Exporting Nevada goods
November 7, 2016
It’s a big world out there.
Some northern Nevada businesses have discovered a ready market for their goods and others would benefit by venturing beyond the borders of the United States.
“Eighty percent of the world’s wealth is outside the U.S. and 95 percent of the buyers are outside the U.S.,” Robert Saikali, vice president/manager of the International Banking Division for City National Bank, said. “If you’re only selling in the U.S., you’re limiting your business to 5 percent of the world’s market.”
From 2005 to 2015, exports from Nevada to Fair Trade Agreement markets grew by 114 percent, according to a 2015 report from International Trade Administration. Companies in the Reno/Sparks and Carson City metro areas exported more than $2 billion worth of goods, or 21 percent of exports from Nevada.
“International trade can be very beneficial and lucrative, but if you don’t (do your homework), you can have your head handed to you on a plate.”Paul Stowal City National Bank market strategist
Exports are increasing but the United States remains far behind other countries.
“We are one of the few countries with a negative trade balance,” Saikali said.
A number of area businesses and organizations are working to change that imbalance.
Coral, LLC, a Carson City company, uses coral imported from the Dominican Republic to make toothpaste and nutritional supplements, and then sells its products in both U.S. and overseas markets.
“Coral both imports and exports,” said Lori Haney, manager of the Carson City branch of City National Bank, which has Coral as a client.
Ametherm, a tech company, is another example. The company sells its thermal sensors made in Carson City to a world market.
Reno’s Kimmie Candy has also made inroads internationally. In May it was recognized with the Presidential “E” Award for Export Success, which recognizes U.S, entities that make a significant contribution to the expansion of U.S. exports.
Exporting takes more than an international shipping label.
Joseph Dutra, president/CEO of Kimmie Candy, described some of the changes they had to make to export its products.
Weight and measurement often need to be converted to metrics, and the labels translated to the target country’s language. In Canada, that means bilingual labels in both English and French, Dutra said.
Shipping food products presents the biggest challenges.
“The Japanese are very strict about benzoic acid,” Dutra said.
Tests on early shipments to Japan of Kimmie Candy products tested positive for the chemical, he said, even though suppliers insisted it wasn’t used in their products. It took three months of research, a second shipment rejected, and tracking down their suppliers’ suppliers before the company found the source in whey powder manufacturing.
It was only a minute amount, but testing is so stringent in Japan — parts per billion instead of the old standard of parts per million — that the product had to be changed to accommodate the demands of the Japanese market, Dutra said.
It’s not just Japan. To sell in Europe, GMO products are banned — which is an easy one for Kimmie Candy since its products are already GMO-free. However, the colorful candies the company produces must use only natural dyes.
“In our EU mix, everything is natural,” Dutra said.
For Kimmie Candy, it’s worth the adaptations.
“Thirteen to 15 percent of my business is exports,” he said.
City Bank’s Saikali noted that companies with seasonal businesses, such as coats or skis, especially can benefit from trade to countries in the southern hemisphere.
“You basically have a cash flow all year round, not only in the winter season,” he said. “A stable cash flow.”
Exports can be profitable, but there are substantial risks. Business owners need to do due diligence before venturing outside the U.S., advisors said.
“International trade can be very beneficial and lucrative, but if you don’t (do your homework), you can have your head handed to you on a plate,” Paul Stowal, market strategist for City National, said during a conference call with the NNBW that included Saikali and Haney.
“If someone calls and says ‘I want $1 million of your product,’ it’s hard to say no,” Saikali said, but it’s better to delay and do it correctly from the start.
Business owners must ask themselves, does the business have funds available for market research? Can it increase production to make enough products to export? What international markets would be receptive to the product? How is trade done in that market? What are the laws governing trade in the target country? And what are the distribution channels?
It’s important to assemble a team of trade-savvy advisors, Saikali said, to answer those questions and to guide a company through potential issues.
Essentials include a bank with an international banking presence, a CPA firm that knows how to do sales in an international market, an attorney knowledgeable in international trade law, plus a strong network of advisors from public agencies and private organizations.
“We become like part of the team, not just their banker,” Saikali said.
That team can help a business through the maze of international trade.
Trade laws differ with each country. For instance, a company may sell overseas and then pull out because it’s not working out like expected.
“The purchasing company may still have the right to sell products in your name even though it’s not your product,” Saikali said. “You need to research the legal system of the country.”
Something as basic as how the exporter gets paid, can cause major headaches.
The manufacturer wants to be paid before shipping, but the international buyer doesn’t want to pay for the goods until they’re received, and then maybe payments over a term.
“It creates a big problem for an exporter to sell with an open account without doing due diligence,” Saikali said.
Banks that have international ties know the reliability of banks in the other country, he said, and can assist by issuing a letter of payment, which protects both the seller and buyer.
“We can give (the seller) money now and we will wait for the bank in India or China (or another country) to pay us,” he said. “So the company doesn’t have to be short cash” while waiting for payment.
A number of government agencies and programs can also help businesses venture into the international trade arena.
“Folks don’t even know the resources that are out there,” Haney said, referring to the help businesses considering exporting can get. “They feel overwhelmed. They don’t even want to try. In Nevada there are a lot of resources out there.”