18/10/2017

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Wi-Fi

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Can!you!afford!not!to!export?

18/10/2017

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Brexit

GDP!Growth!Rates!(2012!� 2016)

Country 2012 2013 2014 2015 2016

Australia 3.63 2.57 2.61 2.42 2.77

China 7.86 7.76 7.30 6.90 6.70

Germany 0.49 0.49 1.60 1.72 1.87

India 5.46 6.39 7.51 8.01 7.11

United Kingdom 1.31 1.91 3.07 2.19 1.81

United States 2.22 1.68 2.37 2.60 1.62

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Agenda

09:30 – Why export?

09:45 – Topic 1: Can you afford not to export?

10:15 – Panel session

10:40 – Coffee break

11:00 – Topic 2: Grants, funding and financial assistance

11:40 – Topic 3: The practicalities of setting up international operations

12:00 – Networking

David!Wright

International!Trade!Adviser

Department!for!International!Trade

Can!you!afford!not!to!export?

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Covering�

1. Why Internationalise?

2. Getting the basics right

3. Delivering the goods – Incoterms

4. VAT & Getting paid

5. Protecting your brand

Internationalisation

Why bother?

International!trade!worries!

Payment concerns:• Getting paid (or not…)

• Delayed payments

• Sterling or other currency?

• Legal issues

• Lack of knowledge

• Language & culture

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• Market size - Economies of scale

• Customer spread - spread your risk

• Product life extension

• Early warning – opportunities and threats

• Higher value customers

• Lower cost suppliers

Why!bother?

Internationalisation

0-20%

Professor Richard Harris and Q. Cher Li 2007

Audience poll• What percentage of companies involved in international trade gain

an increase in productivity in the first year?

21-40% 41-60% 61%+

34%

The!basics

Getting the basics right

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The!basics

Insurance compared to

Carrier liability

Marine / Cargo insurance

Standard!Trading!Conditions!- caution"

• Nondisclosure agreement and Standard Trading Conditions

• The last set of terms and conditions to be exchanged may become those applicable to the contract

• Customer’s orders may contain their terms and conditions

• Always send an acceptance of order referencing your T’s&C’s.

Logistics!/!Carriers

Depends on several factors:

• Physical capacity – volume/ weight

• Speed

• Cost (transport + insurance)

• Convenience

• Packaging

• Security

• Product - magnets etc

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Logistic!matrix

Column1 Plane Ship Truck Courier

Speed High Low Good for Europe High

Cost High Medium Low Very high

Security Good Medium Low Good

Customs regs Good Good Poor Poor IPR/ OPR

Transport!tips

Visit www.bifa.org

• Get competitive quotes

• Scrutinise quotes and invoices

• Use specialist market forwarders

• British International Freight Association

Commercial!Invoices

• Description of goods and value

• Seller + VAT number

• Buyer + VAT number (EU only)

• Place of delivery

• Transport details + incoterms

• Transport and insurance costs

• Payment terms, currency

• Commodity codes + country of origin

• Company stamp

• EORI registration

• Declarations

• Signature

• number

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INCOTERMS!2010!- 3!little!letters

• Published by International Chamber of Commerce to cover transport of goods between businesses

• Internationally accepted definitions of:• Point of transfer of risk• Specification and division of tasks• Division of costs

• Does not define transfer of ownership

• Must be included in contract of sale

• Beware American Foreign Trade Definitions

Impact!on!profits

Selling price 14,000

Works cost 8,000

Deliver to airport 400

Customs entry 100

Airfreight 2,500

Unloading 300

Customs clearance 100

Duties and taxes 2,800

Onward delivery 500

Impact!on!profits!- 3!little!letters

Incoterm Gross margin

EXW 43%

FCA 39%

CIP 21%

DAT 19%

DDP -5%

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Customs!entry

Procedures harmonised across EU

Shipments controlled by computerised

systems (CHIEF in UK)

Freight forwarders

usually have access

Goods going to other EU countries do

not enter customs (yet…!)

