Key Considerations for trading overseas - Is your business ready?
02 December 2019

You have an understanding of how foreign exchange will impact your business and have set your budget rate. The next stage involves implementing an appropriate FX strategy which requires insight and analysis of overseas trading procedures.

Documentation

Having appropriate documentation sets the tone and will include:

  • Commercial– invoices, packing list, harmonised code (a six-digit tariff code) and relevant country of origin certifications
  • Payment– invoices, bank drafts and letters of credit
  • Certificate of shipment– evidence of items shipped and delivered
  • Insurance– at what stage does the risk pass; which party assumes responsibility at each stage of the transaction?

Trading blocs and bilateral trade agreements

Key to successful overseas trading is a working knowledge of bilateral trade agreements between your country and those that you are operating in. These agreements can be with individual countries or regions (as with the EU, the world’s largest trading bloc).

In encouraging trade and cross-border commerce, agreements often eliminate trade barriers such as tariffs, import quotas and export restraints. There are also drawbacks to be aware of – the current ‘trade war’ between USA and China, for instance, hinders a smooth transaction process.

Legal conventions

Trading across borders involves different legal jurisdictions with a reliance on international and domestic law. Examples include the management of transported goods;  EU directives on competition and agencies and acts of Parliament that regulate UK law.

Political Landscape

Brexit is a key factor in overseas trading. Businesses that currently trade with EU members (and those that are weighing up the idea) should take advice on  all aspects of their transactions. The uncertainty of how Brexit will affect overseas trade requires appropriate contingency plans.

Currency

World trade works on understanding procedures of currency exchange, the importance of these transactions and how funds are dispatched and received.

Since the financial crisis of 2008, and with the increase in globalisation, businesses find themselves in a more competitive and unpredictable commercial environment. This has led to currency purchasing decisions frequently based on a ‘best guess’ strategy despite its potential negative impact on profitability.  

Key considerations in devising an overseas trading strategy

  • What impact would a 10 percent move in the FX market have on your business?
  • How easily and quickly can you re-adjust pricing with customers or suppliers?
  • Can you accurately forecast business currency requirements?
  • Do you have a cash flow that can support currency hedging requirements?
  • What is the best way to purchase currency, and with which provider?
  • How can I ensure my funds are safe?
  • What happens if my payment or shipment is delayed?

 

Key Considerations for trading overseas - Is your business ready?
02 December 2019

You have an understanding of how foreign exchange will impact your business and have set your budget rate. The next stage involves implementing an appropriate FX strategy which requires insight and analysis of overseas trading procedures.

Documentation

Having appropriate documentation sets the tone and will include:

  • Commercial– invoices, packing list, harmonised code (a six-digit tariff code) and relevant country of origin certifications
  • Payment– invoices, bank drafts and letters of credit
  • Certificate of shipment– evidence of items shipped and delivered
  • Insurance– at what stage does the risk pass; which party assumes responsibility at each stage of the transaction?

Trading blocs and bilateral trade agreements

Key to successful overseas trading is a working knowledge of bilateral trade agreements between your country and those that you are operating in. These agreements can be with individual countries or regions (as with the EU, the world’s largest trading bloc).

In encouraging trade and cross-border commerce, agreements often eliminate trade barriers such as tariffs, import quotas and export restraints. There are also drawbacks to be aware of – the current ‘trade war’ between USA and China, for instance, hinders a smooth transaction process.

Legal conventions

Trading across borders involves different legal jurisdictions with a reliance on international and domestic law. Examples include the management of transported goods;  EU directives on competition and agencies and acts of Parliament that regulate UK law.

Political Landscape

Brexit is a key factor in overseas trading. Businesses that currently trade with EU members (and those that are weighing up the idea) should take advice on  all aspects of their transactions. The uncertainty of how Brexit will affect overseas trade requires appropriate contingency plans.

Currency

World trade works on understanding procedures of currency exchange, the importance of these transactions and how funds are dispatched and received.

Since the financial crisis of 2008, and with the increase in globalisation, businesses find themselves in a more competitive and unpredictable commercial environment. This has led to currency purchasing decisions frequently based on a ‘best guess’ strategy despite its potential negative impact on profitability.  

Key considerations in devising an overseas trading strategy

  • What impact would a 10 percent move in the FX market have on your business?
  • How easily and quickly can you re-adjust pricing with customers or suppliers?
  • Can you accurately forecast business currency requirements?
  • Do you have a cash flow that can support currency hedging requirements?
  • What is the best way to purchase currency, and with which provider?
  • How can I ensure my funds are safe?
  • What happens if my payment or shipment is delayed?

 

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