FTS-DOC ITA

Moderator: Eduard Roytberg

September 2, 2009

7:59 am CT

Coordinator: Welcome and thank you for standing by. At this time all participants are in a listen-only mode. During the question and answer session, please press star 1 on your touchtone phone. Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

I now turn today’s meeting over to Ms. Natasha Keylard. You may now begin ma’am.

Natasha Keylard: Thank you everyone for joining our Export 101 Webinar. I am Natasha Keylard, Global Automotive Team Leader for the U.S. Commercial Service, which is the Export Promotion Agency of the U.S. Department of Commerce. And I’m pleased to note that we have about 50 participants joining us today. And people are still dialing in as we’re speaking. I see 32 participants so far; some people are not able to make an online connection. So we are just going to go ahead and kick off this Webinar.

The objective of today’s Webinar is to help you, U.S. Companies, begin an export initiative in an effort to develop your international sales. So in a moment I’ll turn the floor over to the first speaker. But before I do that, next slide please; there are some housekeeping details I’d like to run through with you to make sure that everyone gets the most benefit from today’s Webinar.

First of all, very important, we invite you to type your questions on your screen as they occur during the presentation. So please go ahead and look at your screen, you should be seeing a grey tool - horizontal toolbar and the second option on that toolbar should list S&Ds. If you click on that, you will see the names of all S&Ds participating in this particular Webinar and I invite you to double click on -- you should be seeing something like ‘Presenter’, so double click on that and - to type your question in.

All the presenters will actually receive your question and it will be added to the queue of questions at the end of each topic. As this is a little bit of a new format, I invite you to go ahead and to try this right now. So go ahead to that grey horizontal toolbar, select ‘S&Ds’. If you can, select ‘Presenter’ or any option that makes sense and why don’t you just type a question like “Hello.” Just as a test to make sure it works.

Okay, I’m not seeing any questions pop up so either we’re not seeing any of the questions -- is the operator still online?

Coordinator: Yes, I am.

Natasha Keylard: Oh, okay, I was too quick. The questions are coming in right now. Okay, so it’s - that feature does work. Thank you (Chris) for sending that question. So please, throughout the presentation, just send us questions as they occur to you.

Moving on with housekeeping messages. Typed questions that we are unable to answer during the Webinar due to time constraints you will receive personal answers via email after the Webinar. And last but not least, you will be provided with a copy of the materials presented during the Webinar along with the speaker’s contact information so you can follow-up in person within 24 hours after this Webinar.

More chat messages are coming in, wonderful. Okay. As many of you do not know who we are, let me give you a brief overview. Please don’t strain your eyes while attempting to read the fine print. I’ll just run through it with you very quickly. The U.S. Commercial Service is the Export Promotion Agency of the U.S. Department of Commerce. It is in fact our mandate to promote the export of goods and services from the United States particularly by small and medium-sized companies.

Basically we’re here to help you develop or increase your international sales. The way we do this is through our vast network of offices worldwide. In the U.S. alone we have 109 offices in cities. Overseas we operate the commercial section of U.S. Embassies and Consulates in 77 countries. So as you can tell, there’s a vast network of trade specialists on both the U.S. side and the international side and we’re all eager to support your export activities.

Next slide please. Your primary contact person of course should be your local trade specialists. The U.S. Department of Commerce has global industry and regional teams just in case you’re wondering what this global automotive team is all about. And these teams concentrate their efforts on getting you into foreign markets in a cost-effective and efficient manner.

The global automotive team is just one of 20 teams and this particular team brings initiative to you such as the Global Business Development Program, the Automotive Resource Guide, The Jordan/Israel Market SPA Webinars that outlines market opportunities, and we are bringing thousands of buyers to the SEMA APEX show in Las Vegas each year. This show takes place in November by the way.

And although this is not the time or place to elaborate on each program, I do encourage all of you who have not participated in our free Global Business Development Program to try and register before the end of this week by visiting our Web site. We extended the deadline so if you see a June 30 deadline, just disregard that and go ahead and register by the end of this week.

Next slide please. And now I would like to turn the floor over to our first speaker, Danielle Rust, who will help you assess whether exporting makes sense in your company.

Danielle Rust: Thank you, Natasha. As she said, this is Danielle Rust, and I’m in our Cleveland, Ohio office. Before we jump into the hows of exporting, I think it’s worthwhile to expel a few myths about exporting.

The first one there, “It’s a get rich quick proposition.” Exporting might be a great way to diversify and reach new customers resulting in a richer, more balanced company, but it’s not quick. Exporting has a longer cycle. It takes longer to locate your buyers, build a relationship, ship the product and get paid.

In some countries you first have to build a relationship over several years before you reach the level of trust needed for successful trading. Exporting also requires committed resources, time for one of course, but a successful exporter will also need management commitment of monetary resources too.

The next one, “It’s easy.” Exporting is more complex than selling domestically; the customer is harder to find, it’s harder to find information about them, their Web site might even be in another alphabet. More than that, if you think it’s difficult to deal with our own government standards and regulations, say for example you have a medical device or you’re regulated by the FDA, it’s going to be even more complex dealing with another government’s standards and regulations. It’s not easy, but there are people such the U.S. Commercial Service here to help.

By the way, this Webinar is not meant to scare you, it’s just to make you aware of what you’re getting into and to know the challenges that will come up so that you can overcome those challenges.

The third one, “It’s a way to write off more interest.” I think that one is pretty self-explanatory. “You can export anywhere.” Not all products are exportable, and even if you have a product that is exportable, it won’t be competitive in every country. Market research is key to discovering local and foreign competition, regulations and standards, demand, and your specific product’s potential in the market.

Another valid point that this myth raises deals with sanctioned countries. Are U.S. Companies allowed to export to Cuba, North Korea, Iran? What about if you export your U.S. product to the UAE and then they export it to Iran? This is something one of my colleagues will go into more detail later about and I just wanted to mention it here under the myth of “You can export anywhere.”

“You can’t export, you’re too small.” John will veer off on the small business administration as one of the speakers this morning, and he’ll be the first to tell you that you do not have to be large to export. In fact, 97% of all exporters in the U.S. are small- to medium-sized companies. And 70% have fewer than 20 employees. So don’t think that if you’re small you can’t do it. It can be done, and there are many successful small business exporters.

Okay, next slide please. If you’re joining this call, you’re obviously interested in exporting. You know the advantages it could possibly bring to your business. The most obvious one is to make money, to increase your sales and profit. Over 70% of the world’s purchasing power and over 96% of the world’s population is outside the U.S. Companies who aren’t exporting are just reaching a small segment of potential clients.

Exporting also enables companies to diversify their portfolios so they can weather changes in the marketplace. We’ve seen this in action over the past nine months. There are several companies that I’ve been working with who have told me that exporting is what’s keeping them afloat in this economy. They’ve been able to retain all of their employees and keep their factories going by selling abroad.

Next slide please. “Why Export?” First to make money you’ll need to identify all of your costs associated with exporting and factor them into your sale’s price as much as possible to determine up front if it will be worth the cost. Again, one of my colleagues will go into more detail about pricing methods later, but some things to consider are the costs of modifying your products, labeling your products and so on. Factor all that in up front.

Having a price that’s competitive but still gives you the margins you need and want will be critical in determining your success in certain price-sensitive markets. Okay, next slide.

