Organization of foreign economic activity at the enterprise

Companies based in different countries are often interested in expanding their business opportunities and going international. Therefore, such a concept as “foreign economic activity” appeared which regulates this process. It implies export-import operations, cooperation of companies in technological and production spheres.

What are the forms and types of foreign economic activity

This is a specific activity carried out by entire countries or individual companies, economic entities, and industries. We can say that foreign economic activity is cooperation on many issues, entrepreneurship, affecting economic entities in different states. Because of this, certain difficulties arise, since the legislation differs in each state. Even if we take the European Union as an example, then there will also be noticeable differences, different law enforcement practices among the states that are part of it. Features of foreign economic activity:

  • We can not say that this is exclusively trade in its classical sense. It includes investments, cooperation on loans and credits.
  • The participants are companies or individual entrepreneurs, individuals, government agencies, authorities.
  • An important role is played by legal regulation, compliance with customs regulations and rules.

Participants in foreign economic activity (FEA)

To classify participants in foreign economic activity, it is necessary to take into account the territory of registration, type of activity, organizational and legal forms and other factors. If we evaluate what the activities of the subjects are aimed at, then we can subdivide them into three groups:

  • Manufacturers.
  • Those related to intermediaries.
  • Promotional companies.

Promotional companies include those that provide customs brokerage services in accordance with the requirements of foreign economic activity. This area is also subject to regulation by domestic and international legislation.

Enterprises engaged in foreign economic activity

A company, an organization is an independent full-fledged economic entity whose activities are aimed at creating goods or offering services to an unlimited number of people. It is no secret that many business entities are striving to expand their activities and enter the international market. To do this, you will have to take into account the norms of international legislation, involve experts in their activities, which will help in many areas, including in documentary support.

The company carries out foreign economic activity by signing agreements, contracts, that is, when the legal basis comes. This allows you to significantly expand the sales market for products, increase financial performance, stimulate turnover, create a reputation for yourself, and form a positive image. There is no secret that those enterprises that go to the international level inspire more confidence on the part of people and other economic structures.

Foreign economic activity outsourcing, what is it

https://lh3.googleusercontent.com/cl3Oz0DSE_LGOj0-k3Jf5QbS3XmhYIOFSAfM2qIL7hsbuOqS4wIhKTM-klLtQwQZvig6i6gWF1hS-Jo7o5bFqgOJ9xEmcfMfyxEJwvCIes9o5Q-Q5O_axP5onw7NHUL3kFQ-Nsfl=s0

The concept of “outsourcing” in many areas, including foreign trade, is no longer new. It means the following:

  • Transfer of some functions, management process to specialized companies. One of the simplest examples is the need to purchase any goods in the countries of the European Union. Of course, you can send your representative, an employee of the company, there to arrange the deal. All this can be outsourced to foreign economic activity.
  • Moreover, it will be possible to order and delivery of the necessary goods, moving around the country, transportation directly to the warehouse. Thus, all the details regarding the purchase, search for suppliers, signing contracts, delivery are undertaken by the company engaged in outsourcing of foreign economic activity.
  • You can order some separate types of activities, for example, just search for partners, paperwork, and take over the transportation process. There is also a turnkey foreign trade outsourcing. It implies an integrated approach, that is, ordering, receiving, turnkey delivery.

What does the optimization of foreign economic activity mean?

It is in outsourcing that one often hears about optimization. This is the specificity of the system itself. Outsourcing implies the delegation of some of the powers and functions to other companies. To understand the optimization of foreign economic activity better, it is worth taking a look at the table:

Conduct of negotiationsOutsourcers can negotiate with foreign partners on behalf of the enterprise 
Analysis of contractsOutsourcing is preparation, search for commercially profitable contracts for the client

In addition, it is possible to represent an enterprise or a trading house at international exhibitions. Often such presentations in an international format allow you to find partners, conclude lucrative contracts. Attendance at such forums, presentations, manufacturer congresses and other events means a waste of time, money, the need to send your employee to their destination. Therefore, foreign trade outsourcing often comes to the rescue here too.

Searching for partners and checking them for compliance with the requirements

Of course, foreign economic activity is a search for partners and an equally important stage, which consists in financing, monitoring the implementation of financial transactions. By the way, these services are most often delegated by an outsourcer. The search for partners, which was mentioned in general terms above, means the following nuances. This is a check of potential partners for reliability, reliability regarding the fulfillment of conditions, a check of reputation, the duration of stay in the market. As the well-known American rule regarding doing business says: “First it is important to eliminate risks, ensure security, and only then proceed directly to business.” The following tasks are performed:

  • Business expansion.
  • Organization of negotiations without an intermediary.
  • Analysis of the manufacturer’s production capabilities.
  • Preparation of an agreement, discussion of all stages, details.
  • Signing the agreement. This, the last stage, may be attended by both a specialist in outsourcing of foreign economic activity, and directly by the customer, that is, the client whose services are provided by the outsourcer.

