About IMPORT BUSINESS REFERENCE GUIDES will get you working like the pros in no time. These short topics are packed with links to valuable online research and data used every day by those in the import trade.
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 An example big-profit category: floral stems With Free Online Tools, Find the Most Profitable Products to Import
Want to know how much profit there is on those items made overseas? With a little research using free online tools, you can review the average price per unit of goods being imported into the U.S. We’ll show you how to quickly find a product’s classification code so you can review powerful importing statistics.
We’ll use the fresh-cut floral industry for our research. Roses are popular, but how are their profits compared to other varieties of flowers, such as chrysanthemums. Let’s look at the two simple steps to quickly compare the two varieties and determine the average import value per stem for each. We can also see trends in pricing and import quantities.
Let’s Get Started
Step 1: Determine the Harmonized Tariff Schedule (HTS) Classification
First we need to determine the classification code for our products. The United States Harmonized Tariff Schedule contains all the classification codes for goods imported into the U.S. This number is also used to assess duties upon importing. (Note: While this tool is useful for research, it’s recommended you work with a customs agent to provide a final determination of your product’s HTS classification. The discipline of assessing a classification code is complex and takes years of experience to master.)
We go to the United States Harmonized Tariff Schedule website. We enter the first search term “roses” to capture the HTS number, then enter the second search term “chrysanthemums” to capture the second HTS number:
0603.11.0010 – Sweetheart roses
0603.14.0010 – Pom pom chrysanthemums
With these two cut-flower variety classifications known, we can now look at the import trade statistics.
Step 2: Find Trade Data for a Specific Product
The U.S. International Trade Commission website has a wealth of statistical data that can help you explore any product you may consider importing. Best of all, it’s free to use once you set up a user account. Then proceed to use the trade data tool.
We enter our classification numbers and request data on value and quantities, giving us the average price per unit (before duties and custom fees are applied). Here are our results:
Roses: U.S. import average price per stem
2008 – US$0.147 per stem
2007 – US$0.136 per stem
Pom pom chrysanthemums: U.S. import average price per stem
2008 – US$0.135 per stem
2007 – US$0.136 per stem
What We Conclude From These Statistics
Roses: There is substantial gross profit margin between the retail price per stem we see in the U.S. versus the average price per stem paid by flower importers. A bouquet of a dozen roses on 1-800-Flowers.com sells for $59.99 (including the glass vase), while we find the average price per rose stem of just under 15 cents, or $1.76 per dozen before duties. We also see the average per-stem price is on the rise, increasing 8.60% from 2007 to 2008.
Chrysanthemums: A check at our local grocery store floral stand shows pom pom chrysanthemum stems are selling at $2.99 per stem. To order these through a florist will be much higher. We see the average imported price running 13.5 cents per stem. Again, a nice gross profit margin. However the trend on pricing from 2007 to 2008 is on the decline, although not by much, decreasing by 0.60%.
Even with a substantially lower gross margin per stem than roses, the chrysanthemum is often used in all types of floral arrangements throughout the year. While roses see a sharp sales spike for Valentine’s Day and Mother’s Day in the U.S., the chrysanthemum sells in bouquets consistently throughout the year.
Do-it-yourself Research Along With a Professional’s Input
Conduct preliminary research online with these free resources to narrow down the product categories of interest to you. Once you know the product to import, contact a customs broker and ask that your findings be validated. The broker will become your partner in global trade, and will provide ongoing information about trends, regulation changes, and other important issues that will make a difference on your bottom line.
 Customs Brokers – Partners for Success
Every product you import into the United States needs to be identified with a tariff classification number. The tariff classification indicates the duty rate you will pay. The classification is also used to review the country of origin, along with the product type, to see if the item is impacted by any quotas or embargoes. Determining the proper tariff number is not an easy task and is best left to a professional who is knowledgeable in this discipline — the customs broker.
Once you have done some preliminary research and know the product you are importing based on profitability, and the country with which you intend to import from, you’re ready to find a customs broker.
Refer to the U.S. Customs and Border Protection (CBP) website to locate a broker. This page provides a listing of all U.S. ports sorted by state. Click Trade in the top bar; then click Locate a Port of Entry under Resources. Select a state, and then a city, and the resulting page will include key port information and key contacts. You will see a link “Brokers: View List” which will give you a great starting point.
In a quick phone call to a customs broker, you can explain which item you intend to import, give a description of the materials made in manufacturing the item, and name the country you intend to import from. The broker will assist you in narrowing down a tariff number with relative ease, and there is typically no charge for this phone call.
Customs brokers look up tariff classifications all day long. If they have a relationship established with a business, answering a question like this is quick and part of the service they provide their clients. If you are new to importing, most brokers will gladly assist in your early education for no charge; they see it as an investment to gain your future business.
