As stated in Chapter One, to succeed in exporting, you must first identify the most profitable international markets for your products or services. Without proper guidance and assistance, however, this process can be time consuming and costly — particularly for a small business.
The U.S. federal government, state governments, trade associations, exporters’ associations and foreign governments offer low-cost and easily accessible resources to simplify and speed your foreign market research. This chapter describes those resources and how to use them.
Federal Government Resources
Many government programs and staff are dedicated to helping you, the small business owner, assess whether your product or service is ready to compete in a foreign market. The U.S. government created the Trade Promotion Coordinating Committee (TPCC) in 1990. It is the federal government’s export team. The TPCC, an interagency task force chaired by the Secretary of Commerce, is dedicated to thinking strategically about our global competitive position and has been charged with leveraging and streamlining our export promotion and trade finance services.
U.S. Export Assistance Centers (EACs)
EACs were authorized by Sec. 202 of the Export Enhancement Act of 1992 and implemented by recommendation of the TPCC’s report, Toward a National Export Strategy. They are designed to provide the U.S. exporting community a single point of contact for all federal export promotion and finance programs. EACs can deliver services directly or refer clients to appropriate public and private sector partners. The Centers integrate representatives of the Small Business Administration (SBA), the Department of Commerce (DOC) and the Export-Import Bank of the United States (Ex-Im Bank), and additional federal agencies at certain sites. Depending upon site-specific needs and feasibility, the centers are co-located conveniently in facilities with private and other public sector partners already servicing the exporting community.
Co-located federal agencies concentrate on assisting export-ready firms in all areas of export promotion and trade finance. EAC staff assess and service a company in accordance with standard criteria to determine its stage of export readiness. Companies considered to be in the start-up stage are referred by the center counselor to a local resource partner for business start-up assistance and basic “How-to-Export” classes. Resources appropriate for this type of counseling are the SBA’s Service Corps of Retired Executives (SCORE) and the Small Business Development Centers (SBDCs).
The U.S. Small Business Administration
Many new-to-export small firms have found the counseling services provided by the SBA’s SCORE volunteers particularly helpful. Through your local SBA District office (389 chapters nationwide), you can gain access to more than 10,500 SCORE volunteers with experience in international trade.
Two other SBA-sponsored programs are available to small businesses needing management and export advice: Small Business Development Centers (SBDCs) and Small Business Institutes (SBIs) affiliated with colleges and universities throughout the United States. SBDCs offer counseling, training and research assistance on all aspects of small business management.
The SBI program provides small business owners with intensive management counseling, including qualified business students who are supervised by faculty. SBIs provide advice on a wide range of management challenges facing small businesses, including finding the best foreign markets for particular products or services.
The U.S. Department of Commerce
The U.S. Department of Commerce’s (DOC) International Trade Administration (ITA) is a valuable source of advice and information. International trade specialists can help you locate the best foreign markets for your products.
The United States and Foreign Commercial Service (US&FCS) helps U.S. firms compete more effectively in the global marketplace with trade specialists in 69 U.S. cities, including Export Assistance Centers, and in 70 countries worldwide. US&FCS specialists provide information on foreign markets, agent/distributor location services, trade leads and counseling on business opportunities, and trade barriers and prospects abroad.
Check the DOC’s National Trade Data Bank (NTDB) for the US&FCS Country Commercial Guides for each country in which there is a Foreign Commercial Service presence. In addition, the NTDB offers Department of State country reports and the Central Intelligence Agency’s World Factbook (www.cia.gov/cia/publications/factbook/). These are valuable sources for identifying international markets for your exportable products or services.
District Export Councils (DECs) are another useful ITA-sponsored resource. The 51 District Export Councils located around the United States are composed of 1,800 executives with experience in international trade who volunteer to help small businesses export. Council members come from banks, manufacturing companies, law offices, trade associations, state and local agencies, consulting companies and educational institutions. They draw upon their experience to encourage, educate, counsel and guide potential, new and seasoned exporters in their individual marketing needs.
The United States Department of Agriculture
If you have an agricultural product, you may want to investigate the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS). With posts in 80 embassies and consulates worldwide, the FAS can obtain specific overseas market information for your product. The FAS also maintains sector specialists in the United States to monitor foreign markets for specific U.S. agricultural products. The FAS Trade Assistance and Planning Office (TAPO) can assist you in finding out more about the export programs of the USDA, or go to the FAS website: www.fas.usda.gov.
