International Business NewsOctober 2015

How smaller companies bump up sales

Indirect Exporting

In this issue:A look at 3 Indirect Exporters

Review: 2014 Exports by State

Czech-Slovak Ambassadors visit KC

SIDO President

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2 Held & Associates

3 ToC & Letter from Publisher

4-5 Indirect Exporting - ESP International

6 Indirect Exporting – Evergreen UV

7 Indirect Exporting – Galley Support Commerce Bank

8 Industry Trade Committee & Indirect Exporting

9 InterMark 3

10 ITCKC Annual Dinner Czech-Slovak Ambassadors visit KC

11 Pardalos – SIDO President & 2014 Exports

12 Transimpex Translators-Interpreters

IBNewsmag TM: in this issue

One of the more elusive forms of exporting to be identi-fied and quantified is that of indirect exporting.

We all know what it means to sell directly to overseas companies as in direct exporting. It’s relatively easy to identify and quantify direct exporters and resulting sales.

Identifying indirect exporters is much more challenging simply because defining indirect exporting itself is muddy.

One definition of indirect exporting is selling your prod-uct to American and/or foreign third party trading com-panies or to export management companies, which in turn sell to offshore customers. This form of selling is relatively simple in that many small manufacturers typi-cally do not have to make many concessions or changes in procedure to conform to the buying party. It is often seen as an easy way to get into exporting.

The other instance of indirect exporting is when a small to medium-sized company/enterprise (SME) supplies components to OEMs - larger direct exporters. These indirect exporters comprise a significant contribution to our overall export landscape, but are more difficult to identify and quantify.

The latest statistical evidence we know of is an eight year old ITC report citing the fact that indirect exporting SMEs supported more than half of all SME exports, or 2.1 mil-lion jobs out of 4 million SME supported jobs. According to our source at the USTR, no additional calculations are available.

With this much indirect exporting helping to tamper our balance of trade, our indirect exporters should be af-forded many of the same government-assisted programs as direct exporters. As it is now, most indirect exporters don’t even realize the significance of their role in boost-ing American exports, let alone that they are exporting their goods.

In this edition of IBNewsmag, we look at several indirect exporting SMEs here in the Heartland to get a good idea of what they do.

— Frederick Baehner

Publisher’s Letter

IBNewsmagTel 816.616.7779 Fax: 816.472.0959fbaehner@intermark3.com

6655 Troost Ave., Kansas City, MO 64131, USA

In God we trust!PUBLISHER/EDITOR:Frederick Baehner

DESIGN & PRODUCTION:Tom Gilland www.GillandGraphx.com

CONTRIBUTING WRITER: Jennifer Wietelman

ADVISORY BOARD:Jo Anna Edgerton, Doris Ganser, Paul Mastilak

page 3October 2015

IBNewsmagTM

October 2015page 4

Rarely recognized in the world of exporting is the role of the indirect exporter in our overall National Export Initiative (NIE). Small to medium-sized com-panies/enterprises (SMEs) that manufacture parts or components for larger exporting manufacturers or OEMs, they represent a significant contribution to our nation’s overall supply chain and GDP.

In the last tally available, the US International Trade Commission (ITC) pegged manufactured exports at

41 percent of total goods and services sold abroad. Included in this number are indirect exports at 13 percent – a significant boost to overall manufactured exports and not included in our balance of trade.

IBNewsmag visited with several of these much-needed suppliers, discovering a unique range of in-direct export products.

Indirect Exporting – Expanding the National Export Initiative

page 5October 2015

Don Grawe,ESP Director of Seal Markets

Indirect Exporting, continued on page 6

ESP International

ESP International in Cedar Rapids, IA, is a global and domestic supply chain special-ist having served the OEM market for over 40 years, many of them as an indirect exporter with seals, custom rubber prod-ucts, and plastics. Sup-plying the OEM mar-ket is ESP’s reason for existence.

Its major customers include John Deere, Emerson, Polaris, SPX and CNH, to name a few. Nearly all of these customers export directly with a global foot-print supported by ESP.

The company, with its China and India offices, spec, source, import, assemble and export. It is also a di-rect exporter for certain products but nearly all of its business is in the OEM market, with a share of ESP supplied product becoming an indirect export.