So you might be ready to export; you know the benefits, you’re committed, and you want to make this happen. But will you be successful? Before forging ahead, there are a few more questions to ask. Is management committed to the long-range goal of exporting? Management commitment is crucial. So you sign the checks and determine if you have the time and resources to devote to exporting. I can’t emphasize enough that management buy-in and support is critical.

Exporting should be part of the company’s long-range goal. Again, emphasis on long-range; it’s not going to happen overnight and should be consistent with other company goals. So now management is ready, is your product? Evaluate your product through some basic reflecting. Think about what has contributed to your success domestically and consider if similar demands for your product or service exist elsewhere. Ask yourself what the unique features of your product or service are and if these features give you a competitive edge in particular markets or regions around the world.

Other things to consider about your product may be whether you comply with foreign regulations. Can you alter the ingredients or the components necessary to fit in your new overseas’ markets? For example, changing electric cords to fit foreign outlets. Can your instructions or manuals be easily translated? Can you provide after-sales service for your existing networks? Will your product have to be registered in a foreign country or do you have to meet certain directives? These are items that you should become roughly familiar with in order to assess the costs of making these possible changes.

Once you’re familiar with these costs, you’ll have an idea of how large a potential order needs to be in order to justify a change. So now you’ve considered the costs and benefits of exporting and you’re committed to it, right? Well, before I turn the floor over to my colleague for the next topic, does anyone have any questions so far?

Coordinator: Are you meaning on the Net ma’am, or on the phone?

Danielle Rust: Either.

Coordinator: Okay. If you’d like to ask a question on the phone, please press star 1 on your touchtone phone, unmute your line and record your name clearly when prompted. You’re name is required to introduce your question. One moment please on the phone anyway.

Natasha Keylard: Danielle, this is Natasha, I did receive a one-on-one question from one of our participants.

Danielle Rust: Okay.

Natasha Keylard: While we’re waiting. In the beginning you mentioned about standards and regulations and being able to meet foreign market demands, how does a company determine if their product is subject to overseas’ standards and regulations?

Danielle Rust: Okay. Well it’s going to be different for every country and every product, so what I would recommend is getting in touch with your local USEAC or your local trade specialist and sitting down and talking with them about the countries that you’re interested in and your specific products and they’ll be able to guide you through and determine those. Our offices overseas and domestic are great sources of information.

Natasha Keylard: Okay, it looks that answered the question; thank you.

Coordinator: There are no questions on the phone at this time.

Danielle Rust: Okay, thank you.

Natasha Keylard: Great, in that case thank you, Danielle, for making us aware of issues companies need to consider to determine whether they’re export ready. So to you, the audience, if you are export ready, you can start developing your international business plan and my colleague Phil Menard will walk us through this topic.

Phil Menard: Thank you Natasha. This is Phil Menard in our Charleston, South Carolina office and I do want to talk a little bit about developing an international business plan. Once you’ve determined that your company is export ready, company management needs to formulate an international business plan. It doesn’t necessarily have to be very formal, it certainly should not be set in stone because this plan is meant to provide focus and guidance for all parts of the company as you’re growing your international business. It should be flexible to adapt to your company growth and of course to changing market conditions.

One of the items we want to look at first of all is growth. Do you have unused capacity for instance? Most clients that I talk to have - are working and operating at much less than 100% capacity. So this may be one of the objectives in your plan is growth. Have you looked first of all at your domestic growth? For instance, how long have you been in business? Have you - are you sufficiently established in the domestic market? Are you looking for - to international for continued growth in your company? Or are you looking to international simply as a quick fix for perhaps a domestic downturn?

This is typically not a good idea in terms of developing an ongoing, long-term business - international business plan. Be realistic. How much growth can you effectively handle? If you’re small, you want to start out small.

Talk about earnings. How much cash flow or investment is required to sustain export efforts? In other words, the key is to grow in small steps. Some of the things you may want to consider is thinking of, you know, your product adaptation that may be required as Danielle mentioned already. Think of the distribution, channels that you need - that need to be established. Think of marketing efforts. Perhaps even increased personnel dedicated to international development.

In terms of commitment, we can’t emphasize this enough. It’s a - international business development in a company is a top-down operation. In other words, the resources will flow to sustain international sales only if top management is directly involved and is committed to making it happen long term. And accordingly, the whole company needs to be in tune. From accounting to shipping and receiving, everyone needs to understand that some things are going to have to be done differently when you receive and process a customer order coming in from overseas.

And finally, what is the right - what is the managements’ attitude toward risk? Especially financial. Perhaps even in terms of intellectual property rights. Is your company sufficiently protected in terms of your intellectual property rights -- keep in mind for instance that your international - your patents are not international, your U.S. patents are only available and worthwhile for you here in the United States.

I think (John Ogar) is going to talk a little - to us about IPR in a minute. One of the things you want to do in your international business plan is first of all identify products. You need to identify products, but you also need to identify the markets. First of all, identify products, either end of life products if that’s the type of technology that you have that’s been - is already established for a while, those - that would determine to which markets your - you should be focusing on. For instance to emerging economies.

New or very profitable products; that type of technology you should be targeting the more developed markets. And which products will require more or least adaptation? In other words, this needs to be taken into account and considered in terms of putting together your business plan.

And finally identifying customers. This is where you really want to focus on the markets. Your U.S. Customers abroad for instance may be your first category. Your - one of the easiest steps to getting into international is to continue selling to your U.S. Client base. Perhaps to some of their overseas operations, their overseas subsidiaries. I know a lot of folks - companies involved in construction for instance. They are selling to large U.S. Corporations that have been able to win bids on overseas projects.

This is typically one way for them to get involved in international. Keep in mind that new customers require new strategies. Perhaps the needs may be different overseas. And they typically are. Depending on the product, depending on the markets. Confirming your- the ability to pay; i.e. is what is the landed cost of your product in an overseas’ market. We can help you make that determination as well in determining what we call the landed cost of your product in a foreign market. But you need to ask first of all, “Will the market that you’re targeting be able to bear the price that - the price of your landed cost?”

So next slide please. Here we start and we want to talk about analyzing your competitors. As you and - as you analyze your U.S. Competitors so you want to analyze your overseas competitors. And I’ll love the comment from folks that tell me, “Well, Phil, we really have no competition overseas.” And that’s great. I understand that everyone likes to think of their product as unique, perhaps in some cases it truly is. But the real question you have to ask yourself is what is the alternative or alternatives that my customers have in terms of spending their money? Is my product, is my service, is my technology something that is optional to them in terms of identifying exactly what type of competition you’re up against.

In terms of market research, first of all one word of caution, look for authoritative sources. The first thing we mention in terms of market research is Web searches. This is a part of secondary market research that you would need to go through.

Depending on the markets, you may want to even search in different languages. If you’re looking for market research on Holland for instance or in Germany or in Portugal, you would best be advised to look up whatever the translated keynotes or keywords are for your products, your services and to try searching for those competing products in a foreign language if your focus is on one of those markets.

One of the - the other secondary sources of information that we really like to go to and strongly recommend is trade associations. And since we are targeting the automotive industry here, let’s talk about some of these trade associations, like NEMA, SEMA, and the SAE or even ASHRAE. These are organizations that have international chapters, they have an international focus, they make international market research available to their members. And they’re very good sources of information.

In-house we have what’s known as the Market Research Library which is a clearinghouse if you will of all of the market research put together by our colleagues overseas. In this instance for instance those who are covering the automotive industry in all of the markets where we have established a presence. And this, of course, is available to you free of charge by the way.

