Whenever you sell there are risks - your customer fails to pay, for example, or you get sued for harm caused by your product. But doing business with a customer in a different country, and perhaps using a different language and a different currency, can create extra risks and complications.
What risks are involved when exporting?
- Assessing the creditworthiness of your customer can be more difficult, while at the same time taking legal action to recover unpaid debts might be expensive or even impossible.
- Dealing with a different language, business culture and legal system can increase the risk of confusion and potential problems. Understanding the market is essential.
- Your customer's country can present risks. For example, the country might be economically weak, politically unstable or prone to natural disasters.
- Goods generally take longer to deliver overseas, adding an extra delay from when you incur costs such as raw materials to when the customer receives the goods and pays for them. This can increase your financial burden so it's important to check that you can afford to tie up working capital in exports. Read more about the basics of cashflow management.
- If you quote or sell in foreign currency, it's a good idea to protect yourself against the risk of changes in the exchange rate. Read more aboutforeign currency and exchange risks.
- You must register for Intrastat if, in any calendar year (from 1 January to 31 December), your business either: receives more than £500,000 worth of goods from the EU into Northern Ireland or moves more than £250,000 worth of goods to the EU from Northern Ireland. You do not need to use Intrastat for goods you move between Great Britain (England, Wales and Scotland) and the EU, or between Great Britain and Northern Ireland.Read ourintroduction to Intrastat.
- Companies overseas may try to copy your ideas or abuse your trade marks, and it can be difficult to protect and enforce your rights. Read more aboutintellectual property protection overseas.
- Managing international deliveries and payments can be more complex than when trading within the UK. You need to make sure that you have the right skills and resources.
- Your customer may be based in a country that imposes restrictions or limits on the type of goods you wish to export, which could cause delays or even prevent your dealings.
- If you are trading in a third country outside the European Union and there are trade barriers which make trading difficult, you can appeal using the Access2Markets portal. This is a single entry point where you can request clarification on third-country tariffs, import formalities, documentation and other measures. You can also make complaints if you think trade barriers are unrealistic or illegal or are imposed unfairly.
FAQs
Whenever you sell there are risks - your customer fails to pay, for example, or you get sued for harm caused by your product. But doing business with a customer in a different country, and perhaps using a different language and a different currency, can create extra risks and complications.
What is a disadvantage of exporting? ›
Exporting can be a key driver of business growth, opening up new markets and opportunities. However, it also comes with its own set of challenges, one of the most significant being the high costs associated with it. The costs of exporting include both direct and indirect expenses.
What are the difficulties of exporting? ›
Business-related exporting problems include: Lack of relevant knowledge - Many entrepreneurs hesitate and procrastinate in their export aspirations because of their lack of knowledge and information. They may have a suitable product but lack the know-how on how to sell it overseas.
What are the risks of cargo export? ›
Cargo Risk: Goods can get damaged during transit through Road, Sea or Air. Goods can also get damaged through Natural calamities such as Storms, Earthquake, Floods etc., There can also be theft or Pilferage, through Fire or there can be Political Risks such as Strikes, Lock-downs, Riots etc.
Why is exporting low risk? ›
Another one of the advantages of exporting is risk mitigation. Introducing your products to foreign markets and buyers diversifies your customer base, making your business less reliant on and susceptible to changes in a single domestic economy.
Is exporting the least risky? ›
Exporting means sending goods produced in one country to sell them in another country. Exporting is a low-risk strategy that businesses find attractive for several reasons. First, mature products in a domestic market might find new growth opportunities overseas.
What are the disadvantages of import and export? ›
Limitations of Import and Export
- It includes extra packaging, transportation and protection and insurance costs which build up the total cost of items.
- Exporting isn't doable in the event that the foreign nation prohibits imports.
The financial side of the exporting process is one of the largest difficulties that you might expect when exporting anywhere. The most obvious aspect is the different fiscal systems that each country has, which can severely impact the total cost of exporting goods such as electrical devices.
What are three disadvantages of exporting quizlet? ›
Exporting goods decreases sales, market share, and profit.
What is a big impediment to exporting? ›
One big impediment to exporting is the simple lack of knowledge of the opportunities available. Often, there are many markets for a firm's product, but because they are in countries separated from the firm's home base by culture, language, distance, and time, the firm does not know of them.
The exporter clears the goods for export and bears the risks of getting the goods to the agreed terminal and unloading them. However, the buyer is required to clear the goods for import, pay import duty and carry out import customs formalities.
What are the risks of shipping? ›
Shipping risk is the likelihood of something going wrong during the shipping process. It could include the ship sinking, hijacking, or cargo damage.
What are the risks of shipping goods? ›
Natural disasters, wars, terrorism, and cargo theft are reasons for losing or delaying shipped items. Accidents including shipwrecks, truck, plane, and train crashes are common, accounting for lost, delayed or damaged goods. However, because of the potential shipping risks, insurance is available to cover costs.
Why is direct exporting risky? ›
Disadvantages of direct exporting
Direct exporting can be complex as it involves working with foreign customers or distributors and navigating regulations and logistics of exporting goods internationally. This can be challenging for businesses with limited experience in international trade.
What are the negative consequences of export restrictions? ›
Export restrictions have made a bad situation worse, contributing to food scarcity and higher food prices. For key staples such as wheat, rice and soybean oil, these measures have pushed prices up by 9 percent or more.
What is the disadvantage of increased exports? ›
Exports are important to maintaining economic growth and development by increasing business opportunities. A disadvantage to exporting is that it raises prices for domestic consumers, and exporters must contend with the political climate of the nations they are exporting to.
Which is not an advantage of exporting? ›
Limited presence in foreign markets is not an advantage of exporting.
What are the disadvantages of export agent? ›
Disadvantages of using an overseas agent
- You remain responsible for shipping and other trade-related logistics - although your agent should be able to help.
- You need to specify in an agent's contract if you need them to credit check your customers for you.
The advantages of exporting include higher revenues, global reach, government support, and an increased product life cycle. The disadvantages of exporting include high initial costs, documentation and licenses, product adaptation, and exchange rate fluctuations.