Don Grawe, ESP Director of Seal Markets, said, “Im-porting is how we first established our global opera-

tions. That meant finding low cost manufacturing partners that could produce to our specification as an alternative to local sourcing. In certain situations this has helped our customers remain competitive with their cost of materials, which helps them main-tain profitability and thus keep making finished product right here at home, where it all started.”

Mr. Grawe went on to point out, “All of our multi-national customers with overseas production are supported by us to assure conformance to exacting part specification. John Deere alone has 30 locations worldwide that we support [with product].”

In some situations, ESP customers expect the com-pany to be their eyes and ears in their markets to as-sure product conformance as well as the quality and integrity of their components – a further enhance-ment of ESP’s indirect exporting role.

That’s where ESP international offices come into play. Not only do they help identify suitable sourcing of inputs, they also remain tuned into what some of their international competitors are doing, which in turn helps ESP customers remain competitive.

This full spectrum of proper sourcing, manufactur-ing and indirect exporting serving its OEM custom-ers enables ESP to maintain its position as a global supply chain specialist.

ESP patented KSLY radial shaft seal

IBNewsmagTM

October 2015page 6

Indirect Exporting, continued from page 5

Evergreen UV

Memphis-based Evergreen UV produces advanced Ultraviolet Germicidal Irradiation (UVGI) products now used throughout the world to help eliminate airborne respiratory diseases with a particular ap-plication to counteract the ravages of a resurging worldwide tuberculosis epidemic.

Recognized by the Center for Disease Control (CDC), the Environmental Protection Agency (EPA), Emer-gency Management Agency (FEMA) and the Na-tional Institute of Occupational Safety and Health (NIOSH), Evergreen sells a majority of its Lumalier-brand UV products to end users in countries such as Tajikistan through these organizations, including the worldwide Partners in Health (PIH) organization.

“As an indirect exporter, we produce and package the Lumalier UV products which are purchased by the organization,” said Dave Skelton, Evergreen UV President. “The organization picks up the shipment from our dock and ships it to the clinic, hospital or other healthcare destination in other countries.”

With many SKUs, Lumalier’s GL wall and ceil-ing-mounted units are the primary UV units sold throughout the world. For example, its GL Ceiling units operate with anywhere between 5.5 and 22 UV-C Watts and weigh between 11 and 25 lbs. “They are easy to install and cover 110 to 440 sq ft with disinfecting UV light,” explained Mr. Skelton.

He went on to explain how the UV spectrum – es-pecially germicidal UV – works. Wherever people congregate, they exhale droplet nuclei carrying dis-ease. Others inhale the tiny airborne droplets and may contract the disease. Lumalier germicidal UV units should be installed in these areas to effectively disinfect these noxious microorganisms while still airborne.

“We do some direct exporting to customers in Hong Kong,” he continued, “but for the most part we do

very little direct business with anyone outside the US.” Much of the company’s business is a result of its participation in international health symposiums, such as a recent USAID International Symposium on TB held in Washington, DC.

A noteworthy example of Evergreen UV’s indirect exporting are its sales to medical organizations. These Lumalier wall units are then shipped to hospitals and clinics worldwide and used to

effectively disinfect noxious microorganisms.

page 7October 2015

Galley Support

Galley Support produces compo-nents for the transportation indus-try – most notably galley latches, hinges, boltings and locks for the aerospace industry. Galley’s cus-tomers include Gulfstream and other airplane manufacturers that directly export.

Gina Radke, President and CEO of Galley Support in Sherwood, AR, re-ported that Gulfstream, a customer since 2008, represents approxi-mately 70 percent of their business.

Another example of Galley Support indirect exporting is its partnership with Mercury Sales, based in Irvine, CA. Mercury buys components from Galley and exports them to air carri-ers in the Asia-Pacific region. While

a small percentage of Galley’s over-all sales, this trading company is a major direct exporter in its own right. Malaysia Air is one example of a Mercury customer that uses Gal-ley Support components.

While indirect exporting is one as-pect of Galley’s business, it directly exports to transportation compa-nies as well. In this capacity, Galley relies on government assistance from the Export-Import Bank which

has not been reauthorized by the US Congress.

