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The Four Big Challenges of Exporting Successfully: Explained and Answered

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The Four Big Challenges of Exporting Successfully: Explained and Answered

While there are numerous challenges that companies in all business verticals face, there are four that dominate the export process. Manage these successfully and you’ll reduce export headaches and maximize the profitability and long-term sustainability of your export program.

The four areas are:

1. Choice of INCO Terms
2. Logistics
3. Import Clearance
4. Getting Paid

1. Choice of INCO Terms

INCO Terms are internationally recognized terms of sale between exporters and importers that go back over 65 years, managed by the International Chamber of Commerce in Paris, France.

Incoterms provide a universal set of rules and guidelines that help facilitate trade. In essence, they provide a common language that traders use to set the terms of their trades. Buyers and sellers can use Incoterms in a variety of activities necessary to conduct business. Typical activities that call for the use of Incoterms include filling out a purchase order, labeling a shipment for transport, completing a certificate of origin, or documenting an import or export transaction.

There are 11 INCO Term options:

Incoterms Applying to Any Mode of Transport

The following Incoterm rules apply to any mode of transport:

  •  EXW – Ex Works (insert place of delivery)
  •  CIP – Carriage and Insurance Paid To (insert place of destination)
  •  CPT – Carriage Paid to (insert place of destination)
  •  DAP – Delivered at Place (insert named place of destination)
  •  DPU – Delivered at Place Unloaded (insert place of destination)
  •  DDP – Delivered Duty Paid (insert place of destination)
  •  FCA – Free Carrier (Insert named place of delivery)

Incoterms Applying to Sea and Inland Waterway Transport

The following Incoterm rules apply to sea and inland waterway transport:

  • CFR – Cost and Freight (insert named port of destination)
  • CIF – Cost Insurance and Freight (insert named port of destination)
  • FAS – Free Alongside Ship (insert name of port of loading)
  • FOB – Free on Board (insert named port of loading)

It is important for exporters to learn all the options and in collaboration with their foreign buyer choose the best term that mirrors the intended transaction.

CAUTION: For exporters we do not recommend Ex Works or Delivered Duty Paid Inco Term options. We prefer FAS or any of the “Cxx” terms where better control can be maintained.

NOTE: E-commerce export sales usually require the use of the DDP Term, again for greater control.

2. Logistics

Exporting requires moving freight from origin to destination, crossing international borders, often over greater distances, and at times subject to potentially harsh and dangerous exposures.

We make the following recommendations in handling export logistics:

– Make sure that your personnel who will be handling this responsibility are well-trained. NIWT.org is a viable option for export training. Better informed staff will produce better outcomes.

– Make sure the packaging of your shipment will meet the demands of the journey.

– Establish a good working relationship with a capable and experienced freight forwarder. Their knowledge will be a great asset to your export supply chain performance.

– Since the beginning of the pandemic, logistics has become more expensive with greater delays. Allow sufficient time to meet customer delivery requirements and budget higher costs for transportation.

– Track and trace your shipments. Due diligence will assure that the goods arrive at the intended destination timely and responsibly.

– Pay attention to export trade compliance. Make sure you are checking the denied parties list, follow all export regulations and apply due diligence and reasonable care along with supervision and control in your export program.

The fines and penalties for non-compliance can be severe.

3. Import Clearance

Always keep in mind that the goods that you are selling will need to go through customs formalities in the country of destination.

This will mean:

– Adherence to the import regulations of the country you are selling to

– That includes packing, marking, labeling and documentation requirements

– Correct Harmonized Tariff Schedule Numbers

– Import permits and potentially other documentary requirements.

The use of a qualified freight forwarder together with collaboration with the buyer and informed personnel will all mitigate this challenge.

4. Getting Paid

If you do all three of the prior steps correctly yet do not get paid, it will all be for naught.

Getting your money paid upfront before shipping is always a good option but is likely not to be competitive. Offering terms is typically a better long-term strategy.

Due diligence to consider, when offering terms:

– Judiciously vet the companies you sell to

– Letters of credit can work, but are costly

– Payment drafts against documents can work but pose some risk

– Arranging for export credit risk can be a viable option, which comes at lower cost and can offer risk avoidance. At Blue Tiger International, we have a program available to companies that services exporters requiring receivable protection.

Summary

Exporting creates opportunity for all industries but also creates risk. Manage the risks through these four pillars of exporting and you will significantly reduce exposure, maximize profits, and create a robust long-term export program.

