Access to Export https://www.accesstoexport.com Fri, 29 May 2020 08:36:16 +0000 en-GB hourly 1 BREXIT Preparation – Transition Period and Beyond https://www.accesstoexport.com/articles/brexit-transition-period/ https://www.accesstoexport.com/articles/brexit-transition-period/#respond Fri, 31 Jan 2020 10:12:31 +0000 http://www.accesstoexport.com/?p=623 *Coronavirus update (March 17th 2020): The UK government has clarified that the transition period will still end on 31 December 2020, as this is enshrined in UK law.  The UK and European Commission continue to discuss alternative ways that will allow negotiations to continue, in light of guidance and developments regarding coronavirus.* The UK left...

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*Coronavirus update (March 17th 2020): The UK government has clarified that the transition period will still end on 31 December 2020, as this is enshrined in UK law.  The UK and European Commission continue to discuss alternative ways that will allow negotiations to continue, in light of guidance and developments regarding coronavirus.*

The UK left the EU on January 31st 2020 and has now entered the Transition period until December 31st 2020. During the transition period there will be little or no change to current trading arrangements with the EU i.e. the UK will remain part of the customs union and goods will move freely to and from the EU with zero tariffs. From March 1st 2020, the UK will commence negotiations with the EU to agree a new trade deal covering tariffs, customs procedures, data protection and many other areas. Once concluded, the new deal will determine how the UK will trade with the EU after the transition period. Until the deal is concluded, we will not know the details of future trading arrangements with the EU.

So, what does this mean in practice for international trade?

There are a number of important things that all companies that currently trade with the EU should put in place, to ensure they are properly prepared for trade with the EU after the transition period. To help with this planning and preparation, we have put together this brief practical guide covering the essential aspects of future trade for both Exporters and Importers.

Exporters

EORI Number

Exporters will need to have an EORI (Economic Operator Registration & Identification) number so that you can continue to export to the EU. If you are a VAT registered business, you should have been issued with an EORI number. If you are a non-VAT registered business you should apply for an EORI number which you can do here.

You should also check that your Importer has an EU EORI number which will be required to enable them to import the goods.

Tariff Codes

Exporters should make sure they have identified the correct customs tariff codes for the goods, to ensure they are correctly declared for export. The tariff code will also determine the rate of import duty and tax the Importer will need to pay.

Export Declarations

After the Transition period, exports will have to be declared through a formal customs process when departing from the UK. Exporters can submit export declarations themselves, however we would recommend enlisting the services of a good Forwarding Agent (preferably with AEO status) who can deal with the customs process for you, as well as arranging the physical movement of your goods. Although you may use an agent, as the exporter, you will be responsible for ensuring the goods are correctly declared for export, so you will need to provide full and correct details to the agent.

You may be able to use the Common Transit Convention (CTC) to simplify how your goods pass through customs and when your importer pays customs duties. You can find out about CTC here.

At the time of writing, the government is offering the opportunity to apply for grants towards recruitment, training and IT improvements for businesses that complete customs declarations. The deadline for applying for these grants has been extended to January 31st 2021. Read more about customs declaration grants here.

Export Documentation

After the Transition period, Exporters will need to generate Commercial Invoices and possibly other documents such as Packing Lists and Certificates of Origin before attempting to export goods. These documents must contain all the appropriate details to enable the smooth export and import of goods. We recommend you understand how to prepare these documents and what information they need to contain.

During the Transition period, EC Certificates of Origin, EUR1 and ATR Movement certificates will continue to be issued where appropriate.  After the Transition period, the EC Certificate of Origin will be replaced by a UK Certificate of Origin but the issuance of EUR1 and ATR Movement certificates will depend upon the outcome of the trade agreement negotiations.

Export Licences

Current export licensing arrangements will continue to apply until the end of the transition period. After this, arrangements will change, so Exporters will need to be aware of changes to ensure the correct export licences are used. The Department for International Trade (DIT) has issued guidance on exporting and trading items subject to strategic controls during the transition period which can be found here.

INCOTERMS

Exporters should use the correct and appropriate trade terms (Incoterms®) to correctly define both the Exporter’s and Importer’s obligations for each transaction. This will avoid inadvertently being responsible for unforeseen costs and responsibilities. We strongly recommend you become familiar with, and use, Incoterms 2020 which came into effect on January 1st 2020.

Product Specific Requirements

As the Exporter, you will need to check what you need to do, specifically for the type of goods you intend to export. You might need to consider obtaining licences, certificates, marking and labelling requirements etc.

VAT

Exporters need to ensure they hold and retain appropriate proof of export for VAT compliance and also understand the implications of any changes in how VAT is applied. We would recommend seeking specialist advice regarding VAT.

Importers

EORI Number

Importers will need to have an EORI number as mentioned under the export section above.

Import Declarations

After the Transition period, imports will also have to be declared through a formal customs process when entering the UK, in the same way as exports.

The government has announced plans to introduce import controls at UK borders on goods imported from the EU, after the transition period ends on 31 December 2020. Therefore, before this date, traders need to ensure they have an EORI number (see above) and plan for making customs declarations.

Simplified Procedures

We also recommend Importers familiarise themselves with the different import customs processes in order to take advantage of available duty relief schemes. UK businesses who already have authorisation to use special/simplified customs procedures or other facilitations should also take time to find out here what changes may affect any existing arrangements after January 1st 2021.

You may also be able to use the Common Transit Convention (CTC) as mentioned in the export section above.

Tariff Codes

Importers should ensure sure they have identified the correct customs tariff codes for their goods. This is vitally important as the tariff code will determine the amount of import duty and VAT that will need to be paid when goods are imported into the UK.

Import Customs Duty

UK Importers may need to pay different rates of customs duty (tariffs) on imports from the EU after the Transition period, if no trade agreement is reached with the EU.

