Imports and Exports: Amazing Guidelines for Trade in 2022
July 4, 2022
Table of Contents
Most people have heard of imports and exports. They are what international trade is based on.
This article is for entrepreneurs who want to develop their business should start trading outside of their country’s borders and think global.
We will look at what imports and exports are and their pros as well as their limitations. You will discover how to start your own imports and exports business and what the rules and different types of Imports and Exports businesses are.
If you want to become an imports and exports agent, you can find some tips at the end of the article.
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. You can trade in services or in goods.
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. The countries you export to become your export markets.
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 balance of payments is the difference between imports and imports, and if it is zero, it means that there is neither surplus nor deficit of imports or exports.
It is important to keep in mind who your biggest trading partners are. It is fundamental also to keep an eye on the top categories. For instance, the UK exported mostly precious metals and stone (gold) in 2019.
The pros of imports and exports
Pros of imports and exports are:
- 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 as 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
Imports and exports limitations
Limitations of imports and exports:
- Imports and exports of goods lead 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. 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
Importance of imports and exports
The importance of imports and exports varies according to the country. UK imports and exports differ, for example, from the United States.
Indeed, China is the country that exports the most in the world. For this reason, the role of international trade, imports and exports, is important for its economy.
The economies of developing countries need to export to developed nations. Yet, even for the United Kingdom and Australia, it is fundamental to maintain a high level of exports.
Imports and exports: effects on Gross Domestic Product (GDP)
Gross domestic product (GDP) is a monetary measure of the market value of a country. It takes into consideration the value of the total goods and services produced in a country. It is also called National Income.
Imports and exports are fundamental elements to calculate the GDP. The best source to track imports and exports is a nation’s merchandise trade balance. The formula is:
GDP = C + I + G + (X – M)
- C = Consumer spending
- I = Investment spending
- G = Government spending
- X = Total exports of goods and services
- M = Total imports of goods and services
(X – M) represents exports minus imports, which is called net exports. When the result is a positive figure, it is called a trade surplus.
When exports are less than imports, the figure is negative. In this case, the country has a trade deficit.
This datum reflects the balance of trade in a country. It shows whether a country is a net importer or exporter and also to what extent.
Starting your own business
It has been 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. Starting a business and a new work experience and creating a marketing plan. Starting a new business takes a lot of courage, but it is worth it if you are unhappy with your current situation.
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.
European rules on imports and exports
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 to European citizens.
The European Commission provides the data on technical requirements for trade, tariff duties, 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 Commission website.
Businesses types for imports and exports
Whilst there are importers and exporters, there are also many variations within this.
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 all you need.
They will hire dealers, and send out invoices to clients, representatives and distributors. They will take care of the marketing, advertising and promotion.
They will also monitor packaging, marking, and shipping. They sometimes even 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 in foreign markets, products or both. They 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, 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 identifies domestic sources that are interested in exporting. ETCs sometimes take title to the products, while other times they will take a 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, who 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. Yet, it involves linking up buyers and sellers, negotiating deals and getting paid, so it is not so easy.
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 sell, and 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. You can ask them for lists of Canadian suppliers and manufacturers (these are optional modules) of the good you want to represent.
Another way to source products is by getting in touch with overseas trade fairs and asking for a list of the businesses that will be present at the fair.
For example, if you want 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 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
It is important that you understand your products well enough. Although you do not need to know all the minutiae of your products, you need to have a good understanding of them:
- 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 are not completely sure about. 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, it is important that you know your trade market:
- who are your competitors
- what are their wholesale prices
- who are retailing your products
- what is your retail price
- how are you different from your competitors
- what can you improve on and so on
You need to find your niche where you can establish yourself and 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 that you can use in any communications you make or which you can add to 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 of 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. Your 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
When trading internationally and doing imports and exports activities, having a single platform like CONNECTS can be a great help. On CONNECTS, you can find:
It will save you a lot of time and can really boost your imports and exports trading efforts.
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