Everything Overseas Companies Need to Know When Looking for Fulfillment Services in the USA
If you are a non-US based company looking to expand into the American market, then you’ll likely need to find a fulfillment company located in the United States. They can help you overcome logistical challenges and deliver your product to your consumer base. Indeed, this is not a decision that should be taken lightly. However, with the right partner in place, this crucial step can result in sustainable growth and increased profitability for your company.
The following information can serve as an overview of what you need to know when looking for fulfillment services in the USA. It will cover 6 major factors that you should consider:
- Why should you enter the US market?
- What regulatory hurdles must be overcome?
- What specific regulations may apply to your product?
- Why should you utilize a freight forwarding service?
- Where is the best location for your warehouse?
- When should you start looking for a fulfillment company?
Armed with such knowledge, you’ll be able to make an informed decision, and find the best fulfillment provider for your specific needs.
Why Should You Enter the US Market?
The United States has a dominant market share across many global industrial sectors. For example, the US alone holds 45% of the international pharmaceutical market. Further, it accounted for over 70% of total market revenue in the global packaged food market as of 2016.
In addition to the United States’ current market shares, there is also a huge amount of potential for growth. For instance, the United States’ consumer electronics industry grew from a market size of $266 billion in 2018 to $301 billion in 2019 – a year over year increase of over 13%. Also, the general cross-border eCommerce industry is growing at a rate of roughly 30% every year! Odds are, the US market share in your specific industry also has enormous growth potential.
Of course, when we talk about “entering the US market” we’re referring to the establishment of a logistical infrastructure that will help you to bypass extended lead times from overseas shipping, as well as additional shipping costs and customs clearance hassles for non-bulk deliveries. It is also important to factor in lost sales, or missed opportunities. After all, most consumers aren’t willing to wait 30 to 40 days for their product to arrive on that “slow boat from China”.
Thus, cost-saving bulk shipments to the US, along with an established on-hand quantity within American borders, can help you to leverage your presence in the United States to the fullest advantage. In summary, these are the top benefits of US based fulfillment services for overseas and international companies:
- Product availability – US consumers will be able to order and receive your product immediately without any additional international shipping delays
- Reduced customs clearance headaches – By clearing customs in bulk and maintaining a steady inventory of product, clearing U.S. customs without major problems will become a reality
- Increased customer satisfaction and potential repeat business – U.S. consumers are more likely to experience greater satisfaction with their order delivery by using a local U.S. based fulfillment company, thereby increasing the chances of positive reviews on your products and repeat sales.
What Regulatory Hurdles Must Be Overcome?
You may have a lot of questions about regulatory concerns associated with entry into the US market. Here are some frequently asked questions, and their corresponding answers:
Do I Need to Be a US Citizen to Sell Products in the United States?
The short answer is: no. Anyone has the right to sell products in the United States, whether a foreign company or an individual, as long as the products in question are themselves legally permissible to sell.
Does a Warehouse Need to Establish a US Entity?
Strictly speaking, no, international companies do not need to set up a physical presence in the United States. That being said, the establishment of a physical warehouse within US borders can do wonders for building up consumer trust in your business.
What Are the Tax Ramifications of Entering the US Market?
If you choose to not set up a US corporation, then you generally won’t have to worry about paying federal taxes. However, you should count on having to collect and pay sales taxes. The only states that currently do not have a sales tax are Alaska, Oregon, Montana, New Hampshire, and Delaware, and it’s likely that you won’t be using any of those states for overseas importing. Additionally, you’ll need to register with the IRS as a foreign-owned company and receive a Taxpayer Identification Number (TIN) to proceed with your importing operations. It may be wise to consult with an accountant or tax attorney to determine which type of company you should register as with the IRS.
How Do I Import My Products to My US Fulfillment Center?
