Reducing your import and export costs can play a big part in being a successful business. So how do you reduce these kind of expenses?
Importing and exporting can help to make your business more competitive, enabling you to reduce the costs of supplying goods to your customers and allowing you to gain access to new markets overseas - and 2017 has so far been a very good year for businesses that trade internationally.
However, if your business relies on importing or exporting to acquire stock or serve customers, it is important to ensure that you do so as efficiently as possible, to keep costs down and maximize profits.
In this article, we will provide a simple guide on how to import and export cost effectively, in order to keep your business competitive and avoid losing money from your bottom line.
Understand customs and import costs
In order to mitigate the costs involved in import and export, you must consider not only the cost of sending or receiving the shipment itself, but also the fees and taxes that you may be subjected to when trading internationally.
Customs charges and import duties apply to goods coming into the EU from non-member countries, and warehousing and inspection fees may also apply to such goods, as well as the customs charge itself. In some cases, warehousing and inspection fees may be avoidable if your goods are properly inspected, certified and verified at their point of departure, and so this is something that you may wish to investigate further.
Using an internationally recognized commodity code system such as the WCO (World Customs Organization) Harmonized System of tariff numbers for your shipments can help to expedite customs clearance, and reduce the possibility of additional fees or fines for improperly identified or labelled goods.
Consider using EU suppliers to save on import duties
If you import goods to the UK from overseas, the country of origin can have a significant impact on the total cost of making your shipment.
Goods that originate in an EU member state and that have a verifiable commodity code to prove it are classed as “EU acquisitions.” As such, the goods are cleared for free circulation within the EU and do not have to be declared to HMRC. Additionally, with the exception of regulated goods such as firearms, you do not need an import license to move goods from another EU country to the UK, again providing a potential saving.
If you are comparing a range of different sellers or suppliers, remember to factor in the additional cost of import duty for goods originating outside of the EU, and ensure that a supplier further afield who is offering a more competitive rate will still prove to be the most cost effective option when taking the additional cost of import duties into account.
Find out about import and export licenses
Certain goods fall under the remit of subsidy schemes that aim to boost trade by offering incentives to importers and exporters holding the relevant import or export license, in the form of reduced taxes and duties. You can find out more about UK VAT and duty rates for different types of products and if any duty relief is available on your goods by using the Government’s Trade Tariff look-up tool.
Additionally, importing or exporting certain types of restricted goods, or moving goods into or out of the EU may require a specific license. Ensuring that you have the right license in place can help you to avoid fines and secondary costs being levied against your goods, as well as ensuring timely delivery without unnecessary delays.
Compare shipping services
Choosing the right shipping service to entrust with your goods can be a challenge, and looking at the complete picture instead of automatically selecting the cheapest service will save you money in the long run.
Using comparison points such as the shipping timescale, how the shipment is tracked, and what happens in the case of delays are all as important as considering the basic shipping cost. Most businesses today look for seven-day delivery and the ability to track a shipment throughout the journey in order to plot its progress, so check that the couriers you are comparing will meet these requirements.
Being able to use tracking services in this way is invaluable, and can help you to streamline the shipment process, allowing you to accurately plan accordingly for delivery arrangements, saving wasted time and manpower and therefore keeping overheads down.
If a service is very cheap but will take weeks to deliver your goods, this is likely to cost you much more in the long term than using a slightly more expensive service that sets and meets deadlines.
Additionally, choosing a service that offers the ability to request delivery to an alternative address can help to ensure the timely arrival of goods at the most appropriate location, without losing time and money arranging onwards transit.
Never sacrifice reliability for short-term savings
Missing or late shipments can lead to huge financial losses for businesses, both directly and in terms of consequential loss and the damage that failing to deliver can cause to your trading relationships.
Choose an established and reputable shipping service that has the infrastructure in place to handle large or regular shipments, and a proven track record of success in delivering on time, and within the remit of their contract.
A good courier will also provide a clear and plausible framework of how they will handle things if something goes wrong, and this is vital to ensure that you do not find yourself facing unforeseen additional costs due to consequential losses, or failure on the part of your shipping company to fulfil their contracts.
Reduce currency exchange costs
Finally, if you are dealing with trading partners in another country or using a shipping service based overseas and, therefore, using a different currency, the exchange rate is another factor that can have a significant impact on import and export costs.
Using your bank’s own exchange framework is rarely the most competitive way to exchange currency for international trade - such transactions usually provide a very poor exchange rate and can also include an administration or processing fee on top of this, ranging from £15-£30 per transaction or even more.
Using a shipping company that conducts business in your own currency can lead to significant savings when compared to having to add in the cost of currency exchange services, and makes like-for-like comparisons of different services much easier.
If you are trading with a partner in another currency, finding a currency exchange service that offers favorable rates and low transaction fees can lead to immediate and often significant savings on the overall cost of import and export.
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