Massachusetts Small Business Development Center Network

Massachusetts Export Center

Doing Business in Emerging Markets: China, India and Brazil

Marie Hladikova, Trade Services Manager

Massachusetts Export Center

Importance of Exporting for the Economy

• The U.S. Depends on Exports for Economic Growth and Job Creation

– Exports support 12 million U.S. jobs

– Exporting firms experience 20% faster employment growth than non-exporting firms

– Exporting firms pay 15-17% more than non-exporting firms

– In 2006, exports represented 11% of the U.S. GDP

– Exports help to reduce the trade deficit and offset negative influences on the economy

Importance of Exporting in Massachusetts

• In 2009, Massachusetts exported over $23.5 Billion in goods and ranked as the 13th highest exporting state.

• In 2008, Massachusetts ranked 4th nationally in high tech exports.

• Massachusetts also ranks 4th nationally for the percentage of manufacturing workers that depend on exports for their jobs, at 29 percent.

• A total of 8,335 companies exported goods from Massachusetts in 2006.

• Of those, 7,422 (or 89 percent) were small and medium-sized enterprises (SMEs), with fewer than 500 employees.

• SMEs generated 28 percent of Massachusetts’ total merchandise exports in 2006.

Importance of Exportingfor Your Business

• Exporting facilitates long-term growth in sales, profit and market share

• Exporting improves competitiveness and diversifies risk

• 95% of the world’s population and 2/3 of its purchasing power lie outside of the U.S.

• The failure rate for exporting firms is one-third less than the rate for non-exporting firms

• Sales per employee are 150% higher at exporting firms

• The recent signing of over 20 Free Trade Agreements has given U.S. exporters unprecedented access to many international markets

• The weak dollar has made U.S. products highly competitive and sought-after in export markets

US Exports - 2009Partner Countries ANNUAL 2009 %2008- 2009

TOTAL ALL PARTNER COUNTRIES 1,056,931,975,877 -17.91 Canada 204,728,093,537 -21.612 Mexico 128,997,679,354 -14.73 China (Mainland) 69,576,047,992 -0.224 Japan 51,179,643,638 -21.435 United Kingdom 45,713,722,301 -14.716 Germany 43,298,596,250 -20.567 Netherlands 32,347,020,781 -18.568 Korea, Republic Of 28,639,972,247 -17.399 France 26,522,336,139 -8.0410 Brazil 26,175,324,386 -18.9611 Singapore 22,278,511,663 -20.0212 Belgium 21,629,718,968 -25.1713 Hong Kong 21,118,501,206 -1.7714 Australia 19,597,481,206 -11.815 China (Taiwan) 18,432,353,670 -26.0516 Switzerland 17,499,124,159 -20.5417 India 16,462,437,103 -6.918 Italy 12,232,635,740 -20.8819 United Arab Emirates 12,107,293,657 -16.0220 Saudi Arabia 10,803,683,538 -13.46

MA Exports - 2009  Description ANNUAL 2009 %2008- 2009

  TOTAL ALL PARTNER COUNTRIES 23,574,691,740.00 -16.9

1 United Kingdom 4,049,330,994.00 15.56

2 Canada 3,057,861,899.00 -21.74

3 Netherlands 1,982,739,402.00 -25.88

4 Germany 1,748,190,587.00 -29.77

5 Japan 1,714,055,312.00 -29.39

6 China (Mainland) 1,372,028,564.00 -12.23

7 Mexico 901,224,724.00 -22.5

8 France 670,924,545.00 -28.95

9 Korea, Republic Of 625,276,068.00 -6.06

10 China (Taiwan) 619,289,502.00 -12.69

11 Hong Kong 524,968,973.00 -11.09

12 Italy 496,076,984.00 -14.48

13 Switzerland 362,462,539.00 -18.8

14 Singapore 357,949,067.00 -24.18

15 Malaysia 340,377,720.00 -9.09

16 Ireland 339,205,626.00 -38.25

17 Belgium 316,016,874.00 -4.47

18 Brazil 310,331,103.00 -19.35

19 India 306,247,179.00 -21.75

20 Australia 277,061,616.00 -11.98

MA Exports to Brazil

ANNUAL 2009%2008-

2009310,331,103.00 -19.35

1 Pharmaceutical Products 86,763,196.00 -16.512 Medical Devices and Surgical Equipment 74,796,598.00 -9.313 Electronics 41,913,519.00 -32.684 Industrial Machinery, Including Computers 41,536,638.00 -23.625 Plastics 27,546,962.00 -13.666 Miscellaneous Chemical Products 14,751,607.00 20.427 Paper, Paperboard & Articles 5,947,786.00 -1.068 Tools, Cutlery, Base Metal & Parts Thereof 2,825,473.00 -34.219 Glass And Glassware 1,656,054.00 86.8310 Tanning & Dye, Paint, Putty, Inks 1,613,253.00 42.31

