The factors you need to consider in any form of importing

Handled well, importing can make a significant contribution to success in your business. Using overseas suppliers may be a key part of controlling costs. While import procedures are usually straightforward, you will need to devote time and resources to getting it right. Find below all the factors you need to consider in any form of importing:

Why you want to import?

Do you want to source goods that are not available in your country?
Overseas suppliers offer better prices than your local suppliers?
Do you want to import components to use in your production process?
Do you want to import finished products to resell?

What kind of relationship you want with your suppliers?

Building a relationship with an overseas supplier requires an investment of significant time and money. It may not be worth using a new supplier for a relatively small, one-off purchase.
Finding overseas suppliers will add to your costs.
Overseas suppliers may have relatively weak quality or offer products that do not meet the safety requirements of your country.
Potential problems are more difficult to resolve when dealing with overseas suppliers. (i.e. if a delivery is incomplete or faulty, it may take a long time to deliver a replacement and you may stop your production).
You may need to protect your business against fluctuations in exchange rates.
You might face problems in the supplier's country (i.e. new export restrictions or taxes).

Take into account possible risks and disadvantages

The quality of products you import, and the service you get from overseas suppliers, can have a significant effect on the quality of the products and service that you offer your customers.

Import Manager

Nominate an import manager, responsible for your import strategy. The import manager will need to coordinate with other parts of your business (i.e. if you are planning to resell the products you import, the import manager will need to work with staff responsible for sales and marketing).

Investigate potential sources of supplies

Buying from large companies within the European Union (EU) can be a low-risk strategy. However, you may not get the same cost advantages as you could by sourcing suppliers in other countries.

How you are going to import

Importing directly from the supplier, and handling as much of the process as possible yourself, is potentially the most profitable option. Smaller businesses and first-time importers are likely to want to use agents to help (i.e. you might use an agent to clear the goods through customs and deliver them onwards to your premises).

Decide an initial budget

Many businesses start importing with a small-scale trial. As your import business grows, you can then invest more in building up your operation. 

Identify potential suppliers

Your trade association may be able to recommend overseas suppliers. Many overseas exporters exhibit at trade shows. Trade events are also good places to meet agents, distributors and other businesses in your sector who can advise you on suppliers.

Shortlist suppliers in suitable countries

Prefer to work with suppliers in a country where you already have experience and contacts. The simplest option is often to source goods from countries that have relatively straightforward import procedures. Suppliers in developing countries are offering the most competitive prices, however, you may face extra complications and risks.  

Assess the suppliers' financial stability

You can suffer significant disruption if a supplier goes out of business. You may prefer to deal with an experienced exporter, particularly if you have not imported before. Confirm that their products meet your requirements.

Visit the most promising suppliers

A visit is a good opportunity to assess their management and operations. For example, you might want to review their working practices and quality-control systems. Visiting the country can help you to get a feel for the business environment they operate in.

Investigate the local legal environment

Assess your chances of enforcing your legal rights in case of a dispute. This can be time-consuming and expensive. Find out about standard commercial practice (i.e. payment terms and credit periods). In contracts, use Incoterms 2010 wherever possible. These internationally-recognised standard trade terms set out what is expected from buyer and seller, particularly for transporting goods, and can help resolve disputes. Local laws covering your supplier can affect you (i.e. if your supplier is prohibited from exporting the product, it may well be impossible to enforce any contract). Your supplier may need a local export license. Obtaining a license could delay delivery, increase costs or even be impossible.

Check whether the supplier's product meets your local legal requirements

The product will need to meet certain safety standards (you can be prosecuted for selling unsafe products, and can be sued for any harm caused by unsafe imported products). There are specific regulations affecting certain types of product. For example, foods, chemicals, etc. You may have to ask your supplier to modify the product to suit the requirements of your country.

The import contract

Agree an appropriate dispute resolution procedure that can be used instead of going to court. Ask your supplier to confirm that their product meets the necessary quality standards and to indemnify you against any legal action taken against you because of defects in the product. Use Incoterms to specify each party's responsibilities.

Agree how the products will be delivered

Where the goods are coming from? Where they are going to? What type of goods are they? Do they need any special handling? How quickly they need to be delivered?  The contract should include clear agreement on responsibility for each stage of delivery, including insurance. A well-drafted contract will use the appropriate internationally recognised Incoterm standard terms.

Agree what responsibilities you and your supplier will each have

As well as delivery, you need to be clear who is responsible for insurance at every stage of the transport. It does not make sense to ask your supplier to do too much, as the supplier will want to negotiate a price that reflects this. 

Paperwork

Paperwork requirements include commercial invoice, transport documentation, certificate of origin, etc. Smaller importers use an agent, such as a freight forwarder, to handle customs clearance (and onward delivery) for the goods.

Negotiate the price of the product and the currency to use for payment

Experienced exporters are usually prepared to quote and invoice in Euros and/or US Dollars. An exporter may offer a better price if you are prepared to pay in local currency. You can protect yourself against the risk of fluctuations in the exchange rate by using a forward foreign exchange contract with your bank.

Import finance

You and the supplier must agree how to finance the delay between production of goods and their arrival in your country. If you are in a strong financial position, you may be able to negotiate a better price by agreeing to take more of this financing burden. For example, you could agree to pay once you have evidence that the goods have been shipped.

Negotiate the payment method

If your supplier knows and trusts you, they may offer you a credit account. The supplier may want to use an alternative form of payment that reduces their risk and allows them to share the financing burden with you. For example a 'bill of exchange' or a 'letter of credit'. Resist any request for payment in advance, or a deposit, unless you trust the supplier. Agree who will pay any bank charges.



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