Although you may know the difference between imports and exports, in theory, it’s harder to understand the difference in practice. Furthermore, it’s even more challenging to understand how these different economic components affect your business.
Here’s everything you need to know to understand these concepts and expand your economic knowledge:
How to Determine Your Position as an Importer, Exporter, or Both
Are you an importer, exporter, or both? Here’s how to find out what your role is within the global economy.
Who Is an Importer?
An importer is a foreign buyer who brings goods and services into the home country from a foreign country.
Sometimes, import transactions are obvious — for instance, when you order parts for a product from China. Other times, importing is less obvious when you purchase a product online that’s actually fulfilled by an overseas company.
No matter your approach to importing, here’s what you need to know if you want to begin importing goods from overseas:
- Obtain the right licenses or permits: Some imports require you to apply for and receive a special license or permit. Be sure to go over guidelines offered by the U.S. Customs and Border Protection (CBP). Also, be sure to contact the local port of entry where your imports will enter the country to check for any local requirements that differ from those at the federal level.
- Learn about import quotas: The United States employs import quotas that control the amount or volume of various commodities that can be imported into the country during a specific period of time. Such quotas can affect your ability to import certain goods.
- Establish logistics: You then need to establish your import logistics, including how you will transport these goods from the port to your business or your customers. For the best results, you may want to consider using a freight brokerage like RPM that gives you access to numerous different carriers that offer a wide range of shipping services.
Using a freight brokerage is also a great way to expand your capacity, save money on shipping costs, and gain more flexibility in terms of your shipping and logistics processes.
Who Is an Exporter?
An exporter is someone who takes goods and services out of the home country into a foreign country. Taking on a new market is an exciting and challenging venture that you can conquer with the right approach.
Here are some tips to help you start exporting your goods or services to new markets all around the world:
- Lay the groundwork: Begin the process by researching how exporting works both in your home country and in the countries you wish to export to. Find out if you need any permits or licenses. Research any rules or regulations that you may need to follow. Most of this information can be easily found online through the respective government’s websites.
- Make a plan: Exporting isn’t something that you should just do on a whim. Instead, you need to develop a detailed and well-thought-out plan. During this process, you may want to consult experts with experience in the industry or economics in general.
- Identify potential markets: In an ideal world, your product would succeed in every market around the world. In reality, this isn’t usually how it works. Instead, you will need to determine which markets provide you with the greatest chance of success. After all, you have limited resources, and you need to focus your efforts on avenues that are actually worthwhile.
- Assess potential markets: Once you have identified potential markets, you need to do a deep dive to learn more. It’s important to keep in mind that these markets are likely vastly different from the existing markets that you’re familiar with. Look into product trends in these markets, potential competitors, and potential barriers to entry.
- Find buyers: You now need to find buyers in your new market by reaching them where they are. If you really want to transcend borders, then you need to go online. Create international social media profiles that are targeted toward specific markets. Attend trade shows targeted toward these markets. Work with industry associations that are familiar with these markets.
- Finalize logistics: Now that you have buyers for your exported products, you need to find a way to get them there. You will likely need to find an international carrier to help ship your products. However, if you’re expanding across land barriers, ground transportation providers like RPM may also be able to help.
- Set the right prices: The last step in the process involves setting the right prices. This is harder than it looks. Just because your prices work in one market doesn’t mean that they’ll work in other markets. As a result, you need to take into account your additional costs, the new market demand, and competitor pricing when determining your export’s price point.
Can You Be Both an Importer and an Exporter?
Believe it or not, but you can be both an importer and an exporter. In fact, many businesses do just that. For instance, they may have to import various components for their products from other countries before exporting the final product to customers in different countries worldwide.
Points of Production
When it comes to imports and exports, the overall goal is to either obtain or retain the right amount of products to avoid a surplus or a shortage. A shortage can lead to panic, including increased demands and increased prices as a result. On the other hand, a surplus can lead to decreased demand and falling prices.
Another goal is to take advantage of what you have to work with instead of trying to make up for what you don’t have by whatever means necessary. When working with finite resources, the best way to do this is to use a production possibility frontier or PPF. Both companies use a PPF on a smaller scale and countries on a larger scale to determine how much of a commodity to produce.
The PPF helps determine the most efficient combination of goods production based on supply and demand on the national level. This principle is based on the fact that you can divert resources from one area toward another to produce more of a single item, although, in turn, you produce less of another item.
This principle applies on the business level as well, so if you’re having trouble determining how you should use your resources, then you should consider drawing up a PPF.
Importance of Exports
Exports literally make the world go round. And this is not an exaggeration. A world without exports would mean that every country would need to rely solely on its own products and services. For some countries, this would be completely impossible. For most, it would be a major challenge and definitely wouldn’t be economical.
Instead, exports allow different countries to take advantage of each other’s strengths to address their own weaknesses. It’s impossible to be naturally strong in every economic area. As a result, you can lean on others who are strong in that area.
Exports essentially create a win-win scenario — the importing country receives goods and services they need, whereas the exporting country receives money in return. As a result, exports are a great way to stimulate economic growth all around the world. Oftentimes, export industries are interconnected, and growth in one area can contribute to growth in another area.
