Exporters: get a helping hand as international trade faces a rocky year

9 January 2023

 

By Tim Bailey                                                                                                                                  Director, Chamber International

The next 12 months are expected to be even tougher for international trade due to increasing energy costs, higher interest rates, geopolitical tensions and the likelihood that we’re edging towards a global recession.

An unwelcome combination of domestic and international factors, including Russia’s continuing war on Ukraine and growing concerns about China’s relationship with the West, means that 2023 will be far from ‘business as usual’ for UK exporters.

According to British Chambers of Commerce, more than half of UK SMEs will struggle to pay their energy bills after 31 March when Government support comes to an end. This, coupled with further expected interest rates rises and higher post-Brexit trade costs, means businesses will need to be on their mettle to reap the benefits of global trade.

This uncertainty is reflected by two different World Trade Organisation (WTO) forecasts for 2023 which say that global trade will either grow by 4.6% or decline by 2.8% if the Ukrainian war worsens.

The WTO adds that, even though the Middle East and Africa have their own energy resources and are relatively unaffected by Russia’s energy restrictions, trade in these regions is expected to decline.

After flocking to China during the past decades for more cost-effective labour and manufacturing costs, companies are now moving both high- and low-value-added production to neighbouring countries, or other well-disposed, neutral countries, or even “reshoring” back to the UK, as a way of managing geopolitical uncertainty and reducing transportation in light of climate change. This new era of re-globalisation will also see the divide between trade and environmental agendas narrowing, as the race to a net-zero future accelerates. 

Trade is changing, and these changes are bringing a new level of complexity and risk for businesses. One example is how Rules of Origin will be used in the future to inform consumers about labour conditions or the level of carbon content in products. Rules of Origin are needed when a country wants to give either better or less favourable treatment to imported goods, by applying trade barriers such as quotas or additional duties.

To cope with these challenges, UK exporters must make 2023 a year in which they stay alert to the ever-changing trading environment and make risk management a priority.

This advice not only applies to small and medium-sized exporters. Even multinational companies with their own compliance teams and robust operating procedures fall foul of changing trade rules from time to time.

Recently we were contacted by an experienced exporter to check the commodity code they were using for a part-shipment destined for Russia. The consignment was stopped at the port by UK Customs who challenged the classification against the backdrop of the current export controls for trade with Russia. The enquirer explained “But we have used the same code for years, this situation is putting a significant proportion of our orderbook at risk.”

Our customs specialists prepared an application to HMRC for an official ruling on the classification for the goods, known as an Advanced Tariff Ruling (ATaR), and all parties are now eagerly awaiting the outcome.

We have seen hundreds of examples of shipments being snagged by customs overseas, or at home, that could have been prevented had the exporter had a system of reviewing its processes and procedures or, at the very least, applied simple periodic checking to key data such as commodity codes, customs entries and origin statements against the latest trade regulations. Second checks by a qualified export administrator can help avoid missed delivery deadlines and additional costs.

As another example, a client asked for help last summer when its export manager left the business without warning, taking his knowledge and expertise, and putting orders worth hundreds of thousands of pounds at risk. The company, whose business model centred around authorisation to operate a Customs Warehouse, had been notified of an impending Customs audit and faced the possibility of fines for non-compliance or (even worse) losing its authorisation, which would have stopped it trading.

We placed one of our specialists, a former customs officer, within the business to train staff on export procedures and prepare the client for the audit and meet with customs on the day of the audit. The client now has trained staff, standard operating procedures in place and has overcome that existential threat, along with the disruption it caused.

Exporters of all sizes, experience and sectors need to be more vigilant, and export managers and administrators should update their skills continually. It is also important for this knowledge to be shared among export teams or, in smaller companies where one person is responsible for shipping, for them to create step-by-step documented processes for order-handling.

Our new International Trade Qualification has been developed in response to the trends we’ve seen in the last 12 months from enquiries logged by our call handlers. The qualification, fully accredited by British Chambers of Commerce and delivered by our Excellence Academy, is a unique programme of hands-on learning designed to help the individual and their employer’s business. It features top insights from senior industry professionals; the qualification is earned by attending 6 virtual modules and demonstrating competence by submitting workplace evidence. Enrolment for the 2023 cohort, limited to 10 places for a personalised experience, is now open and the first module will begin on 21 February. Contact Peter Bainbridge at Chamber International on 0845 034 7200 to find out more.

Chambers of Commerce, the Department for International Trade, Export Control and UK Export Finance are just a few of the organisations that can help exporters manage risk and guide businesses during these uncertain times.

Registering for their email alerts and adding www.chamber-international.com to your list of favourite web pages would be a good first step towards knowing what’s coming down the line in 2023.

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