Building an Import / Export Business E-Book

Kenneth D. Weiss

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 462

Veröffentlichungsjahr: 2011

Beschreibung

This bestselling, up-to-date guide shows you how to start your own import/export business, from researching a raw idea to a successful launch to ongoing, profitable business operations. Complete with real-life examples from importers and exporters, it helps you every step of the way, from targeting a market and preparing a business plan to dealing with foreign currencies, shipping procedures, customs requirements, and more. It also shares tips to help you take advantage of NAFTA and other trade pacts, plus online resources to help you start and grow your business.

Leseprobe

Table of Contents

Title Page

Copyright Page

Acknowledgments

Introduction

Chapter 1 - Your Big Idea: Is It Any Good?

IMPORTING HANDICRAFTS FROM ECUADOR

EXPORTING HARDWARE

IMPORTING “WORLD CLOCKS”

EXPORTING PRINTER PAPER

BROKERING COMPUTER EQUIPMENT

SOURCES OF INFORMATION AND HELP

Chapter 2 - Is This Business for You?

HAVE YOU FAILED YET?

HOW IS YOUR FINANCIAL SITUATION?

INTEREST IN AND KNOWLEDGE OF THE WORLD

FAMILIARITY WITH FOREIGN CULTURES AND LANGUAGES

PERSISTENCE, PATIENCE, AND JUDGMENT

ATTENTION TO DETAIL

CONTACTS WITH BUYERS OR THE ABILITY TO MAKE THEM

TWENTY IMPORTANT QUESTIONS

IMPORT MERCHANT EXAMPLE

EXPORT AGENT EXAMPLE

SOURCES OF INFORMATION AND HELP

Chapter 3 - Setting Up Your Business

FORMS OF ORGANIZATION

YOUR TRADE NAME AND LOGO

OPENING A BANK ACCOUNT

SETTING UP YOUR OFFICE

STATIONERY AND PRINTING NEEDS

ACCOUNTING AND TAXATION

OBTAINING FINANCING

SOURCES OF INFORMATION AND HELP

Chapter 4 - Beginning with a Buyer

WHY SOMEONE WOULD BUY FROM YOU

WHAT VALUE MEANS TO YOUR CUSTOMERS

ATTRACTING CUSTOMERS—SOME EXAMPLES

FINDING BUYERS AS AN IMPORTER

FINDING BUYERS AS AN EXPORTER

SOURCES OF INFORMATION AND HELP

Chapter 5 - Choosing Products and Suppliers

FINDING PRODUCTS TO IMPORT

GETTING PRODUCT SAMPLES

TESTING PRODUCTS IN THE U.S. MARKET

FINDING FOREIGN SUPPLIERS

FINDING PRODUCTS TO EXPORT

LINING UP SUPPLIERS

THE FORMAL SUPPLY AGREEMENT

PROTECTING YOUR INTEREST

SOURCES OF INFORMATION AND HELP

Chapter 6 - Marketing in the United States and Abroad

WHAT IS MARKETING?

MARKETING IMPORTS

MARKETING EXPORTS

SOURCES OF INFORMATION AND HELP

Chapter 7 - Money Matters

CREDIT DECISIONS ON SUPPLIERS AND CUSTOMERS

METHODS OF PAYMENT IN INTERNATIONAL TRADE

EXPORT CREDIT AND CREDIT INSURANCE

FOREIGN CURRENCY TRANSACTIONS

COUNTERTRADE

SOURCES OF INFORMATION AND HELP

Chapter 8 - Packing, Shipping, and Insurance

PACKING FOR INTERNATIONAL SHIPMENT

INTERNATIONAL TRANSPORTATION

SHIPPING TERMS

MARINE INSURANCE

BROKERS AND FORWARDERS

SOURCES OF INFORMATION AND HELP

Chapter 9 - Oh, Those Lovely Documents

COMMERCIAL DOCUMENTS

BANKING DOCUMENTS

TRANSPORTATION AND INSURANCE DOCUMENTS

GOVERNMENT FORMALITIES DOCUMENTS

A FEW MORE THOUGHTS ON DOCUMENTS

SOURCES OF INFORMATION AND HELP

Chapter 10 - The Regulation of Foreign Trade

U.S. CUSTOMS AND BORDER PROTECTION

GETTING DEEPER INTO CUSTOMS

OTHER FEDERAL REGULATIONS

STATE AND LOCAL REGULATIONS

REGULATION OF EXPORTS

SOURCES OF INFORMATION AND HELP

Chapter 11 - NAFTA, GATT, and Other Trade Pacts

TRADE AGREEMENTS

NAFTA

DR-CAFTA

PREFERENTIAL ARRANGEMENTS

SOURCES OF INFORMATION AND HELP

Epilogue

Appendix A - Sample Market Study Outline

Appendix B - Guidelines for Business Planning

Appendix C - Possible Sources of Financing for Your Business

Appendix D - Sample Supply Agreements

Appendix E - U.S. Export Assistance Centers

Appendix F - Avoiding Import/Export Scams

Appendix G - Letters from Store Owners

Index

Copyright © 2008 by Kenneth D. Weiss. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

Wiley Bicentennial Logo: Richard J. Pacifico

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Limit of Liability/Disclaimer of Warranty: While the publisher and the author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging-in-Publication Data:

Weiss, Kenneth D. (Kenneth Duane), date.

Building an import/export business / Kenneth D. Weiss.—4th ed.

p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-12047-7 (pbk.)

1. Trading companies. 2. Export marketing. 3. International trade. I. Title.

HF1416.W43 2007

658.8—dc22 2007012090

The fourth edition of Building an Import/Export Business is dedicated to the managers and staff of the United States Department of Homeland Security. They have the very difficult task of allowing legitimate trade to flow while blocking imports and exports that might bring harm to the United States.

This huge and relatively new government agency includes the Transportation Security Administration (TSA), which protects the nation’s transportation systems to ensure freedom of movement for people and commerce. It also includes United States Customs and Border Protection (CBP), which is responsible for protecting the nation’s borders against terrorists and terrorism while facilitating the flow of legitimate trade and travel. In addition, it includes the United States Immigration and Customs Enforcement (ICE), which is charged with finding and eliminating vulnerabilities in the nation’s border, economic, transportation and infrastructure security.

Imagine 30,000 sealed shipping containers entering the United States every day through ports on all borders, and the enormous task of deciding which ones to detain and inspect. It boggles the mind, yet it is being done to the best of the DHS’s ability, guided by ever-changing legislation and its interpretation. I congratulate everyone who is involved in this difficult but vital endeavor.

Acknowledgments

It might seem strange to acknowledge the Internet, but that is exactly what I am doing. Unlike the first edition of this book, for which none of the information came from the Internet, this fourth edition draws heavily on electronic information. The new world of high technology helps authors as much as it does international traders.

For example, the Web site of the U.S. Food and Drug Administration, at www.fda.gov, has become user-friendly and extensive. Detailed information, which used to be nearly impossible to obtain, is now freely available. Access is limited to people with computers, high-speed connections, and knowledge of how to search, but that now includes most of us.

I also owe debts of gratitude to friends and acquaintances who have told me of their recent adventures in international trade. Some of these are included in the text. They give life to concepts that might otherwise be difficult to grasp.

Introduction

“The Mighty Micro-Multinational,” an article in the July 2006 issue of Business 2.0 magazine, told of a small company based in San Francisco. Its chief technical officer lived in the Dominican Republic and worked mainly on the beach. From there he chatted by instant messenger and e-mail with associates in Serbia and Ireland and sometimes made international calls through the Internet. The company’s business was shipping fruit from Mexico and California to Washington State, concentrating it and shipping the concentrate to California, then producing juice and sending it to warehouses in California and Wisconsin. Its customer service center was in the Philippines and the accounting department in India. This is the kind of world you can step into when you embark on an import/export business.

Millions of people in the United States and abroad dream of owning their own business. Of the thousands of us who try, many fail, many succeed to some degree, and a few become highly successful. Reading this book will increase your chances of landing in the third category.

I have never seen success and failure statistics just for people who start import and/or export businesses, but they are probably similar to the statistics for businesses in general. I will say in this book that importing is easier than exporting, but there is money to be made either way. For example, I know a fellow Rotarian who raises and sells farm animals. He unintentionally met an importer from Ecuador, whose first order led to a significant business exporting live pigs to South American countries.

This is an enormous business. In 2005, two-way trade between the United States and Canada came to $472 billion dollars. It was $281 billion with China, $271 billion with Mexico, and $225 billion with Japan (data taken from http://dataweb.usitc.gov/scripts/cy_m3_run.asp).

Thousands of companies of all sizes combine to produce these startling figures. Also, nations are trading more and more as interest in foreign goods increases, transportation costs and customs duties decrease, and procedures such as international payment are simplified.

Two journals of commerce publications, the Directory of United States Importers and the Directory of United States Exporters, together list more than 60,000 companies. The listings give indications of company size, and many if not most of the firms have just a few employees and small volumes of shipments.

People who want to start businesses often ask me which products they should deal in to make big money fast. In responding, I usually try to lower their expectations and then tell them that what really matters is the customer. If they can find a person who is willing and able to buy something from them, all the other details can usually be worked out. I will talk about this in more detail later in this book.

I hope that each of my readers will end up in that select group of highly successful international businesspeople. Reading this book will not guarantee it but will definitely help.

There are several books, articles, and Web sites that can introduce you to importing and exporting. Beware, though, of any that promise to set you up in business quickly and easily for a few hundred dollars. There are some that will take your money and not provide much more than product ideas and names of suppliers.

The following information sources are mentioned in this introduction. Some other good ones are the publication Importing into the United States, which is described in a later chapter, and Export Basics, on the Web site www.export.gov/exportbasics/index.asp.

• Business 2.0 magazine’s article, “The Mighty Micro-Multinational,” in the July 2006 issue, http://money.cnn.com/magazines/business2/business2_archive2006/07/01/8380230index.htm.

• The Directory of United States Importers and the Directory of United States Exporters, available from Commonwealth Business Media. Address: 400 Windsor Corporate Park, 50 Millstone Road, Suite 200, East Windsor, NJ 08520-1415; Phone: [phone]; Web site: www.piers.com/impexporder.

1

Your Big Idea: Is It Any Good?

A lot of mediocre ideas have been turned into successful businesses, and many great ideas have fallen by the wayside. Still, you will have a better chance of succeeding if you start with a good idea rather than with a bad one. Let’s look at a couple of import/export business ideas and how you might analyze them: handicrafts from Ecuador and home safes to Mexico or Central America.

IMPORTING HANDICRAFTS FROM ECUADOR

Ecuador, especially the town of Otavalo, is one of the world’s greatest areas for buying handicrafts. The local people are famous for their colorful textile items, jewelry, paintings, and so on. Suppose you visit Otavalo and decide to build a business importing crafts to the United States. First, you might search on the Internet to see whether anyone else is doing this. Otavalo has been there for a long time, and it is not likely that you are the first person to be attracted by its products.

A quick search on the Internet suggests that you may not have many competitors. How can this be explained? People usually buy handicrafts when they visit a country, and aren’t very interested in them if they don’t. Also, crafts sell better in our materialistic society if they are utilitarian. They must be useful in some way. Of course, there is another possible explanation—that some of your competitors do not have Web sites.

If you decide that some of the Ecuadorian crafts are attractive and useful, and can probably be sold in the United States, you will want to look into the matter of finding an honest, reliable supplier. Suppose that you search on the Internet and find an Ecuadorian export promotion organization known as CORPEI, which promises (by e-mail) that you will have no trouble finding excellent suppliers.

When you look at the market, however, you find that most of the sales of similar products are made at ethnic fairs and festivals and that these markets are pretty well supplied. This worries you a little. You don’t want to work on weekends.

