Oklahoma Commerce

Exporting Frequently Asked Questions

Exporting FAQs
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Import/Export Financing

You may have considered selling your goods or services in foreign markets, but just aren't sure where to get started, where your product is in demand, or how to navigate all the paperwork of international trade. You'll find a wealth of information about the export process in this Export Assistance section of the Oklahoma Department of Commerce website. But for a quick overview, we've collected and answered the most frequently asked questions about exporting below. You'll find information about getting started in exporting, securing financing and payment, marketing your goods and services to foreign markets, and how navigate the paperwork jungle.

After you've reviewed the information here and are ready for more personal assistance, contact the Commerce Global Business Services Division at 918-594-8116, and they'll be glad to help.

Getting Started

Where do I find information about exporting that will help my business weigh the feasibility of exporting, develop a strategy, and get started? Top
Developing and carrying out an export strategy requires a significant amount of research, planning, and guidance. The Oklahoma Department of Commerce -- through its Global Business Services Division -- can point your company in the right direction and keep it on track by providing a variety of resources designed to help the state's businesses compete in the international marketplace. For more information, contact the Commerce Global Business Services division, (800) 879-6552, info@okcommerce.gov.

Other sources include:

  • The U.S. Department of Commerce maintains a U.S. Export Assistance Center for this region in Arlington, Texas. For more information, contact Rick Schulze, regional manager, International Trade Programs, North Texas U.S. Export Assistance Center, 2000 East Lamar Blvd., Arlington, Texas, 76006; (817) 310-3749; fax (817) 310-3757.
    For an excellent print source, check out the U.S. Department of Commerce's book, "A Basic Guide to Exporting." 
  • For things to consider, helpful hints, and tips of the trade, check out the Oklahoma Department of Commerce's web pages dedicated to exporting. Exporting Overview provides a template for an international business plan, which is a crucial first step in your company's export efforts. Step by Step distills a good portion of the information found in the guide mentioned above as well as summarizes information from the U.S. Small Business Administration's "Breaking into the Trade Game: A Small Business Guide."
  • The Oklahoma Department of Commerce offers a variety of resources and services to help businesses formulate an export strategy and carry that plan through to success. For a synopsis of these resources and services, check out Commerce Export Services.
  • The Service Corps of Retired Executives (SCORE), a volunteer organization of retired professionals, provides seminars and one-on-one export counseling. SCORE counselors also assist firms in evaluating their export potential.

What are the most common mistakes made by exporters? Top
The reasons some businesses fail in the global marketplace typically have nothing to do with the international aspects of exporting. Instead, businesses fail in their exporting efforts for the same reasons they may fail in domestic markets--under-capitalization, lack of commitment from senior management, or short-term focus rather than implementing a well-researched and detailed strategic plan.

Those international issues that most frequently trip up exporters include: 

  • Selection of overseas representatives without thorough investigation;
  • Chasing orders around the world instead of targeting markets
  • Neglecting their new export customers when domestic markets are booming;
  • Failure to treat international and domestic representatives on an equal basis;
  • Refusal to modify products to meet foreign regulations and local preferences;
  • Lack of sales, service and warranty messages in local languages;
  • Refusal to use export management companies (EMCs) in less promising or challenging markets;
  • Failure to consider licensing or joint venture agreements in more restrictive markets.

Where do I find information that will help me conduct the crucial market research needed to develop my market strategy as well as enable ongoing analysis of my chosen markets? Top
Market research represents a vital part of developing your company's international business plan. Some questions to ask as you begin this research include:

  • Is the product culturally acceptable in the market?
  • Is the product currently sold in the market?
  • Is the product currently produced in the market?
  • How much of the product is sold in the market?
  • How is it sold?
  • Who are your likely competitors?
  • What are the tariffs, taxes, and other costs you will face when exporting to the market?
  • How will your prices compare with your competitors?
  • Are there significant regulatory issues that may affect market entry? 

The Oklahoma Department of Commerce compiles and publishes a variety of reports and publications designed to track the state's export activity in a variety of markets and give potential exporters the information they need to trade internationally. See Market Research for details and a list of the reports available for download. Also for more information on this research and assistance with conducting country-specific research, contact Commerce Global Business Services division, (800) 879-6552, info@okcommerce.gov.

Market Research also provides a comprehensive list of federal resources available to help your company conduct the market research required for developing and carrying out a successful export strategy. This list includes four main sections: general information, which includes sources for country-by-country marketing reports, incisive economic analysis, worldwide trade leads, advance notice of planned exhibitions of U.S. products worldwide, and success stories of export marketing; general industry and agricultural information; general country and area information; and industry and country specific information.


