Despite its rocky start some 250 years ago, the United States trade history with the United Kingdom has blossomed into a mutually beneficial relationship—some 40,000 U.S. companies now export to the U.K. each year.
Thanks to a common language, low trade barrier and the U.K.’s business-friendly environment, exporting to England, Scotland, Wales and Northern Ireland—the countries that make up the U.K.— is on trend to continue to be lucrative for U.S. companies. But how has Brexit affected U.S./U.K. trade relations, and what is in store for the future?
Keep reading to get a look at the recent history of U.S. trade with the U.K.; the process of exporting to the U.K., including documentation and compliance requirements; and the benefits and considerations for U.S. companies looking to break into the United Kingdom market.
A Summary Of Brexit
Brexit—an abbreviation of “British” and “Exit”—was “the most important constitutional shake-up the U.K. has known since it joined the then six-nation European Economic Community in 1973.” The U.K. became the only country to depart the European Union (EU) on January 31, 2020, after prolonged negotiations on EU-U.K. economic and security relationships were hammered out. As the region with the third-largest economy in Europe (trailing Germany and France), the U.K. has faced a slowing economy since it decided to leave the European Union in 2016, known as Brexit.
After leaving the EU, the U.K. is now responsible for constructing its own economic policies (including agricultural policies) and negotiating trade agreements. Despite the challenges and uncertainty posed by Brexit, high inflation due to increasing energy prices, and the COVID-19 pandemic, the U.K. remains a critical market for American exports of goods and services.
Facts and Figures on Trade and Exporting to the UK
The United Kingdom (estimated 2021 GDP of $3.2 trillion) has the fifth-largest economy in the world according to the World Bank and led the G7 in GDP growth in 2021.
According to the ITA, the U.S.-U.K. investment relationship is the largest in the world, with cumulative bilateral stock in a direct investment valued at more than $1.5 trillion in 2021. As of December 2022, the U.S. made up 20.6% of the U.K.’s export market (valued at around $214 billion). As of late 2022, the leading sectors for U.S. exports and investments include the following:
- Aerospace and defense
- Defense equipment
- Electric vehicles/autonomous technologies
- Financial technology (FinTech)
- Design and construction
- Medical technology
- Information and communication technology
- Safety and security
- Travel and tourism
Exporting to the UK: The Challenges
U.S. exporters must be aware of certain barriers when exporting to the U.K. But with careful planning and assistance from agencies like the U.S. Commercial Service, exporters of all sizes can absolutely be successful. According to the United Kingdom Country Commercial Guide, challenges include:
- Post-Brexit tariffs. The U.K.-EU Trade and Cooperation Agreement (TCA) signed in December of 2020 allows for trade in qualifying goods between the U.K. and the EU without tariffs or quotas. Even after Brexit, U.S. exports shipped directly to the U.K. face essentially the same customs and border requirements as when the U.K. was an EU member State. However, U.S. goods entering the U.K. from the EU may face different requirements as the U.K. establishes new border controls with the EU market.
- A high cost of doing business. While London has always been one of the world’s most expensive cities, post-pandemic inflation has made property prices, restaurants and transportation even more expensive relative to other European cities.
- A competitive market. UK and third-country suppliers are strong competitors to U.S. exporters, who will need to differentiate their products.
Exporting to the UK: The Opportunities
The potential rewards of exporting to the U.K. outweigh many challenges exporters may face in many situations. Exporters should identify and cultivate business opportunities while building a strategy to minimize the risks. Opportunities include IT, service, aerospace and defense, health and pharmaceutical, and travel sectors.
The best thing about exploring U.K. export opportunities is knowing you don’t need to go it alone. If you’re an exporter interested in exporting to the U.K. for the first time, or you currently export to the U.K. but are facing challenges, you can get help from in-country allies, including the U.S. Commercial Service offices, trade missions and chambers of commerce.
The first place to go for help is your local and in-country U.S. Commercial Service offices. The Commercial Service’s seven in-country offices offer U.S. exporters business partners in the U.K.—boots on the ground in the country—and include representation by an agent, distributor or partner who can provide essential local knowledge and contacts critical for your success. You can learn more about in-country offices in our article, Tapping into the U.S. Commercial Service’s In-Country Offices.
DECs across the U.S. help exporters by supporting trade and services that strengthen individual companies, stimulate U.S. economic growth and create jobs. DEC members also serve as mentors to new exporters and provide advice to small companies interested in exporting to the U.K.
Sponsored by state and local trade offices as well as commercial service offices, trade missions are a great way to meet new business contacts and network.
The ITA is an excellent resource to help you combat trade problems. ITA staff members are experts in advocating for U.S. businesses of all sizes. They customize their services to help solve trade dilemmas as efficiently as possible. The ITA makes it easy to report a trade barrier, even allowing you to submit your report online.
Chambers of Commerce
Chambers of commerce may be a resource when exporting to the U.K. You can learn more about various chambers and how they can help smooth the way for your export activities in our article, The Chamber of Commerce Role in Exporting.
