If you’ve considered launching a machinery and equipment import/export business, here’s where to start.
In 2012, the US imported machinery worth $166.2 billion and exported machinery to the tune of $122.4 billion. And these figures have only increased since then, representing a significant part of US trade.
You can be in on that profit by starting your own trading company. From motors and generators, to farm and garden equipment, to centrifugal pumps — machines keep the world moving. You can build a thriving machinery and equipment business that facilitates trade around the world.
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Types of import/export businesses
There are three basic types of import/export businesses. Starting out, it’s a good idea to pursue the one that most interests you.
Export management company
An export management company (EMC) helps a company in the US export its machines and equipment. It manages the details of hiring distributors, developing marketing materials and preparing shipping logistics.
Export trading company
An export trading company (ETC) researches the needs of foreign buyers and finds domestic companies to meet those needs.
Import/export merchant (or free agent)
Import/export merchants buy merchandise from a manufacturer — foreign or domestic — then resells that merchandise around the world. Although there’s heavier risk involved in being a free agent, you can potentially earn higher profits when you cut out the middlemen.
You can start your own import/export business with little upfront cost. At a minimum, you’ll need a phone and reliable Internet connection. You may also want to invest in business cards, a website and a fax machine. It’s helpful to hire somebody to take care of branding, including creating a unique business logo.
Narrowing your market focus and target customer
Once you’ve decided the type of machinery and equipment import/export business you want to run, and you’ve figured out the startup costs, it’s time to narrow your market focus. By niching down, you can concentrate on a market you can serve best.
As you spend time researching profitable niches, think about:
- The customers you want to serve.
- Areas of the world you’ll target.
- Types of machinery and equipment you’ll offer.
Types of machines and equipment
To meet the needs of your target customer, you need to choose the type of machinery you’ll offer. Choose something that you have the most experience with. For instance, do you know about semiconductors or compressors? Have you worked with metal-cutting machine tools? Do you know about agriculture, commercial appliances or the transportation sector?
Existing experience with your target area is a plus, but having passion for it widens your advantage. You’ll understand the jargon of your niche and you may already have contacts.
The machinery and equipment market
- Commercial and household appliances. Air-conditioning equipment, ovens, refrigerators.
- Industrial machinery. Packaging and labeling equipment, food processing equipment, manufacturing and textiles equipment.
- Machine tools. Equipment for cutting, boring, grinding and shearing.
- Construction equipment. Earth-moving machinery, plumbing and heating parts, mixing and paving equipment.
- Farm and garden machinery. Tractors, cream separators, animal feeders and lawnmowers.
- Electric motors and generators. Steam- and gas-powered turbines, wind turbines, electrical-generating sets.
Narrowing down target countries
Identify the countries you want to do business with by thinking about your competitive advantages:
- Do you speak a foreign language?
- Do you have connections abroad?
- Have you lived overseas before?
- Have you traveled extensively to a particular country?
- Do you love the culture of a certain country and know a lot about it?
Once you’ve narrowed your list of target countries, investigate each country’s requirements for conducting business — such as tariffs, registration and other documents.
Educating yourself before making a final decision can affect your competitive edge. Ask questions of your target country’s foreign embassy or consulate, and visit the US Department of Commerce to learn more.
Top machinery importers and exporters in 2015
- South Korea
- The United Kingdom
Information courtesy US International Trade Administration.
How do I register my import/export business?
To register your import/export business, you’ll need to complete the US Department of State’s SNAP-R company registration.
After you submit your registration, the Department of State will email instructions about obtaining a Company Identification Number (CIN). A CIN is used for tax purposes and registration with the US Department of Commerce.
Import and export licenses
Typically, the US Customs and Border Protection (CBP) doesn’t require a license to import or export goods from the US. However, other government agencies or departments or local governments may require them. If you’re exporting goods, ask your local port of entry about any required licenses.
Incorporating and forming an LLC
You don’t have to incorporate in order to start an import/export business. But incorporating or creating an LLC can provide key benefits that include:
|Separation of personal and business assets.||Creating a corporation or a limited liability company (LLC) can help protect your personal assets. For example, you’ll have less personal liability for business debts.|
|Expense deduction.||Through a corporation or LLC, you can deduct business expenses before income is forwarded to you.|
|Enhanced credibility.||Clients often prefer working with incorporated businesses, seeing them as more legitimate.|
Specific paperwork required
Depending on the specific makeup of the machinery and equipment you’re interested in importing or exporting, you could be required to submit forms to the US Food and Drug Administration, the Federal Communications Commission or other agencies. You may also be required to submit forms in the country you’re importing from or exporting to.
For more information about specific lines of business within this industry, visit the US Small Business Administration’s Business Guides by Industry.
Because regulations and requirements change, also consider seeking the help of an import/export specialist to determine the exact certificates, licenses and other clearance documents for your machines and equipment.
Charging for your services
Import/export businesses typically charge based on commission or retainer.
With a commission structure, you’re paid a percentage of any trade deal you close — usually around 10%. For example, if you sell a manufacturer’s liquid pump for $1,500, you’ll make a $150 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.
On a retainer model, your clients pay you a monthly fee to be on call when they need your services. To find the right amount for your retainer, consider your costs. These may include labor, supplies and overhead.
An alternative model
Which business model should you choose?
A rule of thumb is to pick a commission model if you think a product will be easy to sell. However, if you think a product will be difficult to sell, price your business based on a retainer.
The thinking is if you’ll sell a lot of product, you want to be paid based on performance. On the other hand, if you believe sales will be slow, using a retainer model could ensure that you’ll be paid even in the downtime.
Finally, if you’re confident in your ability to sell products, you don’t have to negotiate a payment structure with manufacturers. All you’ll have to negotiate is how much you’ll buy product for and then find a way to profit from the merchandise.
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Send Money to the U.S. Efficiently
Compare international money transfer options for machinery and equipment
Shipping the goods
You’ll be sending and receiving goods from other countries, so you’ll need to arrange shipping details.
First, contact a freight forwarder, a company that helps you transport machinery and other goods safely and efficiently. They will help you handle the logistics of completing shipping documents, finding cargo space and securing cargo insurance.
Find a freight forwarder by looking in state-specific business directories.
After you’ve hired one, read our shipping guides to learn how to ship the merchandise.
Laws and legal documents when transferring large sums of money into the US
Risks to avoid
Unpredictable shipping logistics
Needless to say, your success hinges on whether you can ship goods safely and efficiently. If you’re exporting machines and equipment, for example, you’re responsible for ensuring they leave your local port and arrive at the correct destination on time.
You’ll also need to account for anything else that could go wrong, such as damage to the cargo. Staying organized and partnering with a reputable freight forwarder will help you ship goods without a hitch.
Not knowing enough about the machinery and equipment market
It’s a good idea to thoroughly research the market before entering this business, though even that may not be enough.
Consider hiring experts who understand the tastes and cultures of your specific markets. You’ll need to sell products that resonate in countries you’re unfamiliar with.
Running into problems at the border
Customs rules aren’t uniform throughout the world. Instead, you’ll encounter a mass of different regulations while transporting machines and equipment. To avoid drowning in a swamp of border regulations, hire experts in customs law and trade compliance.
The machinery and equipment import/export business is for people who love building relationships in other countries, and success requires an organized mind that can handle logistics. When dealing with machinery and similar goods, a willingness to thoroughly comply to relevant regulations is a must.
If you have these qualities, take the plunge into creating a thriving machines and equipment import/export business.