documentation and shipping terms by the international trade center
TRANSCRIPT
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DOCUMENTATION &
SHIPPING TERMS
North Carolina A&T State UniversityInternational Trade Center
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WHAT IS EXPORT DOCUMENTATION?• The paperwork that is required for an export
sales transaction
• The means by which the shipping process is facilitated and recorded.
• Documentation is essential for moving goods through the channels of distribution, transferring responsibility or possession, clearing goods through customs, and facilitating payment according to the agreed upon terms.
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WHAT IS THE PURPOSE OF EXPORT DOCUMENTATION?• Export documentation provides evidence that
the negotiated terms between the buyer and the seller have been complied with. This is essential if the seller wishes to get paidThis is essential if the seller wishes to get paid
• Export documentation provides important information that is used by the seller, the freight companies, governments, and the buyer.
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THE KEY INFORMATION CONTAINED IN EXPORT DOCUMENTS
• Description of the goods• Mode of transportation
– rail, air, ocean• Terms of sale
– Who pays for what?• Origin of the goods• Identity of the seller/shipper• Identity of the buyer• Terms of payment• Shipping instructions• Evidence of shipment
Foley, James, F. “The Global Entrepreneur: Taking Your Business International.” Dearborn Financial Publishing. 1999. P. 210.
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COMMON EXPORT DOCUMENTS
• Pro forma invoice• Bill of Lading• Certificate of Origin• Packing List• Commercial Invoice• Shipper’s Export
Declaration (SED)• Consular Invoice
• Inspection Certificate• Insurance Certificate• Dock/Warehouse
receipt• Letter of Credit• Draft
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A GUIDE FOR DOCUMENT PREPARATION
• To ensure accurate document preparation, the services of a freight forwarder should be sought.
• However, the exporter should understand the essentials of document preparation and at least review the prepared documents.
• Seek explanation and instruction from the freight forwarder.
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A GUIDE FOR DOCUMENT PREPARATION...• To determine the required documents for a given
country and transaction, an exporter can:– solicit the services of a freight forwarder
– consult the “Exporter’s Encyclopedia” or the National Trade Data Bank (both available at the “Center”.)
– contact commercial attaches in the target markets• Foreign Agricultural Service’s Overseas Offices
http://www.fas.usda.gov/scriptsw/fasfield/ovs_directory_search.asp
• The U.S. Department of Commerce’s Overseas Contact List http://www.buyusa.gov/home/worldwide_us.html
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STEPS IN THE DOCUMENTATION PROCESS• Receive the order under accepted terms & consult
with a banker or a freight forwarder.
• Begin organizing information for required export documents and export license applications.
• Evaluate modes of transportation, requirements for perishable products, and cost of various alternative modes.
• Prepare goods for shipping (marking/labeling, packing, consolidating/containerizing, insuring)
• Complete and forward required export documents.
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STEPS IN THE DOCUMENTATION PROCESS...
• Transport goods to U.S. port of export.• Transfer goods to carrier.• Ship goods and forward appropriate export
documents .• Unload goods at foreign port.• Clear customs.• Transport goods from foreign port to intermediate
and/or ultimate consignee.
Note: Responsibility for different steps in the documentation and shipping process depends on the terms of sale and the method of payment and collection.
International Marketing for Agribusiness - Concepts and Applications, 12/2000
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THE TERMS OF SALE…… INCOTERMS
• Understanding the Incoterms, also called the terms of sale, is the first step in responding to a trade lead or starting to prepare a quote.
• Definition: An international rule for pricing terms which represent different levels of financial responsibility for the buyer and seller in an export transaction.
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INCOTERMS...• The INCOTERMS establish :
– the geographical location where the buyer becomes responsible for the goods
– payment of shipping, handling, insurance, inland freight, etc.