If there is no trade agreement between the UK and another country after the Transition period, you will have to trade with that country under World Trade Organization (WTO) rules using Most Favoured Nation (MFN) treatment. MFN means that the UK cannot offer better trading terms to one country compared to another, unless it has a trade agreement with that country.

On May 19th 2020, the UK Government introduced the UK Global Tariff (UKGT) which will replace the EU’s Common External Tariff from January 1st 2021 onwards. This new tariff is designed to streamline and in some cases reduce the amount of duty payable on products imported into the UK. These tariffs will be applicable to all imported goods except if an exception applies e.g. tariff suspension, if the goods are from a country covered under the Generalised Scheme of Preferences or if they come form a country which has a trade agreement with the UK.

Duty Deferment Account

To avoid having to make individual payments for duty and VAT on each import, we would recommend Importers arrange a duty deferment account. This way, you can delay paying most customs charges and make one payment monthly. VAT paid on the import of goods can be reclaimed (if you are a VAT registered business) but has cash flow implications due to the timing difference between paying VAT and reclaiming. Where import duty is payable, this for the most part cannot be reclaimed so has a cost implication. So, make sure this is correctly factored into your pricing.

In summary…

This brief article is intended to highlight the key aspects of EU trade that will change once the UK leaves the EU, so that UK traders can plan and prepare accordingly. There will undoubtedly be changes and many updates throughout the Transition period, particularly when the UK commences negotiations with the EU on the new trade deal, so we strongly recommend traders keep up to date. You can register for e-mail updates directly from GOV.UK here. We will also be publishing relevant updates via our web site and social media but if you would like to receive these directly please contact us here.

The UK is also in the process of negotiating its own trade deals with its trading partners, now that such deals will be independent of those the UK was covered by, when it was still a member of the EU.  Trade agreements have already been agreed with many countries, effective as of January 1st 2021.  Others are still under discussion and if a deal is not reached by December 31st 2020, WTO rules will come into effect.

Here at Access to Export, we have been helping more companies to export and companies to export more, for over 20 years. During this time, we have developed a wealth of knowledge and experience, which means we can provide help and support to guide you through the Transition period and beyond. We can also provide on-going support, so please get in touch with us for an initial free exploratory discussion. We are always pleased to talk to international traders both new or established. We often find there are areas of international trade within businesses that we can help improve, so please do contact us either by phone, email or via our web site.

Good luck to all businesses throughout the UK after BREXIT!

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Export Shipments: Which transport method to use? https://www.accesstoexport.com/articles/export-shipments-which-transport-method-to-use/ https://www.accesstoexport.com/articles/export-shipments-which-transport-method-to-use/#respond Thu, 06 Jun 2019 12:09:17 +0000 http://www.accesstoexport.com/?p=567 Along with many other export factors, the transport method you choose for your export shipments is very important.  When exporting goods, the physical shipment is after all, what most people would think of first and foremost. So which transport method should you choose?  Transit times compared to cost will probably be your two main considerations. ...

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Along with many other export factors, the transport method you choose for your export shipments is very important.  When exporting goods, the physical shipment is after all, what most people would think of first and foremost.

So which transport method should you choose?  Transit times compared to cost will probably be your two main considerations.  The type of commodity, quality of the service and the reliability are also notable points to pay attention to though.

In terms of export shipments, the main transport methods are as follows.  Below, we also list some of the main pros and cons of each;

Air freight

Pros:
  • Best for larger consignments that need to arrive quickly
  • Global reach
  • Highest standards of safety of any transport method
  • Runs to accurate timetables meaning least delays on the whole
Cons:
  • The most expensive form of international shipping
  • More risk of capacity backlog problems to due limited cargo space compared to sea freight
  • Susceptible to adverse weather, particularly considering the expected speed of service
  • Highest environmental impact with the largest carbon footprint

Sea freight

Pros:
  • It’s the cheapest method per kg of shipping goods beyond Europe
  • Bills of Lading allow you to retain the title over goods, giving more ownership control to the shipper
  • The longest serving global shipment method and therefore the most familiar to exporters/importers
  • Almost unlimited cargo sizes (within reason) can ship by sea
Cons:
  • It’s the slowest method of transport with transit times potentially up to 8 weeks
  • Longer shipping times mean increased exposure to risk of loss or damage
  • Highest chance of longer delays if port arrivals are delayed or missed altogether
  • Most onerous in terms of documentation (although a freight forwarder or agent can often handle this on your behalf)

Road freight

Pros:
  • A good balance of cost vs. transit time compared to Air and Sea freight
  • Door to door services are often available
  • Particularly cost effective for tall packages
  • Flexibility to adapt by changing routes means delays are more easily avoided
Cons:
  • Distance limited – Road freight from the U.K serves only as far as Eastern Europe
  • U.K road freight exports still need to rely on either sea transport or the Channel crossing
  • Lowest level of overall security e.g. risk of theft
  • Different rules and regulations for each country and toll charges can vary

Courier

Pros:
  • Best suited for smaller packages
  • Quickest door to door transit times
  • Delivery time definite options e.g. guaranteed next working day to many destinations
  • ‘All In One’ service – many of the export and import procedures are completed on your behalf
Cons:
  • Can get very expensive for packages over certain chargeable (either gross or volumetric) weights
  • Generally not suitable for palletised freight
  • Some destination countries avoid couriers handling the import process
  • Letter of Credit compliant transport documents aren’t available

The above is a broad summary of the factors that exporters should contemplate when selecting a method of transport for their export shipments.

Whichever method of transportation you use, there are ways to reduce costs.  If you’re shipping Air freight, can you use a consolidated shipment?  If your using Sea freight, can you ship Less Than Container Load (LCL) i.e. ‘share’ container space?  Can you stack your packages to reduce the footprint if shipping by road?  Have you packed your goods in the smallest (but still export worthy!) packaging possible to reduce the volumetric weight?

