exporting trends in northern california: key findings€¦ · exporting trends in northern...

Exporting Trends in Northern California: Key Findings

July 2014

A GLOBAL TRADE SNAPSHOT OF 2014 AND BEYOND


This research project is funded by the Global Trade & Logistics program, grant # 13-157-001and the Centers of Excellence, grant # 13-305-001. These grants are an element of the California Community College’s Economic and Workforce Development program, where a four-pronged approach has been designed to address skills gap in the regional economy. The four quadrants include: (1) give priority for jobs and the economy; (2) make room for jobs and the economy; (3) promote student success; and (4) innovate for jobs and the economy.

The Far North Global Trade & Logistics Deputy Sector Navigator and Northern California Center of Excellence Director and would like to thank and acknowledge the following partners for supporting this research project:

© 2014 Chancellor's Office California Community Colleges Economic and Workforce Development Program

Please consider the environment before printing. This document is designed for double-sided printing.

Northern California Center of Excellence 1


Table of Contents

Introduction ............................................................................................................................................................... 3

Survey Methodology.............................................................................................................................................. 3

Business Demographics .......................................................................................................................................... 4

Export Trends .......................................................................................................................................................... 5

International Sales .................................................................................................................................................. 6

Financial Services and Products ........................................................................................................................... 7

Shipping and Logistics Network ........................................................................................................................... 8

Packaging, Warehousing and Shipping Workforce ....................................................................................... 9

Non-Exporters ......................................................................................................................................................... 10

Interest in Exporting Services ............................................................................................................................... 11

Summary ................................................................................................................................................................... 12

Appendix A: How to Utilize this Report ............................................................................................................. 13

Appendix B: Global Trade & Logistics Services in the Far North ............................................................... 14



Introduction

In partnership with Innovate North State, Superior California Economic Development Corporation (EDC), the Port of Humboldt and the City of Eureka, the Shasta County Economic Development Corporation (EDC), and the Siskiyous County Economic Development Corporation (EDC), the Global Trade & Logistics Deputy Sector Navigator (DSN) and the Northern California Center of Excellence conducted an economic assessment survey to learn about education and workforce development as it relates to exports in Northern California. This report provides a summary of the survey responses.

Survey Methodology

The survey was administered using two methods: email invitations from regional partners and call-center direct recruitment to businesses. The DSN’s business partners – Innovate North State, Superior California EDC, the Port of Humboldt and the City of Eureka, the Shasta County EDC, and the Siskiyous EDC – emailed the survey to their members, clients and vendors. In addition, a call center was engaged to recruit businesses to participate in the online survey. Chief executive officers, business owners, presidents and managers from five industry sectors (agriculture, biotech/biomed, logistics/distribution, manufacturing, and professional services) were asked to participate. These sectors were selected as they tend to have a higher volume of exports than other industries.

During May and June, almost 270 businesses participated in the survey. Of those 244 completed the survey and 25 answered the majority of questions. Four out of five (79%) of the respondents have business locations in Butte, Humboldt, Shasta, Nevada and/or Mendocino counties. More than half (54%) of the respondents hold a position as the owner, 20% as general managers, 18% classified as ‘other’, and eight percent as CEOs/presidents of the company. Respondents in the ‘other’ category hold positions ranging from executive secretary and bookkeeper to HR director, sales manager and chief operating officer.

Exhibit 1: Total Responses by County

1 1

2 6

7 7 7

8 10

15 18

34 36

46 48

49

0 5 10 15 20 25 30 35 40 45 50

PlumasSierra

LassenModocColusa

LakeTrinity

Del NorteGlenn

SiskiyouTehama

MendocinoNevadaShasta

HumboldtButte



Business Demographics

Eighty percent (80%) of the businesses surveyed operate in the manufacturing, professional services or agriculture sector. In the ‘other’ category, retail and printing were the most commonly cited sectors. Eighty-three percent (83%) of the businesses in the sample employ 10 or fewer workers –mirroring the small business landscape of the far north.

More than half of the businesses (146 firms; 54%) exported products and/or services to another country in the last three years. Two-thirds of these firms sold only products, 17% sold only services and the remaining 16% sold both goods and services. Common exports include crops, food and beverages, construction materials, professional consulting, marketing and design, and fashion/art. See Exhibit 3 for additional detail.

