Whether your company is experienced or new to exporting, one way to help ensure profitability in export markets is to step back and assess or reassess the products, services or technologies (hereafter referred to as products) that your company will promote in export markets.
If your company produces only one product, this process will enable you to identify or anticipate potential challenges and hurdles early in your export expansion process and allocate resources accordingly. If your company produces multiple product lines, this process will enable you to focus your resources on the products that will have the greatest success in the near term and gain a better understanding of what will be required to succeed with products that might face export hurdles, import hurdles, or sales and use hurdles.
Often, companies continue to add products to their export catalog without putting each one through this process and the result can be limited sales and profitability in relation to resources allocated to sell the product. While this process can be completed by one individual in your organization, it is more productive to have input from various functional areas within the company.
Follow these steps to determine which of your potential exports have the most chance at success:
1. Assess Export Potential of Products
Your company may be making a worldwide, regional or country assessment of your products depending on how you are defining your market.
To start the selection process, list the products you are currently exporting or you believe might have export potential. Beside each product listed, indicate why you want to export the product and/or believe that the product might be successful in export markets. This list may be based on your current knowledge—no research required—and updated over time. It is also a good opportunity to include others from your organization in this discussion.
After listing your products with export potential, select one or more products that you believe have the highest export potential. List these potential products and your rationale for selecting them.
2. Select Best-Prospect Products
Your initial assessment is designed to determine likely issues you may encounter, such as governmental approvals and product features or characteristics that may require a certain degree of alteration. Ideally, your products can be exported “as is” since one of your objectives will be to successfully sell your product in export markets with minimum expense and complication. Use your experience in the U.S. market, knowledge of foreign markets in general (e.g., use of metric measurements) and your intuition to start the assessment process.
There are four types of questions you will want to address to initially determine the exportability of your products:
- What hurdles might I have to overcome to ship my products out of the country?
- What hurdles might my foreign customers have to overcome to import my products?
- What hurdles might my foreign customers have to overcome to sell or use my products?
- What other hurdles might I have to overcome to maintain export success?
To select your most exportable products (Best-Prospect Products), start with the potential products you selected as Products with Export Potential.
Use the information you currently know about your products, your potential customer base, and your existing knowledge and perceptions about foreign markets. For each product you are considering, write down the hurdles you believe will have to be overcome and what questions you have. This list does not have to be long. The number of questions may, of course, depend on the type of product you choose.
Export Hurdles
There may be export hurdles to be addressed that are related to shipping your product out of the country to a foreign buyer or, for example, to getting your product into the foreign market. You will need to determine if your product will require a special export license or is prohibited from being shipped to a specific country or customer. Note any initial hurdles of which you are aware. You will address export licensing in more detail later in the process.
Import Hurdles
In many countries, your customers may have high import hurdles such as tariffs, restrictive quotas or other formal and informal barriers to importing. If you are exporting electrical, medical, food or certain other types of products, your customer may not be able to import the product until the product has passed inspection and meets the standards of the importing country. If your product requires government approval in your domestic market, for example, there is a chance there is a comparable agency in other countries that may require your foreign customer to obtain approval. Obtaining import approvals is not necessarily an obstacle because there are a number of ways to work through the approval processes. The important thing at this time is to raise the questions that will have to be answered at some later step in the process by you or your customer.
Sales and Use Hurdles
Your initial product screening should also include an assessment of sales and use hurdles such as the product’s features and characteristics. Are there things that would obviously need modification to make the product marketable, and, if so, how difficult would the changes be to implement? Because all but three countries in the world use the metric system and many parts of the world use different types of electrical power, your foreign customers may have problems selling and/or using your product unless the products are modified. Your product should also be reviewed for foreign sales and usage problems, such as the need for training in the use of the product, after-sale support or maintenance, and so forth.
Other Hurdles and Issues
During the initial assessment, you may identify other hurdles and issues about which you are unsure and which will have to be considered as you progress down the export track. For example, if your product is competitive with imports in your domestic market, will it also be competitive in foreign markets? Are there patents or trademarks that will have to be protected? By starting a list of these unresolved issues now, you are more likely to address all the potential areas of concern that will have to be resolved before you take your product into a foreign market.
Select and Prioritize Best-Prospect Products
The assessment of your best-prospect export products has identified some of the potential hurdles you and/or your customers will have to overcome to introduce your product to a new market. In addition, you have raised other issues that you will have to consider along the way.
At this point, you should be able to initially determine the potential “exportability” of your products. Determine the product or products that you believe to be most exportable. Then, select and prioritize the products and record the product names and rationale for selection.
Determine Harmonized System Codes
Determine or double-check the harmonized system (HS) product code for each of your prioritized products. The HS number is a six-digit commodity classification number and is used internationally to classify products for customs purposes. The HS codes are maintained by the World Customs Organization.
U.S. companies should also determine their domestic export Schedule B codes. These codes are composed of the HS six-digit code plus an additional four digits. To identify the Schedule B numbers for each of your company’s products, use the U.S. Census Bureau’s Foreign Trade Division website. If you require assistance with the search for your numbers, use the Contact Us information option listed on the website.
Canadian companies should consult the Statistics Canada‘s Canadian Export Classification codes.
Determine Export Licensing Restrictions
Now is the time to take a closer look at export licensing restrictions. U.S. companies need to comply with the Export Administration Regulations (EAR), administered by the U.S. Department of Commerce, Bureau of Industry and Security (BIS). Depending on your product and other factors, you may have to check with other U.S. agencies.
- Check to see if your product has a specific Export Control Classification Number (ECCN) on the Commerce Control List (CCL). If it is not listed on the CCL, your product will be classified as EAR99 and will not require an export license unless:(a) it is being shipped to an embargoed/sanctioned country, restricted party or in support of a prohibited end use, or
(b) it appears on the U.S. Munitions List (USML). - Check with other federal departments based on other legislation that limits certain exports and their uses (e.g., Department of State for certain defense uses, Department of Treasury for specific end users).
- At this point, you may not know to which country markets and buyers you will be shipping product. Therefore, you may need to return to this task later in the market expansion process.
- The vast majority of products are classified as EAR99 and do not require an export license.
Canadian companies may consult Global Affairs Canada for licensing issues. The Ministry of Foreign Affairs, Export Controls Division issues export permits in accordance with the Area Control List (ACL) and the Export Contact List (ECL).
After completing this process, you will have a prioritized list of best prospect products for export expansion. As your company makes resource allocation decisions for export expansion, you will find the information gleaned from this process to be invaluable in determining which products will be capable of generating the desired return, and you will be in a better position to make decisions related to issues such as product modifications, in-country training or product servicing, and other attributes that will enable true export expansion for your company.
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