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Basics of Exporting - Export Intermediaries The most common methods are direct marketing and indirect marketing through intermediaries. Direct marketing requires a total dedication of time and resources, and finances to identify opportunities in a foreign market. The company and its management team are responsible for market research, planning and distribution of the product in a manner, which will produce satisfactory sales results. This is a feasible option for larger companies that have time and resources to devote to exporting. Another factor to consider is the importance of personal relationships in exporting. In the long run it may be more profitable for a company to build relationships themselves rather than do so through a third party. For small and medium sized companies, indirect marketing through intermediaries is more feasible. The use of Export Management Companies (EMC's) and Export Trading Companies (ETC's) can give a small or medium size company representation in foreign markets without the commitment of time and money to the sales process. In the process of indirect marketing, management maintains control over the export process while benefiting from the knowledge and expertise of an intermediary. Frequently, the exporting company has a reduced level of financial risk because the intermediary assumes the responsibility for finding overseas buyers, shipping products and getting paid. Export Merchants Export Merchants The export merchant buys and sells on his own account. He purchases products directly from the U.S. manufacturer, marks and packages the goods using his own specifications and preferences. Then, under his own name, the export merchant sells these products overseas and assumes all risk. Because of the high level of personal risk, export merchants primarily deal in staple commodities. For the producers, selling to an export merchant involves the same process as other domestic sales. An export agent operates as a manufacturer's representative. The agent promotes and markets the product and assumes the risk of loss remains with the manufacturer, not the agent. In transactions with export agents, a U.S. company relinquishes control over the marketing and promotion of its products. Relinquishing control can have adverse effects on future sales efforts if the product is under-priced, incorrectly positioned, or after-sales services are neglected. An export commission houses are located in the U.S. act as a buying agent for foreign companies. Its primary concern is compliance with the instructions of its buyer (by whom it is paid) rather than the interests of the seller. However, there are advantages for the seller. Many times, the seller receives a cash payment in the U.S. and is relieved of the technicalities involving the export of his product. A export broker brings buyers and sellers together. The broker is paid by a commission from either the buyer or seller and assumes no financial responsibility for the transaction. Normally, a broker works in no more than two staples (i.e. cotton brokers and wheat brokers). The buyer for export represents large consumers of industrial goods, such as foreign government purchasing missions.Export Management Company (EMC) The services of an EMC include foreign market research, marketing strategies, foreign distribution, establishment of a logistics system, the management and training of a foreign sales force, shipping and export information and details, the arrangement of financial assistance and foreign language translation services. Some EMC's work on a buy-and-sell arrangement, others operate on commission. They are experts in foreign trade and recognize the strongest market for an individual product and the best sales strategy to utilize in that market. While there are thousands of EMC's in the U.S., most are quite small. Most EMC's specialize by product, by foreign market, or both. Resulting from this specialization, the best EMC's are familiar with their products and the markets they serve, and they usually have well-established networks of foreign distributors already in place. This immediate access to foreign markets is an advantage of using an EMC. On the other hand, a disadvantage of an EMC is that the manufacturer risks losing control over foreign sales. To avoid such a situation, carefully select an EMC that can meet the company's needs and maintain communication. A company may request regular reports on the efforts employed to sell its product and may set provisions which require approval before promotions may be carried out. Such issues should be negotiated before an agreement is contracted since some EMC's are not willing to comply with such limitations. Selling through an experienced EMC is an excellent way to enter the international arena with a minimum amount of effort. Piggyback marketing occurs when one manufacturer distributes another's product. Piggyback Marketing is common when a U.S. company has a contract with an overseas buyer to provide a wide range of products or services. Because the company is not able to produce all the contracted products, it turns to other U.S. companies to provide the remaining products. Other manufacturers "piggyback" their products without incurring the marketing and distribution costs associated with exporting. In most cases, the piggybacked product lines are complimentary and appeal to the same customers. An export trading company is an organization designed to facilitate the export of U.S. goods and services. It serves either as a trade intermediary, providing export related services to producers, or as an organization set up by the producers themselves. While providing similar services as an EMC, an Export Trading Company accepts the title of the exported goods, whereas an EMC does not. A freight forwarder is an independent agent that assists and facilitates the shipments of exported goods. A freight forwarder can be of tremendous assistance regarding the presentation of the sales proposal or quotation to a foreign customer. A freight forwarder can determine the proper terms of sale (i.e. F.O.B. warehouse or F.O.B. vessel), alert the exporter of required import/export license or particular consular documentation, and help select a term of payment such as cash-in-advance, open account, payment by sight draft, or by letter of credit. (These terms are defined in subsequent sections of this publication.) The freight forwarder coordinates the movement of freight from its point of origin to export ports for timely delivery and proper loading to the vessel. The freight forwarder prepares the export declaration required by the U.S. Department of Commerce, the ocean bills of lading required by the steamship company for carriage of the goods, the insurance certificate and other documentary requirements specified by the letter of credit or shipping instructions. In summary, the freight forwarder is a "travel agent for freight." The freight forwarder is familiar with the procedures