Exporting as Business Strategy

Exporting Definition

In the global marketplace, the exchange of goods and services between nations is a fundamental aspect of international trade. At the core of this economic interplay are exports and imports. Exports signify the products and services produced within a country, that are meant for foreign markets, while imports denote items acquired from international sellers. This dynamic relationship is pivotal for economic growth. In this context, factors such as tariffs, taxes on imports, and domestic subsidies play a significant role in shaping a country's export landscape. [1]

Exporting is the easiest way to participate in global trade. Companies or firms produce their own goods and services in the domestic country and sell the finished products to customers located in other countries [2].

Numerous firms prefer this market entry strategy because it entails limited risk, lower costs and investments, and knowledge of international markets. Exporting is the most common strategy among small and medium-sized firms [3]. It is responsible for the massive inflows and outflows that benefit global trade. Exporters can be very flexible with this strategy, since entering a new market or withdrawing from one comes with minimal risk and expenses [2].

Doing business outside of the local market can boost a company’s credibility. It is an effective way for a business to expand its potential by entering other markets [4].

Advantages and disadvantages

Even though companies might do well in the domestic market, the opening of the Caribbean economies is leading to an increasingly competitive market domestically and internationally. Although expanding to new markets offers numerous benefits, it is also associated with challenges and risks [5].

Pros of exporting:

• Increased competitiveness: by expanding to an international market, companies can innovate new marketing techniques, manage practices, and get exposed to new ideas. They can increase their competing skills by positioning their business better in domestic and overseas markets [5].

• Increased sales: exporting is an effective way to increase your sales potential. A small company will never be able to expand its market beyond the limits of a national market. Within the expanded market, it is possible to reach millions of people [5].

• Higher profits: it is common that international customers are more attracted to placing a larger order than a domestic buyer. Therefore, customers are more willing to pay higher prices for products in an overseas market than in a local one [5].

• Lower costs: firms source goods from locations to capitalize on national differences in production costs. Within exporting, companies can lower their overall expenses [5].

• Safety net: firms should not become dependent on a single market. If economic conditions become undesirable, a company should be able to have a safety net in other markets they have created internationally. Expanding the market is a relevant factor that can affect a company positively [6].

• Expanding the product life cycle: at a certain time, some products can reach the end of their life cycle. Entering a new market by exporting the company’s goods can be a solution to extend the life cycle of the product [5].

• Follow customers abroad: within the migration from Europe to countries overseas, the market attracted a new creation of a European diaspora abroad. Therefore, companies can take advantage by targeting products inspired by European “taste” [5].

• Suit new market: entering an international market is challenging. One way can be to change the existing products to suit the new market [6].

• More jobs: 36 million jobs have been supported by trade with non-EU countries, and 16 million workplaces by investments in the EU [7].

Cons of exporting:

• Competition: within globalization, competition cannot be avoided. Food, beverage and other common providers need to stay ahead and be competitive to create a successful international market [5].

• Extra costs: organizing and developing a business plan to export your goods overseas can be difficult and costly. A company needs to understand its expenditure on new promotions and marketing materials. Controlling the outgoings of a firm is not only time-consuming but also financially risky [5].

• Product modification: if a company decides to globalize its market, it is important to understand the conditions and circumstances of the new market. The new company might not have the same technical know-how. Therefore, the product of a firm needs to be modified for the export market [5].

• Financial risks: some countries deal differently with economic or government restrictions. If a company wants to enter an international market, it can negatively impact their business. It can lead to the risk of non-payment or a complicated process of payments [5].

• Transport risks: exporting goods from a company can always come with some risks of damage, theft, or loss [5].

• Commitment: exporters should understand that expanding a firm is time-consuming and associated with obligations. A high level of commitment is essential to achieve a long-term effect [5].

• Cultural differences and market information: understanding and adapting to the local culture is important for international companies. Cultural differences across nations can affect the way in which business is practiced. Companies that are ill-informed about the practices of another culture are unlikely to succeed in that culture [5].

Trade is an important economic engine for growth and new job creation. In 2018, EU trade with non-EU states supported 36 million jobs. The EU’s Trade Policy is also called the Common Commercial Policy (CCP) and is exclusively part of the jurisdiction of the European Union. The CCP covers trade in goods, services, and the commercial aspects of intellectual property within the EU. The EU is the world’s largest single market and trading bloc. This means that in all trade negotiations and trade policy decisions, the EU acts as one voice on behalf of its member states. This allows for greater bargaining power in bilateral trade negotiations compared to individual states acting on their own. The Union ensures that they hear concerns from all stakeholders regularly during the year before making decisions. This allows for greater transparency and accountability. [8]

A key principle of the EU is fair trading practices, which includes trade liberalization and fair competition regulations. There is free movement of goods, services, and people within the union, which promotes business creation and expansion [9]. Additionally, the EU is the largest trading partner for over 80 countries with over 70% of EU imports entering at reduced or no tariffs [10]. The CCP does not only encourage the removal of tariffs between member states and/or the reduction between non-EU trading partners but also the removal of “non-tariff barriers (NTB)”. NTB includes protection for domestic suppliers (such as quotas on extra-EU goods or subsidies (e.g., Airbus)) and technical barriers to entry [8].

On 18th February 2021, the European Commission published its trade policy for the upcoming years. The updated trading strategy focuses on economic recovery by supporting sustainability, green energy, digitalization, and a strong focus on global trade rules, ensuring that trading procedures remain transparent and fair. A reform of the World Trade Organization is also part of the changes made, including global commitments on trade and climate and new rules for digital trade [11].

