Many people look to the import/export business as an easy way of making money. After all, it’s only about buying cheap in foreign countries and selling for a profit at home, right? But the reality of entering the world of imports and exports is that it can be a complicated business, with varying regulations, taxes, and tariffs which will eat away at any profits unless you are fully aware of what you are doing.
So how can you ensure that you can make money while conforming to the rules? It can be easier than you think as long as you learn the ropes and are cautious with the products you choose.
Tips and Secrets
So you’ve decided to go into the import business. What should you do and what should you know before you start?
- Identify a reliable supplier and build a relationship. Ideally, you should meet this supplier in person. That cements any relationship but it also allows you to see where the goods are made as well as better being able to judge quality. But if you can’t visit in person, or send a representative, then make sure you communicate as regularly as possible and establish a relationship with several members of their management team.
- Research what licenses you may need. The U.S. is one of the few countries where an import license is generally not needed. You may need some form of permit or license for the country of origin, though your supplier may be able to take care of that. Look into local and state requirements too. While you may not need an import license per se, you may need some documentation to operate your business.
- Logistics. So you have a product, or products you want to import, you have a supplier, and you believe you have a market for your imported goods. But now you need a way of getting that product from point of origin to your particular market. This is where choosing the right logistic company is important. Research which companies operate on your planned route, read reviews on those companies, and look into their transportation modes and routes. Once you have done some background work, contact some companies and ask for quotes so you can compare costs. The logistics company will also need to ask you a range of questions so have the information ready so as to get a quote as quickly as possible. You also want a logistics company that can fully facilitate the final stages of the journey, including dealing with all import taxes and clearing customs.
- Finances. How are you financing your business? How are you structuring payments to your supplier? Having a clear financial plan from the start will make the entire process smoother. Instalment plans work best when receiving goods and you do not commit 100% payment in advance. Depending on amounts being transferred, look at different payment routes to see which is most economical.
Why Import Wholesale?
Importing wholesale makes financial sense if you can afford to buy products in larger quantities (and you are sure there is a market for those goods). If you import products in small quantities, then your purchasing price will be higher and your margins smaller.
And, of course, other costs will be reduced with bulk buying. Shipping costs per unit will be significantly less if you, for example, import a container full of goods rather than shared space in a container.
What Should You Import?
The million dollar question and one that is impossible to give a single answer to. What you decide to import is going to depend on a number of factors.
- Are you selling from a physical location or are you selling online?
- What needs have you identified in the marketplace? Doing some market research before deciding on a product is good sense. Are there products that are not readily available? Can you source products that may be unique to your marketplace? Or is there a popular product that you can obtain at good prices?
- Be aware of emerging markets and new products. If there is a demand for a new product and you can source it, you can establish yourself quickly.
- Do the numbers add up? For example, you may have found a supplier who can offer you t-shirts at such a low price that you can undercut the other sellers.
- What laws and regulations cover your intended product? Are there tariffs or additional customs taxes you may have to pay that will reduce your margins? If importing costs are going to mean you paying out substantially more, is it going to be worthwhile?
- Is the deal a one-off or a regular supply? Many small importers look for one-off bargains such as a container full of children’s clothes. While this method may produce good returns, you are always looking for the next good deal. With a regular supplier, you at least know you have a constant supply of any product.
Tips for Beginners: Where to Start and What to Avoid
There are some things to be cautious of when first starting out in the import business. While you may be enthusiastic when entering the world of international trade, don’t jump at what you may initially see as an amazing bargain. That great product may only cost $2 per unit, but what is the shipping going to cost you? If it’s a bulky item, those shipping costs may make it far less of a bargain than you first thought.
Another tip is to avoid a trap so many new importers fall into: do not consider importing designer goods of any type unless the supplier has impeccable credentials and can provide provenance for their goods.
As the bulk of small businesses embarking on importing ship their goods from China, it may be the case that designer goods will be counterfeit. And if the goods are counterfeit, then there is a good chance that they will be seized by Customs and Border Protection officers and you could potentially face large fines or even prison.
