Export Readiness

There are various resources on globalEDGE that allow you to assess your companys readiness to export. These tools help you to understand what constitutes Export Readiness for a firm, and how your company can move toward that goal:

• globalEDGE Diagnostic Tool—CORE — This self-assessment tool allows you to determine your companys readiness to expand its operations internationally and ascertain its ability to export a particular product.

• globalEDGE Analyzing a Companys Ability to Export Module — This interactive module introduces one to the following concepts:

• International and domestic competitive capabilities
• Evaluating a companys internal commitment and motivation to export
• Product design and its impact on export readiness

• globalEDGE Developing An Export Strategy Module — Based on the second chapter of A Basic Guide to Exporting, this module covers:

• The impact of exporting on overall company strategy
• Questions to ask before exporting
• Creating an Export Plan
• A case study on the company Mykytyn Enterprises Incorporated

For additional information about determining export readiness, the following sites may be helpful:

• Export.govs Are You Export Ready? Questionnaire — This questionnaire highlights characteristics common to successful exporters. Many of these questions will guide you into areas of the Export.gov homepage where you can obtain more information on exporting. Upon completion, you will receive a score which will help you to assess your export readiness, as well as identify areas of your business needs in order to strengthen and improve its export activities.

• TradePorts Global Trade Tutorial: Getting Started — This tutorial explains factors which determine whether or not a companys export activities will be successful. It provides feedback on whether a company or a product is ready to export. The tutorial includes case studies and success stories as examples for companies to relate to while trying to move into international sales.

• California Centers for International Trade Development Export Readiness Assessment — This is an interactive on-line diagnostic tool to assess a companys export readiness. The Assessment includes a 23-point test and provides immediate feedback in the form of an export readiness test score; a detailed, point-by-point diagnosis of export strengths and weaknesses; and tips on how to overcome weaknesses. (Requires a free account)
  

  Government Regulations

  Before taking any steps to obtain export licenses or permits, it is imperative to identify which governmental entity has jurisdiction over the particular good or service. To identify the relevant commodity jurisdiction for a product, visit the Directorate of Defense Trade Controls website, or the Bureau of Industry and Security Commodity Jurisdiction site.

  If the product falls under the jurisdiction of the Directorate of Defense Trade Controls (Department of State):

  The Getting Started section of the Directorate of Defense Trade Controls (DDTC) website offers an overview of the steps you will need to take before beginning to export your product. Throughout the process you will:
• Register with the DDTC
• Apply either in hardcopy or through the DTrade system for an Export License
• Review DDTC Export Compliance and Country Policies and Embargoes to help your company maintain compliance with DDTC regulations

For additional information about exporting goods that fall under DDTC jurisdiction, the following site may be helpful:

Directorate of Defense Trade Controls (DDTC) Home Page The main site of the DDTC contains additional information and links about various aspects of DDTCs operations and regulations, including FAQs and contact information (listed under About DDTC). Additionally, the home page features news and updates regarding DDTC regulations.

If the product falls under the jurisdiction of the Department of Commerce, the license to export is contingent upon the following:

• What are you exporting?
• Where are you exporting?
• Who will receive your item?
• What will your item be used for?

After answering these four questions, the Bureau of Industry and Securitys Introduction to Commerce Department Export Controls provides step-by-step instructions to determine the regulation surrounding your export.

During this step-by-step process, the following items must be completed:

1. Identify the Export Control Classification Number (ECCN) for the product.
2. Use the Commerce Country Chart to discover the country-specific regulations related to the export destination.
3. Review the Entity List. the Specially Designated Nationals and Blocked Persons List. the Unverified List and the Denied Persons List to determine if it is legal to sell the product to the country and customer, with or without a license

If a license is required to export the particular product, an application for an export license must be completed.

For additional information about exporting goods that fall under Department of Commerce jurisdiction, the following site may be helpful:

Department of Commerce Bureau of Industry and Security (BIS) Homepage — The main site of the BIS contains additional information and links about various aspects of BISs operations and regulations. Annual reports, seminars, training and BIS-related news updates are also located on this site.

