GROWING YOUR EXPORT BUSINESS
China, Korea, Taiwan

China, Korea and Taiwan are among Asia’s leading economies and are important destinations for U.S. goods and services. In 2007, US and Maryland exports to these three markets were over $126 billion and $692 million, respectively. On June 10, 2009, nearly 50 people interested in expanding export opportunities attended a half-day conference held at Towson University that was organized by TowsonGlobal International Incubator, US Commercial Service, and M&T Bank.

At the event hosted by Mr. Fred Lissauer, Vice President of Global Export Business Development at McCormick and Co. and Advisory Board Chairman of TowsonGlobal, attendees were provided insights into the three markets by US Commercial Service officers who have spent time on the ground in each country. Industry specialists from M&T Bank and FedEx also provided expertise on financing and logistics solutions to support exports into China, Korea and Taiwan.

As the world’s 3rd largest economy, China has huge potential for expanding global businesses. Korea and Taiwan also hold great potential, as they are the world’s 13th and 19th largest markets, respectively. Coupled with the tremendous opportunities are challenges, as well, and one should be sure to research the various potential problems that might be faced while conducting business in these countries and be sure to create viable solutions to both prevent and manage such situations should they occur. Proper preparation is the key to success.

Among the many things to be considered are how to safely and efficiently transport goods and how to ensure payments are received from overseas customers. Shipping goods involves more than just packaging them and placing them on a plane or ship. It also requires obtaining and appropriately completing the required documentation and clearing customs. Fortunately, there are international transportation and logistics companies, such as FedEx, that can help streamline the shipping process. When it comes to managing the finances of your export operation, there also are many things to consider, such as which method of payment to accept. Experienced international banks, such as M&T, can assist in selecting the appropriate solution that meets one’s individual business needs.

MARKET OVERVIEWS: OPPORTUNITIES, STRATEGIES, AND CONSIDERATIONS

Demystifying China: What Your Business Should Know - Janee Pierre-Louise, Commercial Officer, US Commercial Service

As the world’s third largest economy and with a GDP of $4.2 trillion in 2008, China holds huge potential for expanding global businesses. China is presently the world’s largest market for mobile phone communications and internet users. Coupled with a growing middle class with a voracious appetite for consumer “lifestyle” goods, and the continued economic growth of the country’s tier two markets, the opportunity for success is great.

There are many things to consider, though, when considering the China market. For example, the US Chamber of Commerce produces a list of the top issues to consider when trading with China. The number one issue is related to Human Resources—the recruiting and retaining of quality managerial talent. Protection of Intellectual Property is the second major problem. This is not due to a lack of rules and regulations, but instead due to a lack of enforcement on the part of government, or in some cases an inability to enforce it. The following is a list of tips that will help mitigate IP violations:
•    Hire a Lawyer • View the tool kit located at www.export.gov/china/archive_ipr_news.asp
•    Register your IP in China. If it is not, you have no rights and no recourse under law
•    Take preventative measures, such as taking only necessary IP to China
•    Monitor infringement yourself by searching marketplaces for fakes
•    Know how to confront it before it happens

Korea: Gateway to Northeast Asia - Kenneth Duckworth, Commercial Officer, US Commercial Service

South Korea is the third largest market in Asia, and one of the most dynamic. Currently the world’s 13th largest economy, valued at $1 trillion, Korea is home to such global brands as Samsung, LG, and Hyundai Auto. A strong ally of the US for 50 years, Korea is currently the US’s 7th largest trading partner, accounting for $34.8 billion in US exports in 2008. The US is also Korea’s 2nd most important trading partner and represents 1/3 of all cumulative investments in Korea.

Important considerations when deciding to expand business to Korea include:
•   Korea has a very strong market for high-tech goods.
•   Laws and regulations are framed in general terms and subject to interpretations by government officials who rotate frequently
•   Tax and customs audits on foreign companies tend to be excessively aggressive
•    Rule-making remains un-transparent
•    Expensive and inflexible labor market

Taiwan: Getting It Right - Janee Pierre-Louise, Commercial Officer, US Commercial Service

This small mountainous island off the coast of China was the worlds 19th largest economy in 2008, with a per capita GDP reaching nearly $17,000. A true economic success story, Taiwan transformed itself from a poor underdeveloped agricultural economy to one of the world’s leading producers of high-tech goods. It has gone from receiving foreign aid to earning the nickname “silicon island,” and is the world leader in the production of notebook computers, PDAs, IC foundry and testing/packaging, and the second leading producer of flat panel displays and digital cameras.

Taiwan has a positive view of the United States and US products, bolstered by extensive cultural and academic exchanges. During the academic year 2007/08 there were 29,000 students from Taiwan studying in the US, and more than a half-million Taiwan tourists visited the US in 2006. Taiwan and the US also “speak” the same language. Not only do many bureaucrats and businesspeople speak English, but the country also shares US values of free markets, democracy, rule of law, transparency, innovation and globalization. Taiwan’s strong connection to China also is important. It is the number one foreign investor in China with at least 70,000 firms on the mainland, and Taiwan officially invests $65 billion in China, though the unofficial estimate is between $100 and $200 billion.

