Have you ever looked at a good deal to buy a piece of equipment online and then realized that it is in America or some other country only to be put off? You are not alone, especially with farm equipment. Three times over the last eighteen months I have had farmers ask about how they might complete such a transaction. Here are some things to consider.
In every case I suggest they get an Economic Operators Registration Identification number as this has no cost and is a basic starting point. The process is found online: https://www.gov.uk/eori/apply-for-eori
You need to consider the country you wish to import from and whether it is subject to quotas, special tariffs or even sanctions (e.g. Russia and Iraq).
Understand who you will be buying off – you are looking at a transaction that will be heavily reliant upon the person you are buying off being both sound and competent. Can they refer you to other clients in the UK? How do they appear online? Look up the foreign company registry. Cross reference key named people. Google them. Phone them up and talk to them to get an impression. Basically you can only get an impression and the risk is yours to manage. However, the contract of sale will be key.
Find a freight forwarder and a customs broker – it is possible to find firms that do both, or often they work in partnership. They can be local UK firms or international giants such as DHL. They will be able to advise you on how to import the item, manage the paperwork and ensure payments are made at the right time in compliance with an agreed contract. To explain simply if being imported competently and managing the risk to both you and the vendor. They will create the paperwork that determines who is responsible for the goods (the vendor, the carrier and yourself) and when, how the items are insured, who is responsible for what payments and when. All this sounds complicated, but actually it is a process and has internationally agreed rules and terms that help it go smoothly.
Ensure the timing of shipping – for example if goods arrive in the UK and not collected promptly you can start to incur fees or demurrage.
Finally, consider the currency risk. How are you paying and in what currency? What you think is a good deal may be eroded by the exchange rate going against you. It may be useful to open a foreign currency account. If you are to make a payment in a foreign currency but are unsure of the date you can manage the risk in three ways:
- Purchase the currency you require at the outset – that locks you in to the current rate. The downside of this is that it ties up your cash in a foreign currency early in the transaction.
- Arrange a fixed forward contract to purchase the currency at a fixed rate on a fixed future date. The downside of this is that the date may change requiring you to either buy the curerency before you need it, or to “buy yourself out of the contract” if you need it sooner undoing the benefit of the forward contract.
- Arrange a option forward contract to purchase the currency at a fixed rate between two future dates. The advantage of this is that you can purchase the currency at any time it is needed between the agreed dates and you will have a rate agreed in the present. The main disadvantage is if you get the dates wrong or the transaction fails you will still have to buy yourself out of the contract by selling the currency back into GBP.
My opinion is that you should not let all this put you off importing an item, but you do need to understand the complexity, the costs and how to manage the risks using freight forwarding Companies. You should also consider that there are many firms specializing in importing and exporting agricultural and construction equipment and exploring what deals they have may remove the work and risk from your shoulders – albeit at profit to them.
Sources of advice are available from:
The Customs and International Trade helpline 0300 322 9434
The government website: https://www.gov.uk/check-how-to-import-export
Your Bank – the main UK Banks have specialist sections that will help put you in touch with organisations such as the Department of Trade or foreign Chambers of Commerce as well as do practical things such as establish the ability to by currency and forward contracts.
Accountants and Solicitors – many accountants have an international trade specialist. Even smaller firms may have this speciality dependent upon their location. You may also find such speciality in some Law Firms especially at ports where some specialize in being “notary publics” a legal requirement in many foreign contracts.