Importing and exporting within the EU could be vastly different with either a Hard or Soft Brexit. With only 6 months left, now is the time to prepare. We address two simple action points to get you started.
For more information on our Brexit Breakdown membership, please feel free to contact us.
In the post Brexit world, UK Traders will of course, want to continue trading with their established EU partners. Likewise, EU traders will want to strengthen trading ties with their UK partners.
Until now, inter EU trading has been a very easy process, with minimal customs involvement, open borders, unimpeded deliveries, largely paperless and declaration of VAT post delivery just to mention some of the advantages we had as a member of the EU.
With a hard Brexit, this frictionless trading will come to an end and the UK will be thrown into the world of International Trade, with all its impositions, rules and regulations trading under WTO rules and tariffs. Our EU trading partners will have the same status as any of our other international trading partners outside the EU such as Russia and will have to follow the same Customs procedures such as declaration on the new CDS system, which is replacing the old CHIEF system. This means that consignments will need to be given specific statuses of Route 1, 2, 3, or 6, all of which are time consuming. This could cause severe delays at the UK border for EU member consignments, some predicting up to six hours.
However, UK traders can be prepared and grasp this as a great opportunity to become part of a global explosion in trade. UK businesses must identify how Post Brexit will affect their trading position within the EU and beyond and be prepared to meet the new challenges.
The following are a set of questions that is advisable to ask yourself and research, pre-Brexit. Be proactive, no reactive and prepare for a hard Brexit now. Waiting for the 29th March 2019 may well be too late.
1. How will the new Import/Import regulations impact upon my business?
2. Will I have to change my Terms of Delivery (Incoterms 2010)?
3. Will I now have to employ the services of a freight forwarder/ clearing agent and at what additional cost?
4. Does my company have the necessary import/export training to work alongside the new rules and regulations?
5. Am I registered for EORI status?
6. Do my goods attract an Import/Export licence?
7. Can I identify a Customs regime which may help me reduce my import costs?
8. How will VAT be collected on inter EU trade?
9. Do I understand the new Customs Declaration System CDS for Imports/Exports?
10. Can I provide the relevant information for inputs into CDS (i.e. new tariff changes as introduced in Volume 3 of the Tariff)?
11. Have I subscribed to the Government Gateway Account?
12. Will my existing supply chain timing be affected? What adjustments do I have to make to counter any extra delays?
13. Will I have to make changes my company Terms and conditions?
14. Will Post Brexit rules affect my competitive edge? If so how can I retain my competitive edge?
15. Will my existing EU customers impose a different method of payment other than the one currently in use?
16. Do I fully understand the methods of payment associated with International Trade (ie. Letters of Credit, CAD, Bills of Exchange)?
17. Have I arranged for an AWARENESS COURSE for ALL members of staff to attend pre-Brexit 29th March 2019?
ABTS Training can help you address these and other important factors in preparing for Brexit.
The Brexit Breakdown
A new subscription service where we do the research, contact relevant agencies and get to the bottom line on Brexit import and export.
We cut through the complicated web of information to give you need-to-know facts for your business, post Brexit, keeping you informed through webinars, videos, email alerts and printable fact sheets.
See The Brexit Breakdown for more information.
Letters of credit are a hugely important part of international trade and import export. They guarantee payment and allow the seller to receive payment which can be advantageous when capital is needed up front. Our quick guide below shows you the four most common types of letter of credit and when to use them.
IRREVOCABLE: Cannot be changed or amended without the consent of both the buyer and seller.
RED CLAUSED: Useful when the seller needs an up front funds from the letter of credit, this could be to buy the raw material for the contract. The amount available was usually printed in red ink hence the name.
TRANSFERABLE: Used by the seller to purchase the goods of the contract from a third party. It enables the seller the purchase the goods with the funds from the Letter of Credit. Very useful when the seller is acting as a middle man and has not the personal funds to purchase the goods of the contract
CONFIRMED: Used when the seller is unsure of the buyers banks ability to honour the Letter of credit. This could be due to Political or financial unrest in the buyers country. The letter of credit is Confirmed by a second bank usually the sellers bank, The confirming bank becomes the prime payer and seeks reimbursement from the buyers bank.
The construction sector is experiencing the fastest rate of hiring for over 15 years, the pound is stronger than it was 2 years ago across 18 major currencies, and countries are beginning to partner on deals which encourage trade globally.
