Can I Open a Cigar Distributorship to US?

[JimB]

Hi All!
First off, I love this site, very informative and fantastic to read all the personal experiences from those of you who have moved there from other countries.

I'll be in Sousa on vacation and visiting a friend of mine the last 2 weeks of April. I have been running an online cigar business for the past 5 years and while I'm there I'd like to look into expanding into the wholesale field by shipping cigars from the DR to the US.

My questionis this, is it possible to open up a location in a free zone, buy direct from the major factories and then ship to US retailers, or do most factories have exclusive deals with others that prohibit such practices.

I get about 10 requests a month from small shops across the US looking for wholesale prices but due to the fact that I'm already dealing with 3rd and 4th parties for my cigars, my current pricing is too high to generate many wholesale sales.

My online retail end is quite successful and growing daily, but I'd rather work from a laptop on the beach than from my home near Toronto.

I look forward to the responses...
JimB

PS: Hillbilly, from what I've read on this board, looks like you and I have got to get together when I'm in Sousa and talk some cigar business.

[ricktoronto]

I think the point of the Zona Franca is to bring in materials and such tax free, pay local labor to value add (e.g. sew clothes for Tommy Hilfiger) then ship out of the free zone to the rest of the world and other than limited local sales it is all exported and thus tax free locally .

I think you should be able to just buy cigars at the factory/from distributors and ship them to the USA etc., if you like without the free zone being required, assuming there are no distribution licenses in effect for your chosen destination, in which case you'd deal with them. The real tax hit is on landing in the USA.

The big cigar firms should be able to advise if there are opportuities.

PS: It's Sosua. Sousa was the composer of "The Stars and Stripes Forever".

[JimB]

thanks for the info, guess I really have to talk to the different manufacturers in person when I get there.

PS. thanks also for the spelling correction

[ricktoronto]

Originally Posted by JimB

PS. thanks also for the spelling correction

So you don't call it that, when there, to your contacts you are trying to make, de-gringo-izing a bit.

[Hillbilly]

For other readers, there is no need to go free zone, since most manufacturers are already in free zones and ship directly to their distributors in the states.

Unfortunately, all of the major brands are tied up to distribution deals and you would have to face off with the JRs and the Thompsons of this world to get a toe in the door. Major money. If you won that $286 million lottery, well, shoot, of course you can.

Realistically, the solution will be to go with smaller folks that can value your business and that can grow with you.

Cordially,

HB

[JimB]

Thats what I figured about the major brands, which is too bad as that is what I was most interested in. Still there are plenty of others out there.

JimB

[Hillbilly]

If you guys do manage to get up and running, you will just have to go to Newman's place in Tampa,then down to Miami to see Flor Dominicana, and Miami Cigar, them up to Bobby Levine's place in Philly, and JR's place in North Carolina, or New Jersey. You will have to try and get accounts with these guys to cut out the middleman. Might take some doing and time, but lots of folks have made it.

Good Luck,

HB

[PICHARDO]

Originally Posted by JimB

Hi All!
First off, I love this site, very informative and fantastic to read all the personal experiences from those of you who have moved there from other countries.

I'll be in Sousa on vacation and visiting a friend of mine the last 2 weeks of April. I have been running an online cigar business for the past 5 years and while I'm there I'd like to look into expanding into the wholesale field by shipping cigars from the DR to the US.

My questionis this, is it possible to open up a location in a free zone, buy direct from the major factories and then ship to US retailers, or do most factories have exclusive deals with others that prohibit such practices.

I get about 10 requests a month from small shops across the US looking for wholesale prices but due to the fact that I'm already dealing with 3rd and 4th parties for my cigars, my current pricing is too high to generate many wholesale sales.

My online retail end is quite successful and growing daily, but I'd rather work from a laptop on the beach than from my home near Toronto.

I look forward to the responses...
JimB

PS: Hillbilly, from what I've read on this board, looks like you and I have got to get together when I'm in Sousa and talk some cigar business.

To set up shop within Zona Franca all you need is to fill all the paperwork related with it and get an industrial building erected to your needs, as far as buying from DR producers you have to actually manufacture your own cigars be it using your own imported tax exempt material or from the local market, sorry you can't just repackage an already local manufactured cigar and send it out of the country tax free! you must make them yourself using as stated before your own source of material to your liking.

Many Zona Franca cigar exporters use most of the material available in the DR for their manufacturing proccess and save a bundle doing it, I see no reason why you shouldn't be able to set one if as you said to have the clients and market for it, by all means you have the most important piece of the puzzle already in place: a secured market to sell to!

I recommend that you get your ears wet before you go about investing in the Zona Franca and do a little time researching the local ongoing exporters there and those already gone with the wind, it will pay off later not to commit the same mistakes and apply proven techniques already in use with value.

[JimB]

I recommend that you get your ears wet before you go about investing in the Zona Franca and do a little time researching the local ongoing exporters there and those already gone with the wind, it will pay off later not to commit the same mistakes and apply proven techniques already in use with value.

Some sound advice and what I originally intended to do. As this will be my first trip to the DR, it will me a combination vacation and scouting mission. Test the waters, see the sites, play it by ear and see what develops.

Thanks
JimB

[Chris]

Originally Posted by JimB

My questionis this, is it possible to open up a location in a free zone, buy direct from the major factories and then ship to US retailers, or do most factories have exclusive deals with others that prohibit such practices.

I get about 10 requests a month from small shops across the US looking for wholesale prices but due to the fact that I'm already dealing with 3rd and 4th parties for my cigars, my current pricing is too high to generate many wholesale sales.

My online retail end is quite successful and growing daily, but I'd rather work from a laptop on the beach than from my home near Toronto.

I look forward to the responses...
JimB

PS: Hillbilly, from what I've read on this board, looks like you and I have got to get together when I'm in Sousa and talk some cigar business.

The free zones are more manufacturing oriented than distribution oriented. We are a distribution business and currently have some problems in that the language does not even exist in the Free Zone charter for a pure distribution business. I do not know the cigar business, but I would suggest that you see what your cost would be buying directly from manufacturers here, and distribute to your wholesale customers, i.e., setting up as a simple exporter, but not in a free zone, in terms of your wholesale business. The same supply chain could then supply your retail on-line customers - going with the smaller folks like Hillbilly suggests. There are costing issues around this structure - the government is fond of slapping export tarifs on exporters whenever the leaders are short of moola. And then of course, shipping and US taxes are a whole other story.

I'm just thinking that you may explore the free zone story anyway, as merchandise transfers inside zones are commonly done and exporting from a zone, may save you export tariffs.

I'd be happy to chat a little about this when you are around Sosua. A last note, you cannot do this on the cheap. You would need some investment capital. This is the DR, so, whatever number you had in mind, triple it.