MA Exports to China

ANNUAL 2009%2008-

20091,372,028,564.00 -12.23

1 Electronics 544,866,379.00 -0.122 Medical Devices and Surgical Equipment 227,619,525.00 -24.153 Industrial Machinery, Including Computers 222,301,110.00 -27.334 Plastics And Articles Thereof 73,711,790.00 11.365 Wood Pulp Etc; Recovd (Waste & Scrap) Ppr & Pprbd 44,697,049.00 37.486 Raw Hides And Skins (No Furskins) And Leather 42,114,351.00 -31.427 Iron And Steel 31,040,104.00 -18.248 Pharmaceutical Products 25,321,061.00 318.679 Aluminum And Articles Thereof 25,052,048.00 -17.4710 Copper And Articles Thereof 14,161,140.00 -43.52

MA Exports to India

ANNUAL 2009%2008-

2009306,247,179.00 -21.75

1 Industrial Machinery, Including Computers 111,838,812.00 35.122 Electronics 57,469,324.00 -41.093 Medical Devices and Surgical Equipment 55,658,713.00 -32.734 Iron And Steel 21,472,817.00 -50.725 Plastics 10,964,685.00 -25.666 Pharmaceutical Products 5,911,516.00 -5.167 Gold, Precious Stones and Metals 5,155,810.00 2.818 Aircraft, Spacecraft, And Parts Thereof 4,836,202.00 -79.579 Wood Pulp Etc; Recovd (Waste & Scrap) Ppr & Pprbd 3,576,058.00 370.05

10 Tools, Cutlery Etc. Of Base Metal & Parts Thereof 3,350,269.00 65.89

Common Challenges Faced by Exporters

• Finding the Right Partners in Export Markets

• Export Regulatory Compliance

• AES, Paperwork and Customs Compliance

• Managing International Credit Risk

• Access to Capital for Export Operations

International Market Assessment & Development

Export Readiness Assessment

• Export Commitment

• Export Motivations

• Export Potential – Resources – Product– Capacity

Assessing Potential Export Markets

• Indicators of Potential International Markets:• Reactive:– U.S. Customers Moving Into Export Markets– Inquiries From Potential Overseas Customers and Distributors– Interest Expressed by Overseas Visitors

to US Trade Shows– Following Competitors

• Proactive:– International Market Research– Strategic Approach

• Limit Pool of Potential Target Markets

Identifying International Sales & Marketing Partners

• Government Market Research Reports• Internet• Trade Shows (Attending & Exhibiting)• Trade Missions• Trade Associations & Journals• State & Federal Govt Overseas Offices• Companies With Complementary Products• End Users in the Target Export Market

Best Prospects for US Exports- Brazil

• Aerospace: Aircraft and Parts/ Airports • Electrical Power Systems • Environmental • Franchising • Information & Computer Technology • Insurance • Medical Equipment • Mining • Oil and Gas • Pharmaceuticals • Safety and Security • Transportation (Ports / Railways) • Travel and Tourism

Best Prospects for US Exports –China

• Automotive Components Market

• Cleaner Coal

• Construction Equipment Market

• Education and Training

• Machine Tools

• Marine Industries

• Healthcare Market

• Water and Wastewater Treatment

• Rail Equipment

• Renewable Energy

• Green Building

Best Prospects for US Exports –India

• Airport and Ground Handling• Computers• Education Services• Electric Power Generation, Distribution

and Transmission Equipment• Food Processing & Cold Storage

Equipment• Franchising and Retailing• Medical Equipment• Mining and Mineral Processing

Equipment• Oil and Gas Field Machinery• Pollution Control Equipment• Telecommunications Equipment• Textile Machinery• Water

Export Regulatory Compliance

Authorities Governing Exports• Export Controls are Largely Outlined in 3 Sets of

Regulations:– Export Administration Regulations (EAR)– International Traffic in Arms Regulations (ITAR)– Office of Foreign Assets Control (OFAC)

