documentation and shipping terms by the international trade center

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DOCUMENTATION & SHIPPING TERMS North Carolina A&T State University International Trade Center

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Page 1: Documentation and Shipping Terms by the International Trade Center

DOCUMENTATION &

SHIPPING TERMS

North Carolina A&T State UniversityInternational Trade Center

Page 2: Documentation and Shipping Terms by the International Trade Center

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.

Page 3: Documentation and Shipping Terms by the International Trade Center

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.

Page 4: Documentation and Shipping Terms by the International Trade Center

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.

Page 5: Documentation and Shipping Terms by the International Trade Center

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

Page 6: Documentation and Shipping Terms by the International Trade Center

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.

Page 7: Documentation and Shipping Terms by the International Trade Center

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

Page 8: Documentation and Shipping Terms by the International Trade Center

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.

Page 9: Documentation and Shipping Terms by the International Trade Center

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

Page 10: Documentation and Shipping Terms by the International Trade Center

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.

Page 11: Documentation and Shipping Terms by the International Trade Center

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

Page 12: Documentation and Shipping Terms by the International Trade Center

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

Page 13: Documentation and Shipping Terms by the International Trade Center

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

Page 14: Documentation and Shipping Terms by the International Trade Center

DEFINITIONS OF THE MOST COMMONLY USED INCOTERMS

Page 15: Documentation and Shipping Terms by the International Trade Center

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.

Page 16: Documentation and Shipping Terms by the International Trade Center

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

Page 17: Documentation and Shipping Terms by the International Trade Center

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.

Page 18: Documentation and Shipping Terms by the International Trade Center

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)

Page 19: Documentation and Shipping Terms by the International Trade Center

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

Page 20: Documentation and Shipping Terms by the International Trade Center

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.)

Page 21: Documentation and Shipping Terms by the International Trade Center

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

Page 22: Documentation and Shipping Terms by the International Trade Center

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.

Page 23: Documentation and Shipping Terms by the International Trade Center

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)

Page 24: Documentation and Shipping Terms by the International Trade Center

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

Page 25: Documentation and Shipping Terms by the International Trade Center

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.

Page 26: Documentation and Shipping Terms by the International Trade Center

CIF: COST, INSURANCE, AND FRIEGHT...

• COSTS ASSOCIATED WITH CIF INCLUDE (IN ADDITION TO CFR);

– marine cargo insurance

Page 27: Documentation and Shipping Terms by the International Trade Center

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.