So, how does it all work?

Free Trade Agreements are negotiated by the governments of the participating countries. Some are bilateral (e.g. US & Chile), or they can involve several countries (e.g. NAFTA or CAFTA-DR). The most common benefit of free trade agreements is they offer preferential treatment to goods that originate in from partnering countries.  Preferential treatment refers to the waiving or reduction of tariffs when the goods cross borders. This is better illustrated with an example:

Under the North American Free Trade Agreement (NAFTA) I can ship a widget that was made in the US to Canada without paying a duty to the Canadian government. If NAFTA did not exist, then I’d have to pay a duty on the widget upon it entering Canada. This will make my product more expensive to the Canadian buyer. The key is the origination of the product as only goods made in the US will qualify for preferential treatment.

Impact

Some people criticize free trade agreements (FTAs) because they are often deemed as an American job reducer.  However, exporters play an important role in the country’s economy as well as the current unemployment situation. According to the office of the United States Trade Representative, one billion dollars in new U.S. exports supports more than 6,000 additional U.S. jobs. And, every billion dollars of service–based exports supports more than 4,500 jobs (examples of service exports could include marketing, travel and tourism, architectural, construction, and engineering services).

www.export.gov lists other areas the FTA addresses as follows:

• The right for a U.S. company to bid on certain government procurements in the FTA partner country
• The right for a U.S. investor to get adequate compensation if their investment in the FTA partner country is taken by the government (e.g., expropriated).
• The right for U.S. service suppliers to supply their services in the FTA partner country.
• Protection and enforcement of American-owned intellectual property rights in the FTA partner country.
• The right for U.S. exporters to participate in the development of product standards in the FTA partner country.

The United States currently has 14 free trade agreements in place with 20 countries:

• Australia
• Bahrain
• Chile
• Colombia
• DR-CAFTA: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua
• Israel
• Jordan
• Korea
• Morocco
• NAFTA: Canada & Mexico
• Oman
• Panama
• Peru
• Singapore

For more information about free trade agreements, or to schedule an appointment with an international trade specialist visit the following links:

www.export.gov/FTA

www.strtrade.com/wti/wti.asp?pub=0&story=37433&date=7%2F5%2F2011&company

“International business planning is not an easy road to navigate and leaves many business owners lost in a sea of information,” said Maria Yepes, SBDC international trade expert and certified business analyst. “The biggest advantage of the SBA planner is that it sets a clear roadmap for planning and research with key information and sources that a business should consider when importing or exporting.”

The easily accessible PDF file supplies complete worksheets for global market research, developing an export business plan, options and information for obtaining financing, customizable export marketing plans, costing and sale projections and goal setting. There are also sources for training opportunities with SBA business assistance partners, like the SBDC at USF’s low-cost, trade workshops and free, international consulting services.

The tool is sectioned into comprehensive chapters that are linked and indexed for easy navigation to similar topics.

The chapters include:

• Introduction to Exporting

• Training and Counseling

• Getting Started: Creating an Export Business Plan

• Developing your Marketing plan

• Financing your Export Venture

• Accounting Worksheets: Costing, Financial Forecasting and Product Pricing

• Utilizing Technology for successful Exporting

• Your New Marketing Plan: Summary, Timeline

• Updates, Transportation and Documentation

Download your copy at www.sba.gov/exportbusinessplanner

The Cardonas first came to the Small Business Development Center in April 2010 as attendees in the minority and women-owned business certification seminar. By September 2010 they were fully equipped to fulfill their vision of running a successful business.

“I had very specific questions in regards to structuring my company in the areas of business taxes, payroll responsibilities, marketing and financing,” said Beatriz.  “Most people aren’t familiar with every aspect associated with operating a new business or growing an existing one, but the SBDC was able to provide this expertise — for free.”

Prior to becoming fully operational, Beatriz and Roberto spent many hours analyzing different franchise opportunities and conducting multiple feasibility studies.

