The California Asian Pacific Chamber of Commerce presents the 2019 Grow Your Export Forum Series. This series aims to educate small and medium-sized enterprises (SMEs) on export opportunities and re-sources. We bring together export specialists and international trade experts to discuss current trends in global trade, highlight emerging markets, and share insight on the tools and resources available to U.S. SMEs.
This series began with the 2019 Grow Your Export Forum Los Angeles on February 8, 2019. This forum covered export topics around the Japan business market, shipping preparation materials and procedures to export, and the federal and private -sector resources available to help SMEs begin the export process. This report highlights key points to help businesses decide on a market
and navigate through export procedures.
JAPAN BUSINESS OUTLOOK
Japan's bustling economy has become highly attractive
to foreign companies.
Since 2012, Japan ranks the 3rd
highest GDP in the world at 5.45 trillion US dollars. The number of inbound tourists to Japan is nearly four times
larger than in 2012 at 28 million tourists. With the Olympics coming to Tokyo, Japan in 2020, U.S. companies are eager to know about upcoming trends and changes in the Japanese economy and how they can enter this dynamic market.
“Doing things by yourself is the toughest way (to do international business),” says Hisashi Kanazashi, Executive Director of JETRO Los Angeles.
It is not impossible, but the decision-making process takes time. For those companies ready to export, Kanazashi recommends to partner with an established Japanese company. The Japanese company understands the cultural and economic landscapes, has the capital to help fund the partnership, and has insight on the best entry strategy for your product.
Many believe that doing business in Japan is expensive, but business costs are relatively low compared to other countries with well-established economies.
For example, the average office rent per square feet in Hong Kong is $307 USD, while Tokyo is $171 USD and drops down to $46 USD for a small scale office buildings. Japan is not as expensive as many believe, even SMEs can afford to do business in Japan.
Japan is widely recognized for their R&D capabilities and technological innovation.
As the Olympics near, Japan has made structural reforms a priority. This push means an increase in Mobility as a Service (Maas), including driverless transportation services by 2020, drone delivery services in urban areas by 2020’s, and commercialization of connected truck by 2022. This could benefit U.S. companies who manufacture sensors or chips that can be used for distribution. Other structural reforms include technological advances in healthcare, energy, FinTech, and agriculture. Japan also plans to update their inbound activities, such as facial recognition at airports, more efficient check-in, security, and customers, as well as increasing translation systems. This is valuable to foreign business as the language barrier is a common challenge when entering a market.
Take the time to prepare all logistics and export documentation. Performing this process prior to exporting helps minimizes risk and possible obstacles.
“When in doubt, ask for help,” says Vince Martinez, DHL Los Angeles Gateway Director.
It is important to understand three main points about your product for customs clearance.
First, know the classification of your product, indicating exactly what the good is. Second, customs valuation is important as it states the value of the good and how much it costs. This will determine the duty to be paid on your product. Lastly, it’s important to know the rules of origin —what country the good is made in.
Prepare all product documentation in full detail descriptions. Know the import of record of destination, full commodity description with value of goods, harmonized tariff code, term of sale, and payer of duties and taxes. Documents to needed to export are Airway Bill (AWB), bill of lading, commercial invoice, export declaration, Electronic Export Information (EEI), packing list, certificate of origin, and letter of credit. Licenses, permits, carnets, or certificates may also be necessary depending on the product.
Know the basic types of export control regulations to comply with the law. For, commodity based controls, International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) license controls based on what the item is or is essential character. Party based controls include debarred, restricted, and denied parties. Country based controls go to Office of Foreign Assets Control (OFAC) embargoes and Bureau of Industry and Security (BIS) country restrictions. Any product, information, or service, deemed as an export, must comply with these controls.
Export control covers more than commodities. The sharing of technology and data with a foreign country is considered an export, even when hiring foreign nationals. The sharing of documents with other countries need approval, license, and permit to export. Controls should be considered on in-person meetings and email. Get help from your legal department or outside council. It is important to comply with these laws and ensure not to get it wrong. Violations can result in fines, penalties, and even prison time. Use local, statewide, and federal resources to ensure you have the correct documentation specific to your industry and product category.
EXPLORING NEW MARKETS & WHO TO GO TO FOR HELP
Understand in the market you are seeking to enter.
“The more you understand the destination market, the higher the likelihood you get success in that market,”
said Dr. Min Shi, Management Professor at CSU Los Angeles. Companies tend to focus on the economic factors in the foreign country and fail to consider outside factors pertaining to culture, ethics, and sometimes religion.
“All these factors are important because sometimes these factors can have a higher impact than economic factors... The best way (to research) is it go there, meet with the customers, talk to the local people, study the destination market information, and hire local staff,” says Dr. Shi.
Develop an export strategy.
Just like any business plan, “the first step should be to come up with an export marketing plan,” says Norman Arikawa, Port of LA, Assistant
Director of Trade Development. This export plan is the foundation to your business activities, illustrating your expectations, cost, risks, and marketing strategy in detail. In this plan, determine if you are going to be competitive in this market, lay out your expenses, and the price you plan to set you product at. “Establish what price you want to sell your product or service is critical upfront,” said Greg Moore, Regional Director at EXIM Bank. Consider working with a freight forward who is active in the market and had experience in your product sector.
Build a relationship with your potential buyer.
“The highest level of comfort is for them to say 'I trust you’,” says James Santa Maria, CEO of Santa Maria Group. Put the effort in understanding their culture and how they do business. The more trust in the relationship, the more likely they will purchase from you. “Take the time to understand what you are trying to do and who you are trying to sell to. (Then) you’ll have an easier time,” says Santa Maria.
Minimize the risk of non-payment by understanding your payment options.
“If you’re just starting out, get cash in advance from your buyer or get a letter of credit until you get to know them well,” says Greg Moore, Regional Director at EXIM Bank. A letter of credit benefits you and the buyer as the credit and financial risk is with your local banks. “
If you know your buyer well, you can sell to them on open account terms and EXIM bank can insure you,” says Moore. There’s no minimum amount that EXIM can protect.
Export with E-commerce.
There are various online platforms SMEs can use to export. In China, “there are one hundred thousand middle-class customers waiting for foreign goods, ”states Dr. Shi. Large Chinese
e-Commerce websites continue to optimize their logistics and operate efficiently. This is a great option for exporters as these online channels have established infrastructure to export for companies of any size. Many of these large foreign e-Commerce companies have offices in
the U.S. and California, making it more accessible for U.S. businesses.
Explore your resources until you find the right person to help you.
The California area is rich in resources, but it can be difficult to navigate. “Start high level with your government and work your way down or go directly to the country’s consulate. Ask questions and get to know them on a professional level,” says James Santa Maria. Keep the conversation going and continue to clarify the needs you’d like assistance on. Continue to collect this information and eventually someone will connect you with the resource you’ve been seeking.
“Patience, persistence, and determination get you a long way,” says Santa Maria.
Check out photos from the event here.
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