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Overview
Your easy-to-follow primer on the exciting world of import/export
With an increased focus on global trade, this new edition of Import/Export Kit For Dummies provides entrepreneurs and small- to mid-sized businesses with the critical, entry-point information they need to begin exporting their products around the world—as well as importing goods to sell. Inside, you'll find the most up-to-date information on trade regulations, where to turn for additional guidance on seamlessly navigating the dreaded red tape, and much more.
With significant changes in technology, expanding economics, and international trade agreements, the global marketplace continues to grow and change rapidly. In fact, companies that do business
internationally are proven to grow faster and fail less often than companies that don't. This authoritative reference is packed with everything you need to get started, so why not get in on the game while the going is good?
- Gets you up to speed on the lingo of international business
- Shows you how to follow guidelines for developing a successful business and marketing plan
- Helps you understand distributor and agent agreement outlines
- Offers unprecedented insight on pinpointing the right markets for your import/export business
Importing and exporting goods is a valuable way to expand your business and take part in the global economy, and this hands-on, friendly guide shows you how.
If you're thinking about starting an import/export business, do some research and ask yourself some key questions to see if a career in international trade is right for you. Make sure you're in agreement with the buyer or seller of goods about basic issues regarding your import/export business and stay current on trade rules and regulations in the countries that you're importing from or exporting to.
About The Author
John Capela has taught marketing, management, and international business courses at St. Joseph's College in New York for 20 years. He is president of CADE International, which provides consulting and training in international business including importing, exporting, licensing, and foreign investment.
Articles From The Book
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You can get involved in exporting in numerous ways — from filling orders for a domestic supplier (as an export management company) to exporting your own products. Many businesses — small, medium, or large — are excited about the idea of doing business internationally as a way to increase their sales and profits.
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Importing is not as easy as it may initially appear — in fact, it's a real challenge. You have to take the time to select the right product, understand the applicable rules and regulations, identify your customers, find out about different payment and shipping alternatives, and deal with the bureaucracy known as U.
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In the past, opportunities for many small import/export businesses and entrepreneurs ended within the borders of their own country, and international trade was only for large multinational corporations. The Internet, changes in technology, and increased access to affordable information have made it easier for firms of all sizes to engage in international trade.
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Under the Foreign Corrupt Practices Act (FCPA), it's illegal for a U.S. company to offer, pay, or promise to pay money or anything of value to any foreign official for the purpose of securing or retaining business.
Here's a case study for you: In January 2009, Patrick Caldwell, a former federal employee, was appointed head of sales and marketing for Protective Products of America, Inc.
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Whether you're assessing a product you plan to sell in your hometown or one you hope to sell halfway around the world, the product has to match the needs of the market. So how can you tell what your product's potential is?
When you're importing, look at how the product is doing in international markets to try to gauge whether it could be successful in the U.
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Whether you're importing or exporting goods, business agreements need to exist between the person you're buying from or selling to, and the following key points need to be included in those agreements:
The products: You need to be clear about their exact specifications so that you know what you're getting.
Sales targets: This includes things like order quantities and the frequency of shipments.
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The number of products that can be imported into or exported from the United States seems infinite. The key to success is to identify your niche or area of specialization. Most individuals starting an import/export business stand a better chance of succeeding if they specialize in a particular area instead of trying to make it as a generalist.
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Alibaba.com and AliExpress.com are both owned by the Alibaba group, but they have two different business models. Alibaba.com is a business-to-business (B2B) site that provides a trading platform for both buyers and sellers to exchange information. The majority of companies provided by Alibaba.com are manufacturers or resellers who trade in large quantities.
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A manufacturer's agent or manufacturer's representative is an independent agent wholesaling organization that's responsible for selling all or part of a company's products in an assigned geographical territory. The firms are independent and not employees of the manufacturer. Agents are used extensively in the distribution of products and usually have contractual arrangements with the companies they represent.
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A corporation exists as a separate entity apart from the owners and may engage in business, make contracts, and sue and be sued. The corporation pays its own taxes. Incorporation involves the filing of a charter or a certificate of incorporation with the secretary of state in the state where you want to transact your import/export business and where the principal office of the business is located, as well as payment of a fee.
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Values of currencies do not remain fixed — they change, sometimes rapidly, as currencies are traded in the world's financial centers. Fluctuating currency values can result in major losses if a currency trader's timing is wrong, so you need to have a keen awareness of exchange rates and use them as a factor in deciding when and where to do business.
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As an exporter, you need to be aware of the U.S. Customs benefits that are available to you. These benefits are designed to encourage U.S. exporters by letting them exclude any duties paid on imported items from their sales prices.
Here's a rundown of the benefits you may be able to take advantage of:
Drawback of Customs duties: Drawback is a form of tax reduction in which duties collected on imported goods are refunded to the importer if these goods are exported from the United States.
