Frachtbox team

Common Pitfalls With Importing And Exporting

Published 15 May 2021

Common Pitfalls With Importing And Exporting

Common Pitfalls With Importing And Exporting


The import and export industry is indeed big business and still the most lucrative industry anyone could venture into. It offers unlimited opportunities for anyone who has enough knowledge and resources to challenge the tides and reap lucrative benefits which otherwise cannot be realized in other types of business. Aside from the wide range of goods to choose from, playing a critical role as an importer/exporter can help you generate anywhere from a few thousand to millions of dolars/euros monthly in renevue.

However, running an international trading company is not easy. As you navigate through the process, mistakes are bound to happen. Before you can be a successful importer or exporter, you will face a lot of challenges, which if you fail to recognize from the get-go, may cause your whole operations to cease to function. That being said, most of the pitfalls in international trade can be avoided.


What Are The Mistakes In Import & Export Business?

Many importers and exporters ignore the importance of insurance for their shipments all because they want to save on cost. What they don’t realize is that many things can happen to their cargo once it is out of their sight – goods can get stolen, ships can sink, container units can fall overboard, and changing weather can cause irreversible damage to products.

Aside from failure to take insurance, there are other mistakes that could cost your import and export business if you are not careful and prepared. Below we highlight areas where international traders experience the most turbulence. To avoid missteps, focus on these spots before you get started business:

  1. Undercapitalization

  2. Lack of knowledge in import and export regulations

  3. Poor business plan / Poor product choice

  4. Failure to adequately choose your team

  5. Hiring an incompetent or unexperienced customs broker

  6. Not declaring the correct value in customs

  7. Lousy relationship with customs officials

  8. Failing to properly insure goods

  9. Lack of knowledge on exchange rates

10. Unfamiliarity with incoterms

11. Being clueless about import restrictions or control on a product

12. Failure to conform to packaging, marking and language (localization) laws

13. Bad record keeping

14. Making a bribe

15. Not verifying the reputation and legitimacy of the supplier or buyer of the product

Master above common pitfalls and you’ll be on your way to a successful import-export business.


How to Avoid Mistakes In Import & Export Business?


Make Sure You Have Enough Capital For At Least The First Six Months

Importing requires a lot of cash up front before any profit is realized. You must pay duties before taking possession of the goods, and in almost all cases, you have to pay all freight charges due. As a new importer, you probably are not going to get long payment terms from your suppliers, either. Therefore, you need to have an existing domestic business with sufficient assets and cash flow to sustain the initial phase of your business plan or have a lot of cash.

If you are in a situation where you plan to receive monthly shipments and anticipate turning your inventory every four to six weeks, you should have enough assets to finance the first six months of operation.


Learn About Import And Export Regulations

The lack of knowledge in import and export regulations by traders and importers can dramatically increase the cost of a trading business. Due to the number risks arising in the international trade, customs authorities are actively implementing new programs to ensure cargo security. As an importer/exporter, you should participate fully or you risk sanctions from the customs office.


Make A Good Business Plan / Make A Good Product Choice

This is really just as important as undercapitalization. Just because you like the product and you think the price is right, don’t assume it will automatically sell. It is best to have an existing market/distribution system for similar or complementary items. Your imported product should add to or enhance your existing product line. Second best is if you have taken samples and pre-sold the first shipment. The worst is if you are operating on instinct. Instinct rarely results in profit.


Select Your Team Adequately

Importing is a complex endeavor, and it has become even more so in the last couple of years. You must have a team of service providers in place to handle all aspects of your transaction.


Hire An Competent Or Experienced Customs Broker

An incompetent customs broker will break your business. They make sure all your paperwork is appropriate and you are actually ready to import/export products from or to a given destination. Therefore bulding good rapport with the customs officials is a must for anyone involved in the global trade business. Because it will be impossible to achieve successful business without a reliable and expert customs broker.

When choosing a customs broker you should be sure to ask for references from other companies the size of your own and follow up  with them to find out how their experience with the broker was.


