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 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.
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:
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.
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 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
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
Documents Used During the Inland Movement of the Goods:
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.
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.
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
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
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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