Contents
• Single European Market. Though you might think you are exporting your goods and services if you sell them in one of the member states, that is not technically correct. The Single European Market works as a country itself. The principle of free movement of goods, allowing goods to be transported and sold anywhere in the EU, is a cornerstone of the EU market. To a certain extent, complex and varied national laws have been replaced by a single set of European rules, cutting down on costs and inconvenience for businesses wanting to trade in other EU countries. The EU is a customs union - its 28 member countries form a single territory for customs purposes. This means that:
? If you want to sell your goods or services, no customs duties are paid on them moving between EU countries.
? All member states apply a common customs tariff for goods imported from outside the EU.
? Goods that have been legally imported can circulate throughout the EU with no further customs checks. This is quite relevant if you are importing products from any country outside the EU and you want to sell them in any EU country or third countries.
Currently, the European Union is leading a plan to unlock the full potential of the Single Market. With this end, the European Commission has decided to give the Single Market a boost by improving mobility for service providers, ensuring that innovative business models can flourish, making it easier for retailers to do business across borders, and enhancing access to goods and services throughout the EU.
So, for instance, if you have a registered business providing services as an artist or tourist guide, in the country where you live, you can offer those services in another EU country without setting up a company or branch there. So that makes things easier for the development of your business.
• Aspects to take into account before exporting your goods and services.
Think and live international. It must be admitted that looking abroad just for the sake that domestic market is not working properly might not be such a good idea. If not done properly it can double your problems.
First, you need to understand that things will certainly take longer abroad. If you want to build a long-lasting business relationship abroad, you need to be patient.
Secondly, do you remember that in the training fiche on business model and business plan we talked about how you see your business development? If you intend to sell abroad, this has to be part of both plans. At the end of the day, it means that you must take it very seriously because it will draw resources and energy and you may not expect immediate results. It might be a good idea to draft an internationalisation plan that should match your business model and can be integrated in your business plan. Think strategically.
• An internationalisation plan should address at least the following topics:
Market selection, you must be clear about why you have picked one market and not other. Do not spread your market selection as it will be resources, time and staff consuming. Just focus on one at the beginning and work with it as a pilot project to check how it works.
Competitors analysis. This part of the plan needs an in-depth research on the selected market and the companies that are already operating in that market. Get in touch with agencies and institutions, such as Chambers of Commerce that can provide that sort of analysis, contacts and expertise in the field.
Distribution methods. At this point, you need to outline how you will get your product or service to the end customers in your target market. We will deal with this subject later.
Your product or service. Do they need any changes to be made if you are exporting them? These potential changes may include packaging design or size, design changes, branding, labelling, etc. Bear in mind that you need to adapt your product or service to your target market and its regulations. It is also relevant to think of your production capacity to ensure you can deliver properly and in time.
Pricing strategy. Again, this is a critical point of your internationalisation plan. The price in your domestic market is not likely to be the same in the target one. Many different circumstances apply such as foreign currency fluctuations, competitor price in the target market, extra costs due to changes in your product, distribution, transport costs, etc.
Market entry. At this stage, you should have clearly established how you are going to access the target market. There are different options: selling to wholesale or retail, use a partner such as agent or distributor, set up an office, enter into a joint venture. You need to work out which one is the most convenient at the beginning.
Promotional Strategy. Start thinking ahead about how you plan to support your customers and partners (eg agents, distributors). This could include providing training for in market partners, promotional materials, advertising in the target market, etc.
Now you have thoroughly thought about why and how you are going to sell your product or service. You have developed your contacts there, and searched for customers. The following issue is distribution and logistics.
• Some administrative procedures.
Now that you are ready to export you should be aware that there is a (large) number of administrative procedures you need to take into account. For instance, you might need to submit an export declaration for your products and may need an export license. You might also have to pay custom duties and taxes in the destination country. Export regulations vary, depending on the country you’re exporting to and the goods or services you are selling.
The European Union offers a wide range of services to inform you of all you need when exporting from the EU. At the same time, member states have their national agencies to assist you if you wish to import / export. They provide a wealth of information and tips that are very handy when you do not know your target market. In many occasions they might have offices or local associates to help your business in the area.