– the point where ownership of the goods or the title for the goods changes ownership
Note: The terms of sale should always be followed by a physical location so that the buyer cannot surprise the seller and select a costly or infeasible location
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THE THIRTEEN INCOTERMS1. EXW - EX WORKS
2. FCA - FREE CARRIER
3. FAS - FREE ALONGSIDE SHIP
4. FOB - FREE ON BOARD
5. CFR - COST AND FREIGHT
6. CIF - COST, INSURANCE, FREIGHT
7. CPT - CARRIAGE PAID TO
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THE THIRTEEN INCOTERMS….8. CPT - CARRIAGE PAID TO
9. DAF - DELIVERY AT FRONTIER
10.DES - DELIVERED EX SHIP
11.DEQ - DELIVERED EX QUAY
12.DDU - DELIVERED DUTY UNPAID
13.DDP - DELIVERED DUTY PAID
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DEFINITIONS OF THE MOST COMMONLY USED INCOTERMS
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EXW: EX-WORKS• EXW (geographical location)
• EXW signifies a precise location where the product is made ready to the buyer.– When offering a “EXW” quotation: the price
includes only those costs involved up to an agreed point of origin, usually the shipper’s factory. The shipper/seller places the product at the control of the buyer at a concurred place, date, time, etc.
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EXW: EX-WORKS...• EXW COSTS CAN INCLUDE:
– Raw or processed product– Standard packaging– Pallets, banding, shrink-wrap, slip sheets,
slings, one-ton-big-bags– Special labeling– Translation and printing– Inspection certificates (Phytosanitary,
Health, Quality, or Export License)– Bracing or inspecting a container– Export packaging
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FCA: FREE CARRIER• FCA (geographical location) (FCA Acme
Trucking Company, Your Factory, Anytown, Anystate)
• FCA signifies a precise location where the product is turned over to a carrier or person who will ensure carriage, and the goods are cleared for export.
• When offering a “FCA” quotation: the price includes those costs involved up to that agreed point, including transportation and loading if required.
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FCA: FREE CARRIER...
• FCA COSTS CAN INCLUDE ( IN ADDITION TO THE EXW COSTS):– Loading on board carrier
– Transportation to the carrier
– Insurance coverage to carrier (optional)
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FAS: FREE ALONGSIDE SHIP• FAS (port of exit) (FAS
Ocean Port of Exit, State)
• FAS signifies a precise ocean port location where the product is turned over to a carrier, and the goods are cleared for export
• When offering an “FAS” quotation: the shipper/seller places the product alongside the vessel
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FAS: FREE ALONGSIDE SHIP...• FAS COSTS CAN INCLUDE (IN
ADDITION TO FCA COSTS):– inland transportation
(from your plant to the port)
– port charges (including Terminal Handling or Receiving Charges, or stevedore, wharfage, forklift, off-load, etc.)
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FOB: FREE ON BOARD
• FOB (Ocean Ship at Port of Exit) (FOB Ship’s Rail Ocean Port of Exit, State)
• When offering an “FOB” quotation: the shipper/seller places the product over the ship’s rail. FOB only applies to sea or water transportation
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FOB: FREE ON BOARD...• The costs associated with FOB include:
– loading on board ship– heavy lift charges
• These costs are correct in theory, but actually the loading and heavy lift charges will be included in the shipping cost from the port to the final destination which the buyer will pay.
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CFR: COST AND FREIGHT• CFR (FOREIGN PORT OF ENTRY) (CFR PORT
OF ENTRY, COUNTRY)
• CFR signifies that the seller loads the product on board a carrier, clears the goods for export, arranges and pays the ocean freight and other charges.
• The risk during carriage is transferred to the buyer, and the goods change hands when they pass the ship’s rail at the port of shipment. (the final destination)
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CFR: COST AND FREIGHT...• The charges associated with CFR include
(in addition to the FOB costs):– Ocean Freight
– Fuel Adjustment Factor
– Currency Adjustment Factor
– Destination Delivery Charges or Container Service Charges
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CIF: COST, INSURANCE, AND FRIEGHT• CIF (FOREIGN PORT OF ENTRY) (CIF
PORT OF ENTRY, COUNTRY)
• CIF signifies that the seller loads the product on board a carrier, clears the goods for export, arranges and pays the ocean freight and other charges.
• The seller insures the shipment, and the goods change hands when they pass the ship’s rail at the port of shipment.
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CIF: COST, INSURANCE, AND FRIEGHT...
• COSTS ASSOCIATED WITH CIF INCLUDE (IN ADDITION TO CFR);
– marine cargo insurance
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NOTE• The previous definitions and list of costs
are general. These definitions, terms, shipping regulations, etc. often change.
• For these reasons, it is highly recommended that the services of a freight forwarder are enlisted as freight forwarders are aware of any changes.