Small Business,
Big Opportunity

International trade presents exciting options for Alaska’s small businesses

By Alex Salov

laska has a long history of international trade and there is a reason for that: the state is located within the transportation “crossroads” of the world. Due to its relative remoteness and isolation from the Lower 48, since the mid-20th century Alaska has been actively positioning itself as a part of the Pacific Rim. Late Governor Wally Hickel famously noted that “Alaska’s political ties are with the United States, but our economic ties are with Asia. Our economy depends on exports.” The Alaska timber industry was successfully selling to Japan in the 1950s; for several decades liquefied natural gas was exported to Japan and coal to Korea; and after the fall of the Soviet Union, Alaska companies were among the first to enter the Russian Far Eastern market. By the beginning of the 21st century, Alaska had international trade offices (similar to embassies) in five countries: Japan, South Korea, China, Taiwan, and Russia. Many of these fruitful developments have been phased out in recent years due to economic and political changes. For example, the State of Alaska no longer maintains the Office of International Trade or trade representatives overseas.

What does Alaska’s international trade look like? In 2018 Alaska’s overall exports overseas accounted for more than $4.8 billion and when final figures for 2019 are compiled, they are likely to be even higher. Generally, Alaska exports raw commodities rather than value-added products, with some exceptions. Alaska’s largest export commodity is seafood (more than 50 percent) followed by minerals and ores (more than 35 percent). The state’s major export partners are China, South Korea, Japan, Canada, EU countries, and Australia. (Imports are harder to evaluate as the majority of foreign goods arrive in Alaska via domestic ports located in the Puget Sound region and are then considered Washington State imports.)

Some Alaska companies, such as engineering firms, also export their world-class expertise and services; however, since their services are intangible, their export values aren’t documented in the same way. For example, international tourism is also considered an export of recreational goods and services, and according to the Alaska Travel Industry Association, more than 2 million people visit Alaska in one year, with approximately 15 percent of them being foreign tourists.

Alaska ranks 40th among all US states by the value of exported goods; however, on a per capita basis, Alaska ranks 4th. This means the average Alaskan resident is affected by exports economically more than residents in states with larger populations and developed agricultural or manufacturing sectors. According to the US Department of Commerce, there are approximately 300 companies that export from various locations in Alaska. The majority of them are considered small and medium-sized enterprises, classifications that mean they have fewer than 500 employees, which describes most Alaska businesses.

Unique to the state is the Ted Stevens Anchorage International Airport, an absolute asset for Alaska businesses looking to join international markets. It is the second largest air cargo airport in the United States and the fifth largest in the world. Anchorage is located within 9.5 flight hours of 90 percent of the industrialized world. This important transportation hub serves 54 percent of all US to Asia air freighters. If a company’s products are of high enough value to be shipped internationally via air, Anchorage is a perfect location for that business.

And in fact a new business model has been slowly adopted in Alaska: an increasing number of businesses consider overseas clients to be their primary customers. For those companies, there is very little or no market in Alaska or the United States. Great examples of such products are salmon roe or cod milt—while generally not used in American cuisine, these ingredients are in high demand in Asia and considered to be delicacies. This new mindset creates greater feasibility for Alaska companies, as they can access a market of 3 billion potential customers versus 700,000.

If you think your business has the potential to find success in international markets, there are several factors that should be considered.

Step one: determine whether your company is ready for exporting. As a convenient tool, the US Commercial Service identifies four levels of a company’s export readiness:

1) Not a good candidate for exporting—US entities that are not established businesses or do not have an exportable product or service.

2) Not ready to export—entities that are established businesses and have an exportable product but don’t have an international business plan or executive commitment.

3) Ready to export—entities that are established businesses and have an exportable product, executive commitment, and an international business plan but haven’t consummated an overseas transaction.

4) Existing exporters—entities that are currently exporting and seeking to enter new export markets or expand their exports.

Depending on your company’s level of export readiness, there are free or inexpensive local services available. In some cases, your business could qualify for financing or other incentives from government or private entities to engage in international trade.

Be aware that international trade requires a serious commitment of executive time and resources, and you must have a well-developed business plan.

At all stages of doing business, it is important to have established relationships with a banker, an accountant, a lawyer, and an insurance agent. If your company plans to start exporting or importing internationally, you need to work with two additional entities: a customs broker and a freight forwarder.

A customs broker makes sure that your company abides tariff and customs laws, prepares necessary documents, and pays the right amounts of customs duties. If your product requires shipping, a freight forwarder, often called a “travel agent for cargo,” arranges it. In many cases, a well-established freight forwarder will employ a certified customs broker.

When a small business decides to engage in international activities, there is a certain amount of necessary due diligence that the owner or management team must conduct. For example, a business needs to establish ties with its potential customers and understand their business culture and the characteristics of their market. In fact, you should meet with your potential customers or suppliers, especially if the trade is worth significant amounts of money. While some business owners may shy away from the cost of traveling to a foreign country, serious repercussions such as fraud—or even a simple misunderstanding and language barriers—can cost more than a week-long trip overseas.

For example, if you are planning to sell products or services to Korea and therefore work with a Korean company, you should learn about the Korean economy, trade regulations between the US and Korea, and Korean culture—and plan to visit Korea. Even though digital communications in many ways dominate the world today, face-to-face meetings have ongoing relevance in international business. Asian businesspeople (who are Alaska’s major trading partners), for example, prefer to establish personal relationships with their counterparts rather than dealing with them digitally. Test it for yourself: try to reach any Asian executive with your proposal via a “cold call” e-mail.

Attending a trade show can be a good way to meet potential customers or suppliers. The US Department of Commerce certifies several overseas trade shows every year and sometimes establishes an American booth or pavilion that US small businesses can use as an inexpensive (or at least less expensive) platform to showcase their goods or services.

You should also review export assistance services offered by the US Commercial Service in the country in which your company is preparing to do business. While a Commercial Service Officer will help you better understand the market, you still need to do your due diligence. It’s common practice for companies that cannot afford an overseas office to hire overseas sourcing agents who help them find potential customers or partners. However, in some cases, they hire people who shamelessly promote themselves, asserting business and government connections, while their only relevant skill is… speaking English.

Alaska’s international trade community and the organizations that support it are tightly knit and familiar with each other’s missions and services. If your company sees an opportunity to go international, your first step should be contacting the Alaska Small Business Development Center, World Trade Center Anchorage, or the US Export Assistance Center (or all three). These business development organizations have unique missions, but they are all able to help Alaska companies start or expand international business endeavors. They can all direct your company to the right resources and save you time and money. Also, to find out if your business qualifies for export financing, you should contact the US Small Business Administration office and discuss their export-related loan programs.

Overall, there are endless opportunities for Alaska companies overseas. Alaska products are not widely known around the world; however, our state’s image of pristine and unpolluted land adds to the attractiveness of its food and manufactured products, as customers overseas are increasingly conscious of the health and eco-friendliness of products that they purchase. Geographic proximity between Alaska and many countries allows for efficient shipping of Alaska products. International trade is a challenging endeavor, but it can be rewarding with the right approach.