We will tell you what the company’s international trade is and select the outsource team for the international trade department.

What is GSCM and why do I need it?

GSCM is a supply chain management of the company. It is based on two main concepts – import (when we import goods, components, and materials from another country) and export (when we export them).

Legal entities have the right to engage in foreign trade since 1991, but they are subject to strict government control. It includes regular interaction with the tax and customs authorities, obtaining licenses and various certificates, and dealing with the law. But we must not forget about the risks: sanctions, currency rate changes and damage to goods during transportation can hit the business if the foreign trade department is not sufficiently qualified.

However, with a well-organized work, you can get much more – access to the international market, purchase of materials and components at lower prices, new trade connections, and nice profits.

How to start a foreign economic activity for an enterprise?

One can try to organize foreign trade independently, but consider the time, complexity, and costs associated with this.
First, we open a currency account. This is done quickly, but its maintenance – registration of contracts, issue of certificates, and compliance with currency control standards – often requires the involvement of certain specialists and full immersion in the legislation.
So, to organize a foreign trade department, the following specialists are required:

Accountant – its functions are tracking transactions, monitoring taxes and duties, preparing reports, and many specific tasks. But an average accountant is not suitable – here, a deep experience, knowledge of documentation and nuances are essential. For example, the experience in working with cargo customs declarations.

Customs declarant is a customs control specialist. Usually, a dedicated specialist is hired for each direction: for equipment, for components, etc. The delivery time of goods and filling out the necessary documents largely depend on this person. An incapable specialist can ruin the entire delivery – only one item requires up to 50 files where all the data and markings must match.
In addition, customs re-check all documents within 3 years after the issue of the permit, and if any violations are found, sanctions may be applied to the foreign trade participant.

Foreign trade managers – they are responsible for searching for foreign contractors, conducting negotiations, and logistics. Of course, one manager can be hired to perform these duties, but the customs clearance of some items can be quite time-consuming (for example, when importing a set of spare parts, each individual part must be registered), and with large volumes of import, it will be quite difficult for one person to cope.
For this reason, there are individual managers for the below directions:

Business development manager is a person who searches for contractors, visits exhibitions and factories, conducts negotiations, and maintains business correspondence. The expenditures for such specialist are rather high. Only one efficient trip to the exhibition costs about 150 thousand rubles.
The search process itself is also not easy. Very often, foreign contractors do not respond to requests immediately or do not respond at all, and if the process is poorly-organized, only few responses are received out of 10 requests. A good search specialist can effectively build the search process and achieve good results. In addition, such a specialist in negotiations should understand the cultural characteristics of other peoples.

Logistics manager is a specialist in the goods transportation. But, for example, even foreign currency payments are attributed to logistics. This usually takes 4-5 days, but we have agents who help reduce this term to one day. This is done to minimize the time of storing the goods in the warehouses.

Lawyer in the field of customs and international law is a specialist who protects the company from customs difficulties. To put it simply: the company always seeks to find products at more competitive prices. Some companies avoid paying all the necessary fees, underestimate the cost, etc., and the government fights against such violators and checks every delivery. Therefore, a lawyer of a respectable foreign trade participant must prove the real cost and absence of violations, ensure that all necessary checks are passed, and confidently conduct the case in court if problems arise.
Then, the lawyer should be aware of the rules of international law, know the legislation of the country of the company’s trading partner, and prepare documentation for foreign contractors. For example, there may be a lot of disputes with Chinese suppliers. Legal proceedings with them are very complicated, so it is good if there is a specialist who has the experience or necessary knowledge.

Certification specialist is the person whose duty is the preparation of the necessary documents to confirm the compliance of the goods with the technical regulations of the Customs Union (TR CU), national standards of the Russian Federation and, if necessary, the CSR (Certificate of state registration). If the documents confirming compliance with the TR CU standards are not provided with the goods, the delivery may be arrested, fined, or even seized. The point is that the requirement for certification of certain goods is not always expressly specified in the law, so the specialist must “always keep a finger on the pulse” and have the skills to process a lot of information.

How to choose a foreign trade outsourcing company?

There are a lot of criteria for choosing a company for foreign trade outsourcing or for delegating your import/export deliveries because each cross-border transaction is unique in its own way. We will consider the main criteria.
First, the company must have an experience that it can confirm. For example, we often invite new clients to contact those with whom we have been collaborating for a long time. Thus, we confirm not only the experience and availability of real cases, but also the level of interaction between the company and customers.
Secondly, the company must have the above-listed specialists with high qualifications and a set of cases. This way, all risks will be minimized, and you will worry less about each delivery.

In addition, the company must provide an inspection lot of samples to let you test whether the product is suitable for your production. In addition, a reliable company will definitely build a purchasing system for your individual specifics, taking into account seasonality, details, and “purchasing portfolio”, that is, the degree of importance of the product in production and criteria to suppliers based on quality, price, and reliability. The company also independently conducts negotiations in a foreign language, deals with the specification, and fixes the exchange rate for the duration of the transaction (hedging).

Reputation in the countries where the company operates. For example, in Italy, there are black lists of unreliable companies that no supplier will work with. And the Chinese even have a concept called “guanxi”. This means the company’s connections, its reputation in the business community, credibility, and observance of liabilities. If a company has “guanxi”, it is able to build long-term business relationships, which means that it has many connections in China.

