Exporting to the USA: FAQs
With a growing GDP that, according to data collected by the Bureau of Economic Analysis, in the third quarter of 2017 brought a leap forward of 3.3%, the US economy still remains among the most prosperous and competitive at the world.
This is just one of the reasons why Italian entrepreneurs are interested in internationalization in the United States. Before following such a path, however, a series of questions arises. Which are the most frequent?
1. For an Italian entrepreneur, what are the sectors of the American market in which it is convenient to invest?
For Made in Italy, the most attractive sectors of the US market are:
- consumer goods;
- IT and Telecommunications;
- specialized chemicals and pharmaceutics;
- Life Sciences;
- industrial machinery.
2. What are the best sales channels?
A sales channel is a means of selling to customers. Choosing the right sales channel is a fundamental step in the strategy of entering a new market. In the United States the most frequently used are:
- buyer:An inside figure within a distribution company responsible for the purchase of goods and services essential for the commercial activity;
- participate in specialized trade fairs: Establishing a presence, whether big or small, for your company at a trade show gives you a powerful platform for meeting new customers, reaching out to your existing clientèle, and building a more established and reliable brand. With the right strategy, every trade show you attend is an opportunity to drastically expand your company’s customer base. The people who attend trade shows tend to be motivated, interested in the products or services your company offers, and often ready to commit to a deal on the spot;
- agents / brokers: an agent or broker has powers of representation and promotes the product by facilitating the stipulation of sales contracts with local distributors or final buyers;
- joint ventures: the establishment of a joint venture has the advantage of making use of the market and marketing knowledge of an American partner; A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas. Your business may have strong potential for growth and you may have innovative ideas and products. However, a joint venture could give you: access to established markets and distribution channels
- licensing: Licensing is a business arrangement in which one company gives another company permission to manufacture its product for a specified payment. Licensing lets you instantly tap the existing production, distribution and marketing systems that other companies may have spent decades building. In return, you get a percentage of the revenue from products or services sold under your license. Licensing fees typically amount to a small percentage of the sales price but can add up quickly. The foreign company grants a local company the license to use its own brands, patents and technological know-how, in exchange for royalties and / or other financial benefits;
- e-commerce: E-commerce allows consumers to electronically exchange goods and services with no barriers of time or distance. Electronic commerce has expanded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. The direct-to-consumer model gives companies an opportunity to build their brand relationship with customers avoiding the supply chain and reducing costs;
- Teleshopping channels: Shopping channels (also known as teleshopping) are a type of television specialty channel devoted to home shopping. Their formats typically feature live presentations and demonstrations of products, hosted by on-air presenters and other spokespeople who provide a sales pitch for the product. Their use is relevant in the sales strategy of medium-large companies not rooted in the market, since it is able to reach many buyers;
- franchising: a channel that can allow a rapid growth in the market but needs a brand already known internationally. While franchising provides franchisees with a proven system and the support of a much larger organization, the advantages to the franchisor are even more significant. This ability to grow the organization without substantial additions to overhead will allow franchisors to grow their retail presence and their brand more quickly and effectively. Franchising allows companies to leverage off the assets of franchisees. International expansion becomes easier, faster, and carries far less risk since a local partner becomes involved.
- public contracts: each state, county and municipality, more or less large, contract out public contracts that represent a great opportunity for a company able to supply the goods or services requested.
3. Norms, traditions and customs of the American market: how important are they for those who want to export?
American, legal and commercial regulations, as well as business practices and customs, are different from those in force in Italy and are essential to better interact with the local culture.
For further information on this topic you may want to read "Interact with American culture: the SI-Log Network solution".
The United States organized according to a Federal State model, allocating power between the federal government and the states. The model consists of the legal systems of its 50 states, plus the District of Columbia. Each of which is characterized by its own jurisdiction, which is added to the system developed by the Federal Government.
The population is therefore subject to a federal and state law: Federal law, applies to all citizens of all states, and state law applies within each individual states. In the event conflict, federal law prevails. International treaties have the same taxing force as federal laws, while the constitutions of individual states are subject to federal law and international treaties.
4. Starting up a Company: how to go about it?
Starting a U.S.-based business as a foreigner can be a long road, but the country makes it easy to register your company and open your business. Establishing a company in the United States to do business is very often the best choice for companies.
The start up of a company in the USA represents a fairly simple operation from the processes point of view. The forms and other requirements for forming a business entity vary somewhat by state. How long it takes to register your LLC or Corporation depends on which state you form your business in but it typically can take anywhere from 1 business days to 4 weeks, depending on which state you form your business entity in and how long the Secretary of State takes. You can even set up a company even in a different State than that in which it operates, provided that it regularly registers in the other state as an entity that does business within the territory. To do business in the other states through a process called Foreign Qualification.
An essential element at the time of incorporation of a company is the decision of choosing the correct business structure, This is important because the type of business you select influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. It’s important to understand each business type and choose one that is best suited for your situation and business goal. In the United States, as well as in Italy, there are numerous business structures but the most common are the LLC and the Corp.
The corporate entities in the USA are subject to a series of taxations, on the federal level (same for all the States), that in the State of business’s incorporation and that in the State where the business activity is carried out.
These are just some of the questions that entrepreneurs ask themselves when they consider internationalizing their business. Relying on an accountable partner who has a proven experience will help you clear up any foggy doubt you still may have.
Are you thinking of internationalizing your business in USA, but are you still uncertain? Read our white-paper for a more complete overview! Click on the image below and start reading.