Extra-EU Trade of Goods

In terms of extra-EU exports, the European Union was among the top 2 main players for international trade in goods in 2020, coming in just after China (see Figure 1). As you can see, the European Union exports more than it imports internationally, and being right behind China in its exports shows its high importance in the world trade economy. Breaking it down by countries within the EU, Germany has the highest export distribution, followed by Italy, the Netherlands, and France (see Figure 2). 

In terms of imports, the European Union is among the top 3 players, with the United States and China just above (see Figure 1). If we look at the country-specific share of imports in the European Union, we can see that Germany also has the highest distribution, followed by the Netherlands and France (see Figure 2). These countries that hold the highest share percentage of exports and imports (Germany, France, Italy, and the Netherlands) are therefore the main trading partners in the European Union and represent where the bulk of the goods come from that are transported in and out of the European Union.

Intra-EU Trade of Goods

Looking at trade within the European Union (otherwise known as intra-EU trade), we can see on Figure 3 that Luxembourg and Slovakia have the highest share of imported and exported goods combined. Although the rest of the world sees the German, French, Italian, and Dutch goods as the dominant goods, within the EU we have Luxembourg and Slovakia as the top traders. This is interesting to understand because of consumer and market differences, and how trade policies vary by country - especially when looking at the EU and how their laws differ from extra to intra-trading.

Transit and Quasi-transit

An important distinction to be made in extra and intra-EU trade is the difference in transit types. When goods are in transit within the EU, the European countries they pass through are not counted in the statistical data analysis. Therefore, as an example, if goods are transiting from the Netherlands to Austria and pass through Belgium and Germany, we would only say that the Netherlands is the exporting country, and Austria is the importing country.

Quasi-transit routes track the transiting countries differently when transiting internationally. For extra-EU trading, the country in which the products enter or exit the European Union is counted in the statistical tracking as importers or exporters - as well as the final destination country. For example, if products are coming from Canada and going to the final destination of Austria, but from Canada they enter Italy, then transit from Italy to Austria, the partner countries tracked would be as follows: Canada (exporter), Italy (importer), and then Italy (exporter) and Austria (importer). This distinction must be made when tracking imports and exports to understand true import and export data for a country, to ensure proper customs laws are followed when preparing for transits, as well as warehousing, distributions, and gross weights can be properly accounted for. [14]

The Rotterdam Effect

The Rotterdam effect explains a simple concept of the overestimation of imports and exports in the Netherlands. As Rotterdam is a common quasi-transit destination as an entry to the European Union, they can experience extremely high numbers of goods coming in and out. This can be problematic because if we are looking simply at numbers of imports and exports by country, the Netherlands can have an extremely high number in both because they are tracked as being the intermediary place. In reality, many of these transiting shipments are only passing through; therefore, the overestimation of exports and imports of the country is present. For example, oil traded from the Middle East to Rotterdam, and after that exported to the UK, is counted as an export from the EU and not from the Middle East. This effect has been seen to be present in Rotterdam but can, of course, be applied to other significant EU Member States that experience high volumes of quasi-transit imports and exports - by seaport or by airplane - such as Antwerp and Hamburg. [15]

Also, the Rotterdam effect can lead financial analysts to address how exchange insights are assembled and examined. Most national factual specialists have two ways of preparing insights, based on accepted international benchmarks. For the UK, imports from non-EU nations are recorded on a 'country of origin' basis, but imports from EU nations on a 'nation of dispatch' basis [16].

Exporting Products vs. Services

• Exporting products is a concept that we are more familiar with, as it is easy to understand how a product is physically transported from one destination to the next. Products can range in size, weight, and countability but are anything tangible and can be accounted for quantitatively. In terms of significant importance, the global value of international trade in goods is 3.5 times as high as that for trade in services [17].

• Exporting services is more complex because services are intangible experiences that cannot be repeated. Even though services are intangible, they still have to abide by certain laws, regulations, and factors to ensure their cross-border trading is following trade standards. Services as such can be a telephone call or working with a professional like an accountant or lawyer, for example [18].

Trade in Services

Considering the nature of trade-in services, some might assume its complexity to be something that is difficult to track. However, the service sector is an increasingly important part of the global economy and actually accounts for approximately 75% of total economic activity in the EU [17]. The imbalance in levels of international trade, as expressed above, can be explained by a number of factors that include but are not limited to: non-transportability, regulation of professional services bounded by national legislation, and heterogeneity of the services—not to mention trying to decipher services associated or bundled with products [17].

Services are supplied internationally, and can be categorized in 4 different modes [17]: 

• cross-border supply;

• consumption abroad; 

• commercial presence; 

• presence of natural persons. 

Based on GATS provisions, there are differentiations in terms of whether the exporting country is by a juridical or natural person, and then whether the consumer in the importing country has an intermediary that needs to be distinguished and affiliated or not. This can be easily understood by looking at Figure 4 below and comparing the different mode types and their respective means.

Extra-EU Trade in Services

On an international scale, the role of trade in services in the EU has been growing steadily over the last decade, such that in 2017, the United States was the EU’s main trading partner for transport services [19, 20]. Additionally, there has been a change in the structure and composition of international trade in services. This is related to evolving trends in business, such as increased outsourcing in business services like call centers and computer programming, as well as barriers to entry in professional services like lawyers, management consultants, and architects [20].

