Foreign trade is an area that presents unique trade opportunities. But, in this, as in any other sector, good management plays a key role in success. That is, it is not enough to rely on good products, good suppliers and good market niches – it is necessary to continuously look for strategies and solutions that increase competitiveness. One way to accomplish this is through cost reduction. Randall Castillo Ortega, an expert in global trade, provides insight into how to accomplish this.
Foreign trade operators should never overlook the possibility of importing products at lower taxes. It’s a great way for your business to lower costs and increase its competitiveness. Certain destinations offer tax reductions to encourage imports, which makes them cheaper.
Companies based in a country or territory may be eligible for the special regime. This can be used for direct importation as well as operations on account, order, or order. Also, even though the company is not located in the local economy, it may be eligible for tax incentives for using the service.
Import costs are mainly determined by the value of goods. It also serves as the basis for taxes paid in the country. The international supplier pays less than the country, which means that the final cost of importation is lower and taxes in the territory are lower.
Imagine that you are trading a product with a price difference of US$10.00 between China and the US. If you negotiate a 5% price reduction with the supplier, the product will be $9.50 at the origin. If you assume that the FOB tax cost is 85 percent, then $1.35 per unit will be saved.
It is a good idea to get to know the company with whom you do business. Castillo says, “This will help you to get a better understanding of the importance of your request for the supplier’s production.” This will also increase your bargaining power and mutual trust as you establish a long-term relationship with the business partner. It is not fair to lose a customer to the competition.
Foreign trade operators are still hesitant to explore secondary zones or dry ports. These warehouses, also known as dry ports, are located further from main borders, ports and airports but serve the same purpose of controlling entry and exit of import and export goods.
To facilitate the clearance of goods, secondary areas were created. Although they are far removed from traditional distribution centers, secondary areas have advantages in that they can store the goods cheaper and launch products faster.
The possibility to withdraw partial goods is another advantage, making these areas a sort of distribution center. This means that an importer could bring a container and store it in the secondary area. Then, you can release the rest of the merchandise. Taxes will be paid proportionally. This allows for better financial management. This is a great tool to reduce costs if used correctly.
Software that is specifically tailored for foreign trade is available. These tools are an essential strategy to lower expenses. Castillo adds, “Tools such as improved import management provide an overview of the process and help to avoid rework. This allows for more strategic activities. This reduces errors, which in turn reduces operations’ final costs.”
Smart management requires that you map out the deadlines for each stage. It is essential to have all original documents on hand before the ship docks. This will ensure that no delays are caused in the dispatch of products.
Software clearly and objectively indicates the current state of each step of the process. You can avoid making mistakes. You can lower costs by being more flexible and assertive in managing your resources.
Working with multiple clients and being familiar with the most complicated procedures in the sector will give you the ability to negotiate with all parties involved in the import process, especially with suppliers. A small or medium-sized business may not be able to place an order with a major supplier because they don’t have the financial support necessary to complete the minimum order. However, a commercial company can gather multiple companies into one order. This increases the supplier’s negotiation power.