“We had been negotiating with a major transportation company in South America,” said Ms Radke, “but they required guaranteed credit and terms. Without Ex-Im assistance, our deal, which would have doubled our business, is on hold.”

Indirect exporters would have been eligible for Ex-Im working capital

Indirect Exporting continued on page 8

commercebank.com

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Galley Support designs and manufactures high-end latches

and galley appointments for its OEM customers, including

Gulfstream corporate jets.

IBNewsmagTM

October 2015page 8

loans, had certain Republican legislators not hijacked its reauthorization resulting in mounting job losses.

Free trade agreements may, or may not, be a boost to Galley’s business. “I can’t see how the recently approved TPP can offer specific benefits to our busi-ness,” noted Ms. Radke, “but I don’t think it can hurt our business either.”

Industry Trade Advisory Committee for Small Business

A long-time proponent stressing the importance of indirect exporting is the chair of the US Dept of Commerce Industry Trade Advisory Committee for Small and Minority Busi-ness (ITAC 11), and CEO of Kansas Global in Wichita, KS, Karyn Page.

“Here in south central Kansas, the aerospace in-dustry leads all exports with nearly 60% of the pie – worth $4.8 billion in 2012,” Ms. Page said. In sup-port of this significant market, she told us, there are perhaps 350 aerospace suppliers in the region, most of which are indirect exporters. “They sell their components to the aircraft exporters here, such as Cessna, Bombardier Learjet and others .”

As a part of the South-Central Global Cities Initia-tive, Ms. Page is pushing to encourage these sup-pliers from indirect to direct exporting. “We’re taking a 2-pronged approach,” she continued. “We are out talking with many of the suppliers explain-ing the added benefits of direct exporting, and we are working with global MBA students at a local pri-vate university. These students, as they enter the supplier workforce, produce industry cluster export opportunity reports under the joint direction of the university professors and Kansas Global. In both cas-es we provide access to as many tools as possible for success.”

Indirect Exporting, continued from page 7 Ms. Page went on to explain that there many other small to medium-sized manufacturers/enterprises (SMEs) that make all kinds of components other than aerospace inputs. Balco Inc of Wichita for example, manufactures pre-engineered and custom building components for the commercial construction indus-try. “We are working with non-aerospace companies to help them take the next step in the process to export more.”

Indirect Exporting-SBA Financial Support

An exporting specialist, Larry Cresswell, Regional Manager, Export Solutions Group of the St. Louis SBA regional office, had this to report on indirect Exporters.

“Indirect exporters, in my opinion, are extremely important to local economies and even more so in the Midwest region I cover. SBA export loan pro-grams and their 90% guaranties are all eligible to be utilized by companies that are part of larger supply chains, thus allowing better access to capital for in-direct exporters,” he said.

“I also see indirect exporters having great oppor-tunity to become direct exporters, because many times foreign manufacturers can benefit from the quality and precision US companies provide just as much, if not more than larger US manufacturers. “

“Simply because of our geographic location [here in the Heartland], direct exporting can be challenging for a small business, but being a provider of services for a larger company eliminates some of those chal-lenges for our local SME’s. Assisting SME’s that are indirect exporters in getting access to capital and in growing their businesses is a huge part of what I try to accomplish in my position,” he explained.

—IBN

Karyn Page chairs ITAC 11

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6655 Troost Ave., Kansas City, MO 64131 USA

October 2015page 10

Two ambassadors—H.E. Petr Gandalovič (l), Ambassador of the Czech Republic, and H.E. Peter Kmec (r), Ambassador of the Slovak Republic—flanked Harry S. Truman Library & Museum Director Kurt Graham at a wreath-laying ceremony at the gravesite of President Harry S. Truman to honor the 33rd President of the US. The two ambassadors visited the Kansas City area at the end of Sep-tember to learn more about the area’s business and cultural climate. The visit was coordinated by the two honorary consuls in Kansas City, Sharon Valášek, Czech Republic, and Ross Marine, Slovak Republic, marking the first time in recent history that two ambassadors visited at the same time.