Exhibit 2: Industry Sectors

Exhibit 3: Export Products & Services

Agriculture, 20%

Biotech/Biomed, 2% Logistics/Distribution, 4%

Manufacturing, 34%

Professional services, 26%

Advertising/Media, 1%

Construction, 1% Finance, 1% Healthcare, 1%

Printing, 2%

Retail, 3%

Technology, 1%

Misc., 4%

Other, 14%

• Hay, almonds, walnuts, wild rice, frozen seafood, cheese, Italian appetizers, olives, chocolates, balsamic vinegar, wine, beer Crops, Food & Beverages

• Kitchen ventilation products, HVAC equipment, lumber, pre-fabricated retaining walls, structural testing equipment, cabinets Construction Materials

• Quality, environmental and food safety consulting services, language translation, software services, securities value analysis Technical & Professional Consulting

• Logos, business cards, website development, search engine optimization, newsletters, streaming media Marketing, Design & Media

• Glass sculptures, photography, silver jewelry, embroidered garments, woven bags, pottery Fashion/Art

• Laboratory instruments & consumables, ophthalmic surgical instruments, prostate biopsy machines, splints Biotech / Health Products

• Boats, truck suspension parts, aircraft propellers, ATV aftermarket parts, marine corrosion monitoring and protection systems Transportation Parts

• Stainless steel water bottles, aromatherapy vaporizers, aquarium filters/equipment, cosmetics Household Items

• Custom guitars and mandolins, fly fishing tools, ski accessories, redwood products, label peeler removal tool Miscellaneous



Export Trends Northern California businesses export to countries around the world. Two out of three businesses export to fewer than five countries, while 16% export to six to10 countries and 15% export to more than 10 countries. The respondents were asked to list the top three countries to which they export in order of total sales volume. As shown below, Canada, Australia, and Japan are the top three export countries based on total sales volume.

Exhibit 4: Export Countries

For the majority of Northern California businesses in the sample, export sales augment total revenue by less than 10%. Manufacturing and agricultural businesses are more likely to have a higher percentage of total sales from exports than businesses in the biotech, professional services and logistics sectors. Northern California businesses reported the most important benefit to exporting is (1) increased sales and profits; (2) a diversified and expanded customer base and (3) increased stability in a fluctuating regional economy. In the last five years, 46% of firms surveyed reported an increase in export sales, 38% stayed about the same, and 17% decreased in total volume.

23%

46%

16%

7% 6% 2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1 2 to 5 6 to 10 11 to 20 21 to 100 More than 100

% o

f Res

pons

es

# of Export Countries

10%

16%

17%

58%

0% 20% 40% 60% 80%

More than 50 percent

10 to 20 percent

21 to 50 percent

Less than 10 percent

% of Responses

Exhibit 5: Percent of Sales from Exports

Top 15 Export Countries By # of Firms

Canada 43 Australia 25 Japan 22 China 21 Germany 17 Mexico 12 United Kingdom 15 England 11 France 8 India 7 Singapore 7 Spain 7 Taiwan 7 Italy 5 Brazil 4

17%

38%

46%

0% 10% 20% 30% 40% 50%

Decreased

Stayed about the same

Increased

% of Responses

Exhibit 6: Change in Export Sales in the Last Five Years



International Sales

The majority of businesses (71%) reported that they did not have any difficulty entering the exporting market. Only about one-third reported some difficulty entering the export market.

As shown to the right, two-thirds of the businesses spent less than three months to cultivate/facilitate the initial foreign sale. Sixteen (16) of these businesses reported that their foreign customer(s) approached them; as such it did not take any time to facilitate the sale beyond routine paperwork. Alternately, one-third of the businesses spent nine or more months on up-front development time.

The respondents were asked about challenges selling their goods and/or services to foreign customers. Upon initial entry to the export market, extra costs, trade regulations and culture differences were the most commonly cited challenges. Expensive shipping and confusing or complex trade regulations were ranked as the most common ongoing challenges.