The main partners of the EU international trade of services with non-EU countries are the United States and the United Kingdom, as seen in Figure 5. Exports increased for almost all of its main partners during the years 2018 and 2019, and the largest destinations of exports of services comprised 21%, valued at EUR 224 billion for the United Kingdom, and 19% in the United States [21].

Intra-EU trade in services

In terms of the trade of services within the EU, Germany holds the highest value of services exported to other EU countries, valued at EUR 169 billion (or 18%) [21]. Similarly, in the trade of goods, the Netherlands holds the second-highest valuation of exports, and France holds the second-highest valuation of imports (see Figure 6). Thus, we can agree that these countries hold the majority of trade during these years, which can be attributed to geographic proximity and historical trade associations, among other factors discussed [21].

Export channels

Export decision-making is especially prevalent in small to medium-sized enterprises and can greatly improve a firm’s international performance — especially when deciding upon the best channel for selling and distributing in foreign markets [22]. Factors that are important to consider when choosing among export channels include transaction costs, the level of investment commitment and control, as well as cost efficiencies [22].

Independent distributor or agent

Having an independent distributor or agent can give your firm a competitive advantage in terms of contractual obligations and expertise. Although using agents can seem like your firm is losing its control, it is an investment that can positively impact the company as a whole. This type of investment can be made by having a shared option export channel, where the variation in the level of investment and risk taken is established beforehand.

Firm's own marketing subsidiary abroad

Entering a foreign market with a firm’s own marketing subsidiary is the best way to maintain control and consistency. However, this can be seen as a more demanding investment because it is wholly owned by the firm itself. This is also a more aggressive strategy, where the exporter can develop a marketing strategy that provides a clear plan of what the firm intends to do in the foreign market [23]. By having complete control over the entry strategy, the headquartered offices can maintain a certain amount of control over the costs, results of an initial strategy, and changes made if the initial market penetration is unsuccessful.

Exporters typically favor a systematic approach to ensure the successful export of their goods and services. Prior to initiating the export process, management must assess key factors: Is the company adequately prepared for export? Does it possess the necessary capacity, resources, and management expertise to execute successful transactions in the global market? 

The management needs to have:

• Expectations: flexibility, openness to new business ideas, business strategies, enough time, patience, and an understanding of what is required to stay and succeed in the global market.

• Human resource requirements: enough capacity, management committed to the export strategy, marketing skills that are sensitive to a foreign culture, and a management that can deal with language barriers and foreign currencies.

• Financial and legal resources: reduce financial risk, obtain enough capital to produce new orders, act effectively with foreign systems, and protect intellectual property by using patents, copyright, or trademarks.

• Competitiveness: a product with a long life cycle in the potential target market and resources to research the exportability of the goods [4].

1. Step one of this process is to assess various global market opportunities available to the company. The management evaluates the firm’s readiness to implement an export strategy. Another essential factor is to analyze the most attractive markets to carry out exporting. By evaluating market potential and company sales potential, the firm identifies qualified foreign business partners [2].

2. Step two is to organize for exporting. This step contains the decision of the management if the company has enough managerial, financial, and productive resources to commit to the export venture. The management needs to determine what timetable the company needs to follow to successfully achieve their goals [2]. Planning the export project carefully is relevant since a company will have a greater chance of achieving their goals in the global market [4].

Additionally, the company needs to agree on which intermediaries will carry out the exporting. Therefore, the management needs to decide between domestic and foreign intermediaries. Another essential factor to implement is if the company uses a direct or an indirect export [2].

Even though organizing a successful export plan is rather complicated, a company doesn’t have to achieve everything alone. Numerous outside experts can represent the firm and search for overseas partners to transfer the company’s goods [4].

3. Step three is to acquire needed skills and competencies. At this stage, the export transfer requires competencies in sections like product development, finance, currency management, and contract law. In order to interact well in another country, it is useful to understand the language and interact with the foreign culture. For achieving this goal, the company needs to invest in staff training [2].

4. Step four is to implement and manage the chosen export strategy. The company needs to fit the market conditions and approach to suit the customer’s taste. Product adaptation implies that goods and services will get modified to target the needs of the foreign market [2]. Since the taste of customers will change, the last step needs to be updated continuously. Therefore, the goods, services, and strategies have to adapt to new conditions regularly [4].

Exporting intermediation options

Exporters’ success mostly depends on establishing a strong relationship with their foreign market intermediaries. Intermediaries handle products in the domestic country and the market abroad to perform key downstream functions in the targeted market. Relying on such distributors is a low-cost way for exporters to access a global market. These foreign intermediaries are classified into different categories, as follows:

• Foreign distributor: the foreign intermediary works under a contract for an exporter. While the distributor performs a leading role in the marketing section, such as sales and promotion, they are essentially independent wholesalers. Intermediaries purchase goods and resell them, adding a profit margin.

• Manufacturer’s representative: some intermediaries represent the purchased merchandise or services from exporters. These distributors sell the goods in a designated country or territory.

• Trading company: this category includes the engagement of intermediaries in the import and export of various goods and services. Usually, they employ trading companies in manufacturers with a lack of resources to sell the exporter's products internationally.

• Export management company: these intermediaries are based in the home market and act as an export agent on behalf of a client company [2].