• Authorities Governing Exports:– U.S. Department of Commerce (EAR)

• Bureau of Industry & Security– U.S. Department of State (ITAR)

• Directorate of Defense Trade Controls– U.S. Treasury (OFAC)

• Office of Foreign Assets Control– U.S. Department of Energy– U.S. Customs (enforcement of controls)

• Immigration & Customs Enforcement (ICE)

Web Sites for Export Regulatory Authorities

U.S. Department of Commerce, Bureau of Industry & Security

www.bis.doc.gov

U.S. Department of Treasury, Office of Foreign Assets Control

www.treas.gov/ofac

U.S. Department of State, Directorate of Defense Trade Controls

www.pmdtc.org

Areas of Control

• Avoiding Denied Parties

• Avoiding Embargoed Countries

• Product Controls and Classification

• Anti-Boycott Compliance

• Deemed Exports

Validated End User Program China & India

Companies approved for VEU will:

• Receive shipments of designated U.S. controlled goods on an expedited basis.  After receiving an order from a VEU authorized firm for a VEU approved item, any U.S. exporter can immediately ship that item without having to first navigate the individual licensing process.

• Have more certainty and reliability in receiving U.S.-controlled items that are included in their VEU authorization.  If an item is included in a company’s VEU authorization, there is no uncertainty about whether an individual license application will be approved.

http://www.bis.doc.gov/validated_enduser.pdf

Export Logistics

Product Classifications in Global Trade

• Export Control Classifications– e.g., ECCNs

• Harmonized Tariff Schedule (HTS) Codes

• Export Product Classifications– e.g., Schedule B numbers in the U.S.

Harmonized Tariff Schedule (HTS) Codes

• Harmonized Commodity Description and Coding System is used by over 180 countries worldwide.

• Assigns 10-digit codes to identify products as they are imported and exported.

• The system provides for uniformity worldwide in classification of products through the first 6 digits of the provision.

• Provides only for uniformity in tariff provision/classification, not duty rates.

• HTS codes must be reported to foreign customs official at the time of import (typically reported on the Commercial Invoice)

• Harmonized Tariff Schedule of the U.S. provides product classification and rates of duty for U.S. imports.

Tariff Rate Database

• International Customs Tariff Bureau:

The International Customs Tariff Bureau (BITD), established by The Convention of July 5, 1890, which created the International Union for the Publication of Customs Tariffs, translates and publishes customs tariffs

http://www.bitd.org/Search.aspx

Schedule B Codeshttp://www.census.gov/foreign-trade/schedules/b/

• Administered by U.S. Census Bureau

• 10-Digit Product Classification Code for U.S. exports– Difference Between Schedule B and HTS Codes

• Reported via the Automated Export System (AES)

• Used primarily for statistical tracking purposes

Export Documentation & Customs Clearance

Brazil Commonly Required Documents

• Commercial Invoice• Bill of Lading/Airway Bill• Certificate of Origin (recommended)• Packing List• Customs Import Declaration• Technical Standard/Health CertificateAll importers must be registered with the Foreign Trade Secretariat of

Ministry of Industry, Commerce and Tourism (SECEX). Import licenses are typically required in Brazil.

China Commonly Required Documents

• Commercial Invoice• Bill of Lading/Airway Bill• Certificate of Origin• Packing List• Customs Import Declaration

IndiaCommonly Required Documents

• Commercial Invoice• Bill of Lading/Airway Bill• Certificate of Origin• Inspection Report • Packing List• Customs Import Declaration• Technical Standard/Health Certificate

Other Common Export Documents

• Pro Forma Invoice• Dock Receipt • Customs Power of

Attorney

International Payment & Financing

Methods of International Payment

• Cash in Advance

• Open Account

• Documentary Collections

• Letter of Credit

Trade Finance & Risk Management Tools

• Export Credit Insurance

• Foreign Exchange Hedging Tools

• Foreign Credit Reporting Resources

• Export Financing Programs

Export Assistance Resources

Massachusetts Export Center

www.mass.gov/export

Our Mission

The Massachusetts Export Center is part of the Massachusetts Small Business Development Center Network.

Our mission is to help companies throughout the Commonwealth achieve success in global markets, thereby contributing to economic growth in the state. Our goal is to meet the complex needs of exporters by developing and providing targeted, high-impact services delivered through a state-wide network of international trade professionals.

