Determining the True Cost of Importing

by Selma Canas | February 4, 2020

When traveling to different countries and becoming immersed in new cultures, it is easy to get swept away and may inspire many entrepreneurs to want to bring a little piece of the trip home to share.

From unique products to lower labor costs, there are many reasons why business owners choose to import goods.

However, it is not as easy as finding something interesting in a foreign land, buying a large supply and then selling it in the United States. There are many things a business owner must consider before investing in foreign manufactured products.

Feasibility Study
The most important thing a business owner must do before investing is to conduct a feasibility study. You must have your domestic business set up so you know who your customer is. This is done to ensure there is a market for the product. It also highlights any competition you may have as well. The study also helps determine the resell cost of the items and – after calculating all the costs to import that particular product back to the states – if it makes financial sense to invest.  After evaluating costs, you still have to set a competitive price. After evaluating all of these elements, make sure that you are still able to make a profit.

Cost
Sure the labor may be cheaper to manufacture goods in certain countries, but there are other costs to keep in mind when importing goods.

• Shipping – Whether by air or by sea, shipping is a large expense to consider. Shipping costs include handling as well. This includes labor that loads and unloads products, oftentimes, depending on the location, at a number of ports. There is also the cost of inland freights. Once your product has reached America, what will it cost to get it to its final destination?
• Insurance – There are many things that can happen while in route to a final destination. It is important to purchase insurance for all goods.
• Duties – There are many factors that determine the cost of duties to import into the US. This includes the type of product and what country you are importing from. It is important to note that the United States currently has free trade agreements effective with 20 countries – Canada, Australia, Costa Rica, Singapore, and Honduras to name a few.

Customs Broker
Though this is an extra cost, it is important to hire a customs broker when venturing into any type of international business. They are the ones that will be able to clear the goods through customs. They will do the research to evaluate the best way to ship the items and will even provide a variety of quotes to ensure you are getting the best price.

Regulations
Now that you have figured out the costs, you must find out if there are any current government regulations restricting the item you are importing. For example, if you are importing food products, the overseas facilities producing the foods must be registered with the U.S. Food and Drug Administration. They actually evaluate every facility to ensure it complies with all regulations. In addition to food products, the FDA regulates other products, such as cosmetics, drugs, medical devices, and others. The United States Department of Agriculture has regulations and policies in place to protect the health and safety of consumers as it relates to food and agriculture, domestically and internationally. Also, keep in mind that the United States has many quotas on imported food and other products in order to protect American farmers and manufacturers. So, if you want to import “x” number of avocados from Mexico, you have to determine if there’s an existing quota and check the status of the quota with U.S. Customs and Border Protection.

Licenses
You do not have to have a special license to import any goods. The only person in the entire process that requires a license is your customs broker.

Relationships
If you’re a new importer and you don’t have an established relationship with the supplier, it is important to note that they will more than likely want money upfront for you to purchase the items. You must be prepared to have that capital available in order to make this investment. That is why it is important to do the feasibility study in the beginning. This will show you if it is worth the investment from the start. If you continue to use the same supplier, you will build a relationship and down the road, you may not need the upfront capital.

After taking all of this into consideration, it is the business owner’s job to determine if it is worth it to import goods rather than manufacture products right here in the United States. The labor certainly can be cheaper in other countries; however, you must also consider all of the other costs associated with importing goods.