Every business is working towards securing a market share sizeable enough to support healthy profits, growth, and development. The same goes for wholesale suppliers, liquidation companies, small businesses, and Amazon sellers. A large market share means increased sales and the positive chain continues.
From an Amazon seller perspective, you could say that liquidation companies, especially the reputable ones that offer the best services, have grown in popularity and have been securing that market share when it comes to preferred merchandise suppliers. These companies offer merchandise in all conditions, shapes, and sizes in bulk, at prices well below wholesale making the life of e-commerce sellers easier as they can secure a healthy profit margin and market competitiveness.
US merchandise has always had the reputation of being the best value for money and it should not come as a surprise that, with the global reach through e-commerce platforms, this merchandise has gained popularity all over the world. With this opportunity to expand presenting itself, a significant number of liquidation companies will look for ways to export their merchandise to countries such as Peru.
Peru is one of the world’s fastest-growing economies but also one of the most stable in Latin America. No wonder US businesses would be interested in exporting to the country. US businesses can also benefit from the United States-Peru Trade Promotion Agreement (PTPA) signed in April 2006, that came into force in February 2009.
Despite the trade deal, US companies are encouraged to contact local representatives to survey the market and look into potential opportunities for trade. It is often necessary to hire local counsel in order to make it through the red tape and successfully navigate Peruvian business practices.
An interesting segment for any exporter, especially companies dealing with liquidation stock will see promise in a developing e-commerce market that is still relatively new. With the internet access increasing by 10 percent each year, this market has a strong potential for growth.
Although promising as a market, your sales could be hampered by lack of established logistics to reduce shipping times and enable order tracking. In addition to general business obstacles, there are legal obligations you have to follow as well as documentation you have to fill.
In order to clear customs (Superintendencia Nacional de Administracion Tributaria – SUNAT), you are required to provide several documents when importing merchandise to Peru.
For household goods and personal effects, you are required to provide a passport, packing list, bill of lading or airway bill. Residents of Peru require a letter of employment provided, which is issued by the Peruvian Labor Ministry. Foreigners living in Peru must provide a resident visa, while a diplomatic import permit is required for foreign diplomats. This permit is issued by the Ministry of Foreign Affairs. You are also required to have a residence certificate issued by the Peruvian Embassy or Consulate at the origin of merchandise, an immigration record, a copy of your business certificate, inventory list, which includes the value of the merchandise and a business plan. The last four items in the list are required for returning citizens.
However, businesses are first required to acquire an export license, a document that gives the authorization to export specific goods to any given destination. A large number of destination countries may require this certificate. The license a business dealing with US liquidation merchandise needs is issued by the Department of Commerce’s Bureau of Industry and Security.
If a product requires no license or is controlled by the International Traffic in Arms Regulations, you are required to procure a Destination Control Statement (DCS) for exports from the United States. DCS will be added to the commercial invoice, which is required for commercial imports into Peru, as well as a bill of lading or an airway bill. This notifies the carrier as well as the foreign parties that the merchandise is permitted for export to the destination.
U.S. Department of Commerce also advises that a number of other certificates might be required for specific goods. These include an insurance certificate, among others, which assures the consignee that insurance will cover the loss of or damage to the cargo during shipping.
To establish which documents might be specifically required for your business, contact your local U.S. Commercial Service office. In general, in addition to the documents already mentioned, you will require a pro forma invoice (which the exporter prepares before shipping the merchandise), a commercial invoice, a certificate of origin, an export packing list, airway bill or a bill of lading. To acquire all these documents, contact your shipper, freight forwarder or a customs broker.
Also, the U.S. government requires an Electronic Export Information Filing or EEI, which is the most common export control document for shipments valued over $2500 per delivery. It also applies to deliveries that require an export license, regardless of the value.
Peru uses a system of customs management, SIGAD, to validate the data and determine the level of control the merchandise being imported into the country must undergo. If you plan on working with an entity in Peru, they must be part of the Unique Taxpayer Registry (RUC). SUNAT further notes that there are two main ways to import merchandise into Peru, which depends on the free-on-board (FOB) value of the merchandise and the nature of goods to be imported.
If the value of goods to be imported exceeds $2,000, the customs agency, acting as the importer’s representative, will carry out all the clearance proceedings. For merchandise with FOB value below $2,000, you are required to carry out all the customs proceedings yourself, presenting a Simplified Import Declaration. However, if you wish to do so, you can import through the customs agency.