Exhibit 7: Initial Challenges Faced When Entering the Export Market

Exhibit 8: Top Seven Challenges Related to Selling Products & Services to Foreign Customers (based on frequency of responses)

Ranking Challenge 1 Expensive shipping 2 Confusing and complex trade regulations 3 Time consuming 4 Payments: foreign receivable issues 5 Dealing with a multitude of government agencies 6 Language barriers 7 Lack of available financing to work with foreign customers

Shipping Issues

Expensive

Limited options

Shipping delays

Extra Costs

Time-consuming paperwork

Traveling

Special insurance

Slow payments

Complex Trade Regulations

Navigating customs

Import regulations, duties and taxes

Registering trademarks

Cultural Differences

Language barriers

Confusing contracts

Corrupt governments

Time Spent on Up-Front Development of Sales

None 16 13% A little time (3 months) 66 54% A fair amount of time (9 months) 13 11% A lot of time (1 year) 6 5% More than 1 year 22 18%



Financial Services and Products

Six out of ten businesses value access to financial services to support their export activities. However, very few businesses rely on payment enhancement activities, such as Overseas Private Investment Corporation (OPIC) products, Export-Import Bank products or private credit insurance, to support and streamline their export activities. One-fifth of the businesses surveyed have never heard of these services. These products provide a variety benefits, including:

• Overseas Private Investment Corporation Products: medium- to long-term funding through direct loans and loan guaranties for capital investment in projects that allow businesses to expand in foreign markets.

• Export-Import Bank products: extends credit to foreign buyers so that exporters can sell on competitive "open account" terms; provides term financing to foreign companies to buy U.S.-made capital goods and services; provides guaranteed credit lines for working capital; and offers credit insurance to mitigate payment risk (see definition below).

• Private Credit Insurance: protection for accounts receivable from loss due to foreign credit risks, such as default, insolvency, bankruptcy or political dishevel.

17

11

3

75

83

87

43

38

42

0% 20% 40% 60% 80% 100%

Export-Import Bank products

Private credit insurance

OPIC products

% of Responses

Exhibit 10: Percent of Businesses that Rely on Payment Enhancement Products

to Support Export Actitives

Yes No Never heard of it

10%

13%

35%

43%

0 20 40 60 80

Extremely Important

Very Important

Somewhat Important

Not at all Important

# of Resonses

Exhibit 9: Importance of Access to Financial Services to Support Export

Activities



Shipping and Logistics Network

Seventy (70) businesses export their products through one or more of the following venues: ports, international airports and/or maritime airports. Nearly all of the businesses transport their goods from their warehouse/facility to the port or airport by truck. It is not uncommon for products to be trucked long distances to airports throughout California. The most popular airport was the San Francisco International Airport, followed by the Sacramento International Airport and Los Angeles International Airport. Only a few businesses utilize the Arcata Eureka Airport to ship their product.

The respondents were asked how the logistics network could be improved to facilitate greater ability to export to other countries. Lowering shipping costs (e.g. USPS, FedEx and UPS) was the most common suggestion. Below are some of the other suggestions businesses had on how to improve the logistics network:

• Railroad access to the national rail system and ports.

• Improve port facilities. Have more containers available and less wait time at the ports for trucks delivering products.

• Smoother transitions between cargo transfers.

• Fewer trucking regulations.

• Simplify customs laws and the paperwork process.

• Consistency in the interpretation of export laws and regulations.

• Access to DHL Services in Northern California. DHL accounts (rather than FedEx) are more common outside of the U.S. If potential customers do not have or want a FedEx account, the cost of shipping becomes an account receiving issue, thus complicating the process for businesses that require the customer to pay for shipping, duties and taxes.

Exhibit 11: Exporting by Port or Air

Common Exporting Venues

Port (81%) Aiport (36%) Maritime Aiport (9%)

Moving Products to the Port or Aiport

Truck (98%) Railroad (2%) Other (3%)

Popular Airports

San Francisco International (61%) Sacramento International (26%) Los Angeles International (22%) Arcata Eureka (9%) Reno-Tahoe International (9%)



Packaging, Warehousing and Shipping Workforce

Twenty-five percent of the businesses surveyed employ packaging, warehousing and shipping workers including: shipping, receiving (customs) & traffic clerks; forklift drivers; maintenance or repair technicians; supply-chain technicians; and/or packaging workers. Exhibit 12 displays the total number of workers employed by the businesses in the survey sample.

Exhibit 12: Total Logistics/Warehousing Jobs, Sample Data

The respondents were asked to rank the level of important of skills for their packaging, warehousing and shipping workforce. As shown below, professionalism/work ethic was ranked as the most important skill, followed by oral communication, self-direction and critical thinking/ problem solving.

Exhibit 13: Top Most Important Skills1

Ranking Skill Description

1 Professionalism / work ethic Demonstrating personal accountability and effective work habits, such as punctuality, time and workload management.