Czech-Slovak Ambassadors visit KC

Well-known throughout the Heartland by his reporting on new export orders and imports for IBNewsmag since 1996, Ernie Goss, Ph.D., MacAllister Chair and Professor of Economics at Creighton University, sys-tematically laid out the correlation between interest rates, value of the dollar versus foreign currencies, and the net effect on exports and imports at the Oc-tober ITC Annual Dinner in Kansas City.

“I really don’t see exports getting back into growth mode the remainder of this year,” said Prof. Goss, “and even into the beginning of 2016. The strong dollar and a rather weak global economy have really stymied export growth. If the Fed decides to raise

interest rates the dollar will strengthen more so and it will hurt exports even more.”

The 71st annual meeting of the ITC yielded newly elected officers: President Rick Graham, Rockhurst University; 1st VP, Mehgan Flynn, Bannockburn Global Forex; 2nd VP Julia Creek, Park University; Secretary Anthony Houchin, Grantham University; Treasurer Dan Brigg, BMO Harris Bank and Immedi-ate Past President Sharon Valasek, Honorary Con-sul of the Czech Republic.

Newly elected Directors include: Justin Meyer, KC Aviation Dept.; Reid Schultz, MIQ; Tina Taylor, Chubb Insurance and Brian Murphy, Miller & Company.

Ernie Goss Admonishes Export Growth & KC International Trade Council (ITC) Advances Officers

Ernie Goss, Ph.D. Rick Graham,President, ITC

Dinner networking was an appreciated benefit of the ITC KC Annual Dinner. Shown from l to r are Howard Trilling, Jim Malouff, Ivry Karamitros, Candy Wu, Al Figuly, Gene Foster, Jody Edgerton, Raymi Liu

International Business News

page 11October 2015

It wasn’t necessarily a banner year for our ten state Heartland area, but manufactured exports did improve overall in 2014. Only 3 states registered a drop, but they were rather flat. Below is a state-by-state look at 2014 exports compared to those of 2013. With a continuing downward drift YTD in 2015, next year’s export picture will undoubtedly look less positive.

Heartland 2014 exports show marginal growth over 2013. What about 2015?

$ -0.3

$ +1.2

$ -0.5

$ +0.6

$ +1.2

$ +0.5

$ -0.6

$ +1.6

$ +.01

$ +0.3

$ change6.8 7.1

15.1 13.9

12.0 12.5

21.4 20.8

14.1 12.9

7.9 7.4

6.3 6.9

5.3 3.7

1.59 1.58

23.4 23.1 Source: International Trade Administration – www.export.gov. These �gures represent goods only. Services are not included.

2014 2013Exports by State In US$ billions (rounded off to nearest million)

Arkansas

Iowa

Kansas

Minnesota

Missouri

Nebraska

Oklahoma

N. Dakota

S. Dakota

Wisconsin

Ann Pardalos, SIDO President

Ann Pardalos is Man-ager, Missouri Interna-tional Trade & Invest-ment Office in Jefferson City. She is also Presi-dent of the State Inter-

national Development Organizations (SIDO) based in Washington DC, with a 2-year term which lasts until end of June next year.

SIDO, a non-profit, is the only national organization focused exclusively on state international trade develop-

ment helping state international trade agencies better serve our nation’s ex-porters by sharing innovative ideas and resources, developing the skills of state trade professionals, advocating the interests of states in trade promo-tion, and facilitating multi-state col-laboration.

“Our greatest challenge this year and specifically the last few months, has been working to get the Export-Import Bank (Ex-Im) reauthorized,” said Ms. Pardalos. “In Missouri alone, 90 per-cent of the companies that received Ex-Im financing were small compa-nies. Last year, the bank financed over $350 million of business that could be

forfeited to foreign competition. We have already lost a lot of ground and will continue to do so, if Ex-Im is not reauthorized.”

“In addition to the Ex-Im issue, I have placed a great deal of emphasis on the professional development of our members and helping to develop the trade directors of tomorrow. We are also increasing efforts to create initia-tives that help to streamline trade pol-icy in terms of modernizing Customs, export licensing and other trade barri-ers,” she continued. “anything we can do to bolster our states’ exports.”

Missouri Trade Official Steers National Trade Agenda to Boost Exports

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