Opening your own import/export business can be easy and affordable. This blog post is meant to explain how to open an import/export business and the role surety bonds and custom brokers can play in the process and execution that business.
Determine Which Import/Export Business Best Fits You
There are three kinds of import/export businesses a person can choose to open. Each kind offers different advantages and disadvantages, and they each fit a different role in the importing and exporting marketplaces.
An export management company is an import/export business that works on the domestic side of things. Export management companies find domestic companies that want to export products to foreign markets, but are unsure how. Export management companies offer a wide range of services including, but limited to: hiring dealers, advertising the product in the country or countries, and marketing the product to the new market. Generally, export management companies specialize in either a specific good or product good or foreign market. It is not unusual though to find an export management company that specializes in both. For example, an export management company could specialize in selling rugs to Brazil.
An export trading company finds demands in foreign markets, then finds domestic companies to meet the foreign demand. Unlike export management companies, export trading companies generally do not specialize in goods or countries. Export trading companies search for domestic companies that want to sell their products abroad, then helps the company meet the requirements to enter that market.
An import/export merchant is a free agent who does not specialize. They don’t specialize in clients, markets or goods. Instead of working on the domestic or foreign side of things, they do both. What they do is buy goods directly. They’ll buy straight from domestic or foreign companies or manufacturers and distribute the products. They then independently pack, ship and sell the products to whatever markets they want to, assuming all risks in the process. The benefit of being an import/export merchant is they receive all profits from the transactions, meaning they don’t have to share it with the companies they purchased the products from.
Find Your Niche
Having a background in a certain product can be advantageous for opening an import/export business. This can help you find a niche and target market that is receptive to your product or products. In the era of globalization, getting product around the world is much easier. However, specializing can help new import/export businesses learn the ins and outs of the business before expanding.
Having a background in a product can help your business get of the ground and help you learn the basics of importing and exporting in a context that is already familiar to you. It can also be easier to find clients if you have contacts or know the jargon of the industry. Once your foot is in the door, finding a more diverse client base can be much easier.
What is a Customs Broker?
Customs brokers are private people or entities (associations, partnerships, or corporations) that must be licensed by the Department of Homeland Security and U.S. Customs and Border Protection. The Department of Homeland Security also regulates the industry to ensure customs broker are operating their businesses within the law. In short, custom brokers help import/export businesses navigate federal requirements for importing and exporting. This can be the requirements for a certain good, standards for a certain port or a combination of the two. The U.S. Customs and Border Protection Agency requires that customs brokers be experienced in entry procedures, admission requirements, classification of goods, finding the value of goods and know the going rates of duties and taxes for all relevant merchandise.
Customs brokers must be United States citizens that are over the age of 21 who are not currently employed by the federal government. Customs brokers are required to be of “good moral character”. Customs requires that those seeking a customs broker license pass the Custom Broker License Exam and submit the Custom Broker License Application. The application must be submitted to and be approved by the Department of Homeland Security in order for a license to be granted.
How Can Customs Brokers Help Your Business?
Import/export businesses are not required by law to use a customs broker. However, customs brokers are the only people authorized by the Department of Homeland Security to act as agents for importers. They can be incredibly useful to your import/export business because of their vast knowledge of federal standards, regulations, laws, taxes and duties. They have to be incredibly knowledgeable to do their job, and that know can help your import/export business run more smoothly and more efficiently. Custom brokers charge differently, but they generally determine their fee based on the total value of the goods being imported. However, it is not unusual that brokers and clients will decide a fee beforehand.
The Role of Surety Bonds in an Import/Export Business
The United States Customs and Border Protection requires certain documents be filed with the port director within 15 days a shipment is due to arrive in that port. These required documents include the entry manifest, commercial invoice, and evidence of the right to make entry. Packing lists are not always necessary, but if the port direct requires one, that must be submitted with the previous documents.
These documents need to be accompanied by some form of security when they are filed with the port director. Acceptable security can come in two forms: a cash deposit (in US Dollars) or a surety bond. If you chose to use a surety bond, the surety bond’s purpose will be to ensure the federal government is paid the proper duties, taxes and charges. A surety bond is required if the goods imported are worth more than $2,500 or if they are subject to additional government agencies’ requirements. If you are an import/export business and you choose to use a customs broker, the bond brokers’ are required to have can help secure imported goods.
There are two different options for import bonding. Applicants for the bond can chose between a “single entry” bond or a “continuous bond”. If the applicant chooses a single entry bond, the applicant needs a new bond every time they import something. This differs from the continuous bond, because it is valid for a fixed period of time instead of a fixed number of imports. If your import/export business occasionally imports, the single entry bond may better serve your bonding needs. If your import/export business imports often and in many different ports, the continuous bond may better serve your bonding needs.