I had very specific questions in regards to structuring my company in the areas of business taxes, payroll responsibilities, marketing and financing. Most people aren’t familiar with every aspect associated with operating a new business or growing an existing one, but the SBDC was able to provide this expertise — for free.

They worked with SBDC Certified Business Analyst Maria Yepes to navigate the process of becoming certified as a minority-owned business. They are able to use the certification to gain a competitive advantage when bidding on projects for state and local government contracts and private companies.

“Obtaining a certification as a minority business isn’t as simple as some might think,” said Maria. “First the business owner has to make strategic decisions in choosing which certification(s) to obtain and then go through a very detail-oriented process to obtain the certification.”

Maria conducted site visits and reviewed the couple’s certification packets and vendor registrations to agencies like My Florida Marketplace.  At the same time, Beatriz also worked with SBDC Certified Business Analyst and Certified Public Accountant Mario Iezzoni for guidance on taxation and payroll liabilities.

“It was a joy to assist Beatriz through the process.  I enjoy seeing my clients succeed and look forward to working with her in the future,” said Maria.

Beatriz explains that the SBDC’s expertise and experience guides small business owners throughout every step of business. The Cardona’s will continue to seek support from the SBDC to strengthen the longevity of their business through more advanced consulting topics in growth financing, strategic marketing and website search engine optimization.

Their Sign-a-Rama new hires include representatives for customer service, sales and a printing designer. The Sign-a-Rama of New Tampa is located in the corner of HWY 56 and Bruce B. Downs. It’s a full-service sign center designed to be a one-stop shop for all advertising and promotional needs. Their services include a full range of offerings from design to installation in products such as outdoor and indoor signs and banners, full car wrappers and more.  They can be contacted online at www.signarama-newtampa.com or by phone at (813) 994-0101.

The Wall Street Journal’s  “Real Time Economics” contributor, Bob Davis, assesses  the idea of global rebalancing in that “economies with big trade surpluses — China especially — should shift their economies to domestic consumption rather than exports,  and boost imports from trade-deficit countries like the U.S.”

China currently ranks 24th in the list of exporting destinations for Florida origin-exports and there are many small and medium-sized businesses active in the country despite challenges stemming from its sometimes unpredictable business environment. As more and more multinationals and large corporations enter the Chinese market in response to the new global demand, small and medium-size businesses gain enhanced opportunities to position themselves in the market.

Time Magazine reports that 9 out of ten urban areas with the highest GDP growth will be located in China by 2025. When these types of economies rebalance, it gives the population greater purchasing power of American goods. China is already the No. 3 destination for American exports (after Canada, 248.8 billion, and Mexico, 163.3 billion).  In 2010 American companies exported $91.8 billion, according to the U.S. Department of Commerce. As our local, small businesses continue to look at future growth trends they will continue to identify opportunities around the world.

Thinking about exporting?  Learn more about international trade through the SBDC’s International Trade Workshop and read Maria’s article on export licenses.

The SBDC offers a Florida Export Series offered twice a year. If you are interested, preview what will be offered this year at Florida Export Series Details.

Top product categories exported to China:

• COMPUTER AND ELECTRONIC PRODUCTS (16.6%)
• AGRICULTURAL PRODUCTS (15%)
• CHEMICALS (12.9%)
• TRANSPORTATION EQUIPMENT (11.6%)
• ALL OTHERS (44%)

Top 50 Florida-origin exports to China

Sources & More Information on Exporting to China:

http://blogs.wsj.com/economics/2010/08/24/foreign-retailers-fuel-chinas-export-machine/?KEYWORDS=export

http://www.time.com/time/magazine/article/0,9171,2066754,00.html

Read more about Doing Business in China: 2011 Commercial Guide for US Companies from the U.S. Department of Commerce

Both the seller and the buyer are responsible for choosing the INCOTERM for a particular transaction and negotiate a term in which they both agree.  Not understanding these rules delays the transaction process and places the undereducated business at a disadvantage because it isn’t able to negotiate effectively.