Also consider if you have any specific requirements.  For example, are you shipping your goods under a Letter of Credit?  Will the carrier or agent be able to provide you with a compliant transport document?  It’s always best to agree on exactly what you need from a carrier before committing.  This is especially important if your payment depends on any documents issued by carriers or agents!

At Access to Export, we work with a tried and trusted network of carriers, partners and agents.  This allows us to offer high quality international shipping services at competitive rates.  We can make recommendations and arrange any international shipment you require.  Our goal is to ensure our clients goods are delivered in the most timely manner and at a competitive cost that doesn’t compromise on quality.  We can also support you with any export documentation, export compliance and licensing requirements.

If you need advice or practical support with your export shipment, get in contact with us.  We are always happy to provide free quotations or discuss your requirements for any international shipments.

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Common types of export documents and their uses https://www.accesstoexport.com/articles/export-documents-common-types-and-their-uses/ https://www.accesstoexport.com/articles/export-documents-common-types-and-their-uses/#respond Fri, 26 Apr 2019 15:07:47 +0000 http://www.accesstoexport.com/?p=537 In international trade, using correct and compliant export documentation for shipments is vitally important.  Incorrect documents can cause shipment delays and it can end up costing time and money to resolve issues that arise.  The different documents used for export and import shipments to and from different countries can vary a great deal.  Below, we...

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In international trade, using correct and compliant export documentation for shipments is vitally important.  Incorrect documents can cause shipment delays and it can end up costing time and money to resolve issues that arise.  The different documents used for export and import shipments to and from different countries can vary a great deal.  Below, we explain the common types of export documents and their uses, along with what information they should contain or evidence;

Proforma Invoice

A Proforma Invoice is best described as an estimated invoice.  Essentially, it shows what the seller is going to ship and how much they will invoice for, once the order has been shipped.  A Proforma Invoice is sent to the buyer by the seller in advance of shipment.  It details the goods being supplied, quantities, unit prices and total order value including other charges such as freight costs, insurance charges etc.  If the importer is making payment in advance of shipment, then a Proforma Invoice may need to be issued to facilitate the payment.  A Proforma Invoice is often required by the buyer to initiate the import process or open a letter of credit in the destination country.

Commercial Invoice

A Commercial Invoice is the most common document used in international trade. It is required by customs authorities in the destination country.  It is required for all export shipments outside of the EU.  (A Commercial Invoice may be required for EU shipments after the U.K leaves, depending on the customs arrangement that is agreed).  This document is used to establish the value of imported goods so the applicable duties and taxes can be calculated.  A Commercial Invoice should;

  • Include the details of the seller and the buyer
  • be dated
  • show the terms of sale (Incoterms)
  • have a description of goods and quantity
  • show the weight of the shipment and type of packing
  • detail the unit value and total value
  • detail other charges (as applicable) e.g. freight, insurance etc.
Packing List

A Packing List will usually show an itemised list of the goods that have been shipped.  This will normally detail the contents including quantity, description and weight of each shipment package.  A Packing List is generated by the seller and sent to the consignee to allow easy reconciliation of the delivered goods. It is sometimes also known as a Packing Slip, Despatch Note or Delivery Note.

European Community Certificate of Origin

This is a document that certifies a shipment’s country of origin (or ‘nationality’).  It evidences where the last substantial economic processing of the goods took place.  A Certificate of Origin is usually requested to make use of certain benefits given to goods whose origin is of a particular country.  A Certificate of Origin is most often issued by the Chamber of Commerce in the exporting country.  Some buyers will, however, accept a manufacturer or supplier Certificate of Origin as a substitute.

Arab British Chamber of Commerce Certificate of Origin

Some Arab League countries will request a Certificate of Origin specifically issued by the Arab British Chamber of Commerce.  Although we have seen an increasing trend towards such countries now accepting European Community Certificates of Origin.  An AB C of O serves the same purpose though i.e. to certify the country of origin of the goods.

EUR1

An EUR1 is a type of Movement Certificate.  Its purpose is to allow importers in certain countries to import goods at reduced or sometimes zero rates of duty.  An EUR1 can be utilised if there is a trade agreement between the EU and the importing country.  It is only applicable, however, if the goods in question meet the preferential origin rules.  These origin rules are different to those applied to Certificates of Origin.  Preferential origin rules relate to the amount of non-EU material within a shipped product.  The rules can also vary depending on the destination country in question.  An EUR1 must not be issued unless the goods meet the applicable preferential origin rules.

A.TR

This is another type of Movement Certificate, specific to Turkey.  An A.TR document allows goods to be imported into Turkey at beneficial rates of duty.  An A.TR evidences that either;

  • The goods in question originate in the EU, or,
  • The goods have been imported into the EU with all applicable duties and taxes paid and are in ‘free circulation’.

An A.TR must not be issued unless the goods meet the relevant criteria.

ATA Carnet

This is thought of as a ‘Merchandise Passport’.  An ATA Carnet allows duty and tax-free imports in over 70 countries that participate in the scheme.  This can be particularly beneficial for goods being temporarily exported and then re-imported.   Examples would be goods used for exhibition, temporary displays, demonstrations etc.  An ATA Carnet avoids the need to complete more complex customs formalities for temporary goods admission.  It also removes the need for other export documents.

Transport document

If the exporter of the goods is arranging and pre-paying the freight, a transport document will form part of the export documents.  This will most commonly be a Bill of Lading (sea freight) or Air Waybill (air freight), evidencing the shipment of the goods.  In circumstances where the buyer is arranging the freight, a Certificate of Receipt, Forwarder’s Cargo Receipt etc. would be the correct document.  This is not a transport document.  It confirms that the goods have been handed over (delivered) at the agreed place, in good order and condition for shipment.