A product can also fall under the jurisdiction of additional government agencies, as listed below:

The Export Administration Regulation database may indicate that a particular product is subject to the jurisdiction of one of the above agencies. However, to ensure that the product is within the regulatory limits, review the requirements of any agency which may have oversight of the product being exported.

• Drug Enforcement Administration (DEA) Office of Diversion Control oversees the export of any Controlled Substances. as determined by the Drug Enforcement Administrations Controlled Substances Schedules. In order to legally export any controlled substances, a company must first register and become authorized by the DEA. Then products must obtain the appropriate permits and/or applications for export .

• Nuclear Regulatory Commission regulates the export of:

• Nuclear Reactors
• Uranium Enrichment Facilities
• Spent Fuel Reprocessing Plants
• Uranium and Plutonium Conversion Plants
• Heavy Water or Deuterium Production Plants
• Nuclear Fuel Fabrication Plants
• Lithium Isotope Separation Facilities
• Equipment, Component Parts, and Assemblies that are especially designed or prepared for exclusive use in any of the aforementioned facilities
• Special Nuclear Material (e.g. Plutonium, Enriched Uranium, Uranium-233)
• Source Material (e.g. Natural and Depleted Uranium, Thorium)
• Byproduct Material
• Deuterium (Heavy Water)
• Nuclear Grade Graphite for Nuclear End Use

Dependent upon the product and country, either a general export license or a specific export license must be obtained:

1. General Export License. No application submission is required, but the product is still subject to various regulations of the Nuclear Regulatory Commission.
2. Specific Export License . An application to the Nuclear Regulatory Commission is required.
3. Both licenses require additional fees, based upon the type of product being exported and destination.

• Department of Energy, Office of Fossil Energy regulates the export of Natural Gas and Liquefied Natural Gas. In order to export either product, one must obtain an authorization. Authorizations are either blanket (for a period of two years or less) or long-term (for sales agreements/contracts of longer than two years). The Department of Energy also offers a frequently asked questions page, and sample applications for authorization .

• Department of Energy, Office of Electricity Delivery and Energy Reliability regulates the export of Electric Energy. in accordance with the Federal Power Act and the National Environmental Policy Act. In order to export electric energy, the exporting company must submit an application and fee to this office.

• Food and Drug Administration (FDA) regulates the export of Unapproved, Adulterated or Misbranded Products and can also issue FDA Export Certificates. In certain cases, drugs that are unapproved in the United States may be exported to other countries that meet a specific list of requirements. FDA Export Certificates are not required by the United States Government for exports, but may be required by the destination country of your export. Consult the General Guidance on FDA Export Certificates or the specific information on the export of food or the export of drugs and biologics .

• Food Safety and Inspection Service (FSIS) issues export certification for Meat, Poultry and Processed Egg Products. Much like the FDA Export Certificates, FSIS Export Certificates help to meet the certification requirements of the destination country. The Food Safety and Inspection Service offers an Export Certification Checklist with very explicit steps and links to move users through the export certification process.

• Animal and Plant Health Inspection Service (APHIS) regulates the export of:

• Live Animals
• Animal Products
• Pets

• Biologics
• Plants, Plant Products, Processed Plant Products

Many of the product types listed above have minimal export regulations, however, it is still important to review information relevant to the product being exported. This will help to determine U.S. Export requirements, as well as import requirements of the destination country.

For additional information about obtaining export licenses, the following site may be helpful:

globalEDGE International Legal Considerations Module — Based on chapter ten of the Basic Guide to Exporting, this module covers:

• U.S. Regulations
• Programs and tax procedures to open new markets
• Intellectual property considerations
• A case study on the company Tierra Dynamics

Export.gov provides an overview of as well as links to the most common categories of foreign regulations and certification requirements. including:

For additional information about determining foreign regulations or certification requirements, the following sites may be helpful:

The United States Department of the Treasurys Office of Foreign Assets Control maintains the list of current and past United States Trade Sanctions. Specific sanctions are grouped by country, region, or sanction purpose. Within each sanction, you will find specific information about that sanction, including an overview, forms and licensing information, information on enforcement, and the regulation surrounding the sanction.

globalEDGE maintains a list of pertinent Regional Trade Agreements. complete with a description of each site along with a classification based on world region. The world region classifications are based on the region of the countries in the agreement. For example, if you are exporting from the United States, it may be helpful to begin with the resources categorized as North America or United States. The Office of the United States Trade Representative website also includes a link to an extensive list of the United States Free Trade Agreements .

