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International Shipping, Freight Forwarder, Lading, Consular Invoice, Export License, Packing List

Posted at: International Trade Publications | Posted on: Wed 26 Sep, 2007 2:59 am |
 
Transporting Goods Internationally

Now that financing has been arranged, steps must be taken to ensure that the goods are

packed, documented and shipped properly. When transporting goods internationally,


proper documentation and correct packaging are critical to the export process. One of

the main differences between selling domestically and exporting is the documentation

required. Providing proper documentation with your shipments is essential. Although

the paperwork involved in exporting may be more burdensome and costly than that

required for domestic sales, it should not deter you.

The Role of the Freight Forwarder

The international freight forwarder acts as an agent for the exporter in moving cargo

to the overseas destination. These agents are familiar with the import/export rules and

regulations of foreign countries, methods of shipping, U.S. government regulations and

the documents connected with foreign trade. Freight forwarders can assist with an order

from the start by advising the exporter of the freight costs, port charges, consular fees,

costs of special documentation and insurance costs, as well as their handling fees—all of

which help in preparing the pro forma invoice and price quotations. Freight forwarders

also may recommend the best type of packing for protecting the merchandise in transit;

they can arrange to have the merchandise packed at the port or containerized. The cost

for their services is a legitimate export cost that should be figured into the price charged

to the customer.

When the order is ready to ship, freight forwarders should be able to review the letter

of credit, commercial invoices and packing list to ensure that everything is in order.

Freight forwarders also can reserve the necessary space onboard an ocean vessel, if the

exporter desires. The exporter may ask the freight forwarder to make arrangements with

the customs broker to ensure that the goods comply with customs export documentation

regulations. In addition, they may have the goods delivered to the carrier in time for

loading. Freight forwarders also may prepare a bill of lading and any special required

documentation. After shipment, they can forward all documents directly to the customer

or to the paying bank.

In preparing your goods for international transport, you must first determine what mode

of transport you will use. When shipping to Mexico and Canada, land transportation

may be the preferred method of transport. Other methods of shipping internationally are

by sea and air. Maritime shipping is almost always slower and less expensive than air.

However, an exporter must factor in the additional costs of sea freight, such as surface

transportation to the dock. Another factor is the time value of money: payment may not

be made until the ship reaches its destination—and ocean freight can be significantly

longer than air freight. Your international freight forwarder can assist in weighing the

pros and cons of different modes of transportation. Once you have decided on the best

mode of transporting your goods, you must begin to compile the necessary documents.

Documents Prepared Before the Shipment:

Commercial Invoice/Consular Invoice

After the pro forma invoice is accepted, the exporter must prepare a commercial invoice.

This is necessary for both the exporter and importer. The exporter needs the commercial

invoice to prove ownership and secure payment. The description of the goods on the

commercial invoice must correspond exactly to the description in the letter of credit or

other method of payment. There can be no exceptions.

The importer needs the commercial invoice since it is often used by Customs authorities

to assess duties. For this reason, it is common practice to prepare a commercial invoice

in both English and in the language of the country of destination. The freight forwarder

can advise you when a translated copy is necessary. Similar to a commercial invoice, a

consular invoice is required by certain countries. The consular invoice must be prepared

in the language of the country destination and can be obtained from the country’s

consulate, and often must be “consularized.” In some countries, the commercial invoice

must be prepared on a special form known as a “customs invoice.” Your importer may

request this of you.

Export License

Export controls are based on the type of goods being shipped and their ultimate

destination. While most exports do not require a license, it is the legal obligation of

the exporter to seek an official determination from the Bureau of Industry and Security

(BIS). Technically, most exports are shipped under a “No License Required” (NLR)

classification, which is a self-certification that a license is not required.

Should your particular export be subject to export controls, a “validated” license must

be obtained. To determine whether your product needs an export license, you must

have the Export Commodities Classification Number (ECCN) for your product. If your

freight forwarder cannot provide you with the ECCN, you may be able to obtain it from

the manufacturer, producer or developer of your product if it has been exported before,

and you are not the producer. Or, you can look up the number in the Code of Federal

Regulations, 15 CFR Parts 730-774, available in most major libraries. Further information

is available on Export Administration Regulations (EARs) at www.bis.doc.gov. Once

you have this number, check with the Bureau of Industry and Security to determine if

your product might be subject to export controls.

In general, your export would require a “validated” license if export of the goods would

threaten U.S. national security, affect certain foreign policies of the United States or

create short supply in domestic markets.

Shipper’s Export Declaration (SED)

A new Shippers’ Export Declaration (SED) form 7525-V is required for all shipments

over $2,500 (except to Canada) and any shipment that requires an export license. The

form is available for download at www.census.gov/foreign-trade/regulations/forms.

For help with completing the form, go to: www.census.gov/foreign-trade/regualtions/

forms/correct-way-to-complete-the-sed.pdf. The SED enables the Bureau of the Census

to monitor for statistical purposes the kinds of products being exported from the United

States. It must be presented to the carrier before a shipment can be made. Exporters

are encouraged to file the form electronically. Go to the following link for details:

www.aesdirect.gov.

Export Packing List

An export packing list is considerably more detailed and informative than a standard

domestic packing list. It itemizes the contents of each individual package and indicates

the type of package, such as a box, crate, drum or carton. It also shows the individual

net, legal, tare and gross weights and measurements for each package (in both U.S.

and metric systems). Package markings should be shown along with the shipper’s and

buyer’s references. The list is used by the shipper or forwarding agent to determine the

total shipment weight and volume, and whether the correct cargo is being shipped. In

addition, U.S. and foreign customs officials may use the list to check the cargo.