One of the administrative requirements for selling abroad is the EORI number. EORI stands for Economic Operators Registration and Identification number. Any economic operator established in the EU needs to have one. Even an individual or sole trader needs to have a valid registration number, used by one of the Member States. The application should be sent to the customs authorities of the Member States in which the economic operator is established.
Another important issue you must take into account is Value Added Tax (VAT) isn't charged on exports to countries outside the EU. In this case the VAT is paid in the country of import. You will need to provide evidence that the goods were exported to a country outside the EU.
• International distribution and logistics. When we talk about distribution we believe it would be quite helpful to go through these questions:
o Which channels of distribution should your company use to market its products abroad?
o What types of representatives, brokers, wholesalers, and distributors should you use?
o What are the characteristics and capabilities of the available intermediaries?
International distribution is also about processes within your company. You need to have good systems in place that create transparency and trust between you and your retailers. Having the correct distribution agreements, general terms of business and a general grasp of your legal requirements is important.
Start small in your target market. Like anything in growing a business, starting with small tests is the best way to find the right formula. Making use of international distributors and agents will give you quick access to a large number of retailers, but of course you will end up paying for this with margins.
You’ll also need to count on shipping costs, taxes and other logistic fees which can be a nightmare if you are new to international distribution. Search for options and talk to others who are already shipping internationally.
Again, do not forget the assistance you can get from institutions and official agencies that organise trade shows and events in different countries to market your products and introduce you to potential partners. It might be a good idea to take part in European programmes such as Erasmus for Young Entrepreneurs that can serve to foster close relationships with entrepreneurs from different member states and in a later stage you can develop cooperation ties with them and serve as partners or distributors of your products and services in their countries.
• International transport.
Choosing the right mode of transport is essential to ensure your import or export operation is efficient and cost-effective. You can use either road, rail, air and sea, although you may need to use more than one type of transport. When making your choices, you will also need to decide whether to handle logistics by yourself, or outsource the work to a freight forwarder.
Factors that will influence your decision on which type of transport to use include your business’ requirements, the destination country, and the type of goods you are importing or exporting.
At this point, it is relevant to speak about the International Commercial Terms (‘Incoterms’). They are internationally recognised standard trade terms used in sales contracts. They’re used to make sure buyer and seller know who is responsible for the cost of transporting the goods, including insurance, taxes and duties, where the goods should be picked up from and transported to who is responsible for the goods at each step during transportation.
• Methods of payment in international trade.
This last part of the fiche explains the four main payment methods used in export trade. Bear in mind that exporters want to receive payment as soon as possible, preferably as soon as an order is placed or before the goods are sent to the importer, while importers want to receive the goods as soon as possible but to delay payment as long as possible, preferably until after the goods are resold to generate enough income to pay the exporter.
Cash-in-advance, is the most preferred option for exporters as they received the payment before they send the goods. The use of this method generally means you do not trust your buyer and in the long term might imply the lost of sales.
Letters of credit. Letters of credit (LCs) are one of the most secure instruments available to international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents.
Documentary collections. A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank (importer’s bank), along with instructions for payment. Funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents.
Open Account. An open account transaction is a sale where the goods are shipped and delivered before payment is due, which is usually in 30 to 90 days. Obviously, this option is the most advantageous option to the importer in terms of cash flow and cost, but it is consequently the highest risk option for an exporter
Save As PDF
Title:
International trade, distribution and logistics
Keywords
Internationalisation, incoterm, import, export, logistics, shipping, customs
Author:
AE
Languages:
English
To think of selling abroad and what it takes. To take full advantage of the European Single Market for creative and cultural industries and craft enterprises.
Description:
Did you know that many small and medium enterprises have survived through this crisis because they have gone international? Some of them, when they found difficulties in their own domestic markets, they looked beyond their national borders to sell their products and services. Don’t forget we live in a global village.
However, selling abroad is certainly not a bed of roses. There are a number of challenges micro companies must face when looking abroad. For instance, the type of skills needed in your business, in your employees, or yourself, the resources, distribution channels, and so on.
