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The Basics of the Import/Export Trade

The Basics of the Import Export TradeOne of the hot industries today is international trade. International trade has been around for many years. It’s been here all the way back to the great caravans of the biblical age with their cargoes of silks and spices. When one group or country has a supply of some commodity or merchandise that is in demand by another, trade is needed. Technological advances have caused shifts toward one-world thoughts. In terms of profit and personal satisfaction, international trade has become very rewarding.

International trade is big business these days. According to the US Department of Commerce, it is $1.2 trillion in goods annually. Exporting is also a big industry. American companies exported $772 billion in merchandise to more than 150 foreign countries in one year. There is a huge list of products you might not imagine as global merchandise. All of these products are bought, sold, represented and distributed throughout the world each day.

Surprisingly, according to the U.S. Department of Commerce, the big guys make up only about 4 percent of all exporters. This means that 96 percent of exporters are made up of people like you.

There are several reasons imports are such big business in the United States and around the world. The three main ones are:

  1. Availability—There are many things you just can’t grow or manufacture in your home country. Canadian bananas aren’t exactly a possibility. When you can’t produce things in your country, you have to find where they are available.
  2. Cachet / Image—Sometimes, things carry a bigger image if they are imported. Things like Egyptian cotton or French perfume seems classier.
  3. Price—The cost of some products is less expensive when brought in from out of the country. They can be manufactured in foreign factories for far less money than if they were made domestically

Technology and resources are the main reason things can be made less expensively in some countries than others. A country may have a resource like oil. It can export that, but it might need to import things like clothing.

Types of Import/Export Businesses

  • Export management company (EMC)—An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn’t know, or perhaps even want to know how. They will handle everything from:
    • Hiring dealers, distributors and representative
    • Handling advertising, marketing and promotions
    • Overseeing marking and packaging
    • Arranging shipping

Sometimes they can even help with arranging financing. The EMC may, in some cases, take title to the goods. This means they actually become the distributor. They usually specialize by product, foreign market or both. If they don’t take title, they are paid by commission, salary or retainer plus commission.

  • Export trading company (ETC)—Instead of having merchandise to sell and is using its energies to seek out buyers, an ETC identifies what foreign buyers want to spend their money on. Then they search for domestic sources willing to export. An ETC sometimes works on a commission basis, and will sometimes take title to the goods
  • Import/export merchant—These types of entrepreneurs are kind of like free agents. They don’t specialize in one type of industry or products. They don’t have a specific client base. They purchases goods directly from a domestic or foreign manufacturer. Then, they pack, ship and resell the goods themselves. They will assume all the risks and/or the profits.

 

 
 
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