Product Importation Logistics in HN (2023/11/03)

Product Importation Logistics in HN 2023 11 03

Derived from Pixabay Images

Importing products and running businesses in Honduras is a complex challenge to deliver goods to final customers, requiring studying the process and country situation all the way to get to the customer’s home. There are ugly as well as advantageous facts to help build a business according to the entrepreneur context, and those willing to start the adventure in Honduras will want to make sure to set up their business domain and logistics as far as the country’s situation allows it.

Importing Products and Running Businesses in HN

There’s a chance you can operate traditional businesses in Honduras (HN). Since I’ve lived here for over 18 years straight until I finished university, I can leverage that experience to develop something in these bounds.

First, you have to expect the severe challenges you find in countries like these: corruption, transparency issues, violence, poverty, economic instability, slow adoption of technology (i.e., over half the population use the internet), inequality at significant levels, slow regulatory and legislative approvals, tied to the economic performance of the US, large informal economy competes for market share, extreme weather events (reconstruction of 2020 hurricanes are still in progress) [1][2], etc.

Expanding, the events that occurred during the last years, besides weather events, like the COVID-19 pandemic, and the 2021 elections changing administration after 12 years of1 same-party government had led to a negative impact on imports due to political, economic, legal, and social changes and events [5].

High tax rates and no duty or tax de minimis 2 is another challenge for landed costs [1], but let’s not consider it a challenge of the country itself like the ones listed above since taxes won’t inherently limit you.

Since the tax de minimis is zero, all imports are charged duty and tax fees.

Another well-known fact here that’s not explicitly listed in my references is that you can’t open any business at all in ordinary places because you get extorted by gangsters unless you pick a strategic place in a mall or high-end area or e-commerce, so you don’t risk your life for trying to do your job either if you’re a worker or entrepreneur.

Extortion increased 153% in 2022 compared to 2021 concentrating the denunciation in the Central District (capital) and San Pedro Sula, that is, the major cities. Of these, 95% are from the urban area. Moreover, 62% average of homes in the Central District and San Pedro Sula are in poverty conditions [9].

On the other hand, there are benefits and improvements in the situation.

There are trade agreements3 (at least 10[1]) and negotiations like the WTO (World Trade Organization) Honduras has been a member of since 1995 [5].

Infrastructure and modernization are being prioritized, there’s accessibility to shipping to Honduras and universal payment methods. Honduras could soon become the gateway to Central America, it values quality imports, and it has the second-highest economic growth rate in Central America [2].

Out of the serious challenges and benefits/improvements, what struck me as relevant is the fact that “over half the population use the internet, less than half shop online, making the market opportunity average” [1].

The e-commerce market is severely affected by what we can see from the above facts and the informal economy situation. It leads us to focus on market research to validate niche, active products, and services with concurrent consumers not yet saturated by competitors to devise a business path.

General-purpose businesses are saturated here in SPS if that helps.

The informal economy is growing hugely due to unemployment and labor opportunities, while mipymes generate more than 70% of jobs that still prefer the informal way. Formal jobs are disappearing due to low importance to national production. There have been more than 10,000 businesses that have been closed or gone informal [8].

Some students pay stuff from nano businesses they run, so any money you can put to work is good to relativize your money. It’s like exercising: putting money to work produces more money, but saving it won’t.

Despite the unfavorable conditions of running businesses in Honduras, if you’re a citizen, have expertise in the territory, and some money to put to work (even a small amount), you can devise some strategy to overcome the difficulties and set up a side business that helps you out in these tough times. Regarding bringing products in, the situation allows it, and it’s improving in modernization.

Transportation to HN

The investments in transportation infrastructure allow maritime, air, road, and rail means to serve to get products in.

Ports are the key to maritime shipping. This includes [2] Puerto Cortés —suitable for large vessels, first in Latin America to qualify under the “National Nuclear Security Administration’s Megaports and U.S. Customs & Border Protection Container Security Initiatives (CSI)”4. Followed by Puerto Castilla —strategic on the Pacific coast.

The development of the international Palmerola (near the capital) airport opened in 2021 has allowed the deprecation of the legacy Toncontin airport (for int. flights) which is one of the most dangerous airports in the world. Further, there are other airports to support the air transport around Ramón Villeda Morales near San Pedro Sula [2].

The improvements and conditions in Honduras’s means of transportation, mainly ports, airports, and roads allow you to import your products to run your business in HN.

Product Importation History

Next, there’s the overview of products and sources of importation and exportation to understand what’s being moved over this market.

In 2021, Honduras held the 102nd position in the global economy by GDP, ranked 100th in total exports, and 91st in total imports. Importantly, Honduras mainly imported Refined Petroleum, Non-Retail Pure Cotton Yarn, Non-Retail Synthetic Staple Fibers Yarn, Coated Flat-Rolled Iron, and Packaged Medicaments, with primary sources being the United States, China, Guatemala, El Salvador, and Mexico. On the export front, key products included Coffee, Knit Sweaters, Insulated Wire, Knit T-shirts, and Palm Oil, with major export destinations being the United States, El Salvador, Guatemala, Nicaragua, and Germany [4].

