Conducting International trade is not easy. If it were, more people would be doing it. As you go through the process import and export, mistakes are bound to happen, but to avoid a few of the unforeseen circumstances, do some homework well before you get started. Below I highlight areas where international traders experience the most turbulence. Focus on these trouble spots and you will put yourself on the path to what we all crave for — a bumpy-ride free international trade experience.
- Lack of exchange rates knowledge.
If you don’t know the exchange rates when trading internationally, you are exposed to potential currency fluctuations and are restricted when planning ahead or trying to get the best price.
The solution? Consult with your banker on how best to lock in your profit on a transaction and protect yourself from exposure to risk. If you are too busy, buy/sell only in a single currency such as Euro or U.S. dollars. That way you hedge against the roller coaster ride of currency fluctuations. Additionally, you can get informed on the difference between a spot versus a forward foreign exchange and how to hedge against currency fluctuations.
- Poor relationship with customs officials.
Don’t underestimate the importance of a good relationship with customs officials, transportation folks and customs brokers. And never assume you know more than they do! You are responsible for compliance with all import and export laws, so get along with everyone and listen to what they have to say. Even if you hire a firm to carry out import-export procedures on your behalf, the buck still stops with you.
- Making a bribe.
If you are conducting business in a foreign market, you must be familiar with and comply with the Foreign Corrupt Practices Act (FCPA). Learn about Foreign Corrupt Practices Act and discover how to avoid or handle bribery disputes.
- Import restrictions or control on a product.
Import restrictions comprise of quotas, import licensing requirements and so forth. Importing goods that violate quota restrictions or are unsafe could end up costing you money in fines and penalties, and that will erode your profits. Are you complying with government import regulations? Here’s how to find out, check World Trade Organization’s website for details on respective country restrictions.
- Failure to conform to packaging, marking, and language (localization) laws.
What are the laws of the country you are entering? Consult with your transportation specialist and your customer and then compare notes. For example, do labels on your product have to be in the local language? How sturdy must the carton be? What markings need to be on the outside of the cartons to comply with the law? Is there any taboo to the number of products packed in box — eight chocolate bars versus 13, for instance? The point is to leave no situation un-checked when it comes to focusing on the logistics details of product.
- Understanding Incoterms and how they affect a sale.
Incoterms are considered essential to use in contracts for the sale of goods internationally. For example, preparing a proforma invoice using one of the common terms, CNF, which means cost and freight — you are responsible for paying the freight costs and collecting from your customer later. You must understand the costs and responsibilities that come with using a specific Incoterm. For more on Incoterms go here If you don’t, it can lead to underpayment to you, for instance, on an export sale or over-payment to your supplier on an import. It can also lead to customs problems, including documentation that might be prepared incorrectly. You can reduce the risk on the sale of goods internationally by negotiating effective trade terms.
- Inefficient record keeping.
On all your international transactions, keep good records for as long as you keep your financial records — from how you declare a good (e.g: Harmonized code) to termination of a transaction whether by email or some other means, to the financing of a deal.
- Verifying the reputation and legitimacy of a buyer or manufacturer.
Have you done your due diligence on who you are about to conduct business with? Verify prospective manufacturers and distributors. If you find them on a global sourcing site such as Global Sources, ebay or Alibaba check to see whether they have a website on their own. If not, why not? Can they grant you visit? What does that tell you? Conduct a search on the Internet to see what pops up.
On verifying customers, conduct an online search and see what bubbles up on search engines. Also contact governmental officials to see what they know about the customer. If you are exporting from the European Union to a customer in China or Africa, contact one of the International Trade Specialists based on your sector of activity to find out more on the customer. You might also reach out to your Embassy in the respective country to see what they know about your prospect.
Whether you are working with a supplier or customer, ask for references. Check them carefully.
Master these eight common mistakes and you’ll be on your way to a successful import – export transactions. If you don’t have time to deal with such challenges, it’s best you contact an EMC or experts who handle these cases on daily bases.