Selling Overseas - U.S. Government

The export laws enforced by the U.S. government on defense-related goods and information have been a source of irritation for U.S. companies and foreign customers for years. Private-sector firms continue to push for changes, and both the enforcement agencies and the current presidential administration are responding. However, interested parties sitting outside the border see several issues that might not be at the forefront for those making the adjustments.

Barriers to foreign military sales (FMS) exist for both sides trying to do business. U.S. companies have to go through multiple agencies and defense and dual-use item lists on the domestic side. They also have to manage business development on the foreign end. The timeline from wanting to sell to a country and actually making a sale is lengthy, with plenty of administration in the middle.

The lengthy FMS process is a major worry to U.S. companies pushing for changes to regulations. Under current U.S. export laws such as the International Traffic in Arms Regulations (ITAR), sellers can be fined and face other penalties when products or information are misrepresented, even once they leave control of the originator. Companies must deal with all the red tape on the U.S. side of the transaction along with the lesser bureaucracy—but potentially much greater corruption, depending on the nations involved—on the other end.

In the Jobs Act signed into law in September 2010, President Barack Obama allowed for the SBA to increase its capability to provide export-related financing by raising SBA loan limits to $5 million from $2 million on export-related loans.

The law made the SBA Export Express loan permanent, with a 90% guarantee for loans up to $350,000 and 75% for loans between $350,000 and $500,000, according to the SBA. It also provides three-year state grants of up to $90 million to help small-businesses owners grow the exporting side of their businesses.

Exporting isn't just for big companies, especially now that the Internet has made it simple to reach customers around the globe. There are unique issues, including shipping, distribution, currency conversion, marketing, taxes and duties, packaging requirements, etc. However there is nothing a business that's motivated to expand can't overcome.

Selling internationally can present challenges. Depending upon what you're selling and to whom, you may need a bank that can help you with accepting payment in foreign currencies, an accountant who is knowledgeable in tax law as it applies to income derived outside the U.S., and an attorney who can advise you on international contract law. You may also need distributors or agents to represent you in foreign countries. Distributors normally buy goods from you and resell them; agents simply market your goods and let you or a distributor deal with the physical exchange of merchandise.

Call Malyszek & Malyszek for more information on the many regulations for selling overseas.