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How to Export Products Overseas

maIs exporting products overseas really so difficult?

Did you know? According to Businessweek, almost 46% of businesses abroad don’t export their products to foreign markets because they don’t know how? Considering the ever growing buying capacity seen in some foreign markets, this is a disappointing fact. But the truth is, if you are well-prepared, motivated, and confident, exporting your products to overseas businesses is not so difficult. Here we will look at 5 elements you may consider to help you get started exporting products.

CONNECTING WITH CHINESE CUSTOMERS

Visiting trade fairs is an excellent way to introduce your business and products to other business abroad. Thousands of business representatives and people attend trade fairs providing excellent opportunities and fast networking. You can meet and talk to many business representatives and immediately begin forming relationships and trading company information. The time and effort in attending these trade fairs, we believe is an investment. The majority of trade fairs in China are held close to large cities like Shanghai, Guangzhou, and Beijing. Thus, if you are worried about the language difference or transportation, you can take comfort in the fact that most business people in these cities will be able to communicate to you in English and transportation options are readily available. Some businessmen take up the practice of booking a flight and hotel to Hong Kong and taking a train to Guangzhou or one of the large cities where the trade fair is held. (As more planes leave and enter Hong Kong, the opportunity to shop for cheaper flights is increased.) Finally, don’t forget to apply for a visa at least one month prior to your departure.

However, if visiting a trade fair is not an option for you and your businesses, a second option is connecting to businesses similar to your own and seeing if they have any recommended connections or leads overseas. It might take time to find some overseas connections this way, however, if you are committed, it’s very possible to find some overseas buyers through networking.

CONTACTING A DISTRIBUTOR

Some companies recommend using a distributor to help with the exporting process. Although this option comes with a price, it can be a good option for businesses new to the exporting process. (It’s also a useful method for companies who may not have the time or people designated to handling the exporting side of your business.) A distributor will know the overseas market well and can offer advice and assistance on customers clearance, packaging and documentations, importing regulations, and export certifications needed (it varies from country to country). Most distributors offer help in many different areas including marketing guidelines, trademark regulations, etc. Even if you just use the help of a distributor to help you get started, the fee you pay the distributor could be an investment.

CHINA’S CCC MARK

To export most products into China, your products must comply with the standards and regulations outlined in China’s Compulsory Certification (CCC). This certification is issued by China’s Certification and Accreditation Administration of China (CNCA)

There are 21 product categories that require the CCC mark.

– Electrical wires and cables.
– Switches for circuits, Installation protective and connection devices.
– Low-voltage Electrical Apparatus.
– Small Power motors.
– Electric tools.
– Welding machines.
– Household and similar electrical appliances.
– Audio and video apparatus.
– Information technology equipment.
– Lighting apparatus.
– Telecommunication terminal equipment.
– Motor vehicles and safety parts.
– Motor vehicle tires.
– Safety Glasses.
– Agricultural Machinery.
– Latex Products.
– Medical Devices.
– Fire Fighting Equipment.
– Detectors for Intruder Alarm Systems.
– Wireless Local Area Network (WLAN) systems.
– Toys.

To get the CCC mark your company must go through a process. First, there will be an inspection of your factory/company. Second, there will be a follow-up inspection of your enterprise. Finally, your products will be sent to authorization laboratories in China. No matter where your business is located, you must receive the CCC-mark if your products will be marketed in China. If you export products that do not have the CCC-mark, your products will be held-up in customers and perhaps seized or destroyed.

TRADEMARK REGISTRATION

Finally, we strongly recommend you register your trademark in China before you start exporting your products. China’s trademark registry process is based on first-come-first-serve standards. Thus, it’s recommended you to register your trademark before you ship your goods. It’s not required that you register your trademark, however, it’s recommended as this can protect your product and company’s name/reputation.

Is the market for your product flooded with competitors? Every year, increasing numbers of businesses are connecting to the Internet. Your ability to form relationships with businesses and market your products to vastly different markets can offer your company new opportunities you never thought possible. Depending on your product and country of origin, demand for your product could be higher; the demand for foreign products are often greater in other countries. Furthermore, the market for your product may not have so many competitors overseas.