The above lists the most common types of export documents and their uses for international shipments.  There can be many other documents requested that vary depending on the country, trade term and individual buyer requirements.  Insurance Certificates, Certificates of Conformity, Pre-shipment Inspection Certificates to name just a few.  Depending on payment type, you may also need Bills of Exchange (also referred to as Drafts) to facilitate payment.  Export License documents may also be required as necessary.

We have vast experience in all types of international trade documentation.  At Access to Export, we can advise and produce export documents on your behalf depending on your requirements.  We can also arrange any Chamber of Commerce attested documents through our membership.  Where needed, we can also arrange for documents to be legalised. (Legalisation is separate to attestation and is done by the destination country’s Embassy in the U.K.)

Please don’t hesitate to get in touch if you need help with your export documents!

 

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Letters of Credit: Common Types https://www.accesstoexport.com/articles/letters-of-credit-common-types/ https://www.accesstoexport.com/articles/letters-of-credit-common-types/#respond Tue, 09 Apr 2019 14:27:13 +0000 http://www.accesstoexport.com/?p=528 In order to help with understanding the common types of Letters of Credit (L/Cs), we have put together this brief guide on the types of letters of credit. (If you’re new to L/Cs, you can also find our Beginner’s Guide here). The following details the main types of letters of credit, with a short explanation...

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In order to help with understanding the common types of Letters of Credit (L/Cs), we have put together this brief guide on the types of letters of credit. (If you’re new to L/Cs, you can also find our Beginner’s Guide here). The following details the main types of letters of credit, with a short explanation of the features and uses associated with each type;

Irrevocable

All L/Cs are irrevocable.  This means that once the Letter of Credit is established by the opening bank, it cannot be cancelled.  Unless that is, by written agreement of both the Applicant and the Beneficiary.

Unconfirmed

With unconfirmed Letters of Credit, the payment undertaking (guarantee of payment against a compliant presentation of documents) is given by the opening bank in the foreign country.  If the standing of the opening bank is not known, this may represent a payment risk to the Beneficiary. It also means that the payment period is likely to be longer.  This is because the proceeds will not usually be paid until the opening bank has received and checked the documents.

Confirmed

With a confirmed L/C, the payment undertaking moves to the confirming bank in the exporter’s country.  This means it will often be confirmed by the exporter’s own bank or another reputable bank.  Therefore, there is no payment risk to the exporter, providing the documents fully comply of course.  Payment is made once the documents have been received and checked by the confirming bank.  Payment is also made much more quickly.

Sight Payment

With a sight payment L/C, payment is made as soon as the documents have been checked (seen) by the bank giving the payment undertaking.  This would be either the opening bank for an unconfirmed L/C or the confirming bank for a confirmed L/C.  Payment is normally made within a few days under confirmed Letters of Credit.  For an unconfirmed L/C, this might take two to three weeks.  The speed of payment will also depend upon the reimbursing arrangements contained in the terms of the L/C.

Deferred Payment

A deferred payment L/C (also known as a usance L/C) is payable at a future date as opposed to at sight. The deferred payment or usance period will be specified within the terms of the Letter of Credit.  For example, something like sixty days from date of shipment.  A deferred payment L/C would be used if credit terms have been agreed in the associated sales contract.

Red Clause

This type of Letter of Credit contains the facility to claim payment in advance of the shipment of goods.

Revolving

A revolving L/C is used where the buyer (L/C Applicant) and the seller (L/C Beneficiary) have a long-term, multiple shipment sales contract in place.  Instead of opening an individual L/C for each shipment, the Applicant opens a revolving L/C to cover multiple shipments.  After each shipment and payment claim, the L/C revolves (renews) ready for the next shipment and claim.  The L/C can revolve based upon value or time.  The basis for renewal would be specified in the terms and conditions of the Letter of Credit.

Transferable

A transferable L/C is used in cases where there are three parties involved in a transaction.  These are typically the buyer (importer), an intermediary party (agent, broker etc) and the supplier or manufacturer of the goods.  The buyer would open a transferable L/C which facilitates payment to two beneficiaries – the intermediary and the supplier/manufacturer. The intermediary is the first beneficiary and the supplier is the second beneficiary. Once the goods have been shipped, the documents are presented for payment.  The transferring bank makes payment to the first beneficiary and transfers an agreed amount to the second beneficiary. The process of setting up and managing transferable Letters of Credit is potentially complex.  Care needs to be taken, particularly to ensure that details of the transaction are not inadvertently disclosed to the wrong party.

Back to Back

Back to back L/Cs are also used in transactions involving three parties, as transferable L/Cs are. However, instead of one transferable L/C facilitating payment to two beneficiaries, separate back to back L/Cs are used.  This way, it keeps the ultimate buyer and seller involved in the sale separate.

Standby

Standby Letters of Credit are a backup payment instrument.  The buyer and seller may agree on a sales contract whereby the buyer pays the seller on open account terms.  The seller may, however, request the buyer to establish a standby L/C in their favour.  If the buyer defaults on a payment, the seller has the security of claiming payment via the standby L/C.

With well over thirty years of international trade experience, we have a wealth of knowledge and experience of handling all types of L/Cs.  These have covered a diverse range of commodities to many global export markets.  Get in touch to take advantage of our Letter of Credit service.  Receive expert help with setting up or managing the different types of L/C.  We can make sure the L/C process runs smoothly and efficiently for you!

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Letters of Credit: 10 common mistakes https://www.accesstoexport.com/articles/10-mistakes-when-using-letters-of-credit/ https://www.accesstoexport.com/articles/10-mistakes-when-using-letters-of-credit/#respond Mon, 11 Feb 2019 12:35:27 +0000 http://www.accesstoexport.com/?p=456 If you are being paid by Letters of Credit (L/C), you are going to want to make sure you negotiate your way around the potential pitfalls of this international trade payment method and ensure everything runs smoothly.  (If you’re new to L/C’s please read our Letters of Credit Beginner’s Guide).  Read on for frequent mistakes and...

