Wednesday, January 30, 2013

5 Ways To Save Money Importing

Importing products from other countries can provide businesses and individual’s with substantial through a variety of different factors.

Many businesses have been forced into looking at importing as a means of survival. Individuals who sell merchandise via online auctions, mail-order or in brick and mortar stores have found importing directly can help them keep their prices low and also improve their profit margins.

Some of the primary savings that can be derived from importing are:
  1. Savings from cutting out the middle levels of logistics - instead of buying from a wholesaler who may have purchased from an importer, you are saving by eliminating those additional levels of cost.
  2. Foreign exchange rate savings - when the Euro was at it's highest value ratio to the US Dollar a few years ago, may European used car dealers and individuals found USA automobiles cost much less to purchase and ship to European countries, in some instances the savings were $10K or more per vehicle.
  3. Eliminating various levels of shipping costs - this ties in with the number one reason because each time an item is shipped to a different location or level of distribution, it adds shipping costs to that item's cost and reduces the available profit margin - by importing and having the goods shipped direct to your storage facility, you save those costs.
  4. Lower labor costs - importers are often faced with a tough choice, stay with their domestically produced product and conceivably price them out of business or take advantage of the much lower labor costs offered in a foreign country.
  5. Overall cheaper production costs - many foreign production facilities are not subject to the higher taxes and regulations that domestic producers are often saddled with - in the area of regulations, importers must weigh the cost savings against potential safety and quality issues that can quickly devalue any savings this aspect may provide.
Another cost savings that is available to importers is the increased amount of competition for their business. Often, there are far more manufacturers of a product available in a foreign country than there are domestically.

Having multiple manufacturers competing for your business means you have the opportunity of negotiating the BEST price and fastest delivery.

Savings by importing a finished product is often an issue of survivability.

A few years ago, the CEO of a Midwest manufacturing company called to inquire about moving the manufacturing of their products to China. This was a family owned business that literally abhorred the thought of having to make this move but they basically had no choice if they were going to stay in business.

(For confidentiality reasons, the type of commonly used consumer products they manufactured will not be mentioned) The CEO told me that their competition had moved all of their production to China and were bringing the “finished products” back into the USA for a price that it was costing his company just to purchase the raw materials necessary to “begin” production.

Overall, importing can provide substantial savings but one should never be blinded by the potential for increased profit margins by sacrificing safety or quality. Due diligence is important in all buying decisions and is extremely important in making the decision to import.

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Sunday, January 27, 2013

International Trade Business Questions And Answers

Question From Prospective Exporter:

Thank you for your reply, it was greatly appreciated. With that being said I have another question (and yes I have read your blogs) that I do not see being answered on your blogs, or maybe it is and I am not understanding, I live in Canada and intend to submit all paperwork associated with being a exporter. My question is as follows:

Will I be able to export goods from a manufacturer in the U.S. to a client I may find in China, although I am registered as a Canadian exporter?

(i.e. I find widgets being made at XYZ factory in Phoenix AZ (I am in Ontario Canada) I also find a client in the province of Yunnan China who wants the type of widgets I find, how would I (if it is possible) export those widgets to China?)

Hope my question and accompanying scenario make sense. Thank you and look forward to any information you may provide.

Answer to Prospective Exporter:

As you probably read in my blog posts - there are over 90,000 taxing authorities within the USA alone which means there is literally no one, nor no organization that can provide you with a comprehensive guide to what is and is not required to do business within this mass of bureaucratic confusion.

Do whatever it is in Canada that the Canadian government requires you to do in order to be "labeled" an exporter, but understand that when you are in business for yourself, "you" and the parties with which you deal with determine "how" you will do business.

I have mentioned many times, both on the import export business course description page and within my blogs that the "level" to which you involve yourself in an international trade transaction is entirely up to you and the parties you are dealing with.

Taking the scenario you have laid out - think for a minute - does the American company really care or does it matter if you are registered with the Canadian government if you create a transaction where they get paid to ship their goods to your buyer in another country?  If they get paid is all they care about, right!

Do Not Complicate This Business!  You can involve yourself from the most involved degree of being an export management company where you buy the goods, mark them up and ship them to your buyer, where ever that buyer might be in the world.  You can also work with a manufacturing company on a sales commission basis, if they are willing to do so and you are trusting enough with an agreement that says they will pay you a commission upon completion of the sale.  Less money, but far less legal and financial risk!

If I were to sell a product or service and you sent me a buyer who ultimately paid the price I was asking - I would pay you a commission - this is a matter that is between you, me and the buyer, but basically between you and me and is of no official business to the Canadian government, except that you pay the appropriate income taxes (all they really care about anyway).

I once promoted cigarettes that were offered by an export management company in Hong Kong (before it was turned back to China) - the cigarettes were manufactured in China, we had very little success and the company ultimately went out of business but we did have one sale to a buyer in Singapore and $1000 was my commission which the export management company wire transferred to my bank account.

Did it matter to the Hong Kong company that I was in the USA?  Did it matter to the Singapore company that I was in the USA but the cigarettes they were interested in purchasing were being manufactured in China? Answer NO to all the above.  I helped bring the parties together and earned a commission to do so even though the selling company and I had an agreement, they could have ripped me off if they wanted to but if you perform your due diligence, as I strongly suggest, you should be able to identify most of the bad ones.

The import export course teaches you all aspects of the business and all levels up to and including being an export management company.  In the learning process you will learn that most of the dotting of i's and crossing of t's are accomplished by other organizations that you will employ in the process so do not complicate it.

If you seek a reason to not go forward, you will find thousands of them, if you just go forward, you have one decision to make and that is to go forward.

Question Two From A New International Trader:

A new startup founder who used to work in trading company for past 10 yrs in one country but whos is a citizen of my country as sales manager is now starting on his own and he tells me he managed to secure a verbal agreement following which is paperwork from Europe to China supply components for $3.7M for 2 yrs at 30% margins CIF (First Shipment is $800K) by just being a re-seller and using a Back to Back Letter of Credit. However, the bank can only approve at 70-80% of the deal so need to see corporate bank account for the balance cash so this guy come to me for funds and will give me a share of the margins. How reliable is such deals? Or is it a Scam/conman Deal?

Answer From Myself and the Import Export course publisher:

My reply:  I am sure the publisher will provide his own comments on this but it is not the kind of deal I personally would get involved with.

Publisher reply:  Not sure this is a common scam but it sure smells. Most trade deals are pretty simple and straightforward. Most scams suggest a nice payday for doing little work.

Global trade is about relationships. If this guy asking your involvement came out of the blue with this request, I'd run the other way -- fast. Even if you know him -- and by this I mean, if you know him well -- ask yourself what he is risking. What's the collateral on this loan, other than his promise of future riches? What's to prevent him from taking your money and running?

I don't know all the details, but these are the questions to be asking. As for me, I'd pass.

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