Importing Techniques

by Norman Friedman

We will assume that you have studied the market for the products you seek to import and have determined how to market them. This is essential before considering being an importer.
You now have determined the products and are seeking a producer which in many cases will exist in countries far from the U.S.A. How then to find a source.

The Offices of Foreign Governments can be found in the telephone directory of large cities by looking under Consulate of “--------“. Address your letter or email to the attention of the Commercial Attaché requesting that they furnish you with the names and addresses of suppliers who can assist you in your search. You can then proceed with email or airmail to contact them.
Always follow up an email with a letter inquiry on your business letterhead.

With the growth of the internet search engines such as Google, it is also advisable to look in this direction as well. There are specialized sites which focus on the far east and one of these has become well known: alibaba.com. They have garnered a huge amount of sources and present them with a focus on the area of interest to you.

Since you are becoming part of an international program, you should, read a commercial newspaper like the Journal of Commerce as well as the Wall Street Journal for general trade data which is important since you will be dependent upon shipping information.

A Customs Broker/Freight Forwarder is an essential member of your team. They are generally. located near ports of entry close to the U.S. Customs Service. They can advise you on shipping costs, insurance expenses and costs of entry through a Port or Airport. Your broker can find out for you if there is a tariff or duty on the article you intend to import. He or she can also advise where the indelible mark of country of origin must be on cargo and packing material.

International trade has designated certain terms which have legal bearing and which are commonly used in making contracts. These are usually defined by letters, such as C.I.F. which means that your cost includes the price of the goods, insurance for them and the freight costs. You are left with paying duty if any and the brokerage cost for filing your entry with U.S. Customs.

To speed the entry process, instruct your supplier to send duplicate documents directly to your Customs Broker. If your shipment arrives and the documents are late in coming, your products could end up in a Customs warehouse which entails high costs for removing and storing them.

If you do not buy a container, either a 20 or 40 foot of cargo, then your products must be unpacked from a consolidated freight shipment with others and your trucker often has long waits until the cargo is ready. Be prepared for significant costs which differ from those normally used for short hauls.

Payment is somewhat different from the terms generally available in the U.S.A. For example, your supplier may ask for an irrevocable letter of credit. This is a document issued by a bank which promises to pay your supplier if he meets the documentation terms. It is a banks promise to pay rather than your own. To obtain this document you often will have to deposit the full amount of the letter of credit with your bank and pay a fee as well. Until your supplier grants you credit, you may have to accept these terms. Of course, as your business develops your bank may decide that you no longer have to deposit funds for the credit but instead they may grant you a line of credit which you can use.

Another commonly used method of paying for products, is thru a partial deposit and shipment of the goods subject to collection from your bank. This is called by the symbols SD/DA. It signifies that they have drawn a check called a draft on your bank account and sent to your bank for you to accept and the shipping documents have been attached. So when you pay the check/draft the bank releases the papers to you so that you can send them to your Customs Broker for entry.

Since shipping takes 3-4 weeks, and you often have already paid for the goods, you now have to give credit to your customers, have an inventory, and place a replacement order almost concurrently. Therefore your funding needs are often three times the cost of your shipment and this capital requirement will continue to put pressure on your finances until your profit overcomes this hurdle.

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This article was prepared by Norman Friedman, who is a member of the Small Business Advisory Committee, a voluntary organization of the Huntington NY Chamber of Commerce. Norman was Director Of Purchasing for Hi-Technology Manufacturing Companies. Business advice is available free to everyone. Call 631-423-6100 for an appointment.

© 2009 Norman Friedman

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