An Introduction To Exporting

CONTENTS

Introduction

Why Export?

Advantages of Exporting

Disadvantages of Exporting

Who Exports?

What to Export

Where to Export

Starting Out

Distribution

Agents

Distributors

Selling Direct

Collaborative Projects

Trade Shows

Pricing

Getting Paid

Export Terminology

Useful Reading and Sources of Further Information

Useful Addresses for Exporters

Regional Offices of the Department of Trade and

Industry

Appendix - A Country Guide

Introduction

Exporting, or marketing to outside markets, is what turns small companies into large companies, and large concerns into multinational operations. 

In itself exporting is a simple concept, and many excellent sources of advice and information are available to that person considering taking his or her products and services to foreign markets.  Nevertheless many firms never consider the potential o

f exporting, all too often because their proprietors believe the situation will present countless and potentially insurmountable difficulties. 

Exporting can in fact lend itself well to operations large and small, and can provide a greatly increased market for all manner of products and services as most mail order dealers will realise from a browse through the several international opportunities magazines and newsletters available today, in which mailing lists, dropship services, and countless other services are advertised on a regular basis.  Where products and services are suited to marketing entirely by mail, then exporting is little

 more complex than making your intentions known at the post office counter and letting the postal  services do the rest.  Where products are large and bulky -  perhaps also expensive - then the exporter might enlist the services of any of a number of specialist export services able to help in all stages of the export process, from market study to soliciting orders, and from shipment to receiving and processing payments to suppliers.

That title 'An introduction to Exporting' is just that; an intention to provide nothing but a simple understanding of an equally straightforward process, one you might utilise to full extent for whatever goods and services you currently offer or might consider offering in the future.

Why Export?

Businesses enter the field of exporting for many and varied reasons, not the least of which might be to extend the market for a product that has proved popular on a domestic level.  If the product or service is applicable to a wider market and it has

 been tested in the UK, chances are exporting it will prove similarly profitable.  Not so good a marketing strategy however, is the decision to export something because it has not proved popular in the domestic marketplace. 

Some businesses begin with export marketing included in their corporate plan; others slip gradually into exporting, perhaps having been approached by an overseas buyer with whom a profitable business relationship emerges, and it subsequently becomes

clear that other exporting avenues might also prove profitable.   

Advantages of Exporting

*  Increased market size.

*  Market suitability.  Some products might be more suited to

   certain overseas markets than to the UK.  This might

   perhaps best be illustrated in terms of luxury goods

   which the domestic market might not be able to afford but

   which might find a ready audience in more affluent

   locations.

*  Currency benefits.  Changes in exchange rates can prove

   advantageous when selling to a customer against whose

   currency sterling is weak.

*  Protection against a downturn in the domestic market.

*  Protection in the event of world recession since it is

   unlikely that all countries will be equally effected. 

*  Economies of scale from manufacturing in larger batches.

*  There is the option of exporting without being a

   manufacturer, for instance where one operates as an export

   merchant or export agent and sells goods bought from

   British manufacturers.

*  Some British services are much in demand in worldwide

   markets, examples being design, financial and managerial

   consultancy services, engineering, computer software

   provisions, and so on.

*  On perhaps a less business-like note, opportunities for

   foreign travel can prove stimulating and refreshing to the

   entrepreneur used to operating in purely domestic markets.

Disadvantages of Exporting

*  Sometimes higher costs of travelling abroad to obtain

   orders.  High management fees, shipping charges, agent's

   fees, etc., can sometimes increase the exporter's prices to

   a level which makes goods and services uncompetitive in

   overseas markets.

*  Market unsuitability.  Different cultures, customs and

   languages can all present problems to the exporter and can

   mean that a product and service suitable in the UK has

   virtually no market abroad.

*  Import rules and regulations vary between countries. 

   Sometimes rules change rapidly and dramatically.

*  Shipping rules and regulations can prove complicated and

   represent a vast body of knowledge which the exporter

   will at least have to familiarise him or herself with.

*  Currency.  That earlier advantage of a strong currency in

   exchange for a weak sterling might in alternative

   circumstances prove detrimental to the exporter.

*  Collecting long-standing payments and debts can prove a

   very serious problem, particularly for the small business.

Who Exports?

