Growing a market internationally can be an appealing yet daunting task for many entrepreneurs. Looking at the circumstances, growing your business internationally does in some way resemble the process of starting a new business. For example, if you intend to export US liquidation pallets to Ecuador, you will certainly need to become familiar with the applicable laws and regulations and find a reliable partner who can help you research the Ecuadorian market, grow the business in the country and distribute your products across the country.
Market research has become a lot easier nowadays due to the emergence of the internet and the ability that it provides to reach all the corners of the world. This also allows potential customers in Ecuador with access to the internet to access your online storefront and order merchandise they are interested in. Pallets of US liquidation merchandise are becoming more popular due to their low price, which can go well below the wholesale price. In addition to the low price point, US merchandise, in general, has grown a reputation of being good value for money. That is the reason for the rise in popularity and interest. In simple terms, if you are seeing increased traffic from Ecuadorian customers and a significant demand that would warrant exporting larger quantities of merchandise to the country, you should certainly explore all avenues to make that possible and grow your business in another market.
Prior to actually shipping the merchandise ordered by anyone from Ecuador, or setting up your export venture, you should look into the laws and regulations that relate to exporting merchandise from the United States as well as the customs regulations and import procedures on the Ecuadorian side.
Looking at the documentation required for you to export merchandise from the United States, there are some common export documents you will have to fill out. In other terms, this is the paperwork you need to fill out before exporting merchandise from the United States. For every export transaction you are required to have a commercial invoice, which is a bill for the merchandise you are providing to the buyer. This is because the government of Ecuador will use this bill to determine the value of the merchandise and as a guide to assess customs duties.
Another common document is the export packing list. This is similar to a manifest, something you as a liquidator or a seasoned buyer of liquidated merchandise should be familiar with. However, export packing lists are extensive and cover more details than the standard manifest. Export packing lists include information about the seller and the buyer, an invoice number, the date of the shipment as well as the carrier and the mode in which the merchandise will be transported. Similar to the manifest, export packing list provides information about the quantity of items, the description, type of packaging, number of packages, total net and gross weight expressed in kilograms, marks and dimensions of the package, if suitable.
You might also use a pro forma invoice, a document often prepared by sellers and delivered to the buyer even before the merchandise is shipped. This can function as a sale offering or price quotation.
In addition to the export documents, you will have to fill out some transportation documents such as a bill of lading or an air waybill. The latter is required for air freight and is specific to each shipper. The bill of lading is slightly different as it is a contract between the owner of the merchandise and the shipper. If you are exporting your merchandise via ship, you will have a choice of two types of bills of lading. One is a straight bill of lading, which can’t be negotiated, and the other is a negotiable bill of lading, which can be bought, sold or traded even when the merchandise is in transit. When taking possession of the merchandise the owner will have to provide the original.
Probably the most common transportation is the Electronic Export Information (EEI). FIling this document, previously known as the shipper’s export declaration. This document is required for all the shipments that are over $2,500 in value or if such shipments require an export license. The electronic export information is filed online via a free service established by Census and Customs, the AES Direct.
In addition to these documents, some merchandise such as defense articles, require a specific export permit provided by the State Department’s Directorate of Defense Trade Controls. Some countries will also require a certificate of origin for certain types of products. Make sure you check whether you need any specific licenses or the certificate of origin prior to getting the merchandise ready for export.
If you plan on importing merchandise into Ecuador, you are required to register with the Ecuadorian national customs service (Aduana Del Ecuador – SENAE). In addition, each importer has to apply for a tax number with the country’s equivalent of the Internal Revenue Service, the Servicio de Rentas Internas. What this means for a US exporter is that you should hire a specialized customs agent to carry out the import procedure. Also, the Customs Service enacted some 250 technical regulations in 2013, which the exporters should be familiar with and can find more information about on SENAE’s website.
The documentation required on import is similar to the one you have already prepared prior to shipping the merchandise. Ecuadorian customs require a commercial invoice, the bill of lading or an air waybill, insurance policy, the income tax registry number (RUC), certificate of origin (if required) and the certificate of standards compliance (INEN-1) if applicable. These certificates are verified by the Ecuadorian Accreditation Service the Servicio de Acreditación Ecuatoriano (SAE).
You will also have to provide the exact information about the shipment’s weight and labeling in Spanish will often be required as well. All the documentation is submitted through Ventanilla Única Ecuatoriana (VUE), which then carries out the verification of all the documents before it authorizes the duties payment and releases the merchandise.
