Preparing my offering: if you sell a physical product
Lesley Batchelor OBE is an expert on international trade and a passionate champion of UK exporters. She is also the Director General of the Institute of Export, the professional membership body representing and supporting the interests of everyone involved in importing, exporting and international trade. In this article she goes through all the things you need to consider if you thinking about how to sell your product overseas.
Selling internationally is very complex but – as with most things – easy with help and appropriate training. One of the key considerations is preparing your product for export. In this context, your product is loosely defined as the product of your labours either in terms of a physical product or a service including software.
If you’ve done your market research, you’ll have some idea of who you’ll be selling to and what you might need to change or adapt in order to operate in this market. If you haven’t already started doing your market research, our article on getting started with international market research might be of value to you.
How do you sell your physical product in your home market
The first thing to do if you are manufacturing a physical product is to look at what you do in the UK and then think how this might translate into another market.
If your product is simple and doesn’t need any form of registration in the UK, then chances are that this will be the same across the world, but it’s worth checking – especially in some markets where the taxation system supports local manufacturers.
Special cases include any food or drink products or some engineering products that may be considered to have dual use. If in doubt, find out.
Always act in good faith in international trade – you will come to realise that it’s the only way to work and create a sustainable export activity.
Some useful points of contact if you’re unsure are the Food and Drink Federation, DEFRa and BIS Export Controls.
Know your tariff code
The key to any movement of a physical product is the Customs Code. This is called a few things – Harmonised Customs Code, Common Customs Nomenclature and others. But it all boils down to the same thing – to track movement of goods and therefore excise duties across the world. This article on what a Harmonised Code is may be of use if you are not already familiar with the term.
Therefore, the international community has agreed on a standard form of classification of products and the materials or ingredients that form those products.
It is your company’s responsibility to determine your own tariff code. This shouldn’t be taken lightly as this is the basis of the tax that will or will not be charged.
Your Tariff Code will tell you many things about your new export market, mainly how much duty your product will attract in a new market but also how many other people are exporting your same code to that market. That’s why there’s various pieces of paperwork to complete to help the goods transit to their final destination.
There is plenty of help out there to complete the documentation needed:
- There is training available from IOE, BCC and other private providers
- Check that you know what papers you will need to get your product transported to your customer – the IOE Helpline can assist with this
- Croner Exporters Reference book and web site
It is worth noting that when dealing in some markets your customer may ask you to use a different code to the one you have decided covers your product. Resist this as it will only cause you problems in the future.
If you need to send an overseas order quickly, in the short term you can use the assistance of a freight forwarder to determine your tariff code. The British International Freight Association (BIFA) is a good place to start to find a freight forwarder. If it’s a small product you can use a courier such as TNT, UPS and DHL.
If you’re going to rely on a freight forwarder, check that they are registered with BIFA and that they have asked enough questions to understand your product and what its classification code will be.
Remember you must take ultimate responsibility for the tax and duties payable on your product and an incorrect code can trigger an HMRC audit which will involve going back over 6 years of incorrect postings and reclaiming or refunding you accordingly. So it pays to get this right!
To what extent should you modify your product?
Ask yourself this question – will you be able to sell exactly the same product to this new market?
It is always best when starting out in international trade to choose a market similar to your own as this helps you through the planning processes and gives you a template to work on as you go into new markets that are very different to your home market.
Where possible you want to standardise your product to avoid special runs or overtime demands to supply a specific market.
This involves researching and finding out what is acceptable in that market or what is needed to make your product acceptable.
This may be a simple colour change to reflect the cultural nuances of the market or it may need some more radical changes to design. The Design Guild has data on cultural impact of design and colours.
Depending on what kind of product you’re selling, other things to consider are:
- Electrical currents
- Specific health and safety rules
- Technical registrations and adaptions demanded by governments (some of these are ways of protecting a home market, if this is the case look for an easier market)
Talk to people who have traded in this market before ask our online community for advice.
Also, think about how you are going to deliver your product, both in terms of packaging and physically delivering it to customers.
What is the infrastructure like away from the main cities in your new country of operations – not just the road system for delivering physical product but also broadband? Would a lack of broadband jeopardise the delivery of your offering or the support for your customers or business partners? What other areas would this impact upon?
Other places to get help and advice on product modification include:
- British Standards Institute
- Export Controls BIS
- Trade Association Directory
- Manufacturers Trade Association
Once you’ve found out what is needed in terms of modification then look at the costs and how that might impact on the price. The price is going to be key to making a profit and it cannot be underestimated or the exercise of exporting will not be worthwhile.
See our pricing and getting paid section for more details. The following resources are also useful:
- HMRC (especially for VAT issues)
- IOE helpline
- BBA web site
- UK Export Finance
- The Institute of Chartered Accountants in England and Wales (ICAEW)
- The Association of Chartered Certified Accountants (ACCA)
Do you need insurance?
Insurance is an issue that arises throughout your export experience but especially with Product Liability insurance and Marine or Transit insurance.
If dealing with North America or Canada, remember that the premiums may be larger than you expect. It’s always best to check with an insurance expert. The Chartered Insurance Institute is a good place to start.
Copyright and trademarks
When selling a patented or design-righted physical product, check the legislation in your chosen market is respected and that there isn’t someone else already using your trademark.
It could prove expensive if you have to change your packaging or product name after you have launched in a new market. There are various trade mark and patent attorneys you can get advice from, or you can contact the Intellectual Property Office.
If you sell software or a service, our article on preparing your offering when it is a software or a service will be useful, as there are some additional things to think about.
If you would like to learn more about exporting, The Institute of Export & International Trade’s An Introduction to Exporting Physical Goods training course, which describes all the key elements of exporting, with a reference to imports would seem the best place to start. Visit: https://www.export.org.uk/page/IntrotoExporting