Securing Financing and Payment

What are the financial risks of doing business overseas? Top
There are three kinds of financial risks:

  1. Commercial risk: Your foreign customers do not pay you, either because they do not have the funds or there is a contract dispute. Through insurance programs such as those offered by the Export-Import Bank of the United States, you can protect your business against such risks.
  2. Political and economic risks: Foreign governments have, from time to time, restricted or prohibited commercial payments because of economic downturn or political instability. Some companies elect to obtain insurance from the Export-Import Bank and a few private vendors to cover these kinds of risks.
  3. Currency risks: This refers to the risk encountered if the exchange rate between the local currency and the U.S. dollar changes. To protect themselves from having to monitor international currency movements, many U.S. exporters keep their contracts and payment terms in U.S. dollars.

Where can I secure export financing? Top
Several financing options exist and exporters need to be aware of them to ensure that they choose the most acceptable one to both the buyer and the seller. In many cases, government assistance in export financing for small- and medium-sized businesses can increase a firm's options.

Sources for export financing include commercial banks; export intermediaries, such as export trading companies (ETCs) and export management companies (EMCs); international buyers and suppliers; government agencies -- Export-Import Bank of the United States, the U.S. Small Business Administration, U.S. Department of Agriculture, and the Overseas Private Investment Corporation; and multilateral development banks. For more information on these export financing options and the various financing programs offered by each, see Export Financing.

How do I get paid? Top
Payment terms are inevitably one of the negotiating points in any sales contract. Cash in advance represents the easiest and safest for your company. However, it's also the most risky for your customers because their bank must wire funds to your account before you ship. Dollar-denominated checks received by you in the mail involve collection charges and possible delays of up to several weeks if they are drawn on a bank in a foreign country. Letters of credit are a secure and flexible way of mitigating risks for both you and your customer and are a very common means of international payment.

Do I need to price my product or service differently for export? Top
In general, businesses need to calculate their international prices as they do domestic prices, which includes determining the fixed (overhead) and variable costs for producing the product or delivering services overseas. Cost considerations such as international marketing expenses also need to be part of this calculation. However, just as you shouldn't include your company's international marketing expenses in your domestic prices, you also shouldn't include domestic marketing expenses in your company's international prices.

How can I find information on the required import duties or tariffs required to export my products and services? Top
Customs officials around the world use the Harmonized System (HS), an international method of classifying products for trading purposes, to determine the duties, taxes and regulations that apply to exported products. Each product receives a six-digit number, and the product description corresponding to this number should be the same in every country. Some multi-use products may have several possible HS codes. Each country may further expand the Harmonized System by adding additional digits to describe a product in more detail. For example, the U.S. uses Schedule B to assign an additional four digits to products being exported. To find the HS or Schedule B number for your product, visit http://www.census.gov/foreign-trade/schedules/b/index.html. 

Note: Customs officials in other countries may not agree with your Schedule B number selection and decide another best describes your company's products. If that happens, the duty rate may change. However, some countries allow you to obtain an advance duty classification ruling from customs officials before your first shipment. The World Customs Organization, provides links to custom websites across the world.

The U.S. Department of Commerce International Trade Administration serves as another good source for information on taxes and tariffs that may be applied to your company's exports.

Promoting Products and Services

How can I find a buyer, agent, or distributor for my products and services in other countries? Top
The Oklahoma Department of Commerce maintains International Trade Offices (ITOs) in China, Israel (Middle East), Mexico, and Vietnam (Southeast Asia) to assist the state's businesses and communities in developing export opportunities by working with pre-qualified companies to help them sell their products and services and identify specific buyers; attract foreign direct investment (FDI) to Oklahoma's communities; recruit international students to the state's colleges and universities; and promote tourism.

For more information about working directly with the ITOs and becoming a pre-qualified company, contact the Commerce Global Business Services division, (800) 879-6552, info@okcommerce.gov.

Which trade shows should I attend to promote my company and its products and services overseas? Top
The Oklahoma Department of Commerce works with industry groups to exhibit at major trade shows overseas as well as conducts periodic trade missions to markets around the world that are potentially lucrative for Oklahoma companies. For more information, contact the Commerce Global Business Services division, (800) 879-6552, info@okcommerce.gov.

Where do I find information about bidding for government projects overseas? Top
The U.S. Agency for International Development provides a variety of information on international development efforts, including those in Afghanistan and Iraq. Businesses can also find requests for proposals for both products and consulting services for development projects around the world.

The Overseas Private Investment Corporation helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Like the U.S. Agency for International Development, OPIC frequently posts requests for proposals for both products and consulting services in new and emerging markets.

