Exporting should be a natural step for any successful business. It not only abates reliance on your indigenous customers, but also allows for greater market reach and profit. But, as with most things in business, the theory is easier than the practical. Exporting can pose an entirely different set of problems than your business is used to.
The advantages of importing goods from China may be : quality as well as price, and often simply by importing goods from different markets you will find goods that are simply not available in your home market. Unless you know the country of origin extremely well, it is a good idea to engage the services of an expert, who can help you with initial product sourcing (including due diligence), warehousing , shipping and import regulations.
Starting a business in China without any contextual knowledge can often lead to expensive errors. Fundamental to success, is a comprehensive analysis and research of your intended market. Your polar findings will be either an overwhelming or underwhelming response to a product or service, and it’s probably better to know this before parting with reluctant sums of money.
Naturally, you need to think about people. You need to think about places. You need to contextualise your product or service socioeconomically. Who will be buying your product? Can they find an easier or cheaper alternative? Who’s your competition? What’s the market situation in China?
And it’s not just the basic relocation issues and protocol you have to consider. It’s pragmatics such as your route to market in China, logistics, regulation, barriers, tariffs and suppliers too. Many will differ vastly to your accustomed practices.
Planning & Preparation
In preparing to export your goods or services, you must not just assess, but scrutinise your potential, and prepare for the worst. This doesn”t mean you have to negate all optimism; just don’t get consumed by it.
These are the market essentialities to examine :
- Structure of industry
- Demand for your product or service
- Your competition and how your company will forge itself alongside it
- Acclimatisation – alterations your company, product or service may have to adapt to
Next is the process of market entry in China, which will always seem simpler on paper. Your main considerations will be :
- A market strategy that, if needed, acknowledges international trade development
- Financial resources and backing
- People, and how they can help develop your product for export / a new market
- Erudition in local requirements: packaging, pricing, labelling, etc
- Again, erudition, but in the costs and payment procedures of exporting
- Some of these factors alone may establish an unsuitability for your intended market, so research them thoroughly.
Next, is your product cut-out for export? Think about :
- The standards and regulations of products in your overseas market
- The fees involved with altering your product, service and company for a foreign market
Selling & Distribution
To improve the chances of overseas success, you need to consider a few key issues. Sales presence, for instance, should be a top priority. Will you sell directly? Will you trade over the internet? Perhaps trade shows are more suitable? Could you benefit from a local partner who knows the market? Here are a few fundamental choices :
- Get yourself a distributor who can sell on a local or national level
- Sales agents can either sell a product for you, or alternatively acquaint you with potential clients or customers
- Joint ventures with local companies have gained in popularity, primarily because of their knowledge and established presence in the market. It is often a pricey option, however
- Of course, you can also set up your own office, ensuring maximum control on all operations. This is obviously the most expensive of all your options
A few things to remember. Firstly, when drawing up any contracts with agents or distributors, it is imperative to unequivocally define obligations such as delivery and payment.
Next, your intellectual property (IP) may be jeopardised if it is not declared in each foreign country. This can often be a laborious process, so be prepared. Remember that patents are generally recognised only in their country of origin.
It’s no point squeezing a product or service into a new market with the shoehorn of indigenous merit. Your product or service must adapt, refine, alter, acclimatise, tailor and fashion itself to a market, not rely on some fatalistic hope of simply “fitting in.” Products are more pliable than people.
As aforementioned, the necessity to contextualise your product or service socioeconomically can’t be overstated. It will be a paradoxical balance of market sensitivity and exploitation. Does your product require a drastic change to its image? Can it be changed to flatter a national idiom?
Needless to say, a keen attention to laws, legislation and regulation is paramount. VAT rules should be considered early.
Controls & Licenses
You’ll need to check if any of your products require an export license. Products such as chemicals and firearms, for instance, usually do.
Comprehension of the Law
Of course, upon entering a foreign country, a product or service is subject to, and must abide, national laws.
Are You Ready To Export?
Entering into the export market through an existing business may seem like an obvious way to increase your current revenue. In many cases, it is a viable means of expanding a business, and generating greater income. However, it is important to consider the logistics, timing and practicalities before jumping into the unknown.
Exporting can extend your market, boost your turnover and prevent you having too great a dependence on your home-based customers. But it isn’t always an easy option. Starting to export poses a whole new set of challenges, from identifying promising markets and customers to ensuring that you can fulfil your export contracts. Developing new export markets takes time and money.
Exporting isn’t simply an add-on to your existing business. It should be part of an overall strategy to develop the business. Before you start exporting, it’s worth making sure you’ve developed a complete export plan looking at all the costs and risks involved. A well planned extension overseas can bring financial and reputational success, but a rushed job may just cause more damage than it is worth.
Planning is key, so consider the following before making any decisions :
- Exporting presents all the normal challenges of marketing – it’s up to you to find customers and convince them to buy from you. Understanding the market and its requirements is very important. Don’t assume that because you know the domestic market, you automatically know foreign ones.