Declare The Correct Value In Customs

In the import and export industry, declaring correct value and paying the right customs duties and taxes does not only ensure a smooth flow of importation and the peace of mind when being audited by the Bureau of Customs, doing so can also help you achieve a more accurate tax filling, improved investor raputation, to be a valuable member of the society and also saves you from a lot of headaches in the long run.

Yet many business owners disregard the law and choose not to declare the correct value of the goods intentionally just to save amount on their import/export expense - not knowing the irreversible damage it can do to their company's reputation.


Maintain Good Relationships With Customs Officials

Don’t underestimate the importance of a good relationship with customs officials, transportation folks and customs brokers. And never assume you know more than they do! You are responsible for compliance with all import and export laws, so get along with everyone and listen to what they have to say. Even if you hire a firm to carry out import-export procedures on your behalf, the buck still stops with you.


Insure Goods Properly

"Do I need cargo insurance?" is a common question amongst shippers and consignees. It is common misconseption that a freight forwarder or the ocean carrier is responsible for the loss or damage of goods while in their custody. The truth is that all freight forwarders and carriers are severely limited in their liability, why it is highly recommended to insure the cargo in advance.

Include in the commercial agreement between shipper and consignee who is responsible for the insurance, and make sure to share a copy of the insurance contract and claims procedure.


Get Information About Exchange Rates

If you don’t know the exchange rates when trading internationally, you are exposed to potential currency fluctuations and are restricted when planning ahead or trying to get the best price. Consult with your banker on how best to lock in your profit on a transaction and protect yourself from exposure to risk.


Be Familiar With Incoterms

To begin with, you have to understand Incoterms and the costs and responsibilities that come with using a specific Incoterm. Without proper knowledge about what Incoterms are, you not only risk of getting underpaid for an export sale or be overpaid for an import, but you may also face a myriad of legal problems with the customs due to documentation that might be prepared incorrectly.

Incoterms are the laws the govern in the global trading industry. These laws are important and considered essential for they are used to regulate contracts used for the sale of goods internationally. You could reach out to a global trade expert to guide you on every contract you intend to sign - regardless if it's an import or export contract.


Know About Import Restrictions Or Control On A Product

Import restrictions comprise of quotas, import licensing requirements etc. Importing goods that violate quota restrictions or are unsafe could end up costing you money in fines and penalties, and that will erode your profits.


Comply With Packaging, Marking And Language (Localization) Laws

What are the laws of the country in which you will trade? Consult with your transportation specialist and your customer and then compare notes. For example, do labels on your product have to be in the local language? How sturdy must the carton be? What markings need to be on the outside of the cartons to comply with the law? Is there any taboo to the number of products packed in the box—8 chocolate bars versus 13, for instance? The point is to leave no stone unturned when it comes to honing in on the details of your product movement.


Keep The Records Well

On all your international transactions keep good records —from how you declare a good (harmonized code, for instance) to termination of a transaction whether by email or some other means, to the financing of a deal.


Avoid Bribery Disputes

If you are conducting business in a foreign market, you must be familiar with and comply with the bribery laws. You should discover how to avoid or handle bribery disputes.


Verify The Reputation And Legitimacy Of A Supplier Or Buyer Of The Product

Do your due diligence on who you are about to conduct business with. Part of importer's/exporter's due diligence is to check the legitimacy of their customer or supplier before they sign any contract.

A lot of importers assume that a mere presence on global sourcing site automatically translates to a ligitimate supplier. The fact is that there are a lot of bogus suppliers plaguing these websites. So, it's important to conduct a research on the internet to see if the prospective supplier has a business website in place which can somehow prove their legitimacy. On verifying customers, conduct an online search and see what bubbles up on search engines. On verfying customers, aside from conduction research, it's also important to seek the help of government officials to find out more on the customer. Whether as an importer or an exporter, ask on references on the supplier or customer you are about to do business with and check them carefully.