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Synopsis
Fully revised and updated-the go-to guide from an expert on international trade
Doing business across national borders is more profitable than ever. In the exhaustively revised fourth edition, Import/Export provides step-by-step guidance to show you how to take part in the booming world economy.
"synopsis" may belong to another edition of this title.
About the Author
Dr. Carl Nelson is a specialist in international trade with over 40 years of global experience in government and private business. He is the author of seven books about international trade and economics; a professor of international business at the School of International Management, San Diego, California; and the president of Global Business and Trade (GBT), an international business training and consulting company specializing in the Pacific Rim and Mexican markets.
From the Back Cover
International trade from A to Z
Doing business across national borders is more lucrative than ever, and the
classic Import/Export has all the tools you need to reap the profits of
today's booming world economy. In this exhaustively revised fourth edition,
renowned global trade strategist Dr. Carl Nelson demystifies the new
landscape in international trade, providing step-by-step guidance on
entering and succeeding in this opportunity-laden marketplace and
including:
New materials on E-commerce; the World Trade Organization and World Trade
Centers; economic integration; doing business with NAFTA, Africa, India,
China, and the Middle East; ISO standards; outsourcing and in-sourcing; and
using free zones
Updated key contacts, publications, and web sites, as well as sample forms,
useful appendices, and a glossary of terms
Current regulations for trading to different regions of the world
Dr. Nelson's 20 globally tested keys to international business success
From writing a business plan and making overseas contacts to financing a
transaction and getting through the customs maze, this guide explains every
aspect of importing and exporting. Featuring scores of instructive examples
and real-life success stories, Import/Export, Fourth Edition is your
one-stop resource for competing in the global trade game.
Excerpt. © Reprinted by permission. All rights reserved.
IMPORT/EXPORT
How to Take Your Business Across BordersBy Carl A. NelsonThe McGraw-Hill Companies, Inc.
Copyright © 2009 Carl A. NelsonAll right reserved.
ISBN: 978-0-07-148255-4
Contents
Chapter One
WINNING THE TRADE GAME
International trade is the exchange of goods and services across national boundaries. Exports are the merchandise individuals or nations sell; imports are the goods individuals or nations purchase. By these methods, products valued at more than US$11 trillion worldwide are exchanged every year. When we as consumers enjoy fresh flowers from Latin America, tropical fruits in the middle of winter, or a foreign car, we are participants in, and beneficiaries of, international trade. International trade is not a zero-sum game of winners and losers; it is a game in which everyone wins.
Global Opportunities
Major changes that took place in the twentieth century have had a significant effect on international trade in the new century and have provided unprecedented opportunities.
The age of globalism has brought about worldwide distribution, the Internet, satellite communications, and speedy transportation systems. People all over the world seek the same luxuries and standards. They see things and, naturally, they want them.
Globalization is no longer a buzzword; it is a reality. National governments have a large stake in its outcome because this change affects their societies. As the process goes forward, the need for harmonizing interstate laws becomes more serious. Therefore international trade cannot be a static process, and businesses that make products and attempt to sell them across borders must constantly adjust.
U.S. Deficits and Surpluses
Figure 1.1 shows the history of American trade since the earliest days. You will note that it was not until about 1975 that trade began its chronic fall into significant deficits. Nevertheless, as Figures 1.2 and 1.3 show, the United States is at or near the top of the list in merchandise trade and commercial services. That is, America has the largest surpluses and deficits of any nation in the world, which means there is a lot of profitable merchandise moving around the world and you can have a part of that.
What Is an Import/Export Business?
The questions most frequently asked by interested parties are: "What is an import/export business?" and "What organizational methods do traders use?" The answers depend on whether you work for a manufacturer or are independent (for more detail see Chapter 6).
If you own or work for a manufacturer of an exportable product, your company can create and organize its own export department. Today, however, many manufacturers outsource their export function to import/export companies.
