By Eric Eng,
CPA, Partner of CEA, LLP
According to the U.S. Small Business Administration (SBA), nearly 96 percent of consumers and more than two-thirds of the world's purchasing power reside outside of the United States. In this global economy, if a business has products and services that are in demand in the U.S., it makes sense not to limit them to 4 percent of consumers.
Many small- to medium-sized businesses in San Diego have embarked on the road of exporting and are thriving in their expanded markets, benefiting from diversified markets, greater revenues and profit margins.
Progressing along the path of exporting, these businesses usually go through different phases:
• They sell to foreign distributors and customers.
• They set up showrooms and warehouses overseas.
• They create a foreign branch and form joint ventures.
• They incorporate their foreign branch.
• They set up a foreign holding company to manage other foreign corporations.
• They go public in a foreign market or sell the foreign operations.
A prosperous exporting goal will be more attainable if attention is paid to related factors in each of these phases, including regulations, financing, income tax, and logistical. Fortunately, there are many resources available to help address them. Listed below are some of the ideas and resources.
Preparation: The potential exporter will need to find out where the suitable markets are, and whether the products should be modified to fit the demand of the particular markets. It is important to ensure they meet U.S. governmental regulations, and the destinations are not on the boycotted countries list, so that mistakes can be avoided.
Governmental resources in San Diego: To help exporters analyze foreign markets for products and services, the U.S. Department of Commerce is a great resource. The San Diego office may be reached at 858-467-7033 (or www.export.gov). To get help on meeting U.S. exporting regulations, the Bureau of Industry & Security may be contacted at 949-660-0144 (www.bis.doc.gov). The trade division of the targeted countries' consulates and U.S. trade promotion agencies are also good resources.
Other resources: Lawyers and accountants usually belong to international alliances of professionals with members in most of the trading partner countries, their foreign affiliates can assist in setting up local presence, customs and value added tax processing and other compliance issues. For transportation of merchandises and logistics, professionals may be located through the National Customs & Forwarders Association of America (www.ncbfaa.org).
Additionally, many international trade organizations provide helpful assistance, including the World Trade Center of San Diego (www.wtcsd.org) the Center for International Trade Development (www.sbditc.org) and the International Trade Advisory Board of the Hong Kong Association of Southern California – www.itabsd.com.
Financing: Many banks assist exporters with issuance of letters of credit, hedging against fluctuation in foreign currencies by using tools such as forward contracts and options. Many of them work with the governmental programs at the Export-Import Bank (www.exim.gov) and the SBA (www.sba.gov).
Tax compliance and opportunities: Global tax planning is important because taxes affect exporting profits significantly. There are also mandatory U.S. tax form filing requirements.
The resources mentioned above can be valuable in helping you locate suitable foreign distributors and customers; setting up showrooms and warehouses; creating branches, subsidiaries, and holding companies. Many governmental programs are free.
In conclusion, operating in the global market can be very rewarding. In order to make the progression orderly and successful, one should take time to plan, make use of available resources, and talk to other experienced exporters, so that global trade issues are properly handled. It is also imperative to consult with professional and tax advisors about all related issues, so that opportunities can be maximized, and pitfalls avoided.
This article is an abridged version of "Step by Step – Small to Medium Sized San Diego Businesses enter the Global Market," which Eng co-wrote with Joanne Saunders, an international business lawyer. The full article can be seen at www.internationalbusinesscounsel.com. Contact Eric Eng at [email protected].
CPA, Partner of CEA, LLP
According to the U.S. Small Business Administration (SBA), nearly 96 percent of consumers and more than two-thirds of the world's purchasing power reside outside of the United States. In this global economy, if a business has products and services that are in demand in the U.S., it makes sense not to limit them to 4 percent of consumers.
Many small- to medium-sized businesses in San Diego have embarked on the road of exporting and are thriving in their expanded markets, benefiting from diversified markets, greater revenues and profit margins.
Progressing along the path of exporting, these businesses usually go through different phases:
• They sell to foreign distributors and customers.
• They set up showrooms and warehouses overseas.
• They create a foreign branch and form joint ventures.
• They incorporate their foreign branch.
• They set up a foreign holding company to manage other foreign corporations.
• They go public in a foreign market or sell the foreign operations.
A prosperous exporting goal will be more attainable if attention is paid to related factors in each of these phases, including regulations, financing, income tax, and logistical. Fortunately, there are many resources available to help address them. Listed below are some of the ideas and resources.
Preparation: The potential exporter will need to find out where the suitable markets are, and whether the products should be modified to fit the demand of the particular markets. It is important to ensure they meet U.S. governmental regulations, and the destinations are not on the boycotted countries list, so that mistakes can be avoided.
Governmental resources in San Diego: To help exporters analyze foreign markets for products and services, the U.S. Department of Commerce is a great resource. The San Diego office may be reached at 858-467-7033 (or www.export.gov). To get help on meeting U.S. exporting regulations, the Bureau of Industry & Security may be contacted at 949-660-0144 (www.bis.doc.gov). The trade division of the targeted countries' consulates and U.S. trade promotion agencies are also good resources.
Other resources: Lawyers and accountants usually belong to international alliances of professionals with members in most of the trading partner countries, their foreign affiliates can assist in setting up local presence, customs and value added tax processing and other compliance issues. For transportation of merchandises and logistics, professionals may be located through the National Customs & Forwarders Association of America (www.ncbfaa.org).
Additionally, many international trade organizations provide helpful assistance, including the World Trade Center of San Diego (www.wtcsd.org) the Center for International Trade Development (www.sbditc.org) and the International Trade Advisory Board of the Hong Kong Association of Southern California – www.itabsd.com.
Financing: Many banks assist exporters with issuance of letters of credit, hedging against fluctuation in foreign currencies by using tools such as forward contracts and options. Many of them work with the governmental programs at the Export-Import Bank (www.exim.gov) and the SBA (www.sba.gov).
Tax compliance and opportunities: Global tax planning is important because taxes affect exporting profits significantly. There are also mandatory U.S. tax form filing requirements.
The resources mentioned above can be valuable in helping you locate suitable foreign distributors and customers; setting up showrooms and warehouses; creating branches, subsidiaries, and holding companies. Many governmental programs are free.
In conclusion, operating in the global market can be very rewarding. In order to make the progression orderly and successful, one should take time to plan, make use of available resources, and talk to other experienced exporters, so that global trade issues are properly handled. It is also imperative to consult with professional and tax advisors about all related issues, so that opportunities can be maximized, and pitfalls avoided.
This article is an abridged version of "Step by Step – Small to Medium Sized San Diego Businesses enter the Global Market," which Eng co-wrote with Joanne Saunders, an international business lawyer. The full article can be seen at www.internationalbusinesscounsel.com. Contact Eric Eng at [email protected].