In international trade, the exporter doesn’t get their money and the importer doesn’t get their goods until unless they both comply with the laws and regulations that govern trade in that region. For this reason, playing by the rules is an essential ingredient for success.

As you can imagine, international trade operations are associated with a lot of risks. Various factors such as a complex system of import/export regulations, penalties, and customs issues require strict state supervision.

In order to achieve faster customs clearance, duty savings, reasonable and predictable costs, reduced regulatory oversight and a competitive advantage, you should dedicate resources to develop a diligent trade compliance program.

A compliance program will help you identify potential risks and mitigate issues related to customs laws in countries where you operate. In addition to that, you should do the following tasks regularly:

• Check and update customs and regulatory policies
• Review customs documentation with a particular emphasis on declaration and coding
• Train your staff to comply with regulations and follow the most efficient practices in the customs clearance process
• Build healthy long-term relationships with parties involved in the trade process, such as customs brokers, freight forwarders, government offices and customs authorities.

Essentially, smooth trade operations are only possible when you can identify and solve all compliance issues in a timely manner.

Compliance is one of the most complex aspects of international trade. Every country has a unique set of laws and regulations that apply to international transactions conducted in different industries and sectors of the economy. Whether you are an exporter or an importer, you should work closely with suppliers – they are the first people to consult about the details of compliance for your goods or services in their local market.

Here are a few things impact compliance procedures.

1. Understand the Harmonized System of Tariff Classification (HS Code)

The HS Code is comprised of names and numbers of traded products. It is an internationally standardized document that is used to set customs tariffs. The main purpose of the Code is to ensure that all parties involved in a trade deal use the right definition of goods and/or services that are exchanged.

An accurate classification is a legal responsibility of exporters and importers. Mistakes can have a snowball effect and result in incorrect duty rates, complex import and export controls, lengthy inspection procedures, delays at the border and heavy fines.

I can’t stress this enough – do not underestimate the importance of consulting a customs broker and getting correct codes for your products.

The image below provides a quick glimpse of how the HS code works.

2. Know the details of relevant Trade Agreements and Rules of Origin

A free trade agreement is a special alliance between two or more countries that removes tariffs and other obstacles for goods or services exchanged across common borders. Besides that, parties involved in the agreement impose equal tariffs on trade with non-member countries. State authorities play a crucial role in negotiating trade agreements.

If your home country has a free trade agreement with your target market or sourcing market, you should check regulations specific to this agreement prior to making commitments and arranging deals. For example, based on the agreement, customs authorities may require some specific standards for your imported or exported products.

Failure to meet these standards will result in fiscal penalties or delays in product delivery.

Another important factor that must be considered when conducting international trade is rules of origin. According to the World Trade Organization, rules of origin are the criteria that serve to determine the national source of a product. Knowing the point of origin helps to identify specific trade policy measures related to the exchange of your goods and services, such as safeguard measures, levied import duties, and additional anti-dumping duties.

Understanding different legal and administrative requirements of free trade agreements and rules of origin is crucial for any company involved in international trade. Not only does it save parties from an unintentional break of the rules, it also gives a clearer vision for prospective global market expansion.

3. Follow all regional standards for product use

Importers and exporters must comply with multiple regulations and standards related not only to the exchange of products but also to the use of these products both within their domestic and foreign markets.

First and foremost, a product should never be a part of the officially restricted group of goods and services. Besides that, attention should be paid to the rules imposed on technical features of your product, labeling, etc.

4. Pay extra-special attention to special categories

The nature of international trade forces you to work with many different state authorities, diverse regulations and legal requirements. Although exchange regulations of the majority of products are standardized by the World Trade Organization, some products fall into quite a sensitive area where each country has different import and export requirements.

These special categories double your workload by forcing you to conduct more research and spend more time adjusting your products to individual countries’ trade requirements.

For example, basic international standards for exchange of agri-food products, such as sanitary and phytosanitary measures, are defined by the World Trade Organization. However, each country also applies its own requirements related to food processing, labelling, testing, shipping, and storage.

This way, Turkish authorities require a special health certificate from the companies that want to import pet food products from other countries. In addition to that, they require an exporter’s production facility number to be approved by EU.

There are many different regulations and standards existing in international markets. As an exporter or importer, your responsibility is to keep your eyes open and to be vigilant about trade laws and regulations within the countries you operate. Compliance will ensure smooth and efficient trade practices, and is ultimately essential to the success of your international business.

One of the most important questions that I am frequently asking my clients nowadays is “what exactly is your export strategy?” Although there are many definitions of the term “export strategy”, the answer tends to change depending on who is replying to the question.