- Exporting is usually a way of growing a successful business, rather than an easy way out for one that”s in trouble. If you’re struggling with limited finances or overworked employees, you may not have the resources to take on the extra work.
- As an international business, you will need to cope with extra logistical problems, contractual issues and paperwork. You’ll probably want a contract drawn up using internationally recognised terms and conditions and standard commercial practices to make it clear what your responsibilities are.
- There’s also a range of paperwork for sorting out transport, customs clearance and payments. These may take more time and effort than you expect, and must be dealt with in meticulous detail.
- You need to comply with regulations both at home and overseas. For example, some goods that are allowed in your home country might not satisfy another country’s standards.
- Exporting demands additional resources, both in terms of financing and skilled personnel. Be prepared for your expenditure on staff and expert advice and services to increase significantly before you start to see the benefits
- With the additional costs, such as international transport, you may find you simply can’t compete with local suppliers. If the market only offers low margins, or you haven’t got the resources you need, you may decide that exporting isn’t for you. Make sure that you plan carefully and know that you could present a competitive product or service overseas.
Equally, if you’ve got a good product to offer and a well-run business, the chances are there will be opportunities for you out there in the export market. If the rewards you expect justify the investment and the risks, you should commit to your export plan and make it happen.
Assess your skills and resources
To start exporting successfully, you should take a systematic approach and decide what your export strategy is. You need to spend time and money planning, researching market opportunities and building relationships. You may also need to invest in modifying your product and service to suit overseas customers.
Buy in help
Once you’ve planned your exporting activities, you also need to devote extra resources to handling your exporting business. Marketing to overseas customers tends to be more demanding than selling within your home market. Exporting also needs special skills – such as organising international transport and handling customs clearance.
Many businesses find that the best way to get started is to buy in the services they need, and build in-house skills and resources later. For example, you might use a local agent to sell, and a freight forwarder to handle deliveries.
Source your capital
Exporting can also be financially demanding. Customers often want credit from the time they receive the goods. For a long distance shipment, this could be weeks after you produced and shipped the goods, so you get paid later than you would by a local customer. At the same time, you may have to meet extra costs like transport and insurance.
The more successful you are, the greater the demands placed on your business will be. It’s worth planning ahead to be sure you have the capacity to handle the extra production, selling and after-sales support.
Organise your paperwork
When trading internationally the right paperwork is crucial. Missing or inaccurate documents can increase risks, lead to delays and extra costs, or even prevent a deal being completed.
Whether you are importing or exporting, you need to understand what paperwork is required. Even if you use a freight forwarder or an agent, it’s still up to you to make sure the right documentation is available. See our basic guide below for pointers to get you started.
This guide explains the key documentation you need to use. It outlines what should be in your contracts and what paperwork you need for customs, transport and payment.
Key documentation for international trade
- There should be a clear written contract between buyer and seller, including details of exactly where goods will be delivered.
- Specific documents may be needed to get the goods through customs and to work out the right duty and tax charges. Requirements of both exporting and importing countries should be addressed.
- Documentation is needed to cover the transport of the goods and insurance during the journey.
- The right paperwork can be an important part of the payment mechanism. It”s important to co-operate with your counterpart on getting the paperwork right.
NB: If you’re shipping goods to a customer overseas, they should tell you what paperwork they require at their end. If you are dealing with a non-English speaking country, it can be a good idea to provide one set of commercial documents in the local language.
International trade contracts and Incoterms
Different countries have different business cultures and even languages. It’s a good idea to make sure you have a clear written contract to minimise the risk of misunderstandings.
To avoid confusion, internationally agreed Incoterms should be used to spell out exactly what delivery terms are being agreed, such as :
- where the goods will be delivered
- who arranges transport
- who is responsible for insuring the goods, and who pays for insurance
- who handles customs procedures, and who pays any duties and taxes
As well as including delivery details, the contract should cover payment. This should include what currency payment will be made in, how much will be paid, when payment is due and what payment method will be used.
You may need an export licence to export goods. For example, there are controls on exports of chemicals and military technology. Licence requirements may also depend on which country you are exporting to.
If you are selling goods within the EU, most goods are in free circulation and can be easily moved from one country to another without customs controls or charges.
Alternatively, an authorised agent or freight forwarder can handle the customs declaration for you.
For VAT purposes, exports are generally zero-rated, but you should keep copies of your VAT invoices and proof of export. This helps you prove that the goods left the country and that you do not have to pay any output VAT on them.
If your sales to EU countries exceed £260,000 – you must also complete the Intrastat supplementary declaration.
Exports to countries outside the EU do not count towards the Intrastat threshold and do not need to be included.
You should check what documentation is required for import into your customer’s country. Typically, you need a commercial invoice and shipping documents such as an Air Waybill. Other requirements can include a certificate of origin.
Once you have considered the logistics of entering the export market – either with an existing business or a new venture – you can start planning. Just remember to be meticulous, and plan everything to the last detail, follow our pointers, and you should enjoy a lucrative business opportunity!
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