop new ones.

Other SBA programs, such as the Section 7(a) loan guarantee program, can also be used for import/export businesses.

Where can I find more information on getting started in international trade?

If you need more information on import/export, here are a few organizations that will be able to help: Small Business Development Centers, Small Business Institutes and the U.S. Department of Commerce. State and local governments usually have their own agencies to encourage trade, and there are many private and trade groups available as well.

What is the National Trade Data Bank (NTDB)?

The NTDB provides trade leads for businesses in the United States and abroad. These are called Trade Opportunity Program Leads and United Nations Trade Leads.

How can I find out about regulations in foreign countries or even their customs for doing business?

If you are not personally familiar with regulations and customs of a particular country, you might do best by working with a freight forwarder or customs broker.