An important part of the international trade process for exporters of any size is ensuring that the goods that are shipped reach their destination intact and in timely fashion. Appropriate packaging and proper documentation are essential in meeting these goals.
INTERNATIONAL FREIGHT TRANSPORTATION OPTIONS
The exporter's options for transporting goods are dictated in large measure by their final destination. American exporters preparing goods for shipment to Mexico or Canada, for instance, will often make arrangements to transport their merchandise over land routes via trucks, while exports that are headed for destinations unreachable via land routes have to be transported by air or water.
Exporters who are faced with the choice of air or water modes of transport need to be cognizant of the advantages and disadvantages of those two options. While shipping by water is generally less expensive than transporting by air, the difference in cost is narrowed somewhat by ancillary costs associated with sea transport, such as the cost of transporting goods to the dock. Merchandise shipped over water also takes longer to reach its ultimate destination, and since some export transactions do not require the importer to pay until they are in possession of the goods, exporters in immediate need of cash infusions will need to weigh this factor carefully. Of course, the sheer size and tonnage of some export shipments render air transportation impractical.
Consultants to companies who engage in exporting note that the merchandise they ship will generally be subject to more handling and potentially damaging forces during transport than will goods headed for domestic destinations. Intelligent packaging, then, is a key component of the exporting process. Ideally, exporters should use a packaging approach that minimizes the cost of transportation while simultaneously ensuring that the goods reach their destination intact. Many small exporting companies that do not have the financial or operating resources to take care of packaging themselves utilize firms that specialize in providing such services.
Exporting firms need to keep abreast of labeling and marking requirements on goods intended for international destinations as well. Pharmaceutical products, for instance, require special labeling that varies from country to country. In addition, many countries enforce regulations requiring that imported goods bear the name of the country of origin on the outside of their packaging. Packaging containing merchandise intended for foreign ports also typically includes markings indicating the height and weight of the packages, as well as any additional handling instructions.
NECESSARY EXPORT DOCUMENTS
The documentation required for international trade is quite extensive (and potentially confusing), but exporters need to make certain that they have their papers in proper order if they wish to avoid potentially damaging delays in shipment. Documents required for the export of goods include the following:
Export License. While most merchandise can be shipped to overseas customers without benefit of an actual license, some goods are subject to additional regulations and require an Individually Validated Export License (IVL). "Should your particular export be subject to export controls," explained the Small Business Administration, "then a 'validated' license must be obtained. In general, your export would require a 'validated' license if export of the goods would: threaten United States national security; affect certain foreign policies of the United States; or create short supply in domestic markets."
Shipper's Export Declaration (SED). This important document is required for mail shipments of $500 or more, all shipments of more than $2500 value, and any shipment that is covered by an IVL. SEDs are utilized by the U.S. Bureau of the Census to track export trends in the United States.
Commercial Invoice. The commercial invoice is used by both exporters and importers. Exporters use the document as proof of ownership and an aid in securing payment for goods delivered, while importers use it to confirm that the merchandise they have received matches what they ordered. Commercial invoices are also used by Customs officers to figure the correct duty on the goods being imported, so U.S. exporters generally provide translated copies of the invoice when shipping goods to destinations for which English is not the primary language spoken.
Consular Invoice. This kind of invoice serves the same general purpose as the commercial invoice, but it must be worded in the language of the nation for which the goods are intended. Consular invoices are so named because they can be obtained from the destination country's consulate.
Bill of Lading. This document serves as evidence of ownership of the goods being exported, and also specifies the responsibilities of the transporting company. Two types of ocean bills of lading can be used. The first, known as the straight bill of lading, provides for delivery of merchandise only to the person named in the bill of lading. Under the second bill of lading option, called the shipper's order, goods can be delivered not only to the person named in the bill but also to other designated people. Under the latter option, financing institutions are empowered to take possession of the goods being exported if the buyer defaults; they retain title on the merchandise until all payments and conditions of sale have been fulfilled. For exports that are transported by air, documents known as air waybills serve the same general purpose.
Certificate of Origin. Some countries require shipments of goods from foreign ports to include certificates that indicate where the merchandise originated. In instances wherein the importing country has trade agreements in place with the country that is doing the exporting, lower tariffs on those goods can sometimes be imposed.
Export Packing List. This highly involved document provides a detailed description of the contents being shipped. It covers the material in each individual package, providing information such as individual net, legal, tare and gross weights and measurements for each package. This data is typically measured by both metric and U.S. systems of measurement. Export packing lists are used by the shipper (or the freight forwarder) to confirm the shipment's contents and figure the total weight and volume of the shipment.
Inspection Certificate. This documentation is bestowed by independent inspection firms, whose services are required when foreign purchasers ask for independent corroboration that the goods meet agreed-upon specifications.
Insurance Certificate. Some international transactions require the exporting firm to provide insurance on the shipment. The insurance certificate describes the type and amount of merchandise contained in the shipment, and confirms that the shipment has been insured.
Inland Bill of Lading. These documents—known as "waybills on rail" in the railroad industry and "pro-forma" bills within the trucking industry—provide information on the inland transportation of goods and the port that will eventually send the exporter's goods on their way.
Dock Receipt. This paper is the international carrier's acknowledgment that goods have been received. It serves to transfer responsibility for those goods from the domestic to the international carrier.
Shipper's Instructions. This document serves to provide transporters of exports with any other information necessary to ensure the effective movement of goods to their final destination.
THE FREIGHT FORWARDER
International freight forwarders are important figures in the exporting process for American firms. Knowledgeable about all aspects of international trade—including international and U.S. regulations, import and export rules, and shipping options—freight forwarders serve as agents for exporting businesses, overseeing the transportation of their cargo to overseas destinations.
As the Small Business Administration noted in its Breaking into the Trade Game, many freight forwarders provide services at the very beginning of the exporting process by advising exporting firms about freight costs, port charges, insurance costs, consular fees, handling fees, and other expenses. They can also advise small exporters about packaging options, and in some cases can make arrangements to have goods containerized or packed at the port. Freight forwarders also have the power to reserve space on freighters and other ocean vessels in accordance with client specifications.
In order to represent their exporter clients as effectively as possible, freight forwarders may review the wide array of documentation necessary for international business transactions, including letters of credit, commercial invoices, and packing lists. Exporters can also ask freight forwarders to prepare necessary documentation for the exporting process, including bills of lading. Once this documentation has been taken care of, they can be forwarded as needed. Finally, the exporter can also ask the freight forwarder to make arrangements with the customs broker to ensure that their merchandise is in compliance with customs export documentation regulations. Given the wide array of services that they provide, and the importance of those services to the exporting process, trade experts view freight forwarders as an extremely valuable resource for small exporting firms. "The cost for their services," contended the Small Business Administration (SBA), "is a legitimate export cost that should be figured into the price charged to the customer."