Moving into international exports can be a tough task for any small to medium size business. Most governments have policies in place that place strict restrictions on overseas goods that can make trade prohibitively expensive, or even impossible. In 2015, an approximate $1.3 trillion in potential foreign exports to the US was disqualified due to regulatory requirements.
Understanding and navigating these barriers is vital to ensure the success of your export enterprise. Here’s a brief rundown of some obstacles you can expect.
In basic terms, tariffs are a tax on imported goods; these are levied with the intention of limiting the amount of foreign products in the market, thus they act as a form of protection for domestic suppliers.
Similar to tariffs, quotas limit the amount of goods that can be exported into a country in order to reduce the completion faced by local businesses. In effect, these should increase employment and give struggling local industries a chance to grow.
By subsidizing, local production governments can provide domestic manufacturers with a competitive advantage that allows them to sell their goods at lower rates.
Voluntary Export Restraints (VER)
These are agreements between exporting and importing countries. Usually, these place a limit on the number of goods that can be shipped within a period of time. While these can provide an obstacle to trade, they do offer exporting businesses with an opportunity to increase prices and gain revenue, especially if they’re shipping a unique product.
These are legal barriers erected to control the quality and safety of imported goods. They can include certification or testing requirements specific to foreign exporters, complicated customs procedures, and specific standards regulating pollution, manufacturing materials and build quality.
Overcoming Trade Barriers
In an increasingly global world, tariffs are slowly becoming a thing of the past; as barriers to trade and investment lessen, transport costs reduce and new technologies enable a constant and easy flow of communication. More and more businesses are looking worldwide to source raw materials, components, services and finished goods. However, it is still essential for your business to conduct diligent research to identify financial and non-financial obstacles that could severely affect the feasibility of your exports. These risks must be factored in at the planning stage so that they can be mitigated. Make sure that expected returns outweigh the costs of doing business with your chosen foreign market.
Strategies for Tariffs and Duties
One method many firms use to gain a foothold in attractive markets is establishing a local presence. You may establish an affiliate in the local country that can effectively act as a branch of your enterprise without facing any of the export restrictions. Alternatively, you may form a partnership with an already established business in industries where governments heavily control foreign interference.
Of course various countries have different rules regarding foreign business presences, which may make it unfeasible to overcome tariffs. In these cases, compliance is the best way to go. Adjust prices before you enter a market and ensure you have all necessary licenses and certification.
Work With an EOR
When faced with complex regulations and other non-tariff barriers, working with an EOR can offer expertise with local customs and procedures, drastically speeding up the clearance process. They will take care of any import details, obtain all necessary permits and handle the payment of any relevant duties. They can also offer some logistical support helping to arrange warehousing and distribution facilities for your benefit.