So You Want To Start An Import/Export Business
- July 6, 2016
- Posted by: Lalo Solorzano
- Category: Blog
Being in the business of providing education for companies and individuals on Global Trade, we tend to get inquiries ranging anything from consulting questions on trade matters to requests on processing shipments, none of which we do but gladly point them to the right resources. One of the most common questions we get is how to start an import / export business. This can come from individuals who have a great idea on selling a product from their home country here in the United States or vice-versa, shipping a needed product from the U.S. to their home country, and also from companies already in business and seeing success domestically but would like to expand globally.
Our training is an excellent way to keep up to date with trade compliance rules and regulations. This training applies to both new and seasoned professionals. However, the process of starting a business is not addressed in our training and therefore our training does not apply in that situation. Recently we ran into a resource that is both easy to understand and practical in helping understand the ins and outs of starting an import / export business.
Import/Export Kit For Dummies Cheat Sheet
From Import/Export Kit For Dummies, 3rd Edition by
John J. Capela
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.
Questions to Ask before Starting Your Import/Export Business
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?
• Will you be starting part time or full time?
• Do you plan to import, export, or both?
• Will you work as an agent or a merchant?
• What will be your company name and form of organization?
• Where will your base of operations be? Where will you locate your office?
• What will be your business telephone number, mailing address, and fax number?
• What type of products will you choose to deal in?
• Who will be your suppliers? What companies will you deal with? In what countries?
• Who will be the consumers/users and buyers of your products?
• How will you handle distribution? Set prices? Promote yourself and your products?
• Which method(s) of international payment will you use?
• Which means of international transportation and insurance will you use? Which shipping terms?
• Who will be your bank? Your insurance company? Your Customs broker? Your freight forwarder?
• Which U.S. and foreign government regulations will you be concerned with?
• What sources of information and assistance are available as you begin and as your business grows?
Buyer and Seller Agreements in Importing and Exporting
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.
• Territory: In which territory may the distributor sell? Will the distributor have exclusivity there?
• Prices: What are the prices of the products and the allowable markups?
• Payment terms: Will you use letter of credit, sight draft, open account, 30 days, consignment, and so on?
• Shipping terms: Will your terms be free on board (FOB) airport; free alongside ship (FAS); cost and freight (C&F); cost, insurance, and freight (CIF); and so on?
• The level of effort required of the importers: How hard does the importer have to work to sell the products, including minimum order commitments and long-term commitments?
• Sales promotion and advertising: Who will do it, who will pay for it, and how much will be invested?
• Warranties and service: How will defective or unsold products be handled?
• Order lead time and price increases: Lead time is the time required to ship the product to the company purchasing the product. When negotiating with the supplier, you need to be clear on who’s responsible for any increases in material or transportation from the time the order is placed and the time it’s actually available for shipment.
• Trademarks, copyrights, and patents: Who will register, and in whose name will it be in?
• Provision for termination of the agreement: Under what circumstances can the agreement be dissolved?
• Provision for settlement of disputes: If a product is defective or there is a misunderstanding about some aspect of the purchase or sales agreement, what process will be used to resolve disagreements?
Legal Dangers in International Trade
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.
• Agents, distributors, and representatives: Know the laws that govern their retention and, equally important, their termination.
• Shipping: Avoid misunderstandings over shipping. Shipping arrangements must be written and spelled out in detail.
• Dispute resolution: Make sure that any contract designates how and where differences will be resolved.
Global Negotiations in the Import/Export Business
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.
• Language: In spoken and written communication, using the wrong words or incorrect grammar is just one concern. The meaning of the message often depends on the set of circumstances surrounding those words. The danger of misinterpretation of messages requires an understanding of these various contextual factors.
• Non-verbal communication: Unspoken language is just as important as words or writings. Differences in customs and cultures can cause misinterpretations. You need to be aware of the meanings of gestures, facial expressions, posture, appearance and dress, conversational distance, touch, and eye contact.
• Time influences and the pace of negotiations: Some cultures like the Americans or Germans are very fast-paced and punctual, while there are many other regions (such as Asia and Latin America) where time is not of the essence.
• Individualism vs. collectivism: In some societies, people primarily take care of only themselves and their families, while in other societies, the good of the entire group is put ahead of one’s individual needs. Understanding these belief systems will affect how you negotiate.
• Role orderliness and conformity: Some cultures are characterized by a high need for order and conformity. These countries place a great deal of importance on how things are done. Formalities aid in successful negotiations. On the other hand, negotiators from the United States, Canada, Germany, and Switzerland place more emphasis on content than of procedures.
• Uncertainty orientation: This term refers to the degree people are uncomfortable with ambiguity and a reluctance to take risks. People in countries like Spain, Belgium, Argentina, and Japan tend to proceed cautiously following rules, laws, and regulations. On the other hand, people in countries such as the United States tend to feel comfortable in unstructured situations, are more ready accept change, and attempt to have as few rules as possible.
Capela, J. J. (2015). Import / Export Kit For Dummies (3rd ed.). Hoboken, New Jersey: John Wiley & Sons.
John J. 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.
You may reach Mr. Capela at this email: [email protected] and more information on his book could be found here: http://www.dummies.com/store/product/Import-Export-Kit-For-Dummies-3rd-Edition.productCd-1119079675,navId-322448,descCd-authorInfo.html