04 January 2010

International Trade & Importing Advice For Flooring

Jim Gould

How Much Do You Know About Flooring, International Trade & Importing?

DOMOTEX: A Source of Invaluable Flooring Insights for Importing & International Trade

International trade can be extremely profitable or a very expensive lesson depending on how well you understand the importing process and prepare for it - especially in flooring. I've learned many lessons during my floor covering career; some confirmed expectations and others led to surprises -- expensive surprises -- having to do with not knowing enough about importing. As Yogi Berra said, “You don’t know what you don’t know” and, if I had, I might have saved a lot of money! For example, I wish I had known why gross profit margins were higher in ceramic than in other flooring categories before making the investments I did. That was an example of not understanding how freight costs ate away profits every time I moved ceramic. On the other hand, I won when I gambled on a new category called laminate back in the early 1990s. That's when I found Pergo at Domotex and was the first person to import it and then distribute it nationally in the U.S.

The long and the short of flooring, international trade and importing is caution for the inexperienced. As we like to say in America, “there may be gold in those hills” but it can be a dangerous road getting there without knowledge or experience.

And, that's where Domotex is invaluable!

I was reminded of this earlier today while speaking with a man who had recently invested in a wood flooring factory in Eastern Europe. He is using Domotex Hannover as the fastest and most economical way to get a perspective on the international market, see products, trends and meet with manufacturers and buyers from around the world. This is something that everyone contemplating international business must do. Domotex is an invaluable tool for anyone looking outside of their borders for opportunity. But once you decide to take the leap into international waters there is a lot to learn!

As easy as it seems to match up two parties when one is saying “I want to sell” and the other “I want to buy,” I've learned not to underestimate the complexity of the international market. More specifically, there are two high level phases associated with bringing product into the U.S. The first involves procureing, shipping, clearing customs and getting it to its final destination. The second is the process of sales, logistics and distribution to customers.

If you are coming to Domotex to find product to import and you are not an experienced importer there are many things you need to consider. Here are a few:

• Are your Commercial Invoice (a required document) and Purchase Order in agreement and do they specify both the terms of your transaction and the product?

• Does your paperwork conform with U.S. regulatory requirements?

• Are packaging, marking, and regulatory requirements specified and met?

• What constitutes full performance by your supplier and how have you documented it?

• Is your product correctly classified under the HTS codes so that you know what your tariff will be upon entry to the U.S.?

• What is your recourse if shipments are delayed or products turn out to be non-conforming?

• Are there cultural or customary business differences between you and your supplier that you need to be aware of to avoid misunderstandings?

• How will you handle currency fluctuations?

• Have you chosen the right payment and financing vehicles for the transaction? Letters of Credit afford protection against non performing suppliers but only if they are structured properly and are in agreement with performance requirements in your Commercial Invoice.

• When do you want title and risk to pass to you? There are several choices: FAS, FOB, CIF, for example, and each one means title passes at a different point and you become responsible for loss and insurance at a different point.

• Do you know every cost of importing that affects your gross profit margin? Example: procurement, inspections, ground transportation, marine transportation, insurance, tariffs, customs fees (both departure and entry), brokers fees, etc.

• Do you understand the roles of main players along the way: freight forwarder and customs brokers and know how and where to hire them?

• Have you followed tips for packaging and loading that reduce breakage and help expedite your shipment through customs?

• Do you understand the process of “gaining entry” at customs and what is required of the importer of record at this point?

Surfaces 2010: International Trade Expert Panel

Although it takes place a few weeks after DOMOTEX, Surfaces 2010 offers an opportunity to learn about international trade and importing flooring products. More specifically, I will moderate a panel of international trade experts as we discuss the potential pitfalls to be avoided when importing. It will cover important requirements for foreign manufacturers wishing to export to the U.S. as well as for American buyers wanting to procure product abroad.

We will answer some important questions but more importantly show you how you can avoid situations such as:

“What recourse do I have with a supplier that is 8,000 miles away and has already exercised my Letter of Credit but his product does not meet my expectations?”

The quick answer to this is that protection has to be put in place in advance. Product quality expectations must be clearly detailed in the purchase order. Conditions must be placed in the Letter of Credit that restricts release of funds until after the goods are inspected and determined to conform. And, a plan for dispute resolution has to be agreed upon before orders are placed.

“When does title and risk pass to me?

This depends upon which international terms you choose, for example, FAS, FOB, or CIF. Title and risk can pass at various stages along the importing route, depending upon how you structure the deal.

For more information about the seminar, read Find Out What You Don't Know About Importing Before the Ship Sails.

Floor covering is a global industry and opportunity abounds for aggressive entrepreneurs importing or exporting. Just be prepared!

I'd love to hear about your experiences and what you have found most beneficial in achieving success with flooring, international trade and importing.

Thanks, and I look forward to seeing you at DOMOTEX as well as Surfaces.



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