When you decide to export the products of your small business, one of the important aspects is the documentation required. The paperwork that has to be completed for an export is different from that for a sale inside the country, and exporting generally requires more documentation.
When you export using an intermediary, the agent or exporting company normally takes charge of the paperwork requirements, and when