Have you had inquiries about shipping your products internationally? Perhaps you have been thinking, �Now that we have a Web site, we are getting more international calls. I have a good shipping manager. Well, let�s just call the freight forwarder and tell him to ship it for us. We can ask for payment up front.�
So, after talking to several forwarders, you get what you think is a good freight rate, and you make the quote to the customer for the value of the goods plus air freight. The customer accepts the offer and promises to pay you for the goods as soon as he receives them. But you counter that he (the customer) should pay you and then you will ship. That seems like a risk to your customer so he suggests that as soon as it clears Customs, he will pay you. That still sounds too risky to you so you call the bank, and they suggest you ask for a letter of credit. The client agrees, and the problem is solved. But now new challenges have begun.
The customer completes a letter of credit application with his bank; you are notified by a local bank that a letter of credit has been opened, and your company is the beneficiary. A few weeks later, you receive the letter of credit stating you must ship in two weeks, turn in the documents to the bank, and you will get paid. So far, so good. You produce the material, attach an invoice and call the forwarder to pick up the shipment. When the freight forwarder gets the shipment, he calls back with some questions. The following summary should help you answer any international documentation questions to help successfully complete your export transaction.
Your Address � On any invoice or related documentation, obviously place your company name and address as the seller/shipper.
Consignee Name � You will also place the customer�s name as buyer/consignee name on your document. The term consignee refers to the person the shipment is to be delivered to or the person, people or organization to whom something is delivered or addressed, according to the dictionary. Sometimes the buyer is not the consignee. You might sell a shipment to someone in New Orleans, but the shipment is made to a company in France. The company in France is the consignee.
Consignee Street Address � A complete street address is very important for the consignee. A post office box only works for shipments via the U.S. Postal Service. For everyone else, a street address is required.
Date � Putting the date on your export documents is important. You may want to track how long it took for your package or shipment to be delivered. Perhaps your customer has not prepaid the shipment, and you want him to pay immediately upon receipt. So your invoice date plus one week for delivery might be a reasonable way to start your accounts receivable process.
Product Description � The next important piece of information is your product description. Many invoice systems simply put out the product code. You need more than that for international shipping. As a general rule, you need to describe the product that was shipped in English so that someone else can understand what it was. The best guideline for a product description on an international shipment is to use the description used in the harmonized tariff system. Of course, this means you must classify the merchandise.
Harmonized Number � The harmonized classification number, or �schedule B� number as it is sometimes called, for US exports is a 10-digit number assignable to a product for import/export purposes. The complete harmonized system used in the United States is viewable at www.dataweb.usitc.gov/SCRIPTS/tariff/toc.html, and for the harmonized tariff schedule and duty rates for Europe, visit europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?-
Price � The price for international shipments is the price paid or payable; in short, this means the complete price paid, including any adjustments, for freight and handling. The price paid is the actual amount paid. When no price is paid, the amount is the price the unit would sell to someone else in the home market. For detailed information on the transaction value laws, visit www.customs.gov/imp-exp1/comply/value96.htm#top.
Incoterms � The incoterms identify who takes responsibility and at what point. FOB Toronto airport means the shipper takes responsibility to get your shipment to the Toronto airport and prepares any necessary export documentation. FOB Canada is not a valid term of delivery because it does not name a point. For detailed information on the terms of delivery, visit www.iccwbo.org/
Marks and Numbers � The marks and numbers are the markings on the boxes or cartons and the numbers on each box. It is important to mark all the boxes that are shipping together with the same markings in case they are accidentally separated in shipping. With sequential numbering and identical markings, it is easier to account for the complete ship-ment at its destination. Your packing list needs to identify the contents of each individual carton for ease of Customs inspection.
Country of Origin � Country of origin does not designate where a shipment came from but where the product was grown, produced or manufactured. There are two major methods of arriving at the country of origin of an item. If it is grown, produced or manu-factured totally in one country, that is the country of origin. But, if something is produced in Chile and manufactured in Mexico, how do you calculate which country is the origin? There are complicated methods of arriving at a country of origin, but the basic methods are substantial transformation or change in tariff heading.
Under substantial transformation as applied in the United States, the finished product in Mexico must have a new name, character or use and not be some minor change such as dilution or repackaging. Under the change in tariff heading method more commonly used in Europe and the North American Free Trade Agreement, the finished product must have undergone a change in tariff heading. The first four digits of the harmonized tariff number must have changed between the initial product and the finished product. There are a myriad of exceptions based on value added and other methods. In general, a change greater than 50% in value will be the �criterion� to identify the country of origin.
The best advice when shipping internationally is to be careful with the details. International shipments have a few extra documentation requirements. Otherwise, with a few practice shipments and some research, you too will soon be making shipments across the border!
Thomas Stanton is the International Logistics Analyst at AFMS Consulting. He may be reached by e-mail at tom.stanton@afms.com.