Imports and Exports: 5 Things Your Small Business Needs to Know
Inflation is serving as a drag on the retail economy, but ecommerce is still flowing. In the US, ecommerce sales broke the $1 trillion barrier for the first time in 2022, despite a drop in real earnings over the past year, and the National Retail Federation (NRF)'s chief economist Jack Kleinhenz expects consumers to keep spending despite the drop in real earnings.
However, despite encouraging market trends, handling cross-border shipping is a bigger challenge than expected. The supply chain is still under stress, and inflation has driven up the costs of shipping and transportation, as US imports in 2022 fell to their lowest level since the height of the pandemic.
That said, here are five things a small business owner should know in order to navigate imports and exports in the current global economy.
1. Familiarize yourself with customs regulations
It's important to explore customs regulations before you even choose which goods to sell. Different countries have varying tariffs and restrictions on categories of imported products, so you'll need to research the regulations for every country into which you ship goods.
You might need a license to import certain types of goods, or specific permission from various government departments such as the department of health. The value of a given product can make a difference too. For example, in the US, you don't have to pay customs tax on shipments valued at under $800, and if it's worth less $2,500, you won't need to file for "formal entry" which spares you from extra documentation and expenses like customs bonds.
There might also be laws regarding which countries you're legally permitted to import from; the US, for example, has strict rules surrounding imports from countries engaged in criminal activity, such as Ghana and the Ivory Coast, which are at high risk for facilitating modern slavery. If you import from China, you'll need to prove that your goods don't come from the Uyghur region to comply with the Uyghur Forced Labor Prevention Act.
It's important to learn as much as possible about the customs process so you can avoid issues with your shipment. "If you don't provide the correct documentation and follow the right procedures, you run the risk of having your goods detained and/or examined—both of which result in delays and hefty costs." says Agatha Aviso, retail software expert writer at Fit Small Business.
2. Cultivate relationships with freight forwarders and customs brokers
It's tough to manage imports and exports alone, especially if you're a small retailer without a full-time shipping expert on your payroll. That's why it's useful to cultivate relationships with partners who can guide you through the logistics and documentation involved in importing, and ensure your goods are properly transported and clear customs.
Customs brokers, for example, are specialists in import and export laws and can legally counsel a business on shipment logistics and procedures.
Freight forwarders help organize end-to-end transportation. Once your goods reach the port of arrival, they'll need transportation to the warehouse. This can be a serious headache for SMBs, who often do not have a fleet of trucks at their disposal. Freight forwarders provide the last mile transportation.
Online freight forwarders can help you with multiple aspects of the international shipping process, such as navigating the customs bureaucracies for you, arranging cargo insurance, and helping your small business get precedence over larger companies with competitive rates. Ship4wd in particular caters to SMBs only, with cash flow-friendly payment options such as credit and direct debit and 90-day payment windows.
3. Understand landed cost
There are many charges and duties to consider when importing goods, including product costs, shipping costs, customs duties, taxes, insurance, customs brokers, freight forwarders, and more. The total is referred to as the "landed cost", meaning the total cost of delivering the product to the end-user.
"Many ecommerce businesses make the mistake of assuming that cost of goods sold (COGS) and shipping costs are the only costs you need to cover when setting a price for your product," writes Cathy Ostlie, content writer at ShipMonk. "Landed cost includes all of these costs, as well as additional expenses that are incurred by the seller after the product is sold. This makes landed cost a far more accurate number than cost of goods sold (COGS) for setting your list price."
The country of origin can also affect the customs duties and other costs you'll have to pay. To give one example, a shipment entering the US that's worth over $2,500 requires charges and a surety bond. You'll also want to evaluate different transportation options, such as sea freight, air freight, or courier services, which come with different price tags. Mistakes in calculation can lead to misguided profit figures, and that in turn can throw out all your profit calculation.
4. Double down on documentation
Incomplete or inaccurate paperwork and incorrect labeling or valuation can raise the risk that your shipment will be seized for examination or at worst, destroyed or sold at auction. Therefore, it's critical to ensure your products are correctly classified under appropriate HS codes and comply with labeling requirements such as country of origin, safety warnings, or specific product information.
Transportation management platforms can help ensure that your documentation is all present and correct by digitizing the process. By using a software tool, you're less likely to overlook a vital form or miss a required field.
5. Protect your products
Packaging also plays an important role in retail imports. Quality packaging can help ensure your products arrive in good condition, but problematic packaging or packaging that looks like it's been tampered with can also raise suspicions among customs control officers. If your goods aren't packaged securely, it raises the risk that they'll be seized for examination.
At the same time, you'll need adequate insurance. Many retailers make the mistake of assuming that shipping companies cover insurance, but insurance that covers lost, stolen, or damaged goods is the responsibility of the shipper. Many freight forwarders and shipping companies offer cargo insurance, but you'll have to ask for it. It's not applied automatically.
Your regular business insurance provider might offer cargo insurance, or you could choose a specialist in this type of insurance. Companies offer cargo and marine insurance as well as other types of insurance packages.
Imports and exports don't have to be a headache
Importing and exporting comes with many obstacles, especially for retail SMBs with small workforces and limited resources. However, careful research and utilizing the right tools and partners can help make the process smooth and streamlined, so you can focus on growing your small business.
With Old National Bank, you have a partner for your international banking needs. Learn more today!
This article was written by Itai Elizur from Small Business Trends and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to email@example.com.