Export and Exportation (The Do’s, Don’ts and Risk associated with it)
Export refers to the act of sending goods or services produced in one country to another country for sale or use. When a country exports goods or services, it generates income and creates job opportunities, while the importing country gains access to products it may not produce or manufacture itself.
Exportation refers to the process of exporting goods or services from one country to another. It involves various activities, such as producing the goods, arranging transportation, preparing documentation, and complying with customs regulations in both the exporting and importing countries.
In general, exports are considered to be an important component of a country’s economy, as they can increase economic growth, create jobs, and improve the balance of trade. Exportation is a key driver of global trade and helps to connect different countries and economies around the world.
The increasing role of Exports in today’s interlinked global economy cannot be over-emphasized. In any nation’s economy, it plays an important role, such as influencing the level of economic growth, employment and the balance of payments.
To be an effective player in this industry can be an overwhelming task, particularly with many stakeholders out there saying, “it seems like a guarantee for trouble, especially when it comes to exporting”.
Truth be told, International Trade is not easy. A lot can turn out badly when attempting to export, particularly on the off chance that you are not expecting it. But as the familiar adage goes, “When you know better, you can do better.”
Sequel to our Previous post on Export Documentation, we have decided to come up with the Do’s, Don’ts and Risks common to exporting to help you improve as an exporter and have a glitch-free international trade experience.
The Dos of Export Procedure
- Get organized
- Use documented process checklist.
- Learn everything you can about export.
- Use document templates
- Use shipping solution export documentation software.
- Maintain a complete record of your export shipment.
- Keep your records accessible.
- Keep track of your International sales team and partners.
- Audit your export compliance effort.
The Established Don’ts
- Avoid the wrong contact, packing and payment information.
- Avoid the wrong classification of goods.
- Avoid the presentation of the wrong value of cargo.
- Avoid the wrong descriptions of goods.
- Avoid having the wrong person fill out dangerous goods forms.
- Avoid wrongfully assuming your goods qualify for preferential rates.
- Payment Risk
- Foreign Exchange Risk
- Performance Risk
- Delivery Risks
Payment Risk: These are risks associated with situations where contracted payments are not received by the seller from the buyer or the buyer’s bank. To mitigate this kind of situation, a seller is expected to secure a Letter of Credit by the buyer through the buyer’s bank, guaranteeing payment for services provided.
Foreign Exchange Risk: Foreign Exchange risks are risks associated with fluctuations in FOREX as we are currently witnessing in Nigeria. The simple mitigant to this anomaly is for invoices to be issued in local currencies to guard against unpleasant imbalances in FOREX values.
Performance Risk: These risks have to do with one party in an export transaction not performing according to the agreement. The mitigant factor is for the exporter, for instance, to obtain a Performance Bond, which covers the cost of issuing a Letter of Credit and other costs associated with non-performance in accordance to the established terms of the contract.
Delivery Risks: This is a situation where buyers don’t receive the delivery as promised by the seller. In this situation, there has to be a deliberate commitment towards delivering as promised in order to build trust and mutual reliance in international trade.