LITMIR.BIZ

      ✔ Find out what makes doing business internationally different.

      ✔ Discover the different approaches that can be used in setting up an import or export business.

      ✔ Learn which qualities you’ll need to be successful.

      ✔ Determine how much money you need to invest and how much can you earn.

      ✔ Get familiar with the applicable rules and regulations.

      ✔ Begin organizing your export/import operations.

Chapter 1

      Introducing Import/Export

       In This Chapter

      ▶ Finding out what the import/export business is all about

      ▶ Looking at the environmental forces you can control – and those you can’t

      I can’t imagine a more exciting time for international trade than the present. The opportunities for exporting and importing are growing at an impressive rate – and with those opportunities come challenges. Many factors have contributed to this growth: the establishment of the World Trade Organization (WTO), the implementation of trade agreements such as the North American Free Trade Agreement (NAFTA) and the CAFTA-DR (Dominican Republic–Central America–United States Free Trade Agreement), the continued economic integration of Europe, and the growth of emerging markets such as India, China, Turkey, and more.

      You’re living in an exciting time! In the past, opportunities for many small businesses ended within the borders of their own country, and international trade was only for large multinational corporations. Today, the global marketplace provides opportunities not just for the multinational corporation but also for small upstart companies. The Internet, affordable changes in technology, and increased access to information have all made it easier for firms of all sizes to engage in international trade.

      In this chapter, I introduce you to the wonderful and exciting world of importing and exporting. You discover various approaches to doing business internationally and the environmental forces that make doing business with other countries different.

       Importance of Trade to the Economy

      International trade has never been more important. Here are the two primary reasons for this change:

      ✔ Speed of communication: Advancements in transport and communications make people more aware of business developments elsewhere and enable them to take advantage of opportunities. Not only is it now much cheaper to operate internationally and trade with foreign partners, but because of the Internet, potential buyers and sellers can exchange information more efficiently.

      ✔ Lower barriers: Trade barriers between countries have fallen and are likely to continue to fall.

      The United States is the largest exporter in the world for commercial services and the second largest for merchandise. U.S. exports span more than 230 destinations, with Canada and Mexico accounting for more than one-third of the total. Canada was the top export market in 2013, at $301.6 billion. Canada was followed by Mexico ($226.1 billion), China ($121.7 billion), Japan ($65.2 billion), and Germany ($47.4 billion). Although emerging economies make up a smaller share of the overall exports, future world exports are expected to be largely driven by growth in these economies.

      The United States is the world’s second biggest importer. The main imports are capital goods (29 percent) and consumer goods (26 percent). Others include industrial supplies (24 percent); automotive vehicles, parts, and engines (15 percent); and foods, feeds, and beverages (5 percent). Shipments from China represent 19 percent of the total imports, followed by Canada (14.5 percent), Mexico (12 percent), Japan (6 percent), and Germany (5 percent).

       Defining the Import/Export Business

      Most companies begin their initial involvement in international business by exporting or importing. Exporting is sending goods out of your country in order to sell them in another country. Importing is bringing goods into your country from another country in order to sell them.

      Both of these approaches require minimal investment and are, for the most part, free of major risks. They provide individuals and companies with a way of getting into international business without the commitment of significant financial resources, like the kind required to actually set up shop overseas. In this section, I introduce you to the main forms of importing and exporting.

       Exporting: Do you want what I’ve got?

      Exporting comes in two major forms:

      ✔ Direct exporting: Direct exporting is a business activity occurring between an exporter and an importer without the intervention of a third party. This option is good for existing businesses that are looking for ways to expand their operations.

      ✔ Indirect exporting: Indirect exporting is easier than direct exporting. It involves exporting goods through various intermediaries in the producer’s country. Indirect exporting doesn’t require any expertise or major cash expenditures, and it’s the type of exporting used most often by companies that are new to exporting.

      

As you gain experience in doing business internationally, you may want to move from indirect exporting to direct exporting. You’ll have greater control over the sales and distribution of your products.

       Looking at types of indirect exporting

      Indirect exporting can include the use of an export management company or something called piggyback exporting, both of which I cover in this section.

       Dedicated exporting: Export management companies

      An export management company (EMC) is a private company based in the United States that serves as the export department for several manufacturers, soliciting and transacting export business on behalf of its clients. EMCs normally take title to the goods and assume all the risks associated with doing business in other countries. Using an EMC is helpful when you’re new to exporting or you don’t have a distributor or agent in a foreign country.

      

Entrepreneurs not interested in manufacturing can

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