Though the benefits of exporting can apply to companies large and small, it is generally accepted that no small company should consider exporting until the company is well established in the domestic sector, or at least until one of the proprietors h

as sufficient knowledge and experience of exporting to make a concerted effort in overseas markets. 

What to Export

Selling abroad bears very little difference to selling in the UK; a need must be identified and a service or product introduced to fill that need. 

Few restrictions are placed on what can and can not be exported from Britain, other of course than defence supplies to certain countries, and restrictions on livestock and agricultural products.  Where uncertain as to whether or not restrictions might be placed on particular products or services, the entrepreneur will obtain excellent advice from:

The Export Licensing Branch, Department of Trade, Millbank Tower, Millbank, London, SW1P 4QU

071 215 8070

What restrictions and limitations the exporter is likely to encountering are more likely to be placed by that country into which one seeks entry for whatever products and services are concerned.  Developing countries might place restrictions designed to protect their own growing industries.  Import controls might reveal themselves in quotas, customs tariffs or complicated technical and documentation requirements.  Information and advice on technical requirements might be available from:

The British Standards Institution, Technical Help to Exporters, Linford Wood, Milton Keynes, MK14 6LE

0908 220022

Where to Export

Most newcomers to exporting opt for the relative ease of supplying to English-speaking countries of the old Commonwealth and North America.  In many cases British traditions and customs are still very much in evidence and the fact that many British banks and financial institutions have branches in these locations can greatly ease the assimilation process.

The European Community might however present the greatest opportunity for new and smaller export firms, and will doubtless prove a more realistic and attractive option with the removal in 1992 of all customs barriers.

Third World and developing countries present particular problems.  Payment facilities and procedures are rarely uncomplicated and locating suitable distribution channels can prove difficult, time-consuming and costly. 

The most likely first venues for marketing abroad might well be those arising from unsolicited enquiries from potential foreign customers, and information obtained from trade publications, newspapers and specialist export publications. 

Starting Out

Exports can obviously increase markets for one's goods many times over, but for the newcomer exporting can also present numerous complications and learning difficulties.  Though the temptation might exist, the newcomer is usually advised to gradually

 enter the export field, perhaps starting with one overseas market and gradually increasing the range of destinations in which one's products and services are offered.

The newcomer's first port of call for information on exporting in both general and specific terms should be regional offices of the Department of Trade and Industry, details of which are provided at the end of this text.

The all-important initial market research to assess the suitability of your product or service to overseas markets, is one that might well be aided by a visit to a trade show in the country of intended export.  There the exporter can speak to foreign

 and international business men and women and obtain copies of relevant trade publications. 

The exporter might well find the product requires some modification to suit overseas markets, and that an import licence is required before certain products will be allowed into some countries.  All can be discussed with export information and advisory bodies on the entrepreneur's return to Britain. 

Amongst the more useful sources of information and advice for newcomers and established exporters are Chambers of Commerce, most of the largest of which are able to provide group selling facilities, fact finding services, organised trips abroad, shared telex arrangements, documentation advice, and so on.  It is advisable to join one of the larger Chambers of Commerce, such as those in London and Birmingham, as opposed to Chambers of Trade which though generally available in all main towns, are usually composed of retailers with no experience or interest in exporting.  Many Chambers of Commerce hold regular meetings at which members can benefit from the experience and advice of fellow members and longer-established exporters.  Additionally, many Chambers hold regular seminars on matters related to exporting, some aimed at relative beginners and therefore offering a more than useful insight into the ins and outs of this particular marketing method.

All of the major banks offer free literature and guidance to intending and established exporters, and many have specialist advisers available to answer whatever questions you might have in your beginning days as an exporter, as well as problems you m

ight encounter as you begin venturing into new and untested markets. 

Distribution

Once having made as reliable an assessment as possible of the suitability of your product or service to overseas markets, then comes the decision as to exactly how marketing will take place.  The range of possible options include: agents, distributors, selling direct, collaborative projects and trade shows, all of which we might now briefly consider.

     *  Agents

Agents acting on the exporter's behalf will usually visit potential customers for the purpose of taking orders, and will normally command commission to the tune of 10 per cent the cost of goods exported.  The exporter subsequently despatches goods an

d forwards invoices direct to customers.  The main problem confronting the exporter is that of locating a good and reliable agent to act on his or her behalf, something with which most export information and advisory services are usually more than qualified to assist. 

