EXPORTING MARYLAND

The Baltimore Sun

The precipitous fall of the dollar may be giving Americans a blow to their collective ego at home and sticker shock abroad, but it's also turning American goods into bargains on world markets.

As a result, Maryland companies, both startups and established, are finding it's a great time to either begin or expand their exporting business.

"If you export in dollars and you're competing with euros, it's just as though you've cut your price," said David B. Cooke, group manager of international trade finance at Baltimore's M&T; Bank, which provides loans and other services to client companies that export.

The dollar has been caught in a steady downdraft that has accelerated in recent months. Since 2003 it's lost about a third of its value against the euro and now trades near historic lows against the European currency. It's also down versus the British pound and many other world currencies.

With new free trade agreements and the proliferation of the Internet making it easier to sell their wares abroad, Maryland businesses are diving in. Exports of Maryland products were $7.6 billion last year, up more than 30 percent over 2004, according to the state's Department of Business and Economic Development. As of June 30, exports of Maryland products were running 14 percent ahead of last year's pace, at $4.2 billion.

The Seasoned Palate Inc. was only officially launched in February, yet the owners quickly found themselves immersed in efforts to sell their organic spices overseas.

"We thought we could have a gradual local rollout. It's been a very quick lesson for us," said co-founder Katie Luber, president, who has her fingers crossed that the dollar's drop will give the young company an edge. "We had to go from thinking of ourselves as a small Baltimore company to an international one."

Hatched by three neighbors around Luber's dining room table in Baltimore's Homewood neighborhood, The Seasoned Palate sells an array of spices packaged in single-use packets. Nibbles from abroad started coming in after the company won Best in Show at the Gourmet Housewares Show in May in Orlando, Fla., and from last month's Fancy Food Show in New York.

Now, with approval for a Small Business Administration loan to finance its export efforts, it's negotiating with distributors in the Netherlands, Britain, Germany and France as well as Australia, the Middle East and parts of Asia.

"It's amazing what you can do with a computer and a phone," said co-founder Sara Engram. "You can really go a long way from your home."

Last year was a record year for U.S. exports, with $1.4 trillion worth of goods sent abroad, according to the U.S. Commerce Department.

"It really is the best time to export for a number of reasons," said Gabriel Pellathy, acting deputy director general and chief of staff of the U.S. Commercial Service at the Department of Commerce.

New markets open

Besides the dollar, Pellathy said, a slew of new trade agreements have opened new markets.

Still, 90 percent of the nation's exports go to Canada, Mexico and Australia.

"Some markets are easier than others," Pellathy said. "Certainly, China is more difficult than Canada."

For neophytes, navigating the logistics and intricacies of international trade can be daunting.

When Seasoned Palate first tried to ship a single box of samples to a potential Canadian customer, they discovered it wasn't so simple. "We thought Canada, no problem," Luber said. "We thought we could use UPS."

Luber said the three founders underestimated how much work was involved in a commercial invoice under NAFTA and how expensive customs brokerage fees can be for a small shipment. Now, with the benefit of a quick education from a recent export seminar, they plan to use both UPS and commercial freight.

Like the spice company, Maritime Applied Physics Corp., a custom boat builder for the Navy and defense contractors, hadn't thought about exporting. Then it received an inquiry from the South Korean Navy for rudders and related hydraulics for a double-hulled, oceanographic ship. After a competitive bidding process against a British firm over the Internet, Maritime won the $2.3 million contract.

But the sale ran afoul of the International Traffic in Arms Regulations, which prohibit the export of defense products to foreign militaries without approval. In its application to ship overseas, the company didn't mention the Navy tie, thinking it wasn't necessary since the ship had a noncombat, environmental mission. The government stepped in to help the company with the paperwork, so the deal went through.

"We really had no experience in international exporting, so we learned a lot of things the hard way," President Mark S. Rice said.

Once it understood the process, Maritime's export business flourished. Now about 30 percent of Maritime's business comes from overseas, including Italy and Scotland.

Rice passes on lessons learned by helping advise a class called EXPORTECH for executives of young electronics companies looking to export.

"The intent is to avoid some of the pain for others," he said.

Several exporters who spoke at a recent M&T; Bank seminar designed to help businesses begin exporting urged companies to do their homework before engaging potential customers. For example, they may have to adjust their packaging or marketing strategies to fit the local customs and culture.

They said it is critical that company representatives visit their foreign partners often, and hire local people to facilitate the trade relationship. And above all else, they said, be patient.

"Typically, it takes a year to see tangible benefits of exporting overseas," said Bill Burwell, director of the U.S. Commercial Service in Baltimore. "The toughest part for companies is waiting," Burwell said. "It takes time and resources before you see any ROI [return on investment] on sales. That wait can be hard for companies, particularly small businesses."

For companies that have established relationships abroad, business is booming.

Patton Electronics Co. has seen a jump in orders from Europe for its telecommunications equipment, particularly for Internet telephone service, or voice over Internet protocol (VOIP). With the dollar falling against the euro, the Gaithersburg company has been able to lower its prices, making it competitive with giants such as Cisco, Lucent and even Chinese companies. Now 60 percent of its orders are from overseas, said President Bobby Patton.

Business in Europe

"The market in Europe has really picked up in the last two years," Patton said.

But like other companies, the family-owned business learned hard lessons about exporting along the way.

The company had several million dollars' worth of business in China until counterfeiters began producing copies of Patton's products, with the Patton name attached. They even built Web sites with the Patton name to sell their knockoffs.

"They just took the business out from under us," Patton said.

It didn't scare the company away from China or other countries. Patton learned he must stay ahead of the market - and the counterfeiters - by churning out new products. The relatively small company, which employs 200 worldwide, manufactures more than 1,000 products in Maryland.

Officials at Raloid Corp., which manufactures warheads and rocket launchers in Reisterstown, didn't even know they could export their wares until they got a cold call from the state's economic development offices offering to help them do it.

The state encouraged Raloid's Carl Livesay, director of business development, to apply for a grant that would pay part of his way to last year's Farnborough International Airshow in England, the biggest defense trade show in the world with almost 1,500 exhibitors. It's held every two years, alternating with the Paris Air Show. The state provided Livesay a research report on the market and introduced him to potential customers.

Livesay said he was surprised to leave with 15 qualified prospects. "That's like hitting it out of the park," he said.

He recently returned from this year's show in Paris, which the company paid for. He was stationed side by side with the state's trade representative in France who spoke the language. This time, Livesay said, he brought back two dozen qualified leads from five countries, representing $110,000 worth of new business.

The leads will take time to develop into continuing trade relationships; experts say it takes between a year and 18 months for the first transaction to materialize. However, since last year's show and with the price advantage from the lower dollar, Raloid has begun shipping to the United Kingdom and is exploring a partnership with an Italian company. It also is looking at potential sales in Turkey and Greece.

"We're in this for the long haul," Livesay said.

allison.connolly@baltsun.com

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