In northern Nevada we have every reason to be excited about global trade. Our strong presence in international trade is buoyed by lower business and labor costs relative to California and close proximity to the western region. We can move loads for export by the next day to Oakland, the nearest major ocean port. We ship a diverse list of goods, such as mineral products, gaming machines, IT equipment, coffee, alcoholic beverages, engines and machinery and agricultural products. In 2009, the state's exports totaled nearly $5.6 billion, with the Reno-Sparks-Carson market accounting for about 21 percent of that figure about $1.2 billion. Last year our regional share increased to 28 percent.
Most of Nevada's exporters are small and medium-sized businesses with less than 500 employees. Like so many of our clients, these companies are tightly focused and lean: the companies that help to fuel our economy and grow American jobs. It shows: Nevada exporters were recently ranked first in the nation in a Ball State University study of firms able to adapt their exports to changing demand patterns in international trade. This flexible business environment puts us on the cutting edge of opportunity in global trade.
When a company is getting ready to sell American goods abroad (and reduce our trade deficit in the process), they need to take into account certain key considerations when exporting. Our local businesses may not have logistics experts on staff to help them navigate shipping channels, a focus usually different than the company's core competency. They must rely on freight forwarders who offer both personal, expert service and a stable, worldwide infrastructure to support their shipping needs. They must also focus on certain questions before getting ready to ship.
Usually, an export is about a sale. What are the "terms of sale?" The U.S. seller should outline the requirements of the relationship between themselves and their buyer, such as when does title transfer? Who pays for what part of the shipping? Answers need to cover inland trucking from the warehouse to the port of export, handling, international freight costs from port to port, import clearance expenses and duties at the destination port and insurance. Along with agreeing on the quantity of the order and the initial price of goods, the seller and buyer need to outline the distribution of these other costs and responsibilities.
Another category of questions include the mode, timing, type and routing. Whether to ship via ocean, air, rail, truck or multimodal and how those choices affect transit time. Will it ship in a container or as loose, less-than-container load cargo? How will it be routed through which ports will it ship? Will it connect to the nearest port via ocean, or move inland via rail or truck to its destination? Will it transship certain ports and countries which may either encumber or speed transit, or is transshipment prohibited? Certain answers to these questions are well known: Exporting outside of North America, for instance is less expensive via ocean vs. air freight. Shipping full container loads is one of the most reliable, efficient and cost-effective vehicles for export. The right answers will vary based upon circumstances. These questions require careful review to avoid costly pitfalls or delays.
Beyond these relatively straightforward commercial considerations, there are the export regulations. They're complex and can be cumbersome. What are the requirements for the commodity? will it need a license? Goods cannot be shipped to "denied parties" or countries which are embargoed such as Cuba. But even these may have exemptions. Certain agricultural products under special license may be exported to Cuba. These considerations are driven by security. The end-use for a specially manufactured metal alloy shipped to Germany has different implications if shipped to a country that's not a friend. And post 9/11, shipping via air requires new measures. The TSA will not permit parties who are not "known shippers" from shipping cargo on passenger aircraft.
It's a maze. Shippers need to find a good service provider. Most of the larger, small package-oriented companies (also known as an integrator) are good at moving packages but are they there to answer all your questions and assist you in getting started? I believe it is personal service which still separates a good freight forwarder from an integrator. When faced with this consideration, exporters need to consider carefully the alternatives available in the freight forwarding service marketplace.
There have certainly been some changes. It's a hot acquisition market. Clients will see service providers come and go. A recent survey of truckload carriers noted that more than half wanted to buy another carrier or sell their businesses. It's survival of the fittest; some of the smaller, less profitable companies are going away or being acquired. The bigger entities are leveraging their capital, adding scale and in some cases, venturing vertically into services they've never provided before. We're seeing it in trucking, freight forwarding and customs brokerage, air and ocean carriers. The problem is: After the mid-sized fish eats the small fish, it doesn't stop there. There's always a bigger fish ready to gobble up what used to be your local, personal service provider. That leaves shippers with uncertainty about quality of service and those less tangible elements relationship and trust. What motivated an acquisition may not be what drives service for customers.
Shippers need stability as well as service; providers with a long-term record and sound finances. The maze of logistical, transaction and compliance questions demands that clients seek expertise complemented by infrastructure. Then, service can be the focus and the people behind the service that make the difference. I'm fortunate our company is one of the stronger, more stable logistics providers in the world. In my career, I have seen the acquisition process in operation: it doesn't always go as smoothly as predicted!
Nevada businesses are recognized nationally as the most adaptable, export-friendly companies in the nation. Our independent, market-driven business savvy and common sense puts us on a platform to continue to excel and lead the country in global trade. We have the access and the resources to promote Nevada and trade into the future.
Jeff Diesner is branch manager, UTi, United States, Inc., and a 1991 graduate of UNR's Logistics program.