Other agencies that frequently post requests for proposals for products and consulting services include the United Nations, and the multilateral development banks MDBs--the African Development Bank; Asian Development Bank; European Bank for Reconstruction and Development; Inter-American Development Bank; and the World Bank.

The MDB Counseling Center is the U.S. Commerce Department's centralized repository of electronic and hard copy information on MDBs. Besides basic brochures provided by each of the MDBs, the Counseling Center supplies specific project information and guides on how to pursue MDB opportunities. For more information, contact the U.S. Department of Commerce, International Trade Administration, Multilateral Development Banks Operations, 14th Street and Constitution Avenue, NW, Room H-1107, Washington, D.C. 20230; (202) 482-3399, fax: (202) 273-0927.

Should advertising and promotional materials be translated into the local language? Top
If your customers can't understand the benefits and attributes of your company's products and services, then the likelihood of them making a purchase diminishes. While many people around the world speak some English, many more do not. Translations should be done by professionals who know the jargon of your industry and the sector in which your product will be sold. Use professional translators, and ask your agent, distributor, or other contacts in the market to proof any promotional material. Translations can be expensive, and you don't want typos or inappropriate word choice to ruin your message.


Filing the Necessary Paperwork

Where do I find information on export regulations? Top
Charged with the development, implementation, and interpretation of U.S. export control policy, the Bureau of Industry and Security, provides information on export regulations, compliance, denied persons lists, sanctions lists, and a new simplified electronic way to apply for an export license.

Another good resource for regulations, the Market Access and Compliance, provides access to information on trade sanctions and embargoes the United States has against foreign countries.

Do I need a license to export? Top
Only a limited number of products or destinations require an exporter to get a written or validated license from the Bureau of Industry and Security. Most goods can be exported by simply entering NLR (no license required) on the Shipper's Export Declaration. However, a validated license is necessary when exporting high technology, software with encryption capabilities, defense-related, or dual-use (both military and civilian) products or when exporting to countries under a U.S. trade embargo or other trade restrictions (Libya or Cuba). The regulations may require one type of license to ship a product to Country A, but a different license to ship the same product to Country B.

What special forms are most often needed to export? Top
The seller in an export transaction is responsible for several documents. Some freight forwarders will do much of the paperwork for a customer, but the shipper is ultimately responsible for making sure the documents are correct.

The forms most commonly needed for an export shipment include: 

  • Shipper's Export Declaration (SED), Commerce Form 7525-V:  Used for compiling the official U.S. export statistics and for export control purposes. It must be prepared and submitted to a customs agent for shipments by mail valued at more than $500 and all other shipments by any other means valued at more than $2,500. The form includes details on the company exporting the product, the company receiving the goods, the product being shipped, and its value. The SED can be completed electronically by the exporter. The SED can also be completed by a freight forwarder for the exporter. Blank hardcopy SEDs may be also purchased from the Government Printing Office, (202) 512-1800 or can be privately printed. Privately printed SEDs must conform in every respect to the official form. The SED can also be downloaded from the U.S. Census Bureau and printed on buff (yellow) or goldenrod colored paper. Customs will not accept SEDs on white paper. 
  • Bill of lading:  Represents a contract between the owner of the goods and the carrier. There are two types: a straight bill of lading, which is non-negotiable, and the negotiable/shipper's order bill of lading, which can be bought, sold, or traded while goods are in transit and is used for letter-of-credit transactions. The customer usually needs a copy as proof of ownership to take possession of the goods.  
  • Certificate of origin:  Signed by the exporter and witnessed by a semi-official agency, like a Chamber of Commerce, indicates that the goods were truly produced in the country claimed by the exporter. There's no hard and fast worldwide rule as to when a certificate of origin is required or what it must contain. Each country sets its own rules. Proof of origin is critically important when countries have reciprocal trade agreements that grant lower tariff rates to products coming from certain locations. Canada, Mexico, and the United States have agreed upon a common form and set of rules for a NAFTA Certificate of Origin (see NAFTA Certificate of Origin).  
  • Commercial invoice:  As in domestic transactions, this invoice represents a bill for the goods issued by the seller. A commercial invoice should include a description of the goods, addresses of the shipper and seller, and the delivery and payment terms. The buyer needs the invoice to prove ownership and arrange payment. Some government agencies use the invoice to assess customs duties. 
  • Export packing list:  Itemizes the material in each individual package, and shows the individual net, legal, tare and gross weights in U.S. and metric values. Package markings should be shown along with the shipper's and buyer's references. The packing list attaches to the outside of the package in a clearly marked waterproof envelope. The list can be used to determine the total shipment weight and whether the correct cargo is being shipped. Customs officials may use it to check the cargo at inspection points. 
  • Consular invoice:   Required by some countries to identify and track goods shipped to their countries. Exporters purchase the invoice from the consulates of the countries requiring the invoices. It must be prepared in the languages of those countries. Your company's freight forwarder should be able to tell you which countries require consular invoices. 
  • Certificate of inspection:  Some purchasers and countries may require these forms, attesting to the specifications of the goods shipped. Inspections are usually performed by a third party and obtained from independent testing organizations.
    Phytosanitary inspection certificate--are required by some countries. These certificates show that a shipment meets plant health and quarantine regulations.
  • Insurance certificates:  State the type and amount of coverage.

