March 15, 2007

U.S. Commercial Service helps suppliers go global

Israel Hernandez, U.S. Commercial Service

When China joined the World Trade Organization (WTO) in December 2001, market opportunities for U.S. companies expanded by an order of magnitude. China is America's fastest growing export market, with sales of goods and services up 80% since 2001. Although exports by American companies continue to surge, those looking to do business in China need to remember that no opportunity is without its challenges.

 

Here's an example. In the fall of 2005, Caterpillar Inc. (www.cat.com) hoped to win a big contract to supply the engine-generator sets at the heart of a project to build the world's largest power plant fueled by coal mine methane (Figure 1). The Jincheng Coal Mine Methane Development Project in China's Shanxi Province (Figure 2) was expected to attract bids from most vendors of gensets worldwide.

 

 

 

 

"We knew that a win on this Chinese project would have a lot of ramifications for our company," says Jack Gehring, director of Caterpillar's International Services division. "A successful bid would set the table for a lot of new business not only in China but in other key markets such as Ukraine, India, and Botswana as well. However, we also knew that we would face intense international competition for the contract."

In the early stages of the bidding process, Caterpillar reached out to the U.S. Commercial Service—the trade promotion unit of the Commerce Department's International Trade Administration—for any help it could provide. Having done business in China since 1975, Caterpillar was already familiar with the U.S. Commercial Service and its Advocacy Center—the central coordinating office marshaling U.S. government resources to help "level the playing field" on behalf of U.S. businesses as they compete against foreign firms for specific international contracts or other U.S. export opportunities.

Under the Advocacy Center's Early Project Development initiative, Caterpillar representatives got the latest and best information on the Asian Development Bank's (ADB) tender for the Jincheng project as early as possible. The Advocacy Center coordinated closely with its liaison to the ADB on project financing issues and with the U.S. Trade and Development Agency (USTDA).

At the recommendation of the U.S. Liaison Office at the ADB, the USTDA agreed to provide a technical assistance grant to oversee the project's final design specifications and procurement process—making the latter more predictable. The Advocacy Center also worked closely with U.S. Commercial Service officials in Beijing, who met with officials of China's Ministry of Commerce and sent letters to the vice governor of Shanxi Province and the chairman of Shanxi Jincheng Anthracite Coal Mining Group Co., Ltd.—the project developer and customer.

A win-win outcome

Thanks to those efforts, Caterpillar came to the bidding process well prepared and was awarded a $58 million contract to supply 60 methane-fueled engine-generators and switchgear to the project. The company estimates the contract's U.S. export content value at about $49 million.

According to Gehring, the contract will create significant employment at Caterpillar's factories in the U.S. and for its American suppliers as well. For example, the gensets will be built at one Caterpillar plant in Lafayette, Ind., and their control panels will come from another in Griffin, Ga.

According to Gehring, the contract is a great example of how trade between the U.S. and other countries can be positive for both sides. "This is a great example of how having federal backing for a bid can add credibility to the process of convincing potential buyers such as the Chinese to award a contract."

The power plant project, at the Sihe coal mine in Jincheng City, will simultaneously improve safety at the mine and benefit the local community by converting methane into megawatts. To protect underground workers, most coal mines vent to the atmosphere the methane released from seams by excavation. At the Sihe mine, the 60 Caterpillar gensets will use this methane as a clean fuel. For efficiency's sake, their waste heat will be fed to four steam turbines from Shanghai Electric Group Co., Ltd. Working together, the gensets and turbines will be capable of producing 120 MW. Eliminating the venting should reduce the mine's greenhouse gas emissions by an estimated 4.5 tons over the next two decades. The power project is slated to come on-line this year.

"[At Sihe,] we're doing more than using a 'green' generation technology; we're also helping to advance China's rural electrification initiative," says Gehring. "The great thing about this project is that it's not only good for our business. It also really helps improve the quality of people's lives, and that makes it all the more worthwhile."

Become a proactive exporter

The Caterpillar success story is just one example of how the Commercial Service and its Advocacy Center are working to help thousands of U.S. companies compete overseas. The service has a seamless network of trade specialists in 109 cities and at American embassies and consulates in nearly 80 countries. To locate the office nearest you, visit www.export.gov. As a reader of POWER, you'll likely be most interested in the Commercial Service's Energy Team, whose members have expertise in power production equipment and technologies, and generation fuels.

You don't have to be a big firm like Caterpillar to benefit from exporting and the programs of the Commercial Service. In fact, the vast majority of all U.S. exporters are companies with fewer than 100 employees. More than 80% of the service's clients are small and midsize businesses.

The importance of exporting is well-known: It helps companies to compete and diversify their portfolios in world markets, which contributes to the U.S. economy and job growth. Yet, although many smaller providers of power equipment and services are able to reactively meet demand in the global economy, fewer have given serious thought to becoming "proactive exporters."

Proactive exporting is an ongoing strategy that must be supported by a company's top management. Often, that support is lacking because managers believe that exporting is too time-consuming or challenging, and that companies must do it alone. However, the reality is that although exporting always carries some risk, the risks of not exporting are greater. After all, more than 70% of the world's purchasing power lies beyond America's borders.

Indeed, there has never been a better time to be a proactive exporter:

• With the growing number of free trade agreements, the Internet, lower-cost transportation, and the availability of government support for exporters, there are excellent opportunities for firms to expand their sales overseas.
• The U.S. Commercial Service offers more resources to exporters than ever before. It can help your company navigate the avenues of trade through comprehensive export counseling, market research, trade events, advocacy, prearranged business appointments abroad, international partner searches, and many other services. It also can put you in touch with financing partners through its strong relationships with the U.S. Export-Import Bank, the U.S. Small Business Administration, and other relevant entities. It can even help clear up a bureaucratic bottleneck in a "country of destination" see box).
• Highly respected worldwide for their technological innovation, engineering, and reliability, American power generation technologies already have a competitive leg up. Demand for those technologies will continue to grow in parallel with worldwide demand for electricity.

Although many companies have yet to take advantage of export opportunities, almost as many others are well on their way to achieving their export goals with help from the U.S. Commercial Service network. This article concludes with three brief case histories of successful exporting experience.

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