Exporting molds: Painful for many mold makers, but help is available

A lot of opportunity exists for mold manufacturers to export their molds, and in spite of the complexities of exporting, there are ways to do this that can help you get more business.

Ten years ago, Cavaform, a custom mold manufacturer in St. Petersburg, FL, changed its name to Cavaform International. Robert "Chuck" Massie, vice president of the family-owned company, explains the reason: "We began getting a lot of interest internationally, primarily from the trade shows we were attending, so we decided to make 'international' part of our name."

Today, approximately 25-40% of Cavaform's total mold sales are realized from exports. The company exports throughout Central and South America, including Columbia, Peru and Brazil. "We just shipped two molds to Peru, and we've been shipping molds to Mexico for ages," Massie comments.

Cavaform's business model isn't the norm for many mold companies. A recent survey of the American Mold Builders Association revealed that only 42% of the respondents export molds. Of those who say they export the molds they build, 69% said they export these directly from their companies to the OEM customer. The number of molds exported was fairly low with 71% saying they export 1-5 molds annually; 16% export 6-10 molds annually, and just 13% reported  they export more than 10 molds annually.

The drawback for those commenting in the AMBA survey seems to be a lack of understanding about what exporting is ("I take it that export means outsource completely to another shop to design and manufacture" was one comment), and the rules of the exporting game. "We're not educated on how to export and find customers outside the U.S.," said another respondent. And it seems like a lot of work, as this respondent commented: "I'm interested but it seems like a mountain that requires more time than I have."

Understanding the rules and how to export does make it easier. For example, tariff breaks come when Massie ships a complete "turnkey" system, which means he pays no tariff. On molds alone, the company pays somewhere between 15-30% tariff. "It's been a great business opportunity, and today we've got molds running in 35 countries," he adds.

Getting started

So what are keys to getting work from foreign countries? "You have to go there and meet them in person," Massie says, adding that trade shows in Europe and other regions are a great way to get started. "Some of my best customers I've met at K in Dusseldorf, and it's one of the few trade shows where we actually get orders at the show."   

Massie notes that there are a few negatives such as some companies require a surety bond in which a U.S. bank endorses your company and pays for the customer's down-payment so that you can begin the manufacturing process. When the U.S. moldmaker gets paid, it must pay back the bank. A surety bond costs about 1-1.5%, Massie notes. "We just did a surety bond for a Venezuelan customer," says Massie. "Our bank guaranteed their bank that if we would default on performance they'll get their money back. It's a small price to pay for a big opportunity."

According to the latest figures from the International Trade Administration (ITA), the U.S. tool, die, and industrial mold industry includes approximately 6300 small- and medium-sized businesses that manufacture highly customized tools, dies, and molds for use with machine tools and other types of production machinery. Many of these tool and die manufacturers are small "mom and pop shops" that have been affected by the current economic crisis. 

Exports of tools, dies, and mold shipments totaled $1.31 billion in 2008, an increase of 11.8% from 2007 figures of $1.17 billion. Mexico, Canada, Germany and China remain the top four markets for U.S. exporters. Brazil and Singapore saw jumps of 54.7% and 40.9% respectively as U.S. manufacturers seek out and capitalize on opportunities in new export markets.

Conversely, 2008 imports were valued at $4.78 billion, an 18.6% decrease from 2007 figures of $5.88 billion. Japan holds the top spot with 39% market share, Canada with 18%, the Netherlands with 13% and Germany at a steady 7%.

Logistics are crucial

Not every mold company needs to go out and market itself to foreign entities to start exporting molds. Many mold manufacturers offer export services to their U.S.-based OEM customers.

Tech Mold Inc. exports approximately 10% of its jobs, both complete molds and mold components such as spares. "Most of the molds and components we export are for our U.S.-based OEM customers that have facilities in places such as Singapore, Puerto Rico, the U.K. and other countries," explains Jerry Seidelman, marketing and sales manager for Tech Mold.

One of the largest molds that Tech Mold shipped was a 12,000-lb. mold that went to a customer's facility in Singapore. Size and weight of many of the molds that the company ships means that proper crating is a big concern - and a cost factor. Crating must be "materials compliant" which means that wooden crates must be either heat treated or chemically treated for pests. The dimensional lumber (1x2, 2x4, etc.) is heat treated, which kills pests and their eggs. The decking that Tech Mold uses - the outside plywood and OSB - uses microwaves to cure the glue between layers, and the results are the same as heat treating.

Paul Saltrick, manager of purchasing and receiving for Tech Mold, said that the company contracts with an outside specialist to build the shipping containers for the molds, using certified materials. The crate to ship the super-large mold by overnight air freight, for example, had to be built substantially larger than the mold's footprint in order to distribute the weight evenly in the cargo hold of the aircraft. The shipping container utilized a specially-built pallet to hold the crate, explained Saltrick. And it was an expensive shipment. "We have to pay for a large portion of the cargo plane in which it was shipped," he added.           

Saltrick noted that U.S. Customs is now part of Homeland Security, and sometimes its documents can be intimidating. "You have to go online at USITC to get the HTS classification number for the product and then to AES to get an EEI number that allows you to ship the mold out of the country. If the AES site is down or experiencing a high volume of traffic to the site, there's a long delay in getting the approval number - the EEU number that allows you to ship internationally." Freight forwarding and expediting companies will do this for a fee, and that may be an easier, less painful way for mold companies to get the paperwork completed. "Some of the freight forwarders will offer educational opportunities on exporting."

There are various terms used for international shipping in addition to the FOB, which Saltrick says has been used as a "catch-all" term for decades - often incorrectly.  The only time FOB should be used is when shipment is made by sea and inland waterway. Today, shippers use Incoterms (International Commercial terms), which are the codes and initials that define under which rules you are shipping, and lets the shipper and the receiver know where the responsibility for the shipment starts and ends. "You both have to agree under which Incoterms you're shipping," Saltrick said. 

Double-check your paperwork

Proper classification of your products is important for international shipping, notes Saltrick. "If the correct classification is not chosen and identified properly in the customs paperwork, it may cause unexpected delays in getting shipments released and you may incur substantial costs or penalties," he adds.

"We've tried to stay educated enough that we can go to the government website, get current requirements for shipping to the country we need to send a mold to, produce the correct documents, give a quote and then make sure that it all makes it through customs without a glitch," Saltrick adds, noting that filling out all the paperwork is "tedious and time-consuming," which is why some companies opt to have a broker handle it.   

Saltrick said, "When we ship to Mexico, we'll often ship the mold to a certain point, and depending on where the mold is ultimately going, we'll utilize a broker; otherwise the shipment can become entangled in paperwork delays," he added, "There is help out there, either online, educational classes or through brokers."

Online resources available

Resources to help you with exporting your mold: International Chamber of Commerce offers educational seminars on Incoterms - www.Iccwbo.org/incoterms

Good definitions of the initials/terms at www.export911.com/e911/export/comTerm.htm

Link to AES Direct (Automated Export System) government website for training and also used to register and ultimately acquire the code number used on customs documents to file Electronic Export Information (EEI): http://www.aesdirect.gov/

Link to United States International Trade Commission (HTS-Harmonized Tariff Schedule for material/merchandise classification codes: http://www.usitc.gov/tata/hts/bychapter/index.htm