Exporting from UK
21st October 2019
Spatial Globals' Rachel Morley was interviewed for Network Magazine to provide an experts perspective on what's important when exporting from the UK. Read the full article which featured in The East Midlands Chambers of Commerce (Derbyshire, Nottinghamshire and Leicestershire) June 2019 issue.
Opening the door to exporting for UK businesses
By Rachel Morley, General Manager at award-winning Spatial Global, one of the UK’s foremost independent international freight forwarding, mail and ecommerce delivery specialists.
Everybody sighs when they hear the ‘B word’ - frustrations with the lack of direction and decisions are obvious in all areas of trade and commerce. However, if there is one positive that can be taken from this protracted series of events, it is the increased profile, discussion and awareness of International Trade and supply chains.
The International Trade and Logistics industry has never been so topical, with the media full of information, statistics and advice on borders, tariffs and commodity classification; albeit a little knowledge from soundbites and headlines can be dangerous.
UK - a nation of competent importers and exporters
As a nation, we are already competent importers and exporters with Felixstowe, London Gateway and Southampton handling over eight million containers between them per year. Closer to home, the East Midlands is the UK’s largest pure cargo airport, historically dominated by the small parcel integrators. More recently, with the development of the East Midlands Gateway, we are seeing some of the ecommerce giants taking over the landscape and getting on board with the geographic opportunities that our region has to offer.
Whatever the final outcome is for Brexit, and however the borders end up shaping themselves, the supply chain experts from the freight industry can be nimble, creative and ready to support both importers and exporters to take advantage of any new opportunities that are presented through:
- Dealing with changes to regulation, procedures and declaration requirements
- Supporting any IT changes through the implementation of CDS and any upgrades to CHIEF
- Taking advantage of the opportunities for supply chain efficiencies via Customs Special Procedures
Made in Britain continues to have huge global appeal
From the perceived quality standards of British Manufacturing, through our Royal Warrants and Queens Awards for International Trade and Enterprise, the Union Jack denotes a feeling of nostalgia, quality craftsmanship and excellence.
UK is the fifth-largest economy in the world
As the fifth-largest economy in the world, we are of course ourselves a large market for a wide range of products and commodities. This global appeal makes the world a wealth of opportunity for exporters and importers who are prepared to consider the exciting overseas markets and keen to share in the products and services that makes Britain great.
Start with WHY EXPORT!
Correctly identifying and reaching new markets is the first key to success. It may be that you have identified a new territory to sell to for the first time for business growth, or that you have been approached from overseas with an enquiry. There is a vast wealth of expertise and knowledge available to you through the dedicated channels within the award-winning East Midlands Chamber (Derbyshire, Nottinghamshire, Leicestershire); the Government’s Department for Trade - supported locally by the Midlands Engine and Export Champions programme - and the Enterprise Europe Network, to name but a few.
Engagement with recognised export experts
Early engagement with these experts is highly recommended to get a feel and a clear understanding of the market and cultures, customs procedures, documentary requirements and costs to market – essentially, be aware of what you are getting involved in as destinations can vary wildly in terms of freight costs, regulations and documentation requirements.
Example: Freight costs, regulations and documentation requirements.
A 200kg airfreight to JFK Airport in New York would cost approximately £350 but the same shipment to Port Moresby in Papua New Guinea would be £2,110. Similarly, a 40ft-high cube container to Port Kelang in Malaysia would cost around £550 but the same container to Freetown, Sierra Leone, would be £2,500.
Remember to recognise and acknowledge that your overseas buyer will already know their own territory and the issues and pitfalls that importers may face so be guided (but not dictated to) by them.
Keep the end in mind and line up the challenge; take the first things first by understanding your contract – both the terms of shipment and terms of sale.
Your terms of sale for your exported goods
Your terms of sale will identify the method of payment and how and when you are going to get paid. There are only four ways that this can happen and the terms that you agree will be dependent on the negotiation power of each party, the country of destination and any foreign exchange rules, the trust in each party and any credit or risk factors.
The four methods of getting paid for your exported goods are:
- Prepayment in Advance of Shipment
- Cash Against Documents
- Documentary Letter of Credit
- Open Account
Your terms of shipment for your exported goods
Your terms of sale need to be accompanied by your terms of shipment – the two work hand-in-hand together. More commonly referred to as Incoterms, written and published by the International Chamber of Commerce, these terms dictate where the transfer of cost and risk will pass from the seller to the buyer. Abbreviated to three letter acronyms, the term on its own is worthless unless it is followed by a named place. It is vital for each party to know their responsibilities with reference to shipment and delivery, documentation, insurance, customs formalities and licensing.
Use your Incoterms to build up your quotation and proposal and include the costs for freight, handling, packing and insurance. Be certain what you are quoting for and your obligations; don’t get caught out by any surprises.
And then HOW DO I EXPORT…
Once new markets have been identified and a sale secured, the physical activity in arranging shipment and delivery comes into play and you should approach this with confidence. Your freight forwarding partner is able to advise and assist on all areas of the actual physical movement to ensure that this is seamless, hassle free and provides a positive experience for all parties.
