Beginner’s Guide on Starting a Trading Importer & Exporter Business in the United Kingdom
Trade allows for one country to supply the demand of commodities in another country and vice versa. This exchange of goods and services leads to economies of scale and an increased variety of products and services in every region. International trade’s significant economic contribution is the reason why starting a trading importer & exporter business in the United Kingdom is very appealing.
Entrepreneurs take on international trade businesses to take advantage of the minimal investment and fairly low operating costs. With good operations and finance management, this line of business can raise considerable profits. You’ll also build many connections with entrepreneurs and other parties in this business. This network can help you grow if you decide to scale larger markets in the future.
If you think starting a trading importer & exporter business in the United Kingdom is the ideal venture for you, here’s a quick guide to help you set up your business. Here, 3E Accounting, a top United Kingdom corporate service provider, provides an overview of the import and export industry in the United Kingdom, how to register the business, and other legal considerations.
What is a Trading Importer & Export Business?
Importing is the bringing in of goods and services from foreign countries while exporting is the sale of products in foreign markets. But the international trade business is more than bringing goods and services in and out of the region. Trading importer and export businesses have different variations on the microlevel, and their operations depend upon existing international trade agreements.
Export Management Company (EMC) is a business that provides a channel and means for domestic companies to market their products globally. Furthermore, an Export Trading Company (ETC) provides support on the operations of exporting local products. For example, they can help domestic manufacturers find overseas buyers and provide assistance in warehousing, shipping, and billing. Lastly, an import and export merchant is an independent entity that purchases local goods and resells them in foreign markets by itself.
Entrepreneurs planning to engage in import and export business should be happy to learn that the United Kingdom has an array of trade agreements in effect to date. These free trade agreements allow for lesser tariffs and restrictions between signing states, meaning much lesser costs. The United Kingdom has trade agreements with 37 countries as of 2020. The United Kingdom’s biggest trading partners are the USA, Germany, and China.
How to Start a Trading Import & Export Business
Starting a trading import & export business is like any other business, so seeing through all the basics is critical. This means you have to register your business, get licenses and permits to legally operate, acquire funding, and create a business plan. The registration process and costs will vary depending on the type of company and structure you’ve chosen.
To register the business, you’ll have to find a unique name and prepare the other details like office address, company directors, and shareholders. Upon furnishing these details, you’ll also have to submit the Memorandum and the Articles of Association to the Companies House. Postal applications can take up to ten days to process. Still, online registrations are usually processed within 24 hours, costing £2 to £100.
A crucial aspect of a trading import and export business is its supply chain. This refers to the players passing the products between manufacturer and distribution. If you plan to be an import-export merchant, you’d have to think about where to source your products and how to market and transfer them. Identifying these parties and channels will involve a lot of research, networking, and negotiations.
In addition to that, you have to consider your product and your target market. You can choose between many trading niches, for example, jewellery, construction equipment, toys, women’s apparel, and others. Moreover, focusing on previous experience in dealing with particular products or industries will be advantageous. This way, you’d be more familiar with the market and most likely already have contacts for suppliers, intermediaries, or customers.
For easy registration check company registration in United Kingdom.
Licenses, Permits, and Regulations for Trading Importer & Exporter Business
Depending on factors like product type, origin, and destination, an import-export business needs to acquire one or several licenses for their products. Every product type has commodity codes. These codes allow you to identify the product’s duty rate, restrictions, and whether it would require a license to trade. Importing and exporting products in the United Kingdom without proper permits can result in confiscation, fines, or prosecution.
The state does not require a business to have a license for most imported goods. But products like food, firearms, animals, and medicine would require one. For example, the importer needs to apply for an import license from the Department for Environment, Food and Rural Affairs (Defra) to bring in imported meat, dairy, and plant-based products.
Moreover, exporting items like artwork, antiques, live animals, medicine, and prescription drugs would require an exporting license. The exporter would have to apply for such a license from the respective state agencies. Defra oversees the export of animals, the Medicines and Healthcare Regulatory Agency (MHRA) for medicines, and the Arts Council for books and works of arts over 50 years old.
Now you have to remember that you cannot import or export any product you want. Certain states like the US prohibit absinthe or alcohol, wildlife, dog or cat fur, and merchandise from embargoed countries. There are also other restrictions like being able to import or export only a prescribed value or quantity. Therefore it is best to identify your products and where they’re headed early on to learn and plan your strategy regarding these regulations.
How Brexit Changes Trading Importer & Exporter Business in the United Kingdom
Because of Brexit, trading importer & exporter business will now be much more different than before. Starting January 2021, trade between the United Kingdom and non-EU states will require an EORI (Economic Operators Registration and Identification). Every importing and exporting business should have one. The EORI will serve as the business’ ID to track and record your customs data.
To apply for an EORI, you’ll need the details below. You can apply for an EORI number online, and it usually only takes 5 to 10 minutes.
- VAT number
- date of business registration
- national insurance number (for individual or sole trader)
- The date you started your business
- Unique Taxpayer Reference (UTR)
- Standard Industrial Classification (SIC) code
- Government gateway account
Furthermore, you may need to make a customs declaration when moving products in and out of Europe, Switzerland, Norway, Iceland, and Liechtenstein. To declare your products, you’ll have to fill out the form enumerating and detailing the goods for import and export. You may submit this form electronically through the Customs Handling of Import and Export Freight (CHIEF) system. And if you want to make the process more efficient and cost-saving, you may opt to hire a customs agent or broker.
The standard VAT for imported goods is at 20%, with certain items at 5%, exempt or zero-rated. Meanwhile, export products may be subject to 0% VAT or exempt from VAT, depending on whether they satisfy various conditions and if they are direct or indirect exports. And starting 2021, all imports are subject to the new United Kingdom global tariff unless they are exempt.
Company Registration Services in the United Kingdom
Starting a trading importer & exporter business in the United Kingdom requires much research, planning, and strategizing. If merely reading all the procedures you have to see through makes you feel overwhelmed, it’s understandable. Start-up planning and company registration in United Kingdom is not a simple feat and can be overwhelming.
Good thing is, you don’t have to do it all alone! You can always seek the assistance and advice of company incorporation services in United Kingdom. 3E Accounting specializes in helping business owners in their business registration, license application, and post-startup compliance. Our practitioners are knowledgeable and skilled in handling business registration for different industries including trading importer and exporter businesses.
Contact 3E Accounting today to complete your business start-up procedures with much less hassle!
