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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.