Choosing a Freight Forwarder to facilitate your exports
Your chosen forwarder has a duty of care and vested interest to make sure that you look good overseas and, if handled professionally and competently, it will future proof the relationship and ensure repeat orders and future business for you.
When choosing a freight partner, it’s worth considering that while price is an important factor, it certainly isn’t the only thing to think about. Your freight partner should be accredited to the relevant trade associations (BIFA, UKWA, RHA) demonstrating commitment to standards, terms and conditions and insurance liabilities.
Managing Customs for your Exports
Customs competency should be demonstrable through the much coveted AEO standard, or accredited Bonded Warehouse Facilities, Due Diligence Schemes, Deferment Accounts, Customs Special Procedures - all scrutinised by HMRC and therefore offering assurance that you are working alongside a valued, recognised HMRC supplier.
Other evidence of a quality supplier will be regulated, accredited or approved membership status under the rules governing transportation, for example: IATA, FIATA, DfT, DGSA. Track and Trace on shipments is a given in this era of electronic data exchange so check that your forwarding partner has the ability to provide electronic, real-time updates on shipment milestones, order management and electronic archiving for data records and customs compliance. International transportation has a level of transparency beyond customer expectations so look for transparency, integrity and honesty in all information sharing.
Key export transit milestones
Key milestones give recording and assurance that everything is on track, even when you are not looking. These can include loaded, received at port, customs cleared, shipped on board, departure, arrival, destination clearance and final delivery. The responsibility for each of these events is dependent on the Incoterms agreed for the shipment.
The areas that your freight partner can assist with include:
- Route to market
- Export packing
- Customs compliance
How will your exports get to their destination'
The route to market - what are your options on transport mode, what size restrictions are in place for handling at origin, en-route and at destination' What are the transit times, transhipment points if applicable, what are the expectations from both parties' Keep in mind that freight costs do fluctuate along with fuel costs and exchange rates. Equipment availability and cost (i.e. container size, flat rack, open top) can vary and impact on your expected shipment dates so work with your forwarder to manage this, again without any last minute surprises.
Currently 78 countries are signed up for the ISPM15 programme which governs the rules on the use of treated timber for wooden packaging and you need to know these rules before any export packing is undertaken to avoid delays, costs and possible disposal on arrival at destination.
Export customs compliance
A customs audit can feel like a daunting experience but if you are confident with your product classification and Incoterm, a good freight partner can help you navigate the rules and regulations and ensure you are fully compliant and have a full basket of evidence to support your declarations. Correct classification of the product is vital, followed by procedure codes, value build up and the correct use of licenses, special procedures and audit records.
Understanding the rules of origin and detail documentation needs of your exports
Consulage work - either a country regulatory requirement or a specific contractual request, your freight partner will have the ability to offer advice on the document type and content and also be able to assist you with obtaining this through the Chamber of Commerce and UK-based embassies. Understanding the rules of origin and detail needed for completing a certified or legalised document, sometimes including translation services, is a fundamental role and practise for your freight partner.
Understanding the insurance needs of your exports
Insurance - as members of trade associated bodies, most shipments will move under Limited Liability terms and conditions. It is reported that over 65% of all shipments are not insured and in the event of a claim, it is often the management time spent in pursuing the claim that is the bigger risk than the value of the loss or damage.
Full value insurance cover can be a wise decision and taking into consideration mode of transport, destination and value, your freight partner should be able to offer additional insurance cover through their own Goods In Transit policy.
Payment documentation for your exports
Payment documentation - a shipment is a gift until the moment it is paid for and securing payment from overseas customers can be seen as risky. If properly addressed within the contract, the payment method can only be one of four methods as previously mentioned. For bank transactions, either via Cash Against Documents or Irrevocable Documentary Credit, some freight partners offer specialist knowledge, expertise and practical assistance in handling this. Seek out a partner which can demonstrate a depth of knowledge and evidence of training. If handled successfully this is the most secure payment method with cash flow benefits such as discounting available to assist exporters.
Understanding the risks outside of your control when exporting
It’s not always plain sailing and the very nature of international trade means that there can be problems and delays from a simple cold spell which closes the ports due to health and safety risks, a driver shortage, through to unexpected sanctions and border controls.
Your freight partner can help you mitigate these risks wherever possible through their own supplier and carrier relationships by offering creative solutions and making trade as easy as possible for importers and exporters.
A World of export opportunities
In order to remain agile, competitive and fresh, businesses should embrace the opportunities for realising their international trade ambitions. With Europe high on everyone’s agenda, 145,000 businesses which currently only trade within the EU should seek out additional markets and broaden their horizons, confident that help and support is out there and available for them to do this well.
For businesses already in markets outside of the EU, you will already be familiar with the international trade rules and regulations and should continue to exploit the current strong pound, the value of the Made in Britain appeal and the opportunities for business growth outside of our home market.