Drop Shipping, Part 3 – Leveraging Free Trade Agreements and Non-Resident Importing

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By Lou Kaszubski, Apr 11, 2013

In our last blog posts, we discussed the benefits of drop shipping and the responsibilities and obligations of a buyer under the Incoterms®.

Advantages of becoming a drop shipper:

Let’s now take a moment and discuss two compelling advantages in becoming a drop shipper.

1. Free Trade Agreements
2. Non-Resident Importer

1. Free Trade Agreements (FTA)

Free Trade Agreements or FTAs have proven to be one of the best ways to open the world market and increase trade. FTAs allow for preferential duty treatment to items that qualify from certain countries. The North American Free Trade Agreement (NAFTA) for example, consists of the United States, Canada and Mexico and makes up one of the largest trading blocs in the world.

The United States and Canada currently have over 20 Free Trade Agreements in place with various trading partners.

How can you benefit from Free Trade Agreements?

FTAs can significantly reduce your landed costs by eliminating duties and taxes. So, for example, if you source a product from a country with an FTA and pay no duties or taxes, you now own an advantage over your competition that sources from say, China. You also benefit by having more than one market to choose from which gives you more flexibility when sourcing products. In addition to the current FTAs in place, the United States and Canada also offer preferential duty treatment to lesser developed economies under the Generalized System of Preferences (U.S.) and the General Preferential Tariff Regime (Canada), adding hundreds of more sources for international trade. As previously stated, you are not limited to the company down the street.

2. Non-Resident Importer (NRI)

So now that you have sourced products and found clients to sell the goods to, how will you deal with Customs? The last thing you want is to lose a sale because your client has to deal with customs. The most effective method is to remove Customs from the equation, well at least in the eyes of your client.

How can you benefit from being a Non-Resident Importer?

By acting as the Importer of Record, you can meet all the Customs obligations and have the goods delivered to your client as if they came from right down the street. One of the benefits of NAFTA is that you can act as the importer even if you are not physically in the country you are importing to. Customs recognizes this as a Non-Resident Importer, or the NRI.

Let’s say that you reside in Canada and have sourced product from Singapore to be delivered to a client in the United States and you have purchased the goods under CIF (Cost, Insurance and Freight) Incoterms®. Since the seller is obligated to deliver the goods to the port of destination of your choice, you would simply coordinate with your customs broker to clear the goods on your behalf and since the U.S. has a free trade agreement with Singapore you also benefit from duty free treatment on the items.

Becoming a Non-Resident Importer and benefiting from free trade agreements is an efficient way to join the global marketplace and benefit from global commerce.

The Final Analysis on Drop Shipping

Remember, the world is your oyster. You just need to make sure you have the right customs broker in place.

Related Articles:

• Drop Shipping, Part 1- Maximize The Benefits of Global Trade
• Drop Shipping, Part 2 – Using Incoterms® to Your Benefit