Principally, it refers to the sale of commercial goods to another country. In other words, exporting entails the act of trading in the international market. The export business relies on road, sea or air as modes of transportation. On the other hand, the choice of transit depends on various factors.
If, for instance, I deal with perishable goods like flowers to a different country; the most suitable means would be an air cargo logistics company.
But how I know you could ask. What's the distinction between logistics and shipping? Well, both are part and parcel of the exporting process. Notably, shipping is just part of logistics. It's the actual movement of goods. The Logistics bit in a prospect deals with warehousing, inventory handling, packaging, just to name a few procedures.
How will I sail through this in a competent and systematic manner? It's quite sensible to work with reputable Order Fulfillment companies. And here why is this solves all technical issues. Take note, there's some level of risk involved. More reason to procure shipment tracking services to mitigate any loss of goods while on transit.
How profitable is the venture?
Numbers don't lie. Well-founded statistics from the World Integrated Trade Solutions indicate that the world has a total of over 17 trillion in exports. Let's face the facts. China takes the lead with about $2.2 trillion worth of exports. In contrast, US exports around $1.68 trillion. Germany follows it closely with a figure of $1.4 trillion in exports. It's cardinal to give credit to other major exporters globally. We have countries such as Japan, Mexico, South Korea, and Australia making huge exports.
Historically, the export business has been prevalent and increased gradually. This is due to the growing demand of consumers internationally. Ideally, it's a win-win situation for both the exporters and countries. The exporter gets to make the most out of the demanding market. Meanwhile, the country accumulates both revenue and taxes.
Consequently, there's a global GDP contribution of 36% which comes from the very same exports. This has been a success from efforts by countries which have lessened the trade barriers and tariffs. It enhances the free movement of goods. Thanks to all applicable free trade agreements.
How do I start off?
First and foremost, I need to identify legitimate buyers. From this end, I must look out for a flexible payment solution to deal with transactions from the buyers. It's highly advisable to work with a well-established shipping company. They help me do all the documentation work. Moreover, they offer freight forwarding services and in some cases, financing solutions.
Once an order is made, the next step is to send my goods to their respective warehouses. The order fulfillment companies issue me with a tracking number which use to trace my shipment from the comfort of their official website. The goods are promptly shipped to the buyers.
Identifying an export market?
To begin with, the approach is quite different from one exporter to another. However, I need to know if the product I want to deal with is commercially viable. Meanwhile, I should do market research before narrowing down to my business plan.
A realistic export opportunity is one which results in economic growth and sound profitability for the exporter. Besides, It requires me to have a comprehensive description of how my products compare with those of my competitors. As a further matter, I must do all background checks to be conscious of how they handle their branding, marketing strategies as well as logistics.
A prerequisite condition to take into account is the market size. But how do I make a market assessment? Look at the current trends of your particular commodity. This includes its performance and its demand to determine a rough estimate of potential buyers. Interesting enough, it's quite easy to obtain definitive and genuine export statistical data from the data analysis companies online.
With the use of such information, I get to know the demographics. I'll understand where in particular, my products are doing well. Meanwhile, I need to know which countries to be precise, have overly restrictive trade barriers. If I'm hit with high tariffs, then it's obvious that the number of consumers lowers. Unfortunately, ill have to set the prices a bit higher.
There's an outstanding potential online which is an ultimate channel to help me find serious buyers. Manufactures and retailers can capitalize on e-commerce retail platforms such as Amazon, Alibaba, and eBay to source for export opportunities.
One more option to count on is the market expos or trade shows. You get a chance to exhibit your products and interact with other exporters too. On top of that, the growth of B2B and B2C online marketplaces has tremendously proved to be promising for most exporters. Online shopping is taking center stage. A round of applause to the profound virtual online stores.
The most dominant methods are direct and indirect exports. In indirect selling, I get to use third-party services such as Export Managing or the Export trading companies. They help me with handling payments, sourcing buyers and finding the most appropriate shipping methods. Of course, this comes at a fee.
Choosing a channel depends on paramount factors such as;
- The ease of doing business overseas
- Size of my company
- Risk management
- Product quality and quantity
- Historical export data
- Market opportunities
How do I reach foreign buyers
My export plans should be painless only if I use tried and tested strategies. One easy way to scale my export capacity is by fulfilling orders from local buyers. They then export these products to other countries and make a profit out of it. This easily reduces my risk by a significant margin. Alternatively, I have a chance to work with buyers directly. However, this tends to be quite challenging if we put all the tedious processes into consideration.
