Export Documentation, Shipping, And Logistics
Source: Managing
a Small Business When preparing to ship a product overseas, the
exporter needs to be aware of packing, labeling, documentation, and insurance
requirements. Because the goods are being shipped by unknown carriers to distant
customers, the new exporter must be sure to follow all shipping requirements to help
ensure that the merchandise is
- packed correctly so that it arrives in good condition;
- labeled correctly to ensure that the goods are handled properly and arrive on time and
at the right place;
- documented correctly to meet local and foreign government requirements as well as proper
collection standards; and
- insured against damage, loss, and pilferage and, in some cases, delay.
Because of the variety of considerations involved in the physical export process, most
exporters, both new and experienced, rely on an international freight forwarder to perform
these services.
FREIGHT FORWARDERS
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 rules and
regulations of foreign countries, methods of shipping, government export 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, cost of special documentation, and
insurance costs as well as their handling fees - all of which help in preparing price
quotations. Freight forwarders may also recommend the type of packing for best 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, packing list, and so on to ensure that everything is in
order. They can also reserve the necessary space on board an ocean vessel, if the exporter
desires.
If the cargo arrives at the port of export and the exporter has not already done so,
freight forwarders may make the necessary arrangements with customs brokers 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. They may also prepare the bill of
lading and any special required documentation. After shipment, they forward all documents
directly to the customer or to the paying bank if desired.
PACKING
In packing an item for export, the shipper should be aware of the demands that
exporting puts on a package. Four problems must be kept in mind when an export shipping
crate is being designed: breakage, weight, moisture, and pilferage.
Most general cargo is carried in containers, but some is still shipped as breakbulk
cargo. Besides the normal handling encountered in domestic transportation, a breakbulk
shipment moving by ocean freight may be loaded aboard vessels in a net or by a sling,
conveyor, chute, or other method, putting added strain on the package. In the ship's hold,
goods may be stacked on top of one another or come into violent contact with other goods
during the voyage. Overseas, handling facilities may be less sophisticated than in your
country and the cargo may be dragged, pushed, rolled, or dropped during unloading, while
moving through customs, or in transit to the final destination.
Moisture is a constant problem because cargo is subject to condensation even in the
hold of a ship equipped with air conditioning and a dehumidifier. The cargo may also be
unloaded in the rain, and some foreign ports do not have covered storage facilities. In
addition, unless the cargo is adequately protected, theft and pilferage are constant
threats.
Since proper packing is essential in exporting, often the buyer specifies packing
requirements. If the buyer does not so specify, be sure the goods are prepared with the
following considerations in mind:
- Pack in strong containers, adequately sealed and filled when possible.
- To provide proper bracing in the container, regardless of size, make sure the weight is
evenly distributed.
- Goods should be packed in oceangoing containers, if possible, or on pallets to ensure
greater ease in handling. Packages and packing filler should be made of moisture-resistant
material.
- To avoid pilferage, avoid mentioning contents or brand names on packages. In addition,
strapping, seals, and shrink wrapping are effective means of deterring theft.
One popular method of shipment is the use of containers obtained from carriers or
private leasing concerns. These containers vary in size, material, and construction and
can accommodate most cargo, but they are best suited for standard package sizes and
shapes. Some containers are no more than semi-truck trailers lifted off their wheels and
placed on a vessel at the port of export. They are then transferred to another set of
wheels at the port of import for movement to an inland destination. Refrigerated and
liquid bulk containers are readily available.
Normally, air shipments require less heavy packing than ocean shipments, but they must
still be adequately protected, especially if highly pilferable items are packed in
domestic containers. In many instances, standard domestic packing is acceptable,
especially if the product is durable and there is no concern for display packaging. In
other instances, high-test (at least 250 pounds per square inch) cardboard or tri-wall
construction boxes are more than adequate.
For both ocean and air shipments, freight forwarders and carriers can advise on the
best packaging. Marine insurance companies are also available for consultation. It is
recommended that a professional firm be hired to package for export if the exporter is not
equipped for the task. This service is usually provided at a moderate cost.