For information on the impact of the various United States free trade agreements, visit the International Trade Administration Websites Free Tree Agreement section. This page offers an analysis of each free trade agreements effects on states and industries, as well as a link to the United States Trade Representative information for that particular agreement.

For additional information on Free Trade Agreements, the following sites may be helpful:

• globalEDGE Regionalization and Trading Blocs Module — This module provides one with information on:

• What globalization means, its impact on business, and the forces that are driving it
• The advantages and disadvantages of globalization
• What the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) are, how they work, and what their history is
• The history and purpose of some of the worlds largest and most influential Regional Agreements: NAFTA, MERCOSUR, ASEAN, and the EU
• The basic premises of the Free Trade Area of the Americas (FTAA) that is currently under negotiation in North, South, and Latin America
• A case study on CAFTA

• globalEDGE North American Free Trade Agreement (NAFTA) Module — This module provides information pertaining to:

• The historical origins of NAFTA
• Facts of NAFTA and member states
• Canadas role in NAFTA; Mexicos role in NAFTA
• Future developments towards regional integration
• In depth information on the economic effects of NAFTA and the future possibilities that NAFTA holds
• A case study on the U.S.-Canadian software lumber dispute

• globalEDGE European Union Module — This module includes information on:

• The history of the EU
• Predecessors to the current EU
• EU-US trade agreements
• A case study on the EU Constitution and implications on international business.

According to the U.S. Department of Homeland Security, a customs broker is defined as private individuals, partnerships, associations or corporations licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports. Brokers submit necessary information and appropriate payments to CBP on behalf of their clients and charge them a fee for this service.

Custom brokers can be employed by or affiliated with freight forwarders. They can also be independent businesses or employed by shipping lines, importers, exporters, trade authorities and customs brokerage firms.

You can easily find the names and contact details of customs brokers who are licensed by CBP by choosing the relevant port from the CPSs Locate a Port of Entry website and checking the Brokers link for that particular port.

The Export Legal Assistance Network is a program in which attorneys and private law firms provide free initial consultations to businesses looking to begin exporting.

The National District Export Council is an organization with the mission of leveraging local trade professionals to help businesses navigate the challenges of exporting. A typical council is comprised of experienced, high-level professionals including attorneys, CEOs, and government representatives. This resource is especially useful to novice exporters who are seeking guidance on developing and executing an export strategy.

• World Intellectual Property Organization . The World Intellectual Property Organization (WIPO) is a specialized agency of the United Nations and is one of the most prominent sites for information about international property rights is a specialized agency of the United Nations.

• Export.gov also maintains a resource with information on protecting intellectual property rights abroad, which includes:

• Information about a comprehensive anti-piracy campaign
• Background on obtaining and protecting an international patent, trademark or copyright
• Ways to file an intellectual property right infringement

For additional information about international intellectual property rights, the following sites may be helpful:

• globalEDGE Trade Law Resources Section — In this section of the globalEDGE website, there are a number of resources listed that deal specifically with Trade Law, including information about intellectual property rights. Sites may be general, such as the Compendium of Trade Laws site, or more region-specific, such as China/Hong Kong/Singapore: Global Sources Trade Law. To find the sites that are most applicable to intellectual property rights, simply enter intellectual property in the Search box.

• On the globalEDGE site, users may view all of a countrys government resources in the Global Insights section. This can be done by searching a country and selecting the resources tab on the left side of the screen. Here you will find links to official government pages, statistical offices, central banks, international chambers of commerce, economic foundations, foreign trade offices, and more.

Most of the export documentation is routine for freight forwarders and customs brokers, but the exporter is ultimately responsible for the accuracy of all documents. Since each country has different import regulations, the number and kind of required documents varies depending on the destination of the shipment.

