What are the Biggest Challenges When Exporting to the United States?
Aug 3, 2022
For a long time, the United States of America has been one of the UK’s biggest trading partners and there is a wealth of history when it comes to UK companies exporting to the US.
While the European Union as a whole is consistently the largest destination for UK exports, the largest single country for UK exports has traditionally been (and still is) the United States. In 2020, the last full year for useful statistics, the UK exported a total of £126 billion worth of goods and services to the United States. This amounted to 21% of the total of all UK exports. This trend continued into 2021, with the same value of exports being recorded the year up to April 2021.
The importance of the trading relationship between the UK and the US can be seen when comparing it to the other major individual countries with which the UK trades.
Germany, for example, the second-largest country for UK exports, accounted for £47 billion worth of UK exports in the year up to April 2021. This is less than 40% of the value of exports to the US. Similarly, Ireland, the next most significant export country for the UK accounted for £39 billion worth of UK exports. This is less than a third of the total of UK exports to the US.
It is also worth pointing out that the amount of trade that the UK did with the US as a proportion of the UK’s total trade was significantly reduced in 2020 as a result of the coronavirus pandemic compared to geographically closer European countries.
As these statistics demonstrate, there are great opportunities for UK companies in the US market.
Taking Advantage of Opportunities in the United States
For companies that find that they are in demand in the US, the next step is finding out how to access the market. Luckily, the US is one of the easier countries when it comes to importing regulations and other matters related to doing business with the World Bank ranking the country as the 8th easiest country to do business in.
While this is true, there are certain difficulties associated with exporting from the UK to the US and most companies face significant hurdles when attempting to access the US market.
The main difficulties associated with exporting from the UK to the US relate to US import regulations, US law, and US business culture.
While it is important that every importer makes sure they have met their own individual requirements, the major things to consider are…
Customs Clearance and Duties
For unrestricted goods that are shipped to the US, it is important to make sure that the necessary documents are filed with the importing authorities, classification and appraisement are carried out and they are prepared for examination by US Customs and Border Protection.
Export Licenses and Restrictions
Certain goods are restricted in the US and some are even prohibited, including items that infringe trademark and copyright laws. It is important to check whether or not something that you are planning on importing is legally allowed to be imported. For restricted items, it may be possible to import them under special licenses or permits provided by federal agencies.
US Rules and Regulations
Doing business in the US means complying with the country’s laws and other regulations. It is important to be aware of all the rules are that apply to a particular importer.
One thing to take note of is that the rules and regulations are sometimes complicated by the fact that they may vary between different states. One piece of advice is to not treat the United States as one location, as you might do with a country like the UK, but rather to expect there to be significant differences between different states.
The US tax system is very complicated with taxes being imposed by the federal government as well as at a local level by states, counties, and cities. For example, the US does not have a national equivalent to UK VAT but instead has ‘sales taxes’ that are imposed at a state level. It is usually necessary to get tailored tax advice from an accountant or tax lawyer before doing business in the US.
Standards and Regulations
While Customs and Border Protection work to ensure that many prohibited goods do not enter the US in the first place, it is important to further check that any goods or services that you sell in the US meet national and local standards regulatory requirements. The laws on what can legally be sold may vary from state to state, for example.
Labeling and Packaging
It is important to check whether or not a product that you sell is required to meet any labeling or packaging specifications. Beverages and prepared foods, for example, must meet certain labeling requirements in order to be sold legally. Many of the laws that exist in relation to this are similar to those that exist in the UK.
Intellectual Property Rights
It is a good idea to speak to an intellectual property lawyer before selling certain goods in the US. As well as making sure that you are not infringing on anyone else’s products it is also good to check whether it would be wise to apply for patent or trademark protection for your own products.
Product Liability Law
It is a good idea to be aware of the risk of liability for any injury or damage that your product causes and to protect yourself against the risk that this poses.
Personal Entry Requirements
It will usually be necessary to travel to the US before doing business in the country. Many people who wish to begin exporting to the US, for example, find that they would like to attend local trade shows in order to establish business connections. It is usually fairly simple to gain entry to the country for these kinds of purposes, but make sure that you check visa requirements in advance of any proposed trip of this kind.
When it comes to finalising business deals, the two most important things are the payment terms associated with the contract and the currency in which payment will be received.
Key to any exporting endeavor is the terms under which payment will be received. It is important to scrutinise any contractual agreements that you enter into closely and avoid the possibility of disagreements arising in the future. It is normal to find that counterparties in contractual agreements will closely scrutinise the details of any deal that is reached. Again, legal advice can be sought if necessary.
One thing that will normally have to be agreed as part of the payment terms is the currency that is used for payment. Where it is decided that payment will be received in US dollars, this will create issues related to the cost of exchanging currencies and fluctuating exchange rates.
Bound specialises in helping companies that deal in foreign currencies to overcome the issue of fluctuating exchange rates. If your business is at risk of losing money to exchange rate changes, you may benefit substantially from the services that Bound provide.
General Issues of Doing Business in the United States
As well as importing rules, local laws, and contractual arrangements being something to be prepared for, many people also find that the way that business is done in the US is often much different from the UK.
In most of the US, it is common to be far more forthright when discussing business with discussions tending to focus heavily on the details of the deal that is reached.
The standard demands amongst consumers are high in the US and it is important to make sure that you meet those high demands. While products from the UK have a reputation for quality in the US it is wise to research the market well and make sure that you are competing properly.
As well as consumers in the US generally demanding quality, there is also a demand for good customer service. If you are dealing directly with your customers, make sure that you make customer service a priority and that you maintain high standards. As well as providing good customer service when dealing with your customers it is also a good idea to provide follow-up services through complaints or queries services. If you are not dealing directly with your customers, make sure that you appoint a good customer service representative who will help to boost your brand.
It is important to remember that the US is a huge country. As well as rules and regulations varying from state to state, so do consumer demands. Targeting specific geographical areas where your goods or services are likely to be in the highest demand is always a good idea.
What Other Countries Does the UK Export To?
The top 25 countries for UK exports are as follows:
Table 1. Countries to which the UK exports