Introduction to Exporting - Part 7

Chapter 7 Delivering the Goods 

International Trade Regulations

You’ll have to familiarize yourself with your target market’s import regulations, product standards and licensing requirements to make sure that your products are imported without difficulty. If you’re a service exporter, you may have to acquire professional or other accreditation from the country where you’ll be operating. 

Export Declarations

For every shipment leaving a country, customs formalities must take place to meet regulatory requirements. Customs clearance is a transaction whereby a declaration is developed and required documents are submitted to authorities, and can only be performed by companies holding valid customs licenses, so-called customs house brokers. Export customs clearance can either be performed by a freight forwarder with a valid license or an agent appointed by the freight forwarder. Alternatively, it can be performed by a customs house broker appointed directly by the shipper, who does not necessarily take any other part in the shipping process. The export customs clearance step must be completed before the cargo can leave the country of origin, and if not performed by the freight forwarder, often required to be completed before the cargo enters the forwarders origin warehouse. 

Delivering Products

There are four ways of getting your product to your customer’s doorstep. Choosing the right shipping method, or combination of methods, is vital to export success—you want the product to get there on time and at the right cost.

• Truck—even when you’re shipping goods overseas, trucks often deliver the product to its final destination. The quality of trucking services declines, however, once you go beyond the major industrialized countries.
• Rail—is also widely used when shipping to seaports for transport abroad, and from seaports to a final destination.
• Air—international air freight is another possibility. Not all destinations are covered, however, and special charters may be required for more exotic markets. Shipping by air is more expensive than surface or sea transport, but the higher costs may be offset by faster delivery, lower insurance, cheaper warehousing and better inventory control.
• Ocean—goods exported to offshore markets are most often transported by ocean carriers. Shipping large items, bulk commodities and goods that do not require fast delivery is more economical by sea.

Freight Forwarders and Custom House Brokers

You’ll need to deal with a lot of documents when delivering products to foreign countries. However, you don’t normally do it all yourself—you use freight forwarders and customs house brokers.

• Freight Forwarders

A freight forwarder will help you improve your delivery times and customer service. Many specialize in arranging shipments to certain countries, while others concentrate on particular types of products. And if you’re arranging financing through letters of credit, a good freight forwarder can help you clarify the conditions of the transaction.

These agencies will negotiate rates for you with shipping lines, airlines, trucking companies, customs house brokers and insurance firms. If you want them to handle all your logistical requirements, they will. Or you can just have them negotiate a shipping rate; it’s up to you.

• Customs House Brokers

Brokers clear goods through customs, prepare customs documentation and remit duties owing on exported goods. They are also good sources of information on recent tariff changes and other customs related developments. 

Packing Your Goods

Since you want your products to arrive at your customer’s door on time, in one piece and free of legal tangles, you have to take special care in packing, marking and labelling them. Here are some things to consider.

Assume they’ll have a bumpy ride, particularly if you’re shipping them overseas with repeated loading and unloading. Pack them to survive rough-and-ready cargo handlers and poor roads. During transit, handling and storage, your goods may have to endure bad weather and extreme temperatures. If they need special temperature controls or other protective measures, be sure they get them. The type of shipping may determine the kind of packing you should use. For example, if the goods are carried by ship, you need to know whether they will be placed above or below deck. Remember that proper packing can reduce the risk of theft during transit. 

Labels and Marks

Be sure your goods are properly labelled and marked. Labelling regulations vary widely from nation to nation, so verify the required labels before you ship. If labelling, packaging or advertising restrictions apply to your goods, take them seriously. Your product may not clear customs if labels don’t conform to local requirements for things like product weight or electrical standards.

Marking distinguishes your goods from those of other shippers. Marks shown on the shipping container must agree with those on the bill of lading or other shipping documents, and may include some or all of:

• The buyer’s name or some other form of agreed identification;
• The point/port of entry into the importing country;
• The gross and net weight of the product in kilograms and pounds;
• Identification of the country of origin;
• The number of packages; and
• Appropriate warnings or cautionary markings

You must also provide a packing list identifying and itemizing the contents of each container, and each container must contain a copy of the relevant packing list. 

Transportation Insurance

Cargo insurance is more important in international transportation than in domestic transportation. International carriers assume only limited liability for goods when shipping by air or sea. Terms of sale often make the seller responsible for the goods up to the point of delivery to the foreign buyer. For this reason, you absolutely must have transportation insurance.

Marine transportation insurance protects both ocean and air-bound cargo. It also covers connecting land transportation. There are three main types:

• Free of Particular Average (FPA)—is the narrowest type of coverage. Total losses are covered, as well as partial losses at sea if the vessel sinks, burns or is stranded.
• With Average (WA)—offers greater protection from partial losses at sea.
• All Risk—is the most comprehensive, protecting against all physical loss or damage from external causes. In international transportation, it is important to remember that once the documents transferring title are delivered to the foreign buyer, you are no longer liable for the goods. 

Export Documentation

Export documentation identifies the goods and the terms of sale, provides title to the goods and evidence of insurance coverage and certifies that the goods are of a certain quality or standard. Several documents are required for overseas shipping and fall into two categories.

• Shipping Documents

Shipping documents are prepared by you or your freight forwarder. They allow the shipment to pass through customs, to be loaded onto a carrier and be transported to the destination. Key shipping documents include:

• A commercial invoice;
• A special packing or marking list;
• A certificate of origin;
• A certificate of insurance; and
• A bill of lading

A bill of lading is used for land and ocean freight, and an air waybill is used for air freight. Note that the ocean bill of lading can be a negotiable instrument that passes title to the goods. This is unlike the other types, which are simple bills of lading that pass title to the consignee as soon as the goods are delivered.

Your shipment also needs an insurance document. Goods shipped by sea are typically insured for 110% of their value, to compensate for the extra costs involved in replacing lost goods.

• Other collection documents include:

• Certificates of origin;
• Certificates of inspection, used to ensure that goods are free from defect; and
• Import and export licenses as required