Expanding your sales into international locations can be done through a variety of ways. Listed below are six of the more common ways in which this can be done, a brief description of each, as well as some aspects to consider when evaluating each.

1. Direct Exporting / Self Representation:

Direct exporting is merely exporting to the foreign destinations without in-country representation. Direct exporting is typically the simplest and least expensive mechanism to begin exporting. There is no need to establish legal agreements with foreign sales representatives or need to deal with the complexities involved in technology transfers, acquisitions or forming a new entity. Also, this option can allow for maximum profit levels as compared to other avenues which may include payment of commissions, discounting to in-country "middle persons", or payment of royalties on sales.

Additionally, even though the U.S. export laws will still apply, this route minimizes foreign law implications that arise under other options, such as restrictions on investment, registration, terminating agreements, etc. On the other hand, direct exporting does not provide for an in-country presence which can hamper marketing success. Selling from the U.S. can make it difficult to overcome cultural and language issues in the foreign country. Lastly, certain countries may have legal requirements requiring some form of presence in order to conduct business in the country (i.e., sales through a local representative or distributor).

2. Foreign Sales Representative Arrangements:

One of the most common first steps towards establishing local representation is the use of agency or distribution arrangements. In both arrangements, the agent or distributor located in the foreign country solicit orders from local customers. The key differences between these two type of arrangements is outlined below:

Agent	Distributor
Solicits sales on behalf of your company and orders are actually placed on your company. The agent is paid a commission on sales.	Buys product from your company (typically at a discount) and solicits sales on behalf of itself. Its profit is equal to amount received in their sale above the amount paid to your company for the product.
Does not take title or possession of goods.	Takes title and possession of the goods.
Your company bears risk of non-payment from customer.	Distributor bears risk of non-payment from the customer.
Your company can dictate the terms of sale and/or authority of agent to negotiate certain terms (e.g., discount price). Agent may or may not be granted authority to bind your company.	Your company cannot dictate the terms upon which the distributor sells the product to its customers. The distributor does not have authority to bind your company.

Establishing agency or distributor arrangements are attractive options for a number of reasons. They are a fairly common and quick way to take advantage of a foreign representative's in-country sales network and knowledge of culture and language, and the representative can provide in-country service. Also, these arrangements are generally easier to structure from a legal perspective than technology transfers, joint ventures or acquisitions.

A representative arrangement may pose some challenges though. Because the representative or distributor is not part of your company or not part of a joint investment, it may not always have the same goals and expectations as your company. Also, local laws may pose special legal challenges related to exclusivity and ability to terminate these type of arrangements. Locating a good foreign agent or distributor is also a critical first step in establishing these relationships. Some key sources for finding and selecting foreign sales representatives include ¹:

• International Trade Specialist at your nearest District Office of the U.S. Department of Commerce.
• Nearest Small Business Development Center.
• Foreign embassies in the U.S.
• U.S. Chambers of Commerce located within the target foreign country.

Once you have located potential foreign sales representatives, you should conduct an evaluation of the potential candidates. Key things to look at include organizational structure (properly staffed, registered, etc.), type of products handled (complimentary, competitive, etc.), sales and marketing capabilities (including experience working with U.S. companies and understanding English), customer service capabilities, business reputation and financial stability. Also, you should actually visit the representative at its office to get a first hand look at their operation. The following checklist, reprinted with permission from the Coleman Research Corporation's Export-Link Export Sales & Marketing Manual, can be a helpful tool in evaluating potential export sales representatives.

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3. Technology Transfers / Licensing:

Typically, intellectual property rights (i.e., patents, copyrights, trademarks, trade secrets) are owned, protected and used exclusively by the owner of the rights. Technology transfers, also referred to as technology licensing arrangements, provide a second party the contractual right to use licensed intellectual property for specified purposes. For example, a company may allow a foreign company to manufacture its products by licensing them the patents, know-how and trade secrets necessary to make the product.

Technology transfers can be a relatively inexpensive way to enter the foreign market and establish an actual presence. And, by licensing your technology, you can expand the use of your technology (and therefore the derived revenue) without losing the rights to it. In licensing arrangements, you should consider the level of ongoing support needed in order ensure that the party to whom you have licensed your technology can succeed.

Additionally, there can be risk of losing your intellectual property rights if the relationship is not properly monitored. For example, if your licensing partner improperly utilizes your trademarks without proper identification, you could lose your trademark status. Or, you could suffer substantial losses if your licensing partner fails to keep your trade-secrets and know-how confidential as typically required in the licensing agreement; you may have legal recourse, but such could prove very difficult and expensive and fall short of truly making you whole. Key considerations must also be addressed such as how will technology developed by your partner, but derived from your technology, be handled (often addressed in what are called "grant back clauses").

4. Joint Ventures ("JVs"):

JVs can take many forms. Generally speaking, a JV involves two or more parties forming a commonly-owned entity or partnership, with all parties contributing something (e.g., assets, know-how, research, etc.), and sharing in the risk and returns. JVs may be necessary in some countries to achieve some form of local ownership, i.e., local laws may restrict or prohibit ownership except by a JV. Also, a JV may create a stronger relationship with your in-country JV partner and ultimately lead to better market success due to shared rewards and risks. On top of this, there may be investment incentives from the host country for investing in the JV.

JV arrangements are, however, more complicated and time consuming than mere licensing or foreign sales representative arrangements. Issues such as creation, control, management, contributions to intellectual property development, capital, labor, training, etc. must be resolved. Other legal issues may pose challenges as well - for example, where the host nation requires a JV in order to obtain some form of ownership, the host nation will likely require use of its own law as the governing law. This can create challenges with respect to interpretation of the JV agreement and enforcement of its provisions.

5. Acquisition:

Another option for entering a foreign market is to purchase equity in an established company in foreign market. This can range from partial acquisition or investment all the way up to a complete acquisition. Acquisitions can allow you to leverage the market presence and expertise of a well established company in the foreign country, and being located in the local market may reduce your costs of doing business such as those related to transportation costs, labor costs, high tariffs, or material procurement. Another advantage is that you can avoid transferring your technology to non-owned company such as under a technology transfer - this may be preferable in countries lacking strong intellectual property protection laws.

Disadvantages of acquisitions include a need for a substantial amount of cash in most instances, whether or not you can retain key personnel, and whether the local laws restrict or prohibit local ownership. Also, ownership and control issues can be very complex; pursuing an acquisition strategy will typically take much longer than establishing a sales representative or technology licensing relationship.

6. Forming a New Entity:

As another option, your company may consider starting up an entirely new entity. This option may be attractive where no feasible acquisition partners exist, yet you still want to achieve the cost saving and technology retention objectives available under the acquisition avenue. However, unlike an acquisition, your company will normally have to start from scratch in identifying personnel to run the operation, and will have to rely on these individuals develop a market presence. Also, local law restrictions and the complexity in setting up a completely new entity will, like the acquisition option, typically be complex and time consuming.

C. U.S. Export Regulatory Requirements: