Risky Business

Why exporting is outside many companies’ comfort zone

By Bill Armbruster

The results are in, and the risks have it.

37 people responded to the question in my last blog about the biggest obstacle to exporting. The results were:

4 Fear of the unknown
2 The credit crunch
5 Transportation bottlenecks
7 Red tape
12 Too risky
0 Tariff and non-tariff barriers
7 Something else

[You can see the responders’ comments here.]

The response depends in part on who you are, but in my view fear of the unknown is the biggest reason, followed by the perception of risk. Those two are closely related, and I’ll discuss them below. But from the perspective of many small and medium companies that might like to export, or to export more, the biggest obstacle might be the credit crunch. From the perspective of many shippers, the biggest obstacle is transportation – the shortage of vessel space and containers. And for others, it’s the red tape – the hassles of documentation and compliance with lots of rules and regulations. For them, it’s just not worth the trouble.

So let’s look at the fears and the risks. As one reader put it, “Americans are generally very uncomfortable with anything non-American.” I agree. Our culture, our educational system and our media are so American-centered. We just don’t know very much about the outside world, and what you don’t know, you tend to fear.

As for the risks, one reader commented that when companies analyze the risks, they decide that investing in the domestic market is a safer way to expand sales. To be sure, exporting is not for the faint of heart. There are plenty of risks — not getting paid; finding little demand in foreign markets for your product; running afoul of regulations, such as labeling and testing requirements; transportation bottlenecks; unreliable partners, agents and distributors; corruption; and intellectual property theft.

But there are plenty of opportunities, and many companies fail to consider them when they do their risk analysis. Ninety-five percent of the world’s population lives outside the U.S. At least 1 billion of them are in the middle and upper classes. That’s a huge opportunity, but too many business people, don’t know it, and are too afraid to try selling in foreign markets.

Fortunately, there are resources that can help. First and foremost, there is the U.S. Commercial Service, which has trade advisors at 108 offices around the U.S. and about 90 embassies and consulates overseas. Its Web site — http://export.gov/ — is a treasure trove of information. There is also the U.S. Export-Import Bank http://www.exim.gov/, which provides loan guarantees, credit insurance and working capital loans to U.S. exporters, and direct loans to foreign buyers of U.S. goods and services. There is also the Small Business Administration http://sba.gov/. Its services include quick and easy loans to small business exporters. So help is available.

I’ll have more to say about the obstacles to exporting, as well as other resources to help exporters, in my next blog. Meanwhile, let me know what you think.



About Bill Armbruster

Bill Armbruster, the anchor for The Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write to Bill@TheDatamyne.com

Braving the Risks

The U.S. Census Bureau profiles 288,700 exporters

A profile of U.S. companies that exported to one or more countries 2007-2008 has just been released by the U.S. Census Bureau. The report provides general information on companies that braved the risks of doing cross-border business (see the related Risky Business) to ship some $1,148 billion (FAS value) in exports in 2008. The largest companies (500 employees or more) represented 3% of all exporters and accounted for 69% of known export value. 58% of all exporting companies trade with only one other country. Top destination was Canada, followed by Mexico, U.K., Germany, and China. The top five states based on number of exporting companies were California, Florida, New York, Texas, and Illinois. More facts and figures in the report.

Fresh Outlook

U.S. imports will include more fresh veggies and, especially, fruit

The U.S. Department of Agriculture current Long-Term Projection foresees U.S. agricultural import values rising to US$106 billion in fiscal year 2019, compared with US$79.3 billion in 2008. Strong growth in “horticultural imports” (fruits and nuts and vegetables) accounts for almost half of the projected increase in the next 10 years.

The U.S. was a net exporter of fruits and vegetables in the 1970s. U.S. imports and exports were more or less in balance in the early 1990s. Since then, the U.S. has been a net importer, and import growth has continued to outpace exports.

A key driver: Americans’ demand for fresh fruits regardless of the season, and a varied menu that includes plenty of tropical fruits that were rare luxuries not so long ago. A case in point: avocados.

The California Avocado Commission estimates that Americans consumed 84.1 million pounds of avocados just during this year’s Cinco de Mayo celebrations. At one billion pounds, annual U.S. consumption of the green fruit far outstrips domestic output: Mexico and Chile are the source for most avocados eaten in the U.S., with Mexico supplying almost 82% of this import (by value), and Chile close to 18% last year, according to The Datamyne statistics.

Given the short shelf life of fresh produce, most U.S. fruit imports originate in the Western Hemisphere. See the Datamyne Top 5 Sources for U.S. Fresh Fruit Imports. Bananas are the top trade product, by volume and value. But avocados rank second, and mangoes, plantains and papayas make the top 20. For still more evidence of a changing national diet, see What’s for Dinner, Since 1909.

It's What's for Dinner, Since 1909

The USDA’s food consumption data series marks its centennial

The U.S. Department of Agriculture Economic Research Service recently marked the 100th anniversary of its Food Availability (Per Capita) Data System by updating access to its data and adding some useful new tools. A proxy measure of what Americans have been consuming for the past century, the data series captures what was on hand at grocery stores, restaurants, school cafeterias, and other eating places, from the potatoes, flour and cereal that were the mainstays of the 1900s to today’s more cosmopolitan diets. Try this report tool to see the rapid growth in U.S. per capita consumption of tropical and other fruits since 1970 (a key driver of growth in U.S. ag imports).

The Datamyne’s access tools can help you to fresh data on U.S. imports of fruits, nuts, vegetables, and other foods, including such bill-of-lading detail as shippers, consignees and notify parties, information you can use to sell or source. Ask us how.

The Datamyne Top 5 Sources for U.S. Fresh Fruit

Ready to Go Global?

Do you have the 9 characteristics of successful exporters?

Export.gov, the web guide to U.S. government assistance for American businesses that want to sell internationally, is offering a short self-assessment of your company’s readiness to enter the global marketplace. Simply click “yes” or “no” to nine questions and find out whether your company shares the characteristics common to successful exporters — and where to find resources to remedy any shortcomings. Go to http://bit.ly/d2AhZo

Our online survey asks only one question: What’s stopping U.S. companies from exporting? The survey is here. Results so far are here.

How to: Import–Export

SCORE offers small companies an intro to global markets

Companies thinking about importing or exporting can get a good introduction to the basics of doing business across borders from SCORE, the nonprofit "Counselors to America's Small Business" and resource partner with the U.S. Small Business Administration (SBA). Three SCORE chapters have announced one-day Import-Export seminars: SCORE / New York, May 18; SCORE / East Bay (Oakland, Fremont, Calif.), various dates starting May 20; SCORE / San Diego, June 10. Look up local SCORE chapters here.

If you’ve thought about exporting, but have been hesitant to try, can you tell us why? Red tape? The credit crunch? Too risky? Choose (or write in) the biggest obstacle to exporting in our one-question survey here.