1 Where’s the Money and Markets in Our Challenging Global Economy GET MORE $ OUT OF YOUR EXPORTS Presented by Joseph G. Englert President Export Assist, Inc.

2 Objectives for this Session How to put your export sales to work for you Number 1 Rule: Never run out of cash or credit Understand export transaction financing and tax benefits

3 Export Transaction Financing PRE-EXPORT FUNDING POST-EXPORT PAYMENT TERMS WORKING CAPITAL Cash in Advance Ex-Im Bank WCGP SBA WCGP Trading Company IC-DISC SHORT-TERM Cash in Advance Letters of Credit Documentary Collection Open Account Credit Insurance Factoring MEDIUM-TERM International Credit Insurance Ex-Im Bank Guarantees Standby Letter of Credit Forfaiting Leasing SHIPMENT DATE

4 Export Transaction Term Final Payment PRE-EXPORT FUNDING POST-EXPORT PAYMENT TERMS WORKING CAPITAL Average Days SHORT-TERM PAYMENT Less than 1 Year MEDIUM-TERM PAYMENT 1 to 7 Years SHIPMENT DATE Purchase Order Financing Charges for Transaction Term

5 Finance Pitfall: Not planning for the cash required for export growth –Good news: your marketing is working –Bad news: your marketing is working

6 Tax Pitfall: Not taking advantage of existing export tax benefit legislation (leaving money on the table) –Export profit & loss –Interest Charge Domestic International Sales Corporation (IC-DISC) Part of IRC since 1972 Dividends: individual shareholders taxed at 15% rate Deferral: use pre-tax, low-cost funds for working capital and R&D

7 Tax

8 Sample Export Profit & Loss Statement Foreign Trading Gross Receipts (FTGR)$ 50,000,000 Cost of Goods Sold (COGS)(30,000,000) Gross Export Profit20,000,000 Export Expenses: Direct(8,000,000) Indirect(1,000,000) Combined Taxable Income $ 11,000,000 Export Profit & Loss Statement

9 Safe Harbor Commission IC-DISC IRC Sec IC-DISC acts as a commission agent on the export sales of its parent or affiliate Safe harbor commission calculation based on 50% of combined taxable income (CTI) or 4% of foreign trading gross receipts (FTGR), whichever method is greater (IRC Sec. 994(a))

10 Definition of Export Property Manufactured, produced, grown or extracted in the U.S. by a person other than an IC-DISC Held primarily for sale, lease, or rental for direct use, consumption or disposition outside the U.S. Not more than 50% of fair market value of the export property attributable to articles imported into the U.S.

11 IC-DISC Deferral How to use deferred income for export financing: Make producer’s loans Make accounts receivable loans Finance factored export invoices Purchase export customer’s promissory notes

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