Moving on to other details, you find that transportation of the products will be relatively easy and that import regulations on the items from Otavalo will not be especially burdensome. Still, you come back to the vital questions of how and to whom you will be able to sell the various items. If you cannot find good answers to these questions, you should probably look for another business idea.

EXPORTING HARDWARE

Now, suppose you are looking on the Internet one day and you come upon the Web site www.madeinusa.org. From the 30 categories of merchandise you select hardware because you worked for a long time at Home Depot or Lowe’s and know the products well. You want a fairly high-ticket item and one that cannot be produced easily in all countries. Safes for homes and offices catch your eye. Since several companies make safes, you expect to be able to line up a supplier. You can either buy from the supplier and resell or set up a transaction between the supplier and a foreign buyer and receive a commission.

Since these products are too heavy to ship by air, you will have to find markets in countries that you can ship to by land or by sea. Also, since you cannot make money exporting just one safe at a time, you will have to find someone in each country to import a quantity of the safes and sell them to his or her customers.

You know from reading newspapers that crime has been increasing in Mexico and some Central American countries, so many people there should want to own safes. These countries can be reached by land or by sea. Maybe you even know someone in Mexico City or San Salvador who can help you find a qualified importer/distributor. If you do not know such a person, your state or federal department of commerce will help you.

You look into U.S. export controls and Mexican and Salvadoran import controls on safes and conclude that none of them will pose a significant obstacle. Then you move on to the problem of money, because you will probably have to stock the distributor’s warehouse at your expense, perhaps with payment guaranteed by an instrument called a letter of credit (to be explained later).

If you can get over the financial hurdle, you might be able to set up a profitable business venture.

Let’s look at two more examples, in a little more detail.

IMPORTING “WORLD CLOCKS”

Suppose you are looking through an export promotion catalog from Taiwan and see a small clock that tells the time in major world cities. This item seems to be functional as well as decorative, and you decide to look into it, even though you know that world times are available on the Internet. You ask for a catalog and price list and receive them immediately by e-mail. Then you show the appropriate catalog page to several friends, taking care to not reveal the supplier’s name and address.

Since most of your friends seem to like the product, you decide to take the next step. Your order a half dozen items as samples. After some discussion with the supplier, you agree to pay for the clocks through PayPal, and the company in Taiwan agrees to pay to send them by airmail. You might have been able to get one sample free, but free samples have become less common and you wanted more than one.

While you wait for the samples, you go to www.usitc.gov to consult the United States tariff schedule. You become quite confused but finally determine that there is a small duty on clocks, another on clock cases, and a slightly larger duty on the batteries. You determine that each of these three pieces must be marked in a conspicuous place with the country of origin. In addition, the clock movement must be marked with the name of the manufacturer and the number of jewels, including substitutes for jewels. The tariff schedule will be explained later in this book.

While waiting, you think hard about who might want to buy world time clocks. You decide that they will sell best as gifts for people who travel internationally. Also, you decide that gift-givers will be likely to buy such items from hard-copy and online catalog merchants, so these will become the end point of your distribution channel.

Soon the samples arrive. They are marked SAMPLES, NO COMMERCIAL VALUE, and no duty is charged. They look good but not great, and the packaging isn’t as strong or as attractive as you think it should be. The instructions seem clear but have a few mistakes in English. You decide, based on prices you have seen in the market, to set the suggested retail price at $19.95.

From the Internet and a book in your local business library, you identify companies whose product lines include gifts for travelers. You send them a description of your product and ask if they would consider selling it. Since only one responds, you phone them all and find three buyers who are interested. You send each of them a sample, your suggested retail price, and your price to them of $10 including shipping. Your calculations show that you can make an acceptable profit if you sell to the buyers for $10.

Then you call the buyers again and find one who likes the product and wants to talk with you. Fortunately, she isn’t far away, so you make an appointment to see her. You try to anticipate all her questions and develop a “sell sheet” that will answer them. A sell sheet contains the information that you will provide in a sales presentation. Then, you can leave it with your customer.