The United States Export-Import Bank
Country desk officers at The United States Export-Import Bank (Ex-Im Bank) will provide you with information about a country’s political and economic risk.
Non-Federal Resources
State Economic Development Offices
Most state commerce and economic development offices have international trade specialists to assist you. Many states have trade offices in overseas markets. Port authorities are a wealth of export information. Although traditionally associated with transportation services, many port authorities around the country have expanded their services to provide export training programs and foreign-marketing research assistance. For example, the New York-New Jersey Port Authority provides extensive services to exporters including XPORT, a full-service export trading company. XPORT, created in 1982, is the first publicly sponsored U.S. trading company. XPORT specializes in helping small- to medium-size businesses in New York and New Jersey introduce their products in world markets. Among the services XPORT can offer are market research, transportation of products, contact with local distributors and market entry strategies.
Foreign Embassy Commercial Sections
Talk to the Commercial Attaché assigned to the embassy of the country to which you wish to export. For a web listing of embassies, visit www.embassy.org/embassies/.
Exporters’ Associations
World Trade Centers, import-export clubs and organizations such as the American Association of Exporters and Importers and the Small Business Exporter’s Association can aid in your foreign market research.
Trade Associations
The Federation of International Trade Associations (www.fita.org), founded in 1984, fosters international trade by strengthening the role of local, regional and national associations throughout the United States, Mexico and Canada that have an international mission. FITA affiliates are 450+ independent international associations which fall into six categories: world trade clubs, associations/chambers of commerce with regional/bilateral interests, associations focused on international logistics, associations supporting international trade, associations supporting exporters and professional associations. More than 5,000 trade and professional associations currently operate in the United States; many actively promote international trade activities for their members. Chambers of Commerce, particularly state chambers, or chambers located in major industrial areas, often employ international trade specialists who gather information on markets abroad.
How to Gather Foreign Market Research
Now that you know where to begin your research, you should next identify the most profitable foreign markets for your products or services. You will need to:
- Classify your product
- Find countries with the largest and fastest growing markets for your product
- Determine which foreign markets will be the most penetrable
- Define and narrow down those export markets you intend to pursue
- Talk to your U.S. customers or other companies doing business internationally
- Research export efforts of U.S. competitors
- Classifying your product
The Standard Industrial Classification (SIC) code is the system by which the U.S. government formerly classified its goods and services. Today, the government has begun using the North American Industry Classification System (NAICS) (www.census.gov/epcd/www/naics.html). Knowing the proper code for your product or service can be useful in collecting and analyzing data available in the United States.
Data originating outside the United States or information available from international organizations usually are organized under the Standard International Trade Classification (SITC) system, which may assign a different code to your product or service. Another method of classifying products for export is the Harmonized System (HS). Knowing the HS classification number and the SIC and the SITC codes for your product is essential to obtaining domestic and international trade and tariff information. DOC and USDA trade specialists can assist in identifying the codes for your products. The codes are available on the National Trade Data Bank (NTDB). The U.S. Bureau of the Census (USBC) can help identify the HS number for your product.
Finding Countries With the Largest and Fastest Growing Markets for Your Product
At this stage of your research, learn where your domestic competitors are exporting. Trade associations can often provide data on where companies in a particular industry sector are exporting their products. In 2002, the three largest markets for U.S. products were Canada, Mexico and Japan. Yet these countries may not be the largest markets for your product.
Three key U.S. government databases can identify those countries which represent significant export potential for your product: SBA’s Automated Trade Locator Assistance System (SBAtlas), Foreign Trade Report FT925 and the U.S. DOC’s National Trade Data Bank (NTDB).
SBA’s Automated Trade Locator Assistance System (SBAtlas) is offered only by the U.S. Small Business Administration and provides current market information to SBA clients on world markets suitable for their products and services. This valuable research tool supplies small business exporters with information about where their products are being bought and sold and which countries offer the largest markets. The country reports detail products imported and exported by various foreign nations. Data are supplied by the DOC’s USBC and member nations of the United Nations, and are presented in an easy-to-read report format. This information can be obtained through a SCORE counselor at SBA District Offices, at EACs, SBDCs and SBIs. This service is free to requesting small businesses.
Foreign Trade Report FT925 gives a monthly, country-specific breakdown of imports and exports by SITC number. Available by subscription from the Government Printing Office, the FT925 can also be obtained through EACs, DOC ITA offices, or downloaded from the National Trade Data Bank.