Import duties, quotas, and embargoes can change from time to time and can have a big impact on how you negotiate your offshore buying price, as well as how to set your selling price. This step should not be overlooked and should be completed before you begin contacting manufacturers — or certainly before you begin negotiating your buy price.
 No License Required to Be An Importer
Good news! In the United States, you generally don’t need any special license or training certification to become an importer or start an importing business.
As you complete the paperwork to clear products through customs, you will be asked to provide your “importer number” which will be either your business Federal Tax ID number or your Social Security Number if you don’t have a Federal Tax ID. If you don’t have a Social Security Number, you can apply for an importer number through the local port authority where you will be entering your goods. This importer number is used to identify all your trade activities in the U.S.
Special Licenses or Permits Required for Some Products
Some specific items imported do require a special license or permit from various government agencies; these items include food products; alcohol; plant, animal, and dairy products; prescription medications; trademarked items such as name-brand shoes, handbags, luggage, golf clubs, and toys; and copyrighted items such as CDs, DVDs and tapes.
Contact your customs broker to discuss the product you are expecting to import, and he can easily outline any special licenses or permits which will be required. You can also visit the U.S. Customs & Border Protection website for further information on the types of licenses or permits needed for specific product categories.
 Starting an Import Business Takes Less Money Than You Think
The biggest misconception about importing is you need lots of money for a large minimum purchase order, or you need to buy enough to fill a 40-foot container. In fact, that initial purchase order you place with a new supplier may take less money than you think.
Minimum Purchase Order Requirements
Every day, businesses large and small are looking for new suppliers with fresh ideas and products. In the early days of the relationship, suppliers and buyers will treat each other with caution. The importer will want to ensure that he can trust the new supplier and the new item will sell quickly. A supplier will want to be sure the importer can come through on a purchase order with a valid letter of credit (L/C) and can move his product in the market as promised. Because of this, nearly all initial transactions are done on a small trial basis, even by big corporations with big budgets.
The small order from your company may actually be the same amount as the initial order from a major department store or mail-order catalog. What will be of more interest to the supplier is your business model: who are your customers and how are you reaching them? If you are selling to the end consumer, are you doing this from a brick-and-mortar storefront with a geographic region that is limited? Or do you have a website with impressive traffic? Are you an eBay Power Seller? Are you well connected with a community of buyers? Do you have established relationships with retailers and a team of sales reps that assist you in moving product on a wholesale basis?
The answer for those questions are more important than the size of your initial purchase order. Offshore suppliers are looking to grow long-term relationships and are willing to work with you to establish trust. Minimum orders are often a guide to what they would like to see on a re-order basis. Remember: everything is negotiable.
From a cash-outlay point of view, the dollars needed depend on the product you will import and the shipping method you use. If you are buying children’s apparel and want an initial selection of products that have an average offshore cost of US$1.00 per unit, a $500 initial purchase order will give you a nice selection of styles, colors, and sizes. If you plan to import teak furniture and need to ship by sea freight, the shipping costs may make sense only if you fill half of a 40-foot container. And if the teak furniture ships as knock-down furniture, it may require $10,000 to buy enough units to fill half of a container.
Shipping Small Sample Orders
The logistics of getting a small order imported may pose a greater challenge than meeting a minimum purchase requirement. Imported goods travel by either sea freight or air cargo. The product you carry will place you into one of these categories. For example, it doesn’t make sense to ship jewelry parts by freight, and furniture is too heavy for air cargo to be practical. But what about a sample order of apparel? Or pet supplies? Automotive parts or toys? These small sample orders can either be shipped via air cargo (at a higher cost, but with maximum speed) or consolidated on a ship with other items from the same country.
Shipping via air cargo is relatively simple for a supplier who may book directly with the air carrier. The order arrives quickly and clears customs quickly, and you are ready to test the market within a matter of days.
If you are shipping less than a container load by sea, you will wait longer to receive your initial order. Your goods will be held in the country of origin until a consolidator can bundle your goods with other products to fill the container.
Your shipping costs on a small initial order may eat up a good deal of your gross profit margin. But the initial order is a trial run at your dream. After you test the supplier, determine the marketability of the goods, and review potential profits, you can reorder on a larger scale. This will result in lower shipping costs per unit.
Other Business Expenses
Along with your initial purchase order, there are other ordinary business startup costs, such as licensing, accounting software, business logo design, marketing collateral, and more. These startup costs are outside the scope of this article and they vary, but are usually relatively small.
Given that a successful importing company can be managed by one person and given the ease with which an online store can be set up with moderate costs, it’s conceivable that an importing company can be started with US$1,000 to US$10,000 or less, depending on the cost of the product to be imported. There are hundreds of success stories of small business owners who buy directly from suppliers overseas and sell the products on eBay as a most basic example. Your business model may be quite different, but recognize that importing does not have a high cash requirement to break in to.