Certificate of Origin

Due to a number of free trade agreements (FTAs) that the United States has negotiated

with other countries, Certificates of Origin frequently are required by importers to avoid

paying import tariffs. For example, a NAFTA (North America Free Trade Agreement)

certificate of origin should be used for products exported to Canada or Mexico only if

they meet the NAFTA rules of origin for production (thereby exempting them from all,

or most, import duties). For a list of regional and bi-lateral FTAs go to http://ustr.gov/

Trade_Agreements/Section_Index.html. Current FTAs—as of early 2005—include

those with Israel, Jordan, Canada, Mexico, Chile, Singapore, and Australia with several

more nearing completion. Please see the www.export.gov website, or call your local

U.S. Export Assistance Center, for more details on how your customers can benefit from

these agreements and your providing the proper certificate of origin to your buyers.

Insurance Certificate

An insurance certificate is used to assure the consignee that insurance will cover the loss

of, or damage to, the cargo during transit. Typically, marine insurance coverage equal

to 110% of the commercial invoice amount must be obtained for export shipments.

Infrequent exporters may be able to buy insurance through their freight forwarder.

Inspection Certificate

Inspection certificates often are required by foreign customs or businesses for certain

regulated products, typically related to agriculture, health or the environment. Inspection

certificates also may be required to ensure that vessels or crates are free of contaminants

before entering certain ports, or that products met the specifications outlined in a contract

or purchase order. Depending on the product exported, certificates may be issued by

various agencies, such as the U.S. Department of Agriculture, the Food and Drug

Administration, and the Environmental Protection Agency, or by third party inspection

companies.

Documentation must be precise because slight discrepancies or omissions may prevent

merchandise from being exported, resulting in nonpayment or even resulting in the

seizure of the exporter’s goods by U.S. or foreign government customs. An important

pont to remember is that collection documents always are subject to precise time limits

and may not be honored by a bank if the time has expired. Most documentation is routine

for freight forwarders and customs brokers, but the exporter is ultimately responsible

for the accuracy of its documents. The number and kind of documents the exporter must

deal with varies depending on the destination of the shipment. Because each country

has different import regulations, the exporter must be careful to provide all proper

documentation.

Documents Used During the Inland Movement of the Goods:

Shipper’s Instructions

As an exporter, you are responsible to provide your freight forwarder with the necessary

information regarding your shipment. The more details you provide, the greater the

chances your goods will move free of problems. Your freight forwarder can provide you

with a commonly used form for noting instructions.

Inland Bill of Lading

Inland bills of lading document the transportation of goods between inland points and

the port from where the export will emanate. Rail shipments use “waybills on rail.” “Pro

forma” bills of lading are used in trucking.

Delivery Instructions

This document is prepared by the freight forwarder giving instructions to the trucking or

railroad company where the goods for export are to be delivered.

Dock Receipts

This document transfers shipping obligations from the domestic to the international

carrier as the shipment reaches the terminal.

Bill of Lading/Air Waybill

Marine bills of lading, but not air waybills provide evidence to title of the goods.

However, both set forth the international carrier’s responsibility to transport the

goods to their named destination. There are two types of ocean bills of lading used to

transfer ownership: Straight (non-negotiable), which provides for delivery of goods

to the person named in the bill of lading and must be marked “non-negotiable,” and

Shipper’s Order (negotiable), which provides for delivery of goods to the person

named in the bill of lading or anyone designated.

The shipper’s order is used with draft or letter of credit shipments and enables the

bank involved in the export transaction to take title to the goods if the buyer defaults.

The bank will not release title of the goods to the buyer until payment is received

and will not release funds to the exporter until conditions of sale have been satisfied.

When using air freight, “air waybills” take the place of bills of lading. Air waybills

are only issued in non-negotiable form, therefore the exporter and the bank lose title

to the goods once the shipment commences. Most air waybills also contain a customs

declaration form.

Packaging

Goods shipped for export require substantially greater handling than domestic shipments.

The exporter must pack the goods to ensure the weight and measurements are kept to

a minimum, breakage is avoided, the container is theft proof and that the goods do not

suffer from the stresses of ocean shipment, such as excess moisture. In addition to proper

packing, the exporter should be aware that certain markings are necessary on goods

transported internationally. Some countries require that the country of origin be marked

on the outside of the container and even have regulations as to how the mark of origin

should appear.

The second type of marking the exporter should be familiar is labeling. Food and drugs

must often carry special labeling as determined by the laws of the country of destination.

Third, certain “shipping marks” must appear on the outside of the package. The weight

and dimensions should be visible and any special instructions should be shown. You

may want to repeat these instructions in the language of the importer’s country. If your

business is not equipped to package your goods for export, there are export packaging

companies which can perform this service for you. For more information, ask your

international freight forwarder for a list of export packaging companies in your area. In

addition to the information provided above, www.export.gov is an excellent resource for

answering your transporting and licensing questions.

Temporary Export Licenses and ATA Carnets

An ATA Carnet is a special customs document that provides temporary, duty-free

admission into countries for commercial samples, scientific equipment, education

materials, and goods for exhibit. The Bureau of Industry and Security (BIS) can advise

you on the need for a temporary export license. ATA Carnets are made available through

the International Chamber of Commerce and associated organizations. In the United

States, the program is administered by the U.S. Council for International Business in

New York City. Information on procedures for obtaining a carnet is available on their

website at www.uscib.org.

Many businesses, after achieving success in exporting or as an alternative to exporting,

contemplate joint ventures or licensing agreements with foreign companies to produce

goods overseas. Some companies even set up their own off-shore operations.

Source: Breaking into the Trade Game; A U.S. Small Business Administration International Publication



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