Carrying out financial calculations in foreign economic activity (FEA)

https://lh4.googleusercontent.com/RyzLnxyeMGYz6_afLKtsEIfgjlBk5sxdc-Z4gVQj7nFqlaSH6auV599a59Qc0vvDwTuAOzNloFRP_OogSoWFCFeXzAsBLIuxG3l5w3N070VINn0OJOoL0_JMRDxarhQQpn7WEI91=s0

Controlling financial flows is also important, as well as finding reliable partners. The main requirements can be found in the table:

TransparencyFull transparency of cash flows is negotiated in advance and fixed in the contract
ReportingThe outsourcer is obliged to provide documents confirming the performance of certain financial transactions

Sometimes financial transactions are called the technical component of foreign economic activity (FEA). The conclusion of the contract and the subsequent financial transactions, of course, imply complete trust in the partners. But since nothing can be asserted with a 100% guarantee, it is not surprising that such transactions are usually insured. Insurance implies coverage of losses as well due to the bad faith of counterparties, non-performance or improper performance of obligations.

Organization of goods delivery

Another stage or type of foreign economic activity is delivery. It is also often taken to the outsourcing segment. Sometimes everything seems quite simple, since the client is only shown the specifics of the route, duration, travel time. But real professionals will certainly calculate the costs. So, following the routes means the need to cross customs points, pay fees, duties. This means that when carrying out foreign economic activity, it is necessary to take into account the cost of delivering goods directly to the storage point. Besides:

  • If there is the involvement of subcontractors, other intermediaries along with the outsourcer, then this increases the risk of default. Involvement of subcontractors must be negotiated in advance and specified in the contract.
  • Pricing should be transparent, although it is not always possible to calculate costs in advance with great accuracy. Cost also means the price of freight forwarding services along the route, the specifics of routes and, of course, the type of transport: rail, air, road, water.
  • The final stage under the cooperation agreement will be the transfer of goods, verification of their integrity.

Expenses for foreign economic activity

There will always be costs, even in case of refusal from outsourcing of foreign economic activity. The cost consists of several components: import and export duties, overhead costs, excise taxes, standard customs duties. Rates can change over time and even in some cases depend on the season. Sometimes, when ordering goods, it is required to make an advance payment, which will become a kind of guarantor of the seriousness of the intentions of all participants in foreign economic activity. These provisions are also stipulated in the agreement. The contract specifies the amount of the prepayment, the terms and its payment. If the deadlines are violated and the prepayment is made later, then this will already be considered a violation of the agreements.

Other important factors when concluding a contract for foreign economic activity

https://lh4.googleusercontent.com/-x3g7kPkUNuFs8dhQw4_2CmHYq6cvDfMLfgrgddR6b6q60UF05XkcfVx1vgbO4W5Lh21i6htZWH-uHBweXcwUadTEzQnVBQltUjylH4ErJesdRzIh-4TacUmOupmyIbVuySz9eSg=s0

Do not think that foreign economic activity is only one-time cooperation, one-time contracts. A company, enterprise, organization and other business entities often plan periodic, long-term cooperation. It is believed that contracts for long-term supplies are the most stable and reliable. Frequency of deliveries is negotiated, which also affects the price. So, if you involve outsourcing of foreign economic activity, then in most cases the price for outsourcing services will be slightly lower if the client plans to seek help often, periodically, in large volumes.

One of the main stages of foreign economic activity will also be paperwork, filing customs declarations. It is necessary not only to fill them out correctly, eliminating errors, typos, but also to submit the completed documentation on time. Sometimes you have to attach some certificates and other documents in foreign languages, providing their notarized translation. Sometimes customers think that these are trifles that cannot significantly affect the cooperation process. But professionals know that it is because of such oversights that, for example, customs or tax benefits can be lost.

Failure to fill in the documents correctly can theoretically become the basis for double taxation. In order to avoid these consequences, it is necessary to act with the utmost care, promptly and in strict accordance with the law. And here it would be appropriate to mention the outsourcing of foreign economic activity, since in this case the outsourcer will fully bear responsibility, which takes into account the details, including the necessity for translation, notarization of declarations, and other documents.

Compliance with the cooperation algorithms in providing assistance in foreign economic activity

All these stages, which were mentioned above, are divided into sub-stages, imply strict priority, adherence to deadlines. But if it were really difficult, unprofitable and with an abundance of risks, then foreign economic activity would not develop at such a pace. On the contrary, in most cases it turns out to be advantages:

  • Stimulation of turnover.
  • An opportunity to make a profitable investment.
  • Expanding the range, increasing competitiveness within the country due to the competent organization of export-import operations.

Experts study the market conditions, the situation in the domestic market, consider commercial offers, conduct negotiations, examine contracts for compliance with domestic and international legislation, and provide free preliminary consultations. Such a high service is possible due to the rather high competition in this area.

Людмила Логистик УКР

Эксперт в сфере транспорта и логистических процессов НАН Украины. Участница экспертной рады при министерстве транспорта и инфраструктуры

Leave a Reply