United States Market Entry

United States Market Entry

Subchapters:

  • Market entry

The costs of entering the US market are high and should only be done by companies with considerable export experience and a long-term vision. Individual US states have their own jurisdiction in a number of areas (taxes, adjustment of warranties on goods sold, real estate/personnel prices, distribution networks, etc.). It is therefore advisable to consider which state(s) to target. Check smber for agriculture and fishing facts of United States.

  • Forms and conditions of operation on the market

To enter the American market, the Czech company chooses one of the forms of its operation. Direct export is suitable for exporting products with lower added value or smaller quantities. Indirect exporting is exporting through a local distributor/sales representative. The company can also establish a sales or production branch in the USA, most companies choose the Limited Liability Company form. Selling from a consignment warehouse is another option for selling goods in the USA. A consignment warehouse is usually set up with an exclusive sales representative in the US.

  • Marketing and Communications

In the USA, the marketing market is highly developed, there are a number of advertising agencies and companies whose services can be used. However, most of them only operate in selected US states. Marketing costs are high, Czech exporters in the first stages of entering the US market can be advised to find a local importer, distributor who would support the product on the market. Businesses doing business with the US should consider setting up a website with a “com” domain.

  • Issues of intellectual property protection

As a member of the WTO, the USA applies international standards for the protection of intellectual property rights (IPR) and at the same time has acceded to a number of international conventions in the subject area. The main types of intellectual property protection (IPR) include patents, trademarks, copyrights and design protection. Some types of IPR must be registered in the US with the appropriate authority, and some do not directly require such registration. In order to obtain patent protection, it is necessary to register the invention with the US Patent and Trademark Office, always in close cooperation with a patent attorney. In the case of copyright protection, the competent authority is the US Copyright Office. Every Czech company that intends to do business in the USA in the long term and produces products with high added value should include IPR protection in its strategy.

  • Public procurement market

Public contracts are announced in the US by both the federal government and agencies at the state, regional or local level. The basic regulation governing the awarding of federal public contracts is The Federal Acquisition Regulation No. 48 (www.acquisition.gov/far).

  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Czech products and services can succeed in the highly competitive American market with 330 million potential consumers, provided that they are of high quality, innovative and competitively priced. If a Czech company is unable to guarantee quality and timely after-sales services, it quickly loses the trust and loyalty of customers on the market. In the broadest sense of the word, there are no legal barriers that would directly limit the import of goods into the US, unless they are subject to special regulation. However, there are still a number of administrative-technical barriers, and overcoming them (various forms of certification and registration depending on the nature of the imported goods) requires considerable costs on the part of potential exporters. Each potential exporter to the US must consider whether it is worthwhile to invest in engineering the products to comply with US regulations, taking into account the volume of quantities sold. The costs of entering the US market are high, and companies with considerable export experience and a long-term vision should do so. Although it is a very open market, with a significant restriction of access in the area of ​​public contracts and supplies to security components, it requires the perfect preparation of the exporter, a thorough mapping of specific business opportunities and also the ability to navigate local legal and certification procedures. Individual US states have their own jurisdiction in a number of areas (taxes, adjustment of warranties on goods sold, real estate/personnel prices, distribution networks, etc.). It is therefore advisable to consider which state(s) to target. In the USA, there is widespread use of external consultants who help companies with the start-up of their business and individual aspects of entering the market (sales and marketing, law, accounting, certification). With some exceptions, these consultants are not willing to work on a percentage basis, but in most cases insist on a fixed payment for a precisely defined and achieved goal (conclusion of a contract with a distributor, etc.). Sometimes they even insist on regular payments without fixed goals.

