IMPORT BUSINESS GUIDE

31 Jan IMPORT BUSINESS GUIDE

Import/export business is one of the popular business types in the globalization process. We witnessed the last decade is the higher state of growing international business and the free market economy dominating the whole world.

The removal of restrictions on trade and travel between countries, the reduction of travel and shipping costs, B2B sites operating in the online network, e-markets, and the presence of websites and social media channels of almost every manufacturer, has radically changed the A, B, C of trade.

Now it is very easy for buyers and sellers to access a product anywhere in the world. It is no longer difficult to do a global search to find a quality and cost advantage product. You have found the right product, and you believe it will be sold in your market. Importing from all over the world is easier than ever.

However, trade increases the risks brought about by procedures such as customs procedures and shipping processes that come into play. How to import? What should you pay attention to? What documents will you need? In what order should you handle import transactions?

This article will explain the import operation process, including product and supplier research, payment terms, delivery terms, and customs clearance phase. If you are importing for the first time, this article will be a guide for you. If you are already in the import business, it will be useful to create a checklist.

Preparation Phase

In the first stage, we will convey our recommendations regarding the import preparation process in 6 steps.

Step 1. Improve yourself:

Before starting a job, do research to gain theoretical and practical information about that job. Will you import? Follow blog sites, forum sites, and social media channels about import and export. You can find many paid / free training programs on Linkedin. You can access up-to-date data, statistics on international trade such as WTO, UNCTAD, COMTRADE.

And of course, you should bookmark importano.com as both an information source and a company where you can get professional service focused on manufacturing, logistics, sales, and international sourcing.

Step 2. Search for Product & Suppliers

Your job is easier if you have already decided on a product or already have products you buy and sell domestically.

HS Code / Tariff Number: If you come across a product that interests you, be sure to learn the HS Code together with the product information. With HSCode, you can identify all handicaps, such as the amount of tax payable at customs, additional certificates required for the product, surveillance, or protection decision.

We recommend that if you plan to trade in a new product group, do extensive research on the product and the industry, an unfamiliar product, industry you are a novice in, may cost you expensive experience.

Our recommendation is to make a comparative analysis of the products you focus on and the suppliers you identify. At this point, outsourcing can provide you with a fast and effective result.

Undoubtedly B2B sites give fast results to search for suppliers. The pandemic conditions experienced in 2020, travel restrictions and fairs’ cancellation caused the business to focus on the digital platform. However, in the next process, we recommend that you prioritize the fairs, make a factory visit to the suppliers you plan to work with, if possible, or work with sourcing companies that will select the supplier and then control the production processes for you.

Resources you can search for products and suppliers.

• B2B sites
• Sectoral fairs
• Sectoral publications, e-journals, sites
• Exporters’ associations’ postings
• Export consulting agencies

Step 3. Product and Supplier Identification.

Visit websites of products and manufacturers that interest you,

Examine the online catalogs and quality certificates, if any, through the sites. Check the supplier profile of the manufacturer or seller companies you find on B2B sites. Some of the B2B sites, albeit limited, provide identity verification services for their suppliers registered in the system. Criteria such as membership duration and sales volume are shared on the site.

Our recommendation is to get a “supplier and product verification” service from an Import-Export sourcing company. Some of these services are:

a) Control of the company’s identity: The company license is checked, the departments and communication channels specified on the company website and social media channels are confirmed.

b) On-Site Control: The address of the company is actually checked. Company buildings and facilities are visited and reviewed.

c) Supplier evaluation: Independent audit firms control the company’s products or services for sale.

Your supplier selection sensitivity should increase in proportion to your order quantity because larger order means greater risk. You should check your supplier’s references and visit their facility if possible.

Step 4. Sample Product Request,

Always request sample products from exporting companies. According to the product, ask for the necessary analysis report, test report, and quality documents.

Before moving on to the next stage about a company and its products, request a certain number of samples, the samples will provide you with information about the product, and you can get an idea by presenting them to your employees, dealers, or customers with whom you work frequently. By importing a limited number of products, you will also experience the customs stage to be imported for the first time.

Step 5. Inspection Service, Quality Control

You found a supplier that produces the product you are looking for, agreed on the price, determined the quality and waste standards, organized the transportation for the production process, and afterward, calculated all expense items including freight, insurance, taxes, customs duties and determined your unit cost. Our recommendation is to involve an inspection company in the process, request samples for samples, have an inspection company check the products and shipping, post-production, and before shipment. We recommend using our QC partner company Insight Quality Services. You can find more about them on www.insight-quality.com

Step 6. Calculate Unit Cost

Before you start importing, you look for a product in a specific quality and price segment during the product and supplier research phase. You must add all possible costs to the bare price offered by the supplier. The size of your order determines the impact of these additional costs on the unit cost. Calculate all expense items, including freight, insurance, taxes, customs charges. Add a certain waste margin, apart from the margin of error in your supplier’s products, minor or overlooked product damages may occur during the shipment phase that you do not want to include insurance.

In all this process, you should consider the equivalent products in the market, the moves of your competitors, the changes that may occur in the customs taxes of your product group, and the possible political and economic risks with the country you import from. At this point, look for price fluctuations in the past and the current prices of your competitors. You cannot foresee everything, but you must have a plan B against unexpected events.

