I love getting comments posted to my blog. Especially those that are short and to the point. Even more so when the point is to say what an awesome blogger I am. Those that are complimentary and pose a quick, easy to answer question ain’t bad either. I don’t mind sharing information with anyone willing to acknowledge my god-like breadth of knowledge. Comments that include a simple question that requires a detailed answer, not so much. Not that I don’t appreciate receiving those comments too, provided the requisite compliments about what a fantastic person I am are still included, but to answer those fully often takes as much time and space on my blog as a regular post. And that sounds like work. Which is something I try to avoid.
Fortunately for one reader whose recent comment posed a series of questions that would require the aforementioned always to be avoided work, her note came in just as I’d been considering posting on a similar subject. It was also fortunate that she included the obligatory accolades alluding to the fact that some small country somewhere on this planet should be honoring me as their supreme deity (though I may be paraphrasing what she said on that one). It didn’t hurt that she is both American and living in Hawaii either, ‘cuz that opened an entirely different portal into a world I, unfortunately as you will soon see, am far too familiar with. Hence today’s post. Which is a final bit of good fortune because y’all know how much I love any excuse to use the world hence.
The article I originally had been considering, which I’m sure is still yet to some, was going to be about the large group of friends and acquittances I have who make a living from importing goods from SE Asia. Though the importing part of that tale is just a minor detail. You’d think a self-employed small-scale importer would have to be a driven, type A personality. And that doesn’t hurt. But the underlying drive of those people I know involved with doing so is not about success and riches, but rather about being a world-class slacker. Yes, there is a lot of work involved in making a living that way. But more importantly is the ability of spending a quarter of the year living on a tropical beach in some exotic locale doing nothing more than perfecting your tan. They say that if you do something you enjoy for work you’ll always be a success. Whodathunk the path to riches would be an overarching desire to start your days with a massage while laying on a pristine beach surrounded by postcard picture perfect turquoise waters?
Of course when you live in Hawaii, palm trees, the beach, and postcard picture perfect scenery doesn’t have that big of a draw. Making some bucks however does. And you don’t have to have that large of an entrepreneurial spirit to have the brain fart that you too can get rich buying extremely cheap stuff while on holiday and selling it at huge mark-ups back home. I’d bet that little thought crosses the minds of a large percentage of people visiting both Thailand and Bali. It’s just that some people are smart enough to let that thought drift off into the clouds. When you are traveling with friends who instead begin to egg each other on, the opposite occurs. And your bank account will never be the same. Which is not necessarily a positive thing. And so it was, far too many years ago to calculate, for me and my friend Ann (and her girlfriend Cee too, but I’ll stick to the singular ‘Ann’ for this post though you should keep in mind I was up against the willpower of not one but two women, both equally capable of enforcing their will on lessor creatures, specifically those sporting a pair of testicles).
Still somewhat of a newbie to Thailand myself, I suggested Ann join me on a holiday to the kingdom. No problemo. I don’t know where we were at, or who is to blame for first suggesting the idea, but not long into the trip, amazed at how cheap everything was in Thailand (even though at the time the rate of exchange hovered just above 25 baht to the dollar) somebody uttered those fateful words: “Ya know, we could make a pile of money selling this stuff back home.” Problemo. What was supposed to be a relaxing holiday quickly turned into a shopping excursion extraordinaire. No street market was safe from us. The vendors at Chatuchak still talk about the weekend those crazy Americans put their children and grandchildren through college. The stall and shop owners at Pratunam gave us a standing ovation when we hit the market yet again. Platinum Fashion Mall had not yet been built back then, though I’m pretty sure the idea for an air-conditioned one-stop wholesale shopping mall for touri stemmed from our visit and willingness to drain our collective bank accounts stocking up on all the goodies that would soon result in an early requirement for all of us. The deals were incredible. And we attacked the small wholesale stalls giggling like a toddler who just inhaled half a gallon of birthday ice cream.
So here are two very important numbers for you: 800 and 2,000. If you are a first time visitor to SE Asia who decides the unbelievably low prices offered are going to be your version of wining the lottery, I’d also say 105 is an important number. That’s the average person’s IQ and something you should aspire to. The three of us, collectively, fell far short of that goal. But we did learn that the U.S. government allows its citizens to bring home $800 worth of purchases from a foreign trip free of duty. With three of us travelling, when we landed back home in Honolulu and filled out our customs forms that meant we had $2,400 worth of merchandise that we could import tax free. Cool. Unfortunately we’d bought several times that amount. But wait. There’s more!
