Going global

Currently, one of the few bright spots in
the flagging U.S. economy is exporting,
says Cassie Stiles, first vice president of international trade services for Comerica

“Trade is driving our small, but positive,
economic growth,” she says. “In 2007,
exports represented 12 percent of America’s
gross domestic product. So far this year,
exports have expanded by 18 percent, which
is on top of a 12 percent growth in 2007.”

To further encourage global trade and
assist exporters, the U.S. Commercial
Service provides a number of offerings
designed to help small and medium-sized
businesses expand into international sales.

Smart Business spoke with Stiles about
the U.S. Commercial Service, the services it
provides and how a company can secure
export financing.

What is the U.S. Commercial Service?

The U.S. Commercial Service is the trade
promotion arm of the U.S. Department of
Commerce’s International Trade Administration (ITA), which helps to create economic
opportunity for American workers and businesses. To increase trade and investment,
ITA helps U.S. companies navigate foreign
markets. They help educate companies
about how to tailor their activities to a specific market with respect to their product
slate, financing, marketing, assembly and
logistics. In 2007 alone, the U.S. Commercial
Service counseled 25,000 U.S. companies.
This counseling facilitated exports worth $21
billion and helped create or retain 275,000
jobs in the United States.

What type of assistance does the U.S.
Commercial Service provide to exporters?

The U.S. Commercial Service has trade specialists located in 107 U.S. cities, including
San Diego, and in more than 80 countries.
They work with companies just getting started in exporting as well as assist companies
with increasing their sales to new global markets. Their services include world-class market research, trade events that promote a
company’s product or service to qualified
buyers, introductions to buyers and distributors as well as counseling and advocacy
through every step of the export process.

Probably the most popular service offered
is the Gold Key service. Prescreened appointments with buyers and distributors are
arranged by the trade specialist before an
exporter arrives in a specific country.
Additionally, help with travel, accommodations, interpreter services and clerical support are also part of the service.

How does the U.S. Commercial Service build
awareness of exporting opportunities?

The U.S. Commercial Service expanded the
U.S. export base through innovative government-private sector partnerships. By using
each other’s organization, databases and
global/regional networks, they are able to
reach as many small and medium-sized
enterprises (SMEs) as possible. Under the
Partnership Program, seminars are co-sponsored to support the domestic and international marketing efforts of these SMEs.
Topics range from ‘Export Basics 101’ to market- or industry-specific topics. A popular
alternative to the seminar is the webinar — a
seminar conducted on the Internet and telephone. This can reach participants all over
the country and allow access to industry specialists located globally. Finally, trade missions are an excellent way for SMEs to cost
effectively visit specific countries and meet
with pre-screened business opportunities.

How can a company secure export financing?

An important component for companies
expanding into exporting is financing. At
Comerica Bank, we work with our clients to
provide trade cycle financing — that is,
financing that starts at the pre-export stage
and continues all the way through the collection cycle. Two programs that have been very
helpful to exporters are loan guarantees
offered by the Export-Import Bank of the
United States (Ex-Im Bank) and the Small
Business Administration (SBA). U.S. exporters can obtain short-term working capital loans that are guaranteed by either Ex-Im
Bank or the SBA. The loan proceeds can be
used to purchase finished products for
export or to pay for raw materials, labor and
overhead to produce goods for export.

What other options are available?

Since exporters are selling globally, they
need to consider how they differentiate
themselves from the competition. Two ways
of achieving this are to offer competitive
terms and to price in the local currency . Both
of these have additional risk for the exporter,
but they can be mitigated by using export
credit insurance and hedging strategies.

While cash in advance is great if you can get
it, many exporters find that they need to offer
terms to their foreign buyers. Export credit
insurance policies protect against both the
political and commercial risks of a foreign
buyer defaulting on payment. In addition to
the risk mitigation, insured receivables can
be used to obtain bank financing.

To eliminate foreign exchange risk, an
exporter can sell the foreign currency for
delivery at a future date through a forward
contract. This is called hedging and allows
for the company to lock in a rate, hence
assuring the company of a certain profit margin. Subsequent changes in rates will not
affect the company’s profit margin.

CASSIE STILES is first vice president of international trade services for Comerica Bank. Reach her at [email protected] or (619) 652-5774. Comerica Bank has entered into a formal partnership with the U.S. Commercial Service to expand the outreach to more potential exporters.