Another strong source of information is the e-Market Express which is available to you free of charge by registering with us. It’s available at buyusa.gov/eme. And we can give you more details and send you the link to that afterwards if you have questions on that.

In terms of primary market research, of course this is firsthand; it involves interviewing customers, representatives directly. And really the best way to do this is through trade shows. Some of you may not have, for instance, I know in Europe it can be very costly to exhibit at a trade show in Europe even if all you do is visit the trade show. In other words, find a way to get there, but mingle and walk the floor, talk to exhibitors, talk to potential clients, and visit with - even perhaps with potential competitors and do some competitive intelligence if you will.

And that applies to trade shows both here in the U.S. and abroad. Some of the larger trade shows that we’re involved in you have significant international audience and visitors coming to the show where you’re going to gain a lot of information just by firsthand talking with people in your same industry. And these trade show by the way can be identified through our main Web site, export.gov and searching under the trade events search engine there.

Talk to your buyers. First thing to understand is the distribution channels. Do you fully understand what the distribution channels are for getting your product, your service into that foreign market that you’re targeting? That really is the key, and you need to talk to people in those channels to get a good understanding.

One thing we can provide you with is what’s known as a CMR or Customized Market Research. We gave a lot of free market research that is available to you off the shelf from - through our colleagues overseas, but a CMR is specifically designed for your interests, with your questions, your company, your product in mind. And you tell us what information you need, what you’re looking for, and that’s the information that we’re going to go after. And that’s available to you. That is a fee-based service and the fee will differ from one market to another.

And finally, you may also want to consider private consulting firms and industry reports that are available to you out there on the market. And just from my experience, I know those typically are not cheap. The next slide please.

So finally on the international business plan we want to look at market entry. And this will be gone over in much more detail with (Patrick) on the next slide, but really you want to consider the amount of control that you want as a company doing business overseas, how much profit margin you’re willing to settle for, and your internal ability/willingness to grow versus outsourcing your international sales.

Your budget once you’ve decided of course what form of market entry works for you, you’ll have a better idea of you then of your cost structure and what resources will be required in terms of product adaptation to the various markets; the marketing costs and the allocation of personnel. Timeframe, you need to set realistic goals and a deadline to keep you on track. Again, I emphasize small steps. Don’t try to bite off more than you can chew at one time.

We look at pricing, there are basically the three primary methods of pricing, marginal cost pricing which is covering the - basically the production costs of an increased - of the next single unit of production. Cost plus method is basically the cost of your goods sold plus a particular markup whether this be an absolute or a percentage. And finally, exports plus your export costs. This is basically again costs of goods sold plus at the - at your factory dock and whatever export costs are involved.

So I’ve gone through this very quickly. The idea here is not to go in any amount of depth at all, but please know that we are aware of these things and we want to help you with them whether it be in-house or through other partners that we work closely with. And at this point I would invite any questions before we move on to the next speaker.

Man: Are there any questions for Phil at this time?

Coordinator: To ask a question once again on the phone, it is star 1 on your touchtone phone...

Phil Menard: Okay.

Coordinator: ...unmute the line clearly - and announce your name. Thank you.

Phil Menard: I think we’re running a little bit short on time so I would ask folks to perhaps hold their questions until the end and we can address them at that time.

Natasha Keylard: Sure enough. But there is one question; it seems people are comfortable emailing me their questions, so real quick, Phil, this person just wants to know where he can get help putting together an international business plan.

Phil Menard: Okay, that’s an easy question. There are a multitude of resources available to folks to help them formulate their business plan starting with the USEACs or your local export assistance center, the small business development centers, the SBA, other partners such as the (DEK) that we have in-state. And also a couple of great resources of course are The Basic Guide to Exporting available through export.gov and the book entitled “Global Entrepreneur” written by James Foley which is well-known in our industry.

Natasha Keylard: Okay. Thank you Phil, and that’s a lot -- that’s a very extensive answer. I think you’re going to hear this response a lot throughout this presentation. When you don’t know, just contact your local trade specialist as your primary source and they can run though this again, give you a breakdown of where you need to go on no matter what topic. Thanks a lot Phil.

Phil Menard: My pleasure.

Natasha Keylard: Last year accessing your export readiness and putting together an international business plan, it is very important you don’t loose sight of regulation and licensing consideration. My colleague Pat Hope will walk you through these topics. Pat?

Pat Hope: Thank you Natasha, can everybody hear me okay?

Man: I hear you just fine, sir.

Pat Hope: Thank you, thank you very much. Yes, I’ve been tagged with talking about an element of the export process which really is policy driven which may not be the most exciting part of exporting, but never the less it has some very important information that I can share with you. I do want to warn you that typically this information is conveyed in a two day seminar format, so I’ve been asked to speak about this within a five minute time frame, so bear with me because I will be covering some ground that maybe very new to a lot of you. But I’ll try to go as slowly as I can to what I have and then of course there is the opportunity to ask questions after I’ve completed my piece or at the end of this Webinar.

The first thing you will see on the screen and by the way, I must also mention - I have problems with my video link up today so I’m am only able to speak with you via the phone, so bear with me if I don’t see some hands raised during what I have to say or the question process afterwards.

Number 1 on the list you will see something called the EAR as you may be aware the Federal Government is full of acronyms and of course this simply one of them. And what the EAR is is the acronym for the export administration regulations.

It’s the federal policy which governs US Exports. It is a very lengthy document; there are many ways to break it down to size. Your local trade specialist will be very familiar with this and can help you at any step of the way. My comments only serve only as a brief overview for you to introduce you to some of information within it.

The first thing you might ask is how do I access the EAR and there are two favorite ways that I do it. One is read off the Web site of part of (unintelligible) called the Bureau of Industry and Security. There Web site is bis.doc.gov. The other way to access this is right off the Government printing Web site which is access.gpo.gov/bis. I will be happy of course to share these Web sites with anyone who requests them afterwards; I’ve got a few more to share too, so not to worry this information will be sent to you on request.

Getting back to the EAR itself, issued by the United States Department of Commerce and the Bureau of Industry and Security (BIS) Govern Blog relating to export and the control of certain product, the re-export of them and activities associated with them. The EAR is a lengthy document as I mentioned and again, your local (PS) for the DOC Export counseling division in Washington is always there to assist.

Some helpful hints for new and maybe not so new exporters are also available off of that access.gpo.gov Web site I mentioned. So the main idea in all of this that I am speaking with you today and I want to convey to you as clear as I can is that the majority of products shipped from the US do not need an export license per se. And as far as export licenses are concerned, I’ll get into those in a little bit more detail as I continue.

There is a misconception that everybody needs a license export is absolutely not the case. As I said most items do not need a license export whatsoever. I want to draw a few distinctions and information for you that I want you to be aware of though in terms of export.

There are exports that are considered to be dual use exports and these are administered by the US Department of Commerce and these are for items that have both the commercial use and a military use. And where that becomes something of perhaps interest in the automotive industry is when you may be involved in for instance, the armoring of vehicles and that type of thing.

Typically, for items for the automotive industry would not have license restrictions placed upon them with a few exceptions that I’ll call and that I will get into a little bit later on.

A few more agencies that are responsible for regulating exports are the departments of states and also the Nuclear Regulatory Commission. The Department of States administers exports that are armament and military related and they have a separate process for applying for a license through them. And again this is not something that I anticipate a lot of listeners on today’s call maybe involved with, but if you do feel that is something that you need to look into of course, a trade specialist in your local (unintelligible) we be of great help on that.

