Analysis of Import-Export Trading Company - Case Study Example

Import Plan of the of the Number: the Paper: Import Plan Introduction The document highlights an import plan for the import-export trading company known as XYZ Trading. The company will be established in Ohio, which is located in the Midwest of United States (US). XYZ Trading will import readymade garments from Bangladesh and sell them to the residents of Ohio. The demand for imported readymade garments has increased in US by 15.74% from 2001 to 2012 (Export Performance of Bangladesh Global Recession and After”). The readymade garments are imported from across the world, but primary countries for import are China, Bangladesh and India. Bangladesh exports a range of branded readymade garments to US owing to huge production of such products over there. So, the company aims at importing the readymade garments from Bangladesh at a cheap rate and sell them to the residents of Ohio at a reasonable rate. The company through its import plan wants to become the market leader for imported readymade garments and hold a respectable position in the long run. The readymade garment industry has encountered huge growth since demand for branded clothes are improving worldwide (“The United States and Bangladesh toward the Future: Policy Recommendations to Strengthen the U.S.-Bangladesh Commercial Relationship”). XYZ Trading targets to import branded readymade garments from Bangladesh and run a lucrative business. The import plan highlights the products that are imported along with other elements such as, sales price, sales estimate, landed cost, import policies and regulation of US, difference in culture, law and ethics of US and Bangladesh; and last but not the least, details of the trade agreement existing between the two countries. Product The readymade garments will be imported from Bangladesh by XYZ Trading. The reason for choosing readymade garments as well as Bangladesh is that both are related to each other. Bangladesh manufactures readymade garments for leading brands and supplies them to different parts of the world too. There is huge demand for these readymade garments in US; and Ohio is a place where 11 million people reside with varying tastes for readymade apparels. It is observed that about 52% of population in Ohio are females and quite evidently, demand for varieties of branded clothes will increase over the years since females are more fashion conscious than males (“Export Performance of Bangladesh Global Recession and After”). XYZ Trading will mainly imports female wears, like, designer tops, gowns, skirts, palazzo pants, formal pants and short dresses. The male wears include T-shirts and trousers. The qualities of the readymade garments that are manufactured and provided by Bangladesh are excellent at considerably low price. Country and Vendor The readymade garments are imported from Bangladesh. When exports had declined all over the world due to global recession (2008-2009), it has been noticed that export in Bangladesh had not fallen surprisingly. The export of garments is observed to play an important role in Bangladesh. It can, thus, be deduced that Bangladesh has acquired a competitive edge in the world readymade garments market. US import from Bangladesh had increased by 77% during the recession. It is noticed that readymade garments for female are the centre of attraction for US nationals. This fact accounts for the rise in imports over the years. The garments will be imported from vendors of ZARA, Puma, Adidas and Mango and will be distributed through XYZ Trading to reach the customers (“Export Performance of Bangladesh Global Recession and after”). The figure below reflects the demand for imported garments in US from Bangladesh and other countries. Figure 1: Import of garments in US from Bangladesh and others (Source: “Export Performance of Bangladesh Global Recession and After”) From the above figure, it is evident that Bangladesh gains a robust business from US by supplying readymade garments. Therefore, it can be inferred that the import plan is justified and the plan will be a success since the country and the vendor have prospered in these businesses. Price and terms of sale The readymade garments will be imported from Bangladesh. The suppliers will provide these garments in terms of pieces. The garments are for males as well as females, which is why individual garments will have different prices. The price ranges at which the garments will be obtained from suppliers are the following: Readymade garments Price range Female Skirts 150-200 Bangladeshi Taka Palazzo pants 250-350 Bangladeshi Taka Long gowns 350-500 Bangladeshi Taka Designer tops 150-250 Bangladeshi Taka Formal pants 200-300 Bangladeshi Taka Short dresses 450-500 Bangladeshi Taka Male T-shirts 50-200 Bangladeshi Taka Trousers 150-200 Bangladeshi Taka The act of import is carried out in exchange of different currencies. The currency of US is dollar and that of Bangladesh is Bangladeshi taka. Given that, when XYZ Trading will buy garments from Bangladesh, the company will pay in Bangladeshi taka. As for now, 1 Bangladeshi taka is equivalent of $77, which implies that XYZ trading will convert US dollars into Bangladeshi taka, before making payment. So, it is observed that XYZ Trading will have to spend negligible amount as US dollar is stronger than Bangladeshi taka. It can be inferred that XYZ Trading will form a lucrative business. The garments will be purchased on carton basis. Twenty cartons will be imported from Bangladesh, which includes the abovementioned female wears (Seyoum 98). Ten cartons of abovementioned male wears will also be purchased. This order will be placed based on the sale of garments. This can be done at least once a quarter or twice in a year; and the mode of payment is also dependent on the purchase amount. The trading company will provide a 25% profit margin for themselves after sales of the garments that will be imported from Bangladesh. Hence, price of the individual garments will be set accordingly so to earn the expected profit. The profit margin will increase as the company becomes successful over time. It is assumed that the female garments to be imported from Bangladesh will cost $2, 45,790; so, vendors will receive 1, 91, 64, 246 Bangladeshi taka. Even so, the vendors will receive 60, 79, 320 Bangladeshi taka for exporting male wears, which will amount to $ 78,234 for XYZ Trading. Landed cost The garments will be directly imported from the manufacturer’s factory and the cost of shipment will be paid by XYZ Trading on receiving the garments. The cartons are shipped through the sea route and the logistic partner will be DHL (“Ocean Freight Services”). XYZ Trading will place the transport order to DHL prior to order placement for garments to the vendors. The garments are to be assembled from different vendors in Bangladesh