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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. Brand management is another key decision. If a firm wants to control its brand, that will drive options, but if a firm is willing to trust brand development to others, another array of options are opened. 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 and can be a good first step in exporting. For example, the use of Export Management Companies (EMCs) and Export Trading Companies (ETCs) can give a smaller firm representation in foreign markets without as significant a commitment of time and money as if it takes on all responsibilities itself. In 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 collecting payment.

Export Merchants
Export Agents
Export Commission House
Export Broker
Buyer for Export
Export Management Company (EMC)
Piggyback Marketing
Export Trading Company
Freight Forwarder
How to Locate an Importer, Agent or Distributor in a Foreign Country
Evaluating your Distributor or Agent

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.

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Export Agents

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.

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Export Commission House

An export commission house is located in the U.S. and acts 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.

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Export Broker

An export broker brings buyers and sellers together. The broker is paid a commission by 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).

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Buyer for Export

The buyer for export represents large consumers of industrial goods, such as foreign government purchasing missions.

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Export Management Company (EMC)

The services of an EMC may include foreign market research, marketing strategies, foreign distribution, establishing a logistics system, managing and training a foreign sales force, shipping and export information and details, and arranging financial aid and foreign language translation services. Some EMCs work on a fee-basis, while others use a buy-and-sell arrangement or 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 EMCs in the U.S., most are quite small. Most EMCs specialize by product, by foreign market, or both. Resulting from this specialization, the best EMCs 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 EMCs 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.

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Piggyback Marketing

Piggyback marketing occurs when a manufacturer distributes another firm's
product(s). 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. firms 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 complementary and appeal to the same customers.

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Export Trading Company

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 to those of an EMC, an Export Trading Company accepts the title of the exported goods, whereas an EMC does not.

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Freight Forwarder

A freight forwarder is a "travel agent for freight." An independent agent that aids and facilitates the shipments of exported goods, freight forwarders are familiar with the procedures and regulations for shipping products overseas. As an agent of the exporter, a 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, gaining both expertise and reduced prices from the aggregation of international shipments that a freight forwarder realizes.

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 the buyer's port, arranging for timely delivery and proper loading of 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, insurance certificates and other documentary requirements specified by the letter of credit or shipping instructions.

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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 does not 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) is available from the FAS website, www.fas.usda.gov.

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 another excellent way of 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 Consulates and Banks — Generally speaking, U.S.-based foreign consulates, trade promotion offices and banks are not good sources for potential distributor lists. Their mission is to encourage the entrance of imports from their home countries into the United States, rather than to increase the number of U.S. exports their country receives. However, Japan is an exception to this rule. The quasi-governmental JETRO/Japan Trade Center, established in Chicago and several other U.S. cities, actively promotes a "U.S. Exports to Japan" program.

Foreign Magazines and Newspapers — Placing "distributor wanted" or "representative wanted" advertisements in foreign publications can generate responses. However, investigate and qualify the respondents, although this 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. SUSTA's Generic Program provides similar primary services. Visit www.susta.org/services/gip.html to learn about SUSTA's trade missions and training workshops.

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Evaluating Your Distributor or Agent

When searching for a potential overseas distributor or agent, obtain:

1. Basic Information

  • Name, address, location, telephone/fax numbers, email addresses and contact person
  • Annual sales, number of sales outlets, number of salespersons and support staff
  • Organizational structure
  • Years spent in international business
  • Experience in your product category
  • Personnel training

2. Sales Staff Information

  • Do they hire their own sales staff? How many are on the payroll?
  • What are their sales techniques and methods of conducting sales?
  • How many customers do they currently serve?
  • What is the status of their relationship with their current customers? If possible, assess this relationship by contacting customers directly.
  • Are they able to inventory and warehouse your goods? At what additional cost?
  • How are deliveries made? Do they have their own delivery fleet, or do they use common carriers?

3. Product Awareness Information

  • What related, but non-competitive products do they sell? Do they handle any competitive products?
  • Why do they think your product will be successful in the market?
  • What do they assess as your product's strengths and weaknesses?
  • What modifications do they recommend? Can they assist you in making the recommended modifications?

In addition to the previously mentioned methods, alternative contacts for locating a distributor or agent include:

U.S. Exporter Assistance: The Foreign Agricultural Service's website provides information on the following services:
  • Directory of U.S. food distribution companies
  • Lists of foreign buyers of food and agricultural products
  • Assistance in presenting your products at international trade shows

For more information, go to www.fas.usda.gov.

The U.S. Department of Commerce offers services, such as the International Partner Search, for small to mediumsized 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 15 days you will receive complete contact information for up to five of the most qualified candidates, including information on their size, sales, years in business, and number of employees. You will also gain information about sales potential and marketability for your products and services. For more information, contact your nearest U.S. Export Assistance Center.

The Commercial News USA, a U.S. government catalog/magazine, provides the opportunity to advertise your product as well as attract potential distributors. The publication will promote your product in over 176 countries at a fraction of the cost of commercial advertising. It is distributed overseas bi-monthly at no charge to the recipient. For more information, contact a U.S. Export Assistance Center or ThinkGlobal Incorporated.

Once you have narrowed down the field to one potential distributor or agent, the Dept. of Commerce provides International Company Profiles (ICP) at a very reasonable cost. This profile serves as a thorough background check on your potential client, which will reduce your risk and allow you to enter into a new business relationship with confidence. Within 10 days of the request, you will receive a detailed credit report on a prospective overseas partner or sales representative. Commercial specialists abroad will also 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 a U.S. Export Assistance Center.

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