Documents Prepared Before the Shipment

• Commercial Invoice/Consular Invoice

Commercial invoice is the itemized list of goods shipped and the exporter must prepare a commercial invoice after the pro forma invoice is accepted. The description of the goods on the commercial invoice must correspond exactly to the description in the letter of credit or other method of payment. The customer needs the commercial invoice, since it is often used by customs authorities to assess duties.

As a common practice, the commercial invoice is prepared in both English and in the language of the country of destination. In some countries, the commercial invoice must be prepared on a special form known as a customs invoice. A customs invoice is a document used to clear goods through customs in the importing country by providing evidence of the value of goods.

Similar to a commercial invoice, a consular invoice is required by certain countries. Its a document showing exact information about the consignor, consignee, value and description of shipment. It is used for customs clearance and other purposes, and must be prepared in the language of the destination country. It can be obtained from the consulate of the country to which you are exporting, and it often must be consularized or authenticated/certified. Consularization is most common in South America and the Middle East. Consularization requirements vary by country. The United Arab Emirates (UAE), for example, require that shipping documents be authenticated by the U.S. Department of State.

You can visit the U.S. Department of State for a list of Consuls and Embassies in the U.S .

Export controls are based on the type of goods being shipped and their ultimate destination. Although most exports do not require a license, it is the exporters legal obligation to seek an official determination from the Bureau of Industry and Security (BIS) .

In general, most exports are shipped under a No License Required (NLR) classification, which is a self-certification that a license is not required. If the exporters particular export is subject to export controls, a validated license must be obtained. A validated license is a document issued by the U.S. Government authorizing the export of commodities for which written export authorization is required by law.

In order to determine whether your product needs an export license, you must have the Export Commodities Classification Number (ECCN) for your product. An ECCN is assigned to products that require a license at their ultimate destination or due to the nature of the product itselffor example, if the product has dual use as a civic and military item.

• Electronic Export Information (EEI)

This information was previously known as the Shippers Export Declaration or SED. Since the paper form is no longer accepted, the data must be transmitted electronically now.

EEI is a form required by the U.S. Treasury Department and completed by a shipper showing the value, weight, consignee, destination, etc. of export shipments, as well as Harmonized Schedule B identification number. Its required for all shipments of a single commodity in amount over $2,500 (except to Canada) and for any shipment that requires an export license. The EEI enables the Bureau of the Census to monitor the kinds of products being exported from the United States, for statistical purposes.

The form must be filed electronically at Automated Export System (AES). AES is the central point through which export shipment data required by multiple agencies is filed electronically to Customs and Border Protection (CBP).

An export packing list is needed for transport and includes the number and kinds of items that are being shipped. Its much more detailed and informative than a standard domestic packing list.

The list is used by the shipper or forwarding agent to determine the total shipment weight and volume, and whether the correct cargo is being shipped. In addition, U.S. and foreign customs officials may use the list to check the cargo.

A certificate of origin, known as C of O, declares the country of origin for a good in a particular international shipment. Even though the commercial invoice usually includes a statement of origin, some countries require that a separate certificate of origin be completed. Customs offices will use this document to determine which duty rate to assess on the products being imported.

Often, C of Os are required by importers to avoid paying import tariffs and they have become especially common due to a number of free trade agreements (FTA) that the United States has negotiated with other countries.

As an example, a NAFTA (North American Free Trade Agreement) certificate of origin should be used for products exported to Canada or Mexico only if they meet the NAFTA rules of origin for production.

The United States currently has 11 FTAs in force with 17 countries.

An insurance certificate is used to assure the consignee that insurance will cover any loss of, or damage to, the cargo during transit. Typically, marine insurance coverage equal to 110% of the commercial invoice amount must be obtained for export shipments.

Inspection certificates often are required by foreign customs or businesses for certain regulated products. These are typically related to agriculture, health, or the environment. Inspection certificates also may be required to ensure that vessels or crates are free of contaminants before entering certain ports, or that the products met the specifications outlined in a contract or purchase order.

Depending on the product, certificates may be issued by various government agenciessuch as the U.S. Department of Agriculture, the Food and Drug Administration, the Environmental Protection Agency, or by third-party inspection companies.

