NEW YORK — The export business has often been considered a hassle by U.S. companies that preferred the simplicity of selling domestically in a huge market.
The problems of dealing in foreign currencies, customs regulations, letters of credit and language differences all have made exporting a daunting endeavor.
But with competition in the U.S. market stiffening, it is becoming necessary to look elsewhere for growth. Seeing a business opportunity in easing the complexities of overseas selling, the State Street Bank and Trust Co., Boston, has teamed up with the factoring group of a large Netherlands bank and an international shipping, warehousing and freight forwarding company to form EuroMasters.
Malden Mills, a $400-million-a-year, family-owned textile company, is one of EuroMasters’ major clients, and according to Wesley F. Rydin, treasurer of the Lawrence, Mass., textile firm, the arrangement has been of great help in Malden’s export program.
Malden has three plants, all in New England, and is a fully integrated producer of faced fabrics. It makes knits and wovens, all of which are textured or flocked, including the Polartec knit fabric used in active outerwear such as skiwear, underwear and shirting material.
“We do everything but spin the yarn,” says Rydin.
In the past seven years, he says, Malden’s export business has exploded. From about $10 million seven years ago, Malden’s export business now is about one-third of total volume, or about $140 million.
Export growth, Rydin says, has been largely in apparel fabrics sold in Europe. Malden also does exporting to the Far East and to South America. Its upholstery fabric exports are mostly to the Mideast, he said.
When Malden first started exporting, it used a domestic factor that had contacts with overseas factors.
“There was never any direct contact with the market we were selling into,” Rydin said. “Our only contact was with the domestic factor who would contact the overseas factor, who would contact someone else. We rarely talked to anyone who really knew our markets. There was trouble handling checks, and there were long delays in collecting funds.”
In short, he said, the domestic factors just didn’t have the expertise in export.
After about a year of study, Malden worked out an arrangement with State Street Bank in Boston and De Lage Landen, a factoring subsidiary of The Rabobank Group of the Netherlands, an organization with assets of around $133 billion. State Street’s total assets are about $20 billion.
DLL operates six of its own factoring companies in Europe with full service factors in the U.K., the Netherlands, Belgium, France, Germany and Italy.
With its own wholly owned factors in each of the six European countries, DLL differs from other international factoring networks in which each country has its own factoring units loosely tied together by a membership arrangement.
Although Malden has its own warehouse in Europe, the package put together by State Street and De Lag Landen has provisions for shipping and warehousing through the Royal Nedlloyd Group, based in Amsterdam, which has 31 warehouses across Europe and provides freight-forwarding and custom tax clearance services.
Malden began using the service in January.
“While it sometimes took up to 15 days to collect payments under our old system,” according to Rydin, “now in just one business day, funds are transferred from Europe to our account at State Street Bank. Collections are light years quicker.”
One of the most important advantages to Malden, according to Rydin, is that with the speedy flow of money and information on the status of each customer’s account, “we can ship more product to our customers.”
Previously, delays of 10 to 12 days in transfer of payments reduced the customer’s open-to-buy, he explained.
If a customer’s credit line is fully utilized, further shipments can’t be made until the customer makes the payments to open up credit availability, he continued. Thus, the quicker the payments are credited, the quicker the credit line opens up.
“Losing 10 or 12 days of credit capacity can hurt our business, particularly during peak shipping season,” Rydin noted.
“The system takes a lot of the mystery out of the export business. It’s not a heck of a lot different from doing business in New Jersey.”
Kenneth V. McGraime, vice president in international corporate banking at State Street, says that while Malden is currently the only textile client in the EuroMasters portfolio, it is talking to others, which he would not identify. McGraime also noted that the EuroMasters concept could work with other domestic factors seeking an alternative to provide export services for their clients.