Alternative organizational arrangement for exporting

• Indirect export: this arrangement is common for smaller exporters or companies which are new to global business. Firms usually contact intermediaries who are located within the company’s home market [24]. Exporters don’t have direct contact to their customers, so they depend on the commitment of their foreign partners. However, the company can also benefit from this strategy. Additionally, to the smaller financial risk, the firm requires hardly any new staff members, and the agent has access to market and distribution channels [25].

• Direct export: this alternative of export achieves a direct sale to a customer abroad. Foreign intermediaries have the role as an extension to the exporter, which includes responsibilities such as local supply-chain management, pricing, and customer services [2]. Exporters are in direct contact with their customers, leading to independence from foreign partners. Therefore, the company can achieve higher profit margins. Though this kind of export presents some advantages, it leads to greater financial risk and a high investment of time and staff members [25].

• Company-owned subsidiary: Firms at a more advanced stage might be more attracted to this strategy. It requires establishing subsidiaries in foreign markets, which are strategically important. Subsidiaries help manage major tasks directly in the market [2]. The business ownership interest is held by the parent company. It is important that the parent company controls all of the subsidiary company shares and owns between 51% to 99% of the firm’s stock [26]. Difficulties might emerge since cultural differences make it challenging to hire laborers for a foreign subsidiary. However, by using similar services and marketing programs, both companies benefit by reducing their costs [27].

Criteria for evaluating export intermediaries

Even though exporters and foreign intermediaries usually establish a strong relationship, it might happen that the relations go badly. Even more important is for the exporter to find, in advance, an independent and foreign-based distributor. To evaluate such a beneficial partnership, an exporter has to consider many factors:

• Organizational strengths are essential to consider while choosing an intermediary. It includes the ability to work with finance, sales, market growth, and to provide financing to customers. A good distributor also needs to understand managing a team and connecting with influential people in the market.

• An exporter needs to consider criteria such as product-related factors, which require intermediaries to handle the quality and superiority of all goods. 

• Therefore, distributors need enough knowledge about the exporter’s products, and they have to ensure security for patents and intellectual property rights.

• Additionally, it is significant to consider the extent of geographic coverage provided in the target market. Intermediaries need to evaluate the quality and quantity of the sales force and need the ability to formulate and implement marketing plans.

• The last criteria exporters need to consider is the managerial commitment of the foreign distributors. This factor includes the willingness of the intermediaries to fully serve the market and their commitment to achieving the goal [2].

Different Types of Export Documentation

Exporting products is not as easy as it may seem. A lot of attention needs to be paid to the different rules when it comes to exporting products around the world. If a rule is broken or a procedure is not done in the correct way, a company can expect high costs to pay for not paying enough attention to the rules [28, 29].

1.  It is important to distinguish which kind of product is being sold and the quantity of it. The material plays a significant role too. 

2. A Commercial Invoice is required to ship products outside of the EU.

3. A list of all the packages needs to be made to have an overview of the products that are being shipped and delivered to the customer.

4. A Certificate of Origin needs to be seen for the buyer of the product. This is significant to know where the product and where the processing of the goods was made.

5. A transport document is required if the exporter pre-pays all the costs to ship the products. These are some of the most important export documentations that are required for exporting products [29, 30, 31].

Procedures on Documentation

As mentioned before, it is important to check which kind of products are being shipped. This means understanding the materials the product is made of, the commodity to which it belongs, whether it is sold separately, and if it is an already finished product.

Additional questions include: is it allowed to be sold in foreign markets, and is it newly produced or has it already been used? How many products are being sold, and are they heavy or light products that are being shipped? These are important factors to consider in the initial documentation procedures.

Next, it is crucial to know where the products can be exported: does the company have the allowance to ship internationally (outside the EU)? Which countries are buying all types of products, and which country has the best market potential for certain products? Where are potential customers for these kinds of products, and are the exporters aware of certain foreign laws? [29, 30, 31]

EU Product Rules and Regulations

Common rules for EU exports include, for example, dual-use controls (to decrease the sale of weapons for more international peace and security) and waste shipment regulations (to promote environmental friendliness) [31].

Export control violations

To avoid violations when exporting products, companies should always consider providing a detailed description of the export, including names, telephone numbers, and contact persons for the customer, in case any problems arise, for example [30, 31].

Types of INCOTERMS European Exporters use and why?

There are seven different types Europeans use the most:

1. CIP (Carriage and Insurance Paid To) - provide insurance coverage by charging buyer for the costs;

2. CPT (Carriage Paid To) - clarifies transport modes;

3. CIF (Cost Insurance and Freight) - the responsibility for the condition of the goods being shipped to the buyer;

4. CFR (Cost and Freight) - the same as CIF but without insurance advantage;

5. DDU (Delivered Duty Unpaid) - as soon as the product is finished it will be on its way to get delivered;

6. FCA (Free Carrier) - keeping on track where products are being handed/location;

7. FOB (Free on Board) - good for documentary of the products being delivered; keeping them on track if getting lost for example [32, 33, 34].

The seven most commonly used types of INCOTERMS all rely on the 'C' Term Advantage. This term essentially emphasizes that it is advantageous for the exporter to have control over the forwarder and carrier. Therefore, they aim to keep track of every detail, but at the same time, it is recommended not to assume too much responsibility, as it can become risky for the exporter if any mistakes are made. This approach can be highly cost-effective, and sellers under 'C' terms are not held responsible for the condition in which the product is delivered [34].