dockyard and later will be transported to US port through DHL services. The cost of transportation and service charges will be provided by XYZ Trading, after receiving the shipment in the US port. The following table elaborates the landed cost or cost for importing the garments as well as the profit that will be earned by the company. Landed cost Import cost     No. of imports 30 cartons (20 female and 10 male) Shipping charges $ 5000/ carton Total shipping charges $ 150,000.00 Cost of products imported $ 323,760.00 Insurance charges (7.5%) $ 24,282.00 Total cost of products imported $ 473,760.00 Sale price of the garments $ 592,200.00     Profit $ 268,440.00 The table provided above is an estimation of the landed cost and cost of import that will be paid by XYZ Trading to DHL and vendors, respectively. The total revenue that will be generated from the sale of garments to residents of Ohio and the whole of United States will be $5, 92,200. The sales price of individual clothes are formulated in such a manner that 25% profit margin are allotted to the company. Thus, profit of the company amounts to $ 2, 68,440. Legal, cultural, ethical difference between United States and Bangladesh United States has developed diplomatic bonds with Bangladesh since 1972 (“U.S. Relations With Bangladesh”) and relation between these two countries has been excellent with regard to trade. However, there had been disturbances in trading practices between these two countries since labour practices in Bangladeshi garment factories were unworthy of the concessionary treatments. The bad labour practices in Bangladesh can affect the trade between two countries again in future. There can be revolts against these labour practices, which will be headed by Bangladeshi leaders (“US Ends Trade Privileges to Bangladesh Following Garment Factory Disasters”). This possibility can harm the relation between XYZ Trading and the Bangladeshi garment providers. The uprising will affect the shipment of orders and the company would have to incur a huge loss. Hence, the trade may encounter human rights problems that can bring an end to the trade relation with vendors. Import restrictions in US The restrictions that are imposed on import of US are of two forms i.e. quantitative and tariffs. The tariff fees are collected by the government when products or services reach the ports of US. The tariffs that are imposed by the US government on imports are less than 3.5%. The tariffs restrict import by raising price of the imported goods compared to its domestic market. So, the tariffs are able to render the garments that are provided by XYZ Trading expensive for the residents of US (“Import Restrictions”). Import policies for US The goods that are imported in US are subject to either duty or duty free entries, according to classification of the goods under the Harmonized Tariff Schedule (“Customer Guideline”). The import requirements are the following: 1) XYZ should conduct custom clearance of goods for its business as well as the products. This helps to prevent violation of the laws. 2) XYZ Trading does not require a license for trading activity. 3) The company should declare value of the products that will be imported from Bangladesh. 4) It is the company’s responsibility to ensure that the imported garments comply with the established quality as well as safety standards and requirements of the US government. 5) XYZ Trading should make proper documentation before the import takes place. The custom and other duties should be paid by the company to the US government so as to facilitate an uninterrupted trade. Safety regulation The safety regulations that are applied to import of garments from US are the following: 1) The garments are to be brought in such a way that they are torn when the cartons are broken. 2) The garments should not be brought in any way in which they get dirty or their colour gets faded (Cackley 80). Trade agreement between US and Bangladesh There have been many trade agreements between Bangladesh and US in the recent past and it is noticed that about 77% of imported garments in US are exported from Bangladesh. So, the trade agreements are quite strong between these two countries, which have helped them to make their individual businesses prosper (“Importing into the U.S.”) Sales estimate The following table elaborates the estimated sales of the company: Sales estimate (per carton) Female Wear   No. of cartons 20 Per carton 1000 pieces Total number of pieces sold 20000     Male wear   No. of cartons 10 Per carton 1000 pieces Total number of pieces sold 10000 Selling price The selling price of the readymade garments for males and females is set in such a way that the company would incur 25% profit on sales of the garments. The selling price of the garments is such that the vendors also enjoy 50% profit. Selling Price Sale price of the garments $ 7,984,500.00 Selling price Female Wear (Per carton) $ 6,000,000.00 Male wear (Per carton) $ 1,984,500.00 The readymade garments will be marketed by XYZ Trading with the help of promotional activities, such as, pamphlets, television advertisement and monthly or seasonal discounts. Steps necessary to execute the plan The steps that are necessary to execute the import are the following: 1) Make a list of the garments that will be imported from Bangladesh. 2) Identify the best vendor in Bangladesh who will provide the best quality clothes at a reasonable price. 3) Make agreement with the vendors and place import orders. 4) Select the freight partner through which products will be shipped from Bangladesh to US. Works Cited Cackley, Puente. Consumer Safety: Better Information and Planning Would Strengthen CPSC¿s Oversight of Imported Products. Darby: DIANE Publishing. 2010. Print. “Customer Guideline.” Winstar. Winstar Global Logistics Ltd., 2012. Web. 5 March. 2014. “Export Performance of Bangladesh Global Recession and After.” International Growth Centre. International Growth Centre, 2014. Web. 5 March. 2014. “Import Restrictions.” Globalization 101. Levin Institute - The State University of New York, 2014. Web. 5 March. 2014. “Importing into the U.S.” Office of Textiles and Apparel. International trade Administration, 2014. Web. 5 March. 2014. “Ocean Freight Services.”DHL. DHL International GmbH, 2013. Web. 5 March. 2014. Seyoum, Belay. Export-Import Theory, Practices, and Procedures. New York: Routledge. 2008. Print. “The United States and Bangladesh Toward the Future: Policy Recommendations to Strengthen the U.S.-Bangladesh Commercial Relationship.” US. Chamber of Commerce. United States Chamber of Commerce, 2013. Web. 5 March. 2014. “U.S. Relations With Bangladesh.” US Department of State. US Department of State, 2013. Web. 5 March. 2014. “US Ends Trade Privileges to Bangladesh Following Garment Factory Disasters.” PRI. Public Radio International, 2013. Web. 5 March. 2014. Read More