International Expansion

Importing in a Dynamic Global Environment

worker in front of storage containers
 

The United States is the world's largest importer, recording over $2.9 trillion of imported goods and services, up 6.9% from the previous year.[i] Imports of automobiles, parts and accessories, telecommunications equipment and cell phones, computers, crude oil, and pharmaceutical preparations dominate the list.[ii] China remains the number one country of origin for U.S. imports, followed by Canada, Mexico, Japan and Germany.[iii]

International trade is no stranger to conflicts, disputes and tariff wars, and imports are often the target of policy strategies to keep them in check. However, opportunities that were once the exclusive domain of large, multi-national companies are, with the advancement of technology and widely available information about importing sources, now available to small and mid-sized enterprises.

Today, 97% of all known US companies who import are small and mid-sized businesses with less than 500 employees.[iv] That leaves many companies studying the potential advantages and pitfalls of importing goods and services. If you are considering importing, understand the latest global changes and how they affect your company’s decision.

Navigating international trade risks

The case for importing varies from company to company, some to gain a supplier pricing advantage, others to offer an innovative technology, or high value product or service. Conducting business overseas comes with many risks, such as longer cash-to-cash cycles, currency fluctuations and loss of goods in transit. Successful companies take the time to understand the most prevalent international sourcing risks and use available tools to mitigate them including:

Currency fluctuations

Buying and selling in different currencies exposes a business to changes in the value of those currencies. Sometimes currency prices change significantly during the life of a contract. Whether your transaction is priced in local currency or the U.S. dollar, you’ll likely be exposed to those changes, some of which can radically affect sales and profits. Expect currency fluctuations and plan accordingly.

Payment risks

Most domestic transactions are completed on open credit terms (cash on delivery). Many businesses are not prepared to manage new risks presented by international trade. The track record of overseas trading partners can be hard to determine. Even with a trustworthy partner, the complexity of international deliveries and payments adds exposure to glitches and problems. Think about what is going on in the country of origin and how that environment could affect your shipment and payment.

Political situations

Political and trade conditions can change quickly. As an importer, you must be aware of that potential and be prepared to react just as rapidly. Political unrest may not only limit movement of purchased goods out of the country, but also strand working capital parked there.

Operations in foreign countries

Foreign countries operations often work in business environment that is very different from U.S. Different languages, cultures, business practices, accounting methods or customs regulations can easily derail the most prepared trading plan. The World Bank's Ease of Doing Business rankings provide helpful insight into the time and costs associated with importing goods from 190 countries. Always be on the lookout for an experienced trade partner knowledgeable in your industry and the target countries.

Trade expertise matters

To be a successful importer, your company needs to understand country economies, business environments, relevant financial products and services, and much more. The key to success is to find and work with partners who can simplify the complexity of global business and accelerate your progress by bringing years of trade experience and local market knowledge to your management team.

Will importing build value for your company?

Talk to SunTrust for help in crafting your winning global business plan.

1 Annual Trade Highlights, 2017 Press Highlights, 2018, accessed 2/24/2019 at https://www.census.gov/foreign-trade/statistics/highlights/annual.html.

2 U.S. Census Bureau, U.S. Imports by 5-digit End-Use Code - 2008 – 2017, 2018, accessed 2/24/2019 at https://www.census.gov/foreign-trade/statistics/product/enduse/imports/index.html.

3 U.S. Census Bureau, U.S. Trade in Goods by Country, accessed 2/24/2019 at https://www.census.gov/foreign-trade/balance/index.html.

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