Every government loves its regulations. Even when they make little sense and are drafted with terminology that makes even less sense. When you land back in the U.S. with suitcases crammed full of merchandise you have the option of making either a ‘formal’ or ‘informal’ entry. And that helpful employee at customs will ask you which door you choose. If you are lucky, he or she will explain the difference. Don’t expect to be lucky. A formal entry means you have hired a licensed broker to handle all of the paper work involved with importing goods into the U.S. An informal entry means you are a do-it-yourself kinda person. The kicker is that once our second number to remember – 2,000 – comes into play – and that means $2,000 – you are required to make a formal entry. Even when doing it informally. I know. But didn’t I just tell you that government regulations don’t make sense?
Customs brokers are free to charge whatever they like for their services. Most charge 10% of the value of the goods you are trying to get into the country. If you have arranged for their help in advance, your goods will be held by customs at no charge while the appropriate paperwork and applicable fees are dealt with, even if that takes a few days. If you didn’t arrange for a broker in advance, Customs will still hold your goods for you while you scramble around finding a broker. But now they will charge you for storage. And since anyone on the government’s payroll despises having to work for their paycheck, they’ll add a bunch of other fees too. Customs brokers make their job easy. Your ignorance means they have to work. And that means the applicable pound of flesh will come into play. Get it? Of course you don’t. Because you can still choose to make an informal, broker-less entry, right?
Okay, so you hit the $800 duty-free figure, but didn’t hit the $2,000 formal entry required figure. The customs agent now has to deal with the value between those two numbers. And that means work. The amount you will be charged on the difference is called a tariff. And what the tariff is depends on what those goods are. Customs has a book that lists all the various tariffs, a incredibly detailed list that thinks there is a big difference between, for example, a shirt with buttons and one without. The book the customs agent is trying to avoid opening is about the size of Delaware. So even though you have not brought back enough merchandise to require a formal entry, he or she will ask you whether you are choosing door #1 or door #2, hoping your reply is, “informal”. Then, unless you have goods that raise a red flag, he can just charge you a straight 10%. If you reply, “formal’ instead, he then has to spend hours figuring out what the specific tariff is on each and every type of good you brought back home with you. And needless to say, you will not be one of his favorite people.
So obviously, calling ‘informal’ is your best bet, right? Well, it would be, but the rules of this game say that if you are importing goods on a commercial basis, even when their value totals less than $2,000, you have to make a formal entry. If you bought a dozen of one type of merchandise, a dozen of another, and so on, you can claim they are gifts for family and/or co-workers (wink, wink) and the customs agent will believe you because he will want to do everything possible to keep from having to get his book of tariffs out. When you bring back a gross of T-shirts, that ploy will not work. So you are back to making a formal entry. And despite what you’d think considering the antics of Tea Party politicians, the government isn’t completely stupid. So if your goods total more than $2,000, no excuse you come up with will convince them that your intent is anything other than one of a commercial nature. And, again, a formal entry is required. Unless, of course, you decide to do it informally.
The U.S. government is your friend and wants to help you. Okay, so I thought this post needed a bit more humor. The truth is the U.S, government likes to fuck with you. So you have the option of making formal entry informally by acting as your own broker. This is not something you should try at home. If it is your first time importing commercially, your goods will be put in storage (with every possible fee and charge levied against you) while you figure out how to play broker. Surprisingly, the custom agents who have the unenviable job of dealing with self-importing folk are helpful. They will explain how to fill out all the necessary paperwork, and there are dedicated employees whose sole task is to come up with the multitude of tariff codes you’ll need for that paperwork. Not surprisingly, these folk are not at the airport. So expect to spend several days running from one end of town to the other dealing with governmental regulations while your body is trying to deal with jet lag. The good news is that once all of your paperwork is complete, and you’ve paid all of the fees and charges associated with storage, you’re good to go. Unless . . .
You’d be surprised at how many governmental regulations there are to run afoul of. Or I should say you will be surprised by how many governmental regulations there are you will run afoul of. For example, if you are bringing back some small tschokie that includes a shell or two in its design, you are required to have a Wildlife Importer’s license. There is someone at the airport who works for the applicable governmental agency that issues those, and you can apply for one at the airport. Assuming you have enough cash left on you to pay the licensing fees. Importing any form of electronics often require a specialized license too. And if what you decide to bring back requires batteries – if those batteries are included you are now importing an explosive and a permit from the ATF is also required.