The import regime to the USA is regulated by the “Tariff Act” of 1930, which contains the basic conditions of foreign trade and the rules for calculating import tariffs. The specific amount of the import tariff is regulated by the Harmonized Customs Tariff of the USA, which is the primary source for determining the tariff classification of goods imported into the USA according to individual HTS codes. Below you will find the current version of the Harmonized Tariff Schedule with chapters according to HTS codes: Harmonized Tariff Schedule PDFs (usitc.gov) The average amount of customs tariffs when importing goods to the USA reaches less than 3% in the case of imports from the Czech Republic (EU), so it is not a major obstacle to imports into USA. From the point of view of an exporter from the Czech Republic, non-tariff or regulatory obstacles represent a much greater challenge. It must be added that in the case of the USA these are relatively widespread and apply to many categories of imported goods. These obstacles do not directly prevent the importation of goods into the USA, but their fulfillment (import license, technical certification, hygiene standards according to the FDA and a number of other federal agencies) represent a significant administrative and financial burden for exporters, also with regard to the fact of the need to hire local expert advisors who know local legal and administrative procedures in detail. Non-tariff barriers result from regulatory regulations governing, for example, safety issues or consumer protection. Examples are the rules established by the US Food and Drug Administration covering import licenses for the import of food, non-alcoholic beverages or medicines and the Bureau of Alcohol, Tobacco, Firearms and Explosives regulating the import of alcohol, weapons, cigarettes. These regulations need to be mapped out well in advance and it is again recommended to use local specialized companies. During the actual import of goods, American state authorities (mainly US Customs and Border Control) are always interested in who the importer is. The importer is solely responsible for the compliance of the imported goods with US legislation, and in case of problems, he is also the only entity with whom the US authorities will deal further.

Forms and conditions of operation on the market

The company chooses one of the forms of its activity to enter the US market: a) Direct export is suitable for the export of products with lower added value or smaller quantities, and also at the moment when the end American partner secures distribution and other necessary matters. There are a number of smaller exporters who offer goods via Amazon, for example, or ad hoc exports. The disadvantage of exporting without an American intermediary is the complexity of the American market and zero chance of marketing support. b) Indirect export is export through a local distributor/dealer who buys the goods from the exporter at wholesale price and resells through his sales channels. Such a distributor takes care of product support and related services (insurance, marketing). The distributor usually has a warehouse and staff. He is able to estimate the local demand well, which is why he also has products in stock in sufficient quantities so that he does not depend on supplies from the Czech Republic. However, the end American consumer only buys in retail, so the chain increases the price and the competitive price of the product, which was an advantage at the beginning, can gradually rise to the level of other competitors. Distributors can be American private or legal entities, as well as foreign, i.e. Czech entities registered in the USA. A form of indirect export to the USA is also represented by a local sales representative who does not buy the goods directly, but only promotes them and further offers them on the US market to potential customers. Representatives represent the company on the basis of a contract and representation, from which the representative receives a share of the profit from the sale. However, the responsibility for risks (e.g. defects, damage) is still borne by the company in the Czech Republic. c) A company can also establish a sales or production branch in the USA, however, in this case, relatively high initial capital can be expected, and therefore it is only suitable for capital-strong companies with an export history on the US market. d) Sale from a consignment warehouse is another option for selling goods in the USA. A consignment warehouse is usually set up with an exclusive sales representative in the US. The goods remain the property of the supplier (exporter) until the local customer collects the goods and pays the purchase price.