The Author

Thomas A. Cook Is a 30-year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

education

IS THERE A BRIGHT FUTURE FOR TRADE IN EDUCATION?

American University Blues

The arrival of COVID-19 sent students packing mid-semester as many universities continue to mull over options for restarting in-person classes in the fall. Many international students who had returned home for the spring break were unable to return to the United States to finish out their studies.

Travel restrictions and changing student visa rules will have international applicants questioning whether to pursue studies abroad. Universities are working to increase their capabilities to deliver courses virtually but online classes may be less attractive when part of the allure and prestige of American universities is associated with the campus experience. Prospective foreign students may also decline to enroll if they cannot network to secure post-degree employment in the United States.

This is happening against a backdrop of declining new enrollment in American universities by foreign students after a decade-long boom. New international student enrollment has decreased year on year since the 2016/2017 academic year, though the overall number of international students in the United States has increased as more students take advantage of Optional Practical Training, which allows them to stay under their student visa to work for one year.

Education as an Export for International Students

During the 2017/2018 academic year, American educational institutions hosted over one million students. When foreign students come to the United States to study, those institutions are exporting their educational services. Perhaps surprisingly, educational service exports ranked 5th among all U.S. services exports, valued at $45.3 billion in 2018, according to the Bureau of Economic Analysis.

Services trade can be described as supplied in one or more of four ways: the service itself travels over a border but the provider and consumer remain in their home countries; the consumer travels across a border to receive a service; the provider establishes a commercial presence in another country to provide the service; and/or, the service provider travels to another country to provide the service.

Educational services – to varying degrees – are being provided today in all four of these ways. Of course, the most traditional approach is for students to enroll and travel to attend classes in educational institutions abroad for a semester, a year or for a full degree. To a lesser extent, professors may travel to campuses overseas to teach in residence.

As communications technologies improve and become more widely used, virtual education is increasing in popularity. Think: distance learning, corporate training online and expansion of educational software and platforms. Lastly, it has become much more popular in recent years for large universities to open satellite campuses overseas.

Limited Trade Commitments

In the WTO General Agreement on Trade in Services (GATS), members have taken commitments to create more market access, enabling the expansion of global educational exports. However, education services still rank among the least committed of all sectors subject to GATS coverage (after audio-visual and energy services).

WTO members are not required to make any commitments to liberalize their markets for educational services and GATS provides exemptions for members to avoid commitments where services are supplied “in the exercise of governmental authority,” or in other words, providing a public service. Furthermore, where educational services are covered in a country’s commitments, they may maintain some limitations on foreign investment, or set limits on the number of service suppliers, on the total value of service transactions or assets, or other types of limitations such as ensuring that quality standards are maintained.

U.S. is Still Top Destination

The Organization for Economic Co-operation and Development (OECD) estimates that 8 million students will be studying abroad by 2025.

The United States has long held the number one spot for students seeking an international education. According to the Institute of International Education’s 2019 Open Doors Report, the United States played host to over 30,000 students per year during the 1950s. By the late 1990s, that number reached 500,000 and reached an all-time high of 1,095,299 students in the 2018/2019 academic year, including undergraduates, graduate-level students, and students undertaking a one- or two-year post-graduation experience under their student visa.

The U.S. education system attracts students from virtually every country of the world. China sends the most students to the United States by far. India is a not-so-close second.
As a percentage of total students in higher education, however, the United States has relatively fewer international students than many other countries, at only 5.5 percent. By comparison, Australia’s average foreign student body is 28.0 percent, Canada’s 21.4 percent, the U.K.’s 20.9 percent, France’s 12.8 percent, and Russia’s 8.6 percent.

The Foreign Student Premium

It pays for universities and governments to attract international students. Aside from the cultural value, diversity of perspectives and ideas they bring, international students studying at U.S. colleges and universities contributed $41 billion in revenue and supported 458,290 jobs during the 2018/19 academic year, according to NAFSA: Association of International Educators.

International students in the United States, as well as in Australia, Canada and New Zealand, pay on average double the tuition fees paid by domestic students. In the United States, this is largely due to the difference between in-state and out-of-state tuition at public universities, but in other countries, international students are charged separate – often much higher – tuition rates.

In addition to padding university budgets, international students bring additional spending to local shops and restaurants, and tend to travel in their host country, helping to support jobs in the community and through tourism. For example, NAFSA found that international students in the top two enrolling states, California and New York, contributed $6.8 billion and $5.3 billion to each state’s economy, and supported 74,814 and 59,586 jobs, respectively.