An independent import/export business is an individual or company that acts as an international middleman (a unisex term); that is, it sells foreign-made products (imports), sells domestic (home country) products in other countries (exports), or does both. See the Glossary at the back of book for an extensive list of the most commonly used trade terms.
Every manufacturer that is not already exporting can be a potential client for you; there are still many businesses all over the world that do not export. According to the U.S. Department of Commerce, less than 10 percent of all American manufacturers currently sell their products overseas.
Whether you run your business from your home or as an expansion of an existing domestic manufacturing firm, an import/export business often requires little capital investment for start-up. Of course it can grow into a giant business with billions of dollars in annual sales. An import/export business also offers great opportunities to travel and to enjoy the prestige of working with clients from all over the world.
Where Do Importers and Exporters Trade?
Everyone is trading internationally. And once trade begins with one country, new opportunities spring out of nowhere. A business person who successfully starts importing very soon learns of exporting opportunities and vice versa. In any case, a whole lot of money can be made. More than $11 trillion wouldn't be traded worldwide if it weren't profitable to do so.
The World Trade Organization (WTO)
Created on January 1, 1995, the World Trade Organization (WTO), with equal status alongside the World Bank and the International Monetary Fund, has strengthened global trade. It is the only international organization that deals with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified by their parliaments. As of 2005, it has over 149 national members making it easier to do business across borders by reducing tariffs and harmonizing laws and practices that are barriers to trade. The WTO's goal is to help producers of goods and services, exporters and importers, conduct their business.
Cyber Trading
There is no president or congress of the Internet, and it has no boundaries; therefore, cyber communication is the international trader's connection without barriers (see Chapter 4).
World Trade Centers Association (WTCA)
Founded in 1970, the World Trade Centers Association (WTCA) is a not-for-profit, nonpolitical association dedicated to the establishment and effective operation of world trade centers as instruments for trade expansion. To date, the WTCA membership about 300 centers in 75 countries. These world trade centers service more than 750,000 international affiliated businesses.
World trade centers, dedicated to providing services to facilitate international trade, are located in over 170 cities with about 100 more in the planning stages. In other words, they are in virtually every major trading city in the world. To learn more about world trade centers, see Chapter 9.
Trade Integrations
Trade integrations are preferential arrangements between two or more nations to facilitate commerce across borders.
North America
The North American Free Trade Agreement (NAFTA)—the world's largest trading bloc—is expanding to include many of the nations of the Caribbean basin and South America.
Europe
The European Union (EU) formed a single internal market that has resulted in the removal of essentially all physical, technical, and fiscal barriers to the exchange of goods and services within the European common market. The EU is now becoming larger to include some of the newly independent states of Central and Eastern Europe. Some of the changes agreed to are:
• A common value-added tax
• Deregulation of transportation
• Establishment of minimum industrial and safety standards
• Broadening of the EU-wide bidding process for government procurement
Asia
The Asian/Pacific Basin nations of Australia, New Zealand, Japan, and the "Tigers" (South Korea, Taiwan, Hong Kong, Singapore, and Thailand) are the countries that today present the greatest trade opportunities. Trade in this region has expanded faster than any other part of the world.
China and India
China and India are the two most populated countries and are making special progress in international trade. They are worthy of focused research—they are doing business!
Africa
The latest world trade emphasis is focused on the countries of the African continent, particularly those south of the Sahara where there are vast untapped resources and a need for modernization and economic development.
Why Get into Trade?
There are three big reasons to get into the trade game:
1. Imports bring big profits.
2. Exports make big profits.
3. The world is interdependent. People have awakened to two realities—that people of each nation rely on people of other nations to exchange goods, services, and ideas—and that free trade creates jobs.
Those who are winning the trade game know that, regardless of national deficits or surpluses, the time is always right for an import/export business to make profits. The winners simply swing with political and economic changes over which they have little or no control.
