introduction to export documentatio1

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Introduction to Export Documentation & Procedures

Export documentation is far more than just shipping paperwork; it includes all ofthe important records of an international transaction. Using the correct tradeterminology, clearly defining the transfer of interest and liability, selecting theright method of payment and sending the best quotation possible are the keys toeffective exporting. After the sale has been made, proper and timely selection,preparation and distribution of documents are essential.

Documents used in international trade are a reflection of the understanding of theagreement between the seller, the buyer, and third party service and regulatoryagencies. It is vital for the seller to understand that any document produced withtheir name as a party to the document is totally responsible for the actions of theservice provider in the course of their performance.

Although often underrated and overlooked, export documentation and proceduralconcerns are an integral part of the export process and should be considered asimportant as anything else related to the sale. The term export documentationis actually a relative misnomer, as most paperwork is really being prepared onbehalf of the buyer, and is used for customs clearance and other legalities at theport of import, and thus are really import documents.

Successful exporters usually are very adept at preparing export documents, orelse use service providers who are. Problems with documentation can lead todelay in shipment, penalties, unwanted storage costs and an aggravated buyer.

An exporter should always put themselves in the importers shoes. Considerwhat you would do, if as an importer, your supplier caused delays and extraexpenses due to a lack of proper paperwork. Eventually, you would probably finda new supplier.

Differences Between Exporting and Domestic Business:-

The basic intent of a quotation for international trade is the same as it is for quotes made in theU.S.; but the rules and procedures are different. The following are examples of the difference

between international and domestic quotations.

Trade terms:Domestic sales use trade terms such as FOB Factory as defined under theUniform Commercial Code of the United States. One of the benefits of this trade term is that titleof the goods passes to the buyer at our dock. When businesses engage in international trade, theycannot rely on the Uniform Commercial Code or domestic trade terms and should use the tradeterms recognized by international traders.


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Methods of payment:Where open account or cash in advance are the primary waysbusinesses have of collecting domestic accounts receivable, they may not be as commonin international trade. Equally as common in international trade are letters of credit anddrafts. The document preparation and procedures on these consignment controlledshipments requires careful analysis and handling.

Methods of packaging: Shipping goods internationally exposes the in-transit product torisks it would not otherwise encounter. Among the greatest risks for damage to goods inforeign trade are: theft; environmental risks such as heat, cold and moisture;transportation by ocean freight or rail; and lack of mechanized physical handlingequipment in some of the lesser developed countries. There may be certaindocumentation required in international trade that would reflect the proper packaging,packing, handling and stowing of goods in order to satisfy the importers requirements aswell as their governments.

Methods of shipment: Businesses normally ship goods by mail, truck or airfreight totheir customers in the United States. In international trade, truck shipments are limited toCanada and Mexico and most processed food products are shipped by air or oceanfreight. Air freight differs only in the bill of lading used. Meanwhile, ocean freight caninclude drayage to move ocean containers to your facility, railroads to get the cargo to theport of export and another drayage trucking to transport your products to the ocean carrierat the pier. Because these modes of transportation differ a great deal, particularly in thearea of carriers liability, they need to be understood thoroughly before making aquotation. There are specific documents for international shipments that vary in detail,handling and distribution from the domestic equivalent.

Insurance covering damage or loss:The seller has primary responsibility for loss ordamage to the goods, in most cases, all the way to the port of unloading in the foreigncountry. Insurance coverage is therefore a must for all international transactions.Insurance certificates are required for proof of coverage on many exports, especiallythose that are being paid under a letter of credit.

Validity period: The validity period of an international quotation is usually 90 days. Thisallows the buyer to arrange for payment and any import permits that may be necessary tomake the purchase decision of your product. Any changes to the quotation during thattime must also be reflected in the documentation.

Import laws in the foreign country:Before making a quotation to a buyer in a foreigncountry, it will be necessary to determine what restrictions exist. Common considerationsare availability of exchange, country of origin of the product you are offering, importpermits, certificates and inspections. The importer may also have documentaryrequirements in the destination market that must be matched with the exporters prior tocustoms clearance.

Banking fees: Unless the importer used U.S. dollars as their currency, international salesgenerally begin with payment by the buyer in their own currency. The buyers bank will


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then make arrangements to pay the exporter through a U.S. bank in U.S. dollars. Thebanks charge a fee for this process, part of which will be for the sellers account. Thesefees vary depending on the method of payment being used.