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If you are being paid by Letters of Credit (L/C), you are going to want to make sure you negotiate your way around the potential pitfalls of this international trade payment method and ensure everything runs smoothly.  (If you’re new to L/C’s please read our Letters of Credit Beginner’s Guide).  Read on for frequent mistakes and errors that are often made and how you can avoid them;

1. Failing to negotiate the terms of Letters of Credit during the negotiation of the sales contract.

Who pays which banking charges? When will the goods be available to ship?  What are the customer’s documentary requirements?  What is the Country of Origin of the goods?  These are examples of aspects that should be considered and agreed before concluding a sales agreement involving an L/C.  The answers to these and other questions will affect the terms and timescales involved.

2. Not considering the costs incurred by Letters of Credit before concluding a sales contract.

Once you’ve shaken hands on a deal with your customer, you’re not going to want to ask them to change any terms of your agreed contract at a later date.  If you haven’t thought about how much it’s going to cost to be paid by an L/C, chances are the opportunities to recoup any costs relating to a Letter of Credit payment are gone.  Try and build in some additional cost at an early stage if you know the payment method is going to be by L/C.

3. Failing to ask for a draft L/C to be made available for review before it is issued by the opening bank.

This is a golden opportunity to check and resolve any terms or conditions that are unworkable or not consistent with the contract of sale before the L/C is issued and becomes operative.  Changes to the content of an L/C are far easier to implement at the draft stage in terms of both time and cost.  Amendments to operative (i.e. formally issued) L/Cs usually take longer and are more costly.

4. Not reviewing Letters of Credit when they are received.

You reviewed and approved a draft so the operative L/C will have the same terms and conditions, right?  Not necessarily.  We’ve seen many situations where a draft has been agreed with an internal department within the buyer’s company.  Then, when the Issuing Bank gets hold of it, they start adding a few of their own terms that you weren’t expecting!  Always check the formal Letter of Credit advice once received, to make sure there aren’t any nasty surprises lurking within.  Particularly if any changes result in unworkable terms.

5. Shipping goods before receiving a clean and workable Letter of Credit.

This is a big no-no and one of the first rules of L/C shipments!  Until you have received a clean and workable Letter of Credit, you have no payment security.  So why would you go ahead and ship the goods?!  What if the L/C arrives and it contains unworkable terms or conditions that weren’t agreed?  You risk incurring extra time and cost burdens or possibly worse.  Without exception, we never recommend shipping goods without being in receipt of workable Letters of Credit.

6. Not making sure the documentary requirements are consistent with the Incoterms in the sales contract.

We’ve had reputable banks claim that they don’t recognise a Forwarder’s Cargo Receipt as an acceptable alternative to a transport document but they should!  If the Incoterm is FCA Seller’s Premises, you shouldn’t be expected to have to submit an Air Waybill or Bill of Lading.  If your customer’s forwarder is responsible for shipping the goods and issuing the transport document, why should you have to rely on a document you have no control over to claim your payment?

That said, sellers should be aware that the latest version of Incoterms (the 2020 version), allows for an optional mechanism to be used in certain situations.  Subject to agreement between the buyer and seller beforehand, a Bill of Lading with an on-board notation can be included in the L/C documentary requirements for FCA shipments.  This is applicable for FCA Seller’s Premises shipments where the seller’s location is inland.

7. Not being able to adhere to all of the terms and conditions contained within the Letter of Credit.

Hopefully, you can!  However, even if you have reviewed the terms of the L/C prior to it being issued, sometimes it can be tricky to be 100% certain that the terms are workable.  Particularly if the reviewer in question is not familiar with UCP600 and ISBP (International Standard Banking Practice).  These are the two publications which govern all aspects of L/Cs and set out the standard by which L/C documents are examined.  Knowledge and experience of these documents is strongly advised for checking Letter of Credit terms and conditions.  Unworkable terms can also be fairly well hidden from the less experienced L/C checker!

8. Having the documents prepared by someone not experienced with Letters of Credit and the associated rules and regulations.

With Letter of Credit documentation, the person preparing the documentation needs to have experience with L/C documentary presentations and, following the previous point, an in-depth understanding of UCP600 and ISBP.  Without this knowledge and experience, the risk of adding to the statistic of presenting discrepant documents is high!  On a more basic level, attention to detail, particularly with regards to consistency of information throughout the documents, is paramount when preparing L/C documentation.

9. Lack of communication with 3rd parties involved in the L/C process.

Transport documents, 3rd party Inspection Certificates, Installation Certificates and Bank Guarantees are all examples of 3rd party documents that can be required under a Letter of Credit.  The content of these documents, to whatever extent, L/C Beneficiaries have less control over.  If Letters of Credit call for a 3rd party document to be presented for payment, it is vital that communication with the issuing party is proactive and forthcoming.  We recommend, wherever possible, providing a compliant template for third party documents. Otherwise, the risk of being stuck with a non-compliant document is increased.  It can also be necessary to talk to such 3rd parties prior to acceptance of L/C terms, so you are prepared and confident the L/C conditions can be met.

10. Not querying discrepancies if you believe them to be invalid.

If a bank that is checking your L/C documents highlights a discrepancy, most would tend to accept it.  However, a Discrepancy Notice can and should be challenged if it is felt to be unjustified.  We have had many situations where we have successfully disputed discrepancies which are invalid or not consistent with UCP600 or ISBP.  Overzealous or less experienced document checkers within banks can on occasion refuse documents on incorrect grounds, so it pays to query it.

Managing Letters of Credit and making documentary presentations day in, day out, has given us the knowledge and experience to avoid these common mistakes before they occur.  We have extensive knowledge of UCP600 and ISBP so that when we make a presentation or review an L/C, we don’t fall foul of any veiled conditions that those less experienced with L/Cs might do.

This also means we can make a guarantee to submit complaint documents, meaning you get paid as quickly and smoothly as possible.  Making errors with Letters of Credit cost time and money and can affect cash flow. To eliminate this risk, get in contact with us to discuss our bespoke Letter of Credit management services.