Finally, because transportation costs are determined by volume and weight, special
reinforced and lightweight packing materials have been devised for exporting. Care in
packing goods to minimize volume and weight while giving strength may well save money
while ensuring that goods are properly packed.
LABELING
Specific marking and labeling is used on export shipping cartons and containers to
- meet shipping regulations,
- ensure proper handling,
- conceal the identity of the contents, and
- help receivers identify shipments.
The overseas buyer usually specifies export marks that should appear on the cargo for
easy identification by receivers. Many markings may be needed for shipment. Exporters need
to put the following markings on cartons to be shipped:
- Shipper's mark.
- Country of origin (exporters country).
- Weight marking (in pounds and in kilograms).
- Number of packages and size of cases (in inches and centimeters).
- Handling marks (international pictorial symbols).
- Cautionary markings, such as "This Side Up" or "Use No Hooks" (in
English and in the language of the country of destination).
- Port of entry.
- Labels for hazardous materials (universal symbols adapted by the International Maritime
Organization).
Legibility is extremely important to prevent misunderstandings and delays in shipping.
Letters are generally stenciled onto packages and containers in waterproof ink. Markings
should appear on three faces of the container, preferably on the top and on the two ends
or the two sides. Old markings must be completely removed.
In addition to port marks, customer identification code, and indication of origin, the
marks should include the package number, gross and net weights, and dimensions. If more
than one package is being shipped, the total number of packages in the shipment should be
included in the markings. The exporter should also include any special handling
instructions on the package. It is a good idea to repeat these instructions in the
language of the country of destination. Standard international shipping and handling
symbols should also be used.
Exporters may find that customs regulations regarding freight labeling are strictly
enforced; for example, most countries require that the country of origin be clearly
labeled on each imported package. Most freight forwarders and export packing specialists
can supply necessary information regarding specific regulations.
DOCUMENTATION
Exporters should seriously consider having the freight forwarder handle the formidable
amount of documentation that exporting requires; freight forwarders are specialists in
this process. The following documents are commonly used in exporting; which of them are
actually used in each case depends on the requirements of both our government and the
government of the importing country.
* Commercial invoice. As in a domestic transaction, the commercial invoice is a
bill for the goods from the buyer to the seller. A commercial invoice should include basic
information about the transaction, including a description of the goods, the address of
the shipper and seller, and the delivery and payment terms. The buyer needs the invoice to
prove ownership and to arrange payment. Some governments use the commercial invoice to
assess customs duties.
* Bill of lading. Bills of lading are contracts between the owner of the goods
and the carrier (as with domestic shipments). There are two types. A straight bill of
lading is nonnegotiable. A negotiable or shipper's order bill of lading can be bought,
sold, or traded while goods are in transit and is used for letter-of-credit transactions.
The customer usually needs the original or a copy as proof of ownership to take possession
of the goods.
* Consular invoice. Certain nations require a consular invoice, which is used to
control and identify goods. The invoice must be purchased from the consulate of the
country to which the goods are being shipped and usually must be prepared in the language
of that country.
* Certificate of origin. Certain nations require a signed statement as to the
origin of the export item. Such certificates are usually obtained through a semiofficial
organization such as a local chamber of commerce. A certificate may be required even
though the commercial invoice contains the information.
* Inspection certification. Some purchasers and countries may require a
certificate of inspection attesting to the specifications of the goods shipped, usually
performed by a third party. Inspection certificates are often obtained from independent
testing organizations.
* Dock receipt and warehouse receipt. These receipts are used to transfer
accountability when the export item is moved by the domestic carrier to the port of
embarkation and left with the international carrier for export.
* Destination control statement. This statement appears on the commercial
invoice, ocean or air waybill of lading, and SED to notify the carrier and all foreign
parties that the item may be exported only to certain destinations.
* Insurance certificate. If the seller provides insurance, the insurance
certificate states the type and amount of coverage. This instrument is negotiable.
* Export license. (when needed).