Goods enter customs when going into or out of the EU

Duty

• To check what import duty your customers outside Europe might pay use the “Market Access Database”

• To check what import duty you will pay importing goods into the EU use the Trade Tariff on the GOV.UK site

Intra!Company!Issues!

•When will I get paid?

• How will I be paid?

• Cash flow?

• Balance Sheet impact?

• Buyer insolvency?

• Country risk?

• Exchange risks?

• Exchange controls?

• Bank risk?

• Profit?

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The!Risk!Ladder

High Risk

Low Risk High Risk

Low Risk

Advance Payment

Letter of Credit

Documentary Collection

Clean Collection

Open Account

Importer Exporter

Advance!Payment

Positives

• Good for exporter

• Excellent cash flow

• No commercial risk

Negatives

• Not popular with importers

• May require advance payment bond

• Not possible with some countries e.g. Algeria

Open!Account

Positives

• Most usual payment method

• Specified payment date related to goods dispatch

• Shows trust in buyer

Negatives

• Risk of late payment - cash flow

• Risk of non payment – bad debt

• Requires credit monitoring and credit control

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International!Funds!Transfer

• Cash

• Cheque

• Credit Card

• Bank to Bank (SWIFT*, SEPA**, or TT)

*Society for Worldwide Interbank Financial Telecommunication

** Single Euro Payment Area

Documentary!Collections

• Inherently secure when shipment is covered by a Bill of Lading, i.e.‘Document of Title’ to the goods.

• For air transport consign goods to bank*

• Not recommended for road transport or courier

*Air Waybill is not a ‘Document of Title’ to the goods

Documentary!Letter!of!Credit

• A written undertaking given by a bank on behalf of the importer to pay the exporter an amount of money within a specified time provided the exporter presents documents which conform to the terms laid down in the letter of credit.

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Letter!of!Credit

Positives

• Bank guarantee of payment

• Customer cannot back out without agreement

• Can be used for finance if confirmed

• Protection for customer (inspection certificate)

Negatives

• High bank charges

• Complex to administer

• Risk of discrepant presentation

Protecting!your!Brand

Protecting!your!Brand

Global copyright - Free

UK Trademark - £200 US Trademark - $350EU Trademark - €900

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Additional!support

• Export Opportunities

https://opportunities.export.great.gov.uk/

• Open to Export

http://opentoexport.com/

• OMIS - Bespoke, chargeable market info

• TAP - Tradeshow Access Programme

https://www.gov.uk/guidance/tradeshow-access-programme

• Enterprise Europe Network –EEN

http://een.ec.europa.eu/

Additional!value!- GM!Region

• Business Growth Hub

• Access to Finance

• Apprenticeships

• Manufacturing

• GM Export Fund /Textile Fund

• Mentoring

Contact us for further information:

T: 0333 320 0392

E: info@tradenw.org

W: www.gov.uk/dit

#ExportingisGREAT

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Panel!discussion

Panel

Dale BrimelowDuo UK

Alex MarshallClarke Energy

Martin ToogoodHartley Botanic

Brandon PillingAcdoco

Coffee breakNext topic:

Grants, funding & financial assistance –

11am.

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Grants,!funding!and!financial!assistance

Funding!international!trade

Benjamin!Day

Director

Cowgill!Holloway!Business!Funding

Introduction!

• Big barrier to businesses growth is funding

• Banks can be unsupportive, especially to a new market

• So many different types of finance out there

• Important to pick the right type of funding by fully understanding what it will be used for

• Ask advice, don’t just turn to Google

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International!funding

Stock finance If a business holds stock, the cash tied up in your

warehouse can be released as working

capital.

LoansMany businesses go straight

to their own bank when seeking a loan – however, we’re able to seek the best

rates and terms.

Trade financeBusinesses looking for

finance for trading internationally, or

domestically.

Invoice financeInvoice finance can be

used to speed up payment if a customer still owes

money on goods.

Alternative finance Alternative finance is funding that isn’t from a mainstream finance organisation and can

be perfect for niche firms.

International!funding

Conclusion!

