Getting into the Import/Export Business
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In the recent years, international trade is one of hottest industries in this millennium although this is not a new business. In the ancient times, long trade distances existed where items such as salt, shells among others were traded. Trade between countries exists due to the fact that country has supply of some merchandise or commodities in demand by the other country. Due to improved technological development, there has been a shift in subtle but not so subtle means towards one world mode of thought, international trading has become more rewarding in terms of profits as well as personal satisfaction.
It is important noting that importing is not the lone footloose adventure type survived through wits and skin of their teeth. It is a big business, which runs to the tune of above US$ 1.2 trillions in good as indicated by Department of Commerce in US. In 2010, it is estimated that the companies from America exported more than $ 770 of merchandises to more than 155 countries globally. Due to technological improvements barriers for entry, to most entrepreneurs especially those venturing in to international trade have highly reduced.
McKenzie (2007) indicates that international trade requires little financial investments while starting and it also offers prestige of one working with customers and other stakeholders from all parts of the globe. For those venturing in international trade it is worth noting that one does not require having previous experience although good organisation is highly required. In order to fulfil successful import and export business one requires to have constant attention to the little details. If one has ability for selling as well as an air for diplomacy then international trade is one of the best areas to venture into. As the business progress numerous factors becomes easy and obvious to handle. For instant you find that fright forwarders are required and the need of creating strong relationship with suppliers in order to reduce on the overheads.
It is important to note that one can start export/import business even at home. What is required for one to have business cards, file system and a machine for answering phone calls. Classy letterhead is also required. Until the time one can be able to establish the required personal contacts, the letterhead serves as your representative. Thus it is important to make it look professional, two colour or embossed or even gold leafed. Then it should be printed on lightweight papers for airmail correspondences, but do not have printed airmail correspondences. Other than the office equipments, one needs to have a high determination of making the business to work. At the initial stages, the business is slow; with small amounts of profits, thus a great need of one to plan effectively on ways of selling yourself. Once you have made some sales and signed exclusive contacts having good amounts of money then one start realizing that the dedication and determination was worthwhile(Samuelson, 2001).
This is the most vital area of the import/export business. In US, foreign consulates establish commercial attaches who establish outlets in US. A person starting this type of business from US greatly exploits in this important part. In most instances these consulates helps in finding the indices of their export/import enterprises. The other area a person venturing in to exporting goods and merchandises from US can exploit is the US embassies in foreign countries. They help in finding out about the company solvency and reputations. One can also use the chamber of commerce in the city aimed at carrying business. They can help you to get the much-needed contacts thus higher returns.
Analyzing the market
It is important for the owner to be highly informed when venturing into export business from US. One has to read as much as you can on international trades from areas such trade publications, news magazines, international newspapers, financial reports among other notable sources. This will help you address questions such as who to sell to and at what price. American markets for the exported products out of US, highly fluctuates with value of dollar in comparison to value of every other country currency. Importation prices clearly reflect this directly (Jones, 009).
For those exporting goods and merchandises from US, it is important for them to establish healthy business relationships with financial institutions, which handle international businesses. Personal bankers follow through on actual foreign transactions thus helping you to keep credit afloat. This is one of best factor about export/import business. Beside the correspondences and office suppliers or business trips one, do not require having personal cash outlays. All what is required is a god reputation and good credit. The government agencies from US are some of the great places where one can find help. The agencies promote export/import businesses as well as publishing pamphlets and booklets. They also distribute continually updated reports on commerce and financing as well as foreign markets.
It is important for one to built good rapport with the representatives. This can be done by pinning down few companies in similar territories or country to establish their exact needs. If exporting goods from US, it is important to find distributors who can adequately handle quantity of goods at high enough prices in order for you to gain profit. Look in the ways buyers makes contacts and works in larger retail chain if you are in retail merchandise business.
Getting the goods
It is important to note that there are thousands of manufacturers who are looking for overseas markets due to limited distribution in the domestic markets. You have a lot of selling qualities to convince to engage you as their sole agent. This is due to the fact that you have foreign contacts obtained through the US foreign embassies, commercial attaches among other channels and thus you clearly know the goods being demanded in certain countries. In return the manufacturers provide you with price quotations. Manufacturers have a lot to gain from this deal. This range from increased turn over, broader markets which results to increased short and long term profitability. However it is crucial for one to first contact the local manufacturers prior to moving to larger territories. The local manufacturers may be well aware of you, thus giving thus helping you more than in other regions. Prior to making legal agreement with the company it is important to study and evaluate the reputation of the firm in the local market.
Formulating an agreement
Once the agreement has been presented to manufacturer as export agent, one need to have written as well as signed contract binding the agreement. The attorney representing you should be the one drawing up the contract. Later you can use the same letter in substituting the names of manufacturers you get in to contract with. After this agreement you have the exclusive rights of distributing the goods to all places except in those that the company has already distributed to.
Manufacturers pay the specific commission which is quoted to distribution on the top of prices of good. The firms also provide samples and catalogues for use in matters of distribution. As an export representative you should promise the manufacturers to do all you can to make contacts as well as distribute merchandise and goods in the foreign countries. In making the agreement the duration of contract should be signed, term of cancellations by either of the parties involved due to lack of sales actions over given duration of time or voluntary must be stated.