Methods of Payment

Economies can utilize different types of payment methods, each with its advantages and disadvantages, often influenced by the location or level of development of the country. Here are various payment types:

• Cash; 

• Checks: allows for larger purchases but has a high risk of forgery;

• Debit, Credit and Prepaid Cards: allow for larger purchases but involve a delay until money is transferred to the bank account, with a risk of forgery;

• Mobile payments: suitable for foreign travelers but not universally accepted due to limited device availability in stores [35].

Based on the payment process, the five most commonly used payment methods in international trading are:

1. Cash in Advance 

• requires full or partial payment before goods are transferred;

• best for the seller as it ensures the expected amount is received before transportation, minimizing the risk of non-payment [36]; 

• ideal for high-risk trade relationships or unique, high-value exports;  

• the preferred method is Wire Transfer due to its immediacy and traceability;

• may lead to a lack of customers or unwanted risks. 

2. Open account 

• goods are shipped and delivered before payment is made;

• a risky type of payment requiring a strong, established relationship between seller and buyer. 

3. Consignment 

• a variation of Open Account where the exporter is paid only after the goods are sold by the foreign distributor to the end customer [37.1].

4. Letter of Credit (LCs)

• one of the most secure payment methods, ensuring payment under the bank's control and verifying compliance with provided terms and conditions;

• protects the buyer, who is not obligated to pay until the goods are delivered; 

• disadvantages include extensive paperwork and a strict protocol. 

5. Documentary Collections

• payment occurs after an exchange of necessary documents between the banks of the importer and exporter.

The choice of payment method depends on the company's location, the type of transported goods, and the relationship between the exporter and importer. Some countries may offer various payment methods, while others, less developed, may have limited options. Understanding the local environment is crucial to determine whether only cash is accepted or if alternatives like debit cards or mobile payments are viable options [35, 38].

Countertrade & Types of Countertrade

Below are some definitions:

• Barter: the oldest and simplest form of counter-trading, although not often used anymore. It requires a matching need between the buyer and seller, with no use of currency;

• Buybacks: a more complicated form of counter-trading that takes place between a private corporation from a developed country and the government. It is used to finance direct investment and expand the country's export base, offering a variety of assistance such as loans, technology transfer, and joint ventures;

• Compensation trade: involves an agreement between the exporter and importer to make reciprocal purchases of specific goods, covered under a single contract;

• Counter purchase: involves two linked transactions covered by two separate contracts. First, the sale of goods is negotiated and paid for in a specified currency. Second, the contract obligates the buyer to purchase goods over a period of time, and it involves hard currency;

• Offsets: transactions involving military equipment and aircraft, and it can also involve large civilian transactions. It is a common form of countertrade between two industrialized nations [41].

Advantages and disadvantages of countertrade

Countertrade transactions involve trading goods or services instead of money with other companies. Many companies from countries with limited foreign exchange utilize countertrade transactions, but there are also several advantages and disadvantages that need to be considered when using such transactions [42, 43].

One advantage is that a company can engage in more international trade since it doesn't have to limit itself with foreign exchanges or credit facilities. However, there are disadvantages as well. Countertrade can be time-consuming due to the necessity for negotiations about all the goods being exported, for example. Additionally, there is a lack of flexibility as the company has to limit itself to the products it can offer for exchange [42, 43].

Letter of Credit Cycle

Relation between buyer and seller at letter of credit cycle

To make a letter of credit cycle work, both the buyer and seller need to reach mutual agreements on certain terms. This cycle is not immediate, as arrangements must be established between the banks of the buyer and seller [44, 45].

How does letter of credit transaction work

1. The letter of credit transaction starts with the agreement of both the seller and buyer on the terms of use. The letter of credit cycle can be initiated at the buyer's bank, which prepares the documents needed for the payment process.

2.  After that, the buyer's bank will open its letter of credit, allowing the shipment of the product [45, 46].

3. The buyers' and sellers' banks send information to the exporter, who checks all the information on the letter of credit. Everything written on the letter of credit needs to be correct; otherwise, it will cause many problems for both the buyer and seller regarding the shipment of the product [45, 46].

4. The next step is to deliver the order. If it is loaded, the exporter will generate some documentation, which will be sent to the bank for checking.

5. If everything is correct, the seller's bank will send documents to the buyers' bank, which will review the information written on the documents too.

6. If everything is correct too, it will be sent to the buyer, who has a certain amount of time to time/date draft to claim the product and pay for it [45, 46].

Important terms:

• Time draft: a specific period until claiming the product. 

• Date draft: a specific day until claiming the product [45].

Brexit

The United Kingdom voted to leave the EU in 2016, and the "EU-UK Trade and Cooperation Agreement" took effect on January 1, 2021. One of the main advantages touted by Brexiteers was the potential for the UK to diversify its trading routes and increase trade with other parts of the world. Despite the UK's departure from the EU, both parties signed a new trade agreement, known as a preferential trade agreement, extending beyond WTO rules. The agreement continues to provide zero quotas and tariffs for compliant goods, although it doesn't cover all traded goods and services [47].

As a consequence of Brexit, many companies altered their entry plans, choosing to invest in and establish plants within the EU. This shift is expected to boost EU exports and contribute to job creation. For instance, Intel opted not to construct a factory in the UK, citing Brexit as a significant factor [48].

The primary issue impacting trade between the UK and the EU is the departure of the UK from the single market and customs union. This change necessitated additional checks and paperwork at the border, leading to increased costs in terms of both time and money for exporters. The end of free movement of goods, services, and people between the UK and the EU has also made establishing new businesses from the EU into the UK more challenging. These changes influence the strategies of domestic EU focal firms considering market entry, with new entry into the UK perceived as less flexible and riskier [47].