Who Has Control of the World Commodity Markets

efThe ability to control monetary policy and interest rates is among the strongest controls over the commodity markets, financial markets, money supply, and currency underpinnings. The control of currency and the Forex markets directly and indirectly influences and alters the world monetary system. There are several large and powerful groups which lie outside this main power base, and they often have the ability to change the outcome for the better!

There are many theories about true world control and the ability for this to exist in a dynamic manner. As money and assets shift over time from the US and Europe to Asia, South America, and the Middle East, one can observe the drive to control for land, technology, patents, money, water, food, language, equity markets, and interest rates. Interest rates are one of the most transparent ways to spot the difference in policies and opinions.

As commodity prices shift and fortunes rise and fall, there is little chance that money alone dominates the world resources. The power bases of each continent is linked to large quantities of different valuable natural resources. As food and water shortages arise, these areas could demand more importance than energy and mining commodities.

Europe currently has a negative LIBOR. Many countries in Europe have 10 year bond rates which are positive, while Japan and Sweden have negative 10 year bond rates. Several countries including Japan, Switzerland and France have negative rates for short terms. Does the annual Forbes 400 hold the secret to international power, in addition to money and equity.

Forbes Magazine creates a list of the most powerful and important politically people in the world. The list often includes Warren Buffet and Bill Gates. Could they substantially impact the commodity markets in collusion with Goldman Sachs or Koch? It is commonly understood that the power behind the world interest, currency, and commodity markets is wide and scattered. Have recent international oil markets and currency swings moved the base of power behind these markets?

There are reportedly 13 families which run the world including:

Astor
Bundy
Collins
DuPont
Freeman
Kennedy
Li (Chinese)
Onassis
Rockefeller
Rothschild
Russell
Van Duyn
The Merovingian (European Royal Families)

Another source indicates that a different thirteen groups rule the world economy including:

Rothschild (Bauer or Bower) – France
Bruce
Cavendish (Kennedy)
De Medici Royal Family of Italy
Hanover
Hapsburg Royal Family of Austria
Krupp
Plantagenet
Rockefeller
Romanov – Royal Family of Russia
Sinclair (St. Clair)
Warburg (del Banco)
Windsor (Saxe-Coburg-Gothe) -Royal Family of England, UK, and Scotland

These lists contain several of the same large families. It is interesting to note that the power and money of Europe are largely hidden, unreported, or disguised in family trusts, land holdings, and corporate shells. The royal family power and money has existed for over a thousand years. The newly emerging power base in China derived from USA and Canadian acquisitions is bold and unseen in an overall value format per country. Changes in foreign asset ownership challenge long-term balance sheets in this world built on foreign trade.

Can the large fortunes or families dictate interest rates, money supply, commodity prices, and Forex currency? Interest rates have been controlled in NYC through the derivatives markets. The silver market was dominated briefly by the Hunt family. The copper market has been tightly traded several times over the last two decades. It seems possible that the transfer of natural resource control and foreign assets to China may create a new tipping point. The demand for natural resources in product creation gives China a large weapon to use against their trading partners.

What happens as China uses their money to purchase assets rather than financial instruments? The power balance shift is clearly ahead and competes with export tariffs to inflict monetary pain on North America. It has long been thought that Asia could shift its investing into assets rather than financial instruments.

Dr. Rebecca Stone has written over 80 book and product reviews, over 300 articles, 160 LinkedIn posts, and three books found on AMAZON. Her publisher is Speedy Reads. She has a three graduate degrees including a MBA in Finance from the University of St.Thomas in Houston, Texas. Her branded journalism news includes Branding America and Trading Jenga.

Dr Rebecca Stone has three published copyrighted books including The New Drone Juggernaut, Horny Goat Weed, the Magic Chinese Herb, Quantum Orthomolecular Medicine, and Quantum Brain Healing. Her fourth book is a children’s book out later this fall named The Undersea Adventure of Aladin and Alibaba. Her publisher is SpeedyReads.

