October 12, 2021

Ask Dennis - October 2021

Q:  I missed the recent live “Focus over Hocus Pocus” webinar. I was told there was a list of steps to take to lock in a trade lead once it was vetted as a quality opportunity.  I watched the recording and went through that section, but I could not see any references for those sources. Since this is really important can you go over it again and show us where all that information comes from?

A:  Many of the resources are pointed out in the footer of the slide but in this case, there were too many to fit, so thank for the question. It is a good idea to repeat since indeed they are worthwhile steps which Food Export companies have used many times and do in fact help secure the transaction. Let’s broaden this a little for those who missed it entirely, but if you would like to watch the recording you can access it at www.foodexport.org and then click on “Our Programs” and then again on “Webinars”.

The webinar begins by addressing the issue of once again re-connecting with buyers in person after what may be for many a two-year hiatus. We have learned through this period that export business is a bit more challenging come by or least delayed somewhat by the lack of in person meetings and that virtual meetings, while invaluable and preferred by many (they will continue in fact) were missing that primary in person contact where relationships are developed more readily. International trade is based on relationships after all, and they need to be developed in order to succeed in this business.   

So, the point was that activities in the Food Export network will once again come in contact with buyers from all over the world: Buyer’s Missions, Trade Missions and Trade Shows etc. Buyers are also asked to complete evaluations after each event just like the suppliers. Theirs consistently indicate interest in companies, products, and people, but lack of ability to meet their expectations makes it difficult to do business with them. That includes poor communications and lack of execution.

The recommendation is as always to focus first on your “Export Readiness”, a balance between export marketing and promotion and competent export operations. Perhaps even think of yourself as an importer of food products: What would you expect?  Learning even a little about importing is helpful, since that is what the customers are. Naturally, creating a proforma export policy, preparing for meetings with foreign buyers and prioritizing leads and following up on them properly is what we were focused on. There are certain issues buyers are dependent upon export suppliers to be competent in.

Historically it has been difficult for U.S. food export suppliers to achieve their best success if they cannot demonstrate some competence in these areas. Some may find them boring, needless, and not important but to the buyer, who is in effect an importer, they are very important so they should be to the supplier as well.  Food Export has the best export training specifically targeting small and medium sized value-added food exporters. This is delivered through its online compendium of 11 interactive training modules known as Export Essentials Online or “EEO” for short. There are also monthly live and webinars which focus specifically on building export competence, which are then recorded such as this one.  As you will see below, all of the resources you are interested in are presented at length in the export training materials.

We then went over a variety of leads which were all in fact real although names had been redacted for confidentiality, unless publicly available. Some were less than attractive which we analyzed, some mid-range 2nd tier and another one we came upon was well worth using an example of how to prioritize, focus on and follow up with precision.  Spellcheck was not used for reasons of authenticity.

High Quality Trade Leads Look More Like This

“Hello, i am AnnaK from South Korea. I am so delighted ti find the great chocolate candy products of your company. I run a company called Sweety Co., Ltd. Sweety is an importer and distributer of good quality product. We work with mostly premium department stores. I would appreciated it if you share the company profile and product info. So that we can have a opportunity to work together and develop your brand in South Korean market.  Please get back to me at your earliest convenience.” annak@sweety.co.kr +82 10 3214 0775

I was asked if this was worth following up on. I checked their website, product line and background and found them to be legitimate. I advised that some spelling mistakes would be expected since English was not her first language and that once involved in international trade one could tune that out and discern facts from language. It is more based on what they say than how they say it. The company followed up with more detailed information about their products and themselves and indicated an interest in moving forward. A reply came from Anna K the very next day.

“It’s great to hear from your shortly”

“Your great products through the website and got more interested to have an opportunity to work together. Your products would very fit to the high end department stores in South Korea such as Hyundai, Shinsegae, Galleria, Lotte, AK etc. We directly work with them, which means we import good quality products and distribute to them directly. We are not only interested in selling products but more focused in developing the new great brand such as yours. You may refer to the attached our company introduction in ppt file. I studied

If you can share any of yours in more detail, it will be much great. Also, please let us know if you are also willing to build a cooperating business relationship with us. Then we will inform you what would be the next step for us to import your products according to Korean FDA.” Thanks & very best regards, Anna Kim”, Sweety Co., Ltd http://www.sweety.co.kr

These comments only added to her legitimacy and enhanced the lead potential. She identifies more specifically what her company does. She also names most of the major players in the food retail scene in the country. She knows the compliance specifics of getting Korean FDA for import approval. This all demonstrates both market knowledge as well as the proper steps for import compliance. And she is now more excited about the supplier’s product line and the potential of doing business with them.

Hand Off Typical in Korea

Another step that is very common and not surprising is that once Anna K has established the business potential, she delegates the detailed compliance work to another staff member whose job is usually to shepherd the product specifics of ingredients and the manufacturing flow chart in order to make a presentation to the Korean FDA. The next day the supplier received this email. 

“Thanks for your email. My name is Dong Hyun Cho and I work with Anna as a business development director. Looking at the different in time zone, (assuming Anna is sleeping now), I thought I would need to reply to you to get this collaboration going a bit faster. Here is the list of request: Product intro; Spec including ingredients (for now) as we want to look if there is any ingredient that is not allowed in local market. Price list; Your terms & business conditions.”