Turning to the next item on the page as far as regulations and licenses considerations, there is another fantastic acronym that we have (To Fact) and that stands for the Treasury Office of Foreign Assets Control. Our Treasury Office is responsible for control lists that include information on individuals, company’s etcetera that we are barred from doing business with.

These controls are against certain countries as I mentioned that apply to imports and central dealings with those countries. The list that the Treasury Department puts out are the specially designated national list, the Antiterrorism list, Narcotics Trafficking, Nonproliferation and Country Specific Sanctions which are currently 13 countries that Treasury has Sanctions against as far as US business doing dealings with them.

It doesn’t mean you absolutely cannot deal with all 13 of countries, but if there is a question where you are on a ship - you need to go through Treasury to apply for a license to do so and or the Commerce Department and those are consider most always on a case by case basis.

Again, a little bit more about some other list. The US Department of Commerce does maintain a list called the (Entity list) which are individual parties either parties whose name triggers a license request. Again, it may not be denied on the face of it, but it is a presumption of denial for a lot of folks whose names are on these lists. That’s an (Entity list) which are parties that I mentioned. Also there is a list for individual people who have broken the law and were barred from doing business with them for exports.

The third item on the list Export Licensing is an area that I will go into now and it can be a very in-depth topic and I apologize for the time given to be able to deal with this, but I’m just going to give you a broad overview if I can.

Export License is the good news, is it is a relatively small percentage of exports and re-exports subject the EAR requirement application to (DIS) for License. These items I should say can found on the Commerce Control List which is a list of products that trigger the need for investigating the need for whether or not a license maybe necessary. The Commerce Control List is part of the Export Administration Regulations. It’s located in a part called Part 774.

As I mentioned it lists items that have control for one reason or another, so this have many entries and if your product happens to be listed I recommend you contact your local trade specialist for further assistance.

On the Commerce Control List there are designated, alpha numeric designation called export commodity control numbers, and these are the figures used to identify whether or not your product would require a license. And there is a formal procedure that trade specialist can work with you on if actually a decision created that is located within the EAR regulations that is very helpful and finding out in whether or not you have to be concerned about a license.

Regarding that topic itself you know whether or not your items requires a license - there is a list of general prohibitions located within the EAR there are a lit of 10 that I won’t go into at this point, but the second thing you must consider is whether your items is even on the Commerce Control List as I mentioned.

And then the third thing you should look at is the control on the activities of your product. In other words, prohibitions for persons and not export privileges prohibited end uses of your product and end users in countries such as Cuba, Iran and North Korea.

The next thing I want to again mention is the (I Tar) which is items with specific military uses. If anyone has manufactured anything to Mil Spec, Military Specifications chances are you have to register with the (PMDDTC) Office of Department of State; those are the folks that administer firmament related products.

Now suppose that you determine that you need license, how does one go about applying for a license - the mechanism that I recommend that my clients to get involved with is to apply with the Bureau of Industry and Security through there fully automated system which is called (SNAP-R). If you need to apply through Military, again that’s the Department of State information that they have.

One important item of (unintelligible) I also want you to consider as far as licensing is concerned that a lot of firms may not be aware of but is something that is also an export is something called (Deemed Export). And what a (Deemed Export) is, is when a firm is involved you know in certain actions and the release of technology to a foreign national in the US who maybe you know important to your facility visiting your facility and that type of thing. Even if you are providing him with an oral briefing that can be considered to be a deemed export so, it is just a word of caution about who you share trade secrets with, who you might talk to about (IPR) related issues and so forth and just be careful about things like that you know compared to...

Natasha Keylard: Pat you have one more minute.

Pat Hope: Oh, thank you very much. I have you know just a couple of issue to cover with you in terms of good corporate governance. Real quickly I just want to mention our Sanction Country’s that we are obligated to not do business with in general and those are Cuba, North Korea, Iran, Rwanda and to a lesser degree, Syria and Iraq.

The last thing I want to mention is something called an export management compliance program. If anyone is interested on how you go about establishing an in-house compliance program or you have all of your records in order and you know it’s just there to create for yourself internally to an insurance policy if you will that you are doing things correctly the export management compliance program is a great idea.

It helps management to commit to a level of involvement and be responsible for personnel recordkeeping, establishing internal training reviews and identifying any vulnerabilities, classifying product determination for license screening and risk diversion screening dealing with parties that you shouldn’t doing business with.

Finally, the last thing I want to cover is something called (Know Your Customer Guidance) which is located on that bis.doc.gov Web site and these are a list of information about inquiries that you may get from folks oversees that you don’t know and something that doesn’t seem right about it. These are called Red Flags to be aware of. So you know if something doesn’t seem right it may not be right and there is a list of procedures to follow along those lines and I have a good deal of information available about those for anybody who could be interested.

As I mentioned, I’m not able to see the audio or the video of this presentation today, but at this point I’ve concluded my comments and I know that I’ve covered a lot of information very quickly and I realize that. But if anybody has any questions they care to ask me via the audio capability I’d be happy to answer them.

Natasha Keylard: And I’m going to actually hold those questions for the end even though I see two questions for you pass. You did a splendid job, there are seminars on these topics, each separate topic take a day or a day and a half so thank you for trying to condense this in just a couple of minutes.

Pat Hope: Thank you.

Natasha Keylard: I think the message for everyone, is you’re not expected to absorb every single thing we are saying. If you just get the gist of what we are trying to convey to you and you know how to reach your local trade specialist, take the next step. That is half the message that we are trying to convey today. So thank you very much Pat.

Moving forward we are going to go back to Danielle and she will present to us a number of market interest strategies and tools. Danielle, please go ahead.

Danielle Rust: Thank you, Natasha. Phil mentioned earlier when he was taking about developing an international business plan he mentioned different methods of market entry and this is just going a little more in depth in direct market entries when you use an intermediary such as a commission sales agent, export management company or export trading company. Most of the exporting hassles are left up to them, but including another middle man also has its disadvantages.

Direct exporting is when the US Company arranges foreign sales directly to the foreign entity. Perhaps through a foreign sales representative, distributor or selling directly to the end user. Find what works best for your company; a tip is the way that you sell domestically might also be the best method for you to sell internationally. For example, if you use the domestic sales rep consider using an international sales rep. Next slide please.

In case we haven’t talked about it enough throughout this Webinar, the US commercial service is here to help throughout the entire export process. We want to you to succeed in exporting.

Phil already mentioned about some of the market research that we can provide, he mentioned our Market Research Library and the e-Market Express which you can find on our Website export.gov. One thing in our Market Research Library that I’d like to point out is the Country Commercial Guides, the CCG by the way you mentioned earlier that the government uses a lot acronyms, I think this slide right here epitomizes that and shows that perfectly.

The Country Commercial Guides that I mentioned is basically a how to guide in doing business in every country and we’ve got them for every country in which we have an oversee office - they are fantastic resources, a great place to start when you are thinking about exporting to a country. So I would encourage you to take a look at some of those. Again, you find them on export.gov. He also mentioned that we can provide customized primary research for you too if that is something that you’d like.

We are - for trade events, we are active in the industry by promoting and supplementing your time at trade shows and fairs (unintelligible) with trade missions around the world and offer things like catalog shows when US companies aren’t able to travel to shows yourself, but want to have a presence at the show. So again, contact us to find out what is coming up in your industry that might need an opportunity for you.

