June 2011

Exporting May Be Untapped Opportunity

The following article was contributed by Wayne T. Hoeing, CPA, JD, a tax partner

with Clifton Gunderson LLP in Indianapolis. Wayne can be reached at

wayne.hoeing@cliftoncpa.com. For a copy of the survey or more information about

accounting services, please contact karen.hupe@cliftoncpa.com.

The Manufacturing Outlook survey covers large, medium and small businesses in

manufacturing, metal fabrication, distribution, industrial and commercial machinery,

agriculture supply/production, and food and beverage. It was completed by Clifton

Gunderson LLP in late 2010.

Of the more than 200 respondents to the survey, 49 percent say they do not export

and have no plans to do so, while 45 percent currently export. Only 6 percent of

companies say they plan to export in the next two years. Current exporters say they

plan to focus on Canada (56 percent), Mexico (37 percent), and the United Kingdom

or China (21 percent combined).

The U.S. Census Bureau’s current report on State Exports for Indiana indicates that

exports in Indiana have held constant over the past four years, holding at 2.2

percent of total U.S. exports (http://www.census.gov/foreign-trade/

statistics/state/data/in.html). Canada accounted for 37.2 percent of Indiana exports

in 2010; Mexico accounted for 9.1 percent. Germany was next, at 6.4 percent,

followed by the UK, at 5.1 percent. And although the automotive industry has

struggled in recent years, exports of gear boxes, transmissions, engines, and trailers

remain at the top of products exported from our state.

For companies that have already entered the international market, chances are they

began exporting when one of more of these factors provided greater opportunities to

sell products that have the potential to increase overseas sales:

A new U.S. manufacturing survey shows

that large manufacturers are experiencing

increases in profits from exporting, yet 49

percent of companies surveyed say they do

not export and have no plans to export. According to Manufacturing Outlook:

Findings of a National Survey of the Manufacturing and Distribution Industries,

untapped exporting opportunities await companies that want to increase profits and

diversify revenue streams.

• Public incentives

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The North American Free Trade Agreement (NAFTA) is an example of a public

incentive. NAFTA and transportation-cost containment within North America are

among the reasons manufacturers have expanded to Canada and Mexico.

Companies will have better opportunities for exporting in general when both the

domestic and international economies improve and more capital becomes available.

Regardless of geographical targets, products or incentives, exporters need to work

with accredited professionals who have experience reconciling the differences

between U.S. tax and international auditing and accounting standards. Efforts are

underway to adopt a set of global accounting standards and practices that will

eventually improve accounting efficiencies.

Many additional government and private resources exist to help with exporting.

Oftentimes, business advisors have ongoing relationships with overseas partners

who can help companies navigate legal and financial matters. For example, networks

like HLB International have large groups of independent business advisors in more

than 100 countries. The professional members of these networks have thousands of

peers who call on each other to handle multi-national assignments varying widely in

size and complexity.

Companies need to consider the following when expanding their businesses

internationally:

IC-DISCs (Interest Charge – Domestic International Sales Corporations) benefits are

available to any qualified producer or distributor that is directly involved in

exporting, or that sells products to a distributor or wholesaler who then resells them

outside the United States. An IC-DISC allows companies to lower their tax liabilities

on profits from qualified export sales. It can be established as a subsidiary or as a

brother-sister corporation owned by the exporter’s shareholders or owners.

While exporting can appear to be daunting at first, the assistance provided by trade

organizations, state and federal government experts, and business advisors can help

make this lucrative market pay off.

What's in a Name? Including a

City Name in a Trademark

The following article was contributed by William Kaiser and Matt Schantz, attorneys

• Private capital

• Demand

• International structuring

• Effects of tax treaties

• Foreign tax credits

• Transfer pricing

• Expense apportionment

• Foreign withholding taxes

• International tax compliance

• Holding companies

• IC-DISC export incentive

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