President Obama’s National Export Initiative places a specific emphasis on expanding exports by small and midsize businesses, companies that make up 97 percent of all U.S. exporters, according to the U.S. Commerce Department.
Companies of this size — which are often privately held, typically have fewer than 20 employees and usually export to a single market — represent the biggest potential for increasing U.S. exports, but have less experience and export know-how than the big U.S. exporters that have the resources to market and administer their exports.
“Companies in this sector account for 30 percent of the value of exports that are being shipped, but they face challenges,” said Karen Kurek, managing director and national manufacturing and distribution practice leader at McGladrey, a Minneapolis-based international accounting and tax consultant.
If the NEI is to succeed, small and medium-sized enterprises, or SMEs, will need to get a quick education in supply chain fundamentals, according to a survey published in the fall issue of McGladrey’s Manufacturing and Distribution Monitor. SMEs, with revenue ranging from $25 million to $500 million, said the biggest challenges to increasing their exports are shipping, transportation and freight.
Of the 362 companies surveyed, 42 percent cited transportation as the biggest challenge, followed by compliance with local regulations, 37 percent; understanding tariffs, duties and customs clearance, 32 percent; and credit risk, 30 percent.
“That’s top of mind when SMEs decide they want to start exporting or have actually received an order from some other part of the world,” Kurek said. “If they don’t understand who the people like freight forwarders and customs brokers are that they need to call, these transactional factors are at the top of their list of concerns.”
Of the companies responding to the McGladrey survey, 71 percent export to countries outside the U.S., with a majority, 52 percent, reporting increases in the past year. About 16 percent of their total revenues are generated by exports.
More than half of those that already sell to foreign markets export to Canada and Mexico, the United States’ partners in the North American Free Trade Agreement, but only 38 percent export to western Europe and the U.K., and 37 percent export to China.
In the next 18 months, the overseas market to elicit the most interest among survey respondents was Brazil, followed by the South American continent as a whole, India and Central America. The survey was completed before the U.S. signed free trade agreements with Colombia, Panama and South Korea in late October, so these countries were not singled out as promising export markets.