When you are face-to-face with the buyer, she agrees to put the item in her catalog but will purchase only a small quantity at a time. She wants you to have a larger quantity, in stock in the United States, so she can get them from you when she needs them. She wants just two cartons of 60 clocks each but wants you to have at least five cartons in stock. You quickly figure your cost for the five cartons and decide to accept her order. She offers to send it to you in writing within a week.

So, you are in business. You ask the supplier for a firm quotation on seven cases of 60 clocks, sent to you by airfreight. It arrives by e-mail: $270 per case plus $450 for shipping for a total of $2,340. You agree to pay via a sight draft, with documents provided against payment, and send your order. International payment methods and commercial documents such as orders are described later on. You ask the supplier to correct the instructions, use stronger, more attractive packaging, and ship in multiwall cardboard cartons. He agrees.

Just 10 days later you receive a call from Jumping Air Freight. Your goods are in! Unfortunately, since the value is more than $2,000, you will need to file a formal customs entry, and that is somewhat complicated. The airfreight company puts you in touch with a customs broker who can handle this, for a fee of course. You tell the broker to go ahead and to call you when the shipment is ready to pick up. Luckily, you have a vehicle large enough to hold the seven cartons.

You go to your bank and find that it has received a small package of documents from the exporter. The bank presents you with a draft for the cost of the clocks and the airfreight, which you agree to pay. Then you receive the documents and take them to the customs broker. The next day, the broker calls you, and the merchandise is yours for the taking. Later you will be billed for the customs duty and the broker’s fee.

The clocks look good, but the instructions and the packaging have not been improved. You understand that this could not be done so quickly. The exterior packing is pretty strong, and there doesn’t seem to be any damage to the merchandise.

Your cost turns out to be $1,890 for the clocks, $450 for shipping, $75 for customs duty, and $190 for the services of the customs broker—a total of $2,605. This comes to $6.20 per clock, assuming none is damaged or defective. Since you expect to get about $9.70 per clock, after paying for shipping, your gross margin will be $3.50, or 36 percent of your selling price. That sounds pretty good.

You realize that whether you can make money with the clocks depends on your ability to sell them through catalog dealers or other outlets. You do a quick calculation of your office, telephone, and other fixed costs and see that they will come to about $2,000 per month. That means you will have to sell 571 clocks per month to break even (2,000/3.5), which does not include any compensation for your time. If you want to make just $1,000 per month from the business, you will have to sell 857 clocks every 30 days.

Well, it’s a start. If you can add other items to build a product line and market them well, you will have a going concern.

EXPORTING PRINTER PAPER

Now that you have started importing, you decide to try to export. You go to a Web site, www.export.gov, to search for trade leads and to find a company in Cameroon that wants to import several kinds of paper products. The most important of these is printer paper, about which you have some knowledge.

By corresponding with the importer, you are able to get specifications as to the types and quantities of paper she wants. You ask about shipping and payment and are told that the goods should be sent by sea to the port of Douala with shipping and insurance prepaid. The importer is willing to pay through a letter of credit issued by the Commercial Bank of Cameroon.

You start your search for suppliers with the Thomas Register of American Manufacturers, which you buy on a CD-ROM for about $10. There you find several companies. You call some and find, to your delight, that most of them are not represented in Cameroon and are willing to ship to that country, provided they have payment in advance or firm guarantees of payment.

A friend tells you that because of its nature, printer paper is not subject to any special U.S. export restrictions. We will cover this subject later in the book. To find out about import restrictions, you check with the desk officer who handles Cameroon at the U.S. Department of Commerce. Also, you contact the National Technical Information Service in Washington, D.C., and order a Commercial Guide to the country. You consider contacting a commercial attaché from Cameroon but do not find one in the United States. On the Internet you find one in Ethiopia, but that’s far from Cameroon and there is no fax number or e-mail address.

Since many paper manufacturers have similar products, you select one to deal with because you know of the company and have established, by phone, a good working relationship with a person in the export sales department. You get a price of $25 per case of 10 reams of 20 pound, 96 US/108 Euro Bright paper, delivered to a U.S. port. The supplier says that each box weighs 50 pounds, and that he can load 1,150 boxes in a 20-foot container.