Important things to consider when examining the possibility of trade with Taiwan:
•   Sophisticated market
      o      Generally a target for high-quality differentiated products, rather than commodity goods
•   Price sensitive market
•   Dominance of Small/Medium Enterprises (SMEs)
•   Imported products must conform to certain standards and labeling regulations
•   IP Protection
      o      Since accession into the WTO in 2002, IP protection has improved dramatically; products must still be registered to be enforced

FINANCING SOLUTIONS

How Your International Bank Can Help - Jerry Solomon, Vice President, International Trade and Finance Group, M&T Bank

There are four methods of payment used in foreign trade: cash advance, letter of credit, documentary collections, and open account; each having its distinct advantages and disadvantages.

Cash Advance- The exporter receives payment from the buyer prior to shipment. This method is the most advantageous to the exporter, but the least advantageous to the buyer. Since the payment is made prior to shipment, the buyer runs the risk of receiving the shipment late, that the shipment might be incorrect, and that the shipment might not be sent.

Letter of Credit—The buyer draws a letter of credit from an international bank in his/her host country. In the event that the buyer cannot pay, the bank will pay the debt to the exporter, ensuring the exporter payment for his/her goods. To receive the payment, the exporter must provide documentation to his/her bank verifying the shipment of goods according to prior established specifications. In this way, the exporter is assured payment, and the buyer is assured delivery. The only drawback is that the letter of credit can tie up other business funds for the buyer.

Document Collection—The exporter ships the transaction documents to the international bank of the buyer. The buyer must then pay his/her bank before he/she can receive the appropriate documents allowing him to accept the delivery at the docks, airport, etc. This method is only recommended when dealing with a buyer who has a strong history of high performance and with whom the exporter has a great deal of trust. Open Account—The buyer pays upon receipt of the goods. In this case the exporter runs the risk of not receiving payment for the goods. There are many variations on each method of payment, and it is highly recommended that one speak with an international bank, such as M&T Bank, to discuss the appropriate method before entering into negotiations with foreign buyers. For more information contact your international bank, or visit your local M&T Bank branch or its website at www.mtb.com/commercial/internationaltradefinance/Pages/Internationalhmpg.aspx

THE LOGISTICS OF DOING BUSINESS IN ASIA

Getting Your Product to Market: China, Korea, Taiwan - Joe Ciquera, International Sales Manager, FedEx

When preparing to export products abroad there are three main factors to consider: export preparation, customs clearance, and transportation.

When preparing to export products abroad there are three main factors to consider: export preparation, customs clearance, and transportation.

Export Preparation

The first thing to consider when preparing to export goods abroad is export licenses. Do you need them? Do you have them? And if not, where do you get them? Information on obtaining licenses can be found at the Export Administration Regulations website—https://bxa.ntis.gov/—but keep in mind that often times you need an export license from the US as well as the country to which you are exporting.

Second, as an exporter you must be sure to properly screen your buyer(s). Do they have a good credit history? Will you be paid for the goods you deliver? What will they do with the products after the purchase? Most importantly, are they listed on the US Department of Commerce Denied Parties List? Persons or companies appearing on this list are known for illegal activity and are strictly prohibited from engaging in US export transactions. For more information on the Denied Parties list, visit the Department of Commerce website at www.bis.doc.gov/complianceandenforcement/unauthorizedparties.htm.

Finally, what are the restrictions, rules, and regulations, if any, involving trade with the buyers home country? Is the country a member of the World Trade Organization (WTO)? The WTO deals with rules involving trade between countries. Also, is the country involved in any trade agreements, such as NAFTA or APEC? These agreements can have significant impacts on your ability to trade with a country.

Export Preparation

The first thing to consider when preparing to export goods abroad is export licenses. Do you need them? Do you have them? And if not, where do you get them? Information on obtaining licenses can be found at the Export Administration Regulations website—

Customs Clearance

The three biggest problems international traders face (documentation, duties and taxes, and regulations) stem from customs encounters. These problems not only cause company expenses to increase, but once a shipment of goods is held by a customs agency no one can get them back. The company must then follow the specific orders of the agency to have the goods returned to them. Also, if a company is denied or delayed clearance on multiple occasions, it can be placed upon a black list, which is extremely difficult to get removed from, and can cause major delays in future customs clearances.

There are many ways to prevent these problems, starting with doing your homework. Perhaps the easiest way, though, is to talk to experts at international transportation and logistics companies, such as FedEx. They can help you screen your buyers, obtain the necessary licenses and documentation, estimate duties and taxes, and also help expedite customs clearances. For more information, view the following website: www.fedex.com/gtm/international

Transportation

Major considerations involving transportation of products internationally include modes of transportation (e.g. air, ground, ocean), and choice of carrier. Shipment destination, clearance location, and special economic and free trade zones are also important factors. They can have a huge impact on the manner in which you transport your goods, with whom, as well as on timing, costs, etc.