Most importing companies are small operations, especially in the early days. Because so much of the ongoing value in an importing business is the ability to develop relationships, the product or commodity you trade in may differ from one season to the next. You may move product merely for its profitability. Or you may stick with one product industry and become specialized in that item.
Many entrepreneurs find ways to cut corners in the early days to be able to launch their business. Sharpen your pencil and calculate typical startup costs for your business, including cost of space (if leasing), employee salaries, etc. Then add an estimated minimal sample purchase-order budget required of your product. Get clarity around your marketing strategy, and ready yourself for selling your importing business to suppliers overseas.
Locate several suppliers with a solid reputation, introduce your company, and ask for preliminary prices. Explain that you’re in the early days of your business and focus on the energy you will give to moving the supplier’s goods to market. Keep the upper hand by stating what your minimum purchase order amount will be to test the waters, not what the supplier wants of you.
As you can see, how much money it takes to start an importing business depends largely on the product and the required shipping method, not the minimum purchase-order size. Whether you have $500 or $5,000, you can start an importing business.
Realize Between 120% and 340%+ Markup Selling at Wholesale, Retail, or Both!
The amount of money you make importing depends on how big your purchase orders are, whether you are selling wholesale or retail, and how often in the year you can repeat the cycle. Because every small business has a different level of cash in the early stages with which to get started, we can’t predict how much profit in dollar terms you will realize in a year. But we can examine the profit margins of selling at retail vs. wholesale, and how often the cycle can be repeated given these two distribution points.
In this illustration we use an example of widgets with an offshore unit price of US$1.00 directly from the manufacturer. Because we are working through an offshore agent, our actual cost is 10 cents more to cover the agent’s commission. The imported unit price is US$1.10; this is the figure used to calculate duties when they arrive in the U.S. We elect to transport the goods by air cargo for US$1,300. The shipping, duties, customs fees and other costs paid before we can take possession at the airport add an additional 2%, or US$220.00. We now have a “landed unit cost” of US$1.25 coming in our front door.
For our importing company to be rewarded for the risk taken for warehousing, marketing and shipping the goods to the next distribution point, we will need to double our landed cost. This strategy of doubling costs in the front door is known as a ‘keystone markup’ and provides a business with a (50% cost of goods) + (50% operating and profit) ratio. Any business that takes title and possession of goods will mark up at least this much to cover the risk.
If we opt to sell at a wholesale price directly to the retailer, we will set our selling price at US$2.50. If we decide to have independent sales representatives approach their network of retailers and represent our product for us, we will add on a 10% commission for their compensation, bumping our selling price to US$2.75 to cover commissions. For this example, let’s say we will sell our goods with the assistance of sales reps. The wholesale price of our widget is now US$2.75. We paid a landed cost of US$1.25.
Wholesale Profit Margins
Selling at wholesale, we have a gross profit margin of US$1.50 or 55% (US$1.50 divided by US$2.75). Or to put another way, we realize a 120% markup on our landed cost of US$1.25 (US$1.50 gross profit divided by a landed cost of US$1.25).
A 55% profit margin, or 120% return on our offshore purchase investment, is respectable in any business. But what if we could sell to a large community of end consumers with relative ease via a website? At this point we own the goods and can sell in the market to any buyer we wish.
Retail Profit Margins
The retailer can be expected to also keystone, or double, the cost of our widget when they take title and possession until sold. The final price for the end consumer is now set at US$5.50 per unit.
If we sold our item at the full retail value of US$5.50 without the need of a sales rep, this would provide us with a gross profit of US$4.25 (US$5.50 less the landed cost of US$1.25).
Selling at retail gives us a 77% gross profit margin ($4.25 divided by $5.50), and increases our markup to 340% on our landed cost of $1.25 ($4.25 gross profit divided by a landed cost of $1.25).
Repeat the Import-to-Sale Cycle Often
In our example, it may take a year to sell through 10,000 widgets if selling with the staff of a small importing company, but you’ll realize more profit on each transaction. On the other hand, if you sell your items though sales reps on a wholesale basis, your profit for each widget sold will be smaller. However, you’ll have more people selling to retailers who will buy the items in volume, rather than one at a time.
With the ease and minimum investment it takes to set up an eCommerce site today, businesses are enjoying global exposure and sales regardless of their size or location. Traditional lines of the supply chain have become blurred. Retailers are selling direct to consumers on the web and in some segments find this more profitable than maintaining a storefront. Wholesalers sell to retailers in the traditional manner, but may establish a website and sell direct to consumers as well.
An importer having title and possession to goods obtained at offshore prices is in the enviable position of selling to whomever he chooses. If a greater margin is desired, a website will reach the broadest audience with minimal increase in staffing or overhead.
How much money can be made in importing is a matter of how much capital can be invested in the purchase order, and how quickly the cycle of import-to-sale can be repeated. There is generous room in gross margins of up to 77% to find the best sales model that fits with your business size.
