Importing stock from overseas is a lot more complex
than picking up the phone, placing your order and waiting for the goods to
arrive. There are a lot of factors to consider before you go ahead and place
your first import order. We’ve put together 10 tips
to help you decide whether the allure of cheaper prices or better products from
overseas is as attractive a proposition as it might appear to be at first
glance.
1.
Is there a local market for the goods you want to import?
Importing for resale
You’ll need to make sure
there is enough demand in your local market before you start to import goods
for resale. Identify your potential target customers and conduct a survey among
them to get a feel for whether importing will be profitable. If there is
limited demand, you could end up sitting on a pile of stock that you’re
not able to sell and making a loss on the deal.
Importing for use in manufacturing
If you’re planning to
manufacture a new product, you’ll need to check there is
sufficient demand for the end product to warrant importing some of the stock
you’ll
need. If you plan to use imports as a substitute for local suppliers for items
already in production, it would be wise to check that current levels of demand
are expected to remain the same or increase. If demand decreases, you could end
up tying up too much of your working capital in import stock that sits on your
warehouse shelf.
2.
Are you able to import certain items into your country?
Before you spend time, effort, or money on further
research, you should make sure you’re
allowed to import the goods you plan to bring into your country, and make sure
the products you import are legal from Viet Nam.
There are a number of restrictions placed on items you
can import. These range from outright prohibitions, which would apply to things
like chemicals or medicines, to restrictions on particular products or items
from particular countries.
We now just focus on motorcycles & scooter export
only until we expand depends on demand from customer.
3.
The costs of importing
You’ll need to find out all
the costs and charges you’ll need to pay before you
place an order with an overseas company. These costs could include:
Transport
and insurance costs (depending on the trade terms you negotiate)
GST
Customs
duties and levies
Storage
Finance
charges
Charges
for services like the use of customs brokers or freight forwarders.
You’ll probably need to
identify the correct customs clearance tariff for the goods you want to import
to find out how much you will need to pay in customs and duties. You’ll
probably also need to supply the country of origin of the goods and the value
(excluding shipping), to calculate the correct amount payable.
4.
Is importing actually cost effective?
Once you have an idea of the final landed cost of an
item, you’ll be able to check whether importing will
be a cost-effective option for your business. There are a lot of additional
charges you’ll need to pay over and above the cost per
unit from a factory overseas, and these can add up. You’ll
want to be able to make a reasonable return on investment after all these costs
have been taken into account.
It is a good idea to get your accountant, business
adviser or customs broker to go through your calculations to make sure you’ve
included all the costs you’re likely to incur.
You’ll also need to conduct
market research to establish what products your competitors are selling. It is
a good idea to keep a list of product names, specifications and retail prices, to
make sure your imports do have a competitive advantage or unique selling point
that differentiates them from products your competitors sell.
5.
Can you afford to import?
It’s important to make sure
you can afford to finance the cost of importing. Importing is cash intensive
for two reasons. The first is that given the high shipping or transport costs,
it is more cost effective to place larger orders less often than smaller orders
more often – so import orders are often large, and
therefore expensive.
The second reason is that importing ties up working
capital. The person you’re buying from will
either ask for payment upfront or ask for a letter of credit or some other
payment guarantee from your bank. This means you can’t
access the money or use it to run your business in between placing the order
and paying for it, which can spread over a number of months for some orders.
6.
The risks of importing
There are more risks associated with importing than
buying locally and you need to be aware of these to manage them effectively.
These include the following quality and delivery concerns.
The
distance between you and your supplier is great. This means it is harder for
you to check on, or deal with, issues like quality control.
The
delivery distance is further and the delivery time longer, which makes
returning goods more onerous.
Because
of the time it takes to deliver, you might end up in a position where you have
to accept inferior goods, simply because you can’t
source the right quality replacement product in time if your supplier lets you
down.
You’ll need to take care to
source reputable suppliers, and only place orders on terms that give you cover
against non-delivery and include penalties for late delivery or for goods that
are not up to standard. It also pays to source alternative suppliers so that
you have a back-up should you require it.
Run a cash flow forecast to make sure you can still
manage to run your business effectively while you have money tied up for import
orders. Speak to your accountant, bank manager, or financial adviser to double
check you haven’t overlooked anything
important.
7.
Dealing with exchange rate fluctuations
Exchange rate fluctuations are another potential risk
that you could be exposed to as an importer. You’re
probably buying goods priced in a foreign currency, which means exchange rate
fluctuation can affect the final amount you’ll
end up paying in USD. The rate could move in your favour or against you. There
are a few ways you can deal with this:
Transfer
the risk to the supplier by asking them to quote in USD if you are from country
using another currency.
Purchase
forward cover to protect you from fluctuations.
Add an
exchange rate risk to your margins and carry the risk yourself.
8.
Choosing a reliable overseas supplier
The cheapest supplier is not necessarily the best
supplier to deal with for imports. It is more important to find a reputable
supplier. You want to source a supplier who you’re
reasonably sure:
Won’t
disappear overnight with your cash
Will deliver
on time
Will
deliver the products you have specified and at the level of quality expected
Will
keep you informed if there are any problems or delays.
Ask to see a list of customers that your potential
supplier supplies and contact them for references. You better find a trust
consultant for searching the best exporter here or through Viettrade website which belong to the
government.
9.
Dealing with overseas suppliers
Dealing with suppliers in a foreign country often
involves a steep learning curve. You might be dealing with people who do not
speak the same language as you, and you will almost certainly be transacting
with people with a different culture and set of values from yours. The
potential for misunderstanding and miscommunication is much larger than when
dealing with local suppliers. But we are here to help you out.
10.
Trading terms and customs requirements
Trading terms
Before you sign an import order, you’ll
need to understand trading terms used by importers and exporters, and you’ll
need to be sure that both parties are using commonly accepted understandings of
these terms.
To get to grips with terms like EX (ex works or ex
factory, warehouse, or plantation), FAS (Free Alongside Ship), and FOB (Free on
Board) is not as difficult as it might first seem. The International Chamber of
Commerce has developed standardised rules for the interpretation of trade terms
called Incoterms. Incoterms 2000 is currently used, but a revised edition,
Incoterms 2010, will come into effect from the beginning of January 2011. Your
bank’s
international trade department, a freight forwarding agent, or your local
Chamber of Commerce should be able to help you with this.
Customs requirements
There are a number of customs requirements that you
need to be aware of if you plan to start importing. It is an offence to make an
erroneous customs entry or declaration and it is recommended that you have a
freight forwarder or customs broker assist you with this paperwork.
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