Updated November 20, 2023
The Small Business Administration’s State Trade
Expansion Program
American small businesses regularly export to international
SBA to conduct an annual survey to gather feedback on
markets, contributing to both domestic and global
STEP. It also would extend STEP’s authorization of
economies by trading with approximately 95% of the world
appropriations—which expired in FY2020, although
population living outside the United States. But due to
Congress continues to fund STEP through annual
factors such as lack of experience or resources, some small
appropriations bills—through FY2028. Similar legislation
businesses may encounter initial challenges breaking into or
was introduced in the 117th (H.R. 8844, which passed the
expanding their operations in foreign countries. Starting in
House, and S. 5221) and 116th (H.R. 6133, which passed
2011, the Small Business Administration’s (SBA’s) State
the House) Congresses.
Trade Expansion Program (STEP) has helped address these
hurdles by offering competitive grants for projects that help
STEP History, Uses, and Outcomes
eligible small business concerns (ESBCs) build their export
Congress authorized the SBA to create a three-year State
activities. STEP awards are one of several SBA programs to
Trade and Export Promotion pilot grant program—a
promote small business exports. While other programs offer
predecessor to the current STEP—in the Small Business
loans and management and training assistance, STEP is
and Jobs Act of 2010 (P.L. 111-240). Program advocates
unique in that it offers grants.
argued it would help small businesses and promote job
creation following the Great Recession. The pilot program
STEP awards provide funding for a two-year period. For
was funded for two years ($30 million in both FY2011 and
FY2023, the grants offered ranged from $100,000 to $1.4
FY2012), was not funded in FY2013, and the current
million. As of FY2020, the most recent year for which data
version of STEP has received appropriations each year
is available, SBA had 48 STEP grantees totaling $18
since ($20 million in FY2023). In 2016, Congress passed
million. The program has three specific goals:
the Trade Facilitation and Trade Enforcement Act of 2015
(P.L. 114-125), giving the program its current name and
• increase the number of small businesses exporting;
permanent statutory authority. This law authorized STEP to
•
competitively award grants to all states, the District of
increase the dollar value of U.S. small business exports;
Columbia, American Samoa, Guam, the Northern Mariana
and
Islands, Puerto Rico, and the U.S. Virgin Islands.
• increase the number of small businesses exploring
significant new trade opportunities, which includes both
STEP grant funds may be used for the following purposes:
new export opportunities and expansions.
• participation in foreign trade missions;
Recent Legislation
• Department of Commerce subscription services;
STEP, which Congress permanently authorized in the Trade
Facilitation and Trade Enforcement Act of 2015 (P.L. 114-
• website fee payment;
125), has been the focus of significant legislative activity in
• marketing media design;
recent years. In 2021, the House-passed Build Back Better
Act (H.R. 5376) would have appropriated $30 million for
• trade show exhibition;
STEP from unappropriated Department of the Treasury
• participation in export training workshops;
funds each fiscal year from FY2022 to FY2025. The funds
would have remained available to the program for three
• reverse trade missions;
fiscal years. The CARES Act (P.L. 116-136) extended the
• procurement of consulting services; and
utilization period for STEP awards made in FY2018 and
FY2019, making them available through FY2021. The
• other export initiatives, which must be deemed
CARES Act also allowed the SBA Administrator to
appropriate by the SBA’s Office of International Trade
reimburse grant recipients for financial losses related to
Associate Administrator or Deputy Associate
canceled foreign trade shows and missions.
Administrator.
Other program provisions differ slightly among states. The
The STEP Improvement Act of 2023 (S. 77) was introduced
10 states with the largest number of small business
in the 118th Congress. Among other things, the bill would
exporters (California, Florida, Georgia, Illinois, Michigan,
require the SBA to collect additional performance data,
New Jersey, New York, Ohio, Pennsylvania, and Texas) for
including (1) the total number of ESBCs assisted, (2) the
FY2023 can receive no more than 40% of awarded STEP
total dollar amount of export sales by ESBCs, and (3)
grants. STEP awards have a matching requirement. For
number of ESBCs that have created new jobs through their
states with high export volumes (California, New York, and
participation in STEP. The legislation would require the
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The Small Business Administration’s State Trade Expansion Program
Texas for FY2023), the federal share of project costs is
performance metrics should be reported regularly. This
65%, and the required state match is 35% of the sum of the
could assist in better evaluating the program’s outcomes.
federal award and the recipient’s match amount; by this
formula, for every $1 of federal funds, the state must fund