 Is It Possible To Start an Importing Business Without Quitting the Day Job?
With the internet giving us instant access to anyone on the other side of the globe via email, chat, and Skype, starting a global trading business has never been quicker and easier.
Any new business takes a commitment of time and start-up money. But an importer’s hours can certainly be spent after a day’s wage has been earned with an existing job. You don’t have to quit your day job to lay the groundwork for a small importing business. Many global suppliers are located on the other side of the world, and their work day is beginning after your commute home from your job. The day-to-day timing element couldn’t be a better fit.
Whether you are at a crossroads in your career, have concerns about the stability of your job with your employer, or are finishing school, owning your own business in global trade is very realistic with a minimal investment. This is a relationships business. People connecting with people, understanding what the market needs, and knowing where to source products overseas are keys to success as an importer.
What You Don’t Need to Start an Importing Business
- You don’t need to quit your day job. You are communicating at any hour of the day and moving goods with the help of key partners, such as customs brokers and warehouse personnel. All this can be done online or via phone without your personal presence.
- You don’t need a lot of start-up capital. Successful importing companies have long enjoyed sizeable profits operating as small businesses with small staff.
- You don’t need office space. A desktop and computer connection is where you’ll spend most of your time. This could be in your home, a small executive suite, or a coffee house providing wireless internet connectivity.
- You don’t need to sign a long-term lease for a storefront. You can market your goods and reach your customers with a modest website built on Yahoo for a minimum cost.
- You don’t need to commit to large warehouse space, or even give up space in the guest bedroom to store your inventory. You can have a third party logistics vendor handle all your warehousing and fulfillment from another state. You never need to see your product if you wish!
What You Do Need to Start an Importing Business
- A drive to own and grow your own small business.
- An internet connection and computer for communication and marketing your company.
- A desire to play a key role in helping your global partners succeed in their business.
- A curiosity to know what’s new in the marketplace, and excitement in discovering new trends and products before the rest of the world.
- A relationship with a customer base that is looking for new, innovative products.
- Enough capital to meet the minimums of the initial purchase order your supplier requires. This may be a smaller investment than you’d expect.
You can get a solid foundation built for your importing business without quitting your day job and finding large investors. You’ll be in complete control.
 Gain Control of When and Where You Work, and How Much Money You Make
Buy at the lowest offshore price. Sell direct to the consumer at full retail. Or discover a niche somewhere in between. When operating an importing business, you are in complete control of when you work, where you connect, and how much money you make.
Importers are in an excellent position in the supply chain. Manufacturers depend on the importer to develop markets for their items, and retailers look to importers for the latest and greatest gadget and trends coming from overseas. The importer can buy at the lowest cost, and sell at the highest price.
Every season retailers asks “What’s new?” They need to keep inventory fresh and exciting for their customers. An importer has first access to items coming into the market. This knowledge makes him a valuable partner in the retailer’s success.
The offshore manufacturer needs to receive purchase orders from new customers to grow his business. He depends on the importer’s knowledge of sales trends and distribution channels in worldwide economies other than his own, and to help sell his goods into these markets.
Importers have mastered the art of sourcing, shipping, and distributing products across borders. They enjoy a lifestyle that includes travel to exotic destinations (while writing off travel costs), finding the latest products from eager manufacturers, and many ways to make money. A small minimum order of US$2,000 could conceivably gross nearly US$9,000 in sales revenue if sold direct to consumers on a website. How is this possible? It’s the magic of straddling several distribution points in the supply chain.
Importing is a relationship business on a global scale. Some start an importing business because of a desire to travel, or love of a product. Others start because family or friends living abroad can be trusted to help with initial sourcing of goods. And others shift from employee status to business owner, building their dream from the ground up.
The profitability in importing is limitless, and the opportunities are as vast as the world itself. Realize the highest profit margins selling imported items direct to consumers on the internet. Or act as an importing agent bringing buyers and sellers together, where commissions are paid on the deal without ever taking title to the goods.
Realize how easy it is to build a global business with today’s internet, voice, and Skype technologies. Weigh the investment of time and cost with the reward of more control, more money, and business ownership satisfaction. Then answer for yourself, “Is Importing for Me?”
>> Get started now! Select the reference guides from the list located under REFERENCE GUIDES in the right column.
We’re giving you the key to uncovering trade secrets in the importing industry. The Import Channel IMPORT BUSINESS REFERENCE GUIDES are written for quick reading, so you can get back to doing business. The short topics are loaded with links to dozens of crucial sites that professional U.S. importers and customs brokers depend on every day to be successful. These FREE guides will have you working like the pros in no time.
Whether you are an established business owner looking to source products from overseas, or exploring the importing trade as a new business, the reference guides provide the basic answers used daily by everyone in this global industry.
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