2 Oral communication

Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate, and not interrupting at inappropriate times. Articulating thoughts and ideas clearly and effectively.

3 Self-direction Ability to learn from mistakes and to continuously acquire new knowledge and skills. Self-directing and monitoring one’s own learning needs.

4 Critical thinking / problem solving

Using logic and reasoning to identify the strengths and weaknesses of alternative solutions to problems. Analyzing information and evaluating results to choose the best approach and solve problems.

5 Computer application skills Selecting and using an appropriate technology to accomplish a given task; applying computing skills to problem solving.

6 Mechanical ability Ability to use machinery properly and maintain the equipment in best working order.

1 Definitions for skills 1 – 5 are based on Conference Board: www.conference-board.org.

Packaging workers, 300

Forklift drivers, 233

Maintenance or repair technicians, 210

Shipping, receiving &

traffic clerks, 118

Supply-chain

techs, 37


http://www.conference-board.org/


Non-Exporters

Forty-five percent of the businesses surveyed (123 firms) do not currently export their goods and services to foreign countries. Of these, only eight percent (10 firms) plan on exporting products and/or services in the near future. The most prevalent barriers include: dealing with a multitude of government agencies; expensive shipping; confusing and complex trade regulations; and difficulty finding new customers in foreign markets. Other challenges include:

• Lack of rail service to their area; • Too busy to pursue foreign customers; • Low margins on products make shipping to foreign countries unrealistic; • Complex FDA and ADA regulations; and • Lack of knowledge on how to cultivate international sales.

Several businesses stated that exporting was not appropriate for their current business model – e.g. product is too perishable, requires face-to-face interaction, or that they had no interest in expanding to foreign markets because they have enough sales locally. Exhibit 15 displays a word cloud of the ‘other’ responses, highlighting words that appear more frequently.

Exhibit 14: Challenges Preventing Businesses from Expanding to Foreign Markets

Exhibit 15: Other Barriers to Entry, Word Cloud

47%

9%

15%

17%

17%

21%

24%

25%

26%

0% 10% 20% 30% 40% 50%

Other

Lack of available financing to work with foreign customers

Worried about getting paid

Language barriers

Takes too much time

Difficulty finding new customers in foreign markets

Confusing and complex trade regulations

Expensive Shipping

Dealing with a multitude of government agencies



Interest in Exporting Services

Over one hundred of the businesses expressed interest in one or more of the following export services. However, only 46 businesses said they would like to be contacted by the Northern California Deputy Sector Navigator for Global Trade & Logistics to learn more about export services available in the region. One reason for this disparity may be that Northern California businesses are not familiar with the terminology/branding of the California Community College Doing What Matters Initiative and Deputy Sector Navigator terminology, including its purpose and funding structure, and are hesitant to provide their contact information.

Exhibit 16: Interest in Export Services*

* The number of businesses that would find the export service as useful is noted in parentheses next to the service. Multiple selections were allowed.

Identifying reputable distributers, partners, or

other agents in the foreign market to work with (109)

Identifying tax breaks and incentives (94)

Building partnerships with international customers (92)

Navigating international trade laws and regulations (72)

Understanding of the culture and the language as it relates to marketing your goods (64)

Protecting your intellectual property overseas (61)

Assistance with the U.S. International Trade

Administration website and other online resources (55)

Participating in a discussion with your peers about export

strategies (54)

Securing payment enhancement products to

streamline the international payment process (53)

Connecting with supply-chain management businesses in

your area (42)

Securing financing to support your export activities (42)



Summary

Export activity has a significant impact on a local economy. Not only do export sales contribute to the economy through corporate taxes, it also increases the overall wealth in a region. Revenue from other countries introduces ‘outside’ dollars which grows the local economic base, rather than recirculating existing dollars. A strong economic base translates to higher incomes and a better standard of living throughout the community. To better understand export activity in the Northern California region, the Deputy Sector Navigator for Global Trade & Logistics conducted a survey of businesses throughout the region. Key findings from the survey include:

• Northern California businesses export to countries around the world. Canada, Australia, Japan, and China are among the top trade countries.

• Export sales augment total revenue by less than 10% for the majority of Northern California businesses, representing an opportunity for expansion.

• Most businesses reported that they did not have any difficulty entering the exporting market, with little up-front development time.

