If your business has a product or service for which there is an overseas market, you may be looking to export to other countries. However, there are numerous factors that must be taken into account prior to committing to overseas customers as there are financial and legal implications related to exporting goods – as well as practical issues such as language problems.
Assuming that you have conducted thorough market research to ensure that your product is exportable and have located adequate demand in foreign markets to justify the exercise, the next step is to draw up an export plan to target one or more territories. There are numerous ways in which you can sell your products abroad, for example setting up an overseas office, using sales agents, using a distributor or entering into a joint venture. Which method is best for you depends on the nature and extent of your business abroad and the investment you are prepared to make.
There is likely to be a delay between shipping goods to your customer and getting paid for those goods, which could create cash flow problems if you have not made proper allowance for this in your budgets. You should also consider taking out an insurance policy to protect your business in the event that an international customer goes out of business. As regards methods of payment, it is highly advisable to use only confirmed letters of credit. However, there are certain technicalities involved in doing this, so it is sensible to obtain specialist advice.
Your Legal Obligations
Certain classifications of products require an export licence. Exporting without the required licence is a criminal offence, so it is vital that you obtain this prior to sending goods abroad. Licences are required for medicines, animals and plants, chemicals, fine art, firearms and technology, amongst other goods.
There are also obligations relating to VAT returns. Although the majority of exported goods are zero rated for VAT purposes, there are some exceptions so it is important to check. All the goods that you export must be included on your VAT return, and there are different systems for EU and non-EU sales.
As soon as goods enter another country’s territory, they are under that country’s jurisdiction. Transportation overseas can be complex and it is very important to establish the exact requirements of each party in terms of duties and which party carries which risks in the contract.
The International Chamber of Commerce publishes sales terms, the current edition of which is called ‘Incoterms 2000’. When used in international trade contracts, these determine exactly the obligations in relation to payment of shipping, risk, and other responsibilities of the buyer and seller in an international transaction.
For expert advice on the legal aspects of exporting your goods or services, contact us.