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Starting an import/export business with the United States
In the import/export industry, you serve as a matchmaker for companies worldwide.
If you’re a people person with an interest in the US, an import/export business could be for you. If businesses want to export their goods, you help them find buyers. And if companies are looking for specific merchandise, you help them find sellers.
The US is one of the Philippines’ major trading partners. According to Trading Economics, Philippine exports to the US totalled $11.57 billion in 2019. With dedication and this guide, you can get in on this profit and build a thriving business that’ll facilitate trade around the world.
What's in this guide?
- Types of import/export businesses
- Use a money transfer to make and receive international payments
- Startup costs
- Narrowing your market
- Licences and permits
- Charging for your services
- Which business model should you choose?
- International billing and payments
- Shipping the goods
- Risks and how to avoid them
- Bottom line
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 interests you the most.
Export management company
Let’s say a company in Australia wants to export its product. That’s where an export management company (EMC) can help.
An EMC handles all of the details for the company to ship goods overseas. This could include hiring distributors, creating marketing materials and preparing shipping logistics.
Export trading company
An export trading company (ETC) finds out what foreign buyers want and then locates domestic companies that can export the goods.
Import/export merchant (or free agent)
Import/export merchants buy merchandise from a manufacturer – foreign or domestic – then resell that merchandise around the world. There’s heavier risk involved in being a free agent – but with fewer middlemen, there’s the potential for higher profits as well.
Use a money transfer to make and receive international payments
You can start your own import/export business with few upfront costs.
At a minimum, you need a phone and a reliable Internet connection. You’ll also want to invest in business cards, a website and a fax machine. And it doesn’t hurt to hire somebody for your branding, including someone to make a unique business logo.
Narrowing your market
Once you’ve decided on the type of import/export business you want to run and calculated your startup costs, it’s time to narrow your market focus.
By niching down, you can focus your attention on the market you can serve best. Think about the following:
- Customers you want to serve
- Areas of the world you’ll target
- Types of goods you’ll offer
Take your time to dig deep with your research. The extra time you spend finding profitable niches will pay off in the long run.
Your target customer will be someone who wants to trade globally. They’ll either want to sell goods overseas or buy goods from international sources.
Beyond that, you can choose any type of customer you wish. For example, you could decide to cater to companies that sell cars or to companies that sell medicine. The choice is really up to you.
If you can identify a need, you can target a group of companies as customers.
The United States' top 10 exports
- Planes, helicopters and spacecraft
- Refined petroleum
- Gas turbines
- Integrated circuits
- Vehicle parts
- Packaged medicaments
- Aircraft parts
- Medical instruments
Source: The Observatory of Economic Complexity, 2016
Licences and permits
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.
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.
A note about importing goods into the United States
Typically, the US Customs and Border Protection (CBP) doesn’t require a license to import goods to or export goods from the United States. However, other government agencies or departments or local governments may require them.
If you’re exporting goods, you can find out which licenses may be required by asking your local port of entry.
Charging for your services
Import/export business 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 smartphone for US$300, you’ll make a US$30 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.
On a retainer model, your client pays 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 labour, supplies and overhead.
An alternative model
Beyond a commission or retainer structure, you can simply buy goods 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 good 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 based on this: 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 during the downtime.
Finally, if you’re confident in your ability to sell the products you acquire, 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 need to send and receive goods from other countries, so you’ll need to arrange shipping details.
First, contact a freight forwarder – a company that helps you transport 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 a freight forwarder, read our shipping guides to learn how to ship merchandise.
Risks and how to avoid them
Unpredictable shipping logistics
Needless to say, your success hinges on whether you can ship goods safely and efficiently. If you’re exporting goods, 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 markets
It’s a good idea to thoroughly research a market before entering into 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 goods. To avoid drowning in a swamp of border regulations, hire experts in customs law and trade compliance.
The import/export business is for people who love building relationships in other countries, but it also requires an organised mind that can handle logistics.
If you have those qualities, take the plunge into creating a thriving import/export business.
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