Since 1996, Ecuador has been a member of the World Trade Organization (WTO), and the country implements a tariff system divided in four levels. Most raw materials and capital goods are are subject to a 5 percent tariff, 10 to 20 percent for intermediate goods and 20 percent for the majority of consumer goods. There is also a specific group of products like planting seeds, agricultural chemicals or veterinary products that are tax exempt. In addition, the U.S. dollar is the legal tender of Ecuador, meaning you don’t have to do any currency calculations.
However, a number of restrictions still apply. Despite the tariffs being mostly limited below 30 percent, as noted above, due to the membership in the WTO, the country implements an average Most Favored Nation (MFN) tariff of 7.6 percent for industrial products and 19.6 percent for agricultural products. But since its Trade Practice Review in 2011, these rates can be higher. Additionally, as a member of the WTO, Ecuador committed to phasing out its price band system; however, no action has been taken on this. Instead, the country implemented tariff surcharges in 2015, hitting some 2,800 tariff lines with a 5 to 45 percent surcharge, claiming this was a protection mechanism due to the low oil prices as well as the depreciation of the U.S. dollar.
In addition to the import tariffs and customs duties, all imports are subject to a 12 percent Value Added Tax (VAT) as well as a 0.5 percent tax for the Children’s Development Fund applied to the cost, insurance and freight (CIF) value of the merchandise.
The country restricts the importation of certain goods such as used motor vehicles, tires as well as clothing. Ecuador also applies a consumption tax on what can be regarded as ‘luxury’ products. These are divided into four groups and include tobacco products, alcoholic beverages, video games. These taxes can range from 2 percent for hybrid or electric vehicles valued under $35,000 to 150 percent for tobacco and tobacco products and 300 percent for firearms and guns used in sports.
It is essential that you look for a reputable customs agent who will be able to help you not only with procedures but also help you calculate potential customs duties, tariffs and tax.
While there are restrictions you would face as an exporter, the liquidation merchandise does not lose its appeal. But for some there are still plenty of unknowns when it comes to the liquidation merchandise. Many don’t know how far the industry has moved on from only the scrap and used products that used to be on offer before. Nowadays, retailers and manufacturers use liquidation companies as platforms to reach a wider audience online and sell their overstock or closeouts merchandise quicker and directly to the end users.
But what is actually liquidation merchandise? There are various types of liquidated merchandise based on the reason it is being liquidated. In a vast majority of cases, it is used merchandise returned to the retailers and manufacturers by their customers. Reasons for returning merchandise varies from the wrong product shipped to a product being damaged in transport and so on. Such products either get refurbished or simply packed up into pallets and sold through liquidation platforms.
But there are also other examples, such as the overstock and closeouts merchandise. In a number of cases, especially with seasonal merchandise, you will see retailers pulling unsold products from the shelves to free up space for incoming collections. This is usually done at the turn of the season and this type of merchandise is regarded as closeout merchandise. Overstock is slightly different. It is the merchandise that never even got to the store shelves as it was an excess order that was a result of a miscalculation by the store manager. In any case, these products come with the highest resale value point as they are basically brand new, and are the most appealing to the pallet buyer as well as the end customer.
In terms of which type is the best merchandise, there is no answer that fits every industry and individual. If you are interested in working with clothing, you will be purchasing clothing, and if you are looking for spare parts for a number of electronic gadgets you might have and would like to assemble and sell at a flea market, you can go for the unsorted customer returns or pallets of electronics that have been tested but are not working. This means that the best merchandise you need is actually the best liquidation merchandise for you.
With all the unsorted customer returns and scrap products being sold in pallets by liquidation companies, how do you actually find quality products to deliver to your customers? There are several ways to increase your chances. First, you have to look for a reputable liquidator, because these will usually have exclusive contracts to top-tier retailers and manufacturers. In addition, top liquidators provide manifests or the packing lists for every pallet they sell, showing the quantity, the type and the condition of the merchandise. On top of that, any product refurbished and sold by the liquidation company comes with at least a 90-day warranty from the liquidator.
Earlier we also mentioned that reputable liquidators team up with top-tier retailers. This is the case of Walmart Liquidations, which has opened a storefront on Direct Liquidation, using the latter as a platform to reach a larger number of customers quicker and avoid the wholesalers. This results in prices remaining well below wholesale, and Walmart’s name in itself is an additional guarantee of quality.
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