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Guide To International Trade: Supporting Your Global Ambitions
Guide To International Trade: Supporting Your Global Ambitions
Visit www.rbs.co.uk/newmarkets
Guide to
Or call our International Trade Hotline on 0800 210 0235
Typetalk 18001 0800 138 4419
International Trade
Lines are open 9am-5pm Monday to Friday (excluding public holidays).
The Royal Bank of Scotland plc. Registered Office: 36 St. Andrew Square, Edinburgh EH2 2YB. Registered in Scotland No. 90312.
Authorised and regulated by the Financial Services Authority.
RBS87815 0611
Section 6: Index55
That’s why I’m delighted to share this Guide to International Trade with you. It contains
a wealth of useful information about how to trade internationally, including insights into
research we have conducted among UK businesses, and informative articles from prominent
trade bodies such as UK Trade & Investment, the British Chambers of Commerce and the
British Exporters Association.
Our recent research conducted among 500 UK companies has told us that many businesses
believe now is a good time to increase overseas trading. However, they’re not fully realising
these ambitions. In fact, 50% of the businesses questioned believed that UK organisations were
not sufficiently aware of the opportunities out there.
This guide is designed to help you realise those overseas opportunities fully and set you on the
path to international success. I hope that the information, tips and articles here will provide the
support you need and help inspire you to seek out new markets beyond our UK borders.
Aidene Walsh,
Head of Global Transaction Services UK and Ireland
Whether you’re a small business looking to world, servicing some of the largest global
take your first steps abroad, or are one of the organisations in the Americas, Europe, the
world’s top multinational companies looking Middle East and Asia Pacific. We also operate
to expand your international operations, we in an additional 22 countries via partner
can help. banks which, together with our network, bring
the capability and expertise that your
We take the time to understand your company will need.
business, and then work with you towards
your goals and aspirations for the future –
becoming a trusted adviser for the long-term
and delivering real value for your business. Our trade advisers and experts at
home and abroad look forward to
Global presence
RBS is one of the world’s leading financial
serving you and your customers
service companies, providing a range of in your local language and
retail, corporate and institutional banking time zone.
services. For UK customers with local cash
management and trade finance processing
needs, we offer the full range of solutions
and accounts in multiple currencies. With an
on-the-ground presence in 37 countries, our
international solutions operate around the
Managing your cash flow Our supply chain finance solutions help both
When it comes to cash flow and international buyers and sellers to optimise their working
trade, analysing your transaction timelines capital strategies. We also offer a document
is essential. We can help you plan ahead preparation service which saves you time and
and positively structure your finances. You reduces potential errors in your transaction
can manage all of this using our online documentation, helping you to finalise your
channels, such as Bankline, our internet- sales more promptly.
based banking service for business. Bankline
gives you control of your business finances
1 2
4
The weakness of the pound has made
you consider exporting
11 13 20 41 28
%
Strongly Disagree Strongly Agree
l ver two-thirds of businesses believe that now is a good time to increase overseas trading, and that
O
export activity will be key to the growth and success of the UK economy.
3
l ver 50% believe that UK organisations are not sufficiently aware of the opportunities for exporting,
O
or indeed are realising the potential value to be had from such activity.
l Just over one-third of businesses have
Domestic trade in thebeen
UK prompted by the weak pound to consider exporting.
1 4 16 32 42
Ea
Export trade activity to mainland
8 Europe and/or North America
6 9 27 35 17
%
Not at all confident Very confident
1 2
Barriers to international trade main barriers to trade. Furthermore between
There will always be barriers to exploring new a half and two thirds have concerns about not
markets, however theeconomic
In the current research has
climate, withshown
a that getting paid, operating in markets they don’t So
difficulty finding international customers
weak pound, now is a good time for UK
businesses to increase trading abroad
and understand, controlling risks and a general lack starting
b
lack of knowledge are seen by almost half as the 1 4 20
of knowledge about international trade.
