What You Need to Understand Before You Start an Import Export Business

When I start a conversation with some of these individuals I soon realize that they are not too clear on the concepts of import and importing, export and exporting. What is the difference? In theory not much. If you export a product from a country of origin you are exporting. If you’re bringing a product from another country you’re importing. Basically you are most likely going to do one or the other, and not both. Most of my American clients look into importing into the United States. Some feel they want to also get involved in exporting from the United States but don’t have a product. If you want to export you could also for example setup your own company in another country and become involved in exporting from there and at the same time be also an importer of your own products in the United States, or another country.

But here I am only hinting at the subject of how you can run your business these days – for example, do you want to run your business with your company being based in the US, or would you like to entertain a scenario where you would establish a permanent residency in another country and start and base your business over there? Obviously there can be many advantages to doing something like that. There may be new business opportunities with this kind of setup but specific pros and cons will differ depending on where, which country you locate your business in and discussing details here is beyond the scope of this post and best left for another time.

One of the most common questions is wanting to know where to find suppliers. Many feel if only they’d have a good supplier they would be assured of success. Many look for that magic “How to Start an Import Export Business” package offer priced for only $19.95 expecting it will include all those addresses of suppliers to whom they can write and bingo, 60 days later they’ll be up to 6-figure income. Believe me, if it were that easy, that magic How to Information Package would not be $19.95!

To learn how to start an import export business you first need to realize that this is a two-part business. First you need to find the right product, get it out of the country of origin, ship it to destination, a country you import the product into, clear the customs, and then what? You got it home, in your warehouse. Now you have to sell it, get money out of it so you can start the whole process all over again, perhaps on a larger scale and with ultimately more profit.

So how will you sell your imports? Retail or wholesale? On the Internet? If retail, will you open your own shop, have a cart at the mall, do weekend markets, sell at flea markets, door to door? If on the Internet, will you use your own website or will you do eBay, Craigslist? There are too many ways to go when it comes to selling your imports. Will you sell only in US or also in Canada? Mexico? Kenya? Germany? Argentina? Why not?

Yes, having those right suppliers is a key. And many find some great ones on the Internet. Some even get an invitation from the supplier they found and board a flight to China. They get a VIP welcome, a limo ride to a 5-start hotel their supplier is treating them to, at his expense. Impressive! And they get down to business, the supplier sends a plush car to bring them to a board room to discuss the product, the size of their order, they negotiate quantity discount, delivery times, things are moving right along. Our buyer gets more impressed as ravishing young girls serve them fresh fruit during the negotiations. They are ready to place an order and pay upfront to get the best price and fastest delivery time. They shake hands, see a bit of China on a one-day quickie tour, overeat in a fine Chinese restaurant and they get an impressive escort back to the airport to catch their flight back home.

Weeks pass and no product arrives. I won’t hold you in suspense. There was no factory. No production line. No order is coming. The buyer got burnt!

Can you avoid that kind of fiasco? Yes you can. There are financial instruments how to do it, and there are other ways to do it. Above all, there are ways how not to go about starting in import export business.

Many prospective Americans importers just naively believe that things work the same way overseas as they do back home. Even if they get the motivation to take a trip and visit the country they want to import from and meet their supplier or suppliers in person at the country of product’s origin they often make a quick trip to inspect the supply side, may be few days to a week, and feel that did it. Try that in Bali, Bangkok or Bombay (Mumbai), and you just may find a great recipe for getting ripped off. I used to travel overseas to buy months at a time, year after year, visiting, checking my prospective suppliers, scrutinizing the scene, who was new, who went under, again and again visiting the same destinations until it would get to a point where locals would greet me from across the street, even though many of them I did not even know. But they knew me, because I have been coming back, over and over again and they all knew I was a buyer, and when I’d stop by their shop, warehouse or factory, they would quote me the “right” price to start – well, maybe not quite the last price but that’s part of the game, part of the protocol, part of the negotiations, and knowing how business is done in whatever the country, their customs and culture would be absolutely imperative to getting things done the right way.

What I had established with my suppliers was a true working relationship. They would routinely invite me into their family for weddings, child birth, funerals, tooth-filing ceremonies and other auspicious celebrations. Although you may strike it rich with just an email, the likelihood of developing the right relationship, especially on a start up level and above all if you are but a small to medium size business, in particular if you wish to be importing from the Third World, are slim, miss and hit at best. On another hand, if you’re a big business, like Gap or Wal-Mart, no worries, should your orders get messed up, your problems will likely get handled by government-backed arbitration committees. But being a little guy, having a problem in China or India, Thailand or Indonesia, best you eat your losses, regroup and start from scratch, if you’ll still find the stamina to continue in this business.

Bottom line, best learn how to get started in import export business the right way rather than just be muddling through. Following are some of the subjects and issues that you need to consider and become well-versed in if you expect not only to get started right and to survive but to ultimately become successful in import export business:

Where to go and what to buy
Different levels of involvement in import export
Who will be your customer, how will you sell your imports
How to find overseas suppliers and whom to buy from
Product design and development
Sourcing
How much should you pay for the product you want to import
Product price in country of origin vs. landed price after customs clearance at destination
Customhouse Brokers, who are they, how they work and what information you can and need to get from them before you buy
Freight forwarders, your purchases and shipping logistics
Packing practices and shipping process
Shipping documents
Freight insurance
Import export financing and alternatives how to pay for your purchases
Letter of Credit
Documentary Draft for Collection
US Customs Entry process
Formal Entry and Informal Entry
Hand carrying your commercial purchases across international borders and into the US
Harmonized Tariff Schedule and the classification process
Marking requirements on goods
Liquidated entry
Tax issues

Each of the above categories can be subdivided into smaller units, so there is indeed a lot of material to cover. Over and above gaining an inherent understanding of how to start an import export business there is an issue of where really are the opportunities in this business, whether in the current economic situation, or any situation anywhere. To truly understand what the opportunities in this business are you need to realize that the entire world is your marketplace. You need to think globally, because once you understand how the process works, you can import your product into scores of different countries, not only into the United States. Provided you have the necessary knowledge of the culture and the business climate in whatever the country, your opportunities for success begin to grow. Get started in import export business by taking that first step knowing you took it in the right direction!