This article comes from a 3-part interview we ran with John Robinson, the Chairman of the Academic Board at the Institute of Export & International Trade, on export readiness and what exporters need to know about importing.
John also runs the Institute’s ‘An Introduction to Importing’ course.
Is it possible to be an exporter without also being in someway an importer such is the international nature of supply chains these days?
Short answer, yes of course it is. Increasingly we rely more and more on supply chains that contain elements of imported materials.
There’s increasing complication – and it will increase more with Brexit – concerning the origin of the some of the components in what we’re ultimately exporting. There are some very complicated rules in international trade surrounding the origin of goods and therefore what rate of duty is attached to those goods. Whether it’s import or export, origin is going to matter increasingly.
Lots of companies import components from China, say, and then there’s all the duties associated with that. How do exporters go about finding out what duty they have to pay when importing components from China?
In terms of components and even some large sub-assemblies the supply chain relies on what are called long-term supplier declarations. In other words, if you break down a product into its absolute components – where you can’t break down that part any more – whoever supplied that component is required to supply to the buyer a statement of their actual origin.
For example a farmer in an overseas territory would supply a written statement when anyone buys his product saying that it only comes from their country. It’s the same with complicated components like electronic parts – we rely as manufacturers on long-term supplier declarations of origin.
As time goes by trade deals will be done whereby the importer pays the reduced level of customs duty depending on where it can be proved the goods come from.
Can the export/import company trust these statements, generally speaking, or will they be required to do some due diligence on their suppliers?
I don’t think they would investigate the authenticity of statements. They would rely on them. Indeed customs authorities usually rely on those supply statements of origin.
So it’s a case that if a supplier provides an incorrect or faulty statement, there’d be a mark against them from those they supply?
Absolutely – they’d lose their business.
And when the UK does leave the EU, the UK will then need to develop these relationships of trust with suppliers on the continent?
What are the most common pitfalls of importing and how do these pertain to exporters?
If you’re taking about importing and exporting as two directions in international trade, exporting is relatively straightforward. Importing sounds easier because there are fewer customs restrictions, that is to say restrictions from HMRC, but most of the restrictions on imports are imposed by the much finer breakdown of the commodity’s departmental interest.
I’ve personally done quite a lot of work importing food substances, say, to produce animal feed. You’d think that customs have all the regulations available to them, but they don’t. The regulations are posed by DEFRA – a completely separate and independent department. It’s DEFRA who produce the regulations and then inform customs that these are the regulations that they want to see enforced. In many case the specialist regulations are interpreted and applied by DEFRA’s own staff and customs have nothing to do it – they’re just the policemen in case anything goes wrong.
That also applies to arts and antiques that are run effectively by the Home Office and there are a lot of regulations concerning finance that are run by the treasury. Customs have very little say over these regulations; they just police the system.
Importing in this sense is a lot more complicated than exporting because you’re dealing with lots of different government departments in the specialisation for their products.