By: Paul Fudacz, Partner, Braumiller Law Group
It is well known going back to the founding of our country that exporting is the most beneficial form of commerce. One may note that there are tariffs on imports, but no tariffs on exports – our government doesn’t want to hinder a good thing.
As a trade compliance attorney, the first thought that comes to mind when you hear the word “export” is controls, i.e., what products are restricted for export from the U.S., or what countries are we not supposed to do business with. While export control compliance is extremely important, you do not want government officials literally knocking on your door to inquire about how some of your company’s products got into the wrong hands overseas. Note, there are other facets of U.S. government involvement and policy that are very helpful to companies that wish to expand their businesses through export sales.
This article seeks to explore some of these and hopefully equip the burgeoning exporter with more knowledge and tools to grow their business through exporting.
- Government Based Export Development Resources
The U.S. Government, as well as state and local governments, are well aware of the benefits of exporting from the U.S., as well as regional and local economies, and are always seeking to increase exports from the U.S. The U.S. Bureau of Census keeps close track of all exports from the U.S., and it is never good when the government reports that the trade deficit is up, meaning U.S. imports vs. Exports are increasing.
One key government entity that provides extensive resources to exporters is the U.S Department of Commerce, International Trade Administration (ITA), and in particular the U.S. Commercial Service, which is part of the ITA. The U.S. Commercial Service maintains over 100 offices nationwide and over 70 offices worldwide located at U.S. embassies that provide English speaking trade advisors and resources to companies seeking to explore, or grow, their market presence in a given foreign market. These advisors are also valuable resources for resolving trade problems such as business disputes or assisting in securing payment for goods or services provided.
Another benefit is the Gold Key program, with services that include identification and outreach to potential foreign matching firms, sending client’s information to identified matching firms, preparing a profile of interested firms, attending the appointments, and providing a report with the profile and contact information for interested firms. See https://www.trade.gov/let-our-experts-help-0 for more information.
Other government, as well as non-government resources, exist at the state and local level and include state government funded small business associations, regional growth initiatives and local chambers of commerce which offer valuable guidance on tailoring and marketing your products for export, as well as navigating export compliance requirements such as classifying your merchandise, preparing export documentation, and obtaining legalization or certification documents if required.
- Export Financing and Transactional Assistance
While traditional commercial banks may be a reliable source of financing export sales, The U.S. Government, as well as state and local government agencies, offer programs that can help you get bank loans, or obtain loan guarantees for your business development, working capital, and project financing needs. Also, these government resources can provide transactional risk management services to minimize risk such as export credit insurance, addressing foreign exchange risk, and providing guidance to help avoid potential payment problems from your buyer. See https://www.trade.gov/finance. Other resources include the Export Import Bank, The U.S. Small Business Administration, the U.S. Department of Agriculture, the Overseas Private Investment Corporation, as well as state and local export financing programs.
- Free Trade Agreements
To make U.S. products more attractive and competitive in international markets, the U.S. has entered into free trade agreements (FTAs) with 20 foreign countries or groups of countries. Examples include the recently enacted U.S. Mexico Canada Free Trade Agreement (USMCA), the U.S. Australia FTA, and the U.S. Korea FTA. A listing of all the agreements can be found on the Office of the U.S. Trade representative (USTR) website – https://ustr.gov/trade-agreements/free-trade-agreements. A key benefit of the trade agreements is that goods that qualify under established rules of origin are granted preferential treatment when traded between the countries. The most important preference is that qualifying goods are granted duty-free, or reduced-duty, treatment when traded between FTA members. This can make products of the U.S. much more attractive to FTA partners, especially in countries with high import tariff rates.
Important considerations when utilizing FTA’s is to make sure that you follow all the rules established to make sure that products traded between the FTA countries claiming the preferential treatment are indeed products of the FTA countries as defined by the rules of origin of the FTA. The rules of origin can vary between FTA to FTA; however, all FTAs require that the goods undergo significant production in one or both respective FTA countries, and that products originating in non-FTA countries, or with substantial non-FTA content, are not entitled to the FTA benefits.
Other requirements include detailed certification requirements and the need to obtain product origin information from suppliers of purchased products. In connection with these requirements, companies certifying their goods under an FTA must maintain careful records so they can verify that the products certified as originating for purposes of the FTA in the event of a compliance audit.
- Legal Guidance
No trade attorney could conclude without mentioning that exporters should understand the various legal implications associated with exporting. These include practical business focused considerations such as entering into appropriate contracts or agreements with customers, understanding the legal compliance requirements associated with export document preparation and recordkeeping, and complying with FTA requirements. Further, exporters need to be aware of any export restrictions that might apply to their products, as well as any countries or entities U.S. companies are not permitted to deal with. For this reason, a standard best practice for exporters is that they screen all offshore customers to make sure they are not on a restricted party list or otherwise subject to any U.S. sanctions.
The resources described above can provide a good start to understanding these requirements, and not everyone needs to consult a lawyer to get their exporting activities underway. However, exporters should understand that there are legal compliance requirements related to most steps of the exporting process and an exporter of any size needs to understand the specific requirements that might apply to their transaction. A pro-active consultation with a legal or trade professional early on might be the proverbial “ounce of prevention” that can save one from larger issues developing in the future.
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