WHAT IS INTERNATIONAL TRADE
- Viktoryia Nestserava
- Apr 27, 2022
- 4 min read
Updated: Jun 13, 2023
Regulatory components of export & import
If you are moving goods from one country to another to either sell as a final product or to further process, you will befaced with a variety of legal barriers. While there are international standards for movement of goods and a lot of measuresare universally applied by different countries, many other measures are designed by individual countries and must becomplied with to guarantee a smooth business activity.
Therefore, the area of International Trade is quite extensive and there are many different details a business shouldconsider when seeking to export and/or import goods around the world. It is possible, however, to simplify matters, provided your business pays attention to the below.
1. Customs Classification
All goods need to be placed into a category. Each product is, therefore, attributed a reference number, also known as a HS (Harmonised System) code or commodity code that makes it easy for anyone in the world to have at least an approximateidea of what goods are being transported. In this day and age, not all goods are subject to physical checks and soclassification tends to facilitate the process of digital Customs controls.
2. Customs Valuation
All goods need to be attributed a specific market value. Several valuation methods can be used, depending on thecompany’s circumstances. Generally, a transaction/sales value is the most acceptable base value that is thencomplemented by other charges such as transport, insurance, and other, depending on the defined terms of business.
3. Tariffs
Based on classification and the value of the goods, specific import or export Customs duty is applied. Generally, the moresensitive the industrial sector in a given country, the higher the Customs duties. If a given country, for instance, is a carmanufacturer, it would be logical to assume that car parts will attract a lower duty rate in comparison to a whole car. Import and export duties may also refer to excise tax applicable on alcohol, energy products and tobacco. There are alsoparticularly sensitive goods that attract anti-dumping duty. This is very common on some imports from China, forexample, that are believed to be valued under the market value and may, therefore, jeopardise national production in somesectors.
4. Origin
Origin of goods is a very important aspect of trade because different countries tend to establish closer relations with eachother by means of Trade Agreements whereby some goods can be imported duty-free, provided all origin documentationis made available and other standards are upheld.
5. Safeguard Measures
Safeguard measures are structural barriers to trade. These can range from requirement of sanitary and phytosanitarycertificates issued by trusted and internationally recognised bodies, export control licences, sanctions lists and other. These are generally motivated by countries’ political relations with each other, as well as defined industry standards andconsumer protection.
6. Import and Export Declarations
When passing through an international border, the goods must be declared to Customs by means of an import or exportdeclaration. These declarations aim to supply all of the correct details on the nature of the goods, as well as the Customstreatment of those goods that may or may not render a special treatment to the goods transported. This can either relate toCustoms duties reliefs or explanation of special circumstances under which those goods are transported.
7. Procurement
Oftentimes, a business is dependent on the sourcing of materials and specialised services. If different countries areinvolved, it may be most advantageous to procure materials, semi-finished and/or finished goods (and associated services) from a Customs perspective. This will imply planning from a legislative perspective where contact with differentcountries will be required and ensure a sustainable build-up of your supply chain. Nonetheless, this important step willguarantee costs savings, as well as the availability of necessary expertise.
8. Business Governance
If a business is operating internationally, Customs processes need to be properly integrated and all of the relevant stakeholders (staff, customers, business partners, etc.) must be aware of, to avoid any confusion, guarantee complianceand ensure costs savings. Record keeping and a good IT strategy tend to also be very important in this area.
9. Manufacturing & Storage
A supply chain can be a simple one or very complex where different countries are involved in the manufacturing andstorage of the goods. To ensure that this process is organised in the best possible manner, it may be advantageous to applyCustoms Special Procedures that avoid double taxation and supplement origin considerations.
10. Contracts with Third-Party Logistics and Service Providers
Import and export processes are generally outsourced to third-party service and logistics providers that tend to offerCustoms brokerage services as well. Communication with these parties needs to be well established, as mistakes arecommon due to human error, and it isn’t always easy to spot them especially if a business is not in control of its Customsprocesses. As such, it is always advised to have robust contracts in place to mitigate such mistakes and appropriatelyunderstand what responsibility each party holds. In order to ensure contracts are built appropriately, a business may alsorequire a negotiating function where a Customs specialist is able to defend the business’ interests.
Of course, the extent to which these factors should be considered will be dependent on the size of the business, the industry or sector of activity, as well as the extent to which the business is exposed to international markets. In the same manner, there are other topics that have not been mentioned in this article. The important point to make, nonetheless, is that trade in goods across borders will impact the business from all sides and may require convergence of a variety of aspects already described.
Should you need any help with your Customs matters, please do not hesitate in contacting me for advice on your supplychain management, regulatory compliance and costs saving opportunities. I also provide cross-jurisdictional analysis in avariety of languages (English, Portuguese, Spanish, French and Russian) and a mediation function, should you need todefend your business’ interests with the relevant stakeholders.
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