EXPORTING: A BEGINNER’S GUIDE

 

Success! You’ve secured your first order from overseas. Your salesman’s been trying for months …very trying at times! … but he’s finally landed a great order with the promise of more to follow. Break out the bubbly by all means but, in the cold light of the morning after, it’s essential you take the time for some very careful planning and analysis. The five lessons here will help ensure your initial euphoria doesn’t rapidly dissolve into a loss-making nightmare of epic proportions!

 

 

Many inexperienced exporters learn this lesson the hard (and costly!) way by steaming into a hasty decision without the full facts at their fingertips. Directors, salesmen, accountants, receptionists, warehousemen, storekeepers – you know who you are – all get thrown in at the deep end when the orders start arriving.

 

The options available can be mind-boggling even if you understand all the jargon and industry shorthand! (And if you don’t, I’ve included a quick jargon-buster at the end of my article.)

 

Airfreight : fast, often seen as expensive, but that’s not the full picture

 

Seafreight : slow, often seen as cheap, but again that’s not the full picture (FCL/LCL)

 

Road : ideal for large loads into Europe and sometimes further afield.

 

Integrator : Fedex, UPS, DHL etc. Fine for parcels, DDP or DDU

 

Post : not to be forgotten!

 

Courier : like the integrator but often more destinationspecific

 

Charters : for very large or heavy shipments by air

 

On top of all that, there are other major issues like Customs (both in the UK and at the destination) and Paperwork. What’s required over here and overseas?

 

Lesson Two: Five things you shouldn’t do

 

Let’s start by learning from other people’s mistakes. Here are five decisions which, in the heat of the moment, might feel like an eminently sensible way to get your exports moving!

 

1 Let’s ring that company that advertises on the telly/radio – they do everything for you!

2 Let’s send it by sea, it’s cheap

3 Let’s send it by air to the nearest airport, it’s expensive but it will impress the customer

4 Give it to that transport company down the road, they’ll get it there

5 Paperwork? Don’t worry about it – give them a copy of the invoice, they’ll soon tell us if they need anything else

 

If only life were that simple!

 

Lesson Three: Ask your customer!

 

The first step to making the right choices for profitable and painless exports is perhaps the simplest one of all:

 

Ask your customer what they want! Find out the WHO, WHERE, WHEN and WHAT…

 

1 WHO is paying for the transport…you or them?

 

2 WHEN is he expecting it, or when does he need it to arrive?

 

(This may seem obvious, but always check. The last thing you want to do is make a late delivery, which could even render the order useless. On the other hand, why pay to get it there tomorrow if next week is ok or even next month?)

 

3 WHERE is he expecting it to arrive?

 

Very important, because this is not always obvious. Large importers, in particular, have fixed arrangements with appointed agents at certain airports & ports, and prefer to have all their consignments arriving at these central locations rather than at maybe closer regional — but ultimately more expensive & time-consuming— ports. For example, goods arriving at Heathrow destined for Norwich may take 2 days to reach there by road feeder, ample time for an appointed agent to clear the goods and deliver to the door at set rates.

 

4 WHAT paperwork does he need?

 

This varies enormously from country to country and by value or commodity. Check with your customer what he actually needs. There may be special certificates or forms to enable him to achieve preferential rates of duty or even to just simply clear the goods. Sometimes this can be very difficult or almost impossible to arrange afterwards and storage charges may be levied whilst waiting for the correct documents to arrive. Even worse, goods can be returned or confiscated by customs if the correct paperwork is not available. Either way this could prove very expensive indeed, not withstanding the embarrassment! Equally, why pay 100’s of pounds for legalised invoices/certificates of origin if they are not required? (I actually knew someone who paid £115 for documents for every shipment he sent to Riyadh, only to find out two years later that they were always consigned straight to the bin!)

 

 

Hopefully, things should now be a little easier.

 

You know who’s paying, so you know what your budget is.