Find more information about the organization of the supply chain management department here. ©

Here we will tell you about the details and problems that you may encounter at customs, and how to avoid them.

Incorrect HS code (TN VED)

HS code is commodity nomenclature of international trade. This is a kind of reference book that contains all possible goods imported into the country. An individual 10-digit HS code is assigned to each product type. As a rule, the first 4 digits are very important – they define the group to which the product is assigned. The code is needed to determine the rate of import duty, and the amount to be paid at customs, consequently, the cost of goods depends on the correctness of the code. Also, the HS code helps to determine whether the product is subject to excise duty or certification. However, the HS code does not always clearly define the need to apply non-tariff regulations. This will be discussed in the article below.

On the one hand, the scheme is simple – we open the directory, look at a product group, then a subgroup, and select the suitable code. In some cases we request it at manufacturers. But, firstly, sometimes the product is not so easy to classify (or the product is absent in the list, for example, if it is a new innovative product), and, secondly, the code assigned by a foreign manufacturer may not match the Russian code, which can cause a misunderstanding at customs. As a result, a delivery that was supposed to cost, for example, $100, will actually cost 10,000.

Difficulties with the import of equipment may also arise. The directory does contain a list of various machines and installations, but what if the machine combines several functions? To avoid troubles, we select one main functionality, select the code and prove to customs that we have chosen everything correctly.

The import of the production line is particularly difficult. Usually it includes many units with various functions. To register a proper HS code, the customs office can be consulted by requesting a “classification decision”. But the decision on import and the project cost estimation can take ages. For example, waiting for a response on a request sent right now may take up to three months.

Experienced companies, such as ours, aim to correctly divide lines into functional production areas and declare them separately. This takes less time and allows quick changing of codes if some of the equipment functions change in the process.

It is important to keep in mind that customs inspectors pass goods more easily and quickly if they see the level of documentation preparation and competence on the part of an international trade participant.

Absence of the necessary certificates

Let’s assume that you import fans. You easily select the HS code, calculate the cost, but at the customs it turns out that you weren’t aware of the need to certify this product, and now the entire delivery may be arrested. Here is an example: if you import household fans that are ready for use, the certificate of compliance with TR CU is usually required. But if you import fans as part of certain industrial products, the certificate is not required. However, this fact must be confirmed by the appropriate documentation. There are situations when a certificate for a certain HS code has been obtained and agreed with the manufacturer, but for some reason, the applied labeling is incomplete or superfluous (for example, some numbers or letters are added to the main labeling on the cargo). As a result, the certificate may be considered invalid and a violation may be recorded.

Certainly, it is possible to inspect the cargo together with an inspector immediately before declaring, but when there are continuous flows of goods, examining all the packaging and labeling can slow down logistics.
For such cases, the team must have a competent certification specialist. This expert will understand whether the certification is required or not, correctly draw up all documents, give the necessary instructions on correct labeling to the consignor, request a photo of the labeling in advance, and, if necessary, make adjustments to ensure fast and smooth delivery across the border.

Improper cargo packing

Another case when the cargo documents are in order, but an unexpected issue arises. An inspector with a sanitary controller check the packaging and find, for example, that the wooden pallets on which the equipment stands do not have safety labels and proper fumigation mark. This is a violation.

The marking of wooden pallets must be accompanied by a paper confirming that the entire package has been fumigated (treated against insects and harmful substances), otherwise the cargo may be detained.
Usually, it is possible to arrange that the manufacturer properly prepared the marking and all the papers, but it happens that foreign trade participants simply forget about this, and then lose precious time and money. This requires a well-coordinated work of the foreign trade manager, who acts in accordance with a cut and dried checklist because it can be very difficult to keep in mind all the details of foreign trade.

Customs does not pass spare parts for products

Let’s go back to the example with fans. It is often inconvenient to transport them assembled. For this reason, the lot is shipped disassembled – engines and impellers as individual parts.

The difficulty is that a customs duty is not required for the fan, but is mandatory for certain types of motors. The simplest solution is to transport all the parts in one container and attach the correct drawings of the assembled equipment to prove to the inspector that this is a single item and not several individual items.

In some cases components are transported on different routes. in that context, we aim to calculate the shipping time so that all the containers of one delivery arrive at customs at the same time. To do this, we have highly professional logistics managers in our team.

Customs requested the customs value adjustment (CVA)

Let’s assume that company “A” is carrying a fan for $5. Our company has found the same for $3.

The customs inspectors know that the average price of fans is $5. The fact that we declare a cheaper fan may be regarded as an understatement of the customs value, and the inspector agrees to release the goods only after paying the average cost, putting a mark “release against security” on the cargo customs declaration
To avoid this, we prepare additional documents to confirm the cost of the goods. Sometimes it takes a very long time to prove, and without competent specialists, a company will be forced to overpay.
The most important thing is that if we proved that the fan costs $3 this time, the next time we will need to prove it again. Because our delivery won’t change the statistics all that much.

So, each delivery is unique, even if we import the same items every month. Assigning the HS code, proving the cost, preparing certificates and packaging, calculating the route – all this is too difficult for an untrained and inexperienced specialist. Here, every mistake may result in arresting goods or additional costs.

To prevent this to happen to your goods, ask a question to our specialist. ©