It’s good if any medium- or small-sized business has the idea of expanding globally. Exporting goods can help strengthen bonds on an international level. It is also a way of portraying a positive image of your business and your country. However, exporting or importing goods and services is a hard nut to crack.
Exporting and importing come with certain challenges, and if you have a growing business, you may encounter these obstacles and handle them easily. Still, if small or medium-sized firms come across such challenges, it gets tough to cater to them.
From connecting to foreign partnerships and finding better clients to managing payment issues, one has to go through these problems and face them efficiently for smooth delivery. Let’s get to know what challenges we are talking about in detail.
Challenges in determining the place of supply for exports
The challenges you might face in expanding your business fall into three categories. These are:
Laws and regulations
Regardless of how big or small the business is, the rules and regulations are inevitable to all. Global value chains are where 70% of international trade falls. It means that the various categories of products like services, materials, components, and other parts have to cross various borders multiple times to even arrive at a finished product.
Trade agreements are differentiated as follows:
- Multilateral: In this category, the organization is responsible for making and setting rules when the goods or services are supposed to be exported.
- Bilateral: In this category, where the export is being done, that particular country makes an agreement organized by geographical area to govern trade.
- Unilateral: In this category, the trade preferences are generally one-sided. This one-sided trading can often lead to trade barriers. Trade barriers can cause hurdles in export licenses, import licenses, subsidies, tariffs, embargos, and local requirements.
The supply chain is the vast management of sourcing, scheduling, and distributing the goods to the desired location. This is the main job of supply chain management.
It efficiently delivers the goods from supplier to client and client to client. Also, it caters to different logistic processes to get the goods and services delivered to the destination location.
The goods delivered can be smooth and streamlined if supply chain management works effectively.
While you must have read the pros of supply chain management, mismanagement of the supply chain can give your business an edge. It can have a massive impact on the stability of your business. From receiving the goods to sending them to the logistics department to getting them shipped, problems can arise at any stage, and the whole process can get stuck.
Some of the common issues that an exporter or importer faces can be:
- For international payments, one of the crucial steps is identifying the place of supply. Once the place of supply is identified, it’s easy to understand the duties and taxes.
- Impact on VAT: Once the place of supply is known, it’s easy to understand whether VAT is applicable. If there are any mistakes, it can lead to charges, taxes, and penalties.
- The currency keeps fluctuating with time. Apart from this, mitigating currency risks is another hindrance to international payments.
Ensuring accuracy of place of supply
It’s essential to ensure the place of supply in trading. If there is any complexity, you may seek any professional’s help so that he may guide you on what step to take, as this place of supply holds great importance.
A place of supply is any place where goods are being exported.
It’s essential to know the place of supply because if that doesn’t come with accuracy or proper information, the exported goods may face different problems, which can negatively impact the business’s image.
The place of supply plays a pivotal role in the import and export processes. It also defines if the transaction is intrastate, interstate, or import-export. The taxes then apply as per the type of transaction, either IGST, CGST, or SGST.
Best practices for managing the place of supply for exports
The following are the best ways to manage the place of supply for exports. These are:
Understand how goods can be exported.
Learn and educate yourself as much as you can. The more you study about the practices and ways to export, the more you will end up smoothing the process in your business. Do proper research on exporting goods and services efficiently and making good money.
Find a good market and a buyer.
Once you know how to educate yourself in exports, hunt for better clients, and never let your research stop, hunt as much as possible to get potential clients.
Check if your company can benefit from an EU trade agreement.
If your company can benefit from an EU trade agreement, it can be the best way to improve the exporting process. It often enters into bilateral trade agreements with the country you want to export to. It covers trade services in the following sectors:
- Financial services
- Digital trade
Access the requirements in your export market.
Know the market. It’s very important to understand the demand of the market and its requirements as well. Regarding the requirements for cross-border exports, you must know relevant information related to the requirements of authorization and licensing, mutual recognition of diplomas and qualifications, and specific restrictions on certain services. Once you access the requirements in your export market, managing the place of supply in exports is easy.
Mitigating risks of non-compliance with the place of supply rules
It’s important to mitigate the risks of non-compliance with the place of supply rules because noncompliance can lead to various problems, and you can find your business and company at stake if things don’t get sorted out at the start.
The following are the strategies you should implement to mitigate the risks of noncompliance effectively. These are:
Start your compliance at the top.
It’s important to follow rules that are set outside the company and should be followed within it. When the basics are instilled in the working environment, embracing the core compliance principles within company management becomes easy.
