Exporting to the US 101
Four tips for Filipino firms looking to penetrate the American market
The United States has been one of the Philippines’ key trade partners and the numbers speak for themselves.
From January to May 2017, exports from Asia to the United States were worth a staggering $414 billion. Exports from the Philippines to the US totaled $5.589 billion from January to June 2017. With consumer spending forecasts in May 2017 up from the same period last year, we know that shoppers in the US are still buying and buying a lot.
How can you make sure your business doesn’t miss out on the action? What do you need to know to avoid costly mistakes?
The US government recently made exporting to America easier. “De minimis” is a term used to describe the value at which a shipment becomes subject to import tariffs.
In early 2016, former US President Obama signed into law the Trade Facilitation and Trade Enforcement Act of 2015 which contained a provision to raise the de minimis level on international shipments into the US from $200 per shipment to $800. For small and medium-sized companies, this is a game-changer. It is particularly relevant for e-commerce players that regularly make single shipments to individual customers, as well as retailers that have relatively small volume shipments.
So how does this work in practice?
Consider a small high-tech company that produces drones for hobbyists. If they wanted to send a drone worth $400 to a customer in the US, not only would
that shipment have been subject to an import tariff, but it would have also complicated the shipping process due to the need for extra paperwork, not to mention the knowledge and expertise of customs protocol required to accurately fill the forms out.
Fast forward to today, and because this shipment falls under the $800 de minimis threshold, it can pass through customs without any additional costs, without extra paperwork, and without the sender needing to understand complex customs procedures. Now, that’s a win for small businesses.
The US now offers a “Single Window” for simplified shipping. While the US comprises 50 states, all with differing legal and tax codes, the country as a whole recently implemented what’s referred to as a “Single Window,” which is a harmonized, centralized electronic system that allows shippers to provide the necessary paperwork via a single online tool. Officially known as the Automated Commercial Environment (ACE), this system makes shipping to the US simpler, faster, more efficient and cheaper.
Previously, shippers might have needed to manually fill out paperwork for several different federal agencies, such as US Customs and Border Protection (CBP), the Food and Drug Administration (FDA), and so on.
Now, it’s only a matter of providing your details at a single portal, where information will be sent automatically to the relevant agencies. This is far less burdensome on those exporting to the US, but what it also means is that paperwork errors can be picked up almost immediately, substantially reducing the likelihood that
a shipment will be held up at customs due to a mistake on a form.
The US is a wide-ranging economy with regional differences. People might think of the US as one market dominated by service and professional industries, and while there is some truth to this, what’s lesser known is that it is actually a vast collection of economies that are quite diverse. Understanding its variation—and which products are in demand and where—is important when considering how your goods might fit into the US marketplace.
For instance, the US still has one of the world’s strongest industrial sectors. In fact, since the global recession of 2008, manufacturing has been one of the biggest contributors to the United States’ recovery. This is bringing prosperity to large swathes of the Midwest and South, the country’s manufacturing heartland.
In the South, you have economies like Texas, the GDP of which ranks alongside countries like Canada and India, and where energy is a dominant force politically and economically. Meanwhile, Atlanta, Georgia, with its competitive regulatory and tax environment, is highly attractive for established companies, technology startups and entrepreneurs.
On the West Coast you have California, the most populous state in the US, which contributes a whopping 13 percent of the country’s GDP. Here, IT & technology in Silicon Valley, the film and music industries of Hollywood, data processing and internet publishing, make a significant contribution to the state’s economy.
Given these distinct regions, Filipino businesses should consider the broad range of opportunities that exist in the US, the beyond consumer goods industries, whether that’s providing
components for tech products assembled in Atlanta, Georgia, machinery for factories in the Midwest, or geological tools for oil-rich states like Texas.
Check the export checklist. When exporting to the US, there are some clear steps and procedures that all shippers need to follow. These are:
1. Determine costs: When deciding how to price your products for sale in the US market, it’s smart to first determine how much it will cost to get them there, from choosing a shipping solution that meets your cost and speed requirements, to knowing how your goods will be taxed when crossing the border. 2. Prepare your shipment: You’ll need to complete all preshipment documents, and confirm whether you require a license to send goods abroad; this may be necessary when shipping products such as chemicals or medical supplies. It’s also important to connect with your shipping partner to ensure that you are packing your parcels, pallets and containers properly; failure to do so could result in damage or spoilage to entire shipments.
3. Book and track: Good customer service doesn’t stop after the shipment leaves your warehouse. That’s when strong after-sales service kicks in. Once a package is on its way, update your customers on its progress and whereabouts—do ask your shipping partner what tracking and notification services they offer as these will be important to your customers.
4. Post-delivery: Your customer has received their shipment, but what happens if they need to return it? An efficient and cost-effective returns option makes all the difference, and really helps to drive sales in the long run. Again, your logistics provider can advise you about options that will make life easier for you and your customers.
As you can see, America is most definitely open for business.
With a bit of due diligence and a clear understanding of the procedures, accessing the US market can be a relatively straightforward process. Moreover, the initiatives of recent years, such as the single window and deminimis increase, have only helped to simplify things even further, making it even easier to grow your business in America.
So, what are you waiting for?