Want to learn more about international trade basics?
>> Attend the SBDCs Going Global seminar
>> Get Free International Business Resources

INCOTERMS Cheat Sheet:
download a copy here

One of the most common INCOTERMS for international trade transactions is FOB – Free on Board. Under this term, the seller delivers the goods to the buyer once the goods are over the ship’s rail at the port of export. For example, if the seller ships from the Port of Tampa, the term will say FOB Tampa.  If the goods are lost or damaged after they cross the ship’s rail, it is the loss of the buyer. FOB defines the responsibilities of the seller and buyer as follows (although there could be additional items):

There are two main changes from the INCOTERMS 2000 to INCOTERMS 2010:

•        The 2000 rules were grouped in 5 categories (Group E, Group F, Group C, Group D). The 2010 rules are grouped in 2 categories by mode of transport (any mode or  sea/inland waterway).

•     The 2000 terms had five rules listed under Group D (DAF, DES, DEQ, DDU, DDP). Those five rules were replaced by three rules (DAT, DAP, DDP) reducing terms from 13 to 11.

INCOTERMS 2010: There are eleven terms grouped into two classes:

RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW          EX WORKS

FCA           FREE CARRIER

CPT           CARRIAGE PAID TO

CIP            CARRIAGE AND INSURANCE PAID TO

DAT           DELIVERED AT TERMINAL

DAP           DELIVERED AT PLACE

DDP           DELIVERED DUTY PAID

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS            FREE ALONGSIDE SHIP

FOB            FREE ON BOARD

CFR            COST AND FREIGHT

CIF             COST INSURANCE AND FREIGHT

Not every exporter in the U.S. needs an export license. Exporters need to consider the type of exporting product, the country of destination, the end-use of the product and the end-user in order to determine if the exporting transaction requires a license. The majority of export transactions will not require a license from the U.S. government. However, the exporter needs to perform �due diligence� and determine if any Federal department or agency will require a license. U.S. Government agencies involved in export controls include The Department of Commerce, the Department of State, The Nuclear Regulatory Commission, The Department of Energy, The Drug Enforcement Administration, The Food and Drug Administration and The Department of Agriculture.

Most export licenses are issued by the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce and they are issued for transactions involving dual use products. These are products that have a military application, as well as a commercial application. Dual use export licenses are required in certain situations involving national security, foreign policy, short-supply, nuclear non-proliferation, missile technology, chemical and biological weapons, regional stability, crime control, or terrorist concerns. For more information, please visit the BIS website at www.bis.doc.gov.

If you need further assistance with export licenses or export planning, please schedule a free appointment with one of the SBDC�s international trade consultants.

President Obama has signed into law the U.S. Manufacturing Enhancement Act. The bill suspends or reduces the import tariffs on raw materials that are used by U.S. manufacturers and that are not available in the U.S. Products include certain chemicals, synthetic fabrics, herbicides, among others.

With this action, the government hopes to help manufacturers reduce cost and be able to generate more employment. The government also expects the reduction in cost will make American products more competitive in foreign markets, which will translate into a boost for exports. The National Association of Manufacturers estimates that the bill would boost production by $4.6 billion and support almost 90,000 jobs.

The Act supports the president’s National Export Initiative to promote exporting and it comes at a time when the administration is being criticized for not passing the free trade agreements with Colombia, Korea and Panama; and after the U.S. Department of Commerce announced the trade deficit in June climbed to its highest level since October 2008.

Fill out an Electronic Request for Consulting to begin working with an International Trade Consultant.

For more information please visit:

http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04380:@@@D&summ2=m&

http://www.nam.org/Communications/Articles/2010/08/Manufacturers-Praise-Presidents-Signing-of-Miscellaneous-Tariff-Bill.aspx

http://www.washingtontimes.com/news/2010/aug/11/obama-signs-tariffs-bill-to-aid-manufacturers/

Typically, the organization that puts together the trade mission assists the importer/exporter by identifying and scheduling the appointments with suppliers/buyers. Other services can include providing translators or meeting with key government officials in the foreign market.

