1Q 2007

Exports Mar 52.0

Apr 60.7

May 59.3

Imports Mar. 56.5

Apr 60.3

May 62.1

1Q 2006

Exports Mar 56.6

Apr 59.2

May 61.5

Imports Mar. 60.4

Apr 61.0

May 65.8

They just keep coming, and the Heartland Index of Imports just keeps rising.

With more and more Chinese im-ports flooding the Heartland market, and oil prices at an all time high, the April and May import Index pushed past 60 the past two months.

While April’s import Index reached 60.3, May’s import Index hit 62.1, in the most recent survey of Heart-land supply managers, tracked by Prof. Ernie Goss, who chairs the Economics Department at Creighton University in Omaha.

Heartland exports nearly kept the torrid growth pace set by imports. April new export orders shot up to 60.7 in April, before dipping slightly in May to 59.3.

Prof. Goss explained, “The weak dollar and strong economic growth among U.S. trading partners has pushed the export orders higher over

the past two months.”

The Index is a real-time, leading economic indicator of monthly changes in both new export or-ders and imports for the 9-state Heartland region encompassing Arkansas, Iowa, Kansas, Minne-sota, Missouri, Nebraska, Okla-homa, North and South Dakota.

May-Jun, 2007

Pg 1

Vol.4 No.2

ibNEWS™

international business news

from the heartland Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma, North & South Dakota

Content 1. Index

2. First National Bank

3. Paris Air Show

4. Aviation Dept

5. Importing Basics

6. China Warehousing

6. Sonnenschein

7. 12 Tips on China (part 1)

8. 12 Tips (cont)

8. Tax Refund for Exporters

8. ibNEWSmag.com

Heartland Trade

Index

sponsored by

First National Bank and produced in

cooperation with

Creighton

University

Increasing Chinese Imports Push Index to Near Record Highs

May-Jun, 2007

Pg. 3

ibNews

Ramping up efforts to attract aero-space-related companies to this trans-portation hub of the Heartland, the Kan-sas City Aviation Department, Greater Kansas City Area Development Council (KCADC), State of Missouri and Platte County Economic Development Council (PCEDC), teamed up June 18th at the Paris Air Show.

Themed “Paris of the Plains,” the jointly-hosted booth inside the USA Pavilion featured Kansas City jazz and Harley-Davidson memorabilia in a coordinated effort to attract aircraft manufacturers, aviation-focused information technology providers, and transportation and logis-tic companies.

Tim Cowden, KCADC Senior VP – Busi-ness Development said, “Our primary objective is to generate new deal flow that leads to companies eventually se-lecting the Kansas City region for reloca-tion or expansion.”

According to Cowden, “Only so much im-pact can be created through traditional marketing approaches, such as advertis-ing, editorial placement, Web presence and direct mail.”

The consortium’s expectation is to return with company leads to help fill acreage and buildings available for development at Kansas City International Airport.

The airport already offers Foreign Trade Zone status, U.S. Customs automated manifest, low landing fees, one of the nation’s lowest flight delay indices and Enhanced Enterprise Zone tax incen-tives.

“Major new tenants such as the Trammel Crow Company and Fast Track Group LLC were on hand to provide the latest news on developments at KCI Airport,” said Gary Bartek, Manager–Cargo and Eco-nomic Development for the Kansas City Aviation Department. “ Site selection decision makers are now adding this KC region to their short list as the ideal place to be.”

Kansas City - “Paris of the Plains” - Exhibits at the Paris Air Show

You just found out that you may need to source product from over-seas to meet pricing pressure for your best customer. Since this notion may be new to you, do you know where to turn to get needed information? Most U.S. govern-mental agencies are focused on aiding exporters, not importers.

Where do I go to find the product I need?

Once you know what product you require, you can do some prelimi-nary investigation on the Internet. Sources to visit include:

www.tradeshowweek.com This site lists international trade shows throughout the world by product category. Very helpful to get a sense of what is out there.

www.globalsources.com This site lists trade shows in China, Taiwan and Hong Kong. You can also look up specific Chinese suppliers on this site.

www.tsnn.com An international trade show gateway, this site leads you to specific expos by product category.

www.chinaleads.net This is a Kansas-based site which gives you the ability to cast a wider net for trade leads in China.

Once you identify the source of your product, it pays to visit that factory or company. You will want

to inspect the facility and meet the principals yourself. A good, strong personal relationship with factory management will go a long way in assuring you of a steady relationship in terms of quality and timeliness.

Importing Basics-Where to Find Services you Need

May-Jun, 2007

Pg. 5

ibNEWS

How do I protect myself if the relationship doesn’t work?

The next step is to write a good agreement that protects you in case you reach disagreement of some kind with your overseas partner. This may take some back and forth in order to hammer out a workable agreement for both parties, but it is worth it in the long term.

If for some unlucky reason you end up in litigation, you need someone with experience in inter-national law to help pull you through.

There are a number of interna-tional business lawyers in the Heartland area. For more infor-mation, do an advanced search on www.findlaw.com.