The National Trade Data Bank (NTDB), a web-based subscription service of the DOC’s STAT-USA, is a trade library of more than 190,000 documents on export promotion and international economic information from more than 20 Federal sources. With the NTDB, you can conduct databank searches on markets, tariffs and non-tariff barriers, importers, logistics and product information. NTDB can be purchased by subscription or accessed at Export Assistance Centers, many DOC ITA offices, and at nearly 1,000 Federal depository libraries throughout the United States. Once you learn the largest markets for your products, determine which are the fastest growing. Find out what demographic patterns and cultural considerations will affect market penetration.
Several publications, most available on the NTDB, provide geographic and demographic statistical information pertinent to your product: The World Factbook, produced by the Central Intelligence Agency; World Population, published by DOC’s USBC; The World Bank Atlas, available from the World Bank (www.worldbank.org); and the United Nations International Trade Statistics Yearbook.
Determining the Most Penetrable Markets
Once you have defined and narrowed a few prospective foreign markets for your product, you will need to examine them in detail. At this stage you should ask the following questions: How does the quality of your product or service compare with that of goods already available in your target foreign markets? Is your price competitive in the markets you are considering? Who are your major customers?
Answering these questions may seem overwhelming at first, but many resources are available to help you select which foreign markets are most conducive to selling your product. Use the workbook in the first part of this guide to assist you.
The DOC’s ITA can link you with specific foreign markets. ITA offices are part of the US&FCS and communicate directly with FCS officers working in U.S. embassies worldwide. FCS staff and in-country market research firms produce in-depth reports on selected products and industries that can answer many of your questions regarding foreign market penetration. You can also order a Comparison Shopping Service (CSS) report through ITA district offices. The report is a low-cost way to conduct research without having to leave the United States.
SBA’s and DOC’s Export Legal Assistance Network (ELAN) provides new exporters with answers to their initial legal questions. Local attorneys counsel small businesses on a one-time basis to address their export-related legal questions. These volunteer attorneys can address questions pertaining to contract negotiations, licensing, credit collections procedures and documentation. There is no charge for this one-time service, available through SBA or DOC district offices.
The Trade Opportunities Program (TOP) of the DOC can furnish U.S. small businesses with trade leads from foreign companies that want to buy or represent their products or services. These trade leads are available at www.commmerce.gov/trade_opportunities.html. Other important issues about the target foreign markets you should explore include political risk considerations, the cultural environment and any product modifications, such as packaging or labeling, will make the product more “exportable.”
Identifying market-specific issues is easily accomplished by contacting foreign government representatives in the United States. Commercial posts of foreign governments located within embassies and consulates can assist you in obtaining specific market and product information.
American Chambers of Commerce (AmChams) abroad also can be an invaluable resource. As affiliates of the U.S. Chamber of Commerce, 84 AmChams, located in 59 countries, collect and disseminate extensive information on foreign markets. While membership fees are usually required, the small investment can be worth the information received.
Another fundamental question to ask country-specific experts is what market barriers, such as tariffs or import restrictions, exist for your product. You should consult specialists at the U.S. Trade Representative (USTR) office on trade barriers. Trade barriers can include non-tariff barriers, as well.
Tariffs are taxes imposed on imported goods. In many cases, tariffs raise the price of imported goods beyond the level of domestic goods. As a result, tariffs can become real barriers to imported products. Non-tariff barriers are laws or regulations that a country enacts to protect domestic industries against foreign competition. Such non-tariff barriers may include subsidies for domestic goods, import quotas or regulations on import quality.
To determine the rate of duty, you will need to identify the Harmonized Tariff number, which corresponds to the product you wish to export. Each country has its own schedule of duty rates corresponding to the section of the Harmonized System of Tariff Nomenclature (HS).
Defining Which Markets to Pursue
Once you know the largest, fastest growing and most penetrable markets for your product or service, you must then define your export strategy.
Do not choose too many markets. For most small businesses, three foreign markets will be more than enough, initially. You may want to test one market and then move on to secondary markets as your “expertise” develops. Focusing on regional, geographic clusters of countries can also be more cost effective than choosing markets scattered around the globe.
After you have identified the best export markets, your next step will be to determine the best way to distribute your product abroad. Chapter Four, “Foreign Market Entry,” discusses distribution methods.
This chapter appeared in the book Breaking Into the Trade Game, 2004.
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