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Ask the Expert - customs and compliance
Every month, Insider invites readers of the Insider Daily newsletter to submit their questions about international trade to top professionals from the Yorkshire dealmaking community.
This week, Hannah Stansfield, international trade and VAT compliance manager at Croda Europe, has been answering your questions relating to working in overseas markets.
All answers are for general guidance only. Each case must be handled on the individual facts.
Q: I had planned to look more closely at international markets this year, but with the pound rising again I’m concerned I may have missed the boat. What do you feel 2010 will bring for companies eager to take advantage of international opportunities?
A: "2010 should be an exciting year for international trade. The review of FTA (Free trade agreements) with ASEAN and preferential trade agreements are reducing the barriers to international trade, with duty rates being either eliminated or lowered. It’s important to do your research on the countries you want to do business with, to see where you can make use of these agreements and also review any other special requirements that you may need. Duty rates vary based on the product and also vary on country you are exporting/import from. It is also worth reviewing if you currently import any products or raw materials that would go into a finished product for re-exported. Using duty deferral schemes and also using preference documents from your overseas suppliers can greatly reduce your costs.
"I recommend making use of advice and support which is available through Business Link and Chambers of Commerce. They can help with looking at market sector growth, staff training and also run trade mission visits. Reviews on countries and economic growth along with statistical information held on the Business Link databases, which give tariff volumes on trade and information on emerging markets. They can also give good supporting advice on any special requirements for trading with specific countries.
"Having multi-currency banking can also assist in trading in markets with fluctuating strengths against the pound. You can use banking support to secure agreed exchange rates and also to gain information of financial security in different countries. I would always recommend you use a credit checking facility and trade on pre-payment or other forms of secured funds, Letter of credit or draft when initially trading with overseas customers. Take up references where possible. Securing any financial outlay costs in formal agreements, which take into consideration your IP rights, cancellation of orders is recommended and I would always ensure you have legal services check out any formalised agreements before you sign them.
"There is also government funding for some enterprise areas and its worth enquiring if you qualify for any assistance. This can support trade mission visits or specialist support for assisting you to develop in new areas. The Chamber of Commerce and Business Link work closely with funding bodies and arrange trade missions to emerging countries, travel, accommodation, initial introductions and setting up the that which bring forward interested companies and give the opportunity for supported face to face meetings."
Q: I’ve been affected by the recent EU VAT changes, and I’m aware that more are due in 2011 and 2013. When do these come into effect and what will they change?
A: "The changes to EU legislation on VAT have been advertised but not confirmed for some time now. Although the initial agreement was signed in February 2008, most EC member states are still negotiating locally the changes which will be applied.
"It is important to note that in addition to the EU legislation being applied some EC member states are applying their own local interpretation of the rules. In particular business which have multiple registrations in other EC member states but do not have fixed establishments or residence may find that they can no longer apply local VAT on sales invoices for business to business ‘domestic’ supply and may need to use ‘reverse charge’ for sale of goods. This legislation has been adopted in Italy, Spain and Netherlands.
"The implementation of the changes to the EU legislation was brought about to counter VAT fraud, assist in easier recovery of VAT paid over in other EC member states and to simply and align cross-border supply of services.
"The European Commission is still in discussion with member states to agree the common interpretation of the rules to be applied across the EU. This information should be available through HMRC website when it has been agreed.
"From 1 Jan 2011 it is planned to implement the ‘where performed’ rule. The finer details of how this will work have yet to be confirmed but it is expected to be for in line with services in that VAT must be accounted for in the EC member state where the service is received. Where the supplier is not VAT registered or resident in that EC member state, the customer may need to account for VAT using reverse charge mechanism. There are also other plans for 2013 around long term hire agreements for means of transport. It is envisaged that in the majority of cases business customers will account for VAT.
"The main changes planned for 2015 will be the introduction of an optional one-stop scheme for business to customers for supplies of telecoms, broadcasting and electronically supplied services. Supplies of services will generally continue to be the place where the supplier is established. However, from 1 January 2015, the place of supply of intra-EU business to customer supplies of telecoms, electronically supplied services and broadcasting, will be where the customer is established or usually resides."
Q: I recently started at an international company, and I’ve been surprised by how difficult it can be to work effectively with colleagues elsewhere in the world and how little my predecessor did to make things run smoothly. Do you have any tips on good working practices, or systems that I can put in place?
"Understanding cultural differences is critical when building relationships with colleagues across the globe. Some countries warm to an informal approach where other cultures would see this as offensive. It is also important to remember language barriers and interpretation. Make sure you communicate in a clear written format and be vigilant with wording that could potentially be misunderstood. Build a rapport with verbal contact where possible and establish clear working instructions that define roles and objectives. Be clear on your responsibilities and allow your colleagues to express opinion and have input into any changes you wish to implement.
"Don’t assume that any changes needed locally are also required for them or may even have an adverse effect for them. Allow them full input into decision making so that you obtain their ‘buy in’. Use tools available on the internet to research culture for the countries you are dealing with such as Business link or the Chamber of Commerce. Confirm any verbal agreements in writing and seek acknowledgement from them to be sure that they have understood and agree any discussions or instructions."
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