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Exporter Checklist https://www.accesstoexport.com/articles/exporter-checklist/ https://www.accesstoexport.com/articles/exporter-checklist/#respond Wed, 30 Jan 2019 11:00:43 +0000 http://www.accesstoexport.com/?p=281 When exporting and trading internationally, it is vital that the correct processes and procedures are used and the appropriate export documentation raised to ensure that all transactions are accomplished correctly and in a fully compliant manner. As an exporter, you should be able to correctly answer all the following questions otherwise you may not be...

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When exporting and trading internationally, it is vital that the correct processes and procedures are used and the appropriate export documentation raised to ensure that all transactions are accomplished correctly and in a fully compliant manner. As an exporter, you should be able to correctly answer all the following questions otherwise you may not be exporting correctly!

  • Who is responsible for declaring the export to HMRC?
  • How do we correctly declare our exports?
  • Do we need an Export Licence?
  • Should we arrange and pay for the freight?
  • Should we arrange and pay for transit insurance?
  • Are we using a secure method of payment?
  • What payment options are available?
  • Are our shipments correctly packed, marked and labelled?
  • Is our packaging compliant with the export market requirements?
  • Are our products correctly classified under the appropriate commodity code?
  • Are our exports correctly valued for customs purposes?
  • What is the Customs Status of our goods?
  • What is meant by goods in Free Circulation?
  • Do we issue the correct export documents?
  • Are all our export documents correctly prepared?
  • Should we charge VAT on our Invoices?
  • When should we issue a Certificate of Origin?
  • Do we understand how to correctly determine goods origin?
  • When should we issue a Movement Certificate?
  • Do we keep the correct records?

If you do not know the answers to all the above questions, please get in touch as we can help! We are always happy to have an initial free of charge and no obligation discussion, to show how we can get you on the road to full compliance.

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Preparing for a No Deal BREXIT https://www.accesstoexport.com/articles/preparing-for-a-no-deal-brexit/ https://www.accesstoexport.com/articles/preparing-for-a-no-deal-brexit/#respond Fri, 18 Jan 2019 14:50:03 +0000 http://www.accesstoexport.com/?p=441 With the UK due to leave the EU on March 29th 2019 and as yet no exit deal agreed, BREXIT is inevitably the hot topic for discussion throughout the country. From a trade point of view, we have written this article to provide some guidance, tips and advice to importers and exporters. It contains the...

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With the UK due to leave the EU on March 29th 2019 and as yet no exit deal agreed, BREXIT is inevitably the hot topic for discussion throughout the country. From a trade point of view, we have written this article to provide some guidance, tips and advice to importers and exporters. It contains the important elements and changes which should be put in place, to help in the worst-case scenario of the UK leaving the EU with no deal.

For companies that are already importing from and exporting to countries outside the EU then in simple terms after March 29th 2019, you will trade with EU countries in the same way as you currently trade with non-EU countries. In other words, goods moving to and from EU countries will be subject to a formal customs process at the border meaning the process will take longer. Imported goods will be subject to import duties and VAT which has significant cost and cash flow implications for importers.

For companies that are currently only trading with EU countries, then trading with the EU post BREXIT will be very different and more complicated.  Traders will need to arrange customs clearance of goods, prepare additional documentation and provide instructions to facilitate import and export of goods.

So what things need to be put in place to help minimise the impact of the changes and make the import and export processes as smooth as possible post-BREXIT?  The following is a brief summary of points that all exporters and/or importers should consider;

Exporters

  • Ensure you have an EORI (Economic Operator Registration & Identification) number so that you are recognised as an exporter by HMRC.
  • Make sure you have identified the correct customs tariff codes for your goods.
  • Enlist the services of a good Forwarding Agent (preferably with AEO status) who can deal with the customs process for you, as well as arranging the physical movement of your goods. Although you may use an agent, as the exporter, you will be responsible for ensuring the goods are correctly declared for export.
  • Make sure you can generate the necessary export documentation such as Commercial Invoices, Packing Lists and Certificates of Origin before attempting to despatch your goods. These documents must contain all the appropriate details to enable the smooth export of your goods.
  • Use the correct and appropriate trade terms (Incoterms ®) to avoid inadvertently being responsible for unforeseen costs and responsibilities.
  • Ensure you hold and retain appropriate proof of export for VAT compliance.

Importers

  • Ensure you have an EORI (Economic Operator Registration & Identification) number so that you are recognised as an importer by HMRC.
  • Make sure you have identified the correct customs tariff codes for your goods. This is vitally important as the tariff code will determine the amount of import duties and taxes that will need to be paid when goods are imported.
  • Enlist the services of a good Customs Agent (with AEO status) who can deal with the customs clearance process for you. Although you may use an agent, as the importer, you will be responsible for ensuring the goods are correctly imported. So you will need to provide your agent with appropriate clearance instructions.
  • Familiarise yourself with the different import customs processes in order to take advantage of available duty relief schemes.
  • Arrange a duty deferment account to reduce the impact of import duty and VAT. VAT paid on the import of goods can be reclaimed but has cash flow implications. This is due to the timing difference between paying VAT and reclaiming. Where import duty is payable, this for the most part cannot be reclaimed so has a cost implication. So, make sure this is correctly factored in to your pricing.

This brief article is intended to highlight the key aspects of import and export that need to be considered if the UK leaves the EU without a deal. The prospects of a no deal BREXIT sound daunting but with the appropriate planning and preparation, the impact can be mitigated. Here at Access to Export, we have a wealth of experience in international trade and with the export and import procedures that may become applicable to EU shipments, in the no deal scenario.

We can provide help and support to guide you through the transition and provide on-going support if required. Get in touch with us for an initial free exploratory discussion.

And most of all, good luck to all businesses across the U.K post BREXIT!

