Online Exclusive: Importing: A Valuable Small Biz Chip in the Game of Success
From exotic trinkets the U.S. market is waiting to discover to the affordable parts that will fit perfectly with your company's finished product, there's only one thing standing between you and the goods you desire -- the border.
Importing goods can be tricky and mistakes will cost you. Importers can be fined if the product hasn't been processed correctly. Worse, U.S. Customs and Border Protection can seize all of the goods if it believes the act was fraudulent and assess penalties equivalent to the dutiable value of the goods.
Importing is too valuable a chip in the game of business to ignore. But what's a small business owner to do? If you start with a little homework, you're sure to pass Importing 101.
Locating Your Goods
Before you choose to import, ask yourself a few questions:
· Is the product available domestically?
· Do I have a domestic market for the imported goods?
· Does importing the product increase my competitiveness?
If importing passes the litmus test and is the best choice, a good place to start your research is with the U.S. Department of Commerce and their International Trade Administration Web site. The site can provide details about the various imports available and how to link up with the companies. Another location that can put you in touch with the right provider is a subscription site -- Buy USA -- which is sponsored by the U.S. Commercial Service. An array of online sites also exist that can help you find just the company you're looking to do business with.
Once you have located the potential seller, it's important to understand the cultural rules involved with international trade. Research how the country of origin does business and what their traditional process is. In Mexico, for instance, it's important to build relationships and fit in with the family first. It's also important to know that they will rarely say no directly, and instead will say "maybe" or "we'll see." A good source to learn about these cultural nuances is at www.executiveplanet.com.
Another good tool is UPS TradeAbility [The author is a UPS employee]. These services can lighten your research load by identifying tariff codes, search for restricted trading parties, estimate the landed cost of shipments and verify compliance among other things.
Before giving the final signature on the dotted line, make sure you have asked the company for banking and business references, and researched their Web site and company infrastructure. Make sure the company has tangible evidence that they have a record of success before you try it out for yourself.
Receiving and Paying For The Product
Both you and your supplier are going to need a lot of trust to make this deal happen and will both be trying to negotiate the best deal possible. You will be looking to ensure that you receive the right quantity, quality, price, and deadline. Your supplier will want to minimize potential risks, especially when it comes to getting his money.
One of the most common ways to do business, of course, is with a letter of credit authorizing the supplier to draw drafts on the bank under certain conditions. The bank, therefore, furnishes its credit in place of its customer's. Keep in mind though, that the U.S. Council of the International Chamber of Commerce has issued guidelines for a letter of credit. They all must have a specific beneficiary, money amount, a form stating how the payment is to be made and under what conditions, and include an expiration date.
As you become more familiar with your supplier, you can always advance your relationship to use options such as cash in-advance or an open-account, where the importer can make payments at a specified time in the future, often after they've received the product.
You need to know how much your money is worth on the international front, but keeping up with how the U.S. dollar compares to the yen, euro, and rupee on any given day could keep a person very busy. When completing international transactions, it's best to go through a third party. A bank, international currency exchange company, or customs broker can all make this a safe and smooth transaction for both parties.
The responsibility of shipping is largely in the exporter's hands, but you can always include preferences into a contract. Consider which international shipper you trust and then factor in the cost. Timing is of course a factor - if you're in a hurry to receive your goods, air is the way to go; if you're not on a timeline, ocean freight may be a more cost-effective shipping method.
Contracting with an integrated carrier that can handle your shipments from door-to-door keeps your shipments on the move. If possible, it's also a good idea to have your products come directly to you or your customer rather than having a layover in a third-party warehouse.
However you decide to receive your goods, "standard terms and conditions" should be adopted to include: the port of destination; the seller and buyer; mode of delivery; shipment preferences; date of order and invoice; country of origin; quantity in weight, number, or volume and a description; and the purchase price of the goods.
While much of the paperwork is completed on the exporter's end of the sale, there are a few papers you will need to review. The first is the shipment details, which includes the instructions that the railroad, air, or land shipping company will use to get your shipment to its location.
The bill of lading is a crucial form, as it shows proof of title to the goods and directs responsibility to the importer to transport the goods to their final location. These come in straight (non-negotiable), which provides delivery of goods to the person named on the bill of lading, or shipper's order (negotiable), which provides delivery of the goods to anyone specified.
Finally, when a letter of credit is used as payment for goods, like a mortgage, the bank owns the goods until the receiver pays it. The bank will not issue the title to the buyer until the bill has been paid, and they won't pay the seller until all obligations have been met.
So keep all of the paperwork on hand for a minimum of five years to safeguard yourself, and comply with U.S. Customs law.
When the shipment arrives at the U.S. port, the importer will file entry documents for the goods with the port director. For goods to be considered legally entered, they must go through the port of entry, Customs must authorize the delivery, and all fees and taxes have to be paid. It's up to the importer to handle the inspection and release of goods.
Is importing an enticing yet dicey proposition? Certainly. But the inherent value is something that small businesses should at least consider as they look for useful chips in the game of global competition.