The latest figures show that British exports of goods and services reached an all-time high towards the end of 2019, with around 1 in 10 companies tapping into foreign markets to improve their sales and margins. But going global can open up a world of complexity if you don’t do your research and brace yourself for the extra paperwork. There’s also Brexit to take into consideration.
Here are the key steps involved in exporting successfully from the UK and what to expect as Brexit negotiations progress.
- Choosing an export market based on market potential and competition
- Choosing the best route to market
- Following the right rules and regulations
Choose an export market
To get started, ask yourself a simple question: "Where are there people who will buy my product or service instead of choosing a competitor?"
Online market research can be conducted from your desk at little to no cost. Think like a customer who lives in your target country and use Google, Amazon and other relevant channels to find similar products offered by competitors or, for services, look for competitors themselves. What is their proposition to customers?
Perhaps competitors emphasise value, quality or speed of delivery. Scour their online reviews and social media, using language translation if required, to get a feel for why customers love (or hate) their service. This precious intel will help you craft a better buying experience.
Once desk research has unearthed one or two potential markets, consider field research to collect more detailed information. That means hopping on a plane and spending time on the ground in the potential new market, perhaps at trade shows, exhibitions and events. It’s an added cost but could lead to valuable contacts and important conclusions.
Choose the best route to market
No matter how great your product or service is, or how much demand there is for it in other territories, it could fail if you don’t get it in front of customers. Success depends on choosing the right route to market for what you’re offering and the region you’re entering.
Direct sales – Selling to end-users via your website, a physical shop, exhibitions and other direct channels.
Pros: No intermediaries, so greater profit potential; more control over the transaction and better opportunity to build your brand; direct feedback from customers.
Cons: Requires more time, energy and people power to set up from scratch; you’re responsible for all logistics; you must respond to customers quickly when something goes wrong.
An agent or distributor – A company in a new territory introduces your product to customers using its own marketing, prices, and terms of sale. You are paid an agreed price or percentage for the sale and the other company keeps a fee or cut of the profits.
Pros: Smoother market entry by accessing local knowledge, experience and contacts.
Cons: You’re at the mercy of the agent or distributor, so commission, margins and prices must be well managed.
Licensing or franchising – You grant a company or person the right to bring your product to the new market, with a royalty in return.
Pros: You can focus on the product without the worries and expense of setting up in the new market.
Cons: Registering intellectual property could be costly, and there’s no guarantee the licensee will do a good job in developing the market.
A joint venture agreement – You join forces with one or more companies in the new market to form a new business and share costs, profits and losses.
Pros: Responsibilities, knowledge, resources and risks are shared.
Cons: In some cases, especially in countries that limit foreign companies to minority participation, you could suffer from a lack of managerial control over your product’s quality, marketing, surrounding legalities, and profit-sharing.
Follow the right rules and regulations
Once you have a market and route to access it in mind, you’ll need to tackle the logistics of getting your product into customers’ hands. To stay on the right side of the law when exporting and keep your margins healthy, you’ll need to find out the relevant trade tariffs, laws, and regulations.
Exporting to EU countries
The UK is set to leave the EU on January 31st 2020, initiating a transition period in which the terms of future trade relationships with other countries will be negotiated. It’s not clear yet how long that will take, but we know that existing EU rules will remain in place until the end of December 2020. From January 1st 2021, a new era could begin based on World Trade Organisation rules, but time will tell.
For now, if you plan to export to an EU country after Brexit, you’ll need to:
- Make sure your business has an Economic Operator Registration Identification number (EORI) that starts with "GB" and that your importer has one too.
- Decide if you’ll make the export declarations yourself or hire someone to deal with customs for you.
- Decide if you want to export your goods using transit (the Common Transit Convention could simplify the process).
- Check the tax rate and duty for your goods.
- Find out how you’ll claim VAT refunds from EU countries.
- Hire someone to transport your goods.
You can find out more about each of these steps at Gov.uk.
Exporting to non-EU countries
For many British businesses, there’s enormous potential in exporting outside the EU. Figures from December 2019 showed that UK exports outside the EU grew nearly five times as fast in the 12 months to September 2019 as exports to countries inside the bloc.
Each non-EU country has its own set of requirements and regulations, and you’ll need to understand them to export. In all cases, you'll use the Customs Handling of Import and Export Freight (CHIEF) system to make declarations. To access CHIEF, you need to register for the National Export System (NES).
You can use this page to lookup commodity codes, duty and rates and better understand costs and what’s needed for the paperwork. You may also need an export license for certain goods.
Brexit could affect your exports to non-EU countries. For instance, until the government signs a free trade agreement with the United States, UK exports to the USA will work on Most Favoured Nation terms under the World Trade Organization (WTO) rules. You can find out more about these rules, both for the USA and other non-EU countries, here.
Exporting via another EU country
If handling your own expansion outside the UK sounds intimidating, you might opt for indirect exporting – partnering with an intermediary in the EU who will help you ship beyond its borders.
You’ll still need to ensure that your products meet the legal and regulatory standards in their destination country, and submit export declarations with the NES for each export. However, you can lean on your partner’s network and existing customer base to reach new markets quickly.
No matter which country you export to, you’ll likely be handling payments in a foreign currency, so a financial partner with a global presence is a must.
