International trade was severely affected by the pandemic caused by the novel coronavirus or COVID-19. It is bringing with it outcomes in many cases fatal for the business sector. Randall Castillo Ortega, an entrepreneur and global trade specialist from Costa Rica, provides insight into the various challenges companies in foreign trade are facing.
One of the challenges that international trade must face quickly and effectively are the delays in shipments made by commodity-manufacturing nations. This is because imports and exports came to an almost complete standstill last year. With new biosecurity standards and countries still having strong restrictions, a new way of sending and receiving goods must be considered.
Develop an international structure. If a company wants to be competitive worldwide, it must have a team – ready for the challenge – that knows how to operate under different legislation in force.
Select the right markets. Firms can boost their growth by diversifying, but leaders need to analyze which international markets are appropriate for their product or service.
Be up to date on laws and regulations. All the legal implications fall on the heads of foreign trade, as they need to know the local applications and regulations, both of their country and their target market. In this aspect, acquiring a compliance system has become essential to identify risks of regulatory non-compliance.
Confront the controls applied to foreign trade. Explains Castillo, “Authorities have intensified import and export controls and increased foreign trade fines for non-compliance and omission.”
Manage accounting, taxation and finance properly. These three areas are a great challenge for companies that are committed to internationalization to ensure their growth, especially since they must know different tax systems, taxes and requirements.
Understand international pricing calculation and strategy. For exporters, setting the price of their products and services abroad is no easy task, as they must remain competitive while securing their profits.
Adopt international payment methods. “Economic transactions are a constant concern for both importers and exporters,” says Castillo. “Many acquire some international payment system – especially documentary collections and letters of credit – to guarantee a certain degree of financial protection.”
Understand exchange rates. Currency fluctuation can seriously affect the operation of a company involved in foreign trade.
Communication and cultural differences. Effective communication with colleagues, customers, distributors, etc., is critical to the success of international business. It is not easy for leaders to break down the cultural barriers that prevent the insertion of a product or service in a new market.
Political risks. Political uncertainty and instability are latent risks for any company, as governments can change policies, regulations and taxes, harming foreign companies and investments. Against this backdrop, business leaders need to follow political developments and strategize to mitigate risks and negative consequences.
Secure supply chains. Supply chains are exposed to serious problems, which can involve criminal groups or suppliers with illegal practices. To combat this problem, the AEO Certification was established, which can be obtained by importers, exporters, transport companies, customs agents, industrial parks and other companies.
Innovation obstacles have to be overcome. Due to constant technological and economic changes, the biggest challenge for leaders in international trade is to innovate in all their processes to face any adversity.
One of the challenges for international trade is the consolidation of imports and exports in world markets. The reactivation of the economy, which is already an essential factor in overcoming the crisis, is not enough. Also, it is necessary for companies to consolidate in their market niches based on competitiveness and process optimization.