Before you start exporting your goods globally, it is very likely that this will start with a quote request from a potential customer overseas. However, when preparing a quote for export, there are several aspects that exporters need to consider ensuring the extra cost of trading internationally is included and profit margins are protected.
One thing that will most affect what needs to be included in that quote is your choice of Incoterms. It is very common for businesses to quote orders with an EXW (ex-works) price. With Ex-Works, the exporter’s only responsibility is to make the goods available for collection and holds no responsibilities regarding the transport, customs clearance and any other documentation to be prepared. The EXW price would the price paid for the products only.
However, in most cases, we will advise exporters against using EXW, as it can prevent you from having sufficient evidence of export should you be audited by HMRC. Many traders use other incoterms such as CIF, FOB or other. Greater Manchester Chamber of Commerce has developed an infographic to clearly show each responsibility and where they transfer from buyer to seller, which you can download here.
So, what other considerations you need to bear in mind depending on the incoterm you are negotiating your export order:
Transport – Apart from EXW, all other Incoterms include a part of responsibility from the exporter into paying and arranging the transport to the port or the destination. Since the COVID crisis, we have received much feedback from our members relating to an increase in those costs, so these should be considered when developing your export quote.
Insurance – Two of the 11 incoterms require insurance to be provided. However, this might be something that you want to arrange whatever the Incoterms you are using to ensure you and the importer are covered should anything happen during transit. Whilst you can purchase an annual subscription covering you for all your shipments, this is a cost that is worth remembering when building your export cost.
Customs Clearance and Export Documentation – In most cases, apart from EXW, the exporter is at least responsible for arranging and paying for the export customs clearance and to produce any additional paperwork such as Certificate of Origin, certificates of conformity or health certificates, licences, or other forms required for the clearance of those goods. For example, for some exports to the Middle East, your customer might require documents to be certified and legalised by local Chambers of embassies and these can add up and cost a few hundred pounds. Please note the price vary for each country so if you require a specific quote, please check with our international trade team.
Local Taxes and Duties – In some cases, exporters might accept to use DDP (Delivered Duty Paid) which means the exporter becomes responsible for paying and arranging the customs clearance at the country of destination along with paying any local taxes and duties. These can cause other problems such as claiming the VAT back if not registered, etc. but also incurs additional cost for an exporter.
Other considerations into your export pricing should include:
Foreign Exchange: British companies are competing with firms from all over the world. Whilst quoting your order in GBP may be the easiest for you as the exporter, quoting on the local currency or USD or Euros may give you an edge on wining a new order. Managing your FX risk effectively to protect your cash flow is key. There are a range of tools and ways to manage foreign exchange risks and you can speak to the international team to discuss support available.
Adapting your product: As you win a new order, it is important if your buyer requires you to make any adaptations to your product, packaging or labelling to meet local regulations or demand.
Due diligence: Winning a new order can be exciting, however, we always advice to conduct due diligence on a new customer to ensure you are working with a reputable company and minimising the risk of not getting paid. The above is a non-exhaustive list and our team is at hand to provide tailor advice.
Take a look at the wide range of support you can access, whether you are a member or not:
Customs Agent Services and Advice – We can help you with your export and import customs clearance in the UK
Export Documentation - We are the largest provider of certification services in the North of England
Transport and Logistics - We have many members who can help you with moving your goods effectively across the world.
Credit Checks – helping you with your due diligence
Would you like to book a 30-minute complimentary session with our team?
Give us a call at 0161 393 4314 or email us at exportbritain@gmchamber.co.uk