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Understand legal issues for exporters

The legal issues involved with exporting for the first time, particularly outside the EU, can seem complicated. Import licences, restrictions, taxes and different product standards can all create barriers to trade which mean you might need to modify your product, change its packaging, or have it certified to meet local requirements. You will need to consider how best to protect your intellectual property, too. At the same time, you'll need to anticipate potential problems and draw up clear contracts.

Fortunately, there is plenty of help available. The government is keen to help exporters, and business-support organisations can provide both general advice and specific information on the countries you want to sell to. Once you have understood and addressed the legal, customs and licensing issues, you'll be free to get on with building your export sales.

1 Check trade restrictions

1.1 Find out whether you need a UK export licence.

Most products can be exported without an export licence.

However, you may need a licence for weapons, products with a potential military use, food, animals and plants, medicines and certain chemicals, and antiques.

Whether you need a licence may depend on the country you are exporting to.

From time to time, the government may impose sanctions prohibiting certain exports to a particular country.

Take advice from the government department dealing with that type of product or from your advisers (see section 8).

If your goods are subject to strategic controls, or could have a military use, use the GoodsChecker interactive tool on the BIS website to find out if they need a licence.

1.2 Find out whether you will face any import restrictions overseas.

You may need an import licence, depending on the country you are selling to and the product you are selling.

Some countries ban the import of certain products altogether.

2 Investigate the overseas legal environment

2.1 Establish what normal commercial practice in the customer's country is.

Find out what payment procedures and credit terms are normally used.

Assess your chances of enforcing your legal rights in the local courts in case of a dispute.

2.2 Investigate the customer's reputation and creditworthiness.

You may want to visit the customer as part of the process of finding out about them and building a relationship.

Find out what experience other exporters have of dealing with customers in that country. Ask your local chambers of commerce for help with tracking down other exporters.

2.3 Check any legal requirements before visiting the country.

You can find specific passport and visa requirements from the country's embassy or consulate in the UK. Find a list of foreign embassies in the UK on the Foreign and Commonwealth Office website at www.fco.gov.uk/en/about-us/what-we-do/protocol/embassies-in-uk/.

If you are a UK citizen, you do not need a visa to visit other countries in the European Union (EU). Other holders of British passports, such as a British Overseas citizen, may need a visa for some EU countries, however.

Other restrictions can include currency controls and restrictions on where you can stay while in the country.

2.4 Take advice from experts if you are thinking of establishing any kind of local presence overseas.

There may be restrictions on forming a business, such as requiring a minimum level of capital or a particular legal form for the business.

You are likely to be subject to local laws and tax.

It can be difficult to lay off employees and realise the value of your assets if you later decide to cease trading there.

HM Revenue & Customs' (HMRC) Authorised Economic Operator (AEO) scheme is an accreditation scheme for businesses using the international supply chain. A quality mark for international traders, it offers benefts such as fewer customs inspections of goods, less paperwork and faster clearance of goods through customs.

3 Investigate product law

3.1 Find out about any local product standards.

Different countries may have their own standards for particular products. This could mean that even if your product meets relevant British, European or International Standards, this may not be enough.

Your product may need to be certified to state that it meets the appropriate standards. In some cases, the product must be tested and certified by an approved organisation in that country.

Within the EU, trade barriers of this kind are relatively rare. But they do exist for some products, particularly food, in some countries.

3.2 Check what other product regulations there are.

For example, you may be required to label products in the local language, using local weights and measures.

3.3 Find out about local product liability laws.

You might face prosecution if you sell products that fail to satisfy local product safety laws.

Your customers may be able to sue you if they suffer any harm or loss from a faulty product you sell.

If you are selling to a distributor, such as a wholesaler, they may want you to indemnify them against any legal claims their customers may bring against them.

3.4 Check whether you will be in conflict with any local intellectual property rights.

If another business has registered a local patent covering a similar product, or has a trademark similar to yours, you may not be able to export to that country. If you do, you risk them taking legal action against you for infringing their intellectual property.

3.5 Investigate local laws on marketing and selling.

For example, there might be restrictions on advertising or on selling to minors, or price controls on particular products.

If you are selling to consumers (rather than businesses), you must comply with any local consumer protection laws. For example, if you sell at a distance (without meeting the customer face-to-face) within the EU, your customer has various rights, including a 'cooling off' period during which most purchases can be cancelled.

Local laws will apply even if you are selling by mail order or through your website.

4 Check the tax situation

4.1 Comply with UK VAT rules.

Most goods are zero-rated for export, but you will need to check.

If you are selling within the EU, you must record the value of these exports in your VAT returns and you may also need to make an Intrastat declaration if your exports or imports exceed a specified annual threshold.

If you are exporting outside the EU, you must keep numbered invoices and records giving details.

4.2 Find out about the local import taxes.

Import taxes can include customs duty, excise duty (for products like alcohol), and some form of sales or value added tax. The rate of duty you pay will be set by the destination country.