This reminds me of an old Indian fable about the three blind men who touch an elephant and describe to each other what they think the elephant is like. The first man is holding the elephant’s leg, thinking the elephant looks like a tree; the second man holding the tail thinks the elephant resembles a rope; and the third man who grabbed a tusk thinks the animal must look like a spear. Although each of the blind men is partly right, they are missing the big picture. The reason they give a different description is because each of them is touching a different part of the elephant. In reality, the elephant has all of those features that they mentioned.

Similar kinds of faulty assumptions are made all the time about exporting plans and strategies. Many enterprises try to be all things to all markets by applying one strategy. However, the idea of “one export strategy for every market” is as misleading as thinking that an elephant looks like a tree, rope or a spear.

Exporting is a long journey that requires understanding of the market’s dynamics and one-by-one assessment of each market.

One of the hardest efforts in this matter is identifying export strategies for each target market. However, the fact remains that without the right export strategy you cannot become a prominent leader in the industry and all the rest of your market entry efforts will be wasted.

What Has to be Done to Build the Best Exporting Strategy?

Building a good exporting strategy requires several key elements, including money, time, talent, energy, focus, and commitment.  A successful exporter will have the determination to discover the relevant factors that are used in specific export strategies for each target market. So, what are some of those relevant factors?

1. The Product or Service

“If you make a really good product that people want and are willing to pay for, money will come” – Forrest Mars.

An exporting strategy starts with the products or services that you offer. Some companies and organizations believe that their domestic products or services can be exported without significant changes or modifications, but the truth of matter is quite. Every market has its own unique preferences and regulations, and having knowledge of each target market’s unique characteristics is key for a company wanting to enter that market.

Doing trade and market research on foreign partners, distributors, buyers and customers can help your company get an idea of what products or services can be sold in different markets.  This way, even before the sale is made, the company has time to modify a particular product or service to satisfy the customers’ needs and preferences in the target market. Trade and market research are extremely important in identifying the right strategy to pursue.

2. The Customer

Profitable international sales come from a lasting relationship with the customers: it is this relationship that always supports the business.

As an exporter, you should be prepared to spend 75% of your planning time on customers and their needs.

Customer intelligence cannot be gathered simply by following the advice in business books – you can only gather it by doing. In other words, you cannot get anywhere by sitting comfortably on a chair. You have to go out and win the customers over.

Your export strategy will depend on who your customer is. There are three main ways you can market to your customers:

1. Your company may sell directly to a customer
2. You may use the assistance of target market representatives, such as agents or distributors, to reach the desired user
3. Or you can combine these two selling techniques.

The technique you use will determine and shape your export strategy, since each technique requires different research, sources and planning. The customers in each segment may have different tastes and preferences, and understanding those preferences is crucial for your export strategy.

3. Competition in the Market

Remember: losing money to stay competitive in the target market is not a good tactic. As an exporter, you should always look for a better partnership, one where the sales are profitable and promising.

High competition levels in today’s business environment means you need to collect and analyze every piece of information to anticipate competitive activity in your target market.

For that reason, competitive intelligence is an essential component of strategy in exporting. Through  competitive intelligence research you’ll get an idea of the similar products that are already competing in your target market.

As you may have guessed, the main purposes of competitive intelligence should be to understand your rivals: their market share, pricing strategies, distribution network, promotional and marketing activities, and customer service. In addition to that, you should look at your competitors’ strengths and weaknesses to help you understand how you could differentiate your business. All in all, you want even your current competitors to think that what you do is unique.

4. Regulatory & Customs Regulation and Landed Cost

Every exporter knows that there are multiple legal and regulatory constraints that can affect your exporting strategies. When entering a new market, you should look into the trade agreements and regulations prior to developing your export strategies. You may have to deal with anti-dumping legislations, price ceiling or transfer pricing, to name a few.

In addition to the legal and regulatory implications of trading with different countries and regions, exporters also need to look at the customs procedures for their export strategies.

For example, some governments may request certain records or certificates related to quality, health and/or manufacturing of the products. It’s best to know the potential extra costs and procedures in advance. This can help you build competitive pricing strategies in your export plan and prevent you from making costly errors.

Although landed cost is a concern for the importer company, as an exporter you should also know about the landed cost that the importer pays to take the possession of the product in the target market. This cost is mainly related to the customs duties and other relevant duties that define the landed cost. If you know these costs in advance, you will have a better understanding of the cost dynamics. Thus, defining a more competitive price for your customers in the target market.