The USA stands as Honduras’ primary trade partner, with $5.1 billion worth of goods flowing into Honduras from the U.S. in 2019, constituting nearly 43% of its overall imports. Simultaneously, over half (52.5%) of Honduras’ exports were destined for the United States during the same period [2].

Notice how you want to import products from the USA since that’s the mainstream source of importation to get products to Honduras.

Consumer Industry Examples

Some popular consumer goods that can be imported via companies like LAC (Latin American Cargo) to and from North America, Latin America, and the Caribbean can turn out interesting for some business domains.

These goods can be (not limited to) [3]:

  • Electronic equipment, systems, and accessories.
  • High-end luxury products, high fashion clothing and accessories.
  • High-tech products, consumer electronics products and gadgets.
  • Home appliances from dishwashers and dryers to refrigerators and ovens.
  • Household equipment and decorating accessories.
  • Tables, chairs, beds, desks, and all other kinds and sizes of furniture.

You can also use companies like Aeropost to bring products from online shops like Amazon, but it’s for end users, so it’ll likely turn up way too expensive. One exception might be niche products you can sell at a higher price locally if that helps.

These sets of products can provide a wider idea of businesses that can leverage international services to acquire the goods.

Landing Requirements and Costs

Importing to HN is similar to other countries in Central America as well. If you’re familiar with nearby counties, that’d be another advantage to running a business in HN.

You have to keep up to date since HN customs procedures are being modernized and restructured [2]. You can keep reading for general information.

It’s important to consider that San Pedro Sula is claimed to be the most important economic and industrial area of Honduras [5], so it’s strategic to run operations there, so you might as well land to SPS. Although it’s a dangerous zone, as mentioned in Importing Products and Running Businesses in HN, you might get your niche more safely. For example, some maps tell you how “violent” a zone is according to data [9].

Going back to trade agreements:

There are benefits from the “CAFTA-DR free trade agreement” where “all U.S. consumer and industrial goods enter Honduras duty-free. The same applies to textile and apparel products that meet the origin requirements of the agreement”. The trend continues for US agricultural products, with most already enjoying duty-free entry. In the coming years, all tariffs will be eliminated. Notably, rice and chicken leg quarters will be tariff-free by 2023, followed by dairy products in 2025. While quotas for white corn imports are set to increase, a maximum 15% tariff applies to remaining goods, aligning with the Central American Common Market standards [2].

Among the document requirements to export to HN, we have: Import permit application, commercial invoice, bill of lading, packing list, certificate of origin, phyto or zoo-sanitary certificates, sanitary product registration, and other requirements as per your exporting needs [2][10].

Regarding restrictions, there are known things that can’t be imported or have constraints, but that doesn’t matter for our research.

Expanding on what was said in Importing Products and Running Businesses in HN about the tax rates and zero tax de minimis threshold, resulting in high tax rates, we can argue that trade agreements help with this. For example, the duty range is low and often waived, and there are no usual obstacles as per legal regulations [1].

Landed costs include the following fees associated with the products [1]:

  • Product price.
  • Shipping.
  • Duties.
  • Taxes.
  • Fees (currency conversion, carrier, broker, customs, or government fees).

The standard rate for import taxes is 15% applied to the CIF value of the order, and all imports are subject to 15% VAT.

For computing the landed costs, you can use Zonos, which “provides a complete breakdown of duties, taxes, and fees that make up a total landed cost” via a Zonos API for simple integrations. It works for e-commerce logistics solutions and supports many countries (including Honduras) [11].

Being at the heart of Central America, the process in Honduras is simplified because it’s similar to nearby counties, but landing costs imply many challenges you might want to address at a time. Even though, there are many technologies and modernization we can leverage as operations intel to complete the mission.

Local Product Delivery

You might find several ways to ship products locally to customers and reach the maximum population of potential buyers in the territory bounds.

Honduras’ parcel service sector oversees the transportation and delivery of packages and documents locally, nationally, and internationally. The country hosts a range of parcel delivery companies, both domestic and international, providing shipping, collection, and delivery services [7].

Shipping choices include express, standard, and economy options. Express shipping, though swifter, tends to be more expensive, whereas economy shipping, while slower, offers a cost-effective alternative. Standard shipping provides a balanced compromise between speed and cost [7].

I recently received a package from a (small) online store in HN and paid attention to the process to get experience in this stage for further reference. The shipment was interdepartmental from the capital to SPS.

The product was sent to my home through Cargo Expreso, who claim to deliver shipments within the next business day, with interdepartmental shipments guaranteed by the second business day and support for letters, documents, packages, furniture, spare parts, or any other item [6].

My package was delivered on the second day, and their website or information system is lame because I wanted to track the package, but their tracking system didn’t find it. You’ll have to use the chat with a human agent to get basic tracking status.

Moreover, the chat has terrible UX/UI (it feels like an image with events rather than HTML elements) based on a PHP polling to the back-end every ~5 seconds (I checked the console logs). The input element is hard to focus, of course, because it’s 12px height 🤦🏻‍♂️. An average customer must have a hard time here.