• Plan ahead

• It’s never too early to start to engage with funders

• Ensure the funders fully understand what is being asked of them, especially when dealing with export-What law is the contract governed by?-Can the funder transact in that particular currency?-Will the funder support your export customer?-What financial information is available for your export customer?-What exchange rate will the funder use?

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Contact!details

Benjamin DayDirectorCowgill Holloway Business Funding

01204 414243

07884112446

Benjamin.Day@Cowgills.co.uk

Making!exports!happen

Steve!Cowles

Export!Finance!Manager

UK!Export!Finance

Our!mission

UKEF’s mission is to ensure that no viable UK export fails for lack of

finance or insurance from the private sector

We help UK exporters:

• Win export contracts by providing attractive financing terms

• Fulfil orders by supporting working capital loans

• Get paid by insuring against buyer default

We work with colleagues in DIT, HMT and other departments in the UK

and overseas to support HM Government’s export aspirations

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Helping!exporters!win!contracts!overseas

The attractive financing terms UKEF can give to overseas buyers of

UK goods and services can help exporters make their offering more

competitive.

We provide support through our:

• International business development team• Guarantees to banks lending to overseas buyers to source from

the UK• We can also lend directly to overseas buyers (not currently for

Russia)This support is most relevant for larger contracts.

Support!for!overseas!buyers

• UKEF can offer an additional source of long term funding, with repayment typically over 2-10 years, but can be up to 18 years for renewable energy projects

• Finance for up to 85% of contract value

• Support in a range of currencies including GBP, USD, EUR, RMB, Rouble

• Buyer gets extended payment terms, exporter receives payment as goods are shipped or services performed

• Grace period may be considered for interest payments during construction period

• We charge a premium in line with minimum rates set by the OECD

How!can!I!pay!my!suppliers!before!being!paid!from!my!customer?

Payment received

Stock Purchased

Wages paidProduct or

service created

Customer invoiced

Can I finance my suppliers?Export Working Capital Scheme

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Example

Control System Automation Specialist for the printing industry

UKEF Export Working Capital Scheme:

• Any country / max 75% contract value

• Bank guarantee (up to 80%)

• Access to bank funding / bank terms

• Allows flexibility in payment terms

How!can!I!issue!bonds!and!guarantees!without!restricting!cash!flow?

• Advance Payments Bonds/ Guarantees

• Performance Bonds

• Warranty/ Retention Bonds

But… • Utilise bank facilities

• Cash cover

• Make export less attractive

Bond Support Scheme

Example

India - marine hydrodynamics research instrumentation and facilities

UKEF Bond Support Scheme:

• Bank guarantee (up to 80%)

• UKEF security can replace cash cover/ increase facilities

• Guarantees may be required to secure contract/ deposits

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Credit!Insurance

Insurance covers against non-payment by the Buyer to the Exporter subject to the small print in the policy.

Typical risks:• Buyer risks are events associated with the customer which lead

to non payment e.g. insolvency• Political risks are country events e.g. country runs out of foreign

exchange, war.• Normally whole turnover policies as good spread of risk helps

reduce premium

Credit!Insurance

• Over a dozen Credit Insurers in the UK e.g.

• Atradius, Coface, Euler, Credimundi, AIG,QBE,CIFS, Markel, Ace, Equinox, HCC and Zurich etc.

• Use a Credit Insurance Broker to secure most appropriate insurance see www.biba.org.uk

• & www.bexaweb.plus.com/files/BExAGuidefinalcontinuous.pdf

Pros!and!cons!of!Credit!Insurance

Pros

• Low Cost

• Does not tie up Your Bank Lines

• Flexibility – allows late changes to order

• Cover can start at date of contract thus protecting you in the event you are prevented from producing payment documents

• Simple invoice

• Easy solution for service and spares

SOURCE: The British Exporters AssociationThe BExA guide to Credit Insurance

Cons

• Conditions to be complied with

• Normally 90/95% indemnity

• Claims waiting period typically

• 4 or 6 months

• More difficult to finance

• Whole Turnover requirement

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UKEF!Export!Insurance!Policy�

61

Single Risk CoverDesigned to cover specific buyers/contracts, 1-2% premium, up to 95% indemnity

Increased confidence to tradeRisk horizon of 24 months allowing pre and post shipment risk to be covered

Support growth with new partners in new markets

… and may support financing if needed (assignable)

More difficult marketsFor non Europe/Advanced OECD countries where private market cover declined

Which!markets!are!considered!higher!risk?