     *  Distributors

Distributors undertake services very much akin to those carried out by agents, and might additionally maintain stocks of the exporter's goods.  Distributors might sell products through their own already established chains of agents and distributors.

 All goods and services are sent direct to the main distributor.

     *  Selling Direct

Where the exporter opts for direct marketing, it must then be established whether the postal services will prove adequate to facilitate all transactions, or whether the more costly options of air freight or sea freight are more appropriate to marketing of the product or service concerned.  Post, where suitable for the product concerned, can prove cost-effective and eliminate the financial burden known to accompany delivery via agents and distributors.  But only certain products and services are suited to marketing by mail, which by its very nature is unsuitable for fragile and perishable items and wholly inappropriate for services which must of necessity be carried out in person!  Goods suited to posting abroad will usually be both light an

d reasonably compact.  The procedure for posting is relatively simple: the exporter completes customs declaration forms available at the post office and hands them back in the same manner as when posting parcels to a UK address.  Payment terms might

be CBD (Cash Before Delivery) or COD (Cash on Delivery).  Rules and regulations relating to specific countries are available at Post Office counters.

Sea freight and air freight transportation normally require shipping agents to handle the sometimes complicated documentation involved.  The astute exporter will realise only too well the profitability of shopping around for a reliable shipping agent

 and a competitive rate.

Direct marketing can in fact prove very complicated and time-consuming, particularly for smaller firms which will have to master problems of documentation, customs, shipping, payment, and sometimes language differences.  Dealing by remote control can

 in itself prove difficult, and the alternative of trips abroad to effect transactions can prove costly in the extreme. 

One other method of selling direct involves attendance at a Trade Show in the country to which the businessman intends to export.  Orders originate by direct approach from customers. Follow up sales and repeat custom usually comes from regular attendance at trade shows.

     *  Collaborative Projects

Collaboration finds companies in different countries carrying out certain services and providing facilities for exporters abroad, in return for reciprocal representation of their goods and services in other countries. 

     *  Trade Shows

Even small businesses operating on an international basis should consider taking a stall at any of the many international trade shows held in Britain and abroad.  For many exporters it is from attendance at trade shows that the vast majority of business originates.

Pricing

Costs of exporting can of course make products far more expensive than when sold in domestic markets.  Pricing must therefore be carefully monitored and controlled and take into account costs of freight, shipping insurance, overseas agent's commissions, and other incidental expenditure.  Product insurance is essential and can be arranged through insurance brokers.

As a rough illustration of what factors make for accurate pricing controls, the following must be taken into account:

     *  If you are not the producer of the goods to be

        exported, the amount of any discounts for cash or

        quantity that the supplier will allow you, might make

        a significant difference to prices.

     *  Costs of packing.

     *  Costs of freight and transportation.

     *  Bank processing charges.  The bank through which you

        receive payment will charge between 1/8 per cent and

        1/4 per cent of total invoice value.

     *  Currency exchange charges, where appropriate.

     *  Insurance costs. 

     *  Agent's commission, where appropriate.

     *  Your profit.

Getting Paid

One of the major attractions of dealing through domestic export houses or buying agents in one's own country is the relative certainty of being paid promptly, and in sterling.  Extended credit is not usually encountered.  Exporting direct on the othe

r hand brings certain problems, mainly of ensuring payment and avoiding risks incurred from fluctuating currency exchange rates.  It is no secret that some countries have a reputation for speedy payment, whilst others prove quite the opposite.  Advic

e in this respect is available from the following section of the Department of Trade and Industry:

Export Credit Guarantee Department, Export House, 50 Ludgate Hill, London, EC4M 7AY

The normal procedure with a new customer to whom one exports, is to use either Letters of Credit or other documentary collection handled and co-ordinated by banks.  If you plan to offer credit, you should take up references in the same manner as would be the case for a new UK customer.

Amongst the many methods of payment for which the exporter might opt are the following:

     *  Cash With Order - Before Delivery.  This is of course

        a normal business requirement for firms operating in

        domestic markets.  You might not actually get

        payment in advance and some other method might be

        requested by the importer.  But, you can always ask!

