Imagine a company in Denver learns it can sell a special toothbrush to the American market, and it will be manufactured in Singapore and imported to the United States.
Let’s assume it understands how to deal with Asian factories, and knows how to sell toothbrushes to U.S. distributors and retailers. So what are the company’s other potential problems in this scenario?
Well, two governments sit between the factory in Singapore and the firm’s U.S. warehouse. And those governments can delay or even stop the shipment of those toothbrushes to the American warehouse.
Any delay in getting the shipment into the United States will have costs. There are many obvious costs:
• The price of delay may mean a dissatisfied client or a canceled purchase by a retailer/distributor.
• Perishable goods can spoil in a delay.
• Factories can close when they don’t have the necessary imported parts, and the importer may have other activities going on (a business trip) that can’t be accomplished while the goods are delayed.
These are obvious costs to a delay. However, there are many less-obvious costs as well.
“Everywhere along the line there are clocks ticking,”
“Everywhere your shipment sits, storage charges are incurred.”
So it’s in the importer’s best interest to make sure its goods move through the process without costly delays. These delays can raise the cost of our imported toothbrushes, and the firm involved may even lose money by the time the goods arrive.
Steamship lines, airlines, couriers and trucking companies all make money on storage. And if the U.S. customs office delays or holds the shipment, that storage clock still ticked.
And the only way the firm importing toothbrushes can make a profit is to fully understand all of its costs and margins on the products.
So what can our importer do?
• First, it should be certain it’s compliant, and can learn how to be so by talking to a customs broker about the appropriate duties and tariffs.
• Find out if there are special impediments to importing a given product. This will help the company decide if this endeavor is going to work at all. If our toothbrush was made of camel hair, for example, it may require approval from a fish and wildlife department. If the firm was importing a potentially perishable product, concessions might be made to expedite the shipment.
• Customs examination is a large roadblock in importing. This happens when U.S. customs officers decide the paperwork alone isn’t sufficient to allow the shipment into the United States, and they’ll have inspectors look inside the box to see what’s really there. Remember, just because U.S. Customs decides to hold your shipment doesn’t mean that those clocks stop ticking.
In a customs exam, the importer has to pay for truckers to pick up and deliver the shipment to a customs warehouse. The importer has to hire labor to open up the boxes (customs officials don’t do this). Once the inspections have been completed, assuming everything is OK, the boxes need to be reloaded and shipped to the importer’s warehouse. If there’s damage or difficulty in reloading the container back on the truck, this presents more delays and costs.
So far, this seems like a nightmare. But it doesn’t happen every day, and when it does, it happens for a reason: The U.S. customs department exists to protect the United States.
There are too many stories of people and firms claiming they’re importing toys and really are importing weapons, chemicals, plants or foods with parasites — even children. And as we all know, the U.S. customs agency (which is licensed by the Department of Homeland Security) has intercepted hazardous chemicals and explosives, ultimately saving lives.
So some products will cause large delays and hidden costs, and some countries are inherently riskier than others. This means that the “labor is cheaper and we make more money” argument may be invalid.
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