Although there has been a reduction in trading between the UK and the EU, the true effects of Brexit remain to be fully understood. The start of the Covid-19 pandemic coincided with the end of the transition period, making it challenging to differentiate between the impacts of Brexit and those of the pandemic.

Nonetheless, despite the reduction in trade between the UK and the EU, the European Union remains the UK's largest trading partner, as depicted in Figure 8. The impact of this reduced trading can be observed more closely through data from the German Federal Statistical Office, indicating that the UK is poised to "fall out of Germany's top 10 trading partners for the first time in 70 years". This illustrates how events such as Brexit can also alter the composition of trading partners for individual EU member states.

Oil Prices

Significant to the international trade process for exporters is ensuring the costs of the shipped goods. The constant change of the oil price makes it difficult for exporters to achieve a steady outflow of shipping payments. Transportation costs can differ if exporters ship by water, air, or land. However, the longer the distance, the higher the costs of transportation [24].

The rising costs of oil might be caused by increasing demand and the fear of supply disruption [6]. A higher oil price has a negative impact on EU exporters, causing more transportation costs. It also has critical implications for the transport and its competitiveness [37].

Environmental Programs and Climate Change

Over the past 40 years, the EU has begun implementing several policies, and the most recent enactment specific to exporting has been the Environmental Action Programme to 2020. They believe that over the past years, air, water, and soil pollution have decreased dramatically as a result of their environmental regulations [25]. As this may be so, there is still a lot of work to do. The three objectives outlined in this Programme are very vague and not very measurable; they are as follows: "to protect, conserve and enhance the Union’s natural capital, to turn the Union into a resource-efficient, green, and competitive low-carbon economy, to safeguard the Union’s citizens from environment-related pressures and risks to health and wellbeing" [25].

In terms of exporting specifically, Anzjes brings up the new FTAs, which contain legally binding chapters on sustainable development, stress the importance of MEAs and agree not to game domestic environmental protection regulations for economic advantage [26]. Having these specific and binding statements within the free trade agreement will make them more impactful and force companies to follow through. Additionally, the EU has also promised "greater economic value to smaller enterprises and transparency in negotiations" in the Trade for All strategy, as well as the European Commission to "adopt a negotiating approach that involves using trade agreements and trade preference programmes as levels to promote, [...] values like fair and ethical trade" [26].

War in Ukraine

The EU is Ukraine's most important trading partner, constituting more than 40% of its total trade in goods in 2021. Trade between Ukraine and the EU has seen growth, and between 2016 and 2021, Ukrainian exports to the EU increased by 87%, reaching EUR 24.1 billion in 2021. Ukraine's exports include raw materials, chemical products, machinery, and raw products [58]. Both Ukraine and Russia play crucial roles as exporters of wheat, barley, corn, sunflower oil, and meal. However, Russia's invasion of Ukraine has disrupted agricultural exports from the region, creating uncertainties about Black Sea supply chains. This has further driven up commodity prices and increased inflation. The growing uncertainty about future supplies has prompted some countries to implement export bans or restrictions on their domestic supplies, contributing to the tightening of global availability and adding additional pressure on prices.

As of April 5, 2022, 11 countries have implemented export bans, including Russia, Belarus, Hungary, Serbia, Turkey, North Macedonia, and Egypt. These bans cover a range of products such as wheat, corn, flour, rye, barley, oilseeds, beans, lentils, and pasta [59].

References

[1] Indeed Editorial Team (March 11, 2023). What are exports? (With definitions, importance and examples). Available at: https://www.indeed.com/career-advice/career-development/what-are-exports (Accessed: December 11, 2023).

[2] Cavusgil, S. Tamer, Knight, Gary and Riesenberger, John R. (2020) International Business: the New Realities. 5th Edition. Harlow : Pearson Education Limited.

[3] 7.2 Exporting. Available at: https://opentext.wsu.edu/cpim/chapter/7-2-exporting/  (Accessed: December 11, 2023).

[4] Step-by-Step Guide to Exporting - Introduction. (November 18, 2019). Available at: https://www.tradecommissioner.gc.ca/guides/exporter-exportateurs/introduction.aspx?lang=eng (Accessed: December 11, 2023).

[5] The Canadian Trade Commisioner Center (December 10, 2021). Intelligence, CE. The Pros and Cons of Exporting. Available at: https://www.ceintelligence.com/content_manager/contentPages/view/the-pros-and-cons-of-exporting (Accessed: December 11, 2023).

[6] Are you ready to export? Advantages and disadvantages of exporting. Available at:  https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-exporting (Accessed: December 11, 2023).

[7] European Commission, Directorate-General for Trade, (2019) EU trade policy at work : creating opportunities, standing up for Europe’s values and interest. Publications Office. https://op.europa.eu/en/publication-detail/-/publication/ff7a42a0-8740-11e9-9f05-01aa75ed71a1. 

[8] Titievskaia, J. (2019)'EU trade policy: Frequently asked questions'. European Parliamentary Research Service. pp.1-31. https://www.europarl.europa.eu/RegData/etudes/IDAN/2019/642229/EPRS_IDA(2019)642229_EN.pdf 

[9]  European Parliament (2019). 'Making the most of globalisation: EU trade policy explained'  https://europa.eu/youreurope/business/selling-in-eu/selling goodsservices/selling-products-eu/index_en.htm

[10] European Commission. EU Position in world trade. Available at: https://ec.europa.eu/trade/policy/eu-position-in-world-trade/

[11] Commission sets course for an open, sustainable and assertive EU trade policy. (18 February. 2021). Available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_644 (Accessed: December 11, 2023).

