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Machinery and equipment import/export guide for the Philippines

If you’ve considered launching a machinery and equipment import/export business, here’s where to start.

The Philippines’ machinery export market was worth US$317 million in 2019, while the import market hit US$607 million, representing a significant part of Philippine 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.

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 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.

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Startup costs

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.

Get more tips on growing your business

Narrowing your market focus and target customer

Once you’ve decided on 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.

Your target customer will be someone who wants to trade globally by either selling or buying machines overseas or from international sources.

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 a 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 travelled 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 the Department of Trade and Industry’s (DTI) Tradeline portal to learn more.

Top machinery exporters in 2018

  • United States
  • China
  • Germany
  • Hong Kong
  • France
  • United Kingdom
  • Mexico
  • Japan
  • Canada
  • The Netherlands
Source: World Bank

Permits, regulation and licences

Imports

Machinery imported into the Philippines has to pass strict biosecurity rules. If it doesn’t pass, it’ll be exported back out of the Philippines at your own expense. These rules boil down to:

  • The machinery must be free of all contamination like soil or plants.
  • If the machinery has been used, you’ll often need to organise an import permit before it arrives.

For the guidelines on specific machinery, you can find out more on the Department of Trade and Industry’s Import Facilitation website.

Exports

Before you can export your goods, you’ll need to register your business with the DTI. You can get started by registering your company name with DTI’s Business Name Registration System and choosing the right business license. You will then need to secure various permits from your local government unit, then apply for a business tax identification with the Bureau of Internal Revenue.

Charging for your services

Import/export businesses typically charge based on commission or retainer.

Commission structure

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 US$1,500, you’ll make a US$150 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.

Retainer model

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 overheads.

An alternative model

Beyond a commission or retainer structure, you can simply buy machinery or other equipment and sell them. In this case, your revenue will come from the profit you make from selling merchandise.

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 the 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.

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 Philippines

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 organised 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.

Bottom line

The machinery and equipment import/export business is for people who love building relationships in other countries, and success requires an organised 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.

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