It has to be noted that SUNAT is aimed more at generating revenue than at facilitating trade. The agency requires any imports clear its management or valuation service if imports’ customs value is above three tax reference units (Unidad Impositiva Tributaria – UIT). For the past year, one UIT was at 4,050 Soles or approximately $1,216. On top of it is a SUNAT clearance charge of 2.35 percent per UIT, however, the agency applies a flat $34 valuation fee. However, if you are importing merchandise covered under the PTPA, you are exempt from this fee.
The mentioned US-Peru Trade Promotion Agreement (PTPA) eliminates duties on 80 percent of qualifying capital goods according to the US Department of Commerce. No import duties are imposed on 70.4 percent of items, such as agricultural goods or goods not produced locally. A 6 percent duties are imposed on 20.8 percent of products, mainly consumer goods, while 8.8 percent of products are charged with 11 percent import duties. This category includes some vegetables, as well as beef products, chocolate, textiles, apparel, footwear, among others. Non-weighted average tariff is at 2.2 percent.
The country also imposes an 18 percent of value added tax (VAT) on 93 percent of product categories while an excise tax is applied to products like tobacco and alcohol. However, Peru has no restrictions when it comes to quantity of merchandise to be imported.
While this article shines a light on requirements and tariffs, we urge you to contact relevant agencies or, as mentioned above, hire a local counsel for detailed help on the matter.
With the expansion of the market and potential exports of US liquidation pallets into Peru, potential customers might be asking what liquidation merchandise actually is. Now, there are a number of reasons why merchandise gets liquidated and there are also several levels of merchandise condition. Here are several scenarios why merchandise gets liquidated.
If a business is closing or moving location, the merchandise that is being left behind, either unsold or used, will be packed up into pallets and sold in bulk at low prices. Stores that are either closing doors or moving to a new location, find it easier to pack up merchandise into pallets. Instead of paying for the merchandise to be hauled away or transported to a new location they liquidate the merchandise through liquidation companies.
But these are not the only cases in which merchandise is liquidated. If you browse the internet, you will find that liquidation companies have a wide range of products on offer, from electronics to household items such as appliances, labeled as brand new, refurbished or untested. These labels largely depend on the reason the merchandise is liquidated.
Brand new items can certainly be an interesting option. The best source for brand new items would be the manufacturers, but these often have a very high limit when it comes to the minimum order amount, which is usually a sizeable investment for small businesses and start-ups. But manufacturers and retailers don’t always sell all of the products they produce or order. At times you might come across merchandise labeled as closeouts or overstock. There is not much difference between the two except for the reason these are liquidated.
Retailers will organize closeout sales in several scenarios, and these often include seasonal merchandise or products such as smartphones, or laptops. At the turn of the season, for example, summer to fall, all the merchandise that is left on the shelves, bathing suits, t-shirts, shorts will be pulled off the shelves and packed up into pallets. This way the retailer clears up space for incoming fall merchandise. The same goes for electronic devices. The technology is developing at such a pace that every other month a new model of a certain product is released. While the old models are not obsolete or inadequate for the current market and customer demand, they are still discounted and sold at closeout sales.
Overstock merchandise, on the other hand, has never seen the shelves of a store. It might have been ordered, labeled, with price tags added, and stored in a storage room at the back of the shop waiting to go on the shelves. However, the store manager might have misjudged the demand or the current market conditions and ordered excess amount of the product, which is why a portion of it never gets to be offered for sale, and when the time comes it is liquidated. What these two types of liquidation merchandise have in common is that they are virtually new and never used, and are sold at 25 to 50 percent below wholesale price.
But, as mentioned above, products come in all conditions, and often you might come across refurbished products and customer returns. Refurbished products are not a bad choice if you are looking to purchase for very low prices. While closeouts and overstock products have the highest resale value and the price due to their condition, refurbished products offer a cheaper alternative as these products have been returned by the customers and refurbished by manufacturers or liquidators before being offered for sale in bulk.
However, customer returns are not always refurbished. Sometimes the products get returned because the seller shipped the wrong item or the wrong color. So purchasing customer returns can also provide you with unused and new merchandise. But there is a risk you also might receive damaged goods.
While this sounds like a simple question, the answer is not. Depending on your target customers or market as well as your purchase power, any type of liquidation merchandise can be the best type. This means that you have the answer. From a business point of view, closeouts and overstock have a high resale value and would be a logical choice, but sometimes one item in a pallet of unsorted customer returned products can pay for the whole pallet and secure you a larger profit than the whole pallet of overstock products. This strictly depends on market conditions, demand and your preference.
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