41 28
2
Export activity will be key to the growth
and success of the UK economy
1 3 23 44 25 5
TheSome
UK business sectorwill
UK businesses overall does
be put off not Western Europ
currently
starting realisetheir
or growing the potential value to
export activity
by perceived complexity
be had andactivity
from export risk
28 3 7 22 27 41 13
1 3 46 21
% 4
The weakness of the pound has made Strongly Disagree Strongly Agree
25 you consider exporting
11 13 20 41 28
%
l hilst 57% of all businesses believe theirStrongly
W product or service would sell abroad,Strongly
Disagree over Agree
two-thirds
13
believe that some businesses will be put off by the complexity and risk of exporting (particularly
outside of4Europe and North America). Over two-thirds believe that there is a need for specialist Eastern Europe in
export knowledge, and
Western over
Europe half that
excluding UK businesses are ill informed in respect of funding.
28 2 7 21 37 32
3
ongly Agree
North America
8 15 23 29 22
17
7 %
Latin America Not at all confident Very confident
19 21 27 19 11
9 %
Not at all important Very important
l 4% are confident about their organisation’s
7 domestic trade activity. Confidence declines to 52%
y confident in relation to trade with Europe and North America, and to 32% for emerging markets in general
and 30% for Asia.
l ot surprisingly, exporters have higher confidence in their organisation’s trade markets excluding
N
the domestic market.
l L arger and global businesses are significantly more likely to be confident in exporting to Asia.
Those in the engineering sector are significantly more likely to be confident regarding export
activity in Europe and/or North America and Asia.
10
%
Strongly Disagree Strongly Agree
25
North
13
Mid
rongly Agree
North America
8 15 23 29 22
Asia
15 15 21 27 20
Latin
Middle East
16 17 22 25 18
17
Africa
22 16 27 18 13
Latin America
19 21 27 19 11
9 %
Not at all important Very important
ry confident
l estern Europe is viewed as the most important area for current export activity, and Latin America
W
and Africa the least.
Research findings part of RBS annual study. Research findings reflect survey results of research conducted among
518 UK companies in October 2010.
11
13
Sales contract agreed Raw materials Exporter Exporter Exporter ships Importer receives
between exporter shipped receives manufactures the products the product and
and importer materials and the products pays (payments
pays supplier may be staged
before receiving
the product)*
Key
Trade timeline
Funding gap
14
Beware fraud
Losses as a result of fraud may potentially
harm your business if you are duped into
transactions based on fraudulent commercial
Letters of Credit and Standby Credits (see
Standby Credits on page 33).
Fraudsters are always plausible and often
seem to come from impeccable backgrounds.
You should therefore always be wary about
offers of large amounts of business from
unknown parties, especially when presented
as urgent enquiries requiring instant
Payment methods agreement or lose a once-in-a-lifetime chance
Non-payment is a problem in any kind of of an enormous return. The International
trade, but the problem is worse in export Chamber of Commerce’s Commercial Crime
trade because: Bureau is actively involved in combating this
• t he buyer and seller are in different type of fraud and has issued many warnings
countries and publications.
• the goods end up in a different country
from the seller At a transactional level, traders should take
• it is difficult for the seller to get the advice from their banks and should ensure
goods back again. that the authenticity of L/Cs is verified.
All unusual business offers should also be
referred to the bank, which should have
16 up-to-date information on such activities.
17
18
19
20
Notes:
a) The modes of transportation referred to in this guide are for illustrative purposes only. Shipping ports and airports could be substituted for
other terminals used by trains or road-going vehicles. b) This Incoterms® Guide is for illustrative purposes only. For full details please refer to
“Incoterms® 2010” from the International Chamber of Commerce.
21
22
26
27
28
There are three types of collection: The essential word in documentary collection
• c lean collection D/P collections is “payment”. There are two
•d ocumentary collection: documents types of D/P collection – D/P with payment at
against acceptance (D/A) sight and D/P with payment at an agreed
•d ocumentary collection: documents
against payment (D/P).
29
30
31
32
Warranty Bonds
These provide a financial guarantee to cover
the satisfactory performance of equipment
supplied during a specified maintenance or
warranty period.