Currently, there are two trade missions available to Tampa Bay Area Exporters:

Trade Mission to Colombia – August 9 – 14, 2010

This mission is organized by Enterprise Florida and includes visits to Bogota and Cartagena.

Trade Mission to Panama – September 6-9, 2010

This mission is being led by Manatee Economic Development Council and the Economic Development Corporation of Sarasota County. It includes a tour of the Panama Canal.

The Small Business Consultants can help you decide if a trade mission is the right marketing strategy for your business to expand internationally. It is recommend you do extensive planning before participating in a trade mission. Please contact our Certified Global Business Professionals for assistance.

Esitmez’s 27-years as Chief Operations Officer and Supervisory Contract Administrator in the U.S. Air Force in Turkey provided him the contacts and necessary skills for selling products overseas, yet his vast experience in government purchasing couldn’t have single-handedly made his business a success.

Esitmez says that his success is the result of solid business tactics he developed by utilizing the free resources of the Small Business Development Center (SBDC) at USF, which not only enabled him to run day-to-day operations, but also develop strong ethics and best business practices that translate into repeat business. These principles enabled ASTE Trade International to conduct more than 100 export transactions and boast nine clients within the critical first year in which many businesses fail.

Tampa Company Exports to Turkey, Iraq and Afghanistan with SBDC support

After retiring in October 2008, Tuncay came to the United States and quickly discovered his desire to start an exporting business. He turned to the Small Business Development Center at USF (SBDC) for expertise and began attending seminars and counseling with Certified Business Analyst (CBA), Maria Clara Yepes, for his international needs, as well as CBA Mario Iezzoni for assistance in launching the company and understanding taxation implications and business planning.

He is excited to attend the SBDC’s advanced International Trade Certified Program that kicks off spring 2011. This program is one of only 11 NASBITE International accredited trade assistance programs in the world and is the first in Florida. The program is taught by SBDC partners in the international trade community and SBDC international trade experts who are Certified Global Business Professionals.

“I don’t know how to express my feelings about the support given by Small Business Development Center,” said Esitmez. “I’ve always received superb guidance. My business plan is to continue to use SBDC services to help me expand my business to other international markets.”

The SBDC at USF is proud to assist local companies in any industry with all of their business needs by providing free counseling and training and low-cost seminars.

According to recent statistics Florida’s international trade industry is experiencing healthy growth. Statistics for April 2009 – April 2010 show merchandise exports are up 15.4% and imports are up by 27.5%. In 2009, Florida’s merchandise trade totaled $103 million. Florida is also a leader in service exports, with an estimated value of $25-30 billion annually.

More than 95% of exporters in Florida are small businesses and the growth in the international sector is a much needed sign of hope for business owners who have been trying to navigate through rough economic times. Small businesses in Florida can benefit from a world-class trade infrastructure, which includes 14 deep water seaports, 19 commercial service airports, transportation and logistics providers, specialized legal and banking services, and export financing.

Small businesses in Florida can also benefit from free technical assistance from organizations such as the SBDC at USF, Enterprise Florida and the US Commercial Service.

In terms of market potential, a white paper released by the Florida Chamber of Commerce listed the following countries as the most promising foreign markets for Florida’s exports: Brazil, Colombia, Dominican Republic, Chile, Peru, Mexico, China, Spain, India and emerging European economies.

Leaders Look to Double Florida Exports

Florida’s government and business leaders are looking at the potential of doubling Florida-origin exports of goods and services in the next 5-7 years. Florida is well positioned to generate employment and economic development through the growth of its international sector. Small business owners should be preparing themselves to get involved in this industry if they have not done that yet.

More information about international trade assistance

For more information about the statistics mentioned above please visit:

www.onevoiceforflorida.com/media/945a714d-e228-4cf9-a097-4c80505997e9.pdf

www.floridatrend.com/article.asp?aID=53302

www.eflorida.com