Sourcing finished products or raw materials overseas may help you locate specialty items and find a good price. The key to successfully managing the cross-border hurdles and distance is to carefully research your sourcing options and make the right deals with good partners.
Your initial foray into overseas sourcing will require an investment of time and energy. If done right, this effort will pay off with each order you place.
Follow these rules to establish overseas relationships and terms, and source materials overseas to get the goods you need.
Time spent asking industry peers for recommendations, either in person or through social networking sites, can save you time and money. Many buyer-seller relationships start locally with word-of-mouth recommendations — overseas connections are no different. Don’t take someone’s advice without doing your own follow-up research, though. Check out vendor assessments and product samples on sites such as Alibaba or Global Sources to thoroughly vet potential partners. Sources such as Panjiva and ImportGenius specialize in providing information about overseas suppliers, including details about the suppliers’ current customers and their company history.
Correspond with your potential supplier before you make orders or sign a contract so you can see if they are prompt and clear in their communications. If they are not answering your questions, move on to a different vendor.
Understand your all-in price
Shipping charges, taxes and other fees can bump up the final price tag of items you purchase overseas, so always understand all costs associated with goods before you buy. The United States International Trade Commission has an interactive tool to help determine import duty rates and get personalized reports, and sites such as DutyCalculator.com have calculators that assess import costs.
Paying in the currency of the country in which you make a purchase can also help you keep costs down. Vendors are often willing to cut you a deal if they don’t have to manage the currency exchange themselves. If you choose this route, ask your banker about how to protect yourself from fluctuations in currency that may occur between the time you sign a contract and actually make the payment. Guarantees written into contracts can typically provide protection against big currency fluctuations.
Know your legal rights
Most companies with long track records of exporting to the United States will already have contracts that establish each party’s responsibilities and the penalties that are triggered if they aren’t met. While these contracts can offer the promises and protections you seek, it is always a risk to sign someone else’s document. Get an attorney to review these documents for you and ensure that you are well protected. Questions to ask include: What happens if the shipment arrives and something is broken? What happens if your shipment is short a few items? Research your vendor country’s business and contract law through the World Bank Group’s “Doing Business” site, which provides thorough reports on business regulations for 189 economies.
Find the best payment methods
Wire services such as Western Union Business Solutions GlobalPay and American Express FX International Payments handle online payments from U.S. bank accounts and integrate with common accounting programs, so check your accounting program and bank to see if they have preferred methods that you could easily activate.
PayPal has gained traction for smaller international purchases because its fee structure is often lower than other options. Using PayPal may incur a cross-border fee, which can range from 0.5 to 2 percent of the payment amount, and a currency conversion fee of 2.5 percent of the transaction total.
Build in extra time
Sourcing your products from overseas requires advance planning to ensure that you get service or merchandise when you need it. The lowest-cost shipping options are often the slowest. For example, you may have to wait a month or longer for ocean freight from Asia, and that elongated timeline may require you to keep a laser-like focus on your inventory and shipping calendars. Urgent restocking requirements might necessitate quicker shipping methods from time to time. In those cases, you might consider airfreighting a small portion of products to get to market quickly while remaining inventory is sent by sea or land.
Overseas sourcing can open up new doors for small businesses. Plenty of resources are available to help you pick the right partners and forge mutually beneficial relationships with overseas partners that can build your company’s success.Print this article