Growing Global

Best Practices for Global Sourcing

By Kelly Raia, American River International

In early September, APPMA's Member Relations & Business Development Department held the Association's first webcast, entitled Best Practices for Global Sourcing.

Designed for APPMA members who currently import or wish to import, this webcast helped members learn how to source products from other countries into the U.S. Participants were able to tune into their computers while American River International discussed topics such as how to negotiate with the proper suppliers, dealing with raw materials, utilization of brokers and freight forwarders and how to be sure you follow all U.S. regulations regarding import compliance. The summary below serves as an overview of the webcast which is archived at www.appma.org/education.

Making the decision to source globally is easy once you have determined the potential benefit to your company. Locating suppliers who can meet your product specifications, pricing and develop a successful working relationship takes hard work and investigation. To assist with this process, many importers utilize international consultants, trade shows and the U.S. government

Once your suppliers have been located it is time to grow the relationship to attain mutual goals. Identifying deliverables and expectations up front leaves less room for misunderstanding down the road. In drafting agreements with your new business partner look to those with local knowledge to lend a hand in addressing concerns such as proprietary rights, dispute resolution and arbitration. Don’t forget to include issues such as how to handle potential returns and who will be responsible for associated expenses.

Make the effort to educate yourself on Incoterms to better negotiate pricing. Collaborating with a quality customhouse broker/freight forwarder can raise the comfort level of picking up freight in foreign territory and moving it into the United States. An experienced service provider complements your supply chain, anticipates the rough spots and holds your hand when you encounter them.

Build a landed cost model, making sure to include all charges including freight costs, insurance, service fees, security surcharges, fuel fees, duties, taxes, customs clearance and delivery costs. Be specific in quote requests and be sure to provide the weights, dimensions and level of service that you require. Get quotes from service providers that are ‘all-in’ and request the quotes be itemized. Ask about transit times, possible ports of clearance as well as any ports that might cause delays.

Don’t forget about compliance! While importing may be lucrative to your company, there are rules and regulations to which you must adhere regarding record keeping, valuation, harmonized tariff classification and supervising the import process. Exercising reasonable care is the key to a compliant import process and is mandated by Customs and Border Protection. Develop a broker instruction letter for your import process. Train employees on the responsibilities of your company as the ‘importer of record’.

Import compliance is the responsibility of every importer. They must supervise and control all statements made to Customs on their behalf. This includes the manner in which you interact with your customhouse broker. Employing a compliant broker is the first step in being compliant yourself! Train your people on import compliance and their role in the supply chain. The sooner you introduce compliance into your import process the better opportunity you have of avoiding issues with Customs resulting in fines. Don’t put off compliance until you have a higher volume of imports. Customs doesn’t just go after the ‘big guys’!

As a final thought, consider participation in the Customs-Trade Partnership Against Terrorism (C-TPAT). This program was developed as a Post 9/11 initiative to secure supply chains against an act of terrorism. Customs reached out to the importing community to review its supply chains and make efforts to introduce controls to prevent security breaches. The program requires importers to detail security aspects in their logistics process from point of origin to point of delivery. Benefits to the program include less cargo exams resulting in fewer delays, eligibility for the Importer Self-Assessment (ISA) program and let’s not forget about helping your country!

Global sourcing is a terrific option for pet product companies. Once you have identified the many facets of importing, it is doable, manageable and profitable.

To listen to the archive of this webcast and for information on upcoming programs go to http://www.appma.org/education.