Office Locations

Holyoke

New Bedford

Amherst

Worcester

Boston

Providing Assistance Through the Entire Export Process

Export Market Assessment

International Business Development

Export Legal & Regulatory Compliance

Export Logistics & Supply Chain Management

International Payment & Financing

Counseling · Technical Assistance · Market Research & Promotion · Training

Export Counseling & Technical Assistance• Assessment of export readiness & export planning

• Export strategy and international business plan development

• Export market assessment & selection

• International sales, marketing & distribution channel development/management

• Overseas trade show identification and facilitation

• Mechanics of exporting (classification, payment, financing, documentation, shipping & logistics)

• Export Regulatory Compliance

NAFTA First

• Provide assistance in the areas of market development and logistics management for clients selling to Canada and/or Mexico (and shipping under other FTAs)

– Tariff/product classification assistance– Origin determination assistance– NAFTA eligibility assistance– NAFTA documentation assistance– Market research and partner searches– In-house training and seminars on NAFTA issues

Export Regulatory Compliance Assistance Program

• An enhanced assistance program to help clients comply with U.S. export regulations

– Counseling & technical assistance on U.S. export regulations

– ECCN classification guidance– Export license determination assistance– Assistance in establishing an Export

Management & Compliance Program– In-house training and seminars on export

controls and compliance– Targeted referrals to government authorities

responsible for export controls

International Market Research & Publications

• Develop customized research to help clients assess overseas markets and partners

• Distributor/sales agent searches

• Export market analyses• Demographic, economic, political information• Statistical analysis of export activity• Product/industry analysis in target market• Other key contacts (competitors, manufacturers, end-users,

trade associations, government agencies, etc.) in target market

• E-Newsletter – International Trade Reporter

• Publications

Spring 2010 Training

• International Networking Evening & Business Forum• TSA Certified Cargo Screening Program• Export Finance Roundtable• Deemed Export Compliance• Export Documentation and Valuation• Essentials of Export Controls: Lessons Learned for Compliance• Antiboycott Compliance• Certified Global Business Professional Series• Export Classification & Shipping Under FTAs• Export Licensing Under ITAR

Compliance Alliance

Provides a forum for exporting firms to network, share best practices

and stay current on export regulatory compliance issues.

• Networking Briefings

• Conferences & Training

• Online Member Directory

• Online Resources & Databank

• Online Job Board

2008 Economic Impact

• Clients reported nearly $190 Million in export sales as a direct result of the assistance provided by the Mass Export Center in 2008

• Overall, companies assisted by the Export Center generated well over $1.5 Billion in export sales in 2008.

• Between 2007 and 2008, Export Center clients increased their export sales by 39% – more than triple the growth rate of 11% for Massachusetts’ export performance during the same time period.

• 98% of clients found the services of the Massachusetts Export Center to be beneficial and 68% indicated that the Export Center’s services exceeded their expectations

• The Export Center’s impact translates to over 3,000 new/retained jobs in Massachusetts (based on the Commerce Department’s exports-to-jobs formula).

Mass Export Center Wins 2 National Awards in 2008

• U.S. Small Business Administration’s Small Business Development Center (SBDC) Service Center Excellence and Innovation Award

• Honors SBDCs for their innovation and excellence in assisting small businesses -- there are over 1,000 SBDCs in the U.S., and the Massachusetts Export Center was the nation-wide winner of this award

• Presidential ‘E’ Award for Export Achievement• The highest honor the federal government can give to American people, firms or organizations

that have made significant contributions to the increase of American exports – presented by President George W. Bush and U.S. Secretary of Commerce Carlos Gutierrez

Other Export Assistance Resources

U.S. Department of Commerce• Market Research & Data

– www.export.gov– http://tse.export.gov/

• International Market Promotion– International Partner Search– Gold Key Service– Trade Missions & Shows

MA Office of Int’l Trade & Investment• www.mass.gov/moiti• Overseas Offices

– Brazil, China, Germany, Mexico• Selected Overseas Industry Trade Shows

U.S. Customs & Border Protection• www.customs.gov

• U.S. import requirements & regulations

• Assessment of duty on U.S. imports

Export Financing Resources

• U.S. Small Business Administration– www.sba.gov

• Export-Import Bank of the U.S.– www.exim.gov

• MassDevelopment– www.massdevelopment.com

Massachusetts Small Business Development Center Network

Massachusetts Export Center

www.mass.gov/export

617-973-8664