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Do I need to get an Export Licence for my shipment? https://www.accesstoexport.com/articles/do-i-need-to-get-an-export-licence-for-my-shipment/ https://www.accesstoexport.com/articles/do-i-need-to-get-an-export-licence-for-my-shipment/#respond Tue, 20 Nov 2018 14:45:17 +0000 http://www.accesstoexport.com/?p=424 Why are some exports controlled? The U.K imposes export controls on goods shipped to foreign countries, particularly with respect to sensitive goods and their destination and intended use.  There are various reasons for having these controls in place, namely to protect human rights, prevent development of weapons of mass destruction, uphold commitments to EU and...

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Why are some exports controlled?

The U.K imposes export controls on goods shipped to foreign countries, particularly with respect to sensitive goods and their destination and intended use.  There are various reasons for having these controls in place, namely to protect human rights, prevent development of weapons of mass destruction, uphold commitments to EU and UN sanctions and embargoes and to protect the U.K and it’s allies from any threats to safety and security.

What considerations are taken in to account?

To determine whether an Export Licence is required, there are 4 major factors that will be considered;

  1. Nature – The majority of goods that are specifically intended (or modified) to be used for military purposes including any associated components will be controlled.  This includes dual-use items i.e. “strategic goods” which, due to their nature, means they could be used for military or weapons of mass destruction (WMD) purposes without modification. This also includes associated technology and software.  Other heavily controlled items include any goods that could be used for torture and radioactive sources, for obvious reasons.  The U.K publishes various Export Control Lists detailing controlled items and also classifies them dependent on the items to be exported.
  2. Destination – If the goods being exported appear on the U.K’s Military List or are considered to be particularly sensitive items on the EU’s Dual-Use List, an Export Licence will be required for any destination, even within the EU.  Less sensitive items on this list will need a licence only if being exported outside of the EU.  The destination country may also dictate whether a licence is required, depending if any embargoes or sanctions are in place for that country.
  3. Ultimate End Use – Even if the goods themselves are not controlled, there may still be a need for an Export Licence if there are concerns about the end use of the goods.  This could be related to the goods being used in either some form of WMD programme, or the exported goods being incorporated into military goods.  It is also worth noting that it needs to be clearly established if the consignee for the goods is also the end user or whether they are a separate entity altogether.
  4. Trade Activity Licencing – This is relevant if the licensee is an agent or broker for example, who is trading in controlled goods between two overseas countries.
What types of Licences are there?

There are several types of Export Licence but the 3 main types are as follows;

  • Open General Export Licences (OGELs) – these are pre-published licences containing set terms that the licensee must comply with.  They are generally for less restricted goods and less restricted export destinations.  The U.K currently has over 40 OGELs available, some covering military goods and others dual-use goods with a few of them covering both.  OGELs can be a beneficial option if one is applicable, as this can save businesses time and money in avoiding SIEL applications for each export.
  • Standard Individual Export Licences (SIELs) – In the event that an OGEL can not be utilised, a SIEL will need to be applied for.  SIELs are specific to the company, consignee, quantity, value etc. of the exported goods in question.  Supporting documentation needs to accompany the application including an End User Undertaking (EUU) completed by the end user.  Further guidance and some FAQs relating to SIELs can be found here.
  • Open Individual Export Licences (OIELs) – If a company needs to make 20 or more SIEL applications for a single long-term contract or project, then an OIEL may be a better option.  The licensee will remain as a specific exporting company but the consignee, quantity and value of each export could change (unless fixed in the terms of the licence).  It should be noted however that OIELs are reserved for companies with proven experience in exporting.

Currently, any application for an Export Licence or registration to use an OGEL needs to be done via the Export Control Organisation’s SPIRE system.

Access to Export has vast experience in managing and making Export Licence applications and we can assist you and your business with advice and practical support on Export Licensing.  We can manage any Export Licence application on your behalf, to ensure export compliance and leave you free to secure your business’s next export order!  Get in touch for a no obligation discussion about your Export Licence needs.

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A Beginner’s Guide to Letters of Credit https://www.accesstoexport.com/articles/a-beginners-guide-to-letters-of-credit/ https://www.accesstoexport.com/articles/a-beginners-guide-to-letters-of-credit/#respond Thu, 15 Nov 2018 14:16:04 +0000 http://www.accesstoexport.com/?p=90 What is a Letter of Credit? Also commonly known as a Documentary Credit, a Letter of Credit (often abbreviated to just L/C) is a type of international trade payment means of getting paid by your customers. In short, it is a guarantee of payment given by a bank that says if you satisfy the terms, conditions and...

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What is a Letter of Credit?

Also commonly known as a Documentary Credit, a Letter of Credit (often abbreviated to just L/C) is a type of international trade payment means of getting paid by your customers. In short, it is a guarantee of payment given by a bank that says if you satisfy the terms, conditions and documentary requirements set out in the Letter of Credit, you will be paid the agreed amount. You may also see it referred to as an ‘irrevocable’ L/C.  All Letters of Credit that are established now are irrevocable, as revocable L/Cs are no longer used.

 

Why is a Letter of Credit used as a method of payment?

It’s because of the security of the payment.  Short of being paid in full in advance, it’s the next best method in guaranteeing you will be paid for your goods or services.  For example, it’s a particularly attractive option when you have a high-value order from a customer that you have had no previous international trade relationship with. Also, in certain countries, payment by Letter of Credit is mandatory so there is no other option.

 

How can I arrange to be paid by a Letter of Credit?

The first step is to agree with your customer that payment will be made by Letter of Credit.  It is important to establish this from the outset, so the associated costs involved can be built into the sales contract if necessary.  The actual L/C process then starts when your customer applies for a Letter of Credit through their chosen bank. The L/C then passes on to a UK correspondent bank to be advised on to you.

 

What are the Letter of Credit Costs?

