Anyone venturing into the world of exporting will be keen to make their first sale. It’s a vindication that there is a market for your product or service. But it requires preparation.
Export readiness involves assessing whether a business has the capacity and resources to successfully sell a good or service internationally. The following tips from the Institute of Export & International Trade (IOE&IT) can help you start your export journey.
1. Identify your customers
It’s important to know who your potential customers could be. Some businesses will target individual consumers, known as the business-to-consumer (B2C) model, while others will look to sell to other companies, known as business-to-business (B2B). Understanding who customers might be will also help determine how you promote your product. A B2C company may make more use of direct advertising, social media or online platforms, while B2B operators may find more luck at trade shows, or other channels where it’s possible to sell directly to other businesses or distributors.
2. Find out where your item is going
Whether you’re targeting overseas customers in general or those in a particular country, you’ll need to establish which country or region they are in and what, if any, regulatory or compliance issues apply. There may also be language or cultural issues to consider when dealing with customers or distributors in a particular location. Once you know where the item is going and any wider information around transportation, you’ll then be able to work out a lead time. This is the amount of time it will take for the item to be manufactured and to reach the customer.
3. Establish the commodity code and other requirements
Every item that is exported needs a commodity code, also known as a Harmonized System (HS) Code, which can be found using the ITC’s Product Search tool. You should also check the national government website of your target import country to determine whether you will require an export certificate, depending on the nature of the product (items such as food and drink, or controlled goods such as pharmaceuticals, require this).
4. Think about how you will transport it
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.
5. Identify the Incoterms on which you will be trading
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, where most of the responsibility for transportation and declarations rests with them.
This can be attractive to new exporters, but may have implications for VAT rules. Check for any applicable VAT rules of the importing country prior to deciding on Ex Works terms.
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 bares
most of the risk under these terms.
6. Consider using a customs broker or intermediary
If this is your first ever international sale, then it is highly unlikely that you will have ever looked at, let alone completed, an export declaration previously. Getting this right is essential to a smooth export process. It’s a good idea to consider appointing a customs broker or intermediary who would be able to help with this.
7. Determine the origin rules
Another task will be to determine the economic nationality of the goods you’re selling. If you sell a product that has been manufactured in China, for instance, the country of origin will be China rather than the country you are exporting from. Determining a product’s country of origin can impact the tariff rates of that product. If there is a trade agreement in place, your product might qualify for a reduced tariff.
This can be reflected in the cost of your product, essentially meaning you’ll be able to offer it at a lower rate or make more profit on each item sold. You can learn more about preferential tariff rates in IOE&IT’s guide ‘How to Make the Most of Preferential
Tariffs’.
8. Factor in all costs
It’s essential that you include all costs in the price of your product, or any quote you provide for a customer. This should factor in the cost of manufacturing the item, as well as transportation costs and any other expenses, such as hiring a customs broker or using a distributor. You will also need to understand whether you will be liable for costs such as insurance or any import or export duties.
9. Import declaration
Wherever there is an export, there is also an import. Assuming it’s the buyer that takes responsibility for this, it’s important that they have all the information from you around product regulations, for instance any consumer safety markings that may need to go on the product ahead of it appearing on shelves. A distributor is likely to handle this, but if you’re selling directly to a customer overseas it will be important to ensure this is all done correctly.
10. Access further support
Winning your first international sale can be exciting, but it’s important you plan the journey to ensure you can maximise the potential from exporting. Many national governments offer export support services, for instance this step-by-step guide to exporting by the UK government. Furthermore, as you export more you might want to consider specialist training and qualifications, such as those offered by IOE&IT.
Trade missions, where the government takes a group of buyers out to a particular country, can also be a good source of finding out more about a location.
Author: Susan Roe, IOE&IT academy trade and customs specialist