Imports and Exports: Essentials for International Business
February 9, 2021
Table of Contents
Most people have heard of imports and exports. They are what international trade is based on. However, it isn’t that simple.
If you are an entrepreneur or own your own business and you want to start trading outside of your country borders, then this article is for you.
We will look at what imports and exports are, their pros as well as their limitations, how to start your own imports and exports business, what the rules and different types of Import/Export businesses are, and our top tips for becoming an Import Export Agent.
What are imports and exports?
Imports refer to the services or goods that are bought by a country’s residents from other countries across the world, instead of buying from domestic producers or providers. Importing goods leads to an outflow of money from the country because import transactions involve the buyer making a payment to a seller in another country.
Exports are services and products that are made domestically and then sold to clients outside of that country. Exports involve an inflow of money to the producer or provider’s country. This is because export transactions entail selling domestic products or services to a client residing in a different country.
The pros of imports and exports
- It is one of the easiest ways to enter the global trade market
- Imports and exports create huge opportunities for employment and growth
- It will cost a lot less time and money than alternative ways to enter the global trade market
- By comparison, it is less risky than other methods of starting doing business internationally
- No country can be completely self-sufficient so imports and exports are vital for any nation’s functioning and growth
- Imports and exports enable countries to access the best and latest technologies and well as the highest-quality goods and services in the world
- It allows for better control over trade than establishing a market with much higher risks
The limitations of imports and exports
- Importing and exporting goods leads to more packaging, protection, insurance and transportation costs which make the product more expensive
- Exporting isn’t allowed if another country bans imports
- Domestic companies that are nearer to the customer could offer a better service than businesses that are based in another country
- There are certain quality standards for some goods so selling low-quality products or services can result in a bad reputation for the company and country
- It can be frustrating, difficult and time-consuming to obtain licences and documents for foreign trade
- You might run the risk of losing influence within your domestic market and with existing clients, if you are not careful
Starting your own imports and exports business
It has beens shown in some reports that up to 70% of people are unhappy in their current position. However, changing career paths, although daunting, is not impossible. Why not give international trading a go?
Taking time out to learn a new business and do some research, start a business and create a marketing plan takes a lot of courage, but it is worth it. It isn’t easy, but once the first few deals start happening, it is a very rewarding feeling to see what you have been working on come to fruition.
Starting your own business is an exciting process. All the work you put in directly benefits you rather than someone else you report into. You will be making the decisions and be accountable only to yourself, bringing you a sense of freedom. There is plenty to gain from starting your own company.
Imports and exports rules
The European Commission is determined to help traders make the most of global trading opportunities by laying out all the necessary information clearly.
International trading within and outside of Europe brings growth to the European economy and work for European citizens.
The European Commission provides the data on technical requirements to trade, tariff duries, food health requirements, anti-dumping and anti-subsidy duties and other matters.
You can find more information about the specific rules on imports and exports in Europe on the European Commision website.
Types of Import/Export Businesses
Whilst there are importers and exporters, there are also many variations within this. Here are the main ones.
Export Management Company (EMC)
An EMC takes care of export operations for a domestic business that wishes to sell its products overseas but isn’t sure how to. The EMC takes care of it all. They will hire dealers, send out invoices to clients, representatives and distributors. They will take care of the marketing, advertising and promotion. They will also monitor packaging and marking, shipping and they even sometimes arrange contracting or financing for the development of a credit card app. The EMC might even take title to the goods, meaning they become in essence their own distributor. EMCs most often specialise by foreign market, product or both and will most often be paid on salary, commission or retainer plus commission.
Export Trading Company (ETC)
Whilst an EMC sells merchandise and works hard to find buyers, an ETC takes care of the other side of the trading coin. An ETC finds out what foreign buyers want to spend cash on and then identify domestic sources that are interested in exporting. ETCs sometimes take title to the products. Other times, they will take commission.
An Import/Export Merchant is an international entrepreneur that acts as a sort of free agent. They don’t necessarily have a specific client base and don’t always specialise in one type of product or industry. Rather, they buy products directly from a foreign or domestic manufacturer and then pack, ship and resell the product on their own. That also means that unlike an EMC, they are taking all the risks, as well as any profits.
