Welcome back to The International Shipper’s Checklist! Now that you know which way the wind blows when it comes to shippability and packaging, and have made a first mate of your customs broker, it’s time to coordinate a schedule and prep your paperwork. Since there’s so much overlap between these two steps we decided to put them together.
What Should I Know About Paperwork?
Everything! As with all shipping, there’s going to be a lot of paperwork, and quite a bit more when you’re planning to ship across international borders and overseas. We want to stress the importance of going over your paperwork, since it is the first place things go wrong for a lot of new international shippers. If the paperwork is wrong, your whole schedule will be disrupted. So, remember: Whether you’re shipping nationally or internationally, most issues with shipping occur due to incorrect, or even missing, documents.
Have your documentation, and copies of it, set. The smallest discrepancy in your paperwork can lead to extra charges, or inspections, meaning your freight will take longer to get where it needs to be (and we’ve already established it’s going to take a while).
Keep An Eye on the Incoterms
Before giving the papers your John Hancock, you should familiarize yourself with some standard contract terms you’ll come across while drawing them up. These specific terms are referred to as incoterms. Incoterms, like FOB (Free on Board) or FAS (Free Alongside Ship), are acronyms for terms that are used in import and export contracts. They explain how long the supplier will be responsible (and liable) for the commodity before it switches hands to the buyer.
It’s easy to gloss over such terms—common, in fact—and misunderstanding them during the negotiation stage can result in a huge stress on your pockets. Building up your understanding of incoterms will lead to better customer service, and dole out responsibility to those involved.
The most common incoterms are:
- EXW (Ex Works)-The seller packages the goods and prepares them for pick-up, while the buyer is responsible for transport costs and risks. This favors the seller.
- FOB (Free On Board)- Location usually follows the designation of FOB, and it’s pertinent to how the term is used. FOB shipping point, or sometimes origin, means that the buyer is responsible for transport costs (as well as risks) while the freight is in transit. FOB destination means the seller is responsible for transport costs (as well as risks) while the freight is in transit.
- CIF (Cost, Insurance, and Freight)-This means that the seller is responsible for costs, freight, and insurance (it’s in the name!) against the buyer’s risk of loss, or damage to the goods while in transit.
- CPT (Carraige Paid To)-The seller is only responsible for making sure the freight arrives to the carrier’s safely. After the seller drops the freight off at a carrier’s, or a place both seller and buyer have agreed upon, the seller pays the cost to transport the goods to the destination. As soon as the freight is at the carrier’s, liability shifts from seller to buyer.
- DDU (Delivered Duty Unpaid)-Here the seller is in charge of the safe delivery of the freight to its destination. They are responsible for paying transit costs, and liability for damage. Once the freight arrives safely, liability transfers to the buyer, including any subsequent transport costs.
- DDP (Delivered Duty Paid)-The seller takes on all responsibility: costs, risks, export/import customs, etc. until the freight has arrived at its destination.
For more information consult the 11 rules for Incoterms. For a quick breakdown check out this handy incoterm reference chart.
Documents to Ensure Safe Passage
Four documents you should look out for are the commercial invoice, the certificate of origin, the NAFTA certificate of origin, and the electronic export information. What are those, you ask?
- Commercial Invoice is one of 2 documents that lists the country of origin. The country of origin must be listed on every commercial invoice, for every shipment and each product enclosed.
The commercial invoice establishes the products you’re shipping. This is the main document for valuation, importation control, and duty determination, and the information on it will help determine your export tariff rates.
- The exporter (you!) must sign the Certificate of Origin, or CO, to certify the country of origin for each product in your shipment. This certificate is required by some countries for all or specific products you’re importing. There are some cases when this paper must be notarized.
- The NAFTA Certificate of Origin is another version of a certificate of origin, but specific to transit between Canada, Mexico, and the United States.
- The Electronic Export Information (formerly Shipper’s Export Declaration), or EEI, is the most common of all export documentation since it’s used to document export statistics. You or your freight forwarder is in charge of filing it. It’s required for shipments over $2,500 and for any shipments requiring an export license.
This document is necessary for all current and former U.S. territories, though they are not technically exports. It isn’t necessary for Canada, unless the commodity being shipped requires an export license.
International parcel shipping has its own set of customs documents and clearances. It’s much cheaper to ship parcel internationally than it is to ship freight, as the customer will only be responsible for duties and taxes.
Get Your Schedule Right
Shipment times are estimated, not promised, for domestically shipped freight (unless you choose guaranteed shipping), so imagine what it’s like for international shipping. A number of delays could keep your freight from point B since the journey isn’t just measured by distance, but the amount of checks and border inspections freight must pass through.
This is why paperwork is so crucial. Missing paperwork will cause major setbacks. Determine how long it will take to ship your commodity—when it’s expected, how many legs it will take, and the estimated transit time to its destination. Familiarize yourself with the path your freight is going to travel and carve out an estimated time frame. Give yourself plenty of wiggle room. Having a customs broker on your side will be invaluable during the process.
For some countries the option of overnight delivery may not be available at all.