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Barriers
to exporting
There are some traders that would argue that exporting
is no different to doing business in the local market. It
is all about doing good business and making the right decisions.
The reality is, however, that the foreign marketplace is
often very different from that in South Africa.
Foreign environment
as a barrier to trade
To begin with, there are social,
cultural, economic, legal, political, technical and physical
differences between South African and the rest of the world.
After all, other countries speak different languages (e.g.
German, French or Chinese), they use different currencies
(such as the dollar or the yen), they adhere to different
standards (think of the 110V power supply in the US), they
follow different laws (such as Islamic law) and they are
often governed by different politics (such as communism
or socialism). These factors all contribute to making exporting
more difficult - that is, they are barriers to exporting.
These factors are all related to the different environments
that you will encounter abroad and we have discussed them
in more detail a separate section - click here for
more information about the foreign environments you will
need to deal with when exporting.
Besides for the different
environments that you will encounter abroad (which we have
said are barriers to trade in their own right), there are
also tariff and non-tariff barriers to trade
that you should be aware of. These are discussed below:
Tariff barriers
A tariff is a tax that is placed
on imported goods by governments. Governments do this for
several reasons:
- They may wish to restrict the amount of imported goods
coming into the country in order to protect or encourage
a positive trade balance. If a country imports more than
it exports, it will have to use valuable foreign exchange
to pay for these goods - this is referred to as a negative
trade balance or a trade deficit. Since a country's foreign
exchange holdings represents direct wealth to the country,
as more foreign exchange leaves the country to pay for imported
goods so the country becomes relatively poorer. Governments
try to prevent this by placing tariffs (taxes) on imported
goods.
- They may wish to protect a local industry from foreign
competition. This is often done where the industry in question
is still very young and susceptible to foreign competition.
The government will then place a tax on imported goods that
compete with goods being produced by that industry, thus
making these imported goods more expensive compared with
locally produced goods. In so doing, the expectation is
that consumers will buy more of the locally produced goods
thereby helping the industry to grow. Once the industry
is better established the intention is normally to withdraw
the tariff so that the local industry can compete normally
with foreign competitors.
- Some countries introduce tariffs in order to generate
additional revenues for the country. This is often done
in the case of luxury goods.
How duties are calculated?
Tariffs may be calculated
in different ways. They are usually either ad valorem
duties or specific duties.
Specific duty - A specific duty is usually
levied on the quantity (measured by weight or volume) of
imported goods (e.g. R1/kg or R1/cubic meter)
Ad valorem duty - An ad valorem duty
is levied as a percentage duty on the value of imported
goods (e.g. 15% on the CIF value of the imported goods).
Where can I find
information about the duties levied in a particular country?
Clearly, every country applies
a different set of tariffs on its imported goods. Some
countries have very low overall duties, others a very
high set of duties. Unfortunately, there is still no readily
available source of country import tariffs available on
the Web. Nevertheless, we have listed the best sources
of country tariffs currently available on the Web for
you to visit. There is also a link to the South African
duty structure for your reference.
- Country-based import tariff structures
- South Africa's import tariff structure
Non-tariff barriers
Any barrier to doing business
over international borders and that is not a tariff barrier,
is classified as a non-tariff barrier. As the various
environments that you are likely to encounter in foreign
markets represent barriers in their own right, they are
also therefore a form of non-tariff barrier - these environments
have been discussed in some detail elsewhere - click here
for more information.
Other non-tariff barriers include the following:
- Quotes - Quotas are defined as a specific unit
or currency limit applied to a particular type of good.
Quotes are thus quantitative restrictions applied to the
import of goods and have the effect of either barring
goods from a market altogether, or increasing the price
of the goods in that market.
- Licensing requirements - Some goods may only be
imported only if they have been issued with import licences
by the authorities (such as in the case of armaments).
While licensing in itself should not hinder the export
process, some countries issue only a limited number of
licenses (thereby excluding late entrants from the market),
or they may make the licensing process so cumbersome as
to make it impossible or extremely difficult to obtain
the license.
- Sanctions/embargoes/boycotts - Sanctions, embargoes
and boycotts represent an absolute prohibition on the
purchase and import of goods from the sanctioned/embargoed/boycotted
country. In the apartheid era, South Africa was subject
to sanctions and boycotts from many of its former trading
partners.
- Customs and administrative entry procedures - These
procedures, while they may be applied uniformly, are often
so cumbersome and complex that they represent a major
trade restriction in their own right. What is more, local
manufacturers within the target market are generally not
subject to the same procedures (except in instances where
they may be using imported raw materials or components),
and this places the exporter at a disadvantage compared
to local firms.
- Standards - This category is described as including
unduly discriminating health, safety, and quality standards
that make it difficult for exporters to comply with these
standards, thereby effectively barring them from that
market.
- Government participation in trade - It is quite
common for governments to follow discriminatory public
purchasing activities (i.e. that favour buying local)
as an effective way to lock out international competitors.
- Charges on imports - A few countries may apply
port-of-entry taxes or levies on imported goods. The purpose
of such a tax is usually to offset infrastructure costs
at a port, for example, but such levies often stay in
place long after their intended purpose has been achieved.
- Exchange controls - One of the more complete forms
of non-tariff barriers, exchange controls represent a
government monopoly on all dealings in foreign exchange.
South Africa is an example of a country that still applies
exchange controls on its trading community. Local firms
therefore have to obtain permission to buy the foreign
exchange they need to import goods and services and exporters
also need to pay their foreign exchange earnings back
to the commercial banks within seven days of receiving
such income. No company is allowed to hold foreign exchange
without permission from the Reserve Bank.
- Voluntary export restraints (VER) - A VER is a
'voluntary' agreement between an importing country (such as the US)
and an exporting country (such as Japan, in the case of motor vehicles)
that the exporting country will restrict the volume of exports of
the goods in question (in this instance, motor vehicles). Although
such agreements are supposedly voluntary (a "gentlemen's agreement"),
they are generally agreed to under threat of stiffer quotas and/or
tariffs being applied to the exporting country by the importing country.
VERs may sometimes be referred to as orderly marketing agreements
(OMA).
- Differing product classification - Since the classification of a product according to the
various customs' product categories will almost certainly
impact on the duty that is applied to that imported good,
exporters may occasionally be frustrated by customs authorities
(who always have the final say) who classify their goods
into a category that they exporter does not agree with.
This classification may render the goods completely uncompetitive
in the market
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