Exporter:- FILBERTS FOODS PVT LTD.(Seller)

Importer:- CETIN AYDIN FOODS .

THERE ARE VARIOUS STEPS INVOLVED:-

THE PRO FORMA INVOICE- FIRST STEP:-

The pro forma invoice is usually the first export document prepared. It is generated by theexporter in response to an opportunity for export business; often from a trade lead, whether froman unsolicited direct inquiry or as follow-up from a trade event. Virtually nothing isaccomplished in an export transaction without the issuance and acceptance of a pro forma

invoice. Pro forma invoices can be either formal or informal documents depending on therequirements of the destination country.

Formal quotations usually require a letter of credit as the method of payment. For the buyer toobtain permission to exchange or to import the product, they will need to receive a quotation inthe pro forma format. A pro forma invoice is a snapshot of the offer as it stands at the moment.The seller should carefully develop the quote, because once the buyer accepts the offer to sell ata certain price, a formal contract for the exact amount exists.

THE COMMERCIAL INVOICE:-

The commercial invoice is considered to be the most important international tradedocument and should be prepared as accurately as possible. It is the main documentused by customs to accept or reject the customs entry prepared by the customs broker.Even with a sample shipment, a commercial invoice is required, and needs to state thefact that the goods are not for resale - are samples only - and have little commercialvalue.


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The commercial invoice should reflect the exact nature and terms of the agreement thatexist between the buyer and the seller. Most duties are applied at an Ad Valorem rate,which are on the value of the goods upon their arrival, usually CIF, Cost Insurance andFreight. The invoice would be totaled to that amount and the duties paid accordingly, soit is key in most customs clearances. Often, the commercial invoice will be prepared by

the seller and totaled to the desired trade term, then depending on the method ofpayment, submitted through banking channels or sent directly to the importer forpayment. These arrangements need to be agreed upon between the seller and thefreight forwarder prior to shipping the goods.

Although there is no standard form for a commercial invoice, the following informationshould be included:

Sellers name and address Buyers name and address Exact description of goods (kind, grade, quality, weight)

Agreed-upon price in U.S. dollars (in order to reduce foreign exchange risk) Description of packages (number, kind, markings, dimensions) Type of container Delivery point Terms of payment Date and place of shipment Method of shipment Signature of shipper/seller

Parties to the Transaction and the Commercial Invoice

The parties involved in the export transaction that need an original or copy of thedocument underscores the importance of the commercial invoice. They are:

The Exporter: As a record of the shipment and the payment mechanism. The Importer: Also a record of shipment and payment mechanism. The Freight Forwarder: Uses the invoice in part to prepare the documentation

they provide as part of their services. The Customs Broker: Uses the invoice to prepare the customs entry forms at

the point of import. U.S. Customs: May require a document evaluation if they have concerns about

the shipments integrity. Foreign Customs: May also require a document evaluation in order to allow the

customs clearance at the point of import. The Sellers Bank:If the bank is involved in the payment, they would evaluate

the invoice as part of their document review. The Buyers Bank:If the buyers bank is making the payment on behalf of the

importer, they would require an invoice as part of their document review. The Insurance Company: The company that provides the marine cargo

insurance for the shipment may also require an invoice as part of their file.


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THE SHIPPERS LETTER OF INSTRUCTION:-

This document is completed by the shipper and includes all of the information necessary for thefreight forwarder or carrier to make transportation arrangements and complete the bill of ladingand other related documents. Like the shippers export declaration, the SLI does not leave the

United States. The shippers letter of instruction should include:

Shippers company name, address, phone, fax and contact name Shipper employee identification number Shipper reference numbers (bill of lading, invoice, purchase order, etc.) Product information (description of goods, product quantity, number of packages, weight

in pounds, cubic feet, marks) Consignee information Notify partyImporter, Agent, Customs Broker Product invoice value Schedule B number Freight and documentation billing information Special instructions Signature and date

CUSTOM AND CONSULAR INVOICES:-

Some countries require country-specific invoices that should be submitted along with theexporters commercial invoice. A prime example of this is the Canadian Customs Invoice thatis required for shipments exceeding a specific Canadian dollar amount, currently at C$1600.Because this amount and the exchange rates vary from time to time, you should check at the timeof shipment, or prepare the Canadian Customs Invoice as a matter of policy for each and everyshipment.