 

Trials and Tribulations With Transfer Pricing

rThe legality of transfer pricing certainly has a grey line. Sure, there needs to be the benefit of companies trading with other foreign companies. Companies need to benefit from the abundance of goods and resources from foreign land. However, when prices are set as to avoid the larger taxes and gain maximum profit, litigation may be mandatory.

Transfer mispricing is defined as trade to related parties at distorted prices to minimize the overall tax bill. Unrelated parties who participate in a trade that generally follows a good transfer pricing through the use of the “Arm’s Length Principle” where a common market price for the item being traded is set. However when a company has related subsidiaries, they may participate in this price manipulation. Let us say there are three related companies: X, Y, and Z. Company X has an abundance of minerals that they will trade to Company Y at a low price. Company Y is located in a tax haven, or a place where the tax rates tend to be low. Company Y then trades to company Z at an artificially high price. Company Z has low profits, however company Y has very high profits. Along with that, they are in a low tax area, therefore their high profits achieve maximum profit as they avoid the burden of heavy taxes (Tax Justice Network). As a result, taxes become skewed.

As an actual example, China faced issues regarding transfer price manipulation. In the article, “How To Train A Toothless Dragon: Finding Room For Improvement In China’s Transfer Pricing Regulations”, fifty-five percent of Chinese companies reported a net loss in 2005. Along with this number, a staggering forty percent of transnational companies held in China were forced to make tax adjustments. The Chinese Government believed this was actually due to price manipulation and sought to eradicate that practice in their country. In order to accomplish this goal of avoiding the mispricing of international trade, the Chinese government enacted the sixth chapter of the Enterprise Income Tax Law of 2008. This increases penalties against companies whose intention is to lower their taxes, requires companies to fill out detailed disclosures of their international trade, and demands an advance pricing agreement where the taxpaying company and the Chinese tax authority agree ahead of time on the price of taxes.

Transfer mispricing is so hard to track because the trades switch from multiple companies in multiple countries that all have different tax rates. A single, uniform tax rate might be ideal in theory in order to ease the tracking and the tax pricing of these trades, but it of course would not work in practice. Some companies need a lower tax rate in order to promote business in their area. Countries, like China in from 1996 to 2000, have to put a lot of effort in order to recover billions of dollars lost through transfer pricing. China during this time period recovered almost 10 billion yuan in this time period.

Transfer pricing also has a burden separate of mispricing. Even if companies comply fully with the Arm’s Length Principle, they are subject to disputes that cause adjustments to their taxable income as well as potential penalties because the tax authorities may not agree with the corporations’ economic method or value chain (Journal of Accountancy). Statistically, a growing number of participants in a survey conducted by Earnest and Young said that their companies faced penalties due to transfer pricing. They note that transfer pricing is among the top of all tax concerns because the company is unsure if they are properly abiding by the rules set by the tax authority.

The article regarding the struggles China has faced with transfer pricing sets up an argument. The argument is instead of focusing on reviews after the fact, focus on stopping transfer mispricing in its tracks while it is occurring. The government, like most other governments, focus on how to respond to the acts of price manipulation. These responses are generally after the mispricing has been done and the investigation generally takes a large amount of time. Often, these investigations are failures as the companies committing these illegalities slip right under the investigators’ fingers. In order to potentially prevent this from happening, the article proposes that China better educates its local tax officials on what price manipulation is. They also suggest a stronger cooperation with other countries in distributing information about transfer price offenders. These strategies can be performed by all countries to reduce and hopefully eventually prevent transfer mispricing.

Transfer pricing is a key issue with both individual companies and entire countries. It is a key driving force that sways a country’s taxable revenue as well as a corporation’s income. The uncertainty of transfer pricing is what makes both companies and countries very precautious. A stronger, more uniform tactic to stop the disputes of transfer pricing can serve as a useful tool as training can be done in multiple areas since they will all share the same method. Overall, trading internationally needs to have more defined regulations.

