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How to Start an Import/Export Business

Editor’s note: This article was excerpted from our Import/Export Business start-up guide, available from SmallBizBooks.com.

International trade is one of the hot industries of the new millennium. But it's not new. Think Marco Polo. Think the great caravans of the biblical age with their cargoes of silks and spices. Think even further back toprehistoric man trading shells and salt with distant tribes. Trade exists because one group or country has a supply of some commodity or merchandise that is in demand by another. And as the world becomes more and more technologically advanced, as we shift in subtle and not so subtle ways toward one-world modes of thought, international trade becomes more and more rewarding, both in terms of profit andpersonal satisfaction.

Importing is not just for those lone footloose adventurer types who survive by their wits and the skin of their teeth. It's big business these days--to the tune of an annual $1.2 trillion in goods, according to the U.S. Department of Commerce. Exporting is just as big. In one year alone, American companies exported $772 billion in merchandise to more than 150 foreigncountries. Everything from beverages to commodes--and a staggering list of other products you might never imagine as global merchandise--are fair game for the savvy trader. And these products are bought, sold, represented and distributed somewhere in the world on a daily basis

But the import/export field is not the sole purview of the conglomerate corporate trader, according to the U.S. Departmentof Commerce, the big guys make up only about 4 percent of all exporters. Which means that the other 96 percent of exporters--the lion's share are small outfits like yours will be--when you're new, at least.

Champagne and Caviar
Why are imports such big business in the United States and around the world? There are lots of reasons, but the three main ones boil down to:

• Availability: Thereare some things you just can't grow or make in your home country. Bananas in Alaska, for example, mahogany lumber in Maine, or Ball Park franks in France.

• Cachet: A lot of things, like caviar and champagne, pack more cachet, more of an "image," if they're imported rather than home-grown. Think Scandinavian furniture, German beer, French perfume, Egyptian cotton. Even when you can make it athome, it all seems classier when it comes from distant shores.

• Price: Some products are cheaper when brought in from out of the country. Korean toys, Taiwanese electronics and Mexican clothing, to rattle off a few, can often be manufactured or assembled in foreign factories for far less money than if they were made on the domestic front.

Aside from cachet items, countries typically exportgoods and services that they can produce inexpensively and import those that are produced more efficiently somewhere else. What makes one product less expensive for a nation to manufacture than another? Two factors: resources and technology. A country with extensive oil resources and the technology of a refinery, for example, will export oil but may need to import clothing.

Types ofImport/Export Businesses
First off, let's take a look at the players. While you've got your importers and your exporters, there are many variations on the main theme:

• Export management company (EMC): An EMC handles export operations for a domestic company that wants to sell its product overseas but doesn't know how (and perhaps doesn't want to know how). The EMC does it all--hiring dealers,distributors and representatives; handling advertising, marketing and promotions; overseeing marking and packaging; arranging shipping; and sometimes arranging financing. In some cases, the EMC even takes title to the goods, in essence becoming its own distributor. EMCs usually specialize by product, foreign market or both, and--unless they've taken title--are paid by commission, salary or retainer plus...