International Import Basics for Small Fashion Businesses

(Photos Copyright 2012 Fashion Belle, showing international delivery of a Poly Star flexible foam mannequin that is awaiting the finishing touches of face paint and wig)

My introduction to the high cost of importing materials for a small fashion business came from a evening gown designer based in New York for whom I worked as a Couture Design Room Assistant, primarily making patterns. This designer's three decades of experience in the fashion business had allowed him to forge relationships with wholesale silk and jewel distributors in New York City's garment district, and with the exception of ordering hand-beaded mesh from India (billed by the centimeter and pushing retail cost of a gown to over $10,000), he sourced the remainder of his fabric, trim and notions locally to control costs. So trusted were his accounts, that I as his employee could pick up yardage or samples at wholesale buying offices and walk out with them and expect an invoice to be mailed to our office later. When I asked my boss once about attending the Premiere Vision fabric show to source fine Italian and other imported fabrics, he told me that the "landed" cost of those fabrics would be prohibitive. His price sensitivity and resulting commitment to use local goods whenever possible struck me because I knew his evening gowns retailed at $5,000 each on average (double that if beaded). Yet, most of the silks and stretch velvets he used cost less than $20 per yard, and I was told to keep a careful watch on prices for other materials for which I shopped. Occasionally my boss used a small amount of $60 per yard silk duchesse satin for his designs, but that cost he called a "sacrifice."

This designer's price awareness at the manufacturing level is exemplary for small fashion businesses. In a culture where mass manufacturers have crushed retail prices through volume advantages, a designer with limited distribution and expensive overhead must offer exceptional style combined with costs trimmed to the minimum to stay profitable. Occasionally it is necessary to import special items, such as my delivery of a flexible Poly Star mannequin from Germany pictured here. For those occasions, keep the following five factors in mind:

1. Exhaust local options before importing. If an international manufacturer has a sales representative located in your country, work locally rather than trying to deal directly with the foreign manufacturing office. Unless you intend to negotiate price for an order volume that fills a standard 20 foot long shipping container, your purchase will present less hassle and fewer unexpected fees if you work through an experienced middle man and avoid the import process. Take note that even when working with a local dealer, prices may be quoted to you as FOB (Freight on Board). This means that you will be responsible for additional import costs and liabilities, so always ask for an estimate of the total with FOB costs included. If the cost is quoted as "landed," that means the import fees are included. Dealers who specialize in certain goods, especially fabric, enjoy economic advantages for large import volumes, and that is why it makes sense to purchase locally whenever possible until the time at which your own volume reaches container level.
2. Research import fees in advance. When no sales representative exists in your country, research import fees prior to placing an order. Imports incur international shipping, duty and tax charges that may add up to more than you would have expected. In most countries, if the value of the imported item exceeds a certain limit ($2,000 in the USA), then broker and bond fees may also apply. Imports by air usually require less paperwork than imports by ocean freight. Uncover all the hidden costs in advance, because they could influence your purchase decision. In the case of my German mannequin import, shipping and other import fees accounted for one-third of the final cost.
3. Use foreign wire transfers cautiously. Deal with reputable companies. An international order usually requires pre-payment via a foreign wire transfer, and once that money has been sent, it cannot be reclaimed. A currency exchange rate will apply, and each bank sets its own rate of exchange, so call ahead if you want to know what the exact cost will be. Banks also charge a fee for a foreign wire transfer that is usually higher than the fee for a domestic wire transfer. Currency exchange rates fluctuate, so if you have months to spare, you may want to watch trends and plan your purchase when your currency will go the farthest. Two international identifying numbers are needed to channel funds correctly, the receiving bank's SWIFT code and International Bank Account Number (IBAN). Familiarize yourself with the structure of both these identifiers so that you may assist your banker in case he or she is not experienced in international transfers. Also make sure that your banker transfers the correct currency. For example, my wire transfer to Germany was sent in Euros, converting from my USA bank's dollars. The wire took five days to clear into the German bank.
4. FedEx is a major service provider for small, North American imports. When importing merchandise, your foreign supplier should be able to provide you with information for the most reliable, cost-effective shipper that partners with their own country's transportation networks. If you are importing into North America, FedEx will probably be the shipper of choice for small packages from most any modern worldwide location. Be aware that FedEx connects dozens of smaller service businesses into one large family, and the division among those businesses is especially apparent when dealing with international shipments. For example, after setting up a FedEx Trade Networks (FTN) account at the direction of several FedEx representatives, I became concerned that the people who processed my account could not answer my basic questions regarding a low value air shipment. The documents and answers they returned to me appeared to be for high-value or ocean freight imports. An FTN manager was finally able to give me the correct information, that because of the low value of the mannequin and because it was sent by FedEx Express International Priority, the shipment would not be handled by FTN or be assessed entry, broker and bond fees. FedEx Express processed customs instead and will bill me for duty and taxes only at far less cost than FTN would have assessed. A consistent positive about FedEx is that the service is fast. My box from Germany arrived in only 5 days, and that included a weekend.
5. Consider becoming your own broker for frequent shipments. Navigating the paperwork for a one-time import may be a burden, but many small businesses thrive based exclusively on nurturing and supplying customer demand for a stream of specialty imports. If you see a market niche for imported merchandise, research the possibility of becoming registered as a broker so that you can save money by filing your own paperwork for larger shipments (to clarify, broker and bond paperwork is usually not required for shipments with limited value).

In summary, importing may be necessary for special items, but small fashion businesses without volume ordering advantages should be cautious about importing supplies for which acceptable substitutes are available in their own country. Entrepreneurs are prone by economic necessity to doing many things on their own that larger businesses hire out. When it comes to importing small shipments, however, relying on intermediate suppliers who have experience and volume import advantages is usually a smart choice if it is possible. A fashion executive quoted in a Women's Wear Daily article years ago said that outsourcing some jobs to qualified help rather than doing them poorly in house is showing the greatest responsibility. He compared wise outsourcing to reliance on utility companies that supply our electricity. A fashion business would not want to take time away from its primary work to become its own energy supplier, nor would that even be possible. In the same way, importing is a task that favors suppliers who pass along their volume discounts to smaller businesses.