Useful links• https://www.gov.uk/guidance/country-cover-policy-and-indicators

• http://www.doingbusiness.org/rankings

• Check out credit insurers’ country pages.

• Is the market sanctioned? https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/645280/financial_sanctions_guidance_august_2017.pdf

• Also check US sanctions –OFAC - see https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx applies to US citizens who work for you and most likely your bank

• Whether Export Licence is required https://www.gov.uk/guidance/beginners-guide-to-export-controls

Avoid bad debt by:

• Credit checks

• Tight credit control

• Secure payment mechanism

• Credit Insurance

In the event of a bad debt act quickly and consider::

• Visit and negotiate agreement

• Use of collection agency - most credit insurers offer this service

• If debt evidenced by Bill of Exchange Protest (use a Notary)

• Sell the debt

• Go to law

• European Payment Order

• (HM Courts leaflet EX725)

Bad!debts

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Contact!details

Steve Cowles – Cumbria, Lancashire & Manchester NorthT: 07966308452E: steve.cowles@ukexportfinance.gov.uk

Kevin Ledwith – Cheshire, Merseyside & Manchester SouthT: 07580742518E: kevin.Ledwith@ukexportfinance.gov.uk

www.gov.uk/uk-export-finance www

The!practicalities!of!setting!up!an!international!operation

VAT!on!cross-border!transactions

Carolyn!Van!Hecke

Senior!VAT!Manager

Cowgill!Holloway!

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Agenda

1. Principles of cross border supplies

2. Cross border goods

3. Cross border services

4. Key place of supply of services rules

Cross!border!VAT!rules

• VAT rules for cross border supplies different for :

• goods

• services

• Also depend on whether customer or supplier:

• inside or outside UK

• inside or outside the EU

UK!and!EU!for!VAT!purposes

• UK is a single state = England, Scotland, Wales, Northern Ireland, Isle of ManExcludes: Channel Islands (Jersey, Guernsey etc.), Gibraltar, Cayman Isles etc…

• EU = currently 28 states: UK, France, Germany, Spain, Portugal, Italy, Greece, Greek Cyprus etc.Excludes: Turkish part of Cyprus, Switzerland, Norway, Iceland, Channel Islands, Gibraltar, Canary Islands

Some territories in EU for customs duty purposes but not for VAT (e.g. Channel Islands, Canary Islands)

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Goods!v!services

• Goods: tangible physical property

• Supply of goods: transfer of the actual right to dispose of goods as owner. Actual means economic substance over legal form

• Supply of services: any supply which isn’t a supply of goods

• Land: in UK sale of freehold or long lease = supply of goods, sale of short lease or licence = supply of services

Cross!border!supplies!of!goods

Four scenarios:

1. Selling goods to an EU customer

2. Buying goods from an EU supplier

3. Export of goods (send goods outside the EU)

4. Import of goods (bring goods into the EU)

Selling!goods!to!EU!customer

• UK supplier not VAT registered: supply counts towards seller’s UK VAT registration threshold

• Supplier & customer VAT registered: supplier zero-rates subject to evidence and timing requirements, add to EC sales list, customer VAT number and EU state prefix on invoice

• Supplier VAT registered & responsible for delivery, customer notVAT registered: UK supplier charges UK VAT up to customer state’s “Distance Selling Threshold”, above that supplier registers for VAT in customer’s state and charges local VAT

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Selling!goods!to!EU!customer

• Evidence requirements – to zero-rate must obtain and retain proof goods were sent abroad and that customer is VAT registered. To check customer’s VAT number use VIES system or ring HMRC

• Timing requirements – goods must physically leave the UK within 3 months of time of supply (extended to 6 months in some cases)

