Every market differs – there is no ‘one size fits’ all approach to international trade
We’re often asked about what exporters need to do to succeed in international trade. When asked this, we’re always clear in saying that it completely depends on your business situation. You need to look at international trade as the diverse entity that it really is. There truly is no such thing as an ‘average exporter’. You need to forge your own path.
For a start there is no average tariff, there is no average sector and there is certainly no simple answer to the question of what you need to do to succeed in a new market. For example, tariffs for pharmaceuticals tend to be 0% rated, whereas ceramics can vary from 5% – 25% depending on the component parts, materials and eventual shape. Agriculture can range from 30% – 45% – or even more in some cases – and champagne attracts 20%. Rules of origin differ on trade agreements and play a key role in determining whether goods can be imported at a reduced tariff or not.
Importantly, the point here is, there is no average. Every situation is different.
5,300 different product descriptions
There are approximately 5,300 article/product descriptions arranged in 97/99* chapters in the Harmonized Commodity Description and Coding System (HS), each given its own HS Code (a six-figure product classification number). Exporters and importers need to know what code a product falls under to be able to establish what duty or taxes are payable. The code also triggers other factors including anti-dumping duty, quotas, inspections and licences that relate specifically to those goods being moved before they reach the final destination in the UK or abroad.
When exporting to third-party countries where the UK doesn’t have a preferential trade agreement, businesses need to understand that the duty payable for importation into their customer’s market falls under the ‘Most Favoured Nation’ rate lodged by the UK in that market under WTO rules. When exporting to a market with which the UK has a trade agreement, businesses will need to use their HS Code to identify what the preferential rate may be for the importation of their goods into that country.
This may sound complicated, but once you apply yourself to gaining an understanding of how these key global trade processes work, you’ll be fine.
No ‘one-size-fits-all’ answer to the ‘how to export’ question
Once you know your HS Code, you’ll be able to identify the cost of importation for your product into the markets you’re exporting to. This cost will usually be paid by your customers and partners, but you will need to accommodate this into your overall pricing to maintain competitiveness. On the other side, UK importers of goods need to pay duties according to the UK’s tariff schedule to the WTO, whether that’s through the EU or independently set going forwards.
When identifying what you need to do to export to a new market, you therefore need to have determined your HS Code and identified how you will be affected when trading under WTO rules or, for some markets, by preferential trade agreements. With global trade set to go through a lot of change in the years to come due to the implications of the Brexit saga and the potential rise of trade wars, you will need to become more adept at completing these processes and at tracking changes to trade agreements and the tariffs that countries set.
Exporting is easy when you know how
Exporting, like any form of business, involves challenges as well as opportunities. Businesses who have previously exported beyond the EU will be very familiar with the various administrative tasks and pieces of paperwork you need to complete in order to export successfully without delays or fines at the border.
For those who are newer to exporting, you need not be daunted. The Institute of Export & International Trade have a saying that goes ‘exporting is easy when you know how!’ Researching your market, understanding what paperwork needs to be completed and knowing what regulations and taxes apply to your product type are all fundamental tasks for exporters, but they are perfectly doable once you find out about learning how to do them properly.
Further assistance from the Institute of Export & International Trade
If you need further assistance in getting to grips with the processes of global trade, the Institute of Export & International Trade are ready to support. It provides a comprehensive suite of online and offline training courses explaining the processes of international trade, including understanding how the HS System, WTO rules and Free Trade Agreements work. You can set yourself and your team on a Customs Practitioners Award pathway straightway to help when looking at new markets around the world. The Institute also offers qualifications ranging from Level 1 to 7 in international trade, as well as various membership benefits that help you to network with other exporters and get technical support from our team of experts.
*There are 97 chapters in the WCO’s system and 99 chapters in the EU’s.