7 Steps to Limit Your Importing Liability

Don't let red tape scare you away from the lucrative import market

By Chris Malta | June 25, 2008

URL: http://www.entrepreneur.com/ebusiness/dropshippingcolumnists/article195152.html

Any time you import goods into the U.S., you're legally responsible for ensuring that they comply with Customs regulations. This scares away many retailers and e-tailers from learning more. But, although steering clear of importing may allow you to avoid liability issues, it also means you're missing out on the considerable cost savings and unique, cutting-edge products that importing can afford your business.

"It really comes down to covering your bases," advises Kelby Woodard, principal of import consulting firm TradeInnovations.com. "There are some common-sense precautions you can take to limit your liability and protect your business interests."

He offers the following insights:

Start in phases.
Don't just jump on the internet and place a large order with a company you haven't vetted. Take your time, research potential suppliers, and start with small orders.

Consider starting out importing from a country that's close in proximity.
Mexico or Canada are the obvious options. Countries in South or Central America or the Caribbean basin will tend to have easier logistics than Pacific or Asian countries. And many of them have free trade agreements, as well, so they provide the additional advantage of being duty-free.

Do your homework.
In 1992, Congress passed a law that made the U.S. government responsible for making all necessary knowledge on Customs regulations available to importers, either by website or publication. This concept is known as informed compliance. There are several online resources that can help you learn more about your responsibilities in this area:

• CBP.gov is the official website for the Customs and Border Patrol. As part of the agency's informed compliance requirements, its site offers a great deal of education regarding different import regulations.
• TRGDirect.com offers information for companies or individuals interested in learning how to file their Customs entries directly, without the services of a Customs broker.
• TradeBridgeInternational.com provides a vast amount of knowledge geared toward helping small- to medium-size importers.
• TradeInnovations.com provides direct information on the subject of importing, as well as numerous links to other useful sites.

Use a third-party validation firm.
A validation frim can inspect the quality of your products and ensure that they meet all applicable U.S. requirements. While you can't outsource your liability, you can get expert help with the process.

Go multinational.
As you increase your importing volume, you might think about sourcing your products from multiple countries. If quality assurance problems or customs issues arise in one country, you're not cut off from your only product source.

Watch your buying terms.
If your purchase agreement states that you're buying your products FOB (Free on Board), then your supplier is responsible for getting your goods through the export customs process. You take possession of the goods at the foreign port and handle the logistics involved in clearing the goods through U.S. Customs.

If, however, the terms state that you're buying X works or X Factory, then you take possession of the goods at the manufacturer's shipping door. That means you're responsible for knowing and following not only your own country's import regulations, but also the export regulations of the country in which the manufacturer is located. So pay attention to your agreement, and make sure you're comfortable with the terms before you sign.

Keep thorough, accurate records.
Keep a detailed paperwork trail and have that documentation available, whenever Customs requests it. This will not only help protect you legally, it will also speed up the time it takes to get your goods cleared.

Informed compliance and legal liability may sound like daunting terms; but don't let them scare you away from realizing the tremendous deals importing can supply. It's really just a matter of taking some very simple steps to mitigate your risk.

Says Woodard, "If you do your due diligence, you don't need to worry. The benefits of importing far outweigh any extra effort that's required on your part."

Chris Malta is the founder and CEO of Worldwide Brands, the internet's leading authority on product sourcing for e-businesses. Chris was hand-picked by eBay Radio as their exclusive product sourcing editor, and has authored numerous books on e-businesses and product sourcing, including What to Sell on eBay and Where to Get It and How to Find Real Products You Can Sell Online.

Robin Cowie is the president of Worldwide Brands, as well as a business development and marketing specialist, and TV and film producer. Robin is a regular featured speaker at eBay's live national convention each year, and is the co-author of eBay Performance! Selling Success with Market Research & Product Sourcing.