Graduating to the Next Level?

Educational service exports are facing some serious headwinds. If schools want to keep hold of the huge benefits international students bring, they must incentivize new student enrollment and ensure safe returns to campus. One country doing just that is Australia, which is trialing a pilot scheme to gradually reintroduce international students, whose presence in the country supports 259,000 jobs.

In addition to delivering their educational services on campus, the global health pandemic is forcing universities to adapt and innovate to deliver education online. The mainstreaming of distance learning may also create opportunities for more providers to offer educational services across international borders. We’re all learning in this new environment.

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Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

This article originally appeared on TradeVistas.org. Republished with permission.
international

International Diploma-cy

Higher education is one of the world’s leading “exports”

To compete in today’s knowledge-driven economy, college-bound students are increasingly going global in their pursuit of a top-notch degree. Since 2001, the number of students pursuing studies abroad has more than doubled, from 2.1 million to 5.0 million in 2018.

As one result, higher education is fast becoming one of the world’s leading “exports.” Many people may not think of education as an “export,” but when an international student comes to the United States, for example, the monies spent on tuition, fees and living expenses are considered “exports” of education services.

The current world leader in education exports is the United States, whose 7,021 two- and four-year colleges and universities attracted nearly a quarter of the world’s international students in 2018. According to the U.S. International Trade Commission (ITC), revenues from U.S. higher education accounted for about one-fourth of the $903 billion global education services industry in 2011.

Top host destinations for foreign students

International students are the consumers of higher education exports

On the other side of the equation, the world’s leading “consumers” of higher education are China and India, both of whom see enormous benefits in sending hundreds of thousands of their students abroad to take advantage of educational opportunities and to bring that knowledge home.

Chinese students, for example, make up 33 percent of all international students in the United States, according to a 2019 report by the Institute of International Education (IIE), while the share of students from India has also grown dramatically. In 2018, China sent 369,548 students to America, while India sent 202,014. For both groups of students, the most popular fields of study are science, technology, engineering and math (STEM), followed by business and management.

American schools also benefit from the presence of international students, which is one reason why their numbers are rising (although their share of total U.S. college enrollment is still only about five percent). In addition to the cultural and social diversity these students bring, they also pay “full freight” – out-of-state tuition in the case of public universities or sticker price in the case of private schools. At some schools, international students even pay extra. At the University of Illinois at Champaign-Urbana, for example, international students paid a $2,800 surcharge during the 2012-2013 school year.

These well-paying students have been a boon for schools facing rising costs or cash-strapped by cuts in state education budgets. But even elite institutions find these students attractive. For example, according to the ITC, foreign students made up at least 15 percent of the students entering Boston University, Columbia University and the University of Pennsylvania during the 2011-2012 school year and at least 10 percent of students at such flagship state schools as the University of California-Berkeley. Many schools also actively recruit foreign students and even hire “brokers” to find students abroad. The ITC also reports that a growing number of public colleges and universities are forming state-wide consortia, such as “Study New Jersey” and “Study Wisconsin,” to host recruiting fairs and conferences for foreign students.

US Colleges with Greatest Share of Foreign Students 2018

Global competition to provide higher education

American schools, however, are increasingly facing competition from other countries that see the same opportunities. India, for example, recently decided to raise by 10,000 the number of foreign students admitted to its engineering schools as a way to improve the prestige of its national universities. As a result, the U.S. share of the international student market is slipping. While the number of international students going to America continues to climb, its overall share of these students in 2016 was three percent lower than it was in 2001.

While the dominance of U.S. higher education will likely continue for quite some time, competition for the world’s “best and brightest” will only get more fierce.

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This article was updated as of November 20, 2019.

Anne Kim

 

Anne Kim is a contributing editor to Washington Monthly and the author of Abandoned: America’s Lost Youth and the Crisis of Disconnection, forthcoming in 2020 from the New Press. Her writings on economic opportunity, social policy, and higher education have appeared in numerous national outlets, including the Washington Monthly, the Washington Post, Governing and Atlantic.com, among others. She is a veteran of the think tanks the Progressive Policy Institute and Third Way as well as of Capitol Hill, where she worked for Rep. Jim Cooper (D-TN). Anne has a law degree from Duke University and a bachelor’s in journalism from the University of Missouri-Columbia.

This article originally appeared on TradeVistas.org. Republished with permission.