Importing & Exporting UK – Best Advice
First things first, at the point of entering into a contract with your customer consider your Incoterm®. Incoterms (International Commercial Terms) are internationally recognised terms that lay out the responsibilities of both sellers and buyers, and the transfer of risk. They range from EXW (Ex-Works, where the seller has the least responsibility and delivery takes place at the warehouse door, the buyer is responsible for everything including any export formalities which can cause problems with obtaining export licences and submitting customs entries) through to DDP (Delivery Duty Paid, where the seller is responsible for absolutely everything including the import customs clearance in the country of destination which can again cause problems as some countries will require the importer to be registered in the country). There are incoterms that are specific to seafreight/waterborne movements and others that are applicable to all modes of transport. Selecting the correct incoterm is very important, and getting it wrong can be costly.
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Secondly, consider how you are going to move your goods. You could use an express parcel service like UPS or DHL, but these companies very quickly get expensive as the size and weight of the parcel increases and it is likely that you will get a better service from a freight forwarder. Again there are hundreds out there, some who specialise in certain sectors – defence, automotive, pharmaceutical etc. – some who only offer road services, and others who will be able to provide the full service for all modes of shipment. Try and get some recommendations because biggest isn’t always best, and you will generally get what you pay for. Smaller forwarders will be able to offer a more personalised service while bigger international companies will be able to offer lower rates due to their higher buying power. If you are shipping to an unusual destination, look to find someone who has shipped there before as requirements can differ and what will work for a shipment to Germany won’t necessarily fulfil all the requirements for a shipment to Saudi Arabia for example.
Exporting High Tech & Military Products
If your products are very high tech, or manufactured for a military purpose, there is a chance that you will need an export licence. You will need to review the Strategic Export Control List to see if your product is listed, and if so contact the Export Control Organisation to obtain an export licence through their online system SPIRE. Depending on the destination, the licence application could take 6 weeks and you will need to provide the ECO with information on the product, destination, value and quantity of the product and a signed undertaking from your customer.
Goods being exported from the UK will need to be presented to HM Revenue & Customs and a customs entry submitted – your freight forwarder will be able to look after this for you, but they will need to know the tariff code of your product. To find the tariff code you will need to look into the Customs Tariff which is available online, and obtain the 8 digit number (you’ll need 10 digits for import). Assistance from a technical expert within the company is likely to be required here.
When goods are imported, the tariff code will tell HMRC how much will be payable in import duty. Duty rates differ from product to product, and it is important that you classify the product correctly – HMRC don’t take kindly to underpayment of duties, while you will be wasting money if you choose the wrong tariff code and overpay. Import VAT is also payable at the going rate, and while it can be reclaimed by VAT registered companies, import duty can’t. Both import duty and VAT are calculated on the invoice price of the goods being imported and falsifying invoice values to reduce your liability will again upset HMRC.
Importers who are going to process the incoming goods and re-export the item can potentially benefit from a customs procedure called Inward Processing whereby import duty and VAT are suspended on import, and then the customs liability is written off when the goods are re-exported.
Payment of your invoices can be problematic, and letters of credit are a way to guarantee payment which are drawn up formally and lodged with the bank. You have to ensure that all paperwork relating to the shipment matches exactly with the letter of credit as errors can mean the payments are not made.
Importing & Exporting – Currency Fluctuations
Currency fluctuations can be both a good thing and a bad thing, depending on which way sterling moves. It can work for you – a weaker pound makes our products better value for money for customers overseas – while a strong pound can make us more expensive.
The European Union’s Customs Code (UCC) has been rewritten, and the new regulation comes into play in 2016. This is changing some of the rules governing international trade, including a requirement for companies dealing with customs processes to have someone with significant experience or qualifications in international trade.
There are numerous other things to consider – Aviation Security if you’re shipping things by air and Authorised Economic Operator which is a way of showing your compliance with customs processes are just two of them.
It sounds like import and export is a complicated process, but with a little knowledge and assistance it isn’t and can help you to grow your business – a lot of people around the world will pay a premium for British products!
This article has been kindly written by:
Trade Compliance Solutions Ltd