The chat was slow to respond even when it’s a bot 🤦🏻‍♂️, and when I contacted the human agent, they provided basic tracking information but didn’t solve my explicit question of why the track search didn’t work for me when I entered my package guide ID number.

That raises the issue that your customers are waiting for a product they paid for, but who knows where it is (they can be scammed online by fake sellers, too, so there’s the concern of trust).

The chatbot is useless since it has the option to track a package, but the only thing it does is provide a non-clickable and non-selectable (i.e., absolutely useless) link to the main page (which is also wrong because it has to lead you to the track page path instead of home 🤦🏻‍♂️) and tells you an annoying message of going back to the main menu, like mocking at you because it didn’t help at all.

The seller also had to refund the shipment fee back to me because the Cargo Expreso system failed to accept them the local payment (before shipping), so I had to pay with cash the day I received increasing the processing burden further.

The delivery itself was acceptable, as expected compared to other major services like Walmart deliveries. The package was integral and in perfect state and wrapping.

Consider that’s the best of the cases when it comes to branded services like Cargo Expreso or Walmart deliveries, for instance. On the other hand, opportunist trashy (big) businesses like Acosa and Diunsa scam you when you shop online (and in person as well). I’ve always been affected by wrongdoing business practices, just like many other users. The store can be 10 minutes away, but they take more than three days to deliver, if at all, with all kinds of hassle and opportunism included.

A problem, in general, is that delivery systems in HN lack basic technology like GPS, so they have to call you to get manual old-fashioned addresses, so you lose a lot of time the day you’re expecting a delivery even when they have your address but “don’t know where it is.” It’s too repetitive and overwhelming.

Recall that new generations hate talking on the phone, with (many times) pedantic stranger boomers who are lost in their own city while doing their job 📞😵. That’s a general issue here when you ask for products online from local stores.

That’s why I only order supermarket products from Walmart when I want online with shipment service —which is still far from optimal though—, and have preferred shops in my mind to try to reduce the hassle.

What I mean by this is how hard it is to find good-quality providers because your customers need a great experience to keep engaging with your brand. You need to rely on third parties to focus on your niche, but if they’re a hassle, customers might as well go for local stores or buy on Amazon.

Recall that customers want their products, so they can get them anywhere, not only from your online store. So, make sure to set up a smooth experience to eliminate any stress in the process and build trust.

I could still see Cargo Expreso with good eyes, but I would definitely research more about other country-wide delivery options and evaluate whether they operate with better working technologies.

Getting Goods to Customers

If you have experience as a Honduran citizen and nearby Central American countries, you may be capable of running a (side) business to help with the economic situation. The challenges, particularly in Honduras, are extremely crazy, but given your experience in the area, they could be overcome with a planned business strategy.

Products are waiting to be imported (probably from the USA) to Honduras, so you run a business or even create locally developed products that are in decline.

As per requirements and costs for landing, you’ll face constraints according to your market or product types, and several trade agreements can lower the duty fees despite high taxes to pay along the way.

Being at the “heart of Central America,” and having means of transportation and freight for international and interdepartmental (locally) shipment at hand, with strategic places like San Pedro Sula, and new infrastructure modernization in progress like the Palmerola int. airport, running business in Honduras may seem more suitable.

There’s a lot of complexity in the process of importing products, paying taxes and fees, registering a business formally or going informal, and managing logistics locally until the stage to deliver these goods to consumers optimally. Studying the situation in Honduras can get started with the information previously addressed.

Bibliography

References

[1] A cross-border guide to ecommerce in Honduras | Zonos Docs. (n.d.). Zonos.

[2] Lac, & Lac. (2023, April 2). Exporting to Honduras | A Trade & Export Guide | LAC. LAC.

[3] Latin American Cargo. (2022, April 25). Retail, Household & Consumer Goods | Freight Shipping Solutions | LAC. LAC.

[4] Honduras (HND) Exports, Imports, and Trade Partners | The Observatory of Economic Complexity. (n.d.).

[5] Importing into Honduras: Overview | Practical Law. (n.d.). Practical Law.

[6] Cargo expreso – paquetería. (n.d.).

[7] Servicio de paquetería en Honduras – Ali Cargo | Servicios de Envios. (n.d.).

[8] LaPrensa.Hn. (2023, January 16). Diez mil empresas cerraron o pasaron a la informalidad. www.laprensa.hn.

[9] Análisis sobre la situación del delito de extorsión en Honduras | 2022 | Programa De Las Naciones Unidas Para El Desarrollo. (n.d.). UNDP.

[10] Honduras - Import requirements and documentation. (n.d.). International Trade Administration | Trade.gov.

[11] Get started with Landed Cost | Zonos Docs. (n.d.). Zonos.

  1. Dictatorship by conservatives/nationalists (a.k.a. the nationalist party), 8 of the 12 years with illegal dictatorship as far as we can tell ↩

  2. Tax de minimis is a threshold (equals to zero in HN 💀) where “duty and tax are only charged on imports where the CIF value of the import exceeds the de minimis”[1] ↩

  3. These agreements allow to get benefits like low duty range often waived [1] ↩

  4. What an annoying large name it sounds like a Java “enterprise” class 😵 ↩