Back when Ann and I made our initial foray into getting rich there were tight controls on goods made from cotton – those also required a special license as well as a host of other authorizations, all of which cost an additional outlay of cash. Those have since been loosened, but there are still some regulations at play depending on where the goods were manufactured. Then there are embargoes and other laws meant to bitch slap countries we don’t like – Burma tops that list – and so even though the goods you bought were found in Thailand, for example, if they originated in Burma they either can not be imported or can be but only after paying steep fines for that honor.
Trade agreements also come into play: there is no tariff on silver imported from Thailand, there is on silver imported from Indonesia . . . and again, even if bought in Thailand if it originated in Bali, there is a fee. Recently, now that Customs is part of Homeland Security, depending on where your goods originated from and/or where they were shipped from, many shipments are required to be fumigated – which, as you may have guessed, requires a fee and means storage with its accompanying fees and charges too. The regulation that is easy to understand is that every single item you bring back on a commercial basis must have a tag attached stating its country of origin. What is not so easy to understand is that the rules regarding the size of and/or how that tag must be attached, depending on the type of merchandise, can be quite detailed.
After a 15 hour flight, standing at Customs in the airport is not the place you want to become educated on the massive set of rules and regulations the government has set as a roadblock to your get rich scheme. Every time you are introduced to a new one, you have an option: deal with it, pay the fines, duty, and/or tariff, or ‘surrender’ the goods – surrendering your goods involves a large trash can. Depending on the customs agent lucky enough to get to deal with you, you may not get to make the decision on what merchandise you want to jump through hoops to keep and which you will surrender.
Ann and I lucked out and drew a customs agent who took pity on us. I’m sure that our plight was good for a laugh for the entire staff had something to do with how helpful he was too. We took copious notes, spent two weeks running down forms and clearances, making “Made In Thailand’ tags of various sizes and shapes, running back and forth to our respective banks getting more cash to pay for the fines, storage costs, and licenses that kept cropping up, and returning to the airport to find out what other hoops we’d not yet been introduced to that now came into play. We’d landed with just over $5,000 in goods we intended to get rich off of selling. We got to keep less than half. After shelling out close to $2,000 in said fines, storage costs, licenses, and tariffs. That’s not to mention a $10,000 fin the ATF hit us with for a box full of disposable cigarette lighters, which fortunately a kindly judge let us off the hook on. We didn’t make much of a profit off that learning experience. But did have a great tax deduction at the end of the year.
Obviously, using a customs broker can help avoid a lot of problems. But that only works when you know what you’ll be buying in advance of your trip. And it adds 10%, at a minium, to your costs. Shipping your goods (to the care of your broker if you are smart) alleviates the surprises headed your way when you try to pass through customs too. But for small-time importers, that means paying air-cargo fright charges, so there goes more of your profits – assuming you don’t run afoul of baggage limits imposed by your airline; carrying the stuff back with you is a much less expensive option and you get to take the $800 duty free allowance on those goods too. Whether you make a formal or informal entry. UPS makes a killing off of shipping small-time importers’ commercial goods back home from both Thailand and Bali. Most wholesale markets have a UPS branch just waiting for your business. But they include a 10% duty fee on whatever you are shipping – which they won’t bill you for until delivery and which may be a higher tariff than you actually owe. And when Customs checks your shipment, which they will, they may decide instead to impose a higher tariff, so now there are fines to pay on top of that. All before you ever get to see your goods.
You’d think a smart fellow such as I would have learned his lesson from the costly education received thanks to Ann and my get rich scheme. But less than six months later on a return trip to Thailand with my friend Dave, he uttered that siren’s song, “Dude, we could make a pile of money selling this stuff back home!”
You may recall I mentioned a vast network of friends and acquaintances who make their living off of importing goods form SE Asia. I’m not gonna tell you how much they make, since 90% of their sales are in cash and (may) never get reported to the tax authorities. I’m not gonna tell you how to bring back $2,000 worth of goods with receipts showing your merchandise only cost you $500 either (although every vendor in SE Asia will happily clue you in on that little con). And while I’ve mentioned a few, I can not possibly tell you ever regulation and fee you will run across if you decide to import commercial goods from SE Asia – I’m sure there are still plenty out there I have yet to run afoul of myself. But I will tell you whether it’s to just pay for the cost of your trip or to buy that beachfront second home you’ve been eyeballing, there is money to be made importing small amounts of merchandise from developing countries. What it will cost you to do so is something you’ll have to learn on your own. And good luck with that.
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