Import/export guide: Saudi Arabia
If you’re a people person with a love of Saudi Arabia, an import/export business could be for you.
Do you speak Arabic? Do you have connections in Riyadh? Have you lived in Jeddah? Maybe you simply love the Saudi Arabian culture. In the import/export industry, you can use your individual competitive advantages to serve as a matchmaker for companies in Saudi Arabia. If businesses in Saudi Arabia want to export their goods, you can help them find buyers. And if they’re looking for specific merchandise, you can help them find sellers.
With dedication and this guide, you can become a part of the $2.14 billion in goods and services traded between Australia and Saudi Arabia each year.
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Types of import/export businesses
There are three basic types of import/export businesses. Starting out, it’s a good idea to pursue the one that interests you most.
Export management company
Let’s say a company in Saudi Arabia wants to export plastic goods. That’s where an export management company (EMC) can help.
An EMC handles all of the details for the company to ship goods overseas. This could include hiring distributors, creating marketing materials and preparing shipping logistics.
Export trading company
An export trading company (ETC) finds out what foreign buyers want and then locates domestic companies that can export the goods.
Import/export merchant (or free agent)
Import/export merchants buy merchandise from a manufacturer, foreign or domestic, then resell that merchandise around the world. There’s heavier risk involved in being a free agent, but with fewer middlemen, the potential for higher profits as well.
You can start your own import/export business with little up-front costs.
At a minimum, you need a phone and a reliable Internet connection. You’ll also want to invest in business cards, a website and a fax machine. And it doesn’t hurt to hire somebody for your branding, including a unique business logo.
Narrowing your market
Once you’ve decided on the type of import/export business you want to run and calculated your startup costs, it’s time to narrow your market focus.
By niching down, you can focus your attention on a market you can serve best. Think about:
- Customers you want to serve
- Areas of the world you’ll target
- Types of goods you’ll offer
Take your time to dig deep with your research. The extra time you spend finding profitable niches will pay off in the long run.
Your target customer will be someone who wants to trade globally. They’ll either want to sell goods overseas or buy goods from international sources.
Beyond that, you can choose any type of customer you wish. Maybe you’ll cater to companies that sell Saudi Arabia’s number nine export, paper. Or oil. Or textiles.
If you can identify a need, you can target a group of companies as customers.
Saudi Arabia’s top 10 exports
- Plastics and rubber
- Chemical products
- Base metals
- Transport equipment
- Machinery and electrical equipment
- Live animals and animal products
- Food, beverages and tobacco
Source: General Authority for Statistics, 2017
Regulation, licences and permits
There's no general licence you're required to have for importing goods, but Australian Customs does require permits to clear your goods. Quarantine regulations are a big one and you'll need to apply for a permit if your goods fall under this category. This includes plant, mineral, animal and human products, and means you'll need to make time for quarantine.
A permit for these goods comes from the Biosecurity Import Conditions Systems (BICON) and you can search its database to see if your goods fall into this category. Try to do this well in advance, otherwise your goods may be re-exported or destroyed.
Like with importing, you're not required to have a licence to export goods out of Australia, though you may need a permit.
Things that you can't export include certain weapons and heritage items. For other goods, like wine and brandy, you'll need to apply for a specific permit with the issuing agency. You can find more about specific goods and their restrictions on the Australian Border Force's website.
All goods you export will need to have an Export Declaration, which tells the DHA what the goods are and other details to do with the transaction. Once this declaration is lodged, you'll get a number (EDN). You'll be able to export your goods as soon as the Department has given approval to the Export Declaration you completed.
A note about importing goods into Saudi Arabia
Saudi Arabia has no special import provisions. Under WTO obligations, Saudi Arabia is committed to a transparent and predictable import licensing system, but you are required to submit a number of documents
Contact a professional to learn more about registration, tariffs and specific documents you’ll need to provide to conduct business there.
Charging for your services
Import/export businesses typically charge based on commission or retainer.
With a commission structure, you’re paid a percentage of any trade deal you close, usually around 10%. For example, if you sell a manufacturer’s smartphone for $300, you’ll make a $30 commission. On top of your commission, you’ll also want to charge for expenses like packaging and shipping.
On a retainer model, your client pays you a monthly fee to be on call when it needs your services.
To find the right amount for your retainer, consider your costs, which may include labour, supplies and overheads.
An alternative model
Which business model should you choose?
A rule of thumb is to pick a commission model if you think a product will be easy to sell. If you think a product will be difficult to sell, though, price your business based on a retainer.
The thinking is based on this: If you’ll sell a lot of product, you want to be paid based on performance. On the other hand, if you believe sales will be slow, using a retainer model could ensure that you’ll be paid even in the downtime.
Finally, if you’re confident in your ability to sell the products you acquire, you don’t have to negotiate a payment structure with manufacturers. All you’ll have to negotiate is how much you’ll buy the product for and then find a way to profit from the merchandise.
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments, with lower fees and stronger exchange rates, by comparing the services of a money transfer specialist.
Compare international money transfer options for import and export to Saudi Arabia
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Shipping the goods
You need to send and receive goods from other countries, so you’ll need to arrange shipping details.
First, contact a freight forwarder – a company that helps you transport goods safely and efficiently. It will help you handle the logistics of completing shipping documents, finding cargo space and securing cargo insurance.
Find a freight forwarder by looking in state-specific business directories.
Risks and how to avoid them
Unpredictable shipping logistics
Needless to say, your success hinges on whether you can ship goods safely and efficiently. If you’re exporting goods, for example, you’re responsible for ensuring they leave your local port and arrive at the correct destination on time.
You’ll also need to account for anything else that could go wrong, such as damage to the cargo. Staying organised and partnering with a reputable freight forwarder will help you ship goods without a hitch.
Not knowing enough about markets
It’s a good idea to thoroughly research a market before entering into this business, though even that may not be enough.
Consider hiring experts who understand the tastes and cultures of your specific markets. You’ll need to sell products that resonate in countries you’re unfamiliar with.
Running into problems at the border
Customs rules aren’t uniform throughout the world. Instead, you’ll encounter a mass of different regulations while transporting goods. To avoid drowning in a swamp of border regulations, hire experts in customs law and trade compliance.
The import/export business is for people who love building relationships in other countries. But it also requires an organised mind that can handle logistics.
If you have those qualities, take the plunge into creating a thriving import/export business.
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