While making a decision on the best export channel solution, the following two things come into play.
- Which order fulfillment service will help me brand my products better by packaging them in a businesslike manner? Remember, need to tap on consistent buyers.
- I need to find the most practicable Export Management Company(agents). One which offers global warehouse facilities.
It's worth noting that there are export sales representatives who deliver samples to potential buyers at a negotiable commission. It's important to first look at their records before doing any business to analyze their performance.
So how do I prepare my goods for export?
More importantly, I must handle issues such as packaging, branding, and labeling of all items with precision. It's a useful step to consider before entering the foreign market. Besides, I need to comply with all international policies. That aside, the warranties need to be included in all products.
Ordinarily, the buyer expects an exporter to guarantee the conditions of the products. Consequently, I must be cautious with what the warranty covers.
Exportation Legal Documents
The exportation laws vary from one jurisdiction to another. It's prudent to acquaint myself with all the legal procedures so as not to land into trouble with the authorities. As standard practice in the exportation industry, compliance is always a move which gravitates towards a flawless export business.
To avoid all stumbling blocks, be keen to understand a country's customs and have a deeper coherence on all the export duties and taxes. Usually, the relevant personnel will temporarily hold my commercial goods in the customs area up until when all the processing is carried out.
Fortunately, there are quite a number of freight forwarders who help me as an exporter meet the needs of my customers. They help me identify the appropriate documents which authenticate all transactions. This depends on the country I'm exporting from and where the goods are going to.
Here are the most common documents.
Certificate of Origin
As an exporter selling goods internationally, I'll use this document to ascertain their country of origin. This document ought to be approved by my local chamber of commerce.
Bill of Lading
The exporter is issued this document by the carrier (shipping company) to acknowledge that the goods have been received as cargo and are being transferred to the consignee (the buyer). This acts as conclusive evidence that a contract of carriage exists and records the following particulars;
- the exporter's name
- name of the shipping company
- freight rate and weight
- the flag of nationality
- description of the goods
It's quite significant to mention that there are different types of bill of lading. There's an Air waybill which is non-negotiable and used for shipments sent by air. A shipper's B/L is negotiable and can be sold or bought while the goods are in transit. The ocean bill of lading is used for shipments sent by sea. A straight B/L is non-negotiable and sent bearing the name of the buyer only.
This is a billing document from the exporter to the buyer. It captures the exact value of the goods. This amount is used to calculate customs duty. The common details it should have includes the invoice quantity, currency, necessary certificates, country of origin( exporter/manufacturer), and a certified exporter's signature.
This is provided by a third party company. It confirms that an exporter is selling goods which match the description and are of merchantable quality.
It's more like a policy which acts as proof that the buyer's goods are insured against damage or loss. This excludes the exporter from liability in case of any uncertainties.
The shipping company usually has an accurate pricing calculator. Literally, there are important factors which determine the pricing. A cost-focused approach is a common strategy used by most exporters. It estimates the cost of the following elements;
- Custom duties
- Freight and insurance
- Commissions for the foreign agents
- Export documentation processing fees
- Order fulfillment service fees
To put everything into perspective, I must do market research to know how much I should charge the end buyer based on all the export expenses. Also, I must have a snippet of how much my competitors charge.
I can choose to have the payment done in advance or give credit to trusted foreign buyers. This can be through credit financing facilities from commercial banks. The money can be sent to the exporter via wire transfer, cheques or credit card transactions.
Letters of credit are also widely used in the exportation business. The bank guarantees payments by verifying all shipping documents.
What are the risks involved?
There are financial risks which revolve around the entire business. Issues such as late payments or goods getting damaged can be so frustrating. You are prone to fraudulent activities such as theft and scams in the foreign export markets. Also, it might cost me more to improve the standards of my products so as to meet the requirements set by other countries.
It seems like the international exportation industry is fast growing. This is due to the tremendously escalating number of global consumers from all ends. This guide should serve as a starter pack for all newbies in the exportation field. For companies which intend to reach the foreign markets, there are huge opportunities to exploit.