There’s a reason so many companies, small and large, have invested in international exporting and all that comes with it. The global marketplace offers countless opportunities. Of course, there are many companies still on the cusp of expanding their operations. Here are some of the most common challenges businesses face when entering foreign markets, and practical ways to overcome them.
International Product Restrictions and Regulatory Requirements
International shipments sent from the United States are subject to federal export laws and regulations.1 Before choosing a foreign market, companies must understand the shipping restrictions surrounding their products. Export licensing requirements vary by country and are based on U.S. foreign policy and national security concerns. Whether a license is required depends on the type of commodity, how it’s being used, where the commodity is being shipped, and who is involved in the export. Companies must do thorough research to find out if trade is feasible and worthwhile.
Helpful Tip: Though many goods do not require export licenses, it’s important to ensure compliance.2 Contact the federal agency that governs your industry to learn if you need a license. The three agencies that issue licenses are: the Department of Commerce, Bureau of Industry and Security (BIS), the Department of Treasury, Office of Foreign Assets Control (OFAC), and the Department of State.
Beyond laws and regulations, companies must also look at the political climate of a country. Is it stable enough to support successful business operations? Instability can hamper business dealings. Evaluate the environment and whether it can affect your partnerships and consumer purchasing behaviors. Political changes could create new import restrictions, tax controls and labor issues. Consider these details before investing in an international operation.
Helpful Tip: Map out the political and socioeconomic risks in each foreign country you’re looking to ship to. If a transition of power occurs, can the country seize your assets? Find out if and when that’s possible before committing to expansion.
The cost of international expansion doesn’t stop at shipping and related surcharges. Taxes and currency values all play a part in exporting for businesses and, more importantly, their bottom line.
Some shipping providers charge additional fees such as fuel, dimensional weight, and extended area surcharges on top of international shipping rates. These added costs affect profit margins and, ultimately, the viability of an international business. Extended-area surcharges and dimensional weight surcharges, in many cases, can exceed the cost of the product. When choosing a provider, take note of the additional charges and how they factor into your strategy. Some providers, like the USPS, offer limited surcharges on international shipping.3
Customs, Duties & Taxes
Every country charges its own customs fees for importing and exporting goods. Seek out competent legal advice to determine whether your customer is responsible for paying local fees, duties and taxes. These costs add up. Companies looking to expand into foreign markets must know just how much financial burden they are putting on customers and explain the fees clearly on the checkout page.4
When doing business abroad, it’s important to know the local currency and its relation to the dollar. Fluctuations in currency value can affect a company’s bottom line. In some cases, companies can protect themselves from drastic changes in price.
Helpful Tip: For those in need of expertise, work with a bank or foreign-exchange specialist to help mitigate your risk.
Managing consumer relationships abroad is a sensitive but all-important factor in global expansion. Delays, damage and language barriers present their own set of problems.
Delays & Mail Disruptions
Of course, disruptions and shipping delays are an inevitable part of exporting. When dealing with international customers, it’s important to bridge the distance with strong communication. Whether it’s the weather or labor issues slowing down your shipping times, customers always appreciate an update on their shipment.5
Package Loss & Damage
While there’s no way to prevent domestic or international shipments from being lost or destroyed, insurance can help cover the losses. Evaluate multiple quotes from shipping providers and insurance companies. Take into account the level of coverage, claims process, and compatibility with shipping systems before making a final decision.
Being able to communicate with your international customers and understand their local customs and business practices is paramount. Companies should know all the languages spoken in their chosen market. Besides hiring translators to update print marketing materials and your international website, experts also suggest investing in surveys. Conducting online surveys in your chosen market can help you avoid communication pitfalls.6
Helpful Tip: Create a communication protocol for shipping delays. Be sure your messaging is clear and in the correct language. Avoid jargon to prevent confusion.
Intellectual Property Infringement & Copy Cats
Protecting your intellectual property from theft takes preparation. Every country has its own set of rules and guidelines. Consult with a competent attorney with the appropriate subject matter expertise.
Helpful Tip: If possible, work with a lawyer to draft a legal strategy protecting your intellectual property. Ask your legal counsel about the worth of registering patents, trademarks, and copyrights abroad to defend your company against any possible violations.7
Preventing consumer fraud across international borders requires a bit more effort than it does in the United States. Instances of consumer fraud on cross-border transactions may be higher than domestic transactions. Take into account the different payment methods and regulations, prevalent in your foreign market when screening for dubious shopping behaviors.
Helpful Tip: Make time to regularly monitor purchase activity, credit card information, IP, and email addresses to help detect fraud and manage it.
For some companies, the price of shipping products back to the U.S. doesn’t make financial sense. The profit margins on their products don’t allow for it. They may choose not to offer returns. Those looking to invest in a great consumer experience can work with return consolidators in their foreign markets. These companies have warehouses ready to service a company’s international returns.8
Helpful Tip: Do your research on return consolidators in your chosen region. Find the company with the best rates for consolidating and shipping parcels back to the U.S.9
Ready to Make Moves?
While there are risks to global expansion, business owners—from small retailers to millionaire entrepreneurs—understand the benefits. Fear of language barriers, regulations and fraud shouldn’t stop your business from evolving. Success stems from preparation. Knowing the challenges ahead of time allows growing companies to meet them head on.
Please note: The content presented in this article is for informational purposes only and not for the purpose of providing legal advice. Please contact your attorney for in-depth advice on any pressing issue or problem.