By Richard Currie, Senior Director of Public Affairs, UPS
The logistics industry has just seen the end of another peak season, the festive period where holiday gifts and shipments of all types make their way around the world. Every year, it’s a period of extraordinary demand and extraordinary opportunity.
This year businesses had to contend with major market headwinds, namely rising global inflation and supply chain disruption. But this has not diminished the season’s importance in the calendar for small to medium-sized businesses (SMBs), particularly for those trading overseas. As we enter 2023, we know from experience that SMBs should be looking beyond their borders with the end of the year in mind, taking advantage of opportunities to increase their resilience and grow their business.
The benefits of exporting, higher sales, a more robust business model and increased brand profile to name a few, are all enhanced by free trade agreements (FTAs). FTAs reduce and remove tariffs on goods and can alleviate non-tariff barriers for services, making them much more attractive to buyers in these markets and boosting the competitiveness of businesses both at home and abroad. They can also improve the overall operating environment, allowing business of all sizes to benefit from greater economies of scale, increased research and development, and an upskilled workforce.
Businesses selling in FTA markets and regions can count on greater certainty about the business environment in that country, with better trading terms – such as simplified customs procedures and the free flow of data – guaranteed by the agreements.
To date, the UK has agreed trade deals with 71 countries plus the EU. This includes three recent major trade deals: FTAs with Australia and New Zealand and a Digital Economy Agreement with Singapore. The agreements break down regulatory, financial and logistical barriers for UK exporters working with (or interested in working with) these markets. The Department for International Trade (DIT) predicts that the FTA with Australia will see annual duties on UK goods exports fall by around £116 million annually once the deal has entered into force.
How to create a winning exporting business
In the wake of this latest peak season, businesses should take a moment to assess their product portfolios to see where they can take advantage of branching out overseas. Some important questions include:
- Does my product have a market in this territory?
Knowing the market is crucial. This should typically include a visit to the market and initial conversations with potential trade partners to help the business get a feel for how big the opportunity is for their product.
- Which customs fees and duties could I be liable for?
Another key part of the early due diligence is knowing what regulations and legal requirements must be complied with. The shipper needs to ensure the correct customs paperwork is provided with the shipment, identify the goods by the correct commodity codes, understand what duties and taxes may be applied to the goods at the destination and who will pay for these additional fees (the shipper or the final customer).
- How will you balance speed and cost for your shipments?
Understanding the costs at an early stage can help with the development of a pricing strategy that is in line with market trends and ensure you are entering the market with an enticing proposition for customers. Offering different shipping options to help balance speed and cost, being transparent about these costs early in the sales process as well as a clear returns policy will help drive customer satisfaction and repeat business.
Whilst getting to grips with new competitors, working cultures and currencies can take time, SMBs that make this investment typically reap the rewards from spreading their wings. UPS is a long-term advocate of initiatives and mechanisms that facilitate international trade, and there is a collective determination among policymakers, logistics partners and trade groups to improve the trading prospects of every UK small business.