business-plan, business-modelI have a new luxury alcoholic product in mind I would like to import in a West African country which isn’t known there and I believe would be a success. I have the right connections in that country and am fairly confident finding many customers. The manufacturer is a fairly small and new operation in Western-Europe.
I would like to contact the manufacturer and start moving on this. I’m new to the importing business. I would like to get an idea on prices , what their distribution model is and how I basically could get involved. How should I do this without sounding too green.
Shipping and dealing with customs is somewhat hairy, so your best bet to get started will likely be to reach out to a business that is into the import/export business.
In a nutshell though, what typically happens is your cargo gets trucked to a warehouse or two and ultimately ends up in a shipping container. The container ships away. Upon landing its cargo goes through customs, and the trucking shenanigan starts again until its final destination.
Things to worry about include pricing for transporting the goods themselves of course, but also insurance (damaged or stolen cargo is not unheard of), customs, storage (your cargo can’t stay in a dock forever), etc.
You need to mind shipping terms. More specifically, you need to mind at which point you formally take ownership of and responsibility for the goods. The goods could be “your problem” as early as from the moment they leave the factory (which will be likely since your supplier is a small operation), as late as when they arrive at your own warehouse, or at any point in between - including upon getting delivered at the harbor in Europe, or upon getting delivered at the harbor in Africa (likely your best bet unless you’re dealing with an African-based import/export business).
You also need to mind jurisdiction and applicable law in your contracts. You’ll be contracting with a Europe-based supplier, you’re in Africa, and whoever you outsource transportation to might be based in yet other countries. Don’t leave it up to courts to decide who has jurisdiction and what the applicable law might be in the event things go downhill. You want it clear from the start which court is competent and which law applies. Anything goes in this respect, including neutral countries. Switzerland was popular in this respect back when I studied this stuff, as were popular arbitration courts. The latter can be super expensive so think twice about any arbitration clauses that someone might want to creep into your contracts. Large companies like arbitrage clauses because the costs involved are a good way to arm wrestle and get their way.
Mind language too. Make it clear the language in all contracts and communications should be English. Or French, if more appropriate.
In the end it’s not simple. The last thing you want is to be dealing with a shipping company that is formally based in Panama but actually based in Singapore who sends you legal notices written in Malay to go to settle disagreements in front of a $50k/day arbitrage tribunal at the loser’s expense. That’s the type of thing that can happen if you don’t cross t’s and dot i’s.
Oh, and… also mind payment terms. It’s not uncommon in this type of business to put part or all of the payment in escrow, or to release funds at various stages within the logistics process (e.g. upon ordering, at factory departure, at ship departure, at ship arrival, at final destination). And while you’re at it, look into currency risk (either through an insurance or using futures) if you’re dealing in EUR or USD instead of your local currency. Volatile currency markets can easily chip through profits.
The easiest to avoid this will be to reach out to a business that is into the import/export business. There’s no shortage of import/export intermediaries who have half-full containers. Let them deal with the mess of optimizing the logistics, customs, etc. Ideally put the goods under their responsibility or your supplier’s (including insurance and what have you) until the goods arrive at your warehouse. And be sure to have an attorney with some experience in international contract law review your deals.
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