While businesses may choose domestic suppliers to cut down on transport time and support fellow local businesses, overseas suppliers can provide value for money and greater cost savings across the business. Businesses that can successfully leverage the perks of buying from international sellers can go on to carve out a competitive advancement in the market. However, working with overseas suppliers can also come with more considerations like excise duties, VAT payments, and import licensing requirements. The good news is, thanks to the influence technology has had on business, working with international sellers is now easier than ever. With the right preparation, buying from international sellers can prove to be a successful process.
Factor in currency conversion
If you are shifting to international suppliers, you will need to factor in currency conversion- particularly since currency exchange rates are always changing. Therefore, preparing your business for currency volatility is highly recommended. To do this, you need to answer a few important questions about your business needs and financial reach. For instance, what is the lowest exchange rate your business can accept before it impacts your profitability? Also, consider how the change in currency rates will filter down to your profit margin when selling the product.
Also, it helps to speak to your supplier about your payment terms. Will you be paying in installments or a lump sum? If you have agreed on partial payments, there is also the currency risk attached to each installment when the time comes. To keep an eye on the currency rates, set up a rate alert.
Map out the additional taxes and charges of buying internationally
If you are paying international sellers with a business or personal credit card, you will have to account for foreign transaction fees. To ascertain your foreign transaction fees, check the terms and conditions of your card. For issuers like US Bank and Chase, it can be up to 3 percent of your transactions. The shipping options your shipping company uses may also result in additional charges. For instance, priority shipping options like next-day delivery will come with an additional charge to the basic shipping rates quoted.
It is also highly recommended that you do your research on local laws on imports and attached duties. For instance, those importing goods into Australia that are worth more than AUD $1,000 are required to GST equivalent to 10 percent of the value of the goods. Similarly, businesses in the U.S.are subject to different tariffs for their imports. The International Trade Administration website has a useful Global Tariff Finder Tool to help you narrow down your tariff rates, VAT, and any other applicable charges.
Spend time researching and choosing the right delivery company
Finally, ensure you choose a good delivery company for your international trading. The logistics industry is now very varied and competitive, which means businesses have more shipping options than ever before. In addition to the prices quoted by the delivery company, consider their speed, experience, customer service amenities, and tracking capacity.
You may also want to think about appointing an agent and a trade attorney to act on your business’ behalf with international sellers. They may be able to better navigate foreign languages, currency, and customs variations. Ensure you have a trade agreement drawn up and looked over for details like payment methods, trading terms, and responsibility for import licenses. Taking the time to establish these terms will save your business a lot of time and money down the road.