Export Research USA

Susan & Alan Wright undertook a Market Research Trip to the USA 23^rd May to 7th June 2015

We visited New York, Washington, California, and Florida.

We were amazed by the unequal treatment that exists in the USA for companies wishing to export – a bit like playing football on a pitch at a 45 degrees angle and we always play uphill. There are laws which do not appear to be enforced upon US companies, with stories of these very same laws being enforced upon non-US companies. A legal system includes juries renowned for decisions which protect US markets to the detriment of Importers, which is reflected in product indemnity insurance which is extortionately high for UK companies but low for US companies.

None of these issues are addressed by Transatlantic Trade and Investment Partnership (TTIP) and so despite huge potential for sales in the USA  we will not be exporting to the USA. It is our belief that TTIP opens up our markets to the US without allowing European manufacturers reciprocal opportunities.

The USA has huge potential for sales of micro pumps and when time permits I intend to set up a stand alone company in the USA to sell to the USA. The idea I have is a pump which could sell for under $50 and is the pump that I would produce in the USA for hot water recirculation in competition to my own pump so I have entered the market there.

We have had inquiries from the US for the pump, but as the Flowflex Insurances specifically exclude sales to the US and Canada, we have not had the opportunity to test the US market as we have elsewhere. The market in the USA was potentially huge, and the only way to evaluate the market was to visit the market.

Buying on the internet is very common in the USA. The ShowerPowerBooster is a quality product with huge investment made in 2014 to make sure it does not leak and it is very reliable – essential for a US market.

In the USA the water mains operate at pressures higher than in the UK, but this high pressure into homes is firstly attenuated to 2 bars by installing a pressure-reducing valve. At all taps and showers a washer (restrictor) is installed to reduce the flow to legal maximums (5.8 litres per tap in a bathroom, 9.5 litres for a shower). In such circumstances it is possible for consumers to install a pump after the pressure-reducing valve to increase the pressure back to what it was before it was reduced. It is illegal, but common practice, just to remove the pressure-reducing valve or remove the restrictors.

In such circumstances, the SPB is not the cheapest option to solving pressure problems and might be deemed illegal, as the SPB can pump more than 5.8 litres a minute. Non-prosecution of manufacturers of larger pumps is not mitigation to a product in breach of a law, and as such risk of prosecution cannot be ruled out.

In respect to plumbing fittings in general, we found the market saturated with low cost imports throughout the USA. Cross-sales are an important element of sales in the UK and we hoped to replicate this in the USA. The high quality fittings we manufacture in the UK would not sell well against cheap uncertificated imports, but there is an option to bring in lower quality products if the market requires this.

In Washington we visited Eastern Plumbing Supplies and we were able to buy a compression fitting to fit on the external bore of galvanized iron. The fitting lacked any stamp other than ‘Taiwan 1/2’ so we asked the owner about the need for compliance with US standards for fittings. He explained that most of the fittings in the Washington area were brought in from China and Taiwan though US distributors. Technically they did need to be to US standards, although very few were. The need for compliance is applied periodically and had resulted in an importer being sued and put out of business.

We ‘jokingly’ discussed the difficulty for me of exporting to the US, in that all products I brought in would need to be approved to US standard, and I would be competing with US companies buying in cheap Taiwan fittings. He agreed, but suggested they would not sue me until I had made enough money to make it worthwhile to them.

In order to trade, you need Product Indemnity Insurance, and as an exporter to the US product indemnity insurance is expensive.

http://www.ukbusinessforums.co.uk/threads/product-liability-insurance-for-usa-advice-needed.291788/

The legal system allows individual US citizens to prosecute with a trial by a jury (of US citizens). In the past there have been punitive damages awarded against foreign companies, whereas the judgements against US companies appear less severe, which is reflected in the cost of insurances.

Since to enter the market you need to buy the insurances up front, selling a few items and seeing how it goes is impractical. Once you sell items you need to pay year on year fees to maintain cover on items already sold (5 to 15 years depending on risk). In making a decision to enter the market, you need also to consider if the market is long term and sustainable to make the initial investment worthwhile.

We explored several ancillary uses for the micro pumps but even in California and Florida we saw no solar thermal and close to no solar photovoltaic, which was surprising. The reason we were given was that power charges were low and in California the power company charges an additional fee to all those who fit solar PV, to compensate the power company for loss of profit on its investment in generating capacity (they asked for $50 a month but a lesser sum was set).

We hoped to explore ancillary uses such as might exist in gardening and water recycling, but in conversation at a hotel it was stated that it was illegal to collect rainwater.

Research on the internet proved that rainwater collection for use in the home is illegal, as the water belongs to the water company.

Collecting Rainwater Now Illegal In Many States – 2 May 2013

The potential is that the application we are developing, where a solar panel powers a micro pump to collect rainwater (for use for toilets etc), would not only attract a surcharge for the loss of profit from the utility company responsible for provision of electricity, but also the water company which owns the water.

 A relaxation of water bylaws in the USA allowing cross-mixing of hot and cold water supplies (illegal in Europe) eliminates the need for a separate warm water return pipe and makes hot water recirculation (hot water at taps without running cold to waste), a very major potential application for the micro pump in California.

The market leader is selling at a price twice that of my own pump, with less output than my own pump, plus there are a host of other factors which would make California and the adjacent dry states a very lucrative export market.

The market leading pump was examined in detail and the conclusion is that, although their pump has a 1-year limited warranty and is inefficient, there is a real danger if the WRight Choice micro recirculation pump were introduced in the US, the US manufacturers will simply up their game by using a pump similar to the low-voltage high-performance pumps I use.