News & Press

Win over US customers by setting up an import company

As Published In:  The Guardian

28 November, 2014

Small businesses struggling to export can set up import companies in their destination market to overcome challenges, Alison Coleman reports.

Opportunities to export to markets like the US are increasing all the time for British businesses, yet making it on the other side of the Atlantic can be fraught with difficulties.

Winning over American consumers with their famously high standards, and grasping the nuances of a sophisticated and very competitive US economy are only part of the challenge.

Many exporters have encountered difficulties in getting their goods to arrive on time, without incurring additional charges, and to ensure they pass muster through the stringent US customs and security controls.

Some have decided to maintain a tighter control of the process by becoming an importer for their own goods. This can include setting up an import company in the destination market, with a physical presence on the ground, to establishing a company that simply holds their stock and inventory. In the US, the latter is the option of choice for a lot of British SME exporters.

“If you have a product that needs to be fast to market, this can really help to speed up the despatch and sale process,” says Paul Langhorn, audit partner at accountancy firm Baker Tilly.

The way it works, he explains, is by company ‘A’ in the UK setting up company ‘B Inc.’ in the US, with ‘A’ selling to ‘B’, which houses the stock with a third party logistics company. As the orders come in, they can then despatch them from the warehouse.

“The advantage with this is that the process stays under UK control, as the US business is 100% owned by the UK company,” adds Langhorn.

Companies exporting products that are more technical, however, may find they need to establish a physical presence and have an office in the destination market - although this is unusual in the US.

“It is something exporters have been doing for years, but generally only when it is more cost effective, for example, where the tax regimes are very different, or it is simply too expensive to work with local firms,” says Lesley Batchelor, Director General at the Institute of Export (IoE).

“You need to bear in mind the security issues following 9/11 that led to the US tightening all its security processes for cargo, increasing the need to get the paperwork right, which can impact on your margins if you haven’t allowed for this in your price,” she says.

It also requires a great deal of research into the local rules of setting up an import business, and these can vary from state to state. However, for those with established export trade links with the US, depending on the nature of their products, the option may be worth exploring.

But, will importing your own exports take the headache out of the US customs process? According to Corey Bonasorte, director of compliance at international shipping and package consolidation service MyUS, the idea that an exporter becoming the importer will alleviate delays and duties is a false promise.

He says: “While it is technically possible for an exporter to also be the importer, the corporate structuring needed is complex and capital requirements are heavy. In fact, this is not a common practice and for good reasons; the legal responsibilities significantly increase and the returns are not plentiful.

“Customs processing and the payment of duties are realities when purchasing merchandise from another country, whether or not an exporter establishes itself as the importer in the destination country does not solve for these issues.”

But Langhorn argues that, bureaucracy aside, establishing a crossover between export and import can benefit the business.

He says: “It is true that importing your own goods will not make any difference to the issues around customs, security and compliance. You will still have to deal with them. However, it does offer you a much simpler and easier way to get those quick-to-market goods to the customers, and that can make all the difference to your export success.

“SMEs in the UK are still quite poor at grasping some of the issues of exporting, but they don’t have to become importers straight away. A great many start off dispatching their goods via one of the online e-commerce sites. Once your market is established, you can think about importing your own goods by setting up a US stock base. The legal aspects of doing that are really not that complicated.”

One SME that has been able to manage the complexities of import and export is Precision Technology Supplies (PTS). In less than 30 years, PTS has gone from one man in an office to a successful global business, with one of the leading teams in the industry, which buys, sells, imports and exports, distributing nuts and bolts across the globe. One way they have managed this is by working with trusted logistics partner UPS.

Owner Steven Edwards said: “UPS can’t change international laws, but they know how to get goods landed and cleared, and with all the correct paperwork. For many of our exports, UPS has started the process of clearing customs before the goods have even left the warehouse. They just make it easy.”