How do I plan transporta-tion to my facility here?

This too, is an area you will need the help of a professional trans-portation and customs expert.

Customs brokers assist busi-nesses with both imports and exports – by air, land or water. They serve as your watchdogs to ensure all international proce-dures are followed. Customs bro-kers are licensed by U.S. Customs and Border Protection, and they must be knowledgeable of federal custom and border regulations.

Your customs broker can tell you the best way to get your goods to you, at the fairest price. They will also figure duty rates for your product, which you will have to figure into the cost of shipping product.

There are a number of customs brokers here in this region. For information on brokers, check with http://apps.cbp.gov, and type in (your city) Customs Bro-kers.

What kinds of records do I need to maintain?

Even though your customs broker keeps records, ultimately you are responsible for your own accurate record-keeping. Develop your own record-keeping system including proper storage and maintenance of mandatory documents. Import records must be maintained for at least five years from date of entry. And when you are called upon to pull up that documenta-tion, you will need to do it by date of entry.

Missing records come with their own set of penalties, above and beyond, Non-Compliance penal-ties. Penalties can range upwards to $100,000 per import record- keeping violation.

What about special trade programs?

We have various trade agree-ments with countries allowing reduced duty for imports. The most notable is the North Ameri-can Free Trade Agreement (NAFTA) with Canada and Mexico. With each of these agreements, you may qualify for reduced rates of duty, depending on your prod-uct category.

The U.S. also has trade agree-ments with Australia, Chile, Israel, Jordan, Morocco, Panama, Singa-pore and several Central Ameri-

can countries – Central America Free Trade Agreement. (Costa Rica, Honduras, Nicaragua, El Salvador, Guatemala and Domini-can Republic)

For information on trade agree-ments go to www.ustr.gov

How Can I Insure The Secu-rity of my Imports?

Since 9/11, the Department of Homeland Security has launched several programs to protect our homeland from terrorist activities. This includes protection for im-port containers. Most importantly, the U.S. has moved its border security out to foreign ports in an effort to inspect containers before they are shipped to the U.S.

The most notable program for importers is the Customs – Trade Partnership Against Terrorism (C-TPAT) which offers importers a means to speed up customs in-spection through voluntary partici-pation. For information on secu-rity programs visit: www.customs.gov

There are few organizations avail-able for importers, but you may look into your nearest interna-tional trade association. These are listed under various names, but to find one near you, visit one of the sites shown on our Links page of our new site:

www.ibNEWSmag.com

May-Jun., 2007

Pg. 6

ibNEWS

China Warehousing Cuts Retail Costs and Speeds Deliveries

With the consistently high flow of goods from China, comes another distribution cost-saving.

Rather than goods shipped to warehouses in the USA for re-distribution, more and more products are sorted and loaded onto pallets in major Chinese ports.

The goods then get shipped directly to dis-tribution centers here, or in some cases, to the retail stores themselves.

According to Chris Gutierrez, President of Kansas City’s SmartPort, “Large importers are starting to request that their third party logistics (3PLs) partners maintain ware-housing and distribution in Chinese ports.”

“Since the containers are already consolidated, it eliminates the need for consolidation here where costs are higher and delays could be even greater given current port capacity and transportation constraints,” Gutierrez explained.

Along with cheap labor, the Chinese have an edge with their sophisticated technologies,

enabling them to tie shipments from ware-houses to container port, to vessels headed to the U.S.

Transportation companies such as FedEx, which now has a Chinese domestic network in China, will also benefit from increased product movement within the country.

“Large retailers see tremendous opportuni-ties in having complete visibility within their supply chain,” explained Gutierrez. “They can consolidate freight in China and have the container arrive at the store ready to be put on the shelves, avoiding delays and inventory costs at warehouses.”

Part 1, by Steve Pope,

R2Fact Product Development

How many times have you opened that con-tainer of 6,000 pieces of product you had made in China and found that it’s not exactly according to your specs?

Dealing directly with a China manufacturer via email and telephone on occasion is do-able, but communicating on a regular basis when first developing your product, becomes especially daunting. It is especially difficult because of the time zone differences, let alone language difference. The amount of time it takes to deal with even the simplest of issues can be daunting.

For all you entrepreneurs and those in charge of manufacturing offshore, it is highly recom-mended that you engage a professional used to dealing on a day-to-day basis with Chinese factories.

There are many advantages to manufacturing in China, but first and foremost your product and costing problems are more easily solved by engaging a professional accustomed to working daily with Chinese factories. Your advantages will multiply. In fact the advan-tages will greatly outweigh the minimal fees and/or royalties your company will pay for these services.

To make it worthwhile, verify a few key mat-ters.

1. Confirm that you will be dealing directly with an American-based office, not the Chi-nese factory directly.

Ask to see a copy of their U.S. business license.

Inquire if they’re members of the local city international trade association. Not a requirement, but a plus.

