Small Business International Trade: Issues to Consider Part 1

by Robert Goodman

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5. Consider Insurance

Transporting product from one part of the world to another is inherently risky. Delays in transport can rot perishable goods and even non-perishable goods can be damaged on route.

When considering the terms of international trade (see point 4), one needs to consider insurance to cover the risks of carriage. Freight forwarders are very familiar with this type of insurance, which may also cover the warehousing of product at the port of entry.

6. Be Wary of Currency Fluxuations

Because the local market in which you plan to sell your product is likely operating under a different currency regime from that of the U.S., fluxuations in currency values should also be considered when it comes to pricing one’s products in foreign markets.

Indeed, products which may seem relatively inexpensive from the standpoint of customers paying in U.S. dollars can all of the sudden become very expensive in a market governed by a currency that is weaker relative to the U.S. dollar.

7. Understanding the Foreign Tax Environment

The final consideration to be discussed in this article is the potential impact of foreign tax laws on revenues generated from sales in the targeted foreign market.

Again, as in the case of currency fluxuations, high tax environments can make selling products into foreign markets potentially expensive.

To mitigate potential foreign tax liabilities a tax professional should be consulted who is familiar with the relevant tax treaty between the targeted foreign market and the United States.

The Take Away

Engaging in international trade can be an exciting way of expanding the market for one’s product but is not an activity that is free from risk and requires advanced research, logistical preparation, and consulting with international trade professionals who can help with one’s understanding of local conditions, import and export laws, currency values, insurance, and foreign tax environments.

Related articles:

Cross Border Business- Key Questions for New Enterprises

Why the Global Economy Matters to Your Small Business

Don’t Underestimate How Global Issues Can Affect Your Company