The biggest thing to focus on here is the payment of all of your duties for the product shipment. For overseas shipments, you’ll need to enlist the services of a US customs broker to clear the shipments for you. You’ll also need to declare an IOR (Importer of Record) and Ultimate Consignee for your shipment. The IOR is the person or entity that takes responsibility for the inbound shipment, and guarantees that the products meet all applicable legal requirements. To register as the IOR, you’ll need your name (or your company’s name), your foreign address, and your TIN. The Ultimate Consignee will typically be your fulfillment service provider.
Would I Need to Establish a US Website?
This is not a requirement for conducting international business. Nevertheless, a website customized for your US consumer base could greatly enhance the effectiveness of your sales and marketing strategy. In addition, if your website is set up for a variety of different payment methods (debit, credit, PayPal, etc.) then you’ll likely attract more customers.
Do I Need to Set up a US Bank Account?
No. However, most US consumers will put more trust in your business if you maintain a US bank account, especially since international transactions have a reputation as fertile ground for fraud. Moreover, if you want to use credit card payments as an option on your website, then you’ll need to open a merchant account with a US-based bank.
What Specific Regulations May Apply to Your Product?
Apart from the general regulatory burdens that must be borne, you should also carefully research any product-specific guidelines that could impact your imports. For example, you can’t even import dirt into the US without a permit, so you can expect that there will be a lot of detailed (and perhaps surprising) restrictions for more complicated commodities. Failure to meet the required approvals could result in your products being held up or confiscated at the US border.
For many items, guidelines laid down by the Food and Drug Administration (FDA) must be scrupulously observed. Affected items could include:
You should also know which import items are banned from entry into the US. The US Customs and Border Protection website can prove to be an invaluable resource in this regard. Finally, familiarize yourself with other laws regulating product imports, such as the Food, Drug, and Cosmetic Act, and the Fair Packaging and Labeling Act.
Furthermore, Tariffs (taxes on imports and exports) should be explored, identified and planned for. There are numerous websites only that detail the potential tariffs.
Why Should You Utilize a Freight Forwarding Service?
Strictly speaking, it is not necessary to enlist the services of a freight forwarding company to import your products into the US. Nevertheless, there is so much documentation and red tape, and such a bewildering variety of regulations that vary from country to country, and from state to state, that many international companies use a freight forwarding firm to handle these tedious, complicated details for them.
What does a freight forwarder do? Basically, freight forwarding companies are “logistics brokers”. In other words, they handle the logistics of your logistics by temporarily storing your product, negotiating shipping rates, handling multiple bids from carriers. Further, selecting the transportation option that is most economical, secure, and expedient. Freight forwarders can handle:
- Pickup and transporting of your goods overseas
- Clearing US customs
- Final delivery to from the port to your warehouse (often referred to as “drayage”)
- Completion of all required documentation, including the identification of proper harmonized tariff codes
If you are unsure of which freight forwarding company to use, then fulfillment companies can often recommend trustworthy freight forwarders for your consideration.
Where Is the Best Location for Your US Warehouse?
The answer to this question really depends on your current business needs and objectives. If you anticipate immediate high-volume sales, then you may want to use multiple fulfillment centers. Should you need to spread outbound shipping costs, and ensure consistent delivery timelines, then you should consider a centralized location relative to your consumer base. If inbound freight costs are your biggest concern, then you may decide to contract with a warehouse in the same region as the nearest port.
All of the below factors should be considered when choosing the ideal warehouse location:
- Proximity to ports of entry
- Proximity to high concentration of customers
- Anticipated sales volume
- Desire to capitalize on no or low sales tax states
- Need for close proximity to US based staff
Top Places Companies are Searching for Fulfillment Services: Regions, States, and Cities
How fast you get your products out to targeted customers all hinges on fulfillment center location. While the best facilities usually move products quickly across the country, being closer to customers helps deliver packages hours earlier.
Even so, it’s worth keeping in mind a good location isn’t always about delivery. Having your fulfillment center closer to your business makes it easier to visit them and keep communication going. Far too many businesses think fulfillment can work autonomously without interaction, but it only leads to confusion.
Here at WarehousingAndFulfillment.com, we recently studied the top places companies search for fulfillment services. We found most of the searches became segmented by region, state, and city.