What is a Certificate of Free Sale, and how do I get one? Top
A Certificate of Free Sale states that your products can be sold in your company's home country from which it's being exported. Some countries require them as a way of preventing companies from dumping products abroad when they're sale is restricted on the domestic market. Typically, medical or food products require these certificates. The U.S. Foods and Drug Administration (FDA) issues Certificates to Foreign Governments that serve this function but only for products that it directly regulates.

What is a Destination Control Statement? Top
This statement appears on the commercial invoice, ocean or airway bill of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to certain destinations and not ultimately end up in a restricted country. The standard language for this statement is "These commodities licensed by the United States for ultimate destination (country). Diversion contrary to U.S. law is prohibited."

How do I choose a good freight forwarder? Top
A freight forwarder represents one of your most important allies in your international sales efforts. Fast and efficient delivery sets you apart from the competition. Evaluate several freight forwarders before you choose the one that provides the best combination of service and price. Make sure the forwarder has a local office and their hours correspond to yours. The U.S. Department of Commerce's publication, "A Basic Guide to Exporting," provides a comprehensive list of freight forwarders as well as details things companies should consider before making a selection.

When should a North American Free Trade Agreement (NAFTA) certificate of origin be completed? Top
A NAFTA Certificate of Origin should only be completed for products that meet the NAFTA rules of origin. The NAFTA Certificate of Origin is only for products being traded among Canada, the U.S., and Mexico. Generally speaking, under NAFTA, products that qualify under the rules of origin will have zero duties when traded between the U.S. and Canada, and will have low or zero duties when traded between the U.S. and Mexico. In some instances the duties may be zero regardless of country of origin. 

Often times a NAFTA Certificate of Origin is requested if it is a component for further production or assembly even when there are no duties or it is not being shipped to Canada or Mexico by the producer.  NAFTA Certificate of Origin 
 
How do you determine if a product qualifies for preferential tariff treatment under NAFTA? Top
NAFTA operates under complex rules of origin to determine which products qualify for preferential and eventually duty-free access. A product doesn't automatically qualify for NAFTA tariff treatment just because the product was manufactured in the United States or purchased from a U.S. company. Natural resources or crops and animals raised in one of the NAFTA countries qualify. Products assembled from components that aren't in the same HS category as the finished product often can qualify, even if some of those components come from a non-NAFTA country. In some cases, even if no change in tariff classification occurs, but the goods have at least 50 percent value added in one of the three countries, NAFTA preferential treatment may apply. The applicable rules can differ depending upon the HS category of the product.

What are Inco terms? Top
Based in Paris, the International Chamber of Commerce (ICC) created a set of 13 terms (EXW, FOB, and CIF) to foster international agreement on the rights and responsibilities of buyers and sellers related to the movement of goods. When a seller and buyer agree to use one of the terms, they determine which party will be responsible for arranging and paying for different aspects of the shipping process. The ICC periodically updates the Inco terms to reflect changes in shipping technology. Because these terms are specifically designed to cover international transactions, the meanings may be different from similar three-letter codes used to describe domestic shipments.

What is the Foreign Corrupt Practices Act (FCPA) and how does it affect my business? Top
Enacted in 1977 and amended in 1988 by Congress, the FCPA makes it a crime for U. S. individuals and companies, including their subsidiaries, branches or affiliates, to knowingly offer payment or promises of payment of money or anything else of value to foreign government officials to secure business. It doesn't apply to bribes offered to non-government officials, although there may be local laws that could result in prosecution.

In recent years other countries have adopted their own regulations, but the rules and applications can vary from country to country. The rules set forth in the FCPA only apply to U.S. firms. It is important that U.S. exporters dealing with foreign government officials fully understand the requirements of this act because violations could result in a fine of up to $2 million for corporations, $100,000 for individuals, imprisonment of up to 5 years, or a combination of a fine and imprisonment. The U.S. Department of Justice, provides a guide to the FCPA.

Contacts:

Tulsa Office
Dessie Apostolova
Director, International Trade Offices
918-594-8412

Oklahoma City Office
Erika Lucas
International Trade Manager
405-815-5187


 

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