Success Stories
This book does not guarantee financial success—there are too many variables such as management, financial capitalization, and determination; however, the following are a few stories you might find interesting and stimulating. The intention is to motivate and offer a few ideas that might work for you.
Hollywood USA
The president and CEO of a small New Jersey company with a Beverly Hills connection swears that it's true that customers in the Middle East are wild for products bearing American brand names and splashes of red, white, and blue on their packaging. His line of Hollywood USA high-quality body sprays, creams, baby products, deodorants, and shampoos has found buyers around the world—in Africa, Latin America, and, of course, the Middle East.
From Air to H2O
Even in the driest part of the world, Hisham Fawzi's worldwide government customers don't wait for rain to quench their thirsts. As president and chairman of Excel Holdings, a small firm in Leesburg, Virginia, Fawzi develops and markets a patented line of machines that convert moisture from the air into drinkable water. Excel Holdings currently markets its products in 14 countries with more potential customers in the waiting. Most of his customers are foreign governments or international organizations that often finance water purification efforts.
Pumpkin Maternity
While touring the Netherlands, a rock musician thought about her sister and her best friend, both pregnant and complaining that they had nothing to wear. She knew exactly what was needed—hip, quality maternity clothes that reflect today's fashions.
Two months later the Pumpkin Maternity catalog was printed, and she was in business. Two years later, she has thriving mail-order and Web site sales. You can check out Pumpkin Maternity at www.pumpkinmaternity.com and www.babystyle.com.
Down Under
Since 1991, Amy Frey has helped Australian manufacturers gain a niche in the lucrative North American market through her small business, ATC International. Frey nurtured her company from its humble origins in a spare bedroom to a 6,000-square-foot warehouse outside Washington, DC. From there, her four-person team provides market research, business management, distribution, and logistic services to clients in Australia and New Zealand.
Palomar Technologies
Palomar Technologies is a high-tech company headquartered in San Diego, California. It is the premier supplier of high-precision microelectronic assembly equipment in the world. Palomar provides best-in-class solutions for microelectronic component manufacturers worldwide. The unique concentration of telecom and bio-med companies in the San Diego region is renowned worldwide and provides instant credibility for a high-tech company such as Palomar to compete against foreign suppliers for design, process development, custom manufacturing, and service business.
International Consulting Group
The International Consulting Group serves the Mexico–United States border area. Since its start-up in the mid-1980s, it has offered services to expand into Mexico or Latin America. The group assists clients with informed ideas and services that best suit their specialized needs in researching and penetrating markets.
Dog Feeders and Alibaba.com
This company started production of high-end dog feeders and learned that it's almost impossible to compete with the big guys if you don't produce offshore. Start-ups don't usually have the capital for actually going to China and visiting potential business partners before closing the deal. So instead, this company went to Alibaba.com and found the system very easy to use and helpful. It posted its need to find suppliers in Asia on Alibaba's Web site and started making contacts immediately.
DriveCam International
Headquartered in San Diego, California, DriveCam reduces claims costs and saves lives by improving the way people drive. The company's product mitigates risk by improving driver behavior and assessing liability in collisions. Combining sights and sounds, expert analysis, and driver coaching, its approach has reduced vehicle damages, worker's compensation, and personal injury costs by 30 to 90 percent for more than 40,000 commercial, government, and consumer vehicles.
Launched in February 1998, DriveCam has received three patents for its innovative design with additional patents pending. By 2005, the company was ranked number 67 in the Inc. 500. Focusing on improving risky driving behavior by predicting and preventing crashes, DriveCam's exception-based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. The company operates in 10 countries in North America, Europe, Africa, Australia, and Asia.
Candleworks
Located in Iowa City, Iowa, Candleworks is a company that makes and markets natural home fragrances and aromatherapy candles internationally. It was born out of struggle, has survived, and earned $800,000 in sales in their first year.
The next chapter explains how to launch a profitable transaction—the first steps of your import/export project—and speed you on your way toward international trade opportunities with profits and success.