Searching For Fulfillment by Region
We get many requests through our site for where the best fulfillment centers are, and we strive to provide answers based on our expert research. You’ll find some interesting results on which regions many businesses prefer.
In many cases, we pinpointed the East Coast as the top place, seemingly because of the higher populations there. However, when you look at east coast based fulfillment facilities, they mention the Port of New York/New Jersey as being the second largest port in the nation. This automatically gives you access to the world’s biggest consumer markets.
Beyond the east coast, though, we found the Central U.S. being the second choice. As much as you might think the central portion of the U.S. is too far away from ports, consider many major highways connecting to the west and east originate in the Midwest.
The last regional choice was the West Coast, despite the Ports of Los Angeles and Long Beach being the busiest in the entire country.
Most telling: the largest percentage of businesses indicated they had no special preference for region and would consider any place.
Searching For Fulfillment By State
It turns out California is the top state searched for in finding fulfillment centers. Mention of the top ports above are obviously a major factor, though also consider highways like I-5 extend the entire length of the west coast. This allows fast deliveries by truck up to Oregon and Washington State.
We found Florida as the third most searched state, most likely because it’s a direct conduit to Central America, South America, and the Caribbean.
Texas was fourth thanks to being centrally located within the country, and being close to Mexico for cornering more outside markets.
Searching For Fulfillment By City
It’s no surprise that Los Angeles turned up as #1 in our studies on city searches for fulfillment companies. As one of the most thriving fulfillment cities on the entire west coast, it’s within close distance to the most important California ports.
Chicago is second with direct routing right into the Midwest, while not being far from major east coast markets (as well as Canada)/.
Dallas/Fort Worth is third as an example of how popular Texas is for being so centrally located.
Then you have Miami at #4. It’s a major hub for the entire east coast and the other Americas without obstructions to reaching those markets quickly.
With all this information available to you, it gives you some guideposts to go on when searching for a fulfillment center now or in the coming year. Contact us where we connect businesses with thoroughly screened warehouses and fulfillment facilities meeting specific company needs.
When Should You Start Looking for a United States Fulfillment Company?
It’s important to note that fulfillment companies are not high-risk/high-reward ventures; in fact, they are decidedly risk-averse. Thus, if your company is still in its early stages of expansion, most fulfillment companies may not feel comfortable partnering with you or offering a long-term commitment.
Generally speaking, it is best to begin your search within a few months of your sales launch into the US. By this point, you should have many of the details of your plan already nailed down (such as precise inventory counts, arrival dates, item SKUs, etc.) You may also have a US website up and running. In summary, we are best able to assist you with matches when:
- Your business is within 2-3 months of launch of US sales
- Your business at least has a baseline website up and running that the US fulfillment centers can see
- You have an anticipated date of shipment of first product determined, along with quantities being sent to the US warehouse
With these things in hand, most fulfillment companies will be more willing to work with you, and may even provide a discounted offer on a proposed contract.
Making the Right Decision – Picking the Best US Based Fulfillment Service
Selecting a fulfillment company is a weighty decision, but there are many resources available to help you navigate the various options out there. For instance, WarehousingAndFulfillment.com has a large number of helpful articles, including a detailed guide on fulfillment pricing and costs, and a free fulfillment guide on “How to Select the Best Fulfillment Services Company for Your Business“.
Another important step to choosing the right fulfillment partner for your business is a “face-to-face” visit, if at all feasible. After all, your fulfillment provider makes up a crucial part of your business operations, but is thousands of miles away from your company headquarters. Even if you can’t physically travel to the fulfillment center you have in mind, conversations with customers and employees, and even a virtual tour of the facility, can do much to set your mind at ease.
If you’d like assistance in finding that fulfillment company that perfectly aligns with your business needs, objectives, and overall vision, then reach out to us at FulfillmentCompanies.net for further information. Since 2005, we’ve been connecting businesses with the right US based fulfillment companies that are thoroughly screened and best matched for each unique scenario.
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