Documents Used during Inland Movement of Goods

• Shippers Instructions

Shippers instructions contains the necessary information regarding exporters shipment and help the goods to move free of problems. Its the exporters responsibility to provide the full instructions to the freight forwarder.

Inland bills of lading document the transportation of goods between inland points and the port at which the export will arrive/depart. Rail shipments use waybills on rail and truck shipments use pro forma bills of lading.

Its a document prepared by the freight forwarder that provides information for the trucking or railroad company as to where the goods are to be delivered.

A dock receipt transfers shipping obligations from the domestic to the international carrier. It goes into effect when the shipment reaches the terminal.

Marine bills of lading are evidence of title (ownership) of the goods; an air waybill is not. However, both set forth the international carriers responsibility to transport the goods to their named destination.

There are two types of marine (or ocean) bills of lading used to transfer ownership:

1. Straight (nonnegotiable) Bill of Lading: Provides for delivery of goods only to the person named in the bill of lading and must be marked non-negotiable
2. Shippers Order (negotiable): Provides for delivery of goods to the person named in the bill of lading, or anyone else who is designated.

Export.gov provides a list of common export documents. including brief descriptions of the documents and samples of certain documents.

For detailed information about common export documents and more, please review the globalEDGEs Shipping Your Product Module .

Financial Considerations

As explained on Export.gov Tariffs and Import Fees page, there are two key steps to determine the importing regulations applied to a particular good in foreign countries:

1. Determine the Harmonized System (HS) or Schedule B Number for the product(s).
2. Determine the tariff rates, based on the products HS or Schedule B Number and destination country. To help you do this, Export.gov provides several links to resources that can help you look up products.

You can use globalEDGEs online training module Tariffs, Quotas and Non-Tariff Barriers to reach additional information. The Tariffs, Quotas, and Non-tariff Barriers module outlines the following components of international trade law:

• Basics behind tariffs and quotas, including under what circumstances the WTO/GATT prohibits tariffs and quotas
• Types of non-tariff barriers that countries use to restrict imports
• The impact of the General Agreement on Tariffs and Trade (GATT) on the creation of non-tariff barriers
• Different types of subsidies and countervailing duties
• The purpose and importance of the Harmonized Tariff Schedule
• Basics of U.S. customs law
• Methods used by customs to determine an imported goods value when assessing tariffs
• A case study on the recent disagreement between the U.S. and the EU over bananas

Types of Trade Finance

Working Capital Loans

Working capital loan programs are normally associated with pre-shipment financing which covers the operating costs related to a sales order or contract. Loan proceeds are commonly used to finance labor, materials and inventory.

The U.S. Small Business Administration (SBA) provides export loan guarantee programs to help small businesses sell products or services overseas:

• Export Express is the simplest export loan product offered by the SBA which provides streamlined financing up to $500,000.
• Export Working Capital Program (EWCP) is another type of product that The Export-Import Bank (Ex-Im Bank), the official export credit agency of the United States, and SBA offer in order to help businesses obtain private sector loans to meet their transaction financing needs through short-term working capital. EWCP provides financing up to $5,000,000.

The SBA International Trade (IT) Loan Program assists small businesses that are engaged in exporting, prepared to engage in exporting or adversely affected by competition from imports. Under this program, SBA can guarantee as much as $1.25 million in combined working capital and facilities and equipment loans.

Trade Finance Products

Factoring

Once a product has been shipped, that inventory is converted to an Account Receivable (A/R). A list of all Accounts Receivable is maintained on an aging report while the exporter waits for final payment. If there is a need for immediate cash, its possible to sell the A/R at a discount. This solution is called Factoring.

Factors typically provide 70% of the face value with 3-5 working days, and assume responsibility for collection from the buyer. After final payment, the Factor will pay the remaining 30% — less a service fee of 4% — 5%.

Forfaiting

Forfaiting is the selling, at a discount, of longer term accounts receivable or promissory notes of the foreign buyer. These instruments may also carry the guarantee of the foreign government. Both U.S. and European forfaiting houses, which purchase the instruments at a discounted price, are active in the U.S. market.