Acting Phase

We recommend that you prepare an order form with the following information and ask the suppliers you are interested in their products to fill the form or have this information included in the offer forms.

A) Minimum Order Quantity (MOQ – Minimum Order Quantity)

If the MOQ of the supplier is high, try to balance the pieces in your favor. If you are entering the market or importing a new product for the market, it is useful to reduce the order quantity to reduce the risk.

B) Sample prices: If you plan to get periodic samples for various products, it is important to know potential cost of samples and development of new product.

C) Product price: If it varies according to the order quantity, the ranges should be specified. Many manufacturers set breakpoints for prices, as production costs will also decrease based on the order quantity. You don’t buy large quantities at once, but you plan to order often. In this case, request periodic promotion or discount rates. For example, you have committed to buying 1,000 lawnmowers every three months. You can make a contract like this if you order 4000 units in 1 year. You will get a 5% discount on the last order.

D) Production Time: Please specify if there is a deadline for you in this section. Find out the monthly production capacity of the supplier. When you want to increase your orders, will their capacity be sufficient? Be sure to talk about the current production calendars and details such as hot seasons. At this point, our recommendation is always to have alternative suppliers. Make small orders with others during the year to maintain your relationship and keep alive the manufacturing skills of your products, even if they are your main supplier.

E) Payment Terms: As the importer company, your choice should be to purchase term. There will be a problem of trust, especially among companies that have just started trading. If your company has a good commercial background and credibility in banks, you can work with your supplier on bank credit. Manufacturer companies tend to work for cash. If your order is small and you are a new company, you can work with a payment schedule to be made in 2 batches based on the start of production + shipment. As the numbers grow, alternatives for payment terms will increase. For example, the letter of credit is reliable for both parties and can be credited by the bank based on the importer’s credit letter.

F) Delivery terms (Incoterms): Firms can avoid the responsibility of shipment, as a result, making the shipment brings some risks and responsibilities. On the other hand, cost is an important factor, the manufacturer offered you freight included but you received a cheaper freight. US importers generally tend to work on DDP, which means delievered and import duty paid by your supplier, of course in this case those costs are added to product price. Incoterms DDP is more comonly known as “door to door” service. In EU, importers mostly prefer CIF, CIP & DAP.

The exporters may prefer to choose Ex-works. Thus, it will be free from all risk factors. Our recommendation to the importer is that the exporter receives freight offers containing different incoterms, eg FOB and CIF. Especially if you are a new company, the transporters will quote you with the standard price tariff. The exporter company has a volume in the eyes of the transporters. Therefore, the exporter company can get a better price from you. This means your freight cost will be reduced.

Purchase Order – Contract – Proforma Invoice

Our advice to importers is to prepare a purchase order containing the terms you have agreed with the exporter and ask the exporter to sign and stamp.

Standard information that should be included in the purchase order should include the following (additional items may be included according to the product group and sector)

• Product information, details (Product name, type, code or number, basic features)
• Quantity of product, unit price, total value of the shipment (may vary +/-)
• Production conditions, production time
• Payment method.
• Labels, packaging, pallet standards.
• The language in which the documents will be issued.
• Delivery method (Incoterms) (eg: CIF Roterdam Incoterms 2020)
• Type of shipping vehicle. (if specifically requested ship, truck, plane), The requested delivery date.
• Warranty terms, return conditions, withdrawal conditions, penalty conditions

Purchase order is the basis for a contract or proforma invoice to be prepared in a similar process. You can be satisfied with the purchase order and proforma, depending on the product, sector, country you trade. For example, the settlement of commercial disputes between 2 EU countries will be easier since they are bound by a common legal authority.

However, it is best to secure the trade between companies operating in different geographies, countries with different commercial traditions and naturally different commercial authorities, with a contract to be prepared under appropriate conditions on the international trade ground.

Our recommendation is to prepare a contract specific to your company and your sector in accordance with international trade law and use this contract as a template.

Documents Required in an Import Operation

Some of the documents that the importer will need are standard, for example, invoices are requested for each import while customs procedures are carried out.

If there are no details such as container and weight on the invoice, packing list can also be requested. If there is a bilateral agreement between the countries of the exporter and the importer company, if they are a member of a commercial organization, providing tax exemption documents such as A.TR, EUR.1 will provide tax exemption.

In terms of the exporter and importer, the insurance policy is made by the party required by the incoterms in accordance with the accepted incoterms. for example, in a CIF shipment, the exporter is obliged to insure. Firms can determine, by mutual agreement, who will insure or whether the insurance will be more comprehensive. To be on the safe side best is to confirm with supplier about cargo insurance policy.

Apart from this, different countries may request extra documents and obligations such as different certificates, documents, test results, inspection for electronic products, food products, medical products and many other product groups.

1 – Invoice

2 – Bill of Lading (Bill of lading, Airwaybill or CMR)

3 – Certificate of origin

4 – Packing List

5 – Insurance

6 – Movement Certificates (EUR.1, A.TR)

7 – Import License (Some countries may impose license obligations for certain products, companies may need to obtain an import license once or periodically.)

8 – Various certificates for different product groups.