Locating the perfect international partner can be one of the hardest tasks in the export process. Luckily it is one of the best things that the US Commercial Service does. Through our gold team match making service and international partner search, the US Commercial Service works with you to identify possible partners for your needs.

You have explained to us and ideal rep, distributor etcetera for you would and our colleagues domestically here and our oversees colleagues in the US Embassy and US Consulate abroad either in country network to identify companies who meet your criteria. In the gold team service you would actually travel to the country for face to face meetings at these possible partners in the international partner search you have to the opportunity of communicating with these pre-screened potential partners via email or phone instead of in person.

I want to ensure again that all of these potential candidates are pre-screened. The gold key search is an international partner searches that have proven successful for companies over and over again to give you a real life example, I’ve been working with one company here who has used our gold key service in 29 countries. And they now have 45 reps around the world and they are a small company so it can be done and other companies have been successful at it.

By USA and (Fuse) which is the featured US exporter and on there you will see and USA, that stands for Commercial Use USA, these are all opportunities for oversee marketing for exporters. Trade leases are also a great way for us to connect US suppliers with the needs of an oversee buyer.

Consulting an advocate, the US Commercial Service is available at any time for free one on one consulting on any export topics. We’ve got offices in over 107 US cities, so there is a US export systems near you who would be glad to work with you to increase your export sales and advocate on your behalf.

To contact a local use, you can go to export.gov and click on the link that just says find a local office or email any of us and we will be glad to put you in contact with your local office and all of our contact information will be on the end. Next slide please.

I did want to specifically highlight a tremendous opportunity for companies who are new to export and new to the US Commercial Service. In an effort to jump start your company in exporting the US Commercial Service is offering a one time reduced fee incentive on featured services such as our gold and match making service for small to medium size companies.

A gold key service normally costs $700 per market. With this incentive it will only cost $350. To put this in prospective a large company which is over 500 employees pays $2,300 for gold key service. So this is incredible way for new to export companies to break into the export game.

To be eligible for this incentive you must be new to export as defined on the screen. If you are a reactive exporter, you may still quality. You must also be new to the US Commercial Service, meaning that you have not used our fee based services in the past. The Webinar does not disqualify you.

Counseling and advocacy do not disqualify, so if it has helped you with market research and help you develop your international business plan you still eligible. If you have used our goal to key service in the past for example, then you are not eligible for this discount.

One thing I will (unintelligible) is that you have to be a small to medium size company to get the discount. So you must have fewer than 500 employees for the - again, to see if you qualify or to learn more about our services, contact your local US export assistance center. Are there any questions about our services before we move on?

Natasha Keylard: There are several Danielle, but I’m just going to have to pick one, in the interest of time. So perhaps you can quickly answer the questions. How long does it take to set a meeting for prospective partners?

Danielle Rust: It usually takes about six to eight weeks to make sure that we are thoroughly looking at the market and finding all of the best prospective partners for you.

Natasha Keylard: Okay, six to eight weeks?

Danielle Rust: Yeah usually.

Natasha Keylard: Wonderful. And I’m so sorry we can’t take anymore questions right now otherwise we are going to run way overtime. So I’m going to thank Danielle for walking us through those great market strategies and tools - next slide.

And in summary just what you’ve heard up to now are accessing expert readiness international business plan, regulations and licensing consideration, market entry strategies and tools, so we’ve covered a great bit of ground. The last sets of topics are really indispensable for international trade.

Our in-house experts John O’Gara will take us through logistics and export documentation before we conclude. John?

John O’Gara: Thank you Natasha. Again my name is John O’Gara, I’m the Regional Manger for the Export solution group for the US Small Business Administration and I’m housed at the US Export Assistance Center in Detroit. I want to thank everybody for participating with us today.

Logistics and export documentation, we are talking about movement of goods from Point A to Point B and also the documents that are required - after all your federal government is involved. And controlling the movement of goods both into and out of the country and so as you can imagine there are (unintelligible) of documents that must be filled out as well.

The picture that I have there kind of depicts that you really need to exercise care in who you choose to help move your good from Point A to Point B after all, if the buyer doesn’t get the goods you don’t get paid, their not happy and you’re not happy. This is not what we would call total logistics management. For that you would want to contact a local foreign freight forwarded. Freight forwarders are regulated and certified by the federal Maritime Commission - they are involved in air shipments, they are regulated by international air transportation association.

They can advise you on the most favorable routing for your shipment. Advise you on regulations and other countries, they act as the shipper’s agent in that they have power of attorney, they book shipments. The consolidate freight which saves you a lot of money otherwise you’d have to lease the entire container load and if you have less than a container load shipment saves you quite a bit there. And then they handle all the necessarily documents and can handle that for you as well. What are some of the documents required, next slide please.

(Unintelligible) and they maybe other. The shippers export declaration or (SED) is required for any shipment of $25 or more of value with the exception of shipments to Canada. Another one I would like to center on for the sake of time we can’t go through the whole thing just maybe suffice to say, the packing list is basically what’s in the carton, it’s used by both sides customs basically to check and verify the shipment just listing what’s in the cartons or how many packing cartons are there.

Certificate of Origin is a critical document. When I first got started in export we didn’t have any of these trade agreements with other countries, but we’ve got nine individual countries right now and a couple of bilateral or multilateral out there. So for each of these a Certificate of Origin maybe required to prove the origin of the goods and it is a very important document for your buyer because basically that enables them to bring the good into their country at the reduced or the eliminated duties and tariffs. It is a very important document there.

The Bill of Lading is the carrier’s Bill of Lading, in other words the contract between the shipper and the carrier. It also serves as proof that the good were received. The steamship line for example, in case of an ocean shipment the Bill of Lading is a negotiable instrument, it is titled to the good essentially so, a very important document. Particularly when we are talking about getting paid.

The counsel invoice maybe required by a country in order for you to be able to have the privilege of shipping goods to their country, it is basically a scheme for generating income by the government of that country. But again it is a legitimate cost, it might be on the order of $75 to $100 bucks for a counsel invoice to allow you to ship for let’s say a period of a year. So Commerce can help you identify what the individual documentary requirements are for a given country.

Commercial Invoice is used to determine the true value for assessment purposes on duties and tariffs so that’s your commercial invoice. Inspection certificate might be required by the buyer to assure that what they ordered in terms of quantity and quality is actually what is being shipped. And then insurance certificate might be required particularly in case of a CIF shipment and I’m going to talk about those terms in a moment. To prove that there is adequate coverage on insurance.

We are governed by international commercial terms or in-co terms and those are usually a three letter designations such as FOB and the like. The one I have here is an attempt at (unintelligible) (KIG) which stands for kiss it goodbye,” if you look at the picture I doubt that you’re goods are going to make it.

But what I’m talking about in the next slide are the in-co terms, the latest revision is 2000. Again that stands for international commercial terms and these are created actually way back in 1936 as an attempt to try standardize what shipping terms and terms of sales were so we all knew what we were talk the same thing. It has gone through several revisions about six revisions since then - the latest being 2000. And I would highly recommend that you obtain a copy of in-co terms 2000. It is available from (ICC) Publishing at iccbook.com. It is very logically laid out so you can understand what you are required to do on each of these terms.

I have arranged a few of them in a matrix so you can get an idea at that as we go down this list you are providing more and more meaning to the quotation to your buyer.

Ex works, it simply the cost of the goods at your factory. It means that the seller delivers when he places the goods at the disposal of the buyer either at the sellers premises or another named place and it is the minimum obligation for the seller and the buyer has to bear all the costs and risk involved in taking the goods from the sellers premises. So those of you that subscribe to “keep it simple stupid,” you might say or might be thinking this would be the way I would provide a quote to a buyer.