Grants, such as the two examples below, are available for export from time to time:

• Emerging Markets Program. The purpose of this program is to provide funding to aid U.S. agricultural businesses in expanding their exports to eligible emerging markets overseas.
• Foreign Investment Financing: This program provides direct federal loans to projects sponsored by private American businesses to aid in the economic and social development of developing countries, as well as help the U.S. economy by creating jobs and increasing exports.

For additional information about export financing, the following sites may be helpful:

• globalEDGE Financing Export Transactions Module — Based on chapter fifteen of the Basic Guide to Exporting, this module covers:

• Factors to consider in making financial decisions
• Private sources of financing
• Government sources of financing
• A case study on the company JQ American

There are a number of flexible payment forms for exporters:

• Cash-in-advance payment takes shape in three different methods: wire transfer, credit card and check. With this method, the exporter avoids credit risk as the payment is received by the exporter prior to shipment of merchandise. However, this is the least attractive option for the buyer because it can create cash flow problems. Further, the burden of risk lays on the shoulders of the buyer insomuch that he or she trusts that the seller will in fact ship the product.

• A letter of credit is one of the most secure payment methods and can take many different forms including irrevocable, revocable, confirmed, or special (transferable, revolving or standby). A letter of credit is a commitment by a bank, on the behalf of the buyer that a payment will be made as long as the terms and conditions have been met. A letter of credit is useful when reliable credit information about a buyer is difficult to obtain, but the credit information about the buyers bank is satisfactory. Ialso protects the buyer because there is no payment made until the goods have been shipped or delivered as promised.

• A documentary collection is a transaction in which the exporter entrusts the collection of a payment to the exporters bank, who then sends documents to the importers bank along with various instructions for payment. Documentary collections require that the importer pay the face amount.

• Open account is a transaction in which the goods are shipped and delivered to the buyer before the payment is due. This is the most beneficial payment method for the importer due to the delayed payment, but is the riskiest for the exporter.

• Consignment Sales follow the same basic procedures as in the United States. The goods are shipped to a foreign distributor, who sells them on behalf of the exporter. The exporter retains title to the goods until they are sold, at which point payment is sent to the exporter. The exporter has the greatest risk and least control over the goods with this method. Also, receiving payment may take a while.

• For more information on each payment form as well as detailed descriptions, visit the Export.gov page on Methods of Payment .

globalEDGE has an online training module, Methods of Payment. where you can find more detail about the export payment methods. The module covers following topics:

• Payment methods
• Selection of a payment method
• Currency issues and payment problems
• A case study on Lulus Dessert

Foreign exchange risk has an important role on doing business overseas. It may appear in many different ways:

• Transaction Risk: Change in the exchange rate during a transaction between the seller and buyer may result in loss for one of the parties. Companies may use hedging techniques to overcome this risk.
• Economic Risk: Over time, seller may become non-competitive due to movements in the exchange rate. One way of mitigating this risk is to diversify sales markets potential through sourcing and manufacturing locations.
• Translation Risk: This type of risk is related to the loss resulting from restating the values of assets and liabilities on the balance sheet. Companies may use nettings and swap techniques to prevent this risk.
• Risk of non-payment (Credit Risk ):When buyers default on their payment obtaining the monies due can be difficult and expensive. Negotiating with buyers requires patience, understanding and flexibility to resolve conflicts in the least costly manner. If negotiations fail and the amount of money lost is significant, the bank, legal counsel and the U.S. Commercial Service should be contacted to help with this issue.
• Political and economic risk: Foreign governments have been known to restrict or prohibit commercial payments because of problems with the economy or political instability.

To eliminate some financial risk associated with not receiving payments, the U.S. Government offers insurance for risk associated with political instability. For more information on this insurance please visit the Insurance and Risk Mitigation section on Export.gov.

Generally international prices should be calculated in the same manner as domestic prices. Determine the fixed and variable costs for producing the product and the delivery services overseas and calculate the final landed cost. It is important to remember that international marketing expenses should be factored into pricing the product as well.

There are two models that you may use for your international pricing:

1. Cost-Plus Method

The cost-plus method is based on your domestic costs, plus additional exporting costs associated with international sales and promotion, product modification, etc. This method allows you to maintain your domestic profit margin percentage and set a suitable price. Any costs not applicable, such as domestic marketing costs, are subtracted from the overall cost prior to markup to arrive at your selling price. The cost-plus method does not take local market conditions into account.