     *  Open Account - A large percentage of transactions take

        place on open account, where invoices are provided,

        goods delivered, and payments made by bank transfer. 

        This is ideally a form of payment used when a

        certain level of trust has been established between

        parties to the transaction.

     *  Bills of Exchange - This is a document that enables

        the exporter to provide a period of credit to the

        importer, usually sufficient to have goods shipped,

        collected, and possibly sold before payment is made

        through the importer's bank.  A 'sight' draft is one

        that must be paid before title passes in the goods

        concerned.  A 'term' draft on the other hand allows

        for payment some time after received, usually in

        multiples of 30 days.  Term drafts are normally

        extended only to known clients of good financial

        standing.  The main benefit of term drafts is one of

        the customer being able to sell goods well in advance

        of payment.  In EEC countries, some banks will avalise

        (guarantee) payment by their customers of bills of

        exchange.  Normally, because the exporter is agreeing

        to some delay in receiving payment, a reasonable

        amount of interest will be included.

     *  Documentary Letters of Credit - This comprises an

        irrevocable letter of credit, raised by the importer

        upon instructions to his or her bank.  The bank opens

        a credit in favour of the exporter in which very

        precise conditions are laid out in respect of

        supporting documents, methods of despatch, details of

        the goods, and so on.  Both parties' banks confirm the

        agreement and payment is guaranteed.  One problem with

        regard to documentary letters of credit is the amount

        of paperwork known to accompany the transaction -

        commercial invoices, certificates of origin, shipping

        documents, customs declarations, bills of lading and

        so on are all required often with multiple copies of

        all documents. 

        Others form of documentary letter of credit exist. 

        The most desirable is the irrevocable letter of

        credit, given that payment is guaranteed in all

        circumstances, including those of revolution, currency

        crash, insolvency, and Act of God. 

     *  Factoring - Becoming increasingly more popular this

        method is one of dealing with an international

        factoring company which will handle all collections on

        behalf of the exporter and provide credits in

        sterling.  Usually factoring companies are backed by

        major banks.  Information on appropriate factoring

        companies can be obtained through your bank or upon

        request from:

        The Association of British Factors, 24-28 Bloomsbury

        Way, London, WC1A 2PX

        071 831 4268

Export Terminology

Exporting employs a unique body of words and phrases, all of which the beginner will soon become familiar with.  For the time being we might briefly consider a few of the more common terms used in exporting circles:

     *  Bills of Lading - This is the document provided by the

        shipping line as receipt and proof of ownership of the

        goods transported on your behalf.  Usually the

        document tends to come with multiple copies, some of

        which are forwarded to the importer and others to the

        paying bank as evidence of trading.

     *  Certificate of Origin - This is a statement by the

        exporter with the backing of a Chamber of Commerce and

        sometimes an embassy.  The document states from which

        country the goods emanate.

     *  Commercial Invoice - More detailed and complex than

        everyday invoices with which the reader will doubtless

        already be familiar, this document contains a full

        description of goods, along with packing marks,

        weights, insurance details and information regarding

        transportation routes.  Some countries require Chamber

        of Commerce confirmation of the invoice's contents;

        others require all information provided to be given in

        their own official language. 

     *  FOB (Free On Board) - The usual means of quoting

        export prices.  The price includes carriage to

        specified ports or docks, and charges up to placing on

        board the ship or aircraft taking the items to their

        intended destination.  If shipped from Southampton,

        the contract might then say 'fob Southampton'.

     *  CIF (Cost, Insurance, Freight) - A little further on

        from FOB this cost is that of FOB plus insurance on

        board. 

     *  Price Ex Factory - The price of your goods where the

        buyer has to arrange and pay for all other costs of

        carriage, insurance, etc.

     *  Letter of Credit - A common form of payment for

        exports, provided and controlled by the paying bank.

     *  Consolidated - Where your exported goods are

        consolidated or grouped with others, usually in a

        container, in order to obtain the benefits of cheaper

        shipping rates.

