14th March 2019
Whatever the final Brexit deal looks like the reality is we are likely to see changes in the administrative processes for passing goods across borders. But we are also told that with our newly acquired independence will come great opportunity for the UK to strike out and form new trading relationships with other countries of the world. Whether Brexit or new trade deals are the catalyst, or it is a natural next step for your business, if you are considering international trade, you need to be aware that whilst exciting and often fruitful, international trade does carry with it some additional administration and risk.
As someone that has spent many years working in and with companies that buy and sell goods overseas I have become used to managing the sometimes complex areas of international trade accounting. So, with a new international trade horizon forming, I thought it would be useful to share this knowledge with my clients and contacts by way of a two short guides to the basics.
In this second post in the series, we look at shipping and law – the more practical side of international trade.
Following are key tips, personal insight, rules of thumb and general guidance. However, please always seek advice as trading terms with different parts of the World can vary hugely and this is by no means a definitive guide!
Applicable law for overseas trade
Engaging in your first overseas trades can be daunting. When the trade is in the UK your ultimate fall back is to jump in the car and drive to the customer/supplier’s offices and have a face-to-face discussion or collect/deliver the goods. This is not so easy when you are hundreds or even thousands of miles apart. You may not have even met the people you are doing business with!
So, if you are agreeing contracts or terms and conditions with overseas traders, you will need to have a clear understanding of which law applies to your trading relationship, in the case that one side breaches the agreement or things don’t go to plan.
The applicable law often depends on where the company is based and or registered. Adobe, Microsoft and Google have operations in the UK and Ireland/Dublin to put them in EU so sales are managed under EU law and also for EU VAT purposes. Their legal agreements in these countries will be subtly different to their US contracts.
There is also a bit of tradition and patriotism involved! For instance, most UK companies would expect a Japanese company, trying to sell into the UK, to have local/regional company – either in Europe or better still here in the UK. A Japanese company trying to trade in the UK with Japanese or US contract law will struggle, as it all feels too remote.
Shipping and Customs
You’ve agreed a deal and now it’s time to deliver/receive the goods. This is where a lot of the risk and administration can creep in. So, be careful how you ship goods as there can be some hidden issues with clearing customs and hidden costs in terms of freight handling.
- All international shipments need multipart paperwork including delivery notes and invoices. This should be secured to the lead carton/package in the shipment in an unsealed document holder or envelope.
- Some countries will require your paperwork to have specific wording, may require a particular paper or ink colour or multiple sheets in different colours and the number of copies can also vary
- All cartons/packages in the shipment should be clearly marked as box x of x in so that customs and freight handles can keep a track of the entire shipment, especially when loose and forming part of a bigger shipment
- The size of the shipment can determine speed of clearance. If you own the full contents of a container it is often far easier to clear customs. If you are part shipment, it will take longer to clear – especially if you are the minor part
- If you are thinking of trading overseas, choose a good freight forwarder before taking your first deal. Value this relationship and don’t just go for the cheapest option. Your freight forwarder should be a trusted partner that knows your business. They are your ambassadors at the port!
- Smaller freight companies may not get the recognition they deserve but they tend to be more on the ball. They have fewer shipments so they are more aware of when shipments are due, what’s arriving, what’s leaving etc.
- It’s obvious but shipping by sea takes longer but can be ten-times (or more) cheaper
- Airfreight is expensive, but it is much faster. However, weight and dimensions are more important factors here so if you are planning on using airfreight, take some time to consider the best method of packing goods.
I hope these short introductory posts have been of use to you if you are planning to move into international trade. However, as noted at the start, please always seek advice as trading terms with different parts of the World can vary hugely and this is by no means a definitive guide!