Marketing and communication

In the US, the marketing market is highly developed, there are thousands of advertising agencies and companies whose services can be used. It is not possible to recommend specific marketing agencies, as it will always depend on the specific product and where the product is to be primarily offered. Only on this basis can a marketing agency with product specialization and geographic focus on the US market be recommended (most companies only operate in selected US states). The costs associated with a marketing campaign for consumer goods can be very high, in the case of advertising for products in some American chains such as CVS Pharmacy, Walgreens, etc., they exceed tens of millions of dollars. For Czech exporters, in the first stages of entering the US market, it is important to find suitable local importers or distributors and establish such a contractual relationship with them, so that much of the product support is done by them in the market. For initial promotion, it is advisable to focus on professional international trade fairs and exhibitions, conferences, own company presentations during acquisition trips, publishing activities and possibly advertising in the professional press. Promotion using your own website or using advertising space on the Internet is the fastest growing means of advertising. The existence of the company’s own website in flawless English (in addition to the American version) is a basic prerequisite for the existence of a company in the USA. Businesses that do business with or invest in the US should consider setting up a website with a “com” domain that would primarily serve the US market only. Mobile communication strategy is already a necessary part of companies’ marketing. Virtually every major company today offers a mobile app, with the help of which customers can buy goods with some benefit. When building customer loyalty, even those Czech companies that aim directly at American consumers should not neglect this possibility. Mobile applications can be suitably supplemented with advertising on FB, Instagram and possibly other social networks. Trade magazines, trade magazines and technical publications are still a useful and affordable form of advertising industrial equipment, machinery and materials. In the USA, there are a large number of professional journals according to individual specialized fields. You can advertise in these magazines under relatively favorable conditions. Advertisements in major daily newspapers and their electronic versions are used only by large American and multinational companies, banks, insurance companies, telecommunications companies, etc. Television advertising is used by large manufacturers of consumer goods and companies providing financial services. In the US, there are national television companies and many local television stations. National stations cover about 20 million households. There are almost 2,000 local stations and the price of advertising depends on the number and financial strength of the affected viewers. A still relatively widespread form is the postal leaflet form of advertising, the so-called “Direct Mailing”, which is effective if it is properly targeted. Coupons are often distributed to households in this form. A still relatively widespread form is the postal leaflet form of advertising, the so-called “Direct Mailing”, which is effective if it is properly targeted. Coupons are often distributed to households in this form.

Issues of intellectual property protection

The main types of intellectual property protection (IPR) in the US include patents, trademarks, copyrights and design protection. Even in the USA, IPR types are divided into those that must be registered with the relevant authority and those that do not directly require such registration. As a member of the WTO, the US applies international IPR protection standards and at the same time has acceded to a number of international conventions in the field of IPR. Regarding patents, in order to obtain patent protection, it is necessary to register the invention with the US Patent and Trademark Office (USPTO), always in close cooperation with a patent attorney. There is no legal requirement to register, however it is recommended for greater protection. Copyright protection registration is also not required, but only recommended. In the case of copyright protection, the US Copyright Office is responsible. With the growing number of Czech companies on the US market, questions about the protection of intellectual property rights in the US are multiplying. Every Czech company that plans to do business in the USA in the long term and produces products with high added value should include IPR protection in its strategy for the USA and allocate a budget for it. Protecting IPR is a company’s primary responsibility, with government authorities primarily there to prevent or stop infringement. Each company must actively monitor the market, and if it suspects illegal IPR abuse, it must consult with a legal expert for further procedural steps. The possibility of filing a lawsuit is always the last resort, considering the complexity and complexity of the legislation in the USA and also considering the prices of legal advice. In the event that a non-American entity infringes IPR, a federal court or the US International Trade Commission (USITC) can be used.

Public procurement market

Public contracts are announced in the US by both the federal government and agencies at the state, regional or local level. The awarding of public contracts is regulated in the most detail at the federal level, state and local legislation is based on the federal regulation, but at the same time they contain a number of modifications and exceptions. The basic regulation governing the awarding of federal public contracts is The Federal Acquisition Regulation No. 48 (www.acquisition.gov/far). This regulation applies to the procurement of all US central government agencies. Other basic regulations governing the awarding of federal public contracts in the USA are the Federal Property and Administrative Services Act of 1949 (41 USC) and the Armed Services Procurement Act of 1949 (10 USC).

