In This Chapter
The hurdles you have to clear don’t end with the sale and the Web site. You still have to get the goods to the buyer, who is often located thousands of miles away where different rules may apply. When shipping a product overseas, you must be aware of packing, labeling, documentation, and insurance requirements and regulations. Make sure that the merchandise is:
Because of the multitude of considerations involved in physically exporting goods, exporters often receive assistance from their air carrier or freight forwarder to perform those services.
An international freight forwarder is an agent for moving cargo to an overseas destination. These agents are familiar with the import rules and regulations of foreign countries, the export regulations of the U.S. government, the methods of shipping, and the documents related to foreign trade. Freight forwarders are licensed by the International Air Transport Association (IATA) to handle air freight and the Federal Maritime Commission to handle ocean freight.
Freight forwarders assist exporters in preparing price quotations by advising on freight costs, port charges, consular fees, costs of special documentation, insurance costs, and the freight forwarders’ own handling fees. They recommend the packing methods that will protect the merchandise during transit, or they can arrange to have the merchandise packed at the port or put in containers. If the exporter prefers, freight forwarders can reserve the necessary space on a vessel, aircraft, train, or truck. The cost for their services is a factor that should be included in the price charged to the customer.
Once the order is ready for shipment, freight forwarders should review all documents to ensure that everything is in order. This review is of particular importance with letter-of-credit payment terms. Freight forwarders may also prepare the bill of lading and any special required documentation. After shipment, they can route the documents to the seller, the buyer, or a paying bank. Freight forwarders can also make arrangements with customs brokers overseas to ensure that the goods comply with customs import documentation regulations. A customs broker is an individual or company that is licensed to transact customs business on behalf of others. Customs business is limited to those activities involving transactions related to the entry and admissibility of merchandise; its classification and valuation; the payment of duties, taxes, or other charges assessed or collected; and the refund, rebate, or drawback of those charges.
For more information, visit the National Customs Brokers and Freight Forwarders Association of America at http://ncbfaa.org.
Your company should be aware of the demands that international shipping puts on packaged goods. You should also keep four potential problems in mind when designing an export shipping crate: breakage, moisture, pilferage, and excess weight.
Buyers are often familiar with the port systems overseas, so they will sometimes specify packaging requirements. If the buyer does not provide such specifications, be sure the goods are prepared using these guidelines:
One popular method of shipment is to use containers obtained from carriers or private leasing companies. These containers vary in size, material, and construction. They accommodate most cargo but are best suited for standard package sizes and shapes. Also, refrigerated and liquid-bulk containers are usually readily available. Some containers are no more than semitrailers lifted off their wheels, placed on a vessel at the port of export, and then transferred to another set of wheels at the port of import.
Normally, air shipments require less heavy packing than ocean shipments, though they should still be adequately protected, especially if they are likely to attract pilferage. In many instances, standard domestic packing is acceptable 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 preferable.
Finally, transportation costs are determined by volume and weight. Specially reinforced and lightweight packing materials have been developed for exporting to minimize volume and weight while reinforcing the packaging. The proper materials may save money as well as ensure that the goods are properly packed. You should hire a professional firm to pack the products if you are not equipped to do so. This service is usually provided at a moderate cost.
Specific marking and labeling are used on export shipping cartons and containers. This labeling:
The overseas buyer usually specifies which export marks should appear on the cargo for easy identification by receivers. Products may require many markings for shipment. For example, exporters need to put the following markings on cartons to be shipped:
Your company should seriously consider having the freight forwarder handle the documentation that exporting requires. Forwarders are specialists in this process. The following documents are commonly used in exporting, but which of them are necessary in a particular transaction depends on the requirements of the U.S. government and the government of the importing country:
Documentation must be precise because slight discrepancies or omissions may prevent merchandise from being exported, may result in non-payment, or may even result in the seizure of the exporter’s goods by U.S. or foreign customs officials. Collection documents 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 as the exporter, you are ultimately responsible for the accuracy of the necessary documents.
The number and kinds of documents that the exporter must deal with vary according to the destination of the shipment. Because each country has different import regulations, the exporter must be careful to provide all proper documentation. The following sources also provide information pertaining to foreign import restrictions:
The handling of transportation is similar for domestic and export orders. Export marks are added to the standard information on a domestic bill of lading. These marks show the name of the exporting carrier and the latest allowed arrival date at the port of export. Instructions for the inland carrier to notify the international freight forwarder by telephone on arrival should also be included. You may find it useful to consult with a freight forwarder to determine the method of international shipping. Because carriers are often used for large and bulky shipments, you can reserve space on the carrier well before actual shipment date. This reservation is called the booking contract.
International shipments are increasingly made on a bill of lading under a multimodal contract. The multimodal transit operator (frequently one of the transporters) takes charge of and responsibility for the entire movement from factory to final destination.
The cost of the shipment, delivery schedule, and accessibility to the shipped product by the foreign buyer are all factors to consider when determining the method of international shipping. Although air carriers may be more expensive, their cost may be offset by lower domestic shipping costs (e.g., using a local airport instead of a coastal seaport) and quicker delivery times. These factors may give the U.S. exporter an edge over other competitors.
Before shipping, your firm should check with the foreign buyer about the destination of the goods. Buyers may want the goods to be shipped to a free trade zone or a free port, where they are exempt from import duties (see Chapter 10).
Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make insurance an important protection for U.S. exporters. If the terms of sale make you responsible for insurance, your company should either obtain its own policy or insure the cargo under a freight forwarder’s policy for a fee. If the terms of sale make the foreign buyer responsible, you should not assume (or even take the buyer’s word) that adequate insurance has been obtained. If the buyer neglects to obtain ad equate coverage, damage to the cargo may cause a major financial loss to your company.
Shipments by sea are covered by marine cargo insurance. Air shipments may also be covered by marine cargo insurance, or insurance may be purchased from the air carrier. Export shipments are usually covered by cargo insurance against loss, damage, and delay in transit. International agreements often limit carrier liability. Additionally, the coverage is substantially different from domestic coverage. Arrangements for insurance may be made by either the buyer or the seller in accordance with the terms of sale. Exporters are advised to consult with international insurance carriers or freight forwarders for more information. Although sellers and buyers can agree to different components, coverage is usually placed at 110 percent of the CIF (cost, insurance, freight) or CIP (carriage and insurance paid to) value.
Because tariffs, port handling fees, and taxes can be high, it is very important for you to consider their effects on your product’s final cost. Typically, the importer pays the tariffs. Nevertheless, these costs will influence how much the buyer is willing to pay for your product.
International shipping companies have become an excellent resource for exporters. In addition to transporting bulk freight, they now offer assistance with shipping documentation, warehousing in the foreign market, and—in some cases—payment collection from the foreign buyer.