Becoming an Import Export Agent
Becoming an Import Export Agent is often sold as being a quick way to make money without needing to do too much work. It involves linking up buyers and sellers, negotiating deals and getting paid. However, it isn’t that simple. Here is a video that explains the basics of how to become an Import Export Agent:
Top 10 tips for becoming an Import Export Agent
Look for a service or product you want to represent
Figuring out what you want to be selling, finding manufacturers, suppliers or a source for your product is the starting point.
One good way to do this is by getting in touch with the embassy of the country you want to source from. For example, if you are thinking of sourcing your products in Canada, you should contact the commercial branch of the Canadian embassy in your country and ask for a list of Canadian suppliers and manufacturers of the good you want to represent.
Another way to source products is by getting in touch with overseas trade fairs and to ask for a list of the businesses that will be present at the fair. For example, if you were wanting to become an agent for grains, do a search on the internet for ‘grain fairs in Canada.’ You will then be able to create a list of locations, dates and contacts. You can even visit a few of them, if possible, to start getting to know people and to build your network.
Create a range of products
Once you have chosen the product you want to represent, you should then develop a range of them from either one supplier or from a range of suppliers who sell products you think go well together.
When you pitch your main product in front of a potential client, you will be better able to convince them to make a deal if you can back your product with a range of other products where there is an opportunity to sell the range, thus bringing in more money. The other advantage is that if the potential client isn’t interested in the main product, they might be interested in another product within your range. You will thus increase your chances of concluding a deal and growing your sales network.
Know your product
Do you understand your product well enough? Although you do not need to know all the minutiae of your products, you need to have a good understanding of them, of the manufacturing process, how much production costs, wholesale price, retail price, profit margins and so on.
You have to be able to pitch your product confidently and demonstrate a depth of knowledge. It doesn’t matter too much if there is one question you do know the answer to. You can always come back to them. However, if you aren’t able to answer a few questions, it will start to undermine your credibility and your product.
Do your research
When starting as an agent, you need to know your market. Who are your competitors, what are their wholesale prices, who’s retailing your products, what is your retail price, how are your different from your competitors, what can you improve on,…
You need to find your niche and then establish yourself there. Then, you can grow.
Find out about safety regulations
This is a crucial step that is sometimes overlooked but can quickly become very costly if not taken into account. Is your product compliant with health and safety regulations in the country you aim on selling to? If it isn’t, you could go through the whole process of sealing a deal and then find out that your product is being held at customs because it doesn’t comply with national regulations. This will probably cost you a lot, both in time and money.
Establish your territory
Mark the territory you wish to represent. This will largely depend on your goals, how much money you have and how large your network is.
If you’re new to this and have a relatively small capital, then it is best to work within your region. Once you establish yourself and start growing, then you can grow to a national and even international level.
A circumvention clause is a legal way to prevent the buyer or seller from excluding you for future sales as the commission agent. You should make sure you include it in your contract.
In order to promote and demonstrate your product in meetings and pitches, you will probably need samples. You will find it a lot harder to convince people if you are not able to show them what you are offering so make sure your suppliers can also provide you with some samples.
On top of samples, you should also check out what kind of promotional material your supplier is able to provide. They will generally have product images which you can use in any communications you make or which you can add on your website. These images need to be high quality and represent your products and brand well.
Videos are another way to present your product, provided it is good quality. You could also produce brochures to leave with potential clients. There you can include information such as costs, profit margins and prices.
Finally, you should determine what commission you will be working on. You commission has to make it worthwhile for you so you have to make sure you have properly thought through your costs and what the bottom line is. If your calculations are wrong, this could obliterate any profit you make from your sales.
How CONNECTS can help you with your import and export efforts
When trading internationally and doing export or import activities, having a single platform like CONNECTS where you can find new suppliers, distributors, partners and clients can be a great help. It will save you a lot of time and effort and can really boost your imports and exports trading efforts.
CONNECTS is an online B2B matchmaking platform which can help you do business and find new opportunities worldwide within an environment of trust. Indeed, each member on the platform has been assessed and validated by a local chamber of commerce, meaning you can do business in all confidence.
Are you an entrepreneur wanting to discover and develop new opportunities, both locally and internationally? Join our Business Matchmaking Platform and start your free trial. Already a member of a participating chamber? Join our Business Matchmaking Platform for free. Want to learn more about CONNECTS? Find us on Google maps! For more information, don’t hesitate to contact us or request a demo.