Useful Reading and Sources of Further Information

'Marketing Without Frontiers' is the title of an excellent - and free - book issued by the Post Office.  Providing a useful insight into exporting to most other countries, this document might be obtained from:

Marketing Without Frontiers, Royal Mail International, 12 - 15 Fenton Way, Basildon, S15 4BR

Periodicals and regularly updated publications of interest to exporters include the following:

'Direct Marketing International', 3 Bridgefoot, Market Deepong, Peterborough, PE6 8AA

'Direct Response by George!', Greenhouse Publishing, 4 Market Place, Hertford, Herts., SG14 1EB

'Direct Response Magazine', Greenhouse Publishing, 4 Market Place, Hertford, Herts., SG14 1EB

'Precision Marketing', Centaur Communications Ltd., St. Giles House, 50 Poland Street, London, W1V 4AX

'Eurotrade', 25 Helen Road, Hornchurch, Essex, RM11 2EW

'Export Courier', Stoke and Lindley Jones Ltd., 36 Stonehills House, Stonehills, Welwyn Garden City, Herts., AL8 6NA

'Export Digest', Croner Publications Ltd., Croner House, London Road, Kingston-upon-Thames, Surrey, KT2 6SR

'Export Times', 4 New Bridge Street, London, EC4V 6AA

'Export Today', Setform Ltd., Europa House, 13-17 Ironmonger Row, London, EC1V 3QN

'International Freighting Weekly', Maclean Hunter Ltd., Maclean Hunter House, Chalk Lane, Cockfosters Road, Barnet, Herts., EN4 OBU

'Euromarketing', Crain Communications, 75-77 Cowcross Street, London, EC1M 6BP

'Overseas Trade' is a monthly magazine published by the Department of Trade and Industry, aimed at keeping exporters up to date with tariff changes and opportunities in global markets.  Contact:

The Department of Trade and Industry, 1 Victoria Street, London, SW1H OET

'Croner Reference Book for Exporters', is one in a large series of loose-leaf reference documents, regularly up-dated and available on subscription from:

Croner Publications, Croner House, London Road, Kingston upon Thames, Surrey, KT2 6SR

'Enterprise Initiative' is a government sponsored scheme providing the entrepreneur access to experts in various fields of business and marketing.  A free booklet is available by telephoning: 0800 500 200

Government literature is also available free to those interested in marketing in Europe.  Telephone: 081 200 1992

Useful Addresses for Exporters

Association of British Chambers of Commerce, Sovereign House, 212a Shaftesbury Avenue, London, WC2H 8EW

British Exporters Association, 16 Dartmouth Street, London, SW1H 9BL

(Publishes and distributes a useful 'Directory of British Export Houses')

British International Freight Association (Incorporating the Institute of Freight Forwarders), Redfern House, Browells Lane, Feltham, Middlesex, W13 7EP

Croner Publications, Croner House, London Road, Kingston upon Thames, Surrey, KT2 6SR

(Publishes useful directories and sources of information of use to exporters)

Department of Trade and Industry Export Initiative (British Overseas Trade Board), 1 Victoria Street, London, SW1H OET

Institute of Export, Export House, 64 Clifton Street, London, EC2A 4HB

SITPRO (The Simpler Trade Procedures Board), 2nd Floor, Venture House, 29 Glasshouse Street, London, W1R 5RG

This organisation provides information and advice on documentation and payments procedures, customs regulations and import rules and regulations.

Export Licensing Branch, Department of Trade, Millbank Tower, Millbank, London, SW1P 4QU

FIS Publications Ltd., Adelphi Chambers, Houghton Street, Southport, Merseyside, PR9 ONZ

Issues a guide to all major exporters listed by country.

Overseas Status Report Services, British Overseas Trade Board, Department of Trade and Industry, Ashdown House, 123 Victoria Street, London, SW1E 6RB

Provides extensive services to exporters looking for foreign agents and distributors.

Fairs Promotions Branch, Dean Bradley House, Horseferry Road, London, SW1P 2AG

Regional Offices of the Department of Trade and Industry

DTI South East (Greater London)

Bridge Place, 88 - 89 Eccleston Square, London, SW1V 1PT

071 215 0575

DTI South East (Reading, Berkshire, Buckinghamshire, Hampshire, Isle of Wight and Oxfordshire)

40 Caversham Road, Reading, Berkshire, RG1 7EB

0734 395600

DTI South East (Kent, Surrey, East Sussex and West Sussex)

Douglas House, London Road, Reigate, Surrey, RH2 9QP

0737 226900

DTI East (Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk)

