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Growing globally outside the EU: a practical guide for small businesses

How to assess new markets, manage risk and take the first steps to importing or exporting

 
 
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The dual impacts of Brexit and the Covid pandemic have changed the commercial landscape for many UK businesses. Some markets have shrunk while other new opportunities have arisen, including in countries beyond the EU.

This guide will help you identify new opportunities outside the EU and take your first steps into the global marketplace.

It will cover:

  • Trade beyond the EU: first steps

  • Progressing your plans

  • Information for importers

  • Information for exporters

  • Customs and excise: step-by-step

  • Further research and support

Trade beyond the EU: first steps

The benefits of trading globally

While the EU may be the one of the largest single markets in the world, it only comprises a small proportion of overall global trade. By reaching new non-EU countries, you could spread your country risk and market exposure, lengthen the lifecycle of existing products and protect yourself from wider macro-economic issues.
 

Identifying opportunities

Identifying the right opportunities is key to trading successfully with other countries, but where do you go to identify new markets? The Department for International Trade can help with trade missions and market databases, while Chambers of Commerce and industry bodies are also helpful resources. You could partner with a business already in the chosen location or use agents to find new customers. Having a digital presence may encourage new customers and e-commerce can provide a practical and relatively low-cost model to access new markets.
 

Country specifics

When considering entering new markets it is important to assess each country or market individually. This includes market demand and client preferences, as well as legal issues. The cultural aspects should not be underestimated, including being aware of the accepted norms of doing business. Things to consider include:

  • Are there any infrastructure or logistical factors which could make a product or service difficult to access for local consumers?
  • If there is a language difference, how will you communicate with potential partners and customers?
  • Once the market is entered, how will after sales service be conducted, or customers’ questions addressed?
  • How can you mitigate risk in case of shipping issues, non-payment, or other disputes?
  • What are the usual ways in which transactions are carried out? What are the preferred settlement methods? What about letters of credit, pre-payments and the use of agents?
     

Documentation and regulation

Documentation and regulation are key concerns for many businesses. The difference in requirements between countries can be quite marked and so can the responsibilities of each party. These may be dictated by international commercial terms (Incoterms) or local or international law. Trading outside of the EU may also increase the need to understand and comply with international sanctions.
 

Trade agreements

While the UK has agreed a free trade deal with the EU, it has also agreed a free trade deal with Japan and has post-Brexit roll over agreements with many other countries. These could provide excellent opportunities for many UK businesses.
 

Ease of insight

Entering new markets is difficult and researching them can be a challenge. The Gov.uk website has exporting country guides covering almost 190 countries and regions. The Department for International Trade can provide specific reports for products or services and facilitates trade shows and seminars. Barclays has also provided a number of market events with Trade Commissioners for North America and Southeast Asia, and Eagle Labs runs missions that connect UK businesses with global markets.

Progressing your plans

Draw up a shortlist

One approach is to consider five to ten large and fast-growing markets for your product or service. Look at the performance of those markets over the past three to five years.

  • Has the market growth been consistent year on year?
  • Did import growth occur even during periods of economic slowdown? If not, did growth resume with economic recovery?

Don’t limit the research to similar countries as you may miss significant new markets.
 

Research the market for a product

Examine trends which could influence demand for your product or service. Calculate the overall consumption of similar products or services and, for physical goods, identify the amount imported. Studying the competition, both domestic and international, will help you understand market preferences. For marketing purposes, become familiar with channels of distribution, cultural differences and business practices. Research potential UK or foreign government incentives to help promote trade and support market penetration and growth.
 

Research potential trading partners

This is probably the most difficult aspect of the research, as business specific information is often limited. Research using the internet and social media may identify specific feedback which can help inform decisions and online reviews of a potential partner may indicate how they generally behave or the quality of their service. Organisations such as the Department for International Trade may also be able to assist with market specific research. Mitigate risks as best you can by using appropriate services and internationally agreed standards and practices, including Incoterms, as well as considering payment methods such as letters of credit or documentary collections which can provide some protection.
 

Understand country specific regulations

Identify any foreign barriers (tariff or non-tariff ) for the product or service being imported into the country, as well as any UK barriers (such as export controls) affecting exports to the country. Local laws and regulations ought to be thoroughly investigated as well. In addition, as part of the process of exporting, you may need to adapt the labelling of your product to meet local regulations. Laws can vary from one country to another, so a simple translation is inadvisable.
 

Consider the risks

If it looks too good to be true, it generally is. Spend time thinking of the possible negative consequences of entering into a new supply chain arrangement. The following should also be considered:

  • What are the legal, regulatory and financial risks to the business?
  • What impact will this opportunity have on the cashflow and finances?
  • How you cope with a delay in payment or receipt of goods?
  • How did any partner business cope with the pandemic and what did they learn in terms of the flexibility and robustness of operations to events outside of its control?
     

Understand your staff needs

Trading with multiple countries and regions will present many logistical and procedural differences which staff need to be trained and supported for. The following things should be considered:

  • Is the management team capable of developing a comprehensive import/export plan?
  • Does the team have adequate personnel to meet increased demand or the capacity to hire or contract staff to meet needs?
  • Does your business have trained marketing and import/export administration staff, or the ability to hire qualified people, with experience in buying or selling products or services abroad? (an alternative is to use intermediaries with the required expertise, such as agents, distributors or trading organisations).