2. Marginal-Cost Method

The marginal-cost method will likely provide a more realistic means of determining true cost of producing your product for export. To use the marginal-cost method, determine the fixed costs of producing an additional unit for export. Any additional costs of producing products for export are termed variable costs.

For more information on pricing you may see the globalEDGE Pricing, Quotations & Terms training module. The online module discusses below issues:

1. Determining the best price for your product internationally
2. Handling requests for quotation
3. Defining the terms of sale
4. A case study on Home Instead Senior Care

Choice of payment method is the easiest way to mitigate risks of nonpayment:

• The cash-in-advance payment method eliminates all risk of not getting paid, but few foreign buyers are willing to use this method of payment.
• A letter of credit is another payment option that is secure for the exporter and is more widely accepted by buyers because banks guarantee payments. Other options also help to decrease the risk for both the buyer and seller.
• Another way of mitigating the risk of payment problems is to purchase export insurance through the U.S. Government .

Even exporters who take precautions occasionally experience payment problems. Following three options may be considered if you experience payment problems:

1. Try to negotiate directly with the customer.
2. Work with your bank, legal counsel and the U.S. Commercial Service; particularly if negotiations fail and the sum involved is large.
3. Try arbitration through the International Chamber of Commerce if other means fail. This route is often faster and less costly than legal action.

You can find more about the payment problems and how you can deal with them in this Export.gov document .

Foreign exchange risk is the exposure to potential financial losses due to the devaluation of a foreign countrys currency against the U.S. dollar. The exposure can be eliminated by only selling products and services in U.S. dollars; however this method could result in losing some potential buyers due to more flexible currency terms offered by competitors.

The following are the most common ways of hedging:

1. A forward hedge is the most direct method of hedging foreign exchange risk. It enables the exporter to sell a given amount of foreign currency at a pre-agreed exchange rate, with a delivery date ranging from 3 days to one year into the future. This method is beneficial because the exchange rate will be locked in for the set amount of money, and not be affected by the fluctuation in currency.

1. An option hedge is a good choice if there is some doubt as to whether a sale will be completed or collected by a specific date. The exporter (option holder) has the right, but not the obligation, to deliver an agreed upon amount of foreign currency to the lender, in exchange for dollars at a specific rate on or before the expiration date of the option. If the value of the foreign currency goes down, the exporter is protected from the loss; however if the value of the foreign currency rises, the exporter can either sell the option back to the lender or let it expire by selling foreign currency on the market earning more dollars than originally expected with the option. An option hedge is much more flexible than other hedging options. High fees make an option hedge the most expensive choice to protect against foreign currency fluctuation.

For more information on foreign exchange risk management and other international finance topics, view the U.S. Department of Commerce Trade Finance Guide .

You can reach the websites of various banks all over the world simply by going to globalEDGE Country Insights listing and searching for a specific country. Information about the banks of that country is listed under both the Corporations and Resources links. The banks websites will have information regarding the investment and banking practices of specific countries.

Country Commercial Guides are available through the export.gov Market Research Library. Most guides are free of charge and provide users with country trade regulations and investment practices, as well as present a comprehensive look at the commercial environment in a given country. Foreign investment information is also often available on the individual websites of U.S. embassies and consulates .

Duties and taxes are fees imposed on goods shipped from one country to another. Its the responsibility of the shipper to calculate them and for the buyer to pay them. Export.gov has a video about international taxation and introduces users to online tools that help with calculating these fees for more than 100 different countries.

If the products you export contain components or raw materials that were originally imported into the U.S. you may be able to obtain a refund on the import duties paid when the components or materials were imported. This type of refund is known as Duty Drawback .

Its also good to know that, unlike the U.S. most foreign countries have some form of national sales tax. They are commonly referred to as Value-Added Taxes (VAT) or national consumption taxes.

You may find more information, news, and alerts about international taxation at the Deloitte International Tax Source (DITS). DITS is an online database featuring tax rates and information for 65 jurisdictions worldwide.