Chapter Two
LAUNCHING A PROFITABLE TRANSACTION
Some perceive the import/export transaction process as an obstacle, but don't let that deter you. The truth is that anyone can grasp the nuts and bolts of international trade. The bridge from producers to buyers has existed for many years, and it has been tested and retested. By investing some time and money in yourself, you can easily learn this process.
This chapter addresses the first six commonalities of the importing and exporting transaction. If you understand the steps outlined below, your import/export business will get off to an excellent start on the road to early profitability.
1. Terminology
2. Homework
3. Choosing the product
4. Making contacts
5. Market research
6. What's the bottom line?
Don't mistakenly assume that the order presented in this book represents a hierarchy of importance, or that these steps are in the precise order of every import/export project. In reality, sometimes things happen simultaneously.
Terminology
Because of increasing international interdependency, trade literacy has become as important in modern business as Internet and computer literacy. As you progress in your reading, refer frequently to the extensive glossary of commonly used terms found at the end of this book. Many of these terms are also defined when they first appear in the text. Don't be frightened by the new terminology—you can learn it!
Homework
Research is one of the keys to winning the trade game! Even if you have some experience in international trade, it's unwise to jump into an unresearched project. In fact, it's not unusual to spend several weeks learning about the product and its profit potential before getting serious. Think of it as an investment to reduce the number of inevitable mistakes.
Choosing the Product or Service
The question asked most often is, "What product should I select to import or export? Should it be rugs or machinery?" Of course, if your firm already manufactures merchandise or provides a service, that product or service is what you sell. But for your own import/export business, your job will be to sell someone else's product or service. In other words you will be the middleman.
The Personal Decision
Most people begin with a single product or service that they know and understand or have experience. Others begin with a line of products or define their products in terms of an industry with which they are familiar. Above all, product selection is a personal decision, but the decision should make common sense. For example, if you aren't an engineer, don't begin by exporting gas turbine engines. Or, if you are an electronics engineer, don't start with fashionable textiles. A good example is the American house painter who began making excellent profits exporting a line of automated painting equipment to Europe. He knew the equipment before he began exporting.
Start your business with a product or service with which you have an advantage. You can gain that advantage because of prior knowledge, by doing library research about a product, by making or using contacts, or by understanding a language or culture.
The Technical Marketing Decisions
Keep in mind that the product you select may need to be adapted to the cultures of other countries.
• Product standards. ISO is an organization that harmonizes world product standards such as flammability, labeling, pollution, food and drug laws, and safety standards. ISO 9000 (product registration) and ISO 14000 (environmental management registration) are the international quality assurance series. At the time of publication of this edition they have been in effect for more than 13 years and are unlikely to go away. Therefore, it is important to check your products for compliance. Be sure to check www.iso.org
• Technical specifications and codes. Most of the world uses 220 V, 50 Hz but products used in the United States are 120 V, 60 Hz. Similarly, most of the world uses the metric system of weights and measures. Determine how you can convert your product to meet the appropriate specifications and codes.
• Quality and product life cycle. In the life cycle of product innovation, new products are typically introduced first to developed countries leaving an opportunity for sales of earlier models to least-developed countries. Assess the stage in the life cycle in which you find your export/import product.
• Other uses. Different countries use some products for purposes different from those that we apply here. For example, motorcycles and bicycles are largely recreation vehicles in the United States, but in many countries they are the primary means of transportation.
What Is World Class?
What does it mean to have world-class products? Don't deceive yourself. Some things are better than others; you know it, we all know it. World class means there may be something as good, but there is nothing better in the world. But some markets can't absorb world class, so make sure that the products and services you select are right for your market.
(Continues...)
Excerpted from IMPORT/EXPORTby Carl A. Nelson Copyright © 2009 by Carl A. Nelson. Excerpted by permission of The McGraw-Hill Companies, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
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