Moving down the list (free along side) basically means the seller delivers. When the goods are along side the vessel or main port of shipment so we have the cost of the goods and the cost to transport them along side the covariance.

Free on board and you’ve noticed that we have two, three letter designations FOB and (FDA) but the first one as we go down this list only applies to ocean shipments. So in the case of free on board, cost of the goods out your door transport to the covariance and the cost of loading on the vessel. Under FOB shipment as soon as the goods cross the ships rail, the responsibility for the goods changes hands from the seller to the buyer.

Moving on to cost and freight, we are adding to that the cost of moving the goods from Point A to Point B. The next one cost insurance and freight were adding the cost to insure them against damage and transit, remember the (KIG) slide. Things like that do happen more frequency then we would probably like to admit. The CIF includes the cost to insure them against damage and transit. And then we have others such as (X-Key) or (DEQ) delivered (X-Key) which means that the seller is also responsible for the unloading of the good on the waft facility in country.

So these are just a handful of the terms that are out there and you have to be aware of them, because you have to be aware of the cost that associated with each. Remember the idea is to make money, so you want to make sure you’re accurate in whatever quote you end up providing to your buyer and what the term of sale is. Next slide please.

Now it is probably as typical with a government presentation, we are getting you all fired up about exporting and now, okay yeah, there are risks associated and so here they are:

Commercial risk is risk of non-payment by your buyer and of course everybody knows it’s only those foreign buyers that never pay on time, everybody pays on time here in the states. And if you believe that I have some land in Idaho I’d like to sell you...So you have risk of non-payment by the buyer. You have political or country risk, which is action by a sovereign government or a series of sovereign governments that causes you as the exporter to incur a loss on a shipment.

If you look at the photo on the right, I had a buyer that in May of 1998 was shipping product to India. In May of ’98, India set off a nuclear weapon test in violation of the Nuclear Test Ban Treaty which they were signatory, too, so in retaliation, the United States government placed sanction on all shipments to India for the period of one year. So things can happen.

We have transit risk, again, damage to the goods in transit. Currency fluctuation; certainly we recommend for new exporters that they quote in U.S. dollars. However, in order to be competitive in a market, you may have to quote in some other currency such as euros.

And so obviously you have exposure to those currencies as they fluctuate quite wildly lately and you may be in a position to incur a loss or sustain, you know, an additional profit, but that’s not what you’re in business for. You’re in business to sell your goods, make money that way, but you do have that risk if you’re quoting in something other than U.S. dollars.

Strikes, riots and civil commotion, these things happen in other countries and they can delay a shipment and that delay of shipment can be tied directly whether you get paid or not, so you’re in a position to sustain loss. And of course war is kind of obvious there.

There are more attentive risks, but these are the basic ones that you’re encountering but I would say that you are the entrepreneur and by definition, entrepreneur is the one who assumes the risk of running a business, so you’re used to it, you laugh in the face of adversity and risk and you just get on with doing business. So there you have it.

Next slide, please.

If we’re going to try to offset or mitigate our risk, one way we can offset risk of nonpayment is the method that we choose to accept in terms of the way we get paid. And if you’re going to choose your method of payment, a lot of things come into consideration and what maybe dictates what - which one of these four methods you use.

Some of them can be what is the industry practice or the country practice, what is the nature of the goods that you’re building for this individual, certainly. If it’s custom-made and something goes south with the transaction, you have a very limited universe of other buyers or potential buyers as opposed to something that’s off the shelf, in which case you could probably find another buyer in a more reasonable length of time.

So this is going to dictate then how secure a method of payment you might need. And there are others, of course, but for the sake of time, we’ll leave it at that.

The four basic methods are cash in advance, letter of credit, documentary collections and open accounts.

Obviously cash in advance you get payment before you do anything. And it might be wise to bear in mind the spectrum of between what the buyer’s ideal situation is and what the seller’s ideal situation is.

The seller would like to get cash in advance before they lift a finger filling the order. They’re not tapping into their own cash flow. They’re using somebody else’s dime basically to finance the building and filling of the order.

On the other hand, the buyer would like to obtain the goods, sell them in the marketplace and take as long as they can before they have to pay you. And if both of you remained at your respective comfort zones, how much business would get done? And the answer is very, very little.

So methods of payment are also a way to negotiate where you don’t get everything you wanted, but, you know, you’re a little out of your comfort zone but it’s something that you can live with.

So cash in advance, while it is wonderful and you can probably get it if you’re the only game in town, but we don’t see it too often with the exception of a partial cash in advance or down payment with a firm order, such as the order may be 10% to 20% with a firm order.

As we move down the list, of course, as I mentioned, the risk to the exporter increases. What’s the next best thing? Arguably it might be a letter of credit. There are wonderful flowcharts that describe the whole letter of credit process.

What you need to take away is it’s a secure method of payment in that you have the buyer’s bank stepping in place of the buyer and guaranteeing payment provided you perform. And that performance is indicated by documents that you present to the bank for payment.

You do have documentary risk in a letter of credit, because after all, documents are filled out by humans and we are not infallible. We make mistakes.

Irrevocable versus revocable; all letters of credit are deemed irrevocable unless stamped on the face of them according to UCP 600, the rules governing letters of credit.

Irrevocable just means that no party can back out of the transaction after it’s been opened, that is the letter of credit without prior written agreement.

Sight versus time, literally a sight of documents being presented to the bank, the payment of process has begun. You have about 10 days or the bank has about 10 days to negotiate that letter of credit for payment versus time. And this is where you might be meeting your buyer half way. They need terms, you need guarantee of payment.

You can have a time or what is known as a Usance letter of credit in place which means that the letter of credit matures at a prescribed date, usually so many days after its shipment date. It might be, say, 60 to 90 days, to give the buyer time to receive the goods and then pay you.

So letter of credit is a versatile instrument of payment but it costs people money. It costs your buyer money to open. It ties up their credit facility to open.

So what’s the next best thing? Possibly would be documentary collections. And documentary collections basically you’re still involving the buyer’s bank but the buyer’s bank is not guaranteeing payment.

They’re acting as a go-between between the seller and the buyer so the buyer in general doesn’t get the goods in their hands until they have, in effect, made payments at the counters of their bank.

And then we have open account, which is where you want to be with a buyer. You want to have a good, strong relationship over time that proves that they are credit worthy to have more liberal credit terms extended to them, but we don’t recommend that you start out that way certainly.

And there are all variations on these methods of payments, but those are the four basic methods.

Next slide, please.

Now let’s say for example that you struck a deal with a buyer and it’s an open account sales, net 30, net 60 days from shipment date you get paid.

You obviously have risk and the risk is that your buyer when it comes time to pay doesn’t pay you. How do you mitigate that risk?

You can obtain foreign credit insurance through the Export/Import Bank of the United States and other private surety providers, as well to mitigate the risk of nonpayment by the buyer, commercial risk and also in the case of Ex-Im Bank to cover you on political risk.

So that’s nice. You have sleep insurance.

The next benefit is market penetration. It helps you to increase your competitiveness in a market because you can confidently go into a market and if you can insure that buyer, you can extend liberal credit terms to them which makes you more competitive. Remember you’re getting closer to the comfort zone of the buyer in this case.

And then the third benefit of export credit insurance is access to financing. Typically banks will not advance on foreign receivables as part of the borrowing base.

