Forgive my naiveté, but can someone walk me through the process?

Question posted by Nigel Keniry, on behalf of NEA Trade & Representation in E3

I’ve been presented with an opportunity to export a new fashion item from a U.S. based company that manufactures the products in China. Initially having exclusive representation for Colombia, where I have family that currently import toys and sporting goods, and through them a business contact that specialises in the item we’re hoping to sell there. If successful, there would be additional opportunities for us in both South America and European countries where exclusive rights don’t yet exist.
Forgive my naiveté, but can someone walk me through the process?
1. Colombian company places order with us, we then forward the order to the U.S. company, who then has the order shipped to the Colombian company for distribution, sales, etc. Who pays whom, when and in what currency(s)?
2. What risks do I face, i.e. waiting to be paid, making payments in advance, etc.?
3. Any other tips, suggestions, advice would be appreciated!
I am by profession a senior-level sales, sales management and business development expert. I have owned and operated 3 businesses in the past, but never one where the customers, suppliers and agents are all based in different countries.
Thanks in advance!

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Hi Nigel.
I have set this up before and there are some different options.
You can make arrangements through "triangular" invoicing.
If you want to invoice your customer in Colombia your self ,so that you dictate the price and get a fuller margin then you would make the invoice to them and get the US company to ship from their China factory direct to your customer. So the consignee would be your customer in Colombia but the invoice would be to you. You pay $10 and invoice $15 say but you don't touch the goods.
However doing it that way then you take the risk of getting paid. You could operate as commission agent and let the US company do the invoicing to the Colombian customer . Again they could drop ship direct to them from China. Or if your family have a business in Colombia could they be the ones buying as a distributor and getting some payment up front and receiving the balance on delivery .I am presently doing quite a lot of work with several companies for Latin America having just been there in December (including Colombia) so don't hesitate to contact me with no strings attached. gilio@exportadvisory.com

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Hello Nigel,
Whichever model you adopt you need to carefully think through the implications.

Who is to be the importer in Colombia? Your family, the business contact or a customer?
What price would you want them to see on the invoice? I ask this because the shipping documents that accompany the shipment will show a price - which price will depend on the model that you have adopted. The importer will see the shipping documents and it is very easy to accidentally let your end customer see your buy in price. which is clearly not a great idea.

In addition the 'correct' price, again according to the model you adopt, has to be used for import to Colombia so that the import duty and taxes are calculated correctly.

Remember that for customs purposes the prices are supposed to equal 'arms length' prices so if you were selling to a family member at cost price this would not be acceptable.

If you rely on freight agents switching documentation en route, however good they are, there will come a time when the 'wrong' paperwork gets to the customer - human error is a constant!

If you are already importing into Colombia I am sure you will know that the rates of import duty and tax are high so please ensure you take account of this in your costings.

Please don't hesitate to contact me if you wish to discuss the above.

Regards,
Susan
enquiries@morley-consulting.co.uk
www.morley-consulting.co.uk

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HMRC Advisor, on behalf of HM Revenue & Customs in G67.

Information on the Customs requirements for exporting is given in HMRC Public Notice 275. All notices can be found on our website www.hmrc.gov.uk under Quick Links > Library > Official Statistics – Publications – Notices, Info Sheets & Other Reference Materials > Import, Export & International Trade. The Public Notices are in numerical order.

Further detailed information regarding exporting goods outside the EU can be found on our website by using the following link http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageImport_ShowContent&propertyType=document&resetCT=true&id=HMCE_PROD1_032667

You may find the Export Best Practice Guide particularly helpful

HM Revenue & Customs
Customs International Trade & Excise
www.hmrc.gov.uk/contactus

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