Think about Adidas, Lego, Nestlé, Honda, and Louis Vuitton. What do they have in common? Their products are all imported to the United States. Coming from Germany, Denmark, Switzerland, Japan, and France, respectively, these products have surpassed their American-made equivalents in many cases.
When done right, importing can become a powerful force that generates international demand for new products, and is extremely lucrative to boot. There is limitless potential for new import businesses to find their niche and make an impact.
Are you thinking about starting your first import business? It can be overwhelming to break into the import-export world of tariffs, regulations, and bureaucratic jargon. Here are some valuable things to consider as you build your import plan. Remember, it’s okay to learn as you go.
1. Duties and taxes
In most cases, importing involves the payment of certain duties, taxes, and tariffs during the customs process. The main exception to this rule is when the country you’re importing from has a free trade agreement in place with the country you’re importing to.
The best place to start is by using our free import duty calculator. This will give you a rough estimate of how much you’ll owe in duties and taxes. For a more accurate assessment, work with a customs broker to determine how much you’ll need to factor into your budget for import duties and taxes.
2. Your supplier
Partnering with a great supplier is key to the success of your import business. As you’re interacting with potential suppliers, think about quality, speed, reliability, value, and communication. Whenever possible, do a test run with a supplier before signing a contract.
Once you’ve selected a supplier, it’s important to maintain that relationship. This might involve visiting the factory, sending gifts to show appreciation, or constantly searching for ways to improve communication and efficiency. It’s wise to learn about the country where your supplier is located in order to develop a cultural understanding.
3. Insurance
As a brand-new import business, you may think you don’t need insurance. And that might be correct…if everything goes exactly according to plan. Here are some of the risks you could be liable for if you don’t have insurance:
- Stolen goods
- Damaged goods
- Injured employees
- Political risks
It can be difficult to determine exactly which kind of international insurance is best for your import business. Use this guide to help you choose the ideal insurance policy for your company.
4. Your target market
As you’re deciding which products to import, it’s vital to consider your target market. Are you hoping to reach Baby Boomers or Gen Zs? Stay-at-home parents or corporate execs? The 1% or the 99%? Create an ad strategy that targets your chosen demographic.
The most successful imports fill a need that the domestic market fails to meet. They’re likely to be more unique, of higher quality, or cheaper than their domestic counterparts. Conduct a thorough market analysis to make sure there is a place for your products.
5. Import restrictions
You might have your heart set on importing a certain product, only to find out it’s restricted. The sooner you know that, the better. It would be devastating to purchase 10,000 Kinder Surprise eggs and have them get seized at customs by US Customs and Border Protection (CBP).
Start by consulting this list of things that are illegal to ship internationally. If you’re importing to the US, make sure you read CBP’s import restrictions. If you’re importing to Canada, don’t forget to check the import restrictions from the Canada Border Services Agency (CBSA).
6. Cash flow
Due to the need to pay for goods before they’re shipped, import businesses can run into cash flow problems if they’re not careful. There is a lengthy period of time encompassing logistics, packaging, and distribution before you will receive direct income from sales.
When you’re just starting out, it’s common to have insufficient capital. Look into the various kinds of import business loans to see if one of them might work for your company.
7. Import licenses
There is a possibility that you will need to apply for an import license, depending on which products you plan to import. Because of the high standards of the Food and Drug Administration (FDA) and other government agencies, import permits are often required for importing food into the US.
Regardless of what you’re importing, you need to be aware of the various regulations surrounding your products and the country you’re importing to. Hiring a customs broker allows you to benefit from their expertise so you don’t miss any important regulations or risk unnecessary excess costs.
8. Acronyms (ISF, CARM)
CBP, CBSA, FDA, FWS, GST, USDA, FTA, ISF, CARM…the import-export world is flooded with acronyms. Which ones apply to you? Don’t worry, you’ll become familiar with all of them in no time.
If you’re importing to the US, you may need to file an importer security filing (ISF). This is required for all goods that arrive via ocean freight. If you’re importing to Canada, you’ll want to be up-to-date on the CBSA Assessment and Revenue Management (CARM) project.
9. The US-China trade war
In case you didn’t know, the US-China trade war is ongoing. The main way this affects importers is when it comes to relying on a Chinese supplier. If you do choose to import your products from China, you’ll be subject to an extremely high tariff rate.
Learn more about the implications of the US-China trade war for importers here. Don’t forget to keep an eye on the news to stay informed about global issues that could affect your import business.
10. Inventory
As an importer, you have numerous options for where to store inventory. You can keep your products in a foreign-trade zone (FTZ) with the potential to defer duty payments and avoid paying taxes on your inventory, or you can utilize a bonded warehouse, which also has advantages related to duty deferment and goods storage.
Of course, some companies choose dropshipping so they can avoid storing inventory altogether. The drawbacks are having little control over your business, working with a low-profit margin, and dealing with the other problems that come with being a middle man.
11. Paperwork
As a first-time importer, thinking about all of the paperwork you’ll need to complete is probably giving you a migraine. When you’re importing to the US, things get even more complicated due to the many government agencies involved in the customs process.
If you make a documentation mistake or leave out an essential form, you could be charged for customs fraud. The easiest way to avoid this (and keep yourself from losing sleep at night) is to hire a qualified customs broker like BorderBuddy. We offer solutions for small, medium, and large businesses. Give us a call today.