International trade has been mushrooming in recent years. Much of the industry’s success owes to digitization, technology, favorable government policies, and better transport networks.
These factors have reduced the world to a global village. Despite the boom in the import/export industry, the trade is not always a smooth ride for the stakeholders.
Knowing the potential trouble spots that cause turbulence and how to avoid them puts you on the path to a seamless international trade experience.
Here are some of the common pitfalls every importer and exporter needs to avoid for successful operations:
Not paying attention to the laws in foreign countries
A common yet unforgiving mistake exporters make is not paying attention to the laws and quality standards in different countries. Countries have various restrictions and regulations regarding imports. Understand the export and import laws in various products before dealing with them.
Other countries have curtailments concerning product quality, marking, language and packaging. Be aware of your product specifications to know the allowable specifications in the foreign country you want to expand your horizons.
Inadequate supplier verification
Do not let the excitement of expanding to the international stage make you forget to do your due diligence. You have to check the reliability of the importer before signing any contracts or agreeing to send any money.
You risk incurring more losses when you fail to confirm the legitimacy of your suppliers. Do not be baited by made-up company profiles and illegitimate product portfolios.
Seek the help of government officials to authenticate the buyer and seller’s legitimacy before doing business internationally.
Ignoring proper insurance
Staying optimistic and hoping for the best-case scenario is a commendable spirit. That said, the reality is that many unforeseen circumstances could happen in international trade. A common mistake that importers and exporters make is overlooking proper insurance.
Most people avoid insurance because of the high premiums in the hope of saving costs. That can be a dangerous oversight since vices happen. Goods get damaged; they get stolen, or a ship may sink during transit. You risk considerable losses if something like that happens.
Insurance should be a must-have for importers and exporters. Get insurance for your goods before they leave for their respective ports of destination.
Looking at just the price
Deals are great. However, some products are too cheap to be true. And in most cases, it is because they aren’t true. Be wary of the cheap suppliers. Most of the cheap suppliers deal in substandard products.
And the most affordable shipper in the market may not have intensive insurance packages or proper shipping plans. They may also have issues with the customs officials in the destination country.
Be safe and opt for known names in the market. Go for a product that is neither too cheap nor expensive to guarantee product delivery of acceptable quality.
Inadequate education on import and tax issues
Be conversant with the import and tax issues relating to international trade. You will save significant sums of money if you understand all the rules and regulations surrounding refunds.
Understand the duty refunds that apply to your products with the help of duty drawback experts.
That is especially necessary if you operate with goods you import but later export as finished products. The custom duties refunds could be in part or the entire amount you paid against the import duty.
Not paying attention to exchange rates
Currency fluctuations are not a rare thing in international trade. These fluctuations can impact your profit margins significantly.
The best way to boost your profit margin is to work with an expert that understands how currency fluctuations work. That will reduce your risk exposure.
Your banker should advise you on the best way forward on how to proceed in the face of changing currency values.
Having too many delays
Delays can cost you money and significant opportunities. Taking too much time before responding to prospects could make you lose substantial opportunities.
You could risk missing out on the chance to build lasting partnerships that would have guaranteed you long-term earnings and a boost to your profit margins.
Also, delays in collecting goods from the customs make you incur demurrage costs. Even worse, the goods could be forfeited.
When the tax people come knocking on your door, you will appreciate having detailed records of all your transactions. Those records could also save you in case of money laundering investigations.
International trade is a booming sector, and for a good reason. The profitability of the industry is hard to ignore. That said, you have a better chance of reaping from the trade when you know what mistakes to avoid.