The US economy is one of the world’s most globalized, and it’s believed that US exports totaled $1.4tn dollars in 2017. It’s easy to see why firms make this decision: international customers, especially from emerging major economies such as China and India and established rich regions such as Western Europe, often have plenty of money to spend – and lots of desire to spend it on well-regarded American products and services.
However, there are also downsides. If you send out physical products, for example, then you may be hit by import rules and taxes – especially in an age when tariffs are back on the agenda. No matter what sort of business you run, exchange rates and fees always pose the risk of hitting hard. This article will look at these issues and what they mean for American exporters.
The first issue that many companies with international customers run into is the problem of currency exchange. When an international customer wants to buy from the US, they of course have to exchange their cash into dollars in order to complete the transaction. If their currency has weak purchasing power compared to the dollar, then they may well be put off buying.
In some circumstances, the buyer may simply decide to change their purchasing plans, or perhaps buy from a domestic provider. Even if the product is more expensive in their own country, it could make financial sense to buy from there once the other fees are taken into account. In other cases, the buyer may decide to delay and purchase it later. Either way, this could impact your bottom line.
There are other ways that currency transactions can put your customer relationships under threat. Fees are often high, especially when peddled by unscrupulous brokers. A savvy American business owner, then, might want to advise their international customers as to where the better rates can be found. There are plenty of affordable FX brokers available online, and by doing the research now, you may well find that you can point your customers in an affordable direction.
Unfortunately for those who work with certain foreign countries on a regular basis, meanwhile, political interference means that it may be difficult to carry on international trade. President Donald Trump has made it clear that he wants to attempt to prioritize American manufacturing, which has led to him imposing tariffs on a number of nations around the world. Earlier this year, for example, he imposed $50bn worth of tariffs on China in one go – which led to China imposing a similar amount in return. For American firms that sell to China, this has meant tough times – and there’s no immediate signs of the situation returning to the pre-tariff days just yet, either.
When a customer based outside of the US buys from you as an American producer, you’ll technically be classed as an exporter – which means that you’ll need to follow a certain set of rules in order to avoid falling foul of the law. US Customs and Border Protection administrate these rules, and they say that exporters will need to file Electronic Export Information (or EEI) when the value of the commodity being exported exceeds $2,500. It’s not the responsibility of the person buying the item to do this – it’s yours as the exporter. Your item will also have a Schedule B number, and this will need to be found out from the Census Bureau in advance.
It’s also worth noting that when you send a product to a foreign country, it will be subject to the rules of that country. These rules could well be different to the ones in place in the US – and if a shipment is deemed illegal at the destination country’s border, then your customer might not receive it. While this wouldn’t necessarily be your fault, it’s not great for business if it happens. For that reason, it’s wise to encourage all customers to remind themselves to check their country’s import rules when you do business with them.
The American export scene is as booming as ever, and plenty of companies in the US have international customers. However, this doesn’t mean that everything is simple and rosy: in fact, the trading environment for American businesses is in some ways harder than ever. Threats come in the form of everything from shipping rules to currency issues, and there’s no sign of it going away. It’s important, then, for firms to do their research before ploughing ahead with international expansion.