Follow good documentation practice.
For the sake of compliance, the necessary documents should be kept ready all the time for inspection and should be safe as well. Only two to three people should know where the documents are because, at this time of urgency, anyone from the crew must come and bring the documents along.
These documents are often requested during an internal audit or for inspection. The best way to manage important documents is by following proper documentation proactively. This will help you expedite the process, and there are no chances of errors as well.
Invest in automation
The more manual work there is, the more time it will consume. Time is money, so automation is everything in today’s optimization world. Compliance also requires consistency; humans cannot be as consistent as automated documents and records.
Focus on training
It’s essential to know that training helps you encounter weak areas. Your leadership should be vocal enough to train your fellow companions for good. You are wasting time if your employees are not trained enough to focus on the drawbacks and cons. Their training is very important.
Achieving compliance and maximizing export benefits
Export control compliance is of utmost importance in this business. It’s because it’s quite important to achieve compliance so that you can maximize export benefits.
Compliance means you have all the details of the process through which your product is being exported. From scratch to end, you know the steps your product is going through to reach its destination location. This helps in maximizing export benefits. Let’s learn how it’s possible.
- You must know the correct mode of transport for your goods.
- It’s important to go through the screening process with your buyer. This helps you save yourself from any fraud or loss.
- It’s important to know the exact and final location of the supply.
- Implementing an internal compliance program for export control helps maximize the benefits.
- Hiring staff for the management and control of the export process.
- For adequate response, teach the proper control policy.
- Regular audits ensure the company does it just how it should be done.
Compliance has to be the leading factor when it comes to exporting goods. You must go through the whole process to know where and how your product is transported and whether there is any uncertainty.
An exporter should be well aware of the circumstances that come along with the process. It takes time and effort for any exporter to achieve all the necessary factors when exporting goods and services to international clients. With proper and correct knowledge and doing work in a systematic and automated way, things are achievable, and there are fewer chances of errors as well.
Q1. What are some of the key issues to take into consideration when exporting?
While this business is tricky and has a lot of hurdles as well, the company that is exporting should consider the following issues:
- Laws and regulations
- Client perspective
Q2. What are the factors affecting the export economy?
Many factors can affect the economy, such as export competition, where the country must be capable of producing and selling goods internationally at a competitively lower price and high quality, among others.
The exchange rate is where the currency’s value is relative to the other country; these rates can influence the price and the demand, whereas depreciated domestic currency can mean cheaper exports and expensive imports, and an appreciated domestic currency means vice versa. Other such factors include political issues, customer behavior, inflation, and trade barriers.
Q3. What are the trade barriers for exporting?
Multiple factors become trade barriers for exporting, including privacy requirements, administrative processes, quotas, pricing of the products, licensing, and labeling of the products.
Trade barriers can vastly influence the overall market for exports. There are two types of trade barriers: tariff barriers and non-tariff barriers.
Q4. How do you improve exporting?
You can improve exporting by making good terms with foreign clients, doing proper research on the market, properly promoting your product in the relevant market, choosing the right distribution method, and following a proper strategy for exporting.
Q5. What is export competitiveness?
Any country can export more goods and services than imports. At this stage, any country encounters a trade surplus. It’s a great way to exchange rates with foreign countries and bring more business to your homeland.
Q6. What are the four main steps in establishing a successful export strategy?
- You should know where to sell. It’s important to know your market.
- You should work according to a proper plan. With a plan, you can export successfully.
- You should be clear and concise with the route you will follow for the export process.
- You should know how to market your products. Marketing is about making your product viable for your audience.
Q7. Why is exporting risky?
Exporting is risky because you may need to know when and where you can get stuck. Exporters undergo fewer problems, such as logistics, payment, and currency exchange rates. These are some of the problems, but there are other problems as well that exporters undergo, and hence, this profession is a bit risky.
Q8. What is the place of supply?
The place of supply holds utmost importance in importing and exporting goods because that is the place where the goods are supposed to be exported. The exporter should properly verify and check the place of supply so that, if any uncertainty occurs, the exporter can trace it.
Q9. What is a trade surplus?
It refers to a scenario when the exports are greater than the imports of goods and services. When it comes to exports, India is one of the leading countries that exports goods related to machinery, automobiles, food, and pharmaceuticals to other countries.
Q10. Why are pre-export documents necessary?
Pre-export documents are necessary so that everything can be traced ahead of time and there can be a record of every step to get the goods delivered to the destination location.