Dec 14, 2011

Before You Import, Ask These Questions

[caption id="attachment_393" align="alignright" width="325" caption="Importing"]

[/caption] After vacationing in Thailand, you’ve decided to add beautiful button-up shirts made in Bangkok to the shelves of your U.S.-based clothing store. But the customs process is complicated and convoluted. Where do you begin? Ask questions. Ask your attorney. First, make sure you understand the law regarding importers. Because of the hefty penalties involved with improperly importing goods, consider hiring a lawyer who is well-versed in the import process. “Under the Customs Modernization Act (‘Mod Act’), importers are legally responsible for determining the correct classification and value of the imported merchandise,” according to Lawyers.com¹. Duty calculation and recordkeeping are included in their responsibilities. Lawyers.com went into detail about the five responsibilities that small-business owners must assume to import goods into the U.S.: “admissibility” of the merchandise, proper entry procedures, payment of all fees, marking, and recordkeeping¹. Once you have worked out all “informed compliance” details with your lawyer, you’re ready to negotiate contractual terms with your supplier or manufacturer. Ask your manufacturer for samples. If you’re importing manufactured goods, be sure to obtain samples. “Ask for samples or a catalog, the facts and figures of current foreign distribution, and the product demand in their own country,” advised Foreign Trade On-Line². There’s always a risk that the products you’ve designed and requested will not come back to you quite as expected. Exchanging free samples will help build trust between you and your manufacturer. Nevertheless, you should still conduct a comprehensive background check on your manufacturer or supplier. As soon as the manufacturing process has been instituted, you should investigate the rest of the importing process requirements. Ask your customs broker about restrictions. The next step is to create an import plan with a licensed customs broker. The U.S. Small Business Administration defines customs brokers as “private individuals, partnerships, associations, or corporations licensed, regulated, and empowered by U.S. Customs and Border Protection to assist importers and exporters in meeting federal imports requirements³.” Customs brokers are important mediators between you, the small-business importer, and the CBP. They prepare appropriate documentation and ensure that your shipments meet federal import requirements, according to the U.S. Small Business Administration³. As such, a customs broker’s expertise is costly. So, shop around until you find a reasonable rate with an honest, licensed broker. If you’re new to the process of importing, find a broker who can clearly and succinctly explain the regulations and fee requirements to you, because there can be several confusing customs complications when it comes to massive overseas shipments. Ask your CFO if you can afford it. Many of the costs associated with importing—taxes, duties, excises, commission to your broker, payment to your supplier—are payable in advance and in cash. Thus, your small business must be adequately liquid to pay these fees up front. In addition, when dealing with foreign currencies, be sure you’re accommodating exchange-rate fluctuation in your estimates. Just a few days can make a big difference. Ask yourself if it’s worth it. The importing process is long, expensive, and often difficult. Therefore, before you embark on this journey for the first time, ask yourself: “Can I handle the headache and still turn a profit?” Some creations make for great business. Others are best left as seaside souvenirs. 1. “Importing and Your Small Business” 2. “How to Start and Operate Your Own Profitable Import/Export Business at Home” 3. U.S. Small Business Administration: “Importing Goods” 4. “Opening a Small Import Business”