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After you've decided to get into the import/export business, you have to decide how you want to set up your business. You have two options:
Be a distributor (an intermediary who purchases and takes title to the goods). For example, you purchase sweaters from a manufacturer in Japan and import them into the U.S.
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Most companies begin their initial involvement in international business by exporting or importing. Exporting is sending goods out of your country in order to sell them in another country. Importing is bringing goods into your country from another country in order to sell them.
Both of these approaches require minimal investment and are, for the most part, free of major risks.
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You know you're ready for international trade, but do you know whether you want to import or export? The answer that's right for you depends, in large part, on why you want to go global in the first place.
Importing makes sense when
The value of the U.S. dollar is strong — the stronger the dollar, the cheaper purchasing goods overseas is.
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Import/Export Kit For Dummies includes all kinds of useful documents and forms. Just go to the Import/Export Kit For Dummies accompaniment site, click the Downloads tab, and click on the files that you would like to download.
Useful documents
These documents should be helpful as you set up and run your import/export business:
Distributor and Agency Agreement Outlines: This document provides two outlines — one for distributors and another for agents — that you can use in your discussions with other companies.
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When you're figuring out your role in the export business, you have two main options. You can structure your business as one of the following:
Distributor: A distributor is an independent company that purchases products from a supplier, takes title to them, and resells them. A distributor purchases products at a negotiated price and is compensated by selling them at a higher price.
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Export licensing is a basic and important first step in exporting. It may initially appear complex and confusing, but in most cases, the process is very simple and straightforward. A product can fall into only one of two categories:
No license required (NLR)
Validated export license required
The vast majority of items exported from the United States do not require a validated export license.
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In a perfect world for your import/export business, you could select a product you’d like to deal in and identify a great supplier, and customers would fall over each other to do business with you. Unfortunately, the real world is far more complex and unpredictable. Doing business no longer involves just making and selling a product.
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Through regulations, the U.S. Food and Drug Administration (FDA) assures American consumers that foods are pure and wholesome and that drugs, medical devices, and cosmetics are safe. The FDA requires U.S. manufacturers to go through rigorous testing and inspection.
Many countries have their own versions of the FDA.
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U.S. Customs has groups of import specialists who can help you get started in importing. Import specialists are organized according to commodity specialist teams, which are assigned specific types of goods and are available to respond to any questions you have about U.S. importing rules and regulations.
Import specialists provide information about the proper classification of goods for the purpose of charging duties as well as information regarding specific agency permits, licenses, or certifications.
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When you're in the import/export business, you need to realize that the process of global negotiations differs from culture to culture in many significant ways. You have to take into account communications issues such as language, gestures, facial expressions. And you also have to consider differing negotiating styles and problem-solving techniques.
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You've chosen your supplier and you're ready to buy products for your import business. To make sure that the transaction goes smoothly, you need to come up with a contract that spells out all the pertinent information.
Many potential sources of confusion exist between an importer and an overseas supplier, from language difficulties to differences in business practices.
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When goods arrive at the port, Customs and Border Protection (CBP) makes its decision as to the dutiable status of the merchandise — the appropriate tariff classification code, as found in the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS is the primary resource for determining duty classifications.
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To get involved in importing, you need to find suppliers from other countries. And if finding international suppliers is of interest to you, there's a good chance you'll be using Alibaba.com. It's by far the largest e-commerce company in the world, connecting suppliers, primarily from Asia, with buyers from all over the world.
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Selecting a supplier and sourcing goods online can be risky, particularly for a small import business with no personal representative in the other country. However, you can improve your chances of success by performing due diligence.
Before attempting to search for suppliers, research the product you're looking for.
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When you're screening potential export markets, pay attention to the needs of the markets as well as which markets are growing and offer you the greatest potential for success.
Step 1: Focus on needs
A logical first step is to conduct an initial screening based on need. A need is a lack of something. If a market doesn't need your product, no amount of effort on your part will allow you to successfully market goods in that country.
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One of the first decisions you'll make (and one that you can have a little fun with) is finding the right name for your import/export business. You may spend a lot of time deliberating about potential names for your business. Choosing a name is one of the more challenging aspects of starting your new import/export business — and you have to do it without the help of all those name books that new parents have!
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Setting up a business involves all kinds of little details that are easy to overlook. Following is everything you need to think about in the early days of your import/export business, from registering it to setting up a phone line and more.
Registering your business
Depending on the type of business you operate, you need to take one or two steps for your business to be properly registered in most states:
If your business is a legal entity such as a corporation, limited partnership, or limited liability company, you must file formation or authorization documents for the public record.
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When you're looking to be an importer, one of the first things you have to do is identify countries that have the products you want. Depending on what you want to import, you may be limited in your choice of countries. Not every country has every product.
As you narrow down your list of countries that have the product you're importing, consider the following:
Labor costs: Wage rates in many developing countries are lower, which means you'll be able to source goods at lower costs.
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As a general rule, the U.S. Customs Service doesn't require an importer to have a license or permit to import goods into the U.S. However, you may be required to have a license, permit, or other certification, depending on the commodity.