Information for importers

Brexit has changed the way we work with the EU,  and while there has been little change to existing UK customs controls with non-EU countries, it’s worth a quick review of the key issues.
 

Customs declarations

Businesses importing goods and any transporter or customs agent acting on their behalf will both need a GB Economic Operators Registration and Identification (EORI) number. Businesses should use the Customs Declaration Service to make a declaration – this service replaces the  Customs Handling of Import and Export Freight (CHIEF) system which is being phased out. Businesses can also apply for simplified declaration procedures and for Authorised Economic Operator status. These are most suitable for businesses which import goods regularly.
 

Tax and duty

If you would prefer to pay any duty incurred once a month, rather than on each shipment, you’ll need to set up a duty deferment account. This may need a bank guarantee to support the account.
 

Tariffs

The UK Global Tariff (UKGT) applies to all goods imported into the UK unless:

Tariffs is an area which will be impacted by any future trade agreements signed by the UK government. Learn more about the UKGT.
 

Supply chains

A key issue arising out of the pandemic has been the robustness of supply chains across the world. When trading internationally, it’s important you’re are not only aware of your own supply chain, but also that of key suppliers.
 

Paying for goods and services

Different parts of the world prefer payment in different ways. For example, a significant amount of trade with China is conducted in US Dollars with varying degrees of upfront payments, whereas in many other countries open account (where goods are delivered before payment is due) is more common. Researching the market will help to mitigate risks.

Information for exporters

There are multiple considerations if you are looking to export goods or services beyond the EU. Here are some of the main aspects to investigate.
 

Customs declarations

If your business is exporting, whether directly or via a transporter or customs agent, all parties need a GB Economic Operators Registration and Identification (EORI) number. Like an importer, you’ll use the Customs Declaration Service (which replaces the CHIEF system) to make a declaration. You can apply for simplified declaration procedures and for Authorised Economic Operator status.

Many businesses use an agent to handle the complex processes than can be involved in exporting or you could look to save costs by training your own staff. The Institute of Export can assist with this and the Government may provide grants for customs training.
 

Tariffs

Tariffs should be considered as part of any pricing consideration and be aware of the potential impact of future global trade agreements.
 

Rules, licenses and certificates

These will be different for each country and you should ensure you understand the requirements of both the UK and the country to which you are exporting.
 

Supply chains

As an exporter, you should understand your place within a client’s supply chain. Being part of multiple, diverse supply chains can help mitigate risk. A better understanding of your clients’ needs will also help you build stronger relationships with them.
 

Freight transit

A key challenge in 2021 was freight availability due to reasons including staffing and fuel supply. Consider future risks in your planning and delivery schedules and work with customers to help ensure smooth distribution of their goods.
 

Protecting cashflow

There are a number of ways in which international trade can adversely affect cashflow, including customs delays, longer delivery times, increased payment terms, large volumes of new customers and potential issues around foreign currency exchange. Consider the impact of these challenges and work with your bank to explore solutions including foreign exchange services, trade documentation and invoice insurance.

These are just some of the points businesses should be considering. Specific impacts will differ between businesses and sectors.

Customs and excise: step-by-step

If your business will be trading with countries outside of the EU, you’ll need to refer to the UK Global Tariffs which replaced the EU tariffs in January 2021.

If your business is new to non-EU trading, the following high-level journey may be helpful:

  • The business needs to be set up for making customs declarations, ensuring it has a GB EORI number. Use the Customs Declaration Service to make a declaration.
  • Businesses can apply for simplified declaration procedures and for Authorised Economic Operator status. These are most suitable for businesses that import/export goods regularly.
  • Check if Authorised Economic Operator status is suitable and register to import goods with restrictions such as plant or animal products, high-risk food or feed, medicines, textiles, chemicals or firearms.
  • Set up a duty deferment account to be able to make one payment of customs duties a month instead of paying for individual shipments. Businesses must set one up if they use simplified procedures.
  • Submit the import declaration
  • Pay VAT and duty. HMRC will confirm the cost after the declaration has been submitted.

Depending upon your choices around opening a duty deferment account in order to delay VAT or customs duties, you may be asked to obtain a bank guarantee.

Further research and support

The needs of each business will vary significantly and this guide is intended to be just part of your investigations into international opportunities. It does not constitute advice and it is important that you conduct your own independent research.
 

UK government

There is a wealth of information on the GOV.UK website.
 

Department for International Trade and beyond

Great.gov.uk has lots of useful tools and guidance on importing and exporting and can help you find live opportunities for your products and services. They can help you develop your capabilities to grow internationally and offer a broad range of services such as export strategy and planning, and operational advice. There is also a service through which businesses can find suitable online marketplaces to sell their goods.

In addition, creating a business profile can enable businesses to promote their products and services to overseas buyers using the ‘Find a Buyer’ service. There are webinars and events on the site as well.

Further insight and information will also be available from the trade websites of specific countries as well as from their embassies.

Unlocking Growth Report
Doing business abroad

 

This article was written by an independent third party and the views contained within are not necessarily the views of Barclays. This article is designed to help you with your independent research and business decisions. This page contains [link(s) to third party websites and resources that we (Barclays) are not providing or recommending to you. The information contained in this article is correct at the time of publishing. We recommend that you carry out your own independent research before you make any decisions that will impact your business.

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