Andy Reinke – Clearly the best part of working with the SBDC’s throughout Indiana is meeting incredibly talented small business owners – spirited entrepreneurs bound by a common drive for perfection and an unquenchable desire to succeed.
In this installment, we’ll look at one of those firms – Earthbound RV of Marion, Indiana. The company is a relatively new entrant to the RV industry, but has certainly found its niche – very high-end, luxury, towable RV’s with superior craftsmanship, design, quality and is made of 100% wood-free content (green technology). It also has a price tag to match. Its dubbed ‘Green RV of the Year (2010) by Roaming Times, and is described by Men’s Journal as a ‘Smooth & tapered highway torpedo”.
A bit about Earthbound: It’s a family owned and operated business founded by its CEO, David Hoefer, a veteran RV chieftain for over 35 years, with son Charles as the young firm’s President, mom working in accounting with two more brothers involved in production and marketing/advertising.
The RV’s are of a unique, ergonomically-focused design using the latest in high-end composites normally found in aircraft and yachts. Too, the production crew comes from the auto industry, a testament to the firm’s penchant for quality manufacturing and tight specifications.
Their entry to the foreign market came rapidly and as a direct result of foreign attendees to the RV Show in Louisville, KY in 2010 at which the firm received orders for 45 units – a robust signal by the industry for these new trailers. Distributors in Australia, China and Germany were clamoring to sign up as distributors, acknowledging Earthbound’s price point would place the towable trailers at the luxury level in each of their markets at a time of global economic uncertainty. However, the uniqueness of the product coupled with increased disposable income and leisure time in some developing markets like China meant the time was right to pursue foreign sales soon after their entry to the domestic market. A side benefit to eventual success in the Australian market would mean seasonal production demands would be eased, as their summer down-under is our winter season, something to keep in mind if readers to this blog face season production issues.
While identifying the duty and tariffs on these trailers headed to Australia and Germany were a bit more clear-cut, my first efforts were to fully determine the duty for those units heading to China. To determine the tariff and taxes, identification of the Harmonized Schedule code would be required. Fortunately, the HS schedule was easily found at http://www.census.gov/foreign-trade/schedules/b/. If you’ll recall from a prior blog post, identification of your HS code and Schedule B code (the former determines the duty/taxes imposed on US exports by foreign markets, the latter on foreign goods imported to the US), is a first step on the road to determining best export markets to assess and pursue.
Using those same HS and Schedule B codes, accessing the USA TradeOnline database quickly revealed the US has a large and increasing trade surplus with these types of towable trailers, with the EU, China and Australia being among the stronger, growing markets for US RV’s. (Contact the ISBDC to determine the HS/Schedule B Codes, foreign taxes and global trade flows for your products).
Other concerns involved making sure those interested distributors were the best fit, and payment options were attainable and well received. The considerable size of the markets in question, Australia, Germany and China, suggests limiting representation based on geographical reach was advised, and existing relations with possible competing firms needing to be known up front. Due diligence with credit reports on the distributors also is a must, since possible open credit for high-value shipments may be necessary. On this front, we explored the possibility of export – receivables insurance to guarantee payment on those exports should open credit be sought. A meeting with the Export – Import Bank of the United States was established to further answer export-related financial concerns.
The firm had already done a great deal of work in determining the standards required to meet foreign regulations which can be intense, including CE marks for electrical concerns in the EU, and the China Compulsory Certification Mark (CCC) required by China. A review of the proposed contracts by the firm’s existing legal firm was strongly advised as well.
Earthbound also needed a true account on the price of the trailers landed in China. A review and confirmation of duty, taxes (national and provincial) and freight gave a clear understanding on the price of trailers in the Chinese market. It was stressed that Earthbound have a good customs broker already established in China to avoid problems in getting the RV’s cleared through customs with the least amount taxes and tariffs possible. Prior experience in the RV field by the selected broker was highly suggested.
Finally, in keeping with my suggestion on contacting any applicable trade associations, we found the RV Industry Association often hosts trade missions to China. Benchmarking (the Core-3 step referenced in my last blog which involves contacting similar but non-competing manufacturers for added insight on other successful export programs) showed Harley Davidson’s exports to China surging. Harley Davidson, like Earthbound, is known for its luxury brand, uniquely all-American, quality product built for, like Earthbound, the well-off consumer. We’ll revisit Earthbound in the coming months from time to time to check in on their export development, but in the interim, treat yourself to a visit to their website at www.earthboundrv.com
Andy Reinke is the President of Foreign Targets, Inc. (FTI) an export management company creating and managing proactive export programs for small and medium sized manufacturing firms. This is achieved by utilizing a proven methodology: FTI’s Core-8 Steps to Export Management. Read more about export in the ISBDC’s Exporting Your Products and Services FAQ Page.