Payment terms, payment ethics and resolution of commercial disputes

In the USA, as a legal state with a high degree of individualism and personal initiative, there is a relatively high number of legal disputes, the conduct or threat of which is a relatively common part of business. Consultation with an American lawyer or a lawyer with knowledge of American law is recommended in such a situation, however often expensive. Lawyers often assess not only the purely commercial side of the matter, but are also involved in business negotiations. A cheaper and more efficient solution, especially for smaller disputes, compared to proceedings in court, is generally through arbitration. A lawsuit usually does not actually happen, but for a foreigner, the mere threat can be unsettling and he may therefore be inclined to an out-of-court settlement. When signing contracts, it is necessary to pay attention to the often very detailed provisions, which, in contrast to some customs in the Czech Republic, remember often even very hypothetical situations (e.g. in business or rental contracts). A written contract is not signed for smaller transactions. In such a case, the possibility of non-delivery of goods or services cannot be ruled out. We therefore recommend negotiating a sales contract, including the General Terms of Sale, the so-called “General Terms of Sale” (“GTS”), including the determination of the legal order and an arbitration clause (essential for the effective resolution of potential disputes). The vast majority of business entities in the USA act honestly, but the risk can be, for example, proceedings for protection from creditors, which is nothing exceptional in the highly competitive market in the USA. The basic forms of payment are letter of credit and credit. The American importer usually does not agree to pay by irrevocable letter of credit.

Visas, fees, specific conditions for traveling to the territory

For travel to the USA, it is necessary to monitor the pandemic situation regarding covid-19, especially between the Czech Republic (EU) and the USA. For details, you can contact, for example, the US Embassy in Prague or follow the website of the Ministry of Foreign Affairs. All the following information must therefore be perceived in the context of the current situation, and possible limitations should be taken into account. The procedure for granting one of the types of work visas described below is described in more detail on the website of the US Embassy in Prague: http://www.ustraveldocs.com/cz_cz/cz-niv-typework.asp.

  1. Visas for business or work activities

B-1 Visa (Business Visitor)

H-1B Visa (Specialty Worker / Professional)

L-1 Visa (Intra Company Transferee)

E-1 & E-2 Visa (Treaty Traders and Investors)

Green Card

The so-called a green card, i.e. a permanent residence permit combined with the right to work, can usually only be obtained with the support of an American employer – sponsor.

  1. work visas:

II.A. Temporary work visas Two basic types of temporary work visas are available to citizens of the Czech Republic: H-2A (seasonal employment in the agricultural sector), the second type is the H-2B visa (temporary visa for non-agricultural workers).

II.B. Special types of visas allowing work in the USA: L-1, E-1 or E-2.

III. Short-term business trips and tourist visits

For short-term business trips and tourist visits, from 17.11. 2008 US visa required. For the trip, it is necessary to use a passport with an electronic chip (the so-called e-passport, issued in the Czech Republic since September 1, 2006) and before the trip it is necessary to secure electronic consent within the framework of the ESTA program.

  1. Specific conditions for traveling to the territory:

The most common form of transportation in the US is by car. The cheapest is generally the bus; more expensive, but more comfortable, is the train. In the USA, there is a different supply voltage in the electrical network – 110/60 Hz compared to the Czech Republic’s 220/50 Hz, and also the sockets and plugs of electrical appliances are different from the European ones. The security situation is often dramatically different in different areas, the highest crime rate is in big cities. The year 2021 was marked by a significant increase in crime, including violent crime, especially in big cities. A US phenomenon is the significant proliferation of firearms.

Employment of citizens from the Czech Republic

The issue of employing Czechs and Czechs is linked to the issuing of visas. Citizens of the Czech Republic who are interested in working legally in the USA can use several visa regimes (see chapter for details).

The federal minimum wage in the US has been $7.25 per hour since 2009, but most states have their own, higher minimum wage.