Export Document Requirements for the UK
Export documentation and attention to procedures are as critical in U.K. exporting as they are for any other country. An import license is not needed to import the majority of industrial goods into the U.K. or EU; however, some industrial goods require import licenses issued by the Import Licensing Branch (ILB) as a result of controls imposed at national, EU and United Nations levels. Documents you need to export to the U.K. (and the European Union) from the U.S. will vary depending on your products, but may include:
UK Export Compliance Issues
It’s important to understand the regulations covering exports to the U.K. You must be concerned with complying with export regulations no matter where you ship, but, fortunately, understanding regulations is easier to do than, say, if you were exporting to China.
This doesn’t mean you can take export compliance lightly. You need to understand what is required of you and what you risk if you don’t do your job in complying with those regulations.
Product Classification for Export Controls
The first step in ensuring export compliance is determining who has jurisdiction over your goods: is it the U.S. Department of Commerce under the Export Administration Regulations (EAR) or the State Department’s Directorate of Defense Trade Controls (DDTC)?
If your goods fall under the jurisdiction of the Commerce Department, which most products do, you must determine if your export requires authorization from the Bureau of Industry and Security (BIS, part of the Commerce Department). To do so you need to answer the following questions:
- What is the Export Control Classification Number (ECCN) of the item?
- Where is it going?
- Who is the end user?
- What is the end use?
There are three ways to classify your products for export controls: You can self-classify your products, submit a SNAP-R request for a ruling, or rely on the product vendor to provide the information. You can learn about that process in our article, 3 Ways to Classify Your Products for Export Controls.
By classifying your product correctly, you’ll be protecting yourself from severe fines, penalties and even jail time.
Export License Determination
Next, companies must use the ECCN codes and reasons for control described above to determine whether or not there are any restrictions for exporting their products to specific countries. Once they know why their products are controlled, exporters should refer to the Commerce Country Chart in the EAR to determine if a license is required.
Although a relatively small percentage of all U.S. exports and re-exports require a BIS license, virtually all exports and many re-exports to embargoed destinations and countries designated as supporting terrorist activities require a license. Countries fitting that bill are Cuba, Iran, North Korea, Sudan and Syria. Part 746 of the EAR describes embargoed destinations and refers to certain additional controls imposed by the Office of Foreign Assets Control (OFAC) of the Treasury Department.
The Shipping Solutions Professional export documentation and compliance software includes an Export Compliance Module that uses the ECCN code for your product(s) and the destination country to tell you if an export license is required. If indicated, you must apply to BIS for an export license through the online Simplified Network Application Process Redesign (SNAP-R) before you can export your products.
There are export license exceptions, like low-value or temporary exports, that allow you to export or re-export, under stated conditions, items subject to the Export Administration Regulations (EAR) that would otherwise require a license. These license exceptions cover items that fall under the jurisdiction of the Department of Commerce, not items controlled by the State Department or some other agency.
Surprise! You may be an exporter without even knowing it! Deemed exports, or the disclosure of information or services rather than an actual product, is an important issue to pay attention to when exporting. A deemed export occurs when technology or source code (except encryption and object source code, which is separately addressed in the EAR under 734.2(b)(9)), is released to a foreign national within the United States.
Sharing technology, reviewing blueprints, conducting tours of facilities and other information disclosures are considered potential exports under the deemed export rule and should be handled accordingly. You can learn how to apply this principle here.
Restricted Party Screenings
Restricted party lists (also called denied party lists) are lists of organizations, companies or individuals that various U.S. agencies—and other foreign governments—have identified as parties that one can’t do business with.
There are several reasons why a person or company may be added to a restricted party list. For example, they may be a terrorist organization or affiliated with such an organization; they may have a history of corrupt business practices; or they may otherwise pose a threat to national security.
Restricted party screening (or denied party screening) refers to the process in which a company checks a potential customer or business partner against one or more restricted party lists to ensure they are not doing business with a restricted party.
The primary restricted party lists in the United States are published by the Department of Commerce, Department of State and Department of Treasury. However, several other agencies produce lists as well. These agencies recommend that companies perform restricted party screening periodically and repeatedly throughout the movement of goods in the supply chain.
When exporting to the U.K., it’s imperative you check every restricted party list every time you export. If not, you could face the following penalties:
- Fines for export violations can reach up to $1 million per violation in criminal cases (Bureau of Industry and Security).
- Administrative cases can result in a penalty amounting to $250,000 or twice the value of the transaction, whichever is greater.
- Criminal violators may be sentenced to prison for up to 20 years, and administrative penalties may include denial of export privileges.
Export Documentation and Compliance Software
If you’re considering exporting to the U.K., Shipping Solutions export documentation software can help you quickly create the necessary documents and stay compliant with export regulations. Register for a free demo of the Shipping Solutions software to see how it can revolutionize the way you’re currently creating your export paperwork.
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