To accommodate this, business funding has become a hot-topic amongst the SME and corporate community, with the rise of alternative debt and equity funders (e.g. the crowdfunding platform Crowdcube and invoice discounting companies such as MarketInvoice).
Yet 70% of businesses are struggling with getting funding, particularly for purchasing goods and services from overseas, which is surprising given the current position of the UK economy.
Sadly, many companies don’t know where to begin when it comes to funding their business, but what doesn’t help, is that business funding is complicated. Depending on the stage of your business, how much capital you already have, how quickly you need the funding and how long you’ll need it for, the funding you require could vary immensely.
Trade finance, an umbrella term for the ‘financing of international trade’, covers a range of financial products which can help importers and exporters trade. International import and export businesses have the added complications of understanding the mechanisms of trade finance, which involves jurisdiction across different countries, language barriers, understanding shipping protocol and insuring their order.
The most common form of trade finance is a Letter of Credit or Bill of Lading, which are both mechanisms to securitise the assets which are being transported or shipped; in other words, the goods or services are the security to which a funder will lend.
For companies looking to import or export, we’ve put together some tips for ensuring success:
1. Do your due diligence
Most business owners in the space will be aware of their competitors in their market, and the competitors of their suppliers. It’s not hard to pull import or export data from government website or through calling local experts on the field. It’s also worth sense checking your suppliers and customers – are they creditworthy and reliable, do they have trusted reviews?
2. Learn about importing and exporting
Aside from a Letter of Credit Trade Finance deal, it’s vital to understand the mechanisms of transporting and shipping – from freight forwarding, to Bills of Lading. It may be a good idea to go on an education course such as ABTS Training.
3. Talk to a broker
Brokers can offer recommendations or suggestions for a business which could save them time and money. Also, because of their established relationships with many funders, they may be able to negotiate a better deal or rate and find the option which is most suitable for your business.
4. Know your risks
Business owners should know from the outset what the risks and challenges are before undertaking a trade finance deal. Mitigating or reducing these risks through insurance, credit checks, independent analysis and understanding the market that they’re operating versus opportunity and financial benefit of a deal can help determine the go-no-go decision.
5. Don’t underestimate the power of negotiation
Whether it’s your customers, suppliers or financiers, negotiation can often be the make or break for your business. Being able to negotiate terms, prices and rates in a competitive market could give your business a financial advantage.
To conclude, raising funding to help succeed in your import or export business is not easy, but can bring unrivaled success and opportunity for your company. Understanding the fundamentals of the import/export market, mitigating risks and planning carefully though are crucial to protect yourself and the company.
Courtesy of our partner Trade Finance Global. Learn more about trade finance and how it can help your import export business.
Businesses must export their products to a global market if they really want to achieve their potential. With the Internet and relative ease of building your own website, there is no need to focus only on your domestic market. “How to Export” is a common question and the answer involves some study as there is lots to learn, however we have put together the following infographic to get you started.
Once you know how to export, the bigger question becomes, how do you sell to an international market? The Internet is the obvious was to reach a global market without needing millions in advertising budgets through traditional advertising. Out simple guide below explains the basics of getting your website online and key points to marketing:
All businesses have a degree of risk. About 50% of new businesses fold within the first year of trading. In other words, only 50% of start up businesses are SUCCESSFUL. What factors contribute to their success? We can start with a raw skill set such as determination, self belief, a desire to succeed together with the desire to determine your own future as well as the will to build your own business. 100% of start up business owners have these attributes so what makes only 50% successful?
As well as these qualities, it’s vital to have the right knowledge of the industry. Offering the right product, having the right product knowledge, having the ability to foresee potential problems and make suitable provisions and have the ability to understand the details of your business as well as understanding finance and cash flow and of course the ability to ‘balance the books’.
You’ll need all the above raw skills plus the specialised knowledge particular to an export import business.
This knowledge is a requirement before you start trading. Learning on the job is fatal, as too many mistakes will put you out of business very quickly. You must have these skills BEFORE you start up your Export Import business or you’ll find yourself as part of the 50% of unsuccessful businesses very quickly.
So what knowledge is needed? Let’s look at just a few of the international trading terms and subjects you will need to understand:
Remember, this is just a part of the knowledge you must learn and understand BEFORE you start trading. They are the tip of the iceberg.
ABTS Training will be holding a FREE webinar on Friday 26th June which will address some of the problems associated with starting up your Import Export business. The webinar will also identify and explain some of the points above that you will need to understand to help you kick start your business.
Sign up now and get a kick start to starting your business.
