Opportunities in exporting

The U.S. Commercial Service provides
offerings to help small and mediumsize businesses expand international sales. With trade specialists in more than
100 American cities and more than 80 countries, the primary thrust of the U.S.
Commercial Service is to help equip businesses with the knowledge and tools necessary to navigate the foreign market.

Currently, one of the few bright spots in
the flagging local economy is exporting,
says Tim Murphy, first vice president for
Comerica Bank.

“So far this year, California exports have
totaled $49.7 billion, an increase of 10 percent over 2007,” he says.

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

What is the U.S. Commercial Service?

The U.S. Commercial Service is a division
of the Department of Commerce that
assists small- to medium-size businesses in
exporting their products and services
throughout the world. It helps 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 works with
companies just getting started in exporting
and helps companies increase 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
qualified 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 any country. Help with travel,
accommodations, interpreter services and
clerical support are also part of the service.

How does the U.S. Commercial Service partner with corporate organizations to build
awareness of exporting opportunities?

The U.S. Commercial Service recognized
that it has limited resources and decided to
expand the U.S. export base through innovative government and private-sector partnerships. By using each other’s organization, data bases 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?

Trade-cycle financing is financing that
starts at the pre-export stage and continues
all the way through the collection cycle.
Two programs that we found to be very
helpful to exporters are the working capital
guarantees program offered by the Export-Import Bank of the United States (Ex-Im
Bank) and the Small Business Administration (SBA). Additionally, we have a private insurance product that we call a trade
payables policy, where we make short-term
working capital loans to U.S. exporters that
are guaranteed by private insurance. The
loan proceeds can be used to purchase finished products for export or to pay for raw
materials, supplies, 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 is to offer competitive
terms and to price in the local currency (i.e.
euro or yen). Both of these have additional
exposures 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. 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, assuring
the company of a certain profit margin.
Subsequent changes in rates will not affect
the company’s profit margin.

TIM MURPHY is first vice president for Comerica Bank. Reach him at (562) 463-6530 or [email protected]. As a partner
with the U.S. Commercial Service, Comerica Bank has the opportunity to work closely with its local offices in San Diego, Los Angeles
and Ontario.