Building A, Westbrook Research Centre, Milton Road, Cambridge, CB4 1YG

0223 461939

DTI North East

Stonegate House, 2 Groat Market, Newcastle upon Tyne, NE1 1YN

091 232 4722

DTI North West

Sunley Tower, Piccadilly Plaza, Manchester, M1 4BA

061 838 5000

DTI North West

Graeme House, Derby Square, Liverpool, L2 7UP

051 224 6300

DTI Yorkshire and Humberside

25 Queen Street, Leeds, LS1 2TW

0532 443171

DTI South West

The Pithay, Bristol, BS1 2PB

0272 272666

DTI West Midlands

77 Paradise Circus, Queensway, Birmingham, B1 2DT

021 212 5000

DTI East Midlands

Severns House, 20 Middle Pavement, Nottingham, NG1 7DW

0602 506181

DTI Northern Ireland

Industrial Development Board for Northern Ireland, Export Development Branch, Marketing Development Division, IDB House, 64 Chichester Street, Belfast, BT1 4JX

0232 233233

DTI Scotland

Industry Department, Exports Division, Alhambra House, 45 Waterloo Street, Glasgow, G2 6AT

041 242 5495

DTI Wales

Industry Department, New Crown Building, Cathays Park, Cardiff, CF1 3NQ

0222 825097

Appendix

A Country Guide

Note:  Though embassies and representatives of foreign governments are not usually able to assist with specific information regarding exporting to their country, most will provide addresses and information relating to such as Chambers of Commerce and various business and export information services of use to the intending exporter.

The following is but a brief selection of Embassies, Consulates and High Commissions with bases in Britain.

Argentina

49 Belgrave Sqauare, London, SW1X 8QZ

Australia

Australia House, Strand, London, WC2B 4LA

Austria

18 Belgrave Mews West, London, SW1X 8HU

Belgium

103 Eaton Square, London, SW1W 9AB

Brazil

32 Queen Street, London, W1Y 4AT

Canada

Macdonald House, 1 Grosvenor Square, London, W1X OAB

Chile

12 Devonshire Street, London, W1N 2DS

China

49-51 Portland Place, London, W1N 3AH

Denmark

55 Sloane Street, London, SW1X 9SR

Finland

38 Chesham Place, London, SW1X 8HW

France

58 Knightsbridge, London, SW1X 7JT

Germany

23 Belgrave Square, London, SW1X 8PZ

Greece

1a Holland Park, London, W11 3TP

Hong Kong

Hong Kong Government Office, 6 Grafton Street, London, W1X 3LB

Hungary

35 Eaton Place, London, SW1X 8BY

Iceland

1 Eaton Terrace, London, SW1W 8EY

India

India House, Aldwych, London, WC2B 4NA

Republic of Ireland

17 Grosvenor Place, London, SW1X 7HR

Israel

2 Palace Green, London, W8 4QB

Italy

14 Three Kings Yard, London, W1Y 2EH

Japan

43-46 Grosvenor Street, London, W1X OBA

Kuwait

45-46 Queens Gate, London, SW7 5HB

Libya

119 Harley Street, London, W1N 1DH

Luxembourg

27 Wilton Crescent, London, SW1X 8SD

Netherlands

38 Hyde Park Gate, London, SW7 5DP

New Zealand

New Zealand House, Haymarket, London, SW1Y 4TQ

Norway

25 Belgrave Square, London, SW1X 8QD

Portugal

11 Belgrave Square, London, SW1X 8PP

South Africa

South Africa House, Trafalagar Square, London,  WC2N 5DP

Russia

13 Kensington Place Gardens, London, W8 4QX

Spain

24 Belgrave Square, London, SW1X 8QA

Sudan

3 Cleveland Row St James, London, SW1A 1DD

Sweden

11 Montagu Place, London, W1H 2AL

Switzerland

16-18 Montague Place, London, W1H 2BQ

Syria

8 Belgrave Square, London, SW1X 8PH

United Arab Emirates

20 Princes Gate, London, SW7 1PT

United States

24 Grosvenor Square, London, W1A 1AE

Uruguay

48 Lennox Gardens, London, SW1X ODL

Venezuela

1 Cromwell Road, London, SW7 2HW

Yugoslavia

5-7 Lexham Gardens, London, W8 5JU