and regulations for shipping product overseas. As an agent of the exporter, the forwarder becomes the port representative for the exporter. He oversees and coordinates the movement of the export shipment. The exporter pays for the freight forwarder, gained from the handling of many thousands of international shipments, will thus be available to the exporter. Visit FAS has a "Directory of Freight Forwarders serving Agricultural Shippers" at www.fas.usda.gov (under the export assistance sections). How to Locate an Importer, Agent or Distributor in a Foreign Country A common obstacle for exporters is attracting and securing a good importer, distributor or agent. If your company doesn't have the personnel or financial resources needed to establish a business presence in a foreign market, there are several resources: U.S. Federal and State Government Offices Abroad — The USDA's Foreign Agricultural Service (FAS) and the U.S. Department of Commerce have trade contact services for American exporters. Additionally, many states have representative offices established in foreign countries, which help facilitate contacts between U.S. manufacturers, exporters and foreign buyers. Another excellent source of assistance is the Agricultural Trade Offices (ATOs) located throughout the world. These offices can give advice about the importers in their country. Contact information for all of the Agricultural Trade Offices (ATOs) are available from the FAS website. Direct Mail — Write a letter to a company requesting that it represent your product. Only a few positive replies are needed to continue your search and evaluation of prospective distributors. Personal Visits — Once you receive a few prospective distributors, plan a trip to that country. While traveling, visit other potential markets to assess the situation and make contacts. Personal visits eventually pay for themselves in terms of the gained benefits. One order or sale of sample products could cover the cost of your round-trip airline ticket. Trade Shows & Exhibitions — Trade shows and exhibitions are perhaps the best source for finding distributors. Distributors visit these events to learn about new products and to evaluate competition. Even if you are just getting started and not quite ready to export, you should at least visit the shows. Speak with non-competing manufacturers in your industry, and ask for names of distributors. Beware of professional "exclusive distributor hustlers" who work on behalf of domestic manufacturers to sign up foreign manufacturers for appointments to control and restrict competition. Always investigate and evaluate several distributors before making a definite decision. Mail Lists — Domestic and international trade magazines
often publish or sell lists of distributors and agents. Many publications
compile "Annual Buyer's Guide" issues. Foreign Magazines and Newspapers — Placing "distributor wanted" or "representative wanted" advertisements in foreign publications can generate responses. However, Investigate and qualify the respondents; although it is difficult to achieve without visiting the distributor's offices. Private Marketing Consultants — Several nationwide companies offer services (for a fee) that bring together American exporters and foreign buyers. Typically, the primary "international marketing program" offered by these consultants includes market assessment and analysis, a distributor search and recommendations, and a marketing- sales promotion plan. As secondary services, these consultants also offer joint venture or licensing development, manufacturing assistance, and observation of your overseas operations. Generic Program provides similar primary services. Visit www.susta.org/services/gip.html to learn about SUSTAís trade missions and training workshops. Evaluating Your Distributor or Agent When searching for a potential overseas distributor or agent, obtain: 1. Basic Information
2. Sales Staff Information
3. Product Awareness Information
In addition to the previously mentioned methods, alternative contacts for locating a distributor or agent include: AgExport Connections: The AgExport Connections Office of the Foreign Agricultural Service has "AgExport Action kits" available. They include information on the following services:
For more information contact the AgExport Connections Office of FAS. In addition, the Trade Assistance and Promotion Office (TAPO) office provides export counseling and referrals to other services of the USDA. The U.S. Department of Commerce offers services, such as the Agent/Distributor Service, for small to medium sized exporters. This service helps determine the best markets and ways to promote your products. After they receive a specific request, commercial specialists at U.S. embassies and consulates abroad then search the market for qualified agents, distributors, or representatives according to your specifications. Prospective agents or distributors are screened for capability and interest and within 30-60 days you will receive information on up to six of the most qualified candidates. Your company may also request a Customized Market Analysis with detailed information needed to make the most efficient and beneficial marketing decisions. Sixty days after the request is placed, you will receive information about sales potential, competitors, best channels for market arrival, prices for comparable products, the best way to gain exposure in market, impediments to sales, the best potential representatives and buyers, and potential licensing or joint venture partners. For more information contact your nearest US Export Assistance Center. The Commercial News USA, a U.S. government catalog-magazine provides the opportunity to advertise you product as well as attract potential distributors for as little as $395. The publication will promote your product in over 152 countries at a fraction of the cost of commercial advertising. It is printed ten times a year and distributed overseas, at no charge to the recipient. For more information, contact a US Export Assistance Center or the Associated Business Publications International. Once you have narrowed down the field to one potential distributor or agent, the Dept. of Commerce provides at a very reasonable cost, International Company Profiles (ICP). This profile serves as a thorough background check on your potential client, which will reduce your risk and allow you to enter new into a business relationship with confidence. Within 30-45 days of the request, commercial specialists abroad will give their assessment of whether or not you should enter into this relationship. The profile includes bank and trade references, product lines of that distributor, number of employees, financial data, sales volume, reputation and market outlook. In addition, your ICP will qualify as one of the reports required for you to obtain foreign credit risk insurance coverage. To order an ICP contact an US Export Assistance Center. Back to Top
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