[12] European Commision 2013, EU Trade Ploicy explained, Youtube, 13 November, viewed Dezember 8 2023, https://www.youtube.com/watch?v=IiOC5XG2I5Y 

[13] Eurostat Statistics Explained. International trade in goods https://ec.europa.eu/eurostat/statistics-explained/index.php (Accessed: December 11, 2023).

[14]  Statistics Netherlands. (2018). International trade and transit trade; value and weight. CBS. Available at: https://www.cbs.nl/en-gb/onze-diensten/methods/surveys/korte-onderzoeksbeschrijvingen/international-trade-and-transit-trade-value-and-weight. (Accessed: December 11, 2023).

[15] Eurostat Statistics Explained. Rotterdam: the largest freight port in the EU ​​https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20200402-2. (Accessed: December 11, 2023).

[16] The Rotterdam effect (January 27, 2020). Available at: https://www.economicsonline.co.uk/global_economics/the_rotterdam_effect.html/  (Accessed: December 11, 2023).

[17]  Eurostat Statistics Explained (July, 2023). World trade in services. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=World_trade_in_services (Accessed: December 11, 2023).

[18]  Open to Export. Exporting services- how are they classified. Available at: https://opentoexport.com/article/exporting-services-how-are-they-classified/ (Accessed: December 11, 2023).

[19]  Eurostat Statistics Explained (February, 2023). EU international trade in other business services. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_international_trade_in_other_business_services (Accessed: December 11, 2023).

[20]  Eurostat Statistics Explained (July, 2023). International trade in services by type of service. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_services_by_type_of_service (Accessed: December 11, 2023).

[21]  Eurostat Statistics Explained (July, 2023). International trade in services - an overview. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_services_-_an_overview (Accessed: December 11, 2023).

[22]  Ipsmiller, E., Brouthers, K., Dikova, D. (2021). 'Which export channels provide real options to SMEs?',  Journal of World Business, Volume 56, Issue 6, https://doi.org/10.1016/j.jwb.2021.101245

[23]   FAO.org. Market Entry Strategies. Available at: https://www.fao.org/3/W5973E/w5973e0b.htm (Accessed: December 11, 2023).

[24] Transportation of exports (December, 2021). Available at: https://www.referenceforbusiness.com/small/Sm-Z/Transportation-of-Exports.html. (Accessed: December 11, 2023).

[25] Netherlands Chamber of Commerce, KVK. Direct and indirect export: pros and cons. Availbale at: https://business.gov.nl/running-your-business/international-business/export/export-direct-or-indirect/ (Accessed: December 11, 2023).

[26] Gordon, J (21 October, 2023) Wholly-Owned Subsidiary - Explained.  Available at: https://thebusinessprofessor.com/en_US/business-governance/wholly-owned-subsidiary-definition (Accessed: December 11, 2023).

[27] Kenton, W (18 December, 2022) What is a wholly owned subsidiary? Definition and Examples. Available at: https://www.investopedia.com/terms/w/whollyownedsubsidiary.asp (Accessed: December 11, 2023).

[28]  European Commission. (2021). EU companies accessing world markets. Available at: https://ec.europa.eu/trade/import-and-export-rules/export-from-eu/ (Accessed: December 11, 2023).

[29]  Johnson, T.E. and Bade, D.L. (2010). Export/import procedures and documentation. 4th Edition. Saranac Lake: AMACOM

[30]  Aavani Ghangurde. (2019). Documents Required for Import-Export Customs Clearance. Available at: https://www.dripcapital.com/resources/blog/documents-for-export-customs-clearance (Accessed: December 11, 2023).

[31] Access to Export. (2019). Common types of export documents and their uses. Available at: https://www.accesstoexport.com/articles/export-documents-common-types-and-their-uses/ (Accessed: December 11, 2023).

[32]  International Trade Administration. (2020). Know Your Incoterms. Available at: https://www.trade.gov/know-your-incoterms  (Accessed: December 11, 2023).

[33]  European Commission. Welcome to Access2Markets to Trade Helpdesk users. Available at: https://trade.ec.europa.eu/access-to-markets/en/content/welcome-access2markets-trade-helpdesk-users (Accessed: December 11, 2023).

[34]  Institute of Management & Administration. (2004). Exclusive ME survey: why 69% of exporters to Europe rely on six favorable Incoterms. Available at: https://www.practicalbusinessskills.com/managing-a-business/financial-management/payment-options (Accessed: December 11, 2023).

[35] Practical Business Skills. (2021). Payment Options. Available at: https://www.practicalbusinessskills.com/managing-a-business/financial-management/payment-options (Accessed: December 11, 2023).

[36] Privacy Shield. Cash in Advance. Available at: https://www.privacyshield.gov/article?id=Trade-Finance-Guide-Chapter-2#:~:text=Management%20Credit%20Payment-,Cash%20In%20Advance,advance%20options%20available%20to%20exporters (Accessed: December 11, 2023).

[37] Noah, D. (17 July, 2019) Methods of payment in international trade: an introduction. Available at: https://www.shippingsolutions.com/blog/methods-of-payment-in-international-trade-an-introduction (Accessed: December 11, 2023).

