By Jeffrey G. Grody Did you see the signs at many SHOT Show booths announcing “We Export” in bright colors and five languages? Those companies recognize the opportunity presented by sales to the international market and are in position to reap the benefits. Are you? Some businesses, while sensing a market for their products outside the United States, see exporting as a bridge too far. Their hands full with the challenges of operating in the firearms industry domestically, they stare into a dense fog of unanswerable questions when they contemplate selling firearms, components, ammunition or accessories outside the U.S.

• To whom will I sell?
• How will I get paid?
• What are the customary terms of trade in the international market?
• How do I ship product outside the U.S.?
• What do I do about customer service and warranty service
• How will I handle export licensing?
• I don’t know anything about the firearms and ammunition laws of countries other than the U.S.
• Who can help me get this right?

Facing these questions, many give up. Ironically, the first question, ordinarily the most difficult—where will I find customers—is already answered for many of the non-exporters who exhibited at SHOT. The customers walked right up to their booths! Do you really want to say “no” to foreign customers who are ready to buy your products? You don’t have to. Exporting firearms, components, ammunition and accessories isn’t that hard if you have customers. The following is a short summary of the main commercial and compliance considerations: Getting paid. Not a lot to think about here. For smaller orders (say, under $100,000) you want to try to get paid before shipping. A common cash-in-advance payment term is 50% with the purchase order and the balance due after receipt of the export license. The problem with selling internationally on open account is the extreme difficulty collecting the debt in a foreign country if the customer doesn’t pay you voluntarily. As hard as it can be to collect invoices in the U.S., it is ordinarily much harder in other countries and isn’t cost-effective for smaller amounts. If you have no alternative but to sell on open account, consider beginning the relationship with a small credit line and tight payment terms (e.g., wire payment in 10-15 days). In the case of large orders, payment is more likely to be handled by a “documentary letter of credit.” If you know what you’re doing, a letter of credit is almost as good as cash, but there are pitfalls for the inexperienced. We will address letters of credit another day. Customary terms of trade. When you do business domestically, your terms of sale are for the most part dictated by the market. A buyer or seller of product with commercial leverage may be able to skew the terms in its favor, but most companies have to sell on more or less the same terms as everyone else or people won’t do business with them. If buyer and seller fail to spell out all the terms in a domestic transaction, the Uniform Commercial Code and other state and federal laws fill in the gaps. This does not apply when you sell internationally. The terms of sale will be the terms agreed to by buyer and seller. If they fail to address an important issue, say, the terms of the warranty, there will be confusion. The way to get ahead of this issue is to go to market with a complete set of terms and conditions on which you sell internationally. In other words, in your marketing materials, or when asked, tell international buyers, this is how and when we expect to be paid, this is how we will ship to you, this is where risk of loss will pass, this is who will pay for shipping, etc. If you establish the terms before your customer does, most of the time your terms will stick and become the rules governing the transaction. Shipping product. Getting product from point A to point B is handled differently when point B is outside the U.S. One of your best friends if you are going to export firearms, components, ammunition or accessories is a good, ethical freight forwarder that has worked in the industry previously. A good freight forwarder will help you with everything associated with shipping your product to its destination. The freight forwarder can also help advise you on “Incoterms,” which deal with where risk of loss and ownership passes, as well as payment for shipping and alternatives for insuring the goods in transit. Customer service/warranty service. The main issue with customer service in most cases is likely to be language, which generally can be addressed adequately—most foreign buyers who interact with U.S. sellers speak enough English to get by. Warranty service is a different matter. Returning goods to the U.S. for repairs is expensive and, for ITAR-regulated defense articles, requires a temporary import license from the Department of State, which creates administrative work for the seller and delay for the customer. Setting up a warranty service center outside the United States may be a better idea if the sales volume is sufficient, but care needs to be taken with regard to the selection of location and personnel, and approval from the Department of State for the export of repair technology may be necessary. Export licensing.  If the product you are exporting is regulated by the ITAR, as most firearms and ammo products other than sporting shotguns are, you will need to learn how to obtain a DSP-5 license for permanent export. Interacting with DTrade, the State Department’s electronic interface for applying for DSP-5 licenses, takes a little bit of training but if you export frequently you won’t need much assistance after the second or third license. You will be required to present an import permit for the destination country with your license application. As between you and your customer, you will want to build the time for obtaining an export license into your delivery commitment to the customer. (If you are selling NFA products, you also need a Form 9 from ATF, which can add substantially to the delivery schedule.) Dealing with foreign laws. A widespread practice among U.S. sellers in the industry is to rely completely on the customer to ensure compliance with local laws in the customer’s country. Is this a good idea? Not necessarily, but it generally isn’t practical or cost-effective to hire an attorney in each foreign country into which you sell product. If you are dealing with well-established distributors or dealers, relying on the customer to ensure that your sale complies with local laws is often a practical solution to a difficult problem. Relying on your customer to navigate the local legal system for you underscores the importance of knowing your customers very well. Other issues. The issues discussed above are not only issues to address but they are the principal ones. You also need to avoid getting into trouble under the U.S. Foreign Corrupt Practices Act or U.K. Bribery Act by succumbing to the temptation to advance your business interests by paying bribes in the many countries where corruption is part of the way business is conducted. Working with brokers and sales representatives can also create special challenges. Getting help. Help launching your export business is available and is not prohibitively expensive. At SHOT 2015, several exhibiting companies were ready to say “yes” to international customers with assistance from Orchid Advisors. Get in touch with us and we can show you how to launch your export business, too.   Contact Us For More Information