• Expensive shipping and confusing/complex trade regulations are the biggest challenges to selling good and services to foreign customers.

• Only a few businesses rely on payment enhancement products, such as Overseas Private Investment Corp (OPIC) products, Export-Import Bank products or private credit insurance, to support and streamline their export activities. Expansion of these products & how they help could facilitate additional sales and revenue.

• Improvements to the port facilities, railroad services and shipping cost structures would facilitate greater ability to export to other countries.

• Fewer than 10% of non-exporting businesses plan to start exporting in the near future. The most prevalent barriers include: dealing with a multitude of government agencies; expensive shipping; confusing and complex trade regulations; and difficulty finding new customers in foreign markets.

• Local businesses are most interested in services that would help them to (1) Identify reputable distributers, partners, or other agents in a foreign market to work with; (2) Identify tax breaks and incentives and (3) Build partnerships with international customers.



Appendix A: How to Utilize this Report

This report is designed to provide current industry data to:

• Define potential strategic opportunities relative to an industry’s emerging trends and workforce needs;

• Influence and inform local college program planning and resource development;

• Promote a future-oriented and market responsive way of thinking among stakeholders; and,

• Assist faculty, Economic Development and CTE administrators, and Community and Contract Education programs in connecting with industry partners.

About the Centers of Excellence The Centers of Excellence (COE), in partnership with business and industry, deliver regional workforce research customized for community college decision making and resource development. This information has proven valuable to colleges in beginning, revising, or updating economic development and Career Technical Education (CTE) programs, strengthening grant applications, assisting in the accreditation process, and in supporting strategic planning efforts.

The Centers of Excellence Initiative is funded in part by the Chancellor’s Office, California Community Colleges, Economic and Workforce Development Program. The Centers aspire to be the premier source of regional economic and workforce information and insight for California’s community colleges.

More information about the Centers of Excellence is available at www.coeccc.net.

Important Disclaimer All representations included in this report have been produced from primary research and/or secondary review of publicly and/or privately available data and/or research reports. Efforts have been made to qualify and validate the accuracy of the data and the reported findings; however, neither the Centers of Excellence, COE host District, nor California Community Colleges Chancellor’s Office are responsible for applications or decisions made by recipient community colleges or their representatives based upon components or recommendations contained in this study.


http://www.coeccc.net/


Appendix B: Global Trade & Logistics Services in the Far North

Doing What Matters for Jobs and the Economy Framework The California Community Colleges and its Doing What Matters for Jobs and the Economy framework is a coordinated effort to provide industry-specific workforce services through a system of regional sector specialists called Deputy Sector Navigators (DSNs). The DSNs work to align community college and other workforce development resources with the needs of industry sectors and occupational clusters. The goal is to invest in the skills of California’s workforce through partnerships with business and industry that result in highly specialized industry training, technical consulting and business development.

The Global Trade and Logistics Deputy Sector Navigator for the Far North Region works with associations and other industry partners throughout Northern California communities. Key priorities include:

1. Provide services to businesses entering or expanding into foreign markets and 2. Create a pipeline of trained, industry certified workers.

To meet these objectives, the Global Trade and Logistics Deputy Sector Navigator will be launching a new Center for International Trade in 2015 that will provide services to local businesses and expand access to Certified Global Trade Business Professional (CGTB) training.

Center for International Trade (CITD)

Based on the California Community College Economic and Workforce Development’s CITD model, the Far North CITD will support the region’s international trade and competitiveness, assist exporters and importers, and advance economic and job growth. The Far North CITD will assist regional business to expand internationally as well as help colleges become more globalized. The Far North CITD will provide a full range of trade assistance services to companies and individuals throughout Northern California. All services will be either free or low cost. Key services will include one-on-one technical assistance and consulting, market research, training and educational programs, trade leads and special events.

Certified Global Trade Business Professional (CBTB) Certification The National Association of Small Business International Trade Educators (NASBITE) offers an industry recognized credential that confirms “knowledge in international trade and assures that employees are able to practice global business at the professional level required in today’s competitive environment.” NASBITE offers accreditation to training programs that teach to four domains: (1) global business management, (2) global marketing, (3) supply-chain management and (4) trade management.

Contact Information For more information, please contact:

Leah Goold-Haws Deputy Sector Navigator Global Trade & Logistics Far North Region

530.410.1182 [email protected] doingwhatmatters.cccco.edu


mailto:[email protected]

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