Import Export Business For A Beginner – How To?

Import Export business is one of the traditional businesses. However, it is not the same as it used to be. It has grown in complexity despite the efforts of the international community to simplify and liberalize the same.

New elements that have entered into this business range from the introduction of new items to a myriad of safety and environmental issues.

World Trade Organization (WTO) has been working towards the reduction of trade barriers and promotion of a free trade regime. Still international traders have to comply with plethora of rules and regulations of individual countries. Mounting tariffs are one of the major factors to be considered.

Many people talk about import export business as a very lucrative profession. There have been great success stories across the globe. There are numerous failures as well. These often don’t get the same publicity as successes.

What is the right way for a total novice to enter this career? What are the considerations for undertaking this profession?

It should be recognized that starting any business is not an easy task, especially import export business. It demands a lot of work, dedication and investment. Of course one can start this business online as well and in which case, investment will be small.

There are many things that a person can do relating to this business. One can start import export consulting, be an intermediary between exporters and importers or be himself a trader.

There are various other related things that one can do like be a financier, freight agent, transporter, insurance agent or simply be an information magnate.

So before entering this filed, one should decide what one wants to do. Many persons actively start trading themselves or just connect exporters and importers. The selection depends upon the level of expertise and comfort level, the choice of products and countries, the availability of finances etc. that a person has.

If you decide to start direct trading by yourself, I would suggest learning the theory part of this trade thoroughly in the first instance. One needs to be conversant with products that are being traded internationally, the rules and regulations of countries that one wants to trade with, the terminology involved, import duties, quotas, consignments, transportation, import export licenses etc.

After being comfortable with theory part, one should get some practical training. Hopefully one has chosen a product or products to trade before starting the practical part of this business.

One of the safe ways is to start trading products with local importers and exporters. This way one can learn many tricks of trade and also be able to avoid several pitfalls. Spending about a year’s time should provide necessary experience to one to start direct import export.

Another safe way of doing exim trading is to locate buyers in the first instance before importing as otherwise one may be left with unwanted inventories and losses.

How to Get Started in an Import Export Business

So how can one get involved in an import export business?

One: You can start an import export business using your own money

Most people think of getting involved buying product overseas with their own money, on their own account. This is the most logical and preferred way for most. Buy a product, pay for it, take title to the goods, import your purchases into the country you want to sell them in, sell them, and do it all over again.

Two: Import export agent – putting buyers and sellers together

If you are familiar with a particular country, especially if you have been there numerous times and may already know what is manufactured there and where to find suppliers of those products, you can offer your knowledge to others. If for example you have been to Thailand many times, may had lived there before, and know the Thai product, you can approach a retail store buyer in the United States, in the city where you live or elsewhere, and offer to be his buyer, especially if he carries products from Thailand. In this case the US-based retailer may hire you to place an order on a product he sells from Thailand. You will order the product in Thailand, put the shipment together, pay for the product not with your money but with his money, and ship the good to his store in the United States, with his store’s name as the consignee on the shipping documents. For your services the US-base retailer-importer will pay you agreed upon commission. The amount of the commission is negotiable, not a fixed percentage. The amount may depend on the amount of your time you’ll put into putting the shipment together, your overhead associated with the export side of the process, expenses you will incur at the country of origin, needing to travel back and forth to the manufacturer’s factory or dealing with the export shipping company. The retailer will be the importer, he will pay not only for the goods but for the cost of preparation of the export documents, packing and actual international freight from country of origin, Thailand, to destination, wherever may be his store or warehouse. Your commission may be a percentage of the total invoice value or a negotiated amount between the two of you. Under this scenario you are using other people’s money but your expertise. You can get started tomorrow. Obviously if you have never been to Thailand you may not want to offer your services as an import export agent of Thai products.

There are two basic variants of this involvement. One described above where your commission is paid by the importer on whose behalf you have worked. Similarly, however, while you are in Thailand, a Thai manufacturer may offer you a sample of his product to introduce to prospective buyers in the United States. In this case you may return from your last trip to Thailand as Manufacturer’s Representative – perhaps not with an exclusive contract to represent his products in the United States but with the understanding that should you find buyer for his product who may want to place an order, he, the Thai-based manufacturer will pay you an agreed upon commission on the shipment.

From these two examples it is clear that you can work with other people’s money, not just your own, putting buyers and sellers together where commissions may be paid to you by either or both of the parties, the buyer as well as the seller and the method constitutes the easiest way to get started in an import export business.

Three: Import Export Sourcing Agent

You can work as an independent import export sourcing contractor, an involvement in import export business that is very much in the same category as described above, but with more responsibilities in the entire import export process. Say for example a clothing store in the United States will hire you to find a manufacturer in Bali, Indonesia that could manufacture garments based on their product design specifications. Armed with drawings of product given to you by the retailer you’d source more than one prospective manufacturer in Bali to prepare samples of product to be eventually ordered by the retailer in quantity. Each manufacturer would prepare the sample as well as a quote sheet showing quantity discounts and delivery time. The retailer would select one of the suppliers you had sourced based on product quality, price and delivery time, and then ask you to award the contract to that supplier. You would then have to oversee production, quality control, preparation of documents and pay for the goods with the retailer’s money, not you with yours, who would become the actual importer and consignee on the shipping documents. As above, you would get paid by the retailer-importer on commission basis, plus expenses as well as possibly be kept on a retainer to be available next time.

Four: Export Shipment Broker

Last is an example that is based once again on using other people’s money to put buyers and sellers together. In this example a manufacturer in Thailand is offering a container load of a product, for example toys. The shipment is ready to be shipped, and must be bought as is, whatever the qualities of each item style inside. The shipment may be assorted, and it may contain some attractive products but also some less marginal ones, perhaps even seconds, or discontinued products. The manufacturer-exporter is looking for a buyer. You are an agent that knows who may be interested, who are the buyers for these type of products. It could be a store in Miami, Florida or in Berlin, Germany, or in any other country that you know buyers in for this type of product. You provide samples from the seller-exporter to the buyer-importer. If the buyer agrees to buy the container at the agreed upon price, you may handle the whole sale transaction on what could be a back-to-back letter of credit using your bank in Denver, or wherever you are located. The buyer in Berlin pays you by a L/C in the amount of $40,000 and once the funds clear your bank, your bank cuts an L/C in the amount of $30,000 to the seller’s bank in Thailand and you pocket the difference less bank expenses. The container goes from Thailand to Berlin, Germany, not via the United States – you never take title to the goods. You only connect the seller with the buyer and broker the deal. Needless to say the export shipment can be brokered by countless number of other brokers who will come across the export offer by the manufacture-exporter located in Thailand.