A consular invoice could also be required along with the regular commercial invoice. Theconsulate of the destination country often sells these documents, or they might be availablethrough your freight forwarder. The forwarder not only prepares and validates the consularinvoice, but also handles the courier delivery and pick-up of the documents with the consulate.Check with your forwarder for an updated list of which countries require consular invoices orpre-shipment inspections.

The consular invoice is used along with the other export documents by the consulate to screenthe transaction for fraud, and could be part of the pre-shipment inspection process manydeveloping countries use to verify the description and value of the shipment prior to export.


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PRODUCT SPECIFIC DOCUMENTATION:-

Some food and agricultural products require product specific documentation certifying theirsafety, purity and accordance with U.S. or foreign government regulations. The ForeignAgricultural Service, FAS, has a portal for companies to access a variety of regulatory sites for

food products, which is a good place to start evaluating your document requirements in this area.These rules need to be used in conjunction with the regulations at destination as well, and theyall recommend confirmation with the buyer or their customs broker in order to arrive at thecorrect compliance prior to shipment. In this site, you will find the following:

U.S. Trade Restrictions: The list of trade restrictions that may require an export licenseapplication. These rules may apply for embargoes of foreign countries, domesticshortages or other reasons.

Shippers Export Declaration:This is the main document required by the U.S.government, and is covered later in this section. The Bureau of the Census andInternational Trade Administration uses it for compiling U.S. export statistics and it is

also used by customs for export control purposes. USDA Food Safety Inspection Service: The FSIS includes the Library of Export

Requirements for products such as red meat and poultry. Export permits for alcoholic beverages: The Bureau of Alcohol, Tobacco and

Firearms, ATF, requires a Wholesalers Basic Permit for any resale, domestic or foreign. Food and Agricultural Regulations & Standards: The FAIRS reports, which were

reviewed in an earlier section, describe import requirements and contacts for assistance.These reports are focused on consumer-ready products.

USDA/APHIS:The Animal and Plant Health Inspection Service provides inspection andveterinary services for plants, meat, poultry, live animals and animal products to helpensure the product meets foreign import requirements.

USDA National Organic Program: The NOP has information on export certificatesand trade issues for organic products.

Seafood and Aquaculture:The Seafood Inspection Program offers information onimport requirements for seafood products.

Food and Drug Administration:The FDA issues export certificates for variousproducts that may have that requirement.

CERTIFICATES OF ORIGIN:-

The certificate of origin is used by a neutral third party to identify the origin of manufacture ofthe good. The origin of manufacture, not the origin of export, is important to determine theproper duties to be applied by customs at the destination. Many chambers of commerce in areasaround ports of export sell and prepare the certificate of origin, or allow local freight forwardersto do so on their behalf. Some countries have specific certificates of origin, but many will allowthe general use certificate to satisfy their requirements. Shipments paid by letters of credit mayrequire one as mandated by the issuing bank. In this case, the certificate of origin will need to beprepared exactly to the letter of credit requirements.


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However, there are some specific requirements for certain countries. For example, shipments toCanada and Mexico require a NAFTA Certificate of Origin for preferential duty treatment underthe NAFTA to apply. Chambers of Commerce and freight forwarders are not allowed to prepareNAFTA Certificate of Origin on behalf of the exporter or producer who must self-certify. Themost frequently issued certificate of origin in the U.S. is the NAFTA, based on the tremendous

volume and value of goods crossing the North American borders each day.

THE SHIPPERS EXPORT DECLERATION:-

The shippers export declaration is required on shipments valued greater than $2,500 (perSchedule B number) or shipments, regardless of value, of goods requiring permission from theU.S. government to sell outside the U.S. (i.e. export licenses), and shipment to certain countriesregardless of value. The lone exception to the requirement is for exports to Canada that are noton an export license and terminating there. The U.S. obtains its export data for Canada from

Canadian Customs.The export declaration is a form designed and approved by the Bureau ofCensus, and is used to collect census information regarding exports.

This document goes by multiple names. Customs Form 7525-V is the technical name, but it isalso known as the SED, EX-DEC, or Shippers Export Declaration. It can be prepared by theinternational freight forwarder handling your shipment and submitted electronically prior toexport. This is a legal record of the shipment and a copy of the SED should be placed in theshipment file. You can obtain a copy from the forwarder, or save your own if you complete ityourself. In order to review the export declaration,

THE BILL OF LADING:-

A bill of lading is a contract of carriage between an exporter and a service provider, such as anairline, steamship line, freight forwarder or shipping company. It identifies the parties to thetransaction and their responsibility for payment of transportation and other accessorial fees, suchas transfers and delivery. In international trade, the origin and destination of the bill of lading areusually for the main carriage. This is usually the transportation from the port of export to theport of importation. Trucking services may also provide bills of lading for export, if they areleaving under that mode of transport.

