International trade has been severely affected by the pandemic caused by the novel coronavirus or COVID-19. It has often fatal consequences for the business sector. Randall Castillo Ortega, entrepreneur and global trade specialist from Costa Rica, provides an overview of the different challenges faced by foreign trade companies.
One of the challenges that international trade has to deal with quickly and efficiently is delays in shipments from commodity-producing countries. Indeed, imports and exports almost completely stopped 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 on a global scale, it must have a team – ready for the challenge – who knows how to operate under the different legislations in force.
Select the right markets. Businesses can stimulate growth by diversifying, but leaders need to analyze which international markets are suitable for their product or service.
Be up to date on laws and regulations. All legal implications are the responsibility of foreign trade managers, as they need to be familiar with local applications and regulations, both in their country and in their target market. In this aspect, having a compliance system has become essential to identify the risks of regulatory non-compliance.
Confront the controls applied to foreign trade. Castillo explains, “Authorities have intensified import and export controls and increased foreign trade fines for non-compliance and omission.
Properly manage accounting, taxation and finances. These three areas are a big challenge for companies that engage in internationalization to ensure their growth, especially since they have to know different tax systems, taxes and requirements.
Understand international pricing calculation and strategy. For exporters, pricing their products and services abroad is not an 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 an international payment system – especially documentary collections and letters of credit – to ensure some degree of financial protection.”
Understand exchange rates. Currency fluctuation can seriously affect the operation of a business involved in foreign trade.
Communication and cultural differences. Effective communication with colleagues, customers, distributors, etc., is essential to successful international business. It is not easy for managers 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 business, as governments can change policies, regulations and taxes, which harm business and foreign investment. In this context, business leaders need to monitor political developments and develop strategies to mitigate risks and negative consequences.
Securing 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 created, which can be obtained by importers, exporters, transport companies, customs agents, industrial parks and other companies.
Barriers to innovation must 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 of international trade is the consolidation of imports and exports in world markets. Reviving the economy, which is already an essential factor in getting out of the crisis, is not enough. Also, it is necessary for companies to consolidate in their market niches based on competitiveness and process optimization.
About Randall Castillo Ortega
Randall Castillo Ortega has been involved in the financial space virtually his entire professional career. In addition to founding the financial loan company RACO, he is also an avid outdoorsman and, along with his family, is a big supporter of the community. He regularly participates in community ceremonies and events organized to create a better environment for children and families.