[38]  Eurostat Statistics Explained. (2020). Balance of payment statistics – background. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Balance_of_payment_statistics_-_background (Accessed: December 11, 2023).

[39] Eurostat Statistics Explained (June 2023) International trade in good by mode of transportation. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods_by_mode_of_transport&oldid=536756 (Accessed: December 11, 2023).

[40] Eurostat Statistics Explained (June 2023) International trade in good by mode of transportation. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods_by_mode_of_transport&oldid=536756 (Accessed: December 11, 2023).

[41]  Reference for Business. (2021). Countertrading. Available at: https://www.referenceforbusiness.com/encyclopedia/Cos-Des/Countertrading.html (Accessed: December 11, 2023).

[42]  European Commission. (2021). Trade barriers. Available at: https://trade.ec.europa.eu/access-to-markets/en/barriers/details?isSps=false&barrier_id=11140 (Accessed: December 11, 2023).

[43]  Burtescu, C.L., Dumitru, M.I. and Bondoc, M.D. (2017). 'The use of countertrade: advantages and disadvantages for companies', Annals of University of Petroşani. Economics, 17 (1), pp. 27-34). 

[44]  European Commission. Guide for export services. Available at: https://trade.ec.europa.eu/access-to-markets/en/content/guide-export-services (Accessed: December 11, 2023).

[45] Privacy Shield Framework. Letters of Credit. Available at: https://www.privacyshield.gov/article?id=Letters-of-Credit-and-Documentary-Collection (Accessed: December 11, 2023).

[46]  Gilje, E.P., Loutskina, E. and Strahan, P.E. (2016) 'Exporting Liquidity: Branch Banking and Financial Integration', The Journal of finance (New York), 71 (3), pp. 1159-1184. 

[47]  European Commission. The EU-UK Trade and Cooperation Agreement. Available at: https://ec.europa.eu/info/strategy/relations-non-eu-countries/relations-united-kingdom/eu-uk-trade-and-cooperation-agreement_en  (Accessed: December 11, 2023).

[48] Thomas, D. (2021). Intel not considering the UK chip factory after Brexit. Available at: https://www.bbc.co.uk/news/business-58820599.amp (Accessed: December 11, 2023).

[49] O’Carroll, L. (2021) UK trade with the EU falls sharply as Brexit and Covid drive down exports. The Guardian. Available at: https://www.theguardian.com/business/2021/sep/10/uk-trade-with-eu-falls-as-brexit-and-covid-drive-down-exports (Accessed: December 11, 2023).

[50] Eurostat Staistics Explained (March 2023) International trade in goods. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=International_trade_in_goods&oldid=502739#The_three_largest_global_players_for_international_trade:_EU.2C (Accessed: December 11, 2023).

[51]  Eurostat Statistics Explained. (2021). EU trade in COVID-19 related products. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_trade_in_COVID-19_related_products (Accessed: December 11, 2023).

[52]  Batmanghelidj, E. (2020). European supply chains are global lifelines: Why Europe must maintain medical exports during the COVID-19 pandemic. European Leadership Network. Available at: http://www.jstor.org/stable/resrep24724. (Accessed: December 11, 2023).

[53] Eurostat Statistics Explained (2021) File:Extra EU trade in medicinal and pharmaceutical products, 2021 € million and %.png. Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:Extra_EU_trade_in_medicinal_and_pharmaceutical_products,_2021_%E2%82%AC_million_and_%25.png (Accessed: December 11, 2023).

[54] Eurostat Data Browser. Available at: https://ec.europa.eu/eurostat/databrowser/view/ext_st_eu27_2020sitc/default/table?lang=en (Accessed: December 11, 2023).

[55]  OECD. (2020). COVID 19 and international trade: Issues and actions. Available at: https://www.oecd.org/coronavirus/policy-responses/covid-19-and-international-trade-issues-and-actions-494da2fa/ (Accessed: December 11, 2023).

[56]Espitia Rueda, A.R., Ruta, M., Rocha, N., Winkler, D.E. & Mattoo, A. (2021). 'Pandemic Trade : Covid-19, Remote Work and Global Value Chains', Federal Reserve Bank of St Louis, St. Louis.

[57] OECD. (2021). Global value chains: Efficiency and risks in the context of COVID-19. Available at: https://www.oecd.org/coronavirus/policy-responses/global-value-chains-efficiency-and-risks-in-the-context-of-covid-19-67c75fdc/ (Accessed: December 11, 2023).

[58] European Parliament (2022) EU-Ukraine trade and investment relations and the impact of Russia's war. Available at: https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/639321/EXPO_BRI(2022)639321_EN.pdf (Accessed: December 11, 2023).

[59] Foreign Agricultural Service (2022) The Ukraine Conflict and other factors contributing ot high commodity prices and food insecurity. Available at: https://www.fas.usda.gov/data/ukraine-conflict-and-other-factors-contributing-high-commodity-prices-and-food-insecurity#:~:text=Russia's%20attack%20on%20Ukraine%20has,are%20further%20boosting%20food%20prices. (Accessed: December 11, 2023).

[60] DW News 2022, Ukraine war putting pressure on global grain supply / DW News, Youtube, 20 May, viewed Dezember 8 2023, https://www.youtube.com/watch?v=mm4UoFYJZH0

[61] Header image. Available at: https://www.kanakkupillai.com/learn/stay-ahead-in-international-trade-with-top-import-export-code-registration-trends/ (Accessed: December 11, 2023).