Then you contact a freight forwarder to help you develop a price quotation. The numbers are as follows.

Cost ItemAmount1,150 boxes of paper delivered to Port Newark$28,750Freight forwarding and related charges300Ocean freight from Newark to Douala with surcharges and insurance3,660Banking and miscellaneous charges300TOTAL COST$33,010

There are a couple of other important details, one of which is profit. You have to earn enough to justify the time and the risk, but you cannot quote more than other companies unless you can offer something of value besides the paper. You decide to add 10 percent to the merchandise cost, or $2,875. That makes your quotation, delivered to Douala, $35,885 (33,010 + 2,875).

The other important detail is how to arrange the payment, and this presents a problem. You could scrape up the $33,000 but are not sure you want to take the risk. The supplier, based on your very limited track record, isn’t willing to give you enough credit. What to do?

Finally, the supplier suggests that you get the order written to his company. He offers to pay you a 5 percent commission, which means you will make just half as much as you counted on, but he offers to pay the 5 percent commission on any future orders you get from the same customer. Finally, he says that he wants the letter of credit guaranteed by Citibank in New York. You decide to agree to these conditions.

When you recalculate your price to the importer, it goes down, because you are changing from a 10 percent markup to a 5 percent commission. Then it goes back up a little because of the cost of confirming the letter of credit.

After more contact by phone and e-mail, your customer agrees to buy and sends her purchase order, which you forward to the supplier. The customer’s bank opens a letter of credit to the supplier, who succeeds in getting it confirmed by Citibank. The supplier ships, gets paid, and sends your commission.

It all worked out pretty well. Maybe there is some future in this business of arranging export transactions—for a commission.

BROKERING COMPUTER EQUIPMENT

I have an acquaintance who advertises himself as an “international products search broker and manufacturer’s representative.” His idea is to help people find the best source for products they want to buy, arrange a deal, and earn a commission. He will deal with any product but specializes in laptop computers and related equipment. Will this idea work for him? Would it work for you? Read on. In a few chapters you should be able to form an opinion.

SOURCES OF INFORMATION AND HELP

This chapter is about analyzing product ideas, or product/market combinations, to determine whether the one you have in mind seems viable. This is a vital part of your preparation to do business. There are various Web sites that will help you with this process. One is NetMBA at www.netmba.com/marketing/market/analysis, and a more sophisticated one is KnowThis.com at www.knowthis.com/tutorials/marketing/marketingplan1/3.htm.

The following sources of information are given in chapter 1.

• PayPal, an online payment solutions company. Address: 2211 North First Street, San Jose, CA 95131; Phone: [phone]; Web site: www.paypal.com.

• WWW.USITC.GOV, the United States International Trade Commission, an independent federal agency. Address: 500 E Street, SW, Washington, DC 20436; Phone: [phone]; Fax: [phone].

• WWW.EXPORT.GOV, the U.S. government’s export portal, which is sponsored by several federal agencies specializing in exporting. Phone: (800) USA-TRAD(E).

• Thomas Register of American Manufacturers, a publication of Thomas Publishing. Address: Five Penn Plaza, New York, NY 10001; Phone: [phone]; Fax: [phone]; Web site: www.thomaspublishing.com.

• National Technical Information Service’s (NTIS) publication, Commercial Guide. NTIS is part of the U.S. Department of Commerce. Address: 5285 Port Royal Road, Springfield, VA 22161; Phone: [phone] or (800) 553-NTIS; Fax: [phone]; Web site: www.ntis.gov.

2

Is This Business for You?

This chapter is really about you. I am assuming that you are interested in starting your own business and are thinking that it could be an import and/or export business. The discussion that follows covers some personal characteristics that will affect your ability to be successful. Then you will see 20 important questions, the answers to which can be the beginning of your business plan. We will conclude with two brief financial examples, which can help you decide whether your business is likely to pay off economically.