5 Easy Steps to Importing Wholesale
- Research. Identify products that you can sell, find out how much they sell for on your chosen marketplaces. Work out the shipping costs and calculate possible margins. Knowing what your chosen goods and services will sell for is crucial to moving forward.
- Identify a supplier. There are tens of thousands of companies in China and Hong Kong offering goods to import to the U.S. Some are fraudulent, most are not. Don’t just jump at a bargain, do some due diligence and see if the company has good reviews (and plenty of them).
- Contact. Once you have identified a supplier – or suppliers to get quotes to compare – make contact, establish a relationship, ask plenty of questions. Ideally, you will find a supplier who you can have an ongoing business relationship with.
- Make an order. Once you are sure you have found the right supplier, make your first order. Getting favorable payment terms – a % on order and a % on delivery – also makes good sense. Be aware that many suppliers may not offer those sort of terms till you have placed more than one order.
- And go! Once you have received your goods, you are ready to start selling them onto individuals or retailers. If buying clothing, even consider adding your own label or logo to customize them.
Importing from China Wholesale
China is a fantastic source for a wide range of goods that are cheap and offer good potential margins. But be aware of the potential for the circumstances you have carefully researched to change. The United States is currently embroiled in an ongoing trade war with China due to the trade deficit and other factors so tariffs could change on some goods with little notice.
But while you are importing from China, follow these handy tips:
- Know your product and know the demand for it. Think about how you will market it and how you will price it.
- Start slowly. You may think something will sell well but if you order three containers of goods, you may be left with a lot of unsold products.
- Think safety. Be aware not only of products that may be banned in the U.S., but also products that have the capacity to harm. That can include being cautious with items like cosmetics which may not be properly labeled.
- Build relationships. Speak to your supplier regularly and strengthen your initial relationship. Remember, you want to make money and so do they.
- If you are going to have a long term business relationship with a supplier, learn a little about Chinese business culture.
- Make sure you know all the relevant laws and regulations that will affect your imports.
- Always check all paperwork, including verifying that what is on the invoice is what has been delivered. This also includes paying close attention to any contract and the clauses it contains.
Do I Need A Customs Broker?
While legally you do not need to employ a customs broker when importing into the U.S., it can help make the process smoother. If you are working with a competent logistics company, then they will usually offer this as part of their service.
Prepare Your Import Documents
Research is crucial here. Depending on what you are importing, you may need different types of import documents. For example, a company that imports oil will need different documents from a company that imports clothes. Being aware of the CBP requirements is a good starting point for thinking about documentation.
Meet Commodity Specific And OGD Requirements
Make sure you are aware of any requirements specific to the product you are importing. This will include OGD (Other Government Departments) requirements. Some items will need more documentation that others so do thorough research,
All products imported into the U.S. must also be marked with the country of origin. There are some exceptions to this rule.
Pay Import Duty Fees And Taxes
Make sure all fees and taxes are paid. Your duty fees are paid to the CBP and will vary according to how the products are classified. The importer of record (IOR) is responsible for these fees but your customs broker can pay on your behalf. They can either invoice you for the fees or they can set up a clearing house account so that you can pay directly to U.S. Customs.
Determine Correct Harmonized Tariff Schedule
Every product imported to the U.S. has a classification under the Harmonized Tariff Schedule of the United States. All goods are classified and assigned an HTS number consisting of 10 digits. That number will be used by Customs to determine what duty fees are payable.
The Wrap Up
The idea of setting up a small import business can be very appealing. If done correctly, and with all relevant research and documentation, there is the potential to make some good profits from it. But caution should be second nature if you are considering this. As well as the advantages, there are many pitfalls along the way that can ensnare the unsuspecting or unprepared.
Write out a checklist of everything you need to do and work your way through it patiently before committing to any contracts. Look at major trading partners of the U.S., and what free trade agreements such as Nafta are in operation as these may make a huge difference.
It is also worth looking at how an experienced logistics company may help you. With a wide range of services, Asiana USA also has offices in China which could be a major benefit to anyone considering importing from there or Hong Kong. If you want to discuss your import ideas in more detail, call us on 855-500-1808 to find out more?