Export merchant describes international business model of company who buys goods from foreign (or domestic) manufactures, packages the goods and sells them under its own brand. By doing this export merchant takes all risks which stems from legal uncertainties, taxes and tariffs, customer needs, competition on the international market. This model is used by companies which have broad competencies and knowledge of international trade to exploit less knowledgeable companies which are afraid of entering international markets. Export played a very important role of United States economic expansion.
Advantages of export merchanting
Main goal of export merchanting is to exploit opportunities of foreign markets to maximize profit of company, those opportunities are in most cases impossible in domestic market. There are various options of merchanting. As example firm can focus on importing obsolete electronics gadgets like phones, TV sets, or computers from highly developed countries, and then sold abroad for higher price, since there will be higher demand for not newest electronics than in manufacturer country.
Similarly, when product in domestic market begins to be saturated, and its price starts to decrease, or it is decreased enough to draw benefit from it, there is great opportunity for export merchants, manufacturers are able to keep achieving steady sales by exporting their product abroad. Also broker gets his profit, providing to benefit of both sides.
Along with the increase of the deals quantities merchant gets more recognizable, improving merchant's competitiveness, and knowledge of both foreign and domestic markets.
(Alan E. Branch,2006)
Barriers of export merchanting
It's easy to trade inside European Union. There are simple procedures and taxes of intra-Community trades. The real problems starts when you trade
There are wide array of barriers, developed by countries to avoid troubles provided by import-export mechanisms. It's necessary to protect domestic market of dumping, protecting specific industries, not allowing for increase of unemployment rate.
Most important instruments are taxes, in destination country. Government in that country should protect market from goods much cheaper than substitutes in domestic market, government is imposing a duty, and taxes to make price between imported and local goods equal. It makes dumping almost impossible. As well duty is way to penalize other country for various expensive deals, making them not profitable to enter your country with some products, It is also response for too high taxes and tariffs applied to other sides products.
There can be also more restrictive way of fighting export merchanting, one of unavoidable is applying the embargo (it mainly deals with the arms trade).
Other can be requirements of some documents and different entry fees.
Various standards of how the imported goods should look like, packaging, or quality specs.
Miscellaneous documents such as confirmations between contractors, export formal agreements, and invoices.
(Alan E. Branch,2006)
- Alan E. Branch (2006). Export Practice and Management, Cengage Learning EMEA.
- Balabanis, G. I. (2000). Factors affecting export intermediaries' service offerings: The British example. Journal of International Business Studies, 31(1), 83-99.
- Weiss, K. D. (2011). Building an import/export business, John Wiley & Sons.
Author: Michał Rogóż