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Appa Guide to Global Trade APPA GUIDE TO GLOBAL TRADE Export/Import … Operations, Purchasing, Supply Chain, Logistics, Sourcing, Foreign Sales and Business Development ExclusivEly for APPA MEMbErs 2 Contents Chapter 1 Overview of Pet Products in Export Sales and Global Sourcing to Foreign Markets: Basic Business Model & Operating Considerations Export Sales .......................................................................................... 4 Export 101: The Export Business Model ................................................ 6 Preparing to Export ............................................................................... 7 Export Business Requirements .............................................................. 7 Foreign Distributors: Export Partners .................................................... 11 Packing, Marking & Labeling Considerations......................................... 14 Chapter 2 Export Customer Service 10 Steps to Creating a Robust Export Customer Service Capability ...... 17 Customer Service Questions ................................................................. 19 Customer Service in Export Administration .......................................... 20 Common Export Documents ................................................................. 20 Transportation Documents ................................................................... 21 Export Trade Compliance Documents ................................................... 22 Other Export Related Documents ......................................................... 29 Temporary Shipping Documents ........................................................... 34 Basic Export Trade Compliance Management ....................................... 36 Export Case Study ................................................................................. 37 3 Chapter 3 Logistics in Global Trade Developing Successful Logistics ............................................................ 38 Understanding Cargo Insurance ............................................................ 40 Chapter 4 – Global Sourcing and Importing Import 101 ............................................................................................ 42 Global Sourcing ..................................................................................... 44 Foreign Purchasing Management 101 ................................................... 58 Import Regulatory Considerations ........................................................ 61 Global Sourcing Case Study ................................................................... 75 Summary and Best Practices in Pet Product Imports and Exports ......... 76 Appendix Acronyms .............................................................................................. 78 Glossary ................................................................................................ 79 Incoterms ..............................................................................................138 Credits ..................................................................................................142 4 Chapter 1 Overview of Pet Products in Export Sales and Global Sourcing to Foreign Markets: Basic Business Model & Operating Considerations Export Sales Selling into foreign markets presents a lucrative opportunity for companies to increase their overall business development and diversify sales strategy. Factors Supporting These Opportunities Include: Faced with stiff competition and thin margins in the U.S., pet product companies can create an international business that has the potential to account for 15 percent of annual revenue and up to 40 percent of annual sales in new markets where U.S.-made products are in demand. The U.S. currently exports about $15 billion annually in pet and related products. U.S. manufacturers and distributors have advantages in foreign markets sales where U.S. pet products: . Are considered prestigious by international consumers . Are not available from other sources . Offer better quality control standards . Provide better customer service . Have a more competitive supply chain . Provide creative approaches to marketing and business development strategies . Provide sustainable business strategies for long-term business development . Provide competitive payment terms Among the opportunities for exporting pet products are: - High end animal feed - Containment and security devices - Grooming supplies - Animal pharmaceuticals and supplements - Specialized habitats - Bedding and carry products 5 Among the best opportunities available for exporting pet products: 95% of the consumer market is outside the United States The U.S. only accounts for about five percent of global pet product sales, creating a major opportunity for selling products overseas. And while Asia, Europe and Latin America are the leading regions for exporting products, many pet products companies also have secured business in the Middle East, Africa, the Caribbean and other locations. 85% of the commercial market is outside the United States While consumers represent 95% of the international market, from a commercial perspective this amount drops to about 85% depending upon the region. In Europe, pets are as an important social icon as they are in the U.S. In other markets like Asia, and more specifically China, having pets is a prestigious Western approach to socialization and stature. Numerous market studies have shown that as developing and third world countries see a rising middle class, the ownership and hobbies associated with pets grows in a similar fashion. Among the most lucrative markets for U.S.-produced goods are those closest to the U.S. borders. Mexico and Canada are among the largest U.S. trading partners in representing $100 million in annual sales. That figure is likely to increase with a renegotiation of the NAFTA agreement that favored pet products by easing the entry of U.S. manufactured and sourced products in Mexico and Canada. American based companies sell pet products in more than 100 countries, led by Canada, Great Britain, France, Germany, Benelux (Belgium, Netherlands, Luxembourg) and Japan. Many of these sales are through distributors, but a growing number of products are sold directly to consumers via ecommerce. This is discussed in greater detail in Chapter 3. 6 Export 101: The Export Business Model Companies considering with international markets in mind: 1. Strategy and the viability of marketing 2. Creating a model for operations 3. Determining the correct Incoterm 4. Arranging logistics 5. Insuring payment 6. Export regulations and trade compliance 7. Handling warranty and return programs 8. Managing customer service demands The marketing approach is covered throughout the following pages. It is imperative to recognize that while exporting can be a very lucrative means for increasing sales, its inherent risks and challenges, when not handled properly, can lead to difficulty and financial loss. Advantages for U.S. Exporters: Reliability Prestige Quality Diversity Accessibility Infrastructure 7 Preparing to Export In considering whether to export products, it must be recognized that many countries have their own regulations that need to be followed so goods can enter those markets. This requires having an understanding of the importation regulations so that a shipment can be prepared in advance of being delivered to a foreign customer. In preparing for shipment, products may need to be modified to meet geographic and climate conditions, buyer preferences, standards of living, government regulations, or religious practices. Packages also need to be designed to meet consumer preferences in individual markets. For example, Japanese consumers tend to prefer certain kinds of packaging, leading many U.S. companies to redesign cartons and packages destined for that country. The decision to modify a product to meet local consumer demands depends on how committed a company is to a given market and whether potential sales outweigh the costs of making the changes. A firm with short- term goals will likely have a different perspective than one with long-term goals. In addition to deciding whether to redesign a product, companies also must take foreign government regulations into account, including covering tariffs and products specifications. The governments typically impose the regulations to: • Protect domestic industries from foreign competition. • Protect the health and safety of their citizens. • Require importers to comply with environmental controls. • Ensure that importers meet requirements for electrical or measurement systems. • Restrict the flow of goods originating in, or having components from, certain countries. • Protect citizens from cultural influences that the country considers inappropriate. Export Business Requirements Import Regulations Impacting U.S. Pet Product Exports: Any pet products sold in the United States, such as medicines, supplements, grooming items, or electric fencing, which are governed by federal and state regulations, will likely face the same scrutiny in foreign countries. Foreign Standards & Certification Member countries of the World Trade Organization (WTO) are required under the Agreement on Technical Barriers to Trade (TBT Agreement) to report to the WTO all proposed technical regulations that could affect trade with other member countries. 8 One beneficial resource is a free, web-based e-mail subscription service that offers an opportunity to review and comment on proposed foreign technical regulations
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