The State of Manufacturing Shifts From China to Vietnam

asAsia became a manufacturing leader during the 1960s, when Japan began exporting electronics and other retail merchandise. Twenty years later, South-East Asia became dominated by Japanese-owned manufacturing plants. During those 2 decades South Korea and Taiwan also entered the industry.

In 1990, following China’s entry, 26 1/2 percent of worldwide manufacturing was being done in Asia. Thirteen years later this figure grew to 46 1/2 percent. Today, China outputs approximately 1/2 of all Asian manufacturing.

The Shift from China to Vietnam

News releases in 2010 reported that Vietnam had become the primary supplier of Nike sneakers, accounting for 37 percent of the fabrication while Chinese numbers had dropped to 34 percent. A few years later, in 2013, Vietnam’s share of Nike product manufacturing had grown to account for 42 percent. China dropped even further to 30 percent. Over the intervening five years, news reports featured an increasing number of stories about manufacturing moving from China to Vietnam.

Chinese Wages and Currency Strength

There have been many factors responsible for the increasing attractiveness of Vietnam to provide the assembly labor including increases in the demands of the Chinese workforce and rises in their economic and currency strength.

Beginning with 2001, the hourly wages for low skilled factory labor in China have risen by nearly 12 percent per year. Additionally, their currency, the yuan, reached new all time highs when compared against other trade-weighted currencies.

In response, manufacturers have sought other resources resulting in the growth of Vietnam’s market share in the assembly and fabrication of handbags, apparel, footwear and furniture items.

Further, the HSBC’s purchasing managers index revealed that factory output in China for November of 2014 had reached its lowest level since May of that year, falling to an index figure of 50. For understanding the index, numbers above 50 indicate growth, while those below show retraction.

Affected Products

Recent announcements from major industry leaders reveal that the shift in preference of Vietnam over China for factory production crosses several product lines:

Ambivalences with Southeast Asian Facilities

  • Esperson CEO announced shifting more of their whitefish processing from China to Vietnam.
  • The TAL Group revealed plans to move their garment operations to Southeast Asia from China.
  • Microsoft disclosed changes in its manufacturing strategy, resulting in shifting phone production from China to Vietnam.
  • Samsung announced opening a $2 billion smart phone factory in Vietnam, followed by a later announcement of developing a $3 billion factory there to support their production requirements.
  • Mitsubishi disclosed plans to develop the doors for the Boeing 777 commercial jets in Vietnam

While the general picture painted about Vietnam becoming a manufacturing leader are generally optimistic, there exist a number of issues that cause concerns for overseas firms.

The location of Vietnamese ports are much better situated than their Chinese counterparts. However, the quality of the roads leading to and from them are significantly worse. This is a situation that also affects the industrial locations of Ho Chi Minh and Hanoi to the north, where the appeal of the modern industrial parks is counterbalanced by the unattractiveness of the poor vehicular access.

Travel by train has its own problems in Vietnam. Locomotive access from Hanoi to Ho Chi Minh takes roughly 34 hours. In China getting from Beijing to Urumqi by train takes close to 32 hours, for a distance that is nearly double the Vietnamese locations.

Vietnam also suffers from severe issues related to outdated manufacturing processes. In fact, the state of their manufacturing has been described as “[equivalent to] China 10 years ago.”

Chinese Advantages in Asian Manufacturing

While several factors have driven manufacturing to Vietnam, many analysts believe that China still represents a better option for several reasons that include:

  • Poor Vietnamese infrastructure and heavy governmental bureaucracy representing significant barriers to smaller organizations
  • Fragmentation in the Vietnamese manufacturing industry because of lack of a basic infrastructure
  • Chinese domination of industry perceptions and supply chain channels, e.g., alibaba.com queries reveal that Chinese penetration is 151 times greater than Vietnamese for equivalent products
  • Chinese advantage over Vietnamese for delivering local substitutes for components required for product completion