 

You know what paperwork is needed so get it done quickly (especially if any certification or legalisation is required as this can take 7 – 10 days).

 

You know where to send it – possibly to the door if specified by the customer.

 

And you know when it’s expected/required.

 

You’ve narrowed your choices right down and you should be better placed to make the right decision to match your decisions to your customer’s needs:

 

1 If you are paying:

 

If your customer has asked for delivery to his door (DDP, DDU) for small consignments try the integrators (DHL, Fedex etc) or couriers, within Europe. For larger consignments go for Road. For Europe & the rest of the World, go to the Freight Forwarders and ask for their Door to Door prices… either by air or sea dependent on when it needs to be there.

 

For other consignments (CIF C&F FOB etc) start by checking transit times to the requested port of arrival. This should tell you if you need to use the faster Airfreight option or if you can use Seafreight. Obviously larger consignments are going to be cheaper by sea but smaller shipments (dependent on destination and markets rates) may be cheaper by air. Within Europe don’t forget to check Road.

 

2 If your customer is paying:

 

You may not have to make a choice as he will possibly tell you when and where to deliver the goods. If not, be nice! Decide as though YOU were paying!

 

And don’t forget Post. For small, inexpensive items, Mail may be a very cheap & uncomplicated system.

 

Plus, if you ever need to move very big or outsize items quickly by air don’t forget charters & part charters.

 

But beware! It’s rarely as simple as it seems. For example:

 

A parcel of a certain weight by courier or integrator may at first glance appear to be dearer than if it were sent by consolidated airfreight. If however you take into account your customer’s clearance and delivery costs at destination, the overall cost, albeit not yours, is better value - -- I leave it up to you whether this should be taken into your decision making!

 

Or:

 

Sometimes Importers will not allow integrators or couriers to clear/deliver their goods because of set arrangements already in place or VAT/Duty account issues. This can affect the way overall prices might look. If in doubt, ask!

 

Lesson Five: Call the experts!

 

Naturally, a short article like this can’t turn you into an expert overnight but I hope it’s given you a taste of some of the issues involved and helps you avoid some of the more dangerous pitfalls along the way.

 

But, when all’s said and done, you can’t beat good old experience. And whilst you CAN do it all yourself, I really wouldn’t recommend it for a beginner. For real peace of mind use a professional Export/Import partner. One that’s small enough to respond to the specific needs of your business but experienced enough to get it right.

 

But then, I would say that wouldn’t I!

 

Graham Husband MIEx

Managing Director

Exportise Consultancy Ltd.

 

EXPORTER’S JARGON-BUSTER

 

The terms are grouped into four different categories:

 

* the E term - Ex works

the seller only makes the goods available to the buyer at the seller's own premises

* the F terms - FCA, FAS, FOB

the seller must deliver the goods to a carrier appointed by the buyer

* the C terms - CFR, CIF, CPT, CIP

the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods after shipment and dispatch

* the D terms - DAF, DES, DEQ, DDU, DDP

the seller must bear all costs and risks needed to bring the goods to the place of destination

 

Group E - Departure

 

EXW - Ex Works (... named place)

 

Group F - Main Carriage Unpaid

 

FCA - Free Carrier (... named place)

FAS - Free Alongside Ship (... named port of shipment)

FOB - Free on Board (... named port of shipment)

 

Group C - Main Carriage Paid

 

CFR - Cost and Freight (... named port of destination)

CIF - Cost, Insurance and Freight (... named port of destination)

CPT - Carriage Paid To (... named place of destination)

CIP - Carriage and Insurance Paid To (... named place of destination)

 

Group D - Arrival

 

DAF - Delivered at Frontier (... named place)

DES - Delivered Ex Ship (... named port of destination)

DEQ - Delivered Ex Quay (... named port of destination)

DDU - Delivered Duty Unpaid (... named place of destination)

DDP - Delivered Duty Paid (... named place of destination)