It is very hard to put a figure on this, as different banks charge different amounts for doing different things!  At a very minimum, there are Advising charges (from the UK bank that advises the L/C on to you) and Negotiating charges (from the bank who you submit your documentary presentation too).  If the L/C is confirmed, whereby the guarantee of payment transfers to a UK bank, this also incurs extra charges.  Discrepancy charges (the penalty imposed for presenting any non-compliant documents) can also vary quite significantly from bank to bank.  Whether the buyer or seller pays these charges can also be defined in the terms of the Letter of Credit.

 

How can Access To Export help me manage the Letter of Credit process?

We have collectively managed and produced documentation for in excess of a thousand Letters of Credit over the years and have gained a wealth of experience when it comes to ensuring their smooth and efficient processing.  By combining the management with the actual practical task of document production, we are able to make sure the terms of the L/C are adhered to. Our preference is always to be involved from the outset, to ensure an L/C is set up correctly in the first place so amendments (and their associated charges) are not necessary.

The big question – how much will it cost you for us to manage your Letter of Credit?  We don’t base our fees necessarily on the value of the Letter of Credit – there can be more work involved in managing and document preparation for a £2,000 Letter of Credit than one with a value of £2,000,000!  We look at it on a case by case basis but our full Letter of Credit management services are available from as little as £350+VAT.  We are always happy to discuss, obligation free, the options and prices involved at any time.

 

In summary…

The above is designed to give as simpler overview as possible on Letters of Credit, most notably in international trade situations. The honest reality is that Letters of Credit can be challenging and complex and the financial penalties involved when mistakes are made during the process makes them daunting and off-putting.

They shouldn’t be. They just need to be set up and managed correctly.

Letters of Credit are a payment tool that opens up your exporting opportunities and accesses new markets to sell your products and services in to.  With Access To Export managing your Letters of Credit, you can be confident in the knowledge that the process will be managed correctly, accurately, and more importantly, compliant documentation will be presented and the moment when the funds become available with be reached as quickly and efficiently as possible.

After that, it’s on to the next order!…

Get in touch to discuss your letter of credit requirements

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Getting paid for your export shipments: Types of International Trade Payment https://www.accesstoexport.com/articles/getting-paid-for-your-export-shipments-types-of-international-trade-payment/ https://www.accesstoexport.com/articles/getting-paid-for-your-export-shipments-types-of-international-trade-payment/#respond Fri, 26 Oct 2018 15:41:45 +0000 http://accesstoexport.com/?p=400 Making sure your business gets paid for its export shipments is usually top of the priority list for exporting companies. This is not just limited to ensuring the payment is received but also making sure it arrives as quickly and efficiently as possible, so there are no adverse effects on cash flow. Broadly speaking, there...

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Making sure your business gets paid for its export shipments is usually top of the priority list for exporting companies. This is not just limited to ensuring the payment is received but also making sure it arrives as quickly and efficiently as possible, so there are no adverse effects on cash flow. Broadly speaking, there are 5 international payment options available to exporters;

Advance Payment

This is the most secure payment method for exporters and is the best option for security and cash flow. However, in some export destinations, facilitating advance payment is a difficult and time-consuming process and in some cases prohibited by the country’s legislation. If you don’t offer any kind of credit period or alternative payment method, there is also the possibility that it will make you less appealing to potential buyers.

Letter of Credit

Often abbreviated to just L/C, a Letter of Credit is a guarantee of payment given by a bank that says if a seller satisfies the terms, conditions and documentary requirements set out in the Letter of Credit, they will be paid the agreed amount. (For those new to Letters of Credit, see our Beginner’s Guide here).  It is a very secure means of getting paid because as long as the terms of the L/C are workable in the first place, the seller is in control of receiving their payment. The drawback of L/Cs is that they are the most expensive payment method when banking charges are factored in.  They can also prove complex and mistakes are often made by those who are not familiar with them.  Letters of Credit are however a globally accepted method of payment and are in fact the mandatory form of paying for foreign goods in certain countries.

Avalised Bills of Exchange

This method follows a similar process to an L/C whereby a set of shipping documents along with Bills of Exchange are sent by the seller’s bank to the buyer’s bank on a collection basis (see below for further details of Documentary Collections). However, the buyer’s bank does not check all the shipping documents as they would under an L/C They do, however, ‘avalise’ the Bills by adding the words “pour aval” to the back and then authorised signatories of the buyer’s bank sign them.  These Bills are then sent to the buyer to accept by signing and stamping.  Once this process is complete, the bank will add its guarantee of payment by holding the buyer liable to pay the Bills at maturity. Once avalised and accepted, the shipping documents are released to the buyer.  The charges involved in avalising Bills are less than with a Letter of Credit as the buyer’s bank’s risk period and the processing responsibilities are reduced.

Documentary Collection

A Documentary Collection (also sometimes referred to as Cash Against Documents) also have similarities with Letters of Credit in that the shipping documents are delivered to the buyer through a bank. The buyer needs to agree to pay for the goods before the bank will release any shipping and/or title documents to them. The fundamental difference to an L/C or avalised Bills process is that while the bank will hold the documents, they won’t guarantee or enforce the payment.  As the bank plays less of a key role in Collection payments though, the charges are significantly reduced.

Open Account

Offering credit terms to a foreign buyer clearly brings the biggest risk in terms of payment security. The flip side of this is that it will be an attractive proposition for buyers. This type of payment for export shipments should only be considered for companies that have developed an established and trustworthy relationship with their buyers, or at a minimum, have local representation in the country of export. We also strongly recommend exporters consider export credit insurance to protect against payment default.

At Access to Export, we have a wealth of experience in exporting goods and preparing all documents required for the various types of international trade payment methods. We can handle the whole process on your behalf thus securing your payments and removing the administrative burden.

If you need any advice or practical support on matters relating to international trade payments, or other areas of exporting, get in touch with us to see how we can support your business with its export activities.

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