Exporting products - a beginner's guide for start-ups and SMEs

Figures released by the Office for National Statistics revealed that British exports reached an all-time high of £43.44 billion in June 2013; a huge contribution to the economy. Exporting is also an effective way in which small businesses and start-ups can establish new markets, increase sales and experience growth.

Exporting is an involved process and there are many factors to take into consideration, but once you know the basics, it's not too difficult. It's certainly an avenue that is worth exploring. Here's our beginner's guide to exporting products:

1) Market research

Step one - and a crucial one at that - is understanding your potential for success overseas. You must research the market to determine whether - and if so, where - there is an appetite for your products. This will form a key element of any associated funding applications you may need to obtain.

If it helps, the ONS data showed that the UK's main export partners are (in order) the US, Eurozone areas, China, India, Canada, Hong Kong, Russia, UAE, Japan and Australia. The majority of what we export are 'manufactured products' and of these, the most important categories (in order of amounts exported) are transport equipment, chemical products, machinery and equipment, computer, electronic and optical products, pharmaceutical, petroleum and basic metals. That's not to say 'other' goods won't succeed, but it's your responsibility to carry out sufficient research.

2) Classify your product

Okay, you have a product and you're going into the export business, congratulations!  The next step is to ensure that you pay the correct taxes and duties while following any specific regulations. To do that, you first need to classify your product by identifying the right commodity code, which can be done via the gov.uk Trade Tariff page.

The Integrated Tariff gives all the relevant information regarding laws, licences or any 'measures' - special requirements due. Helpfully, the same system is used across the EU, with the same codes and duty rates. It's important to get this classification right, as mistakes can lead to fines from HM Revenue and Customs.

3) Do you need a licence?

A licence is not always required for exporting goods, it depends on several factors: where the goods are going, their purpose and the category. A licence will usually be needed for any products that fall within the military, technology, artwork, chemicals, medicine or plants and animals classes. 

Further information is available on gov.uk's export licence page, or through registration to the Department for Business, Innovation and Skills' Export Control portal.

4) Declare your intention to export

Prior to sending goods overseas, you must declare your intentions to customs. This is done via the electronic National Export System (NES), which works within a wider, nationwide system called Customs Handling of Import and Export Freight (CHIEF). CHIEF controls the movement of international cargo via road, air or sea, to and from the UK. 

You will need to apply to use the system by completing a C&E 48 form, after which you will be issued with an Economic Operator Registration Identification number, allowing you access to the system.

5) Pay your taxes

Export VAT is applicable depending on whether the goods are heading to the EU or beyond; no other tax is due from the British side, but some local taxes may be levied at the destination.

There are two scenarios for tax on goods being exported within the EU (known as 'dispatches' or 'removals'). Rule one applies if the recipient is VAT-registered. In this case, export VAT is not applicable and you can 'zero-rate' the sale, providing you've been furnished with the customer's VAT number. This, together with a copy of the VAT invoice and proof that the goods have left the EU are necessary for your VAT return.

Rule two applies if they are not VAT-registered and stipulates that you must charge export VAT at the usual UK rate and issue an invoice. If you are selling goods in a quantity that exceeds the country's 'VAT distance-selling threshold' (usually around €35,000), you should charge VAT at the receiving country's rate instead.

VAT is not applicable on goods that are being exported to countries outside the EU zone (known as 'third countries') and are thus 'zero-rated', providing you have proof that they were exported outside the EU.

6) Physical transportation

Most exporters engage the services of a parcel courier, commercial agent or freight forwarder to move their goods overseas. The agent is responsible for completing the customs forms, keeping records, obtaining proof that the goods have been shipped abroad and exporting within given time frames. This should guarantee that the border agencies allow your goods through border control, without risk of fines or seizure.

Further information

Of course, there's more to the process than is outlined in the steps above. Should you require more help and guidance, there are several resources you can turn to. HMRC provides a telephone helpline service to assist businesses with any queries prior to export, while the UK Trade & Investment site and gov.uk also offer some invaluable information. 

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