The import and export game in the U.S. is skyrocketing! Government numbers tell us that in just December 2021, imports and exports jumped by a whopping $7 billion each. Americans are craving new and exciting products from all corners of the globe.
So, starting an import/export business might be a gold mine waiting to be discovered. But before you jump in, let’s unpack different types of “import” and “export” businesses, how to get your international business started in the USA, and if it’s really the profitable venture you imagine.
Types of Import Export Businesses
Importers and exporters” – that’s the primary cast of characters in the international market trade. There are more exciting players, each with their role in global trade. Let’s meet the crew:
Import Export Merchants
These independent people don’t stick to just one product or market. They either make or buy products and then sell them to other countries. This way of doing business can be risky, but you might earn more money.
Export Trading Company (ETC)
This is like being a go-between or a distributor. Instead of making their products, ETCs find foreign buyers for goods and then look for someone in their home country to send these goods abroad. Sometimes, they might even own the goods they’re exporting and make money through commission.
Export Management Company (EMC)
An EMC manages all the export stuff for a company. If a company in your country wants to sell its products in other countries, an EMC will take care of everything needed to make that happen. This includes finding people to sell the products, creating ads, and arranging for the products to be shipped.
Now that you’ve learned about the various types of business, let’s explore how to start an import export business in nine easy steps.
Steps to starting an Import-export business
- Identify products to import or export
- Explore shipping options
- Source your suppliers
- Write an Import-export business plan
- Register your business
- Obtain necessary licenses & permits
- Figure out financing
- Get a business insurance
- Market your business
1. Identify products to import or export
Starting a successful import-export business means determining what products or services you want to trade.
You need to look into different items and industries to find out what’s in demand worldwide and see if importing or exporting them is practical.
Here’s how you can find out:
Learn What Customers Want
You can ask people directly through surveys or group discussions. Look at what’s selling well in foreign markets by checking sales data and market reports. Also, watch social media and import-export industry websites to stay updated on trends and what people like.
Doing this makes you more likely to sell products that people will want to buy.
Is the Product a Good Fit? After conducting market research, consider whether your export products will work well. This means looking at things like how much they’ll cost to make and send, how unique they are, and how much people need or want them.
Check Out Your Competitors
You need to know what your competitors are offering to pick the right products.
- Look at their prices and what their customers are saying. Websites like Alibaba can give you a good idea of global prices.
- Watch their ads and marketing to see how they’re selling their products.
Learning from your competitors can show you what might work or not in your target markets, helping you choose profitable products.
Costs and Profits
Consider the costs of making and shipping your products, including extra expenses like taxes. Then, think about how much profit you could make. A simple way to compare costs and profits is to use a spreadsheet.
Rules for Your Products
Before you start exporting or importing, know the rules for the products you want to send. This includes safety certifications, what needs to be on labels, and any export restrictions.
Different countries have different requirements for things like safety and environmental impact. Know these rules for the countries you’re targeting.
How you label and package your products can also vary by country. Ensure you know things like language requirements and what information must be on the label.
Now that you know your product, it’s time to make sure it will make money. You can look at the following studies:
- GlobalEdge’s Market Potential Index (MPI): This study by Michigan State University has been done since 1996. It looks at how good different countries are for business each year and ranks them from 1 to 100.
- International Chamber of Commerce (ICC): This group helps trade and teaches businesses how to do things better.
- U.S. Census Bureau, Foreign Trade: This is the official place for U.S. export and import numbers. They also make sure exports follow the rules.
- Local Government Officials and Websites: You can also talk to local Commerce Departments for insights on what products and services are popular or needed in your area.
2. Explore shipping options
This step can be complex because there’s a lot to think about. You must decide how to ship your products – by land, sea, or air. You also have to figure out the right way to package them for shipping.
Plus, you need to plan how to store them so they’re easy to get to and arrange transport to and from places.
It’s usually a smart move to hire a global freight forwarder for any import/export business. They act like a shipping agent, taking a big load off your shoulders.
You tell them about your business and what you want to do with your products, and they handle the shipping plans, insurance, and often the paperwork like licenses, permits, taxes, and limits for trading in another country. This can make starting an import/export business much less stressful.
3. Source your suppliers
Once you’ve chosen a product to trade internationally, your next step is to find a local maker or supplier who can work well with you. Here’s how to do it:
Start by searching on Google for suppliers or makers of the product you’re interested in. If you want to buy from local sources, look for local wholesalers and distributors.