The importation of certain classes of merchandise may be prohibited or restricted.
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If you're thinking about starting an import/export business, do some research and ask yourself some key questions to see if a career in international trade is right for you. Make sure you're in agreement with the buyer or seller of goods about basic issues regarding your import/export business and stay current on trade rules and regulations in the countries that you're importing from or exporting to.
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Importing/exporting isn't just about business — you also need to study the cultures of the countries you want to work with. Culture affects all business functions, including marketing, human resource management, production, and finance. Culture is the total of the beliefs, values, rules, techniques, and institutions that characterize populations.
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The single most important document in an import or export transaction is the purchase agreement. With a suitable purchase agreement, you can eliminate or greatly reduce most of the problems that might occur. The terms of sale upon which the seller and buyer must agree include the passage of title, risk of loss, price, and payment.
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Import and export laws differ from one country to the next. Make sure you know the laws regarding international trade wherever you're doing import/export business. Watch out for these common legal pitfalls:
Regulations and restrictions: Be aware of how your transactions may be affected by the import/export laws in the United States or in the foreign country involved.
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A limited liability company (LLC) brings together two benefits that can be valuable to many business owners and that you can take advantage of when forming your import/export business:
Limited liability: The members of an LLC enjoy the same limits on their personal liability as a corporate shareholder does. They aren't personally liable for the company's debts.
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Negotiations happen everywhere in the import/export business. After you select the product to deal in and identify a supplier and a customer, you need to discuss the terms of purchase. Many people feel that negotiating is unpleasant because it involves conflict. In every negotiation, somebody wants something. But if you understand the process, you’ll be able to negotiate with confidence, increasing the odds that the outcome will benefit both parties.
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If you can't come up with enough money to make your new import/export business a success, or if you lack some of the skills needed, consider a partnership. A partnership is an association of two or more persons engaging in a profit-making business as co-owners. A partnership is similar in many respects to a sole proprietorship, with the exception of sharing responsibilities and profits.
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If you're considering entering the world of global trade by starting your own import/export business, ask yourself these important questions to see if ready to commit your time and money to the venture:
Why are you thinking of starting a business, and what makes you think you'll be successful?
How much money will you invest and how much will you earn?
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After you've identified potential suppliers and specific products, you may feel like your work is done. But before you buy anything, you need to request product samples. You can use these samples to verify the product's quality as well as to make presentations to prospective customers. You can also use product samples in identifying the product's designated Harmonized Tariff Classification Code — samples are required in your request for a binding ruling.
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An S corporation is a special form of corporation that allows the earnings of the corporation to be taxed only as individual income — the corporation does not pay taxes. Additionally, the S corporation also preserves the owners' right to limited liability.
A corporation can elect to be an S corporation under the following conditions:
It must be a domestic corporation with only one class of stock, which means that all shares must share the same rights (dividends).
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Your potential customers can choose from an overwhelming variety of products by assessing the value each product can deliver. Your business exists to satisfy your customers while making you a profit, so selecting the right product and identifying the best supplier are critical to the success of your business.
The number of products that you can import into or export from the United States seems infinite, so how do you choose?
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The sole proprietorship is the simplest of the three primary forms of organization and the form used by the majority of new businesses. There are usually no setup costs if you decide to do business under your own name.
If you want to operate your business under a trade name, you need to register with your local county clerk office.
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Capital is the money that you need to start and run your import/export business. When trying to figure out how much money you need to get started, you need to forecast the sales volume you expect your business to reach during your initial year of doing business.
This forecast helps you determine your overall capital requirements.
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When you're selecting a product for your import/export business, you need to be personally and emotionally committed to its success. Begin the selection process by asking yourself the following questions:
Do you like the product that you're planning to offer for sale? If you don't like it, you'll have a hard time selling it.
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ThinkGlobal.com has developed several apps for U.S. exporters. The Export Resources app, published by ThinkGlobal Inc., provides access to trade leads, trade events, market research, and news gleaned from U.S. government trade specialists and other reliable sources worldwide. Here's what you'll find on the app:
The Trade Leads section includes leads and opportunities for product and service providers.
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An agent is similar to a distributor in that he's a middleman. However, an agent does not take title to the goods and provides fewer services than a distributor does. The agent's role is to get orders and (usually) earn a commission for his services. The following figure illustrates the relationship among the agent, the supplier, and the buyer.
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A distributor is an independently owned business that is primarily involved in wholesaling and takes title to the goods that it's distributing. A distributor is a middleman who handles consumer or business goods that may be manufactured or not manufactured (such as agricultural products), imported or exported, and then sold.
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The import/export business is part of everyday business. Everyone encounters the result of international business transactions every day, whether they realize it or not. International business is any commercial transaction that crosses the borders of two or more nations.
Importing is bringing goods into your country from another country in order to sell them, and exporting is sending goods out of your country in order to sell them in another country.