THE INTERNATIONAL AIR WAYBILL:-

The air waybill is the contract for carriage (bill of lading) for shipments made by airfreight. Theair waybill is normally issued by a freight forwarder acting as the agent for the airline whotransports the goods, or an airfreight consolidator, who may use the airline to transport the goods


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of several companies under its own master bill of lading. The airline air waybill is known as themaster air waybill or Mawb. If your shipment is consolidated with other cargo, the forwarderwill issue his house air waybill. The house bills are then consolidated into t he master airwaybill.

The most important things to know about the air waybill are:

If you consign the air waybill directly to the buyer in the foreign country, the buyer canclear the goods immediately upon arrival at the destination port. If the air waybill isconsigned to a third party (normally the buyers bank), you can control possession of thegoods until the buyer pays or signs a promissory note, or time draft, to pay at a later date.

Options for declared value for carriage are best discussed with the freight forwarder whois handling your shipment. A minimum cost per kilo will be charged based on eitherweight or volume, depending on the density of the cargo. (Density is calculated as theamount of pounds per cubic foot. The higher the density usually means more attractivepricing for the shipment.)

INTERNATIONAL OCEAN BILL OF LADING:-

The ocean bill of lading is the contract for carriage, or bill of lading, for shipments made byocean freight. The ocean bill of lading is normally issued by a freight forwarder acting as theagent for the ocean carrier who transports the goods, or by an ocean freight consolidator, whowill use the ocean carrier to transport the goods of several companies under its own master bill oflading. The most important points regarding the ocean bill of lading are:

If you consign the ocean bill of lading directly to the buyer in the foreign country, thebuyer can clear the goods immediately upon arrival at the destination port.

If you consign the ocean bill of lading to the order of the shipper, you can control thetitle or possession of the goods until the buyer pays or signs a promissory note to pay at alater date. A To Order bill of lading makes the document negotiable, as it also includesan endorsement on the back by the shipper or their agent. This is quite similar to yourpaycheck or the checks you write, which say To the order of instead of To.Negotiable bills of lading, when signed, represent ownership of the goods and need to beprotected from any other party obtaining them other than as directed by the shipper.

The carriers liability and where the liability begins. For example, if the carrier picks thegoods up from the exporters dock, the ocean carriers liability for loss or damage will be

limited by the amount of liability stated in the ocean bill of lading. If less than a container load, LCL, shipment, and the charges will be based on either

weight or volume depending on the density of the cargo. The carrier will charge thehigher of the two costs.


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THE PACKING LIST:-

The packing list is used by customs to apply certain types of duties, and is a required documentfor customs clearance. Most duties are applied on a basis of value, known as Ad Valoremduties, and the commercial invoice is key for those. There are also two other types of duties

applied to imports; specific and compound. Specific duties require the packing list as they areapplied on the physical nature of the goods, such as their pieces, weight or measure and thisinformation comes from the packing list. Compound duties are applied as both Ad Valorem andSpecific tariffs together and thus both the commercial invoice and packing list would be requiredfor customs clearance.

It is also used by shipping companies to identify the weight and dimensions of your product, andshould be completed in metric form. It does not usually require any value for the merchandise,but a very complete list of all the products, their packing (example: cartons, boxes, crates,barrels, bags) their gross and net weights, their cubic feet and cubic meters and any markings orhandling issues.

Many exporters simply block out the price on their commercial invoices and use it as a packinglist, but this is not recommended. You would not want foreign customers to confuse yourcommercial invoice and packing list, as they may consider your document package to beincomplete. It is recommended to create your commercial invoice in portrait form and yourpacking list in landscape form to clearly point out the differences.

The export packing list is considerably more detailed and informative than a standard domesticpacking list. An export packing list itemizes the material in each individual package andindicates the type of packagebox, crate, drum, carton, etc. It shows the individual net, legal,tare and gross weights and measurements for each package (in both imperial and metric units).

Package markings should be shown along with the shippers and buyers references. The packinglist should either be included in or attached to the outside of the package in a waterproofenvelope marked packing list enclosed. The shipper or forwarding agent to ascertain the totalweight and volume in addition to determining whether the correct cargo is being shipped uses thelist.