Nevertheless, the European Commission in its Communication on Entrepreneurship 2020 Action Plan, reigniting the entrepreneurial spirit in Europe, invite member states “to bring together all business support services, including mentoring, facilitation and advice on access to conventional and non-conventional finance, access to incubators and business accelerators and support for early internationalisation of young enterprises”. Single European Market is out there to favour your international development.
In this training fiche, we intend to show what it takes to sell abroad. Starting with a self-reflection that an enterprise must endure whether your business is ready to internationalise or not. Some tips will be shown and we will provide the leads in case you need, and you probably will, further information, support and expert assistance. We will acknowledge the advantages and pitfalls that the Single European Market offers and how some European Programmes might lend you a hand before jumping ahead.
Read on to discover your next market destination: Europe and the world.
• Single European Market. Though you might think you are exporting your goods and services if you sell them in one of the member states, that is not technically correct. The Single European Market works as a country itself. The principle of free movement of goods, allowing goods to be transported and sold anywhere in the EU, is a cornerstone of the EU market. To a certain extent, complex and varied national laws have been replaced by a single set of European rules, cutting down on costs and inconvenience for businesses wanting to trade in other EU countries. The EU is a customs union - its 28 member countries form a single territory for customs purposes. This means that:
? If you want to sell your goods or services, no customs duties are paid on them moving between EU countries.
? All member states apply a common customs tariff for goods imported from outside the EU.
? Goods that have been legally imported can circulate throughout the EU with no further customs checks. This is quite relevant if you are importing products from any country outside the EU and you want to sell them in any EU country or third countries.
Currently, the European Union is leading a plan to unlock the full potential of the Single Market. With this end, the European Commission has decided to give the Single Market a boost by improving mobility for service providers, ensuring that innovative business models can flourish, making it easier for retailers to do business across borders, and enhancing access to goods and services throughout the EU.
So, for instance, if you have a registered business providing services as an artist or tourist guide, in the country where you live, you can offer those services in another EU country without setting up a company or branch there. So that makes things easier for the development of your business.
• Aspects to take into account before exporting your goods and services.
Think and live international. It must be admitted that looking abroad just for the sake that domestic market is not working properly might not be such a good idea. If not done properly it can double your problems.
First, you need to understand that things will certainly take longer abroad. If you want to build a long-lasting business relationship abroad, you need to be patient.
Secondly, do you remember that in the training fiche on business model and business plan we talked about how you see your business development? If you intend to sell abroad, this has to be part of both plans. At the end of the day, it means that you must take it very seriously because it will draw resources and energy and you may not expect immediate results. It might be a good idea to draft an internationalisation plan that should match your business model and can be integrated in your business plan. Think strategically.
• An internationalisation plan should address at least the following topics:
Market selection, you must be clear about why you have picked one market and not other. Do not spread your market selection as it will be resources, time and staff consuming. Just focus on one at the beginning and work with it as a pilot project to check how it works.
Competitors analysis. This part of the plan needs an in-depth research on the selected market and the companies that are already operating in that market. Get in touch with agencies and institutions, such as Chambers of Commerce that can provide that sort of analysis, contacts and expertise in the field.
Distribution methods. At this point, you need to outline how you will get your product or service to the end customers in your target market. We will deal with this subject later.
Your product or service. Do they need any changes to be made if you are exporting them? These potential changes may include packaging design or size, design changes, branding, labelling, etc. Bear in mind that you need to adapt your product or service to your target market and its regulations. It is also relevant to think of your production capacity to ensure you can deliver properly and in time.
Pricing strategy. Again, this is a critical point of your internationalisation plan. The price in your domestic market is not likely to be the same in the target one. Many different circumstances apply such as foreign currency fluctuations, competitor price in the target market, extra costs due to changes in your product, distribution, transport costs, etc.
Market entry. At this stage, you should have clearly established how you are going to access the target market. There are different options: selling to wholesale or retail, use a partner such as agent or distributor, set up an office, enter into a joint venture. You need to work out which one is the most convenient at the beginning.
Promotional Strategy. Start thinking ahead about how you plan to support your customers and partners (eg agents, distributors). This could include providing training for in market partners, promotional materials, advertising in the target market, etc.
Now you have thoroughly thought about why and how you are going to sell your product or service. You have developed your contacts there, and searched for customers. The following issue is distribution and logistics.