He continued “We know exactly how to launch new products and we’re interested in your products pretty much every product. Once we get the info, we’ll check and will ask for more information (to meet the requirement by Korean FDA) and give you more insight what would be needed (such as Korean label etc.,)”

This is also a very positive development, and it means they are quite serious about the opportunity. They are even willing to assist in the creation of a label for the retail packaging. As long as the ingredients are acceptable to the FDA in Korea and you can meet their pricing requirement, this is close to being a deal. But we talked about taking certain steps to “Focus” on meeting your end of the bargain, and not just using “Hocus Pocus” and waiting for them to do all the work. You can demonstrate your export skills and commitment to them and their market by using the following steps.

Focus Over Hocus Pocus

Here are the steps outlined in the webinar which will include the resources used to obtain the information. All of these are also explored in EEO Modules as well as recorder webinars. The first was to establish the HS code/Schedule B number if not already on hand. To locate the codes you can go to https://www.census.gov/foreign-trade/schedules/b/index.html Once there use the “3CE” or commodity code classification search which was in this case “chocolate” and then drive down to the specific type which was boxed assortment for retail. The HS code was 1806.90 and the Schedule B number was 1806.90.0063.   

The HS will be used to evaluate the duties and taxes in Korea on the product and the B number is used for export clearance upon departure from the U.S. and the source of the export statistics used to evaluate the volume and value of the products being exported to Korea.

Next it was suggested to run the export data on B number in order to gauge Korea’s market size and the value and volume of product being exported there from the U.S. The best resource specifically for food exports is the “GATS” or Global Agricultural Trade System. This database can be programmed in a variety of ways but in this case “All Partners” is used once the data is loaded so you can see their ranking overall. Korea is the 4th largest U.S. export market for retail confectionery totaling $12.5 million in 2020.

So far through August of 2021 U.S. exports have grown 18% on a year to date (YTD) basis and were at $7.4 million. The GATS system can be located by accessing the website of the Foreign Agricultural Service, FAS, at www.fas.usda.gov and once in click on “Data and Analysis” in the top ribbon and then over on the left side of the page you can click on the GATS icon.  

It was clear in the correspondence that compliance is important and essential to the importers, so a thorough review of the food import regulations should be conducted. In addition, since the importer serves so many of the key players in the retail food market you should also check the Retail Sector Report as well as the Exporter Guide. These are also located at www.fas.usda.gov and you also click on “Data and Analysis” but rather than the GATS icon there is another one for “GAIN” or Global Agricultural Information Network reports.

A few clicks to access the “FAIRS” or Food & Agricultural Import Regulations & Standards, a narrative on the food import process. Right below the FAIRS report is what is known as the “CERTS” report which is an overview of the export documents required for Korea. You will note that for processed food products they are more interested in the ingredients over paperwork, which is why Anna K and Dong Hyun Cho, both brought it up. But both reports are helpful to learn about their concerns and to be able to ask any questions based on them.

Even without the Free Trade Agreement (FTA) called KORUS it would be important to be aware of the duty and taxes on the product in order to understand that part of the landed cost to the buyer. In order to do that you can use the products HS code and go to CustomsInfo which is located at the following website:  https://www.customsinfo.com/trade-gov/ If you are a new used simply create the free online account using your email. Open up the system and select Korea and then under “Tariff No.” enter in 1806.90.

The line-item extension is “1806909010 Cocoa preparations containing 50 % or more by weight of milk powder”. It reports the duty without the benefit of KORUS being 8% on the cost, insurance, and freight (CIF) value. There is also a value added tax (VAT) of 10% aggregated on the CIF + Duty. The duty under KORUS for the product would be Free which is obviously preferable to the buyer, so the next step, again using the HS code would be to qualify products for KORUS using rules of origin (ROO). For that you can go to The FTA “Tariff Tool” located at https://www.trade.gov/fta-tariff-tool-search%201

Once in you can select “You are exporting goods to an FTA Partner”, select and then load the HS code 1806.90 in below. The ROO for 1806.90 for the KORUS says, “A change to subheadings 1806.31 through 1806.90 from any other subheading.” This means that as long as it is not a chocolate product when imported, the various ingredients can make up chocolate candy from anywhere in the world and they would still qualify for the product entering Korea free from duty. All you need now is a KORUS Certificate of Origin for the buyer to confirm the eligibility with Korean Customs. You can download a copy of one with all the instructions at www.trade.gov and type in “U.S. – Korea Free Trade Agreement”

So, after these steps you can not only impress the buyer with your export skills and give both you and them confidence in moving forward. You classified the product for trade and can see the important uses. You know Korea is an excellent market for chocolate confectionery; you also learned that the importer’s customers are some of the top retailers in the country. You also became familiar with the regulations and understand they need the ingredients listed to 100% and a manufacturing flow chart and this is not to copy the product but to appease the FDA.  You also learned about the documentation requirements, one of which is the KORUS Certificate of Origin. You also are aware of the duty if the product does not qualify and what the VAT is, but more importantly you can confirm the product qualifies and provide them with proof. This is FOCUS and not HOCUS POCUS.