The basics of buying and selling merchandise overseas

Exporting is a good thing for small businesses. According to the U.S. Small Business Administration, small businesses account for 97 percent of all U.S. exporters. Companies that export expand their annual total sales about 0.6 to 1.3 percent faster than non-exporting companies, and are nearly 8.5 percent less likely to go out of business.

Before you begin exporting, there are two Web sites you should consider become familiar with. The SBA has a detailed guide for exporting, and the U.S. Department of Commerce’s Export.gov site details possible commercial opportunities for U.S. exporters. Here are some basic pointers:

• You probably don’t own a fax machine. If you’re going to be exporting, you’re going to need to buy one. Exporting countries will often need you to fill out and sign forms, and you often can’t do that through e-mail or online. That’s changing, but not fast enough for you to ditch a fax machine.
• Expect to work weird hours and to spend some quality time with your voice mail system.
• Get to know a good freight forwarder.
• Be aware of the cultural implications of your product name and branding. Coca-Cola famously translates to “Bite the wet tadpole” in Chinese, and the Chevy Nova has the unfortunate translation to “no go” in Spanish.
• You’ll need to learn the local regulations for your products. Cosmetics and food often carry the most strict rules.
• You should be familiar with the common terms of sale used in international trade before preparing your pro-forma invoice. International Commercial Terms (INCOTERMS) are universally recognized in export and import contracts. These terms refer to the rights and obligations of each party (i.e., who pays what costs, when title to goods is transferred and where the goods should be delivered).
• Your manufacturing may need to be ISO 9000 certified to be competitive for some overseas contracts.

The SBA site has a good step-by-step description of the export process in one section. Here's the plan:

1. The exporter, upon receiving an order for a specified quantity of goods, sends the buyer (importer) a pro forma invoice defining all conditions of the transaction.
2. The importer takes the pro forma invoice to the bank and applies for an Importer/Exporter Letter of Credit (LC).
3. After verifying the terms and reaching the appropriate credit decisions, the importer’s bank opens the LC and sends it to the exporter’s bank.
4. The exporter’s bank authenticates the LC, verifying it was issued by a viable bank, and either forwards it to the exporter or keeps the original and sends a copy.
5. The exporter compares the LC with the original pro forma invoice to ensure that agreed upon terms and conditions have been incorporated in the LC and that they can be met.
6. The exporter prepares, usually with the help of a freight forwarder, an invoice and a packing list. These documents must be completed exactly as specified in the LC. The exporter also prepares a shipper’s letter of instruction or SLI and any other specialized documents required, e.g., export license and certificate of origin. (Check with a freight forwarder to determine what documents are required in your case.)
7. The freight forwarder receives the goods along with completed paperwork in accordance with the terms of the LC.
8. After the goods are shipped, the forwarder or exporter submits the LC and documents to the exporter’s bank.
9. The exporter’s bank verifies that all required documents are in compliance with the LC and forwards the documents package with a draft to the importer’s bank with wiring (payment) instructions.
10. The importer’s bank reviews all documentation and, if the documents meet all requirements, credits the exporter’s bank.
11. The importer’s bank simultaneously debits its customer’s account.
12. The exporter’s bank credits the exporter’s account.
13. The importer’s bank releases documents to its customer. With documents in hand, the importer picks up the shipment.