Remember, buying directly from foreign manufacturers or their agents usually gives you better prices than local sources. Once you find a supplier’s website, go to their “Contact Us” page and send them your questions.
Many online marketplaces can help you find suppliers. One of the biggest is Alibaba, which is based in China and is great for finding Asian products. Global Sources, D.H. Gate, and All.Biz are also well-known if you’re looking for other options.
Use Import/Export Port Data
Look for suppliers and makers by getting import/export data from companies that sell this information. Companies like IHS Piers gather data from ports worldwide and sell it.
This data might not have direct contact info, so you should look up suppliers on Google.
Visit Trade Shows
Despite the shift to online business, meeting suppliers and seeing the products yourself can be valuable.
Trade shows are great for this, especially for high-tech or expensive products. Meeting sellers in person can build trust and add much to your business relationship.
Also, use incoterms®, or international commerce terms. These are rules that buyers and sellers agree on to make sure everyone involved in international deals is protected.
4. Write an Import-export business plan
An Import-export business plan lets you understand the facts, limits, and goals of selling internationally. You can use it to set clear targets, plan when to do things, and track your progress. It can also help your team stay focused on reaching these goals.
A written plan outlines the steps you must take to commit to exporting. Without a plan, you might miss opportunities to grow your business beyond your country.
Usually, a business plan has parts like:
- A quick summary
- Info about your company
- Market Research
- Details about your products or services
- How you’ll market and sell
- Predictions for money coming in and going out
- Funding Request
5. Register your business
After deciding on your product and suppliers, it’s time to make your import-export business official!
Here’s how you can do that:
Step 1: business registration:
Think of this as getting your official passport for your global target market. It makes your business legit and separate from you personally, which is suitable for legal purposes and taxes.
Most small import-export companies in the U.S. need to head to their state or local government office and tell them:
- Your business name
- Where your international trade H.Q. is located
- Who’s in charge (you, your partner, or your LLC crew)
- Your unique “Doing Business As” name, if you have one
Step 2: Pick your team structure:
Do you want to start your import export business solo, grab a partner, or have whole LLC members? This choice affects your taxes, money, and paperwork. Conduct market research and find what fits your goals best.
Step 3: Get your I.D. numbers:
- CIN: This is like your international trade license. It lets the Department of Commerce track your trades across borders. You can quickly get it on their website.
- EIN: This is your business tax I.D., like a social security number for your company. Get it online, by mail, or fax from the IRS.
If you want to bring products from other countries into the U.S., you must register with Customs and Border Protection. This makes you an Importer of Record (IOR).
As an IOR, you ensure all the import rules for your products are followed. This includes filling out customs forms, paying duties and tariffs, and other tasks.
To be an IOR, you must fill out the Importer Identity Form, also known as CBP Form 5106.
6. Obtain necessary licenses & permits
Licenses and permits are the gatekeepers of the import/export world. The good news is most products in the U.S. don’t need them!
Here’s what you need to know about these licenses:
CBP doesn’t have a complete list of “import license needed” items, but they have some guidelines. Some special items do need licenses, which include:
- Dairy products
- Radioactive materials
- Wildlife and pets
- Biological Drugs
- Biological Materials and Vectors
If you’re importing one of these, double-check with CBP before your shipment gets stuck at the border.
It’s your job to determine if your item needs a license to leave the country—usually, the Bureau of Industry and Security or the U.S. Department of State handles these permits.
So, how do you know if you need a license?
Four things matter:
- The item itself
- Where it’s going
- What is it used for
- Who’s getting it
In this case, the Export Administration Regulations (EAR) is your handbook for export licenses. Think of it like a map showing which items need permission to leave. It lists stuff under the Commerce Control List (CCL) in 10 categories, like nuclear materials, chemicals, computers, and airplanes.
However, not everything on the CCL needs a license. If your item isn’t listed, it’s probably EAR99 – mostly license-free. But be careful; some EAR99 products still need permission.
You can also find out if your product needs an export license by looking at its Export Control Classification Number (ECCN).
Here are three ways to find the ECCN
- Check it yourself using the CCL
- Ask your supplier
- Request it from the Bureau of Industry and Security.