* Export packing list. Considerably more detailed and informative than a
standard domestic packing list, an export packing list itemizes the material in each
individual package and indicates the type of package: box, crate, drum, carton, and so on.
It shows the individual net, legal, tare, and gross weights and measurements for each
package . Package markings should be shown along with the shipper's and buyer's
references. The packing list should be attached to the outside of a package in a
waterproof envelope marked "packing list enclosed." The list is used by the
shipper or forwarding agent to determine (1) the total shipment weight and volume and (2)
whether the correct cargo is being shipped. In addition, customs officials (both local and
foreign) may use the list to check the cargo.
Documentation must be precise. Slight discrepancies or omissions may prevent
merchandise from being exported, result in exporting firms not getting paid, or even
result in the seizure of the exporter's goods by local or foreign government customs.
Collection documents are subject to precise time limits and may not be honored by a bank
if out of date. Much of the documentation is routine for freight forwarders or customs
brokers acting on the firm's behalf, but the exporter is ultimately responsible for the
accuracy of the documentation.
The number 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 proper documentation. If the exporter does not rely on the services
of a freight forwarder, there are several methods of obtaining information on foreign
import restrictions:
- Foreign government embassies and consulates can often provide information on import
regulations.
- The Air Cargo Tariff Guidebook lists country-by-country regulations affecting air
shipments. Other information includes tariff rules and rates, transportation charges, air
waybill information, and special carrier regulations. Contact the Air Cargo Tariff, P.O.
Box 7627, 1117 ZJ Schiphol Airport, Netherlands.
- The National Council on International Trade Documentation (NCITD) provides several
low-cost publications that contain information on specific documentation commonly used in
international trade. NCITD provides a free listing of its publications. Contact National
Council on International Trade Documentation, 350 Broadway, Suite 1200, New York, NY
10013; telephone 212-925-1400.
SHIPPING
The handling of transportation is similar for domestic orders and export orders. The
export marks should be added to the standard information shown on a domestic bill of
lading and should show the name of the exporting carrier and the latest allowed arrival
date at the port of export. The exporter should also include instructions for the inland
carrier to notify the international freight forwarder by telephone on arrival.
International shipments are increasingly being made on a through bill of lading under a
multimodal contract. The multimodal transport operator (frequently one of the modal
carriers) takes charge of and responsibility for the entire movement from factory to the
final destination.
When determining the method of international shipping, the exporter may find it useful
to consult with a freight forwarder. Since carriers are often used for large and bulky
shipments, the exporter should reserve space on the carrier well before actual shipment
date (this reservation is called the booking contract).
The exporter should consider the cost of shipment, delivery schedule, and accessibility
to the shipped product by the foreign buyer when determining the method of international
shipping. Although air carriers are more expensive, their cost may be offset by lower
domestic shipping costs (because they may use a local airport instead of a coastal
seaport) and quicker delivery times. These factors may give the exporter an edge over
other competitors, whose service to their accounts may be less timely.
Before shipping, the firm should be sure to check with the foreign buyer about the
destination of the goods. Buyers often wish the goods to be shipped to a free-trade zone
or a free port where goods are exempt from import duties.
INSURANCE
Export shipments are usually insured against loss, damage, and delay in transit by
cargo insurance. For international shipments, the carrier's liability is frequently
limited by international agreements and the coverage is substantially different from
domestic coverage. Arrangements for cargo insurance may be made by either the buyer or the
seller, depending on the terms of sale. Exporters are advised to consult with
international insurance carriers or freight forwarders for more information.
Damaging weather conditions, rough handling by carriers, and other common hazards to
cargo make marine insurance important protection for exporters. If the terms of sale make
the firm responsible for insurance, it should either obtain its own policy or insure cargo
under a freight forwarder's policy for a fee. If the terms of sale make the foreign buyer
responsible, the exporter should not assume (or even take the buyer's word) that adequate
insurance has been obtained. If the buyer neglects to obtain coverage or obtains too
little, damage to the cargo may cause a major financial loss to the exporter. |