In the field of health care, it is generally true that in the USA it has a high professional level and at the same time it is one of the most expensive in the world. Good health insurance with a reputable health insurance company will cost about $400 per person per month (around $1,000 for a family of four). State hospitals, or hospitals in poorer neighborhoods, usually charge several times lower rates for the same procedures than private hospitals in wealthier areas. Uninsured people often pay higher premiums. In the United States, doctors and hospitals are not allowed to turn away a patient with a serious or life-threatening medical condition, but they will be charged after discharge, even abroad. When traveling to the USA, the best prevention of high expenses is insurance with sufficiently high limits. It is advisable to take the contact of the partner insurance company in the USA with you on the trip. In the case of employment of citizens of the Czech Republic in the USA on the basis of one of the visa regimes described in chapter 5. 7, the situation differs depending on the employer. Some companies provide 100% health insurance compensation, others only pay part of this compensation in the range of 50% to 80%, depending on the employee’s income. Therefore, employees usually pay a certain amount of healthcare costs themselves. In addition, each employee pays mandatory insurance premiums to the federal and state systems, which can be used when they reach age 65 or lose all income and assets or become permanently disabled. Social and health insurance is paid by both the employer and the employee from their gross income. The employer pays 6.2% to Social Security and 1% to mandatory health insurance to the federal and state system (Medicare). 45% of the volume of wages of its employees. The employee deducts the same from his salary. In total, the employer pays 15.3% of the wages for its employees. As for the self-payer, he pays 12.4% of the wage volume and 3.08% for health insurance (Medicare). For employees with a salary above $200,000 per year, the employer is required to deduct an additional 0.9% for Medicare. Another change was reflected in the social security tax, which is the only one with a wage limit, which increased from USD 132,900 to USD 137,700 for 2020 and USD 142,800 for 2021.

There are a number of consulting and law firms in the US that specialize closely in immigration and commercial law. However, the fees for their legal assistance are quite high. Contact for these companies is available on the websites of the embassies operating in the USA. Selected websites related to this issue of immigration and commercial law: American Association of Immigration Lawyers – aila.org American Bar Association – americanbar.org Legal Information Institute – law.cornell.edu Independent information site for immigrants – foreignborn.com. Irena Juras, Legal Services / Immigration Matters, Arizona, – juraslaw.com Bohunka Goldstein, Legal Services / Immigration Matters, New York – [email protected] / bohunkagoldstein.com.

Fairs and events

Among the most important exhibition cities in the USA are New York, Chicago, Las Vegas, Atlanta, San Francisco, Orlando and Boston. Exhibitions and fairs held in the USA or in other countries can be found on the following websites: globalsources.com, tsea.org, tradeshowweek.com, expocentral.com, tsnn.com.

Selected exhibitions and fairs in the USA:

International trade fair for home appliances and equipment – The Inspired Home Show 2022: Homeware, home accessories and equipment, 5-8. 3. 2022. Chicago, Illinois.

WCX SAE World Congress Experience 2022: autonomous cars and electrification. 5-7 4. 2022. Detroit, Michigan.

NRA SHOW 2022: Products for Hospitality, Restaurant, Gastronomy, May 21-24, 2022. Chicago, Illinois.

Craft Brewers Conference: Ingredients and Technology for Brewing, 5/2-5/2022 Minneapolis, MN

Vinexpo: Wine & Spirits, 3/9-10/2022, New York City, NY

National Western Rodeo and Stock Show – 1/7-22/2023 Denver, CO

EAA AirVenture Oshkosh Fly-In – July 25-31, 2022 Oshkosh, WI

National Farm Machinery Show – 2/15-18/2023 Louisville, KY

Consumer Electronic Show CES – January 5-8, 2023 Las Vegas, NE

AAPEX Automotive Aftermarket Products Expo – November 1-3, 2022 Las Vegas, NE

Miami International Boat Show – 2/15-19/2023 Miami, FL

The Offshore Technology Conference OTC – 2.-5.5.2022

International Manufacturing Technology Show IMTS – September 12-17, 2022 Chicago, IL

NAMM International Music Market – June 3-5, 2022 Anaheim, CA

Atlanta International Gift & Home Furnishings Market – July 13-17, 2022, Atlanta, GA

United States Market Entry