Doing your homework and spending the time and effort to do it right聽will make a world of difference.
By Louis Dejoie
With considerable fanfare, the first U.S. cruise ship to travel from Miami to Havana in 40 years arrived in Cuba on May 2. The ocean voyage signaled to many the start of a new era and endless opportunities for the American economy. Not so fast.
While the event marked an important chapter in Cold War d茅tente, it does not mean that Cuba and other international markets are as open and free as the media depicts.聽 In the Cuban example, outside of certain agricultural, electronics and medical products, significant restrictions still exist.聽There is a long way to go before Cuba is truly open for business.
Foreign countries represent both opportunities and perils for enterprising businesses. But make no mistake; export markets have been a bright spot since the financial crisis, serving as a powerful engine for growth.聽Even though that engine has slowed somewhat with the U.S. exchange rate and a lessening global demand, many buyers overseas continue their preference for 鈥淢ade in America.鈥�
According to the Census Bureau, companies with more than 500 employees are still responsible for more than 70 percent of all exports. The biggest exporters in Pennsylvania are manufacturers of chemicals, fabricated metals, machinery and food.聽聽 But, with 95 percent of the world鈥檚 consumers living in foreign lands, federal and state governments want to make sure that smaller businesses get a bigger share of the pie. But before you cast a line into foreign markets, keep the following tips in mind.
#1: Decide How Deep Your Involvement Should Be
There are three main ways to enter a foreign market and transact international business.聽You can make simple export sales where foreign buyers come to you in the U.S.聽 Or, for a greater commitment, you can appoint a distributor or agent in a foreign country to solicit sales.聽Or, for the deepest involvement, you can open a branch office or a foreign subsidiary and hire local employees.聽Each has risks and rewards.
If you appoint a local distributor or agent, protective legislation often hinders your ability to extricate yourself from the relationship. The law in the host country might override your executive decision-making, and you might wind up with an agent or distributor for life unless you negotiate a costly severance.
And, without proper structuring, a branch or subsidiary may expose you to unexpected taxes or liabilities. Research and planning are required regardless of how you go.
#2: Decide How You Will Be Paid
When you sell to foreign customers thousands of miles away, a major risk is getting paid.聽Some ways to reduce your risk are to buy export credit insurance, require payment by a letter of credit, or break the payment down in phases and receive more money on the front end.
#3: Check U.S. Export Controls
You might need an export license to make the sale, particularly for a high-tech or defense-related product.聽 Check the regulations concerning your product and its destination.聽 Exports to some countries may require a license while exports to others may not.
The U.S. government also keeps lists of persons and entities to whom you cannot ship. These restricted parties are published on the Web site of the Bureau of Industry and Security at the Department of Commerce.
#4: Protect Your Trademark
In the聽U.S., if you use a trademark on a product first, you automatically have rights to it.聽 But in most other countries, the trademark belongs to whomever registers it first. Be careful that no one beats you to the punch and then claims your trademark for themselves.
#5: Know International Contract Laws
International contracts are governed by U.S. laws, foreign laws, and a variety of international laws established by treaties, conventions and trade agreements.聽Which law applies in any given case can determine whether you win or lose if there is a dispute. To avoid costly surprises, an international lawyer can help you before you enter into that contract.
#6: Respect Cultural Differences
The American way of doing business might not work in other lands.聽In many countries you must develop personal relationships first. You might need to 鈥渁dapt and adopt鈥� your product to local markets to be successful.聽 Often, the pace of business is different (usually much slower).聽 Patience is often a virtue. In all countries, local custom must be understood to avoid giving offense.
#7: Secure Free U.S. and Pennsylvania Government Services
The U.S. Department of Commerce and the Pennsylvania Office of International Business Development (OIBD) can provide a great deal of assistance.聽 For example, they have numerous overseas offices that can help you screen potential distributors and agents.
Pennsylvania鈥檚 鈥淩egional Export Network鈥�, which includes the World Trade Center of Harrisburg, works closely with the OIBD and its overseas offices.聽They can help at all stages of your international transactions.
The above cautionary tales should not discourage you. Doing your homework, and spending the time and effort to do it right, will make a world of difference.
Louis Dejoie chairs McNees Wallace & Nurick LLC鈥檚 International Law Practice Group (Harrisburg, PA) and is a member of the Corporate and Tax and Intellectual property groups. Louis has practiced law involving international business since 1984. Louis has counseled clients on transactions in all the major foreign jurisdictions, including China, India, the Middle East and South America. He regularly assists clients with the complex issues involved in international supply and distribution chains, establishing foreign offices and manufacturing facilities, foreign joint ventures, overseas construction and engineering projects, international project and export finance, and the protection and licensing of U.S. technology and intellectual property. Louis has counseled clients on U.S. export controls, including the Export Administration Regulations, the International Traffic in Arms Regulations, and the sanctions regulations administered by the Office of Foreign Assets Control. Louis also represents clients in a broad range of commercial transactions domestically as well, including mergers and acquisitions, private placements, intellectual property licensing, computer and technology contracts, product distribution, and commercial contracts generally. He can be reached at (717) 237-5387 or [email protected].
McNees is a full-service law firm based in central Pennsylvania with more than 130 attorneys representing corporations, associations, institutions and individuals. The firm serves clients worldwide from offices in Harrisburg, Lancaster, State College and Scranton, PA; Columbus, OH; and Washington, D.C. McNees is also a聽member of the ALFA International Global Legal Network. For more information, visit聽.