VIEWpoint Issue 2 | 2022
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Is It Time to Update Your Accounting Practices?
When it comes to a potential customer base, many manufacturers are just scratching the surface. The International Trade Administration estimates that less than 1 percent of 30 million U.S. companies partake in exporting manufactured goods worldwide, with small businesses making up more than 70 percent of U.S. exporters.This means most companies are missing out on a bevy of customers.
Tapping into overseas markets can boost your bottom line and make you less dependent on U.S. consumers, and even offers tax benefits. But before you decide whether exporting is right for your business, Doeren Mayhew’s manufacturing accounting professionals offer several issues to consider.
If you’re thinking about exporting, you need to determine where to sell. Finding the best markets for your product is essential. Several government websites provide useful information that can help you find the right markets:
English-speaking countries, such as the United Kingdom, Ireland, New Zealand and Australia, are often easy to work with because of minimal language and shipping barriers.
Tax Breaks for Exporting Manufacturers
As a domestic manufacturer with foreign sales, revised tax rules mean you can take advantage of significant savings by creating an interest charge domestic international sales corporation. Forming an IC-DISC, manufacturers can enjoy paying tax rates on export profits at the dividend rate of 23.8 percent, a decrease of more than 10 percent from the standard corporate tax rates.
In addition to researching geographical markets, consider the exporting method that works best for you. Manufacturers have multiple options for exporting, including setting up sales offices in foreign countries, fulfilling orders from the United States or working with local distributors. You’ll need to consider the costs involved in each method, such as transportation costs, wages for workers abroad and applicable taxes.
Whether you partner with local distributors or sell directly to local consumers, you’ll need to network to make your exporting venture successful. Attend industry trade shows and make contacts with industry insiders to find out who’s shopping in your chosen markets.
Organizations such as chambers of commerce in foreign countries, U.S. embassies abroad and consulates in the United States also may know contacts who are interested in establishing connections with American companies. If they have an existing network you can tap, they’ll also be able to share company background that can help you decide whether to work with a particular business.
After you’ve identified possible contacts, tell them about your background and products, and ask for the names and addresses of appropriate distributors or stores to contact. To field potential distributors, request a catalog if they have one, and develop an outreach questionnaire including information such as:
When you’re ready to start exporting manufactured goods, you’ll need to know how much you’ll pay in export tariffs.
Export tariffs are taxes that certain foreign countries collect when your product crosses their borders. Businesses traditionally have had to slog through complicated agreements written by various governing bodies to determine the tariffs they must pay. In some agreements, the tariff schedules alone would number nearly 1,000 pages.
The Fair Trade Agreement Tariff Tool can help alleviate this headache, but does have some limitations. It covers “industrial good” products, but not agriculture or textile goods. And it includes only trading partners with which the United States has a trade agreement. Furthermore, product descriptions for some tariff schedules aren’t published in English. Talk to an international business advisor if you need help determining the tariff for a particular country.
Help With Your Global Game Plan
It’s a great time to enter the global market because a large percentage of the world’s purchasing power is outside the United States. International tax and business advisors such as Doeren Mayhew can help you crunch the numbers and come up with a game plan to achieve export success.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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