With some performance metrics leading to potentially
53.8 cents. For all other states, the federal share is 75%,
nebulous conclusions, and with STEP activity concentrated
with the state matching 25% of the sum of the federal
in a few activities, Congress may wish to determine which
award and the recipient’s match amount, or 33.3 cents for
metrics it considers most useful for evaluation and
every federal dollar. State matching funds must be at least
oversight and what, if any, role those metrics may play in
50% cash, with the rest either as in-kind or indirect
driving amendments to the program. A list of required
expenses such as rent and utilities.
performance metrics and an analysis of them was included
in the STEP Improvement Act of 2020.
In 2021, the SBA commissioned an evaluation of STEP by
an outside consulting firm (2M Research). The study found
The results of the 2021 STEP evaluation provided
domestic firms expanding export operations most
somewhat conflicting data about the effectiveness of
frequently use STEP funds to participate in trade show
allowable uses for STEP awards. Congress may wish to
exhibitions, whereas newly exporting firms most frequently
consider which findings are more significant than others,
use awards for export training workshops. The evaluation
and if that determination should impact the range of
found that, from FY2014 to FY2018, export sales from
allowable uses for the grants. For example, the 2021 STEP
STEP-funded participation in trade show exhibitions
evaluation found that from FY2014 through FY2018, of the
dominated overall sales for STEP-funded activities,
nine allowable uses, export training workshops (10,381),
generating almost $2 billion; other export initiatives
trade show exhibitions (7,657), and other export initiatives
(including foreign sales trips) made $600 million; and
(6,600) were, by far, the most utilized by STEP recipients
foreign trade missions and reverse trade missions each
(compared to 1,772 firms participating in foreign trade
earned about $200 million. ESBCs in four states—
missions, the fourth most used.) But of those activities, only
Michigan, New Jersey, North Carolina, and Washington—
trade show exhibitions ranked as having one of the three
accounted for 68% of sales from STEP-funded trade show
highest ROIs. And yet, when asked what activity generated
exhibitions. Lastly, the study calculated that reverse trade
the highest sales, 49% of participating states identified trade
missions had the highest return on investment (ROI) for
show exhibitions—twice the percentage that selected the
STEP activities, followed by marketing media design and
next-most profitable option. More granular and regular
trade show exhibitions.
performance reporting may help clarify the connection
between allowable uses and small business export growth.
The SBA establishes an annual target average ROI for
STEP. Average ROI is calculated as the dollar amount of
The 2021 evaluation also found that some STEP benefits
small business exports for every $1 in STEP grants. Figure
may accrue unevenly. As mentioned, between FY2014 and
1 presents the actual and targeted average ROI for STEP for
FY2018, 68% of all STEP-related export sales from trade
FY2018 to FY2022. As shown, STEP exceeded the targeted
show exhibitions were from ESBCs in four states, with
average ROI from FY2018 to FY2020. However, STEP did
one—Michigan—accounting for 36% of export sales.
not achieve its target ROI in FY2021 and FY2022, when
Congress could consider additional rules to ensure ESBCs
the COVID-19 pandemic disrupted the global economy.
in all states benefit from STEP grants, such as increasing
the federal share of project costs for states that do not have
Figure 1. Actual, Target Average ROI of STEP Grants
a high volume of exports. Conversely, Congress may
determine that STEP is working as intended; the 2021
evaluation found that ESBCs in states which have
participated in STEP the longest had the most export
clients.
Lastly, Congress may wish to consider how current and
potential economic and business trends might impact
STEP’s design. For example, a number of STEP’s most
utilized activities, including trade show exhibitions and
foreign sales trips, require business travel. The COVID-19
pandemic heavily diminished the ability of small businesses
to travel abroad; this may have contributed to STEP
missing its target ROI in FY2021 and FY2022. Members of
Congress may consider whether additional allowable uses,
Source: SBA, FY2024 Congressional Budget Justification FY2022 Annual
such as the purchase of virtual meeting and conference
Performance Report.
tools, might address this issue and help exporting small
Policy Considerations
businesses compete in an increasingly interrelated world
economy.
As American small businesses and the world economy
recover from the COVID-19 pandemic, Congress may
Adam G. Levin, Analyst in Economic Development Policy
discuss how STEP can play a role in that process. To do so,
Congress may continue its debate on which STEP
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The Small Business Administration’s State Trade Expansion Program

IF12149


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https://crsreports.congress.gov | IF12149 · VERSION 3 · UPDATED

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