The majority of companies that export do so because they received a sales enquiry from abroad and wanted to take the opportunity to increase sales and profitability. In these circumstances there is usually a degree of learning on the job and the sales, finance and logistics teams manage to work it out between them. However, this approach can be stressful and result in costly mistakes such as goods being held at the border or receiving invoices for duty that weren’t expected. To export with confidence, whether you’re new or have been doing it for a while, follow our top tips to successful exporting.

 

  1. Identify the correct commodity code / HS code in the relevant tariffs

All goods that are traded internationally can be identified by a number – the commodity  Code or HS code. As a general rule, export codes are 8 digits and import codes are 10 digits – the export code + 2 digits. It is essential to use the correct commodity code for the goods you are moving because it indicates what level of duty is applicable and whether any controls are in place e.g. whether you need a licence or, for food and drink products, a health certificate may be required. Each customs territory has its own tariff and there are often local variations – the UK HS code probably isn’t exactly the same as the USA HTS code. It’s advisable to check the tariff of the country you’re exporting from and to, in order not to miss anything.

 

  1. What’s the final destination?

In our global economy and with new sanctions coming online weekly, it’s important to establish which country or region the end user of your product will be and what, if any, regulatory or compliance issues apply – for example export licenses. Once you know where the item is going and any wider information around transportation, you’ll then be able to select the most appropriate transport company and customs broker.

 

  1. Planes, trains and automobiles (probably trucks actually)

Transport is a vital element of fulfilling your first export order, and is likely to depend on the type of good you’re selling and how quickly the customer requires it. Air transport, for instance, is quick making it ideal for fresh produce. But it is also expensive. Most items heading to a nearby destination could feasibly go by road or rail, but if you’re exporting to a country further away (and if speed of delivery isn’t crucial), then shipping by sea is likely to be a good choice.

 

  1. Agree which Incoterms to use with your customer

Short for international commercial terms, Incoterms are a recognised set of arrangements covering the delivery of goods from sellers to buyers, including elements such as who will cover freight costs, insurance of goods in transit and liability for any import or export duties. In all, there are 11 Incoterms, and seven of these relate to transport. When written into a sales contract they become legally binding. Some buyers may offer to trade on Ex Works terms (EXW), where most of the responsibility for transportation and declarations rests with them.

This can be attractive to new exporters but you may struggle to prove the goods have left the country and be handed a bill for the VAT. At the other end of the spectrum is the Delivered Duty Paid terms, where the exporter undertakes all responsibility, including both the import and export declaration. While this may be helpful in attracting new customers, be aware that the seller bears most of the risk under these terms and depending on the rate of import duty and value of the consignment could be very expensive.

 

  1. Understand rules of origin

Another task will be to determine the economic nationality of the goods you’re selling. Even if a product is manufactured in the UK, if a certain percentage or the value of materials / components used are not UK origin, you may not be able to claim that the end product is UK origin. The reason that origin is so important is that it affects the rate of import duty applicable when imported by your customer. For more information on this subject have a look at our FAQs, Blog, webinar or free Download.

 

  1. Prepare your customer for import VAT

Many of our clients report that customers in the EU are surprised and annoyed when required by the transport company / customs broker to pay import VAT. When the UK was a member of the European Union this wasn’t an issue and a shockingly high number of EU companies still haven’t got to grips with the UK being a third country. All export sales from the UK are 0% rated for VAT but the customer will have to pay VAT at their local rate when the goods arrive at an EU border (unless you’ve agreed to deliver using DDP Incoterms). If they are registered for VAT they can account for it in the normal way on their VAT return but as the money has to be paid up front it will have an impact on their cash flow which can be a nasty surprise if they’re not expecting it. Good communication in advance will solve most export problems.

 

All of this can be rather daunting if you’re new to it and even seasoned exporters trip up every now and again because the landscape is constantly changing. If you’re concerned about anything to do with exporting (or importing) get in touch today to arrange a free consultation and benefit from the peace of mind that working with an international trade consultant provides.