How to Import Products

You’ve decided on a great idea for a product that you want to produce overseas. How do you start? How do you import? So many questions! Don’t be discouraged. Buying and selling goods internationally is not just for the large companies anymore. Small and Medium Sized Enterprises (SMEs) have the possibilities to greatly expand their markets by sourcing products from overseas suppliers. Importing product does not have to be difficult, but there are some things that you must keep in mind.

Vendor Selection

First and foremost, you must work to find a legitimate vendor and qualified partner. Be cautious, there are plenty of people out there who will steal your money. The internet is a great tool to begin this search. There are many popular websites (i.e.: Alibaba) that help to find manufacturers and put you in touch with the manufacturers that can help to create your products. Utilize your local resources. Network with companies in the United States that might be able to provide referrals for manufacturing partners. Do your homework! Don’t just pick the first vendor that you find, research, ask for references, and maybe even seek the help of a manufacturing agent that has built a relationship with foreign companies. Don’t underestimate the power of a physical visit to the manufacturer of the goods, set up a trip to visit your top 5-7 options, so you can qualify them in person. Make sure they have the machinery to produce the goods and are not just a front for other manufacturers. You want to go direct to the source.

Understanding Logistics and Managing Your Supply Chain

OceanFreight? FCL? LCL? Air Freight? How will you distribute your product? Who to use? There are so many questions that arise for new importers who don’t know anything about logistics. Don’t make the mistake of only going to a Logistics Provider or Freight Forwarder that you have seen advertised on television. There are thousands of providers and I would argue the most well known logistics companies are not necessarily the best fit for small business. Do you ship via ocean or air? Normally the value of the product will determine whether you can afford airfreight. Airfreight services can vary significantly, so make sure you ask about transit times, transloading points, and minimum/maximum charges, and look out for Peak Season Surcharges during the Holiday Rushes. Ocean Freight can be much more affordable, you can even ship Less than Container Load (LCL) freight. The downside to ocean freight is the additional transit times. Vessels from Asia, Shanghai for instance, can take up to 18-20 some days to go from port Shanghai to a West Coast Port, add another 7-15 days to distribute throughout the U.S. via rail. On imports from Asia, it might make sense to look at West Coast Distribution to cut down on the ocean transit times and still take advantage of the cheaper ocean costs.

Purchasing Terms

How are you going to pay the vendor for their products? Typically they will not produce or ship until they receive their money. In order to protect yourself, you should be extremely cautious of wiring any funds without contracts or guarantees. Letters of Credit (L/C) are a great tool that can help to protect you. Issuing L/C’s with a qualified bank can assure that the manufacturer fulfills the requirements of the L/C, which means they must tender the goods to your Freight Forwarder, provide you with necessary documents and typically tender a Bill of Lading (B/L) to their bank. In the case of Ocean Freight, that B/L will assign ownership of the cargo to whoever possesses the document, so reputable banks will surrender it to you upon payment by your bank. An L/C will actually protect both the Shipper and the Consignee. They do cost money, figure $300-$500 depending on values of the cargo and your bank fees. After building the relationship you can ease into other payment terms, but proceed with caution.

Shipping Terms

Know your Incoterms! Incoterms 2010 is the latest version, they typically make updates every 10 years or so, don’t expect new one’s for a while. Everyone knows the term FOB, although it is often misused, but do you know about EXW, CPT, FCA, or which apply to air freight and which are applicable to ocean only. Beware of DDP both when selling as well as purchasing. Incoterms define the costs and risks associated with transportation they do not define purchasing terms or other terms that may be inside a separate contract. You can get burned if you don’t clearly understand your shipping terms.  

U.S. Customs and Other Regulations

It is extremely important to understand all of your obligations under U.S. Law in regards to importing goods. As an Importer, you will be recognized as the Importer of Record. Importing requires responsibilities and compliance to all U.S. law. Ultimately the Importer of Record is responsible to correctly classify their goods and make sure the proper HTS (Harmonized Tariff Schedule) Classification Number is being used. Don’t rely upon a Freight Forwarder to make the classification on your behalf. Utilize the forwarder and preferably their licensed customs broker for advice and to help you with your tariff classifications, but make sure they understand your product and that you ultimately look at the best option. You can engage U.S. Customs if you’d like. In addition, you’ll want to find out if your product is regulated by any other government entities. You might be surprised to find that your product is regulated by FDA, FCC, USDA, or many other government agencies that have an interest in your particular commodity. Sometimes your products may require an import license or other special considerations. It’s important to make sure you look at all of these things prior to arranging a shipment.

For More Information

These are just a few of the basics to consider when Importing Products for the first time. For any questions or further assistance, please contact C.L.O. Company at +1-512-299-1296, we’re in the Austin, TX area, but can assist with any questions related to international supply chains and imports into any part of the United States. Don’t leave the details to untrained logistics professionals; rely on C.L.O. Company to manage your supply chain & logistics needs.