2. Confirm that the American Trading Partner has physical offices in the U.S., China, and Hong Kong, and/or that they have an estab-lished partnership with a Chinese sourcing

12 Top Tips to Finding your “Golden Egg” Maker in China

May-Jun, 2007

Pg. 7

ibNEWS

business. Hong Kong is not the location of the manufacturer, but often acts as a go-between for China and the U.S.

Request the Chinese/HK email address from the trading partner.

Email the contact to confirm their relation-ship.

Once you are satisfied with the results from points 1 and 2 above, you can begin to imple-ment the following 12 guidelines for selecting a manufacturer in China.

Points 1 – 6 are basic guidelines used to evalu-ate any new vendor. In this case, a U.S. trading partner. They are listed in logical order to pro-tect your interests while also helping to stream-line your time and effort.

Points 7 – 12 are guidelines specific to locating a reliable U.S. trading partner. By following these guidelines, your likelihood for greater success working with China is much higher. If you are thorough, the latter 6 guidelines offer the many advantages of offshore manufacturing as well. You will quickly realize that it is very much worth it.

1. Confidentiality Prior to disclosing your prod-uct over the telephone to your U.S. trading part-ner, have the sales manager, COO, CEO, or president sign a Non-Disclosure Agreement (NDA).

Require in this NDA that your product, electronic files and hard copies of anything related to your product, NOT be left with any Chinese factory without your knowl-edge and written approval.

Your trading partner will have a qualified legal agreement if you do not have one. It’s preferable to have the trading partner sign your NDA if they will. It will more likely pro-tect your interests and save you time and money, but is not required.

2. References Request 2 – 3 references prior to meeting with the U.S. trading part-ner and showing them your product.

Acquire business names, contact names and telephone numbers.

Contact all references and discuss in detail with each. Ask about cost, time, quality and communication methods.

Think of as many questions as possible that may be essential to your business and the product. Get to a point where you are comfortable in order to proceed to the next guideline.

3. Track Record Request to see packaged products and related literature in which the trading partner has helped source for com-panies in China.

4. Non-Compete Agreement Once the factory or factories for manufacturing have been located and confirmed capable, re-quire a Non-Compete Agreement (NCA) be signed by an authorized Chinese factory representative.

Once you receive the signed agreement, authorize necessary prototypes or samples, along with product specification package, to be left with the factory or factories for a quote.

It is typical for multiple factories to be sub-contracted for certain components, or as-pects, of a product. No NCA is needed from these subcontractors. NCAs are needed only with factories that have the entire specification package or prototype/product. This reduces the likelihood of product piracy.

(Cont. on Pg 8)

Published bi-monthly

Publisher & Editor: Frederick Baehner

Graphics: Joe Hullebusch

Tel 913.248.7770 Fax 913.248.7771

info@intermark3.com

ibNEWS

Published bi-monthly for the Heartland International Business Alliance—a nine state region—to keep companies up to date on developments affecting international business.

Each issue, we’ll bring you the latest trend in new export orders and imports for the Heartland. Our exclusive index is the only real-time, leading economic indicator of changes in exports and imports.

We’ll also keep you updated with news, trends and regulations that could affect your business. If you have suggestions to make ibNEWS more informative, please send

your suggestions to info@intermark3.com.

May-Jun., 2007

Pg. 8

ibNEWS

(12 Top Tips cont. from pg 7)

5. Manufacturing Guarantee A written guarantee is highly recom-mended, but not formally dealt with at this time. The guarantee should be integrated into the purchase order contract once tooling is or-dered.

Ask the Trading Partner if they will guarantee in writing, the product functionality and quality with re-placement or money back.

6. Product Liability Insurance (PLI)This is a plus, but not a requirement initially. There are financial and legal risks whether or not your busi-ness insists this to be carried. Your insistence on insurance depends on your product, application, industry and where you are in the develop-ment process.

Do each of the Trading Partner prod-ucts sourced, and on the market, carry PLI?

The American source must have evidence of previous experience with their successful products. A liability lawsuit may occur when you least expect it. And, if your product is on the market, you need to be sure you are covered.

Part 2 to be continued in the next issue of ibNEWS.

Tax Refund For Exporters

The Kansas World Trade Center recently reminded members of an “under-appreciated tax incentive for U.S. exporters” that manufacture here in the U.S.

It has been in existence since the early 1970s under various names including DISC, FSC and ETI. Al-though repealed at the end of last year, Heartland exporters may claim deductions from 2003 to 2006, to claim this benefit if not claimed or under-claimed during those years.

If your CPA is not knowledgeable about this tax benefit, send an email to Karyn Page at the KWTC page@kansaswtc.org for a Kansas contact to assist.

For additional information about this tax incentive, visit www.irs.gov and type in Form 8873 in the Search Box in the upper right hand corner of the site.

Visit ibNEWSmag.com

ibNEWS has launched its Web site, www.ibnewsmag.com

which contains past issues, key links, and other pertinent infor-mation about our publication – now in its 3rd year.

Look for other new features and things to come.

www.ibNEWSmag.com

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