• Some administrative procedures.
Now that you are ready to export you should be aware that there is a (large) number of administrative procedures you need to take into account. For instance, you might need to submit an export declaration for your products and may need an export license. You might also have to pay custom duties and taxes in the destination country. Export regulations vary, depending on the country you’re exporting to and the goods or services you are selling.
The European Union offers a wide range of services to inform you of all you need when exporting from the EU. At the same time, member states have their national agencies to assist you if you wish to import / export. They provide a wealth of information and tips that are very handy when you do not know your target market. In many occasions they might have offices or local associates to help your business in the area.
One of the administrative requirements for selling abroad is the EORI number. EORI stands for Economic Operators Registration and Identification number. Any economic operator established in the EU needs to have one. Even an individual or sole trader needs to have a valid registration number, used by one of the Member States. The application should be sent to the customs authorities of the Member States in which the economic operator is established.
Another important issue you must take into account is Value Added Tax (VAT) isn't charged on exports to countries outside the EU. In this case the VAT is paid in the country of import. You will need to provide evidence that the goods were exported to a country outside the EU.
• International distribution and logistics. When we talk about distribution we believe it would be quite helpful to go through these questions:
o Which channels of distribution should your company use to market its products abroad?
o What types of representatives, brokers, wholesalers, and distributors should you use?
o What are the characteristics and capabilities of the available intermediaries?
International distribution is also about processes within your company. You need to have good systems in place that create transparency and trust between you and your retailers. Having the correct distribution agreements, general terms of business and a general grasp of your legal requirements is important.
Start small in your target market. Like anything in growing a business, starting with small tests is the best way to find the right formula. Making use of international distributors and agents will give you quick access to a large number of retailers, but of course you will end up paying for this with margins.
You’ll also need to count on shipping costs, taxes and other logistic fees which can be a nightmare if you are new to international distribution. Search for options and talk to others who are already shipping internationally.
Again, do not forget the assistance you can get from institutions and official agencies that organise trade shows and events in different countries to market your products and introduce you to potential partners. It might be a good idea to take part in European programmes such as Erasmus for Young Entrepreneurs that can serve to foster close relationships with entrepreneurs from different member states and in a later stage you can develop cooperation ties with them and serve as partners or distributors of your products and services in their countries.
• International transport.
Choosing the right mode of transport is essential to ensure your import or export operation is efficient and cost-effective. You can use either road, rail, air and sea, although you may need to use more than one type of transport. When making your choices, you will also need to decide whether to handle logistics by yourself, or outsource the work to a freight forwarder.
Factors that will influence your decision on which type of transport to use include your business’ requirements, the destination country, and the type of goods you are importing or exporting.
At this point, it is relevant to speak about the International Commercial Terms (‘Incoterms’). They are internationally recognised standard trade terms used in sales contracts. They’re used to make sure buyer and seller know who is responsible for the cost of transporting the goods, including insurance, taxes and duties, where the goods should be picked up from and transported to who is responsible for the goods at each step during transportation.
• Methods of payment in international trade.
This last part of the fiche explains the four main payment methods used in export trade. Bear in mind that exporters want to receive payment as soon as possible, preferably as soon as an order is placed or before the goods are sent to the importer, while importers want to receive the goods as soon as possible but to delay payment as long as possible, preferably until after the goods are resold to generate enough income to pay the exporter.
Cash-in-advance, is the most preferred option for exporters as they received the payment before they send the goods. The use of this method generally means you do not trust your buyer and in the long term might imply the lost of sales.
Letters of credit. Letters of credit (LCs) are one of the most secure instruments available to international traders. An LC is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated in the LC have been met, as verified through the presentation of all required documents.
Documentary collections. A documentary collection (D/C) is a transaction whereby the exporter entrusts the collection of a payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank (importer’s bank), along with instructions for payment. Funds are received from the importer and remitted to the exporter through the banks involved in the collection in exchange for those documents.
Open Account. An open account transaction is a sale where the goods are shipped and delivered before payment is due, which is usually in 30 to 90 days. Obviously, this option is the most advantageous option to the importer in terms of cash flow and cost, but it is consequently the highest risk option for an exporter