The African American Chamber of Commerce of Western Pennsylvania represents over 500 owners of minority and supporting businesses. While most are active only in the United States, Chamber president and CEO Doris Carson Williams does, nevertheless, get her share of requests for assistance from members seeking growth beyond national borders. That is one reason for her recent week-long business opportunities group tour of China, meeting with key officials and entrepreneurs.
China: the International Trade Mecca
According to Export.gov, “… a total of 30,394 U.S. firms … exported merchandise to China …” Better still, the International Trade Administration’s Small & Medium-Sized Exporting Companies: Statistical Overview, 2008 notes that “… SME’s merchandise exports to China [were] … higher than the SME share of overall U.S. merchandise exports ,,,.”
A chart from the U.S. Office of Trade and Industry Information, shown here, pegs the total dollar amount exported to China by SME’s for 2014 at $69.6 billion. The figure has ballooned to more than three times the 2007 figure..
Pitfalls for Small Business in the Global Economy
For Dennis Unkovic, partner with law firm Meyer Unkovic & Scott, doing business on a global scale is routine by now, but always exciting. A substantial amount of his practice involves Pacific Rim countries and India. His vote for the prime sin of omission by small businesses is failure to secure an international letter of credit BEFORE buying and selling abroad. “They forget to secure it [the letter of credit] ,” says Unkovic, “and it is the main way to guarantee your payments” internationally.
Small businesses also need to line up “… a bank that has a good working relationship with a bank or banks in the countries” in which those businesses plan to buy, sell or both. With those relationships in place, Mr. Unkovic notes that a firm’s confirmed letter of credit will best insure timely payment, and in some cases, any payment at all. For instances in which a businessperson needs to sue a foreign client, “you need to be aware in advance that international contract disputes are settled by arbitration, not in the courts.”
International Business for Small Businesses: More Crucial Things to Know
Carl Knoblock, district director of the Small Business Administration’s Pittsburgh office, suggests that small business owners be aware of several issues in going global. These issues, Knoblock says, include: being sure to immerse yourself as much as possible in the culture(s) of the markets into which you plan to sell; making your Web site multilingual and at least beginning to get your workforce to think and act globally BEFORE landing in country X . Knoblock believes that two often overlooked information sources are foreign students attending American universities or the universities themselves, which often have foreign campuses or strong relationships with universities in other countries.
Accounting and financial issues should also be reviewed. Daniel Phillips is a CPA and shareholder with Schneider Downs & Co., an accounting firm with offices in Pittsburgh PA and Columbus OH. Phillips boasts extensive international tax planning and compliance experience. Keeping up with often bewildering array of tax issues in international trade, says Phillips, is a job best entrusted with one’s accounting firm.
Schneider Downs and other firms can and often do belong to associations such as IGAF Worldwide, that have one or more member firms in the major trading countries, Phillips notes. This type of association gives member firms a longer reach that crosses borders. Those on-site firms can prepare some of the tax forms for a foreign trading firm themselves and keep track of changes in the accounting rules in their countries. Taxes are also obviously a major issue. Many countries, he noted, have some version of a VAT (value added tax) in place. Should a small business enter one of those markets without being aware of the VAT, the additional costs/expenses can be significant.
What Role Will Small Business Play in Global Business Going Forward?
The United States chalked up export revenue of $1.15 trillion in 2017, based on data crunched by NationMaster.com. The number of small businesses involved and the total revenue in play have so far done nothing but increase.
However, the State of World Tradereport from the U.S. Chamber of Commerce notes that “according to the [World Trade Organization], there are 262 free trade agreements in force around the globe … but the United States has FTAs with just 17 countries. There are more than 100 bilateral and regional trade agreements currently under negotiation …while … the United States is participating in just one …..”
Overall, a mixed bag of successes and dangers. The bottom line for small firms beginning global operations would seem to be: do as much homework, gather as much information and as many information sources as possible, work you bank(s) and their international partners up front, and check for all of the business-saving international documents that you will or may need.