Overdraft Guarantees
These guarantee the borrowing requirements
of UK exporters or contractors who need
finance in the importer’s country. The
Guarantee covers the local bank against the
exporter defaulting. Without such security, the
local bank would be unwilling to lend monies
where the UK exporter is unknown to them.
33
2.0000
GBP:USD Exchange Rate
1.9000
1.8000
1.7000
1.6000
1.5000
1.4000
1.3000
00
01
02
0
-00
-01
-02
-03
1
l-0
l-0
l-0
l-0
l-0
l-0
l-0
l-1
n-0
n-0
n-0
n-0
n-0
n-0
n-1
n-1
ul-
ul-
ul-
an
an
an
an
-Ju
-Ju
-Ju
-Ju
-Ju
-Ju
-Ju
-Ju
-Ja
-Ja
-Ja
-Ja
-Ja
-Ja
-Ja
-Ja
-J
-J
-J
-J
-J
-J
-J
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
03
Year 2000-2011
34
Businesses should prepare themselves for that can drive currency fluctuations, it’s likely
a changing landscape in foreign exchange to become ever more important that businesses
markets; one where businesses are dealing in work with a trusted and experienced partner
more countries and in more currencies than to develop an integrated, relevant and flexible
they have in the past. Combined with the risk management strategy.
increasing economic and political uncertainty
With tight profit margins, the business cannot This approach to foreign exchange risk
risk the exchange rate moving too far against management gives them their ideal blend of
them, so needs to guarantee a known ‘worst case’ protection and the potential to steal a march
rate at which they can exchange EUR for GBP. on their competitors, should exchange rates
However, having experienced a weaker Pound move in their favour.
against the Euro in recent years, they know the
35
37
From leading government bodies to the team • The British Chambers of Commerce
at RBS, the following articles offer a broad (BCC) – this organisation is a powerful
spectrum of trade guidance from a wide and influential network of Accredited
variety of expert sources. Chambers of Commerce across the UK.
Helping businesses for over 150 years,
The following articles can help to give your the BCC sits at the very heart of its
business the edge and ensure you are as local business community providing
prepared as you can be for the various representation, services, information
demands of global trade. and guidance to its members.
•The British Exporters Association
Article contributors include: (BExA) – the international trade
• International trade team at RBS – association that has been representing
founded in 1727, RBS is one of the all sectors of the export community
leading global financial services groups, since 1940.
supporting and promoting global trade
in over 37 countries.
• UK Trade & Investment (UKTI) – the
government department that helps
UK based companies succeed in the
global economy and assists overseas
companies to bring their high-quality
investment to the UK. UKTI also has
partnership agreements with the
Federation of International Trade
Associations, under which they
contribute market research and other
global trade reports.
38
40
Once a relationship develops and a greater Finally, ensure any goods imported comply
degree of trust exists between buying and with all government regulations of the
selling parties, then the cost of doing business destination country. Failure to do so can
can also be reduced (for example, moving delay the custom’s clearing process and incur
from L/Cs to Documentary Collections, which significant taxes.
are a simpler and less expensive option).
41
42
Why export?
• Achieve levels of growth not possible
domestically
• Increase the resilience of revenues and
profits
•A chieve economies of scale not possible
domestically
• Increase the commercial lifespan of
products and services
• Increase the returns on investment in R&D
• Improve financial performance
• Improve productivity.
44
45
46
47
SS
OCIATIO
B N
48
49
51
For more information on any of the topics covered in this guide, you can contact us by:
• c all our International Trade Hotline on 0800 210 0235 or Typetalk 18001 0800 138 4419.
Lines are open 9am –5pm.
• visit www.rbs.co.uk/newmarkets
52
53
55
56
Section 6: Index55
Visit www.rbs.co.uk/newmarkets
Guide to
Or call our International Trade Hotline on 0800 210 0235
Typetalk 18001 0800 138 4419
International Trade
Lines are open 9am-5pm Monday to Friday (excluding public holidays).
The Royal Bank of Scotland plc. Registered Office: 36 St. Andrew Square, Edinburgh EH2 2YB. Registered in Scotland No. 90312.
Authorised and regulated by the Financial Services Authority.
RBS87815 0611