Taxes vary from country to country and depend on the particular product. You may also have to pay VAT on any import duty.

Within the EU, goods are usually 'in free circulation'. There is no customs duty and VAT can be handled automatically.

Your contract with the customer must specify who is responsible for handling customs clearance and paying any import taxes.

4.3 Find out about any other local taxes.

If you have a local presence, you may be liable to some form of tax on your profits there.

5 Protect your intellectual property

5.1 Find out what automatic intellectual property protection you will have.

For example, copyright applies automatically in most countries.

However, most IP protection applies only in the country of registration and it is important to seek advice. Exporting goods within the EU carries some additional protection, for instance.

5.2 Decide whether to register any intellectual property for additional protection.

Most countries have local systems allowing you to register patents, trademarks and designs.

If you are exporting to several countries, you may be able to protect intellectual property on an international basis. For example, patents can be registered European-wide.

Registering intellectual property will add to your export costs. You will also usually have to enforce your rights yourself if someone else infringes them.

Find advice on how to obtain IP protection overseas and links to overseas intellectual property offices on the Intellectual Property Office website at http://www.ipo.gov.uk/otherprotect-abroad.htm.

5.3 Remember to take intellectual property protection into account in your negotiations and contracts.

If you use an agent, the contract should specify what rights they have to use your intellectual property. It should also state who will own any intellectual property that is created or modified during the relationship.

You may need extra protection if you are sending samples or disclosing ideas before a contract has been agreed.

6 Negotiate contracts

6.1 Cover all the basics as in any other sales contract.

For example, state what goods you are supplying and their price.

6.2 Agree the terms of delivery.

Negotiate which party must take responsibility for each stage of delivery, insurance and customs clearance.

You can do this using one of the internationally recognised 'Incoterms' which sets out exactly what each party's responsibilities are.

6.3 Agree the payment method.

Within the EU, many businesses use payment on account in much the same way as within the UK.

But unless you know and trust the customer, avoid payment on account. It can be difficult or impossible to chase payment if the supplier fails to pay. Instead, consider alternatives like payment by letter of credit.

6.4 Anticipate potential problems you may encounter.

Agree what will happen if you cannot deliver the right goods on time, or if goods are faulty. When you do so, take into account practical issues such as the cost of supplying a sample for final approval or collecting faulty goods.

Make sure the contract includes clauses protecting you if it is impossible for you to fulfil the contract: for example, if war breaks out.

Make sure you take advantage of duty relief schemes if you have to reimport the goods.

6.5 Agree how any disputes will be handled.

Aim to negotiate that UK law will apply.

Agree a dispute resolution procedure that can be used rather than going to court. For example, the contract you draw up might name a particular arbitration organisation.

7 Negotiate the agreement with any agent

7.1 Decide whether you want to use an agent.

Most exporters find it easier to use an agent or a freight forwarder to handle their responsibility for delivery, insurance, and export and import documentation.

7.2 Ensure that responsibilities are clearly agreed.

Make sure the customer knows what agent you will be using and what the agent's responsibilities will be.

While facilities between agents vary, an agent's services will typically include transport, customs procedures and export documentation, distribution, warehousing, and packaging.

Customs brokers will deal with overseas customs authorities, whereas customs agents only deal with UK authorities. Outside the UK, customs broking is a licensed profession, so choose a licensed broker if you recruit an agent abroad.

7.3 Establish clear limits to the agent's authority to act on your behalf.

You may face a claim if their earnings are lower than expected, or if you terminate the agency agreement.

A lawyer can prepare an agreement that will help protect you.

7.4 Check any potential legal obligations you may have to individuals acting as your agent.

You might be liable for the actions of your agent.

Make sure you give the agent all the information they need. A direct representative cannot be held liable for your customs debt.

However, an indirect representative can be held liable for your customs debt.

7.5 Do not pay bribes.

Paying bribes is illegal in most countries. Paying, or failing to prevent payment of, bribes overseas is also illegal under UK law. The UK Bribery Act 2010 has extended liability and toughened penalties for directors.

For example, you might face legal action if you allow or encourage an agent acting on your behalf to pay bribes or if you fail to prevent them from doing so.

You should have adequate procedures in place to prevent bribery.

8 Take the right advice

8.1 Use sources of foreign market information to find out about local legal issues.

UK Trade & Investment provides a range of support services for exporters, including information on different countries' regulations and commercial practice. They also support local Export Clubs where you can meet other exporters and share information.

Other sources of information include British embassies overseas.

8.2 Find out about specific legal issues for your product.

8.3 Your trade association should be able to help you.

The British Standards Institution offers consultancy services on issues such as standards and product certification.

The relevant government department can advise you on any export controls for your product.

8.4 Where necessary, invest in legal advice.

Make sure you have written contracts with your customers and any agent you employ.

Take advice on any legal uncertainties. Use a lawyer with experience of exporting, and ideally with experience of the country you are planning to export to.

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