• Time of supply - earlier of fifteenth of the month following month of despatch and the invoice date

Distance!selling!thresholds

Updated from time to time – www.ec.europa.eu

Threshold EU state(s)

€35,000

Austria, Belgium, Cyprus, Estonia, Finland, France, Greece,

Hungary, Ireland, Italy, Latvia, Lithuania, Malta, Portugal, Slovakia,

Slovenia, Spain

€100,000 Germany, Luxembourg, Netherlands

Others

Bulgaria 70,000 BGN; Croatia 270,000 HRK, Czech Republic:

1,140,000 CZK; Denmark: 280,000 DKK; Poland: 160,000 PLN;

Romania: 118,000 RON; Sweden: 320,000 SEK; UK: £70,000

Buying!goods!from!EU!suppliers

• Customer UK VAT registered: EU supplier zero-rates, UK customer self-accounts for ‘acquisition VAT’ - enter in VAT Return Box 2

• Customer not UK VAT registered: supplier charges local VAT up to UK’s distance selling threshold (£70,000)

Relevant acquisitions. If supply is for the customer’s exempt or non-business activities, counts towards customer’s UK “relevantacquisitions threshold” (£83,000). If total such purchases in calendar year or in next 30 days exceed threshold must register for VAT

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Exporting!goods

• Zero-rated provided evidence and timing requirements are met –similar to EC sales

Importing!goods

• Special type of VAT (import VAT) applies when goods brought into the EU

• Applies to imports by businesses, non-business entities and private individuals

• Must normally be paid before goods can clear Customs, but may be able to prepay or pay on delivery

• Recover import VAT like input VAT subject to normal VAT recovery rules

Cross!border!services!- steps

1. Check transaction is a business supply

2. If yes, determine the service type and any specific requirements (e.g. B2B or B2C)

3. Establish the place of supply using the place of supply rule for the service type

4. If the place of supply is in the EU:

• Check if VAT exempt

• Check if reverse charge applies

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B2B!and!B2C

• B2B = Business to business means customer is VAT registered or hassome business activities, even if supply is for the customer’s non-business activities• But if supply for private use of business owners or staff, treated

as B2C

• B2C = Business to consumer means customer not VAT registeredand has no business activities• E.g. individuals acting in private capacity and charities or other

organisations with no business activities

B2B!evidence

B2B treatment generally preferable. So suppliers must obtain evidence to support B2B treatment:

• VAT registration number

• Equivalent outside EU (e.g. GST no. in Australia)

• Certificates from fiscal authorities, audited accounts, sales materials, website etc.

If no evidence – treat as B2C

Customer cannot demand B2B treatment, up to supplier to decide

Service!types

• General rule

• Land related supplies

• Event admissions

• Where performed services

• IPR, advertising and consultancy services

• Electronic supplies

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Reverse!charge

Means customer self-accounts for any output VAT due on supplyrather than supplier. Applies if all of following conditions met:1. Supply is B2B and place of supply is in EU2. Customer belongs in the EU state of supply but supplier does not3. Supply not VAT exempt in customer’s state4. Supply type is general rule or EU state of supply has extended

their reverse charge to the supply type

Top!tax!tips!re!trading!internationally!

• Agent

• Division

• Subsidiary/ Stand alone entity

Top!tax!tips!re!trading!internationally!

• Losses

• Profits

• Assets

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Top!tax!tips!re!trading!internationally!

• Speak to your UK advisor about your plans

• Consider the structuring of the venture (consider risk profile)

• Find a recommended local accountant/tax advisor

Contact!us

Manchester

Telephone: 0161 827 1200

1st Floor, XYZ Building

2 Hardman Boulevard, Spinningfields

Manchester M3 3AQ

Liverpool

Telephone: 0151 203 7900

20 Chapel Street

Liverpool, L3 9AG

www.cowgills.co.uk | enquiries@cowgills.co.uk | @Cowgills

Bolton

Telephone: 01204 414 243

Regency House

45-53 Chorley New RoadBolton, BL1 4QR