Additionally, exports can also affect the service economy as well — providing jobs in the process. In turn, this also grows the economy since people have more money than they’re spending to stimulate economic growth further.
Common Exporters
The United States exported $2.3 trillion in goods and services to foreign businesses and consumers in 2017 alone.
Here are the biggest U.S. export goods industries in 2017:
- Food, beverage, and feed with a total value of $133 billion
- Crude oil, fuel, and other petroleum products with a total value of $109 billion
- Civilian aircraft and aircraft engines with a total value of $99 billion
- Auto parts, engines, and car tires with a total value of $86 billion
- Industrial machines with a total value of $57 billion
- Passenger cars with a total value of $53 billion
- Pharmaceuticals with a total value of $51 billion
Here are the biggest U.S. export services in 2017:
- Travel and transportation with a total value of $236 billion
- Finance and insurance with a total value of $76 billion
- Intellectual property sales with a total value of $49 billion
The United States is the second-largest exporter of goods in the world, with exports that totaled $1.6 trillion in 2019. Here are the top six purchasers of U.S. goods:
- The European Union (EU), with exported goods totaling $267.6 billion
- Canada with exported goods totaling $292.6 billion
- Mexico, with exported goods totaling $256.6 billion
- China with exported goods totaling $106.4 billion
- Japan with exported goods totaling $74.4 billion
- The United Kingdom (UK), with exported goods totaling $69.1 billion
The United States is the largest exporter of services globally, with exports that totaled $875.8 billion in 2019. Here are the top six purchasers of U.S. services:
- The European Union (EU), with exported services totaling $200.3 billion
- The United Kingdom (UK), with exported services totaling $78.3 billion
- Canada with exported services totaling $67.7 billion
- Ireland with exported services totaling $57.5 billion
- China with exported services totaling $56.5 billion
- Japan with exported services totaling $50.0 billion
Common Importers
The United States imported $2.614 trillion in goods and services from foreign businesses in 2018 alone.
In terms of goods, here are the biggest U.S. import industries in 2018:
- Machinery, including computers and hardware with a total value of $386.4 billion
- Electrical machinery with a total value of $367.1 billion
- Vehicles and automobiles with a total value of $306.7 billion
- Minerals, fuels, and oil with a total value of $241.4 billion
- Pharmaceuticals with a total value of $116.3 billion
- Medical equipment and supplies with a total value of $93.4 billion
- Furniture, lighting, and signs with a total value of $72.1 billion
- Plastics with a total value of $61.9 billion
- Gems and precious metals with a total value of $60.8 billion
- Organic chemicals with a total value of $54.6 billion
But where does the United States get most of its imports? In terms of goods, here are the top six suppliers of imported goods in 2018:
- The European Union (EU), with imported goods totaling $515 billion
- China, with imported goods totaling $452 billion
- Mexico, with imported goods totaling $358 billion
- Canada with imported goods totaling $319 billion
- Japan with imported goods totaling $144 billion
- Germany with imported goods totaling $128 billion
In terms of services, here are the top six suppliers of imported services in 2018:
- The European Union (EU), with imported services totaling $145.9 billion
- The United Kingdom (UK), with imported services totaling $62.3 billion
- Canada with imported services totaling $38.5 billion
- Japan with imported services totaling $35.8 billion
- Germany with imported services totaling $34.9 billion
- Mexico, with imported services totaling $29.8 billion
Future of Exports
While it’s impossible to predict the future, it’s important to talk about the future of exports — especially in a global market that’s been plagued by supply issues and other constraints due to the COVID-19 pandemic over the past year and a half.
The bad news is that exports don’t seem to be increasing any time soon; however, the good news is that they don’t seem to be decreasing either. At the beginning of the pandemic, international trade dropped off as countries closed their borders and many manufacturing plants all over the world were closed to prevent outbreaks.
Things have improved since then but have yet to reach pre-pandemic levels. Experts expect better numbers by 2022 and 2023 as we continue to deal with variants and relatively low vaccination rates. When it comes to other countries, their varying approaches to COVID-19 will impact their economic recovery in different ways.
For instance, countries that have “accepted” the virus and have committed to keeping businesses open are likely to see higher levels of economic growth. On the other hand, countries whose goal is to eradicate the virus by any means necessary — including shutting down businesses and the overall economy — are likely to see lower levels of economic growth as a result.
It’s going to take some time, but the global export market should bounce back from COVID and continue to grow as global vaccination rates rise and virus transmission rates fall.
Conclusion
As you can see, managing exports and imports can be challenging without the right approach and support. The right approach involves plenty of research and planning to ensure that you’re bringing in and shipping out the right quantities of products.
The right support involves working with a versatile and flexible transportation broker like RPM, who can help you get your products — both imports and exports — where they need to be when they need to be there.
Visit RPM today for support managing your import and export shipping.
Sources:
Production Possibility Frontier (PPF) Definition | Investopedia
These Are the Top US Exports | CNN
Countries & Regions | United States Trade Representative<br