7. Figure out financing
Starting an import/export business is exciting, but it takes some real money to get going. The good news? You can start small, even from home, without much inventory or employees. Starting an export-import business from your house would cost around $5000 to $25000.
But if your import export business takes off and you need more fuel, here are some options:
Export-Import Bank: They help American import export businesses like yours by offering loans, guarantees, and insurance.
SBA Export Loan Programs: The Small Business Administration has special programs to help you develop and grow your exports. They offer loans for different stages, from starting up to expanding.
Here are three loans that they offer:
- Export Express Program: Up to $500,000 for inventory, receivables, and development activities.
- International Trade Loan Program: Grow or expand your exports or fight against import competition.
- Export Working Capital Program: Get working capital for production, receivables, inventory, or even standby letters of credit.
- Import/Export Line of Credit: This is a flexible credit card for your import/export needs, helping you manage cash flow and pay suppliers or customers over time.
- Ex-Im Working Capital Guarantee Program: Need help before you even start exporting? This program can secure financing for things like raw materials and equipment for your export goods.
8. Get a business insurance
Shipping products across borders can be risky! But fear not; import-export business insurance is here to save the day. It’s like a superhero cape for your goods, protecting them from financial harm.
Here’s what you need to know:
Export Credit Insurance: Worried buyers won’t pay? This covers you if they skip out, reimbursing 80-90% of the loss.
Marine Insurance: Covers your goods from the moment they leave the supplier until they reach your buyer, no matter where they travel (not just the ocean!).
Political Risk Insurance: If you’re doing import export business in shaky countries, this insurance shields you from government seizures, payment delays, and even wars or riots.
International Product Liability: Even if you do your market research, sometimes goods get rejected at customs. This covers you if regulations change or your product doesn’t meet the mark.
Remember, research and preparation are essential, even with insurance. But with these options in your arsenal, you can trade internationally with more confidence and peace of mind!
9. Market your import export business
In your job as an international trader, your main goal is to sell yourself, your company, and the products you offer. You have to get companies to trust you to sell their products in foreign countries (export) or to bring in products from abroad to sell here (import).
The better you do in either exporting or importing, the easier it gets to do well in the other. Say you help a company sell many products in overseas markets; you can show that success to other companies to get more business.
Many import-export businesses don’t export or import, even though it could earn them more money. Your job is to find these companies and persuade them to let you help them sell abroad.
Before you reach out to a company, do your homework:
- Find out what products are hot in the U.S. Think about stuff you use or things certain groups love.
- Are these products also wanted in your target market countries?
- If they’re not popular, could they be if people knew about them?
- Who makes these products?
- How much does selling them, both here and in the target countries, cost?
Using this info, you can contact companies with your sales pitch through direct-mail campaigns.
Pick a company that makes one of the products you’ve looked into. Find the right person to talk to, like their president or sales manager.
Your letter should explain:
- Who you are and what your company does.
- How exporting or importing could benefit them.
- Why is your company the best choice for this?
You have contacts with foreign distributors ready to sell their products.
Finish the letter by asking for a meeting. Keep sending out letters to other companies until you’ve covered your list.
Wait a week or two, then follow up with a phone call to request a meeting.
You can also try calling companies directly. It might save money, but it’s tougher to nail.
Before you call, plan out what you want to say. You can even write a script but don’t stick to it too rigidly.
Be ready for rejections. It’s all part of the job.
Build an SEO-friendly website
Imagine this: someone searches for your products, and your website appears first. That’s what SEO can do. Make your website more accessible, and you’ll attract more customers.
Social media accounts
Use platforms like Facebook, Instagram, LinkedIn, and Twitter. They’re great for connecting with potential customers, showing off your products, and building trust.
You can post interesting stuff, answer questions, and join industry chats. People will start seeing you as the expert.
Work with local pros
Team up with local agents in the countries you’re targeting. They know the local scene, language, and rules, helping you avoid mistakes.
Let your happy customers speak for you
Satisfied customers are like free salespeople. Ask them for referrals and testimonials, and put these on your website and social media.
The import export business brings products from one place to another, meets people’s desires, and makes money. Have you ever wondered how to get stuff that’s made far away? Or how do you share something cool with people in other countries while ensuring it’s suitable for everyone involved, from the makers to the transporters?
If you’re thinking about this, don’t worry about how big the task seems. With the proper research, a solid import-export business plan, and paperwork, you can start your own import-export business and make it work.