Mike Josypenko, Director of Special Projects for the Institute of Export, provides some top tips for companies exporting for the first time.
Every business is different so there isn’t a one-size-fits all guide, but there are a number of pieces of advice that have been relevant to many companies I have helped to export. This 11 tip guide gives exporters all the help they need to get started selling overseas.
11 tips to get started exporting
1. Don’t enter business without a contract knowing how you will get paid.
What payment terms you are offering? Are you going to give them open credit or ask for cash up front? How is that going to work? Whatever you agree on, get it in writing.
2. If you’re exporting to a market that could be considered risky, or dealing with an uncertain customer, you may want to go for a formal payment mechanism.
These are formalised procedures which enable exchange of payment against documentation through banks. There are various mechanisms you can choose, from letters of credit to documentary collections.
3. Consider what currency you’re going to be trading in.
Are you going to be selling in sterling, dollars, euros, or the local currency? How will you protect yourself against fluctuations in the market place? That can make a big impact on your project margins.
4. Protect your finance.
This can be done through a credit insurance agency or getting help from UK Export Finance. You can read more the financial and currency related issues of trade in this article which tells you all you need to know to get paid.
5. When selling products (rather than services), think carefully about distribution.
Terms of delivery help to define responsibilities around who pays for what transport charges and who carries the risk in case of any loss or damage to the goods while in transit. Incoterms® are an internationally recognised set of standard terms of delivery, drawn up by the international Chamber of Commerce. If you use one of the Incoterms® it’s clearly stated and understood internationally who pays for what. You can read this article about International Commercial Terms (Incoterms) for more information.
6. If you are arranging international transport, make sure that they are covered by cargo insurance while in transit
Don’t assume that this will be covered by the carrier. Read our cargo insurance overview for more information.
7. Know the customs tariff code for your product.
Tariff codes vary from country to country, but most are based on the Harmonised System. Once you have your tariff code you and your customer can identify what rate of import duty must be paid to import the goods, which obviously has an impact on the costings. Knowing your tariff code will also help you find out if your goods need an export license. Our article what harmonised codes are contains further information and explanation about this.
8. Find a good freight forwarder.
A good freight forwarder can be worth its weight in gold – they can give you help on transport, documentation, customs and regulation and will deal with a lot of the red tape you’ll come across. This article on finding the best freight forwarders gives advice on how to do this.
9.Regulations for customs clearance and VAT need to be looked at, to ensure that you comply fully with legal obligations.
Documents are always needed when goods are cleared through customs, and countries may have specific documentation requirements.
10. Legal conditions are important.
International law is often very different from UK law. If you’re looking at distributors or agents, check the local law in that country because it can be very different, and you could find yourself landed with unexpected costs or obligations.
11. Don’t get caught out by the Bribery Act.
The Bribery Act 2011 means it’s now an offence to fail to prevent bribery. UK companies must be aware that this applies to their distributors and representatives abroad who may be used to doing business differently.
This bootcamp webinar on pricing, regulation and fulfilling your order will be helpful regarding some of the legal issues involved in completing your export transaction.