If they are insured and let’s say use the example they’re insured by the Import/Export Bank of the United States, the bank then is encouraged to include those receivables in the borrowing base or collateral pool because they’re now advancing on U.S. government risk. So it’s a very useful tool.

If you want to explore that, www.ex-imbank -- E-X-I-M, as in Mary, bank -- dot gov is their Web site.

Next slide, please.

You have to determine since we want to identify all the costs associated with an export sale to insure that you make money, you have to identify whether you’re going to need financing in order to fill a particular order.

And fortunately it’s broken down into either pre-shipment financing needs or post-shipment financing needs.

Some of the pre-shipment financing needs are you need to acquire or build the manufactured goods for shipment, you need to post a bid or a performance bond in order to secure foreign contract, maybe you’re paying some market development cost up front in advance of getting the order.

These are all costs that you’ve incurred in order to get the international business.

And then we have post-shipment financing needs which is you’re selling on some kind of open account sales. So you’re providing supplier credit to your foreign buyer and in some cases you may be required to post a warranty bond after the goods have arrived for, say, the period of one year, and that’s another cost.

So you need to identify do I need to borrow money, if so, how much, how much is that money going to cost me, and the objective, of course, is to bake those costs into your landed cost, as Phil referred to, to your foreign buyer.

Next slide.

I work for the Small Business Administration and I work with exporters in helping them obtain financing for export orders that they have or that they anticipate.

So we have the Export Working Capital Program and that’s our mantra a business should not lose a viable export sale due to a lack of capital.

Basically what it is is a credit enhancement tool that is used by a bank to offset or fund a deal that the bank couldn’t normally do on their own. Yet it is not to be used to take a bad deal and make it good, but to take a deal that’s definitely doable but slightly outside the current lending parameters of the exporter’s bank.

Next slide, please.

The use of proceeds of this program specifically are to acquire or produce goods or services for export. It can also finance foreign accounts receivable and support the issuance of standby letters of credit to act as a bid or performance bond.

Next slide.

We can also support, as Danielle talked about different channels of selling your products overseas, if you’re selling indirectly to a third party, say, here in the United States such as a trading company and they in turn are exporting your product, that is still an export and we can support that with this particular program.

Next slide, please.

The features of the Export Working Capital Program, we can support single large transactions or multiple transactions set up as a revolving line of credit.

Currently, to the provisions of the Recovery Act, there is no guaranteed fee. Normally that guaranteed fee would be for a facility of 12 months, it would be one quarter of 1% of the guaranteed portion of $2250 for $1 million facility. But right now for the balance of this year under Recovery Act provisions, we are waiving the guarantee fee for exporters, so that’s good news for you.

Because we are the Small Business and we deal with small businesses, the maximum that we can involved with is our exposure is $1.5 million, gross loan amount can be up to $2 million.

We don’t have a U.S. - a minimum U.S. Content requirement such as the Export/Import Bank. You can source your exports from an offshore source as long as they’re being brought into and then leaving the commerce of the United States. We can’t support drop shipments from, say, France to Thailand, for example.

We can support sales to military buyers, provided you’re legally able to ship to the military buyer and that’s the difference between us and the Export/Import Bank.

We have a short-term turnaround time on a decision. Here I cover Michigan and Indiana. I normally take in three to five working days for a decision. And we can support the issuance of standby letters of credit to act as a performance bond.

Next slide, please.

What do we look for? This financing is different from term financing. Term financing is relying on the overall cash flow of the business to retire the debt or support the debt service.

In the case of export transactions, it’s transactional or self-liquidating. You have a purchase order, you advance on the purchase order, you build the product, you ship it, the proceeds from the sale come in and the line is paid down. So it’s self-liquidating by nature.

So the thing that we center on is the exporter’s ability to perform, because we are guaranteeing the performance of the exporter for the exporter’s bank and that’s the grey area; the work in process.

Some banks are more comfortable once you created the product and you shipped it and you have a receivable. The bank is maybe more comfortable in advancing on that, particularly if it’s insured, but the grey area with the work in process they tend to shy away from.

So we need to see a purchase order, a letter of credit or signed contract of some sort to evidence that we actually have a real deal in place.

We certainly take a look at who the buyer is, both the country and the individual foreign buyer, so we need information on who they are how you came about obtaining the transaction.

We’re looking at the credit-worthiness certainly of you the exporter, so we’re looking at all your financial statements and the like.

And then we are looking very closely at the turns of sales, the INCO term, that is and the method of payment. Does the deal structure make sense? That’s very, very important. Some deals can be done with some tweaking and so we are called in usually fairly early on in the process to sit down with your bank and determine whether we have a doable transaction or series of transactions.

Next slide, please.

We also have another product that lenders can use and it’s called Export Express. It’s a derivative of SBA Express and it’s designed to serve the needs of exporters, not necessarily limited to just supporting transactions, but other uses, as well.

We’ve streamlined the application process for the lender. They get to use their own form. They have a fast turnaround. We’re talking about 24 to 36 hours. Provide a 90% guarantee up to the maximum for this program of $250,000, as long as the proceeds support the export activity of the exporter.

Next slide, please.

So the use of proceeds might include export development activities, marketing and trade shows. Perhaps you’re working with Commerce and you’re going to attend a foreign trade show and exhibit your product there. And you have these soft development costs, market development costs associated with that, the lender could set up a line of credit facility to support those expenses.

We can support specific transactions and revolving lines of credit for export purposes.

Next slide, please.

We can also support the acquisition of equipment to be used to produce goods or services for export. We cannot fund overseas operations. And the lender has to take a look at the Ex-Im Bank, that’s the CLS, Country Limitation Schedule, which is available on their Web site to see whether the Ex-Im Bank is open for cover in the various countries of the world.

Next slide, please.

Perhaps the best way to illustrate how our program works is through some examples. I’ve changed the name of the firm. Here’s a firm in the west side of Michigan Up, Up and Away. Their product they manufacture meteorological instrumentation for weather data collection and analysis.

So they not only manufacturer the disposable radio (sons) that the U.S. Weather Service sends up by balloon from 100 location on a daily basis, but they also manufacture the tracking antenna and the proprietary software to receive the data, analyze it and spit it out in a format that a meteorologist could understand.

In their particular situation, they were in the process of performing on U.S. government contracts for the weather service and so you can imagine that most of their working capital is tied up in the performance of that contract.

Working closely with the Commerce Department, they secured and won the bid on an opportunity for the government of India for $1.8 million. We thought it was a perfect fit, after all, they had the balloons and the government had the hot air.

That’s a late afternoon joke. I apologize.

Payment on this deal was through an irrevocable letter of credit drawn on the State Bank of India. They needed pre-shipment working capital to manufacture the tracking equipment and ship it. And the solution was that we provided a 90% guarantee to their bank for $700,000 line of credit facility.

We’re advancing only on their cost. That’s what this line is supporting. And if you look at that, their cost $700,000 total contract amount, $1.8 million, that’s a pretty healthy margin. That’s why we’re involved in export promotion. We think that you have wonderful opportunity for profits and growth through exports. So that’s why we do it.

Next slide, please.

This one might be like what we call (coals to New Castle), this is a tool and die ship in the thumb area of Michigan. Their product plastic processing machinery and strand pelletizing equipment. Essentially these are pumps that extrude plastic through a pelletizer.

Fifteen pumps was the order. Each pump on the order of 12,000 to 15,000 pounds. Duration of the contract, 18 months.

Four million dollar contract with China. And their need, obviously, was pre-shipment but two-fold pre-shipment. They had to support a standby letter of credit to cover a $500,000 down payment that the Chinese were placing on the contract and then also they needed an additional $1.5 million to build the product and ship it.

Looking at the deal, we structured it as two loans rather than one, and by doing so we saved the exporter approximately $35,000 in guarantee fee, and they were very happy about that.

Of course, for the balance of this year, that point would be superfluous because we’ve waived the guarantee fee. But nonetheless, that’s how we get involved in structured deals.

Next slide, please.

Here’s the pro forma invoice. The reason we put this slide at the back is the pro forma invoices basically by definition putting down in writing the deal that you think you struck with your buyer the way you understand it.

And if that is accepted, it becomes the basis for a binding contract. It is also the document if payment is going to be by letter of credit which the foreign buyer and their bank utilize to construct the language on the letter of credit.

So it’s got to be very accurate. And you’re really not in a position to fire off a quote to a buyer until you’ve identified all the costs associated with filling that order. You’re going to better your chances for profitability, obviously, if you do so.

So basically it should describe the product, stating the price and the unit price at the time of shipment, specific the term of sale, that would be the INCO term, you know, FOBs, CIF, whatever the case may be. And also the method of payment, whether that’s going to be a letter of credit or a documentary collection or open account.

You should double check it for accuracy, certainly, because like I said, if it’s accepted, it’s a little difficult to go back and say I made a mistake on the price and it’s actually more.

And then it should only be valid for a specific period of time that’s tied very closely to the volatility of your raw material and labor. After all, if you were selling gold jewelry, I don’t think you want to set 180 days as a validity date for this pro forma invoice based on what the price of gold has done lately.

So that’s why we listed the pro forma invoice last.

And then finally, the final slide would be our contact information. And I’d be pleased as with the other speakers to take any questions we might have and turn it back over to Natasha.

Natasha Keylard: Well, very good. Very impressive how you can turn pretty much a very many hour presentation into a half an hour. Very impressed. Thank you for walking us through that John.

John O’Gara: You’re welcome.

Natasha Keylard: There are a couple of questions but before I raise them, I want to ask the operator to go ahead, could you unmute all the lines. Perhaps that will stimulate some Q&A.

Coordinator: Sure.

Natasha Keylard: Okay, so you don’t have to go through the procedure any longer. If you would just want to voice a question, please feel free and until I actually hear - until I actually hear a question, I’m going to raise the first one I got typed.

It says how do I determine what (unintelligible) requirements for shipments to a specific country?

John O’Gara: Oh, basically I think your trade specialist from the U.S. Department of Commerce would be instrumental in helping you make that determination.

They have a lot of tools available to them. I know we have online (access) to the Exporter Reference Manual put out by the Bureau of National Affairs and that’s updated, you know, for the - that’s updated, you know, instantaneously online, and so they have access to that. So they can tell you what the documentary requirements are in order to ship product to a given country.

I know many countries right now are requiring their heat treat certification if you’re shipping on any kind of wooden pallet. Some countries won’t allow any shipments on wooden pallets if it’s made of coniferous wood or it has to have a certification of fumigation to make sure that any, you know, beasties aren’t hitching a ride on that and then they’re importing some trouble for their agriculture.

So I would invite you to contact your trade specialist at your earliest convenience to determine that.

Natasha Keylard: Okay, wonderful. So no matter if you’re interested in exporting to Kazakhstan, Thailand, no matter what part of the world, basically you’re saying the trade specialist will be able to answer your question or find the answers for you.

John O’Gara: Yep.

Natasha Keylard: Okay. You covered a lot of ground on export documentation. (Val) here asks where can I get these export documents.

John O’Gara: There are several places to get them. Unz & Company, U-N-Z & Company provides many of the documents - I hope everyone can still here me.

Natasha Keylard: Yes.

John O’Gara: Unz & Company provides many of the documents that might be required with a particular shipment, everything from country-specific certificates of origin, all the way up through hazmat documents if your material is hazardous in any way, shape or form and you have to pull out certain documents there.

They’re a good store. There are others, your freight (forwarder) should be able to provide certain documents for you, as well.

Any others want to chime in with any other sources?

Natasha Keylard: You know, sounds like...

Man: Sounds, like you’ve covered a lot of them, yeah.

John O’Gara: Okay.

Natasha Keylard: Yeah, pretty much covered them.

Okay. And one more question from (Kathleen). What is the process for applying for an SBA export loan?

John O’Gara: Well, since I mentioned, our product is a credit enhancement tool that your bank has available to them, the exporter starts with application at their bank.

And they approach their bank and apply for whatever their needs are, let’s say it’s for a revolving credit facility of, say, $500,000. The bank maybe early on might contact SBA or contact me to ask about the program.

What you might run into in approaching your bank is that if you’re dealing with the relationship manager, through no fault of their own, they may not be familiar with trade finance tools that they have available.

So what you want to make sure if you’re dealing through your branch or whatever, you want to make sure that you are talking to a small business lender or a commercial lender. They are going to be the most familiar with the tools that are available to them such as just in general SBA guarantees.

And in many cases you would also want introduction to somebody from the Trade Services Division of their bank. If they’re a larger bank and they have a Trade Services Division, it would be a very good idea to bring them in early on in the game.

You know, your banker can play an instrumental role with wire transfers, letters of credit, certainly if you are dealing with letters of credit, you would want them to be advised through your bank.

So they play a very important role and you shouldn’t wait until the last minute to approach them.

So they basically - if they want to use our guarantee as a tool, they would take any information from you, they collect the documents that are required. They essentially approve it through their committee with the contingency that SBA agrees to apply the guarantee to that loan and then they submit - in the case of the Export Working Capital Program, they submit the paperwork to me.

I handle Michigan and Indiana. I have about 16 of my counterparts around the country so we have entire U.S. Coverage.

Natasha Keylard: Okay, great. That’s very clear. Thank you very much. Although we have four more questions, I’m afraid we’re going to have to answer them directly to you via email because we have (several minutes) until the end of this conference. So I would just like to go ahead and wrap up.

John, thank you so much, again, for running us through all the logistics in export documentation.

John O’Gara: You’re welcome.

Natasha Keylard: For the participants, you will receive a follow-up email with the download location of the presentation and the recorded version of this Webinar within 24 hours.

I would also like to encourage you to register for the free Global Business Development Program. That will be promoted by our overseas colleagues to foreign buyers, distributors and partners in 39 countries.

As we’ve already extended the original deadline which was June 30, we really must ask you to register by the end of this week. And in the follow-up email you will find the URL that will take you to the registration page.

Please bear in mind there is one catch and it’s not financial. This opportunity, first of all, is only available to automotive companies and automotive companies that are confirmed to be export ready by August 4.

So if you’re in need to export and there’s some work you need to do, I would urge you to contact your trade specialist as soon as possible to see what areas you need a little bit of direction in in order for us to help you become export ready.

If you’re not sure who your local trade specialist is, you can either consult export.gov, but in the interest of time, by all means, feel free to shoot me or my colleagues an email and we can answer you immediately.

On that note, I’d like to thank our speakers for their time and dedication in making this Webinar possible and, of course, I also very much appreciate all the participants’ time and I encourage everyone to please let us help you develop or increase your international sales.

So this officially concludes our Webinar. Thank you very much, again, and everyone have a good day.

Bye-bye.

END