You have made contacts with the foreign distributors ready to buy your merchandises. At the same time you have signed contracts with American manufacturers ready to give you goods to export from the country to foreign markets. The distributors on the other end may now be requesting for the firm quotations on price of certain amounts of goods and this have been given to them. The quotation should be varied for given duration of time. Manufacturer may have agreed delivering goods to ship and handling freight to this particular point or making arrangements from factories. Commission expected to be received is added to the price of goods before distribution. Extra cost of getting the goods from factories to warehouse from factory is added. If the sale is to companies which aim at retailing or distributing goods wholesale from the premises, then arrangements on all transport have to be made.
Terms of shipping
As the business progress one becomes more familiar with terms of shipping which are used in price quotations as well as delivery of the goods. The responsibilities of the business owner vary with terms of orders and agreements. It is thus important for you to check with the freight forwarder in order to be aware of your responsibilities. Bill of landing is receipt of the goods shipped. The receipt is signed by common carrier or the agent of the ship. It assures buyer that goods were unloaded in same conditions as they had been accepted. The receipt among other documents is some of the vital documents one needs to produce in order for your banker to give you letter of credit. FOB stands free on board. In this case seller delivers goods to particular destination and no extra charges. Seller’s insurers as well as takes responsibility until the agreed point. Buyers take responsibilities and pay the charges.
For instant when exporting goods from New York, FOB means that the seller price quotation and this include full responsibility as well as shipping to New York.FAS stands free alongside. In this case seller delivers goods to ship which carry to merchandise. Buyers pay to the load onto ship as well as take care from that point. Free alongside New York means that seller delivers and stores the goods a waiting being loaded to the ship. C& F stands for cost and freight. This means that the seller pay freight charges. On the other hand, buyer insures merchandises as well as takes complete responsibility after destination.CIF sands for Cost, insurance and freight. In this case the seller take care for condition and value of goods and pay freight and insurance charges to certain point. Buyer takes care from this point. By clearly understanding the shipment terms and conditions both from US and the country in which the goods are exported to, it is easier for one to make more informed shipping choices hence reduced operational costs(Bowen, 2010).
Letter of credit
Letter of credit helps to eliminate financial risks for the manufacturer, distributor as well as you the exporter. When the distributor confirms the order, letter of credit is then draw from company’s bank to branch in the US. The letter confirms that the funds are obtainable from distributors to cover same costs quoted. Irrevocable letters of credit assure you that order can not be cancelled at any given time. The letter of credit is also important due to the fact that it gives you as the exporter an assurance of not being affected by currency fluctuations.
Delivering the goods
There are various methods that are used in delivering goods ordered by the distributors. When price quotation is produced for the merchandise, it is crucial for all steps to be followed. Compare amounts of letter of credit to amounts quoted for products. Be sure that the prices exactly match. If the distributors choose particular quantity of several distinct offers, then prices and quantity have to be checked again. To assure quality of the goods, some of the manufacturers may prefer to handle freights to loading docks making it easier for the exporter.
If overload shipping is to be handled, it become useful to follow through to ensure that the goods are picked up and arrives safely at intended destination. Signing of all documents must be done thus fulfilling the required conditions of sale as indicated on the terms of letter of credit. The freight forwarder should get the required bills of lading for merchandises right in all the expected destinations.
For any one wishing to venture into international business especially exporting merchandise from US it is vital to understand that market is huge. There are very many firms from America looking forward to have foreign markets for distributing their goods. Some of the items are better made, less expensive, while some of them are exported due to the fact that they are manufactured in country fashionable with designers. Importing requires same levels of follow ups and diligence just like exporting. Contracts have to be signed with manufacturers to become sole distributing agent to the North America or any another part of the world. Follow all the shipment details to ensure that things like insurance storage fees, dock fees, shipping overland among other notable shipping requirements are met.
Letter of credit goes from American distributors to bank of manufacturer. Terms of agreements on areas such as prices, insurance and freight are well defined. Manufacturer’s representatives are the ones allowed to confirm on the receipts of this letters thus releasing goods for shipment purposes. Custom duties and unloading needs to be followed effectively from American port as the cargo may require to be freighted on overland to final destinations. As soon as these goods arrive at designated destinations, proper documentation of papers has to be done. The papers are then presented to bank which hold letter of credit. After this all the agents and carriers needs to be paid as you collect your commission.
After several sales transactions have been established, there is a great need of promoting the export/import businesses so as to get higher number of clients. First transaction gives you the exporter adequate experience in learning ropes required in starting business. This after the establishing the required numbers of agents and contacts in both in domestic and foreign markets. To effectively promote your merchandises it is recommendable to join commerce and foreign associations dealing with trade thus extending the sale territories. Advertising through the print media is crucial as it increases sales figures by more than 30% in the foreign markets (Bowen, 2010). You should also show the manufacturers your credentials so that their trust in you can increase.
The quantity of goods sold in the foreign market determines the profitability of the export/ import business. Higher profits are mainly brought about by high cots of merchandises. Thus to increase profitability there is the need to contact as many manufacturers as you can in the domestic market. Get in depth information’s on products they are selling. Also you might make a trip abroad to meet the distributors all in an aim of increasing awareness of your firm.
From the above it can be deduced that import / Export business from US have been much simplified. This can be attributed to technological improvements such as internet and social Medias like face book, Twitter among others. This has reduced the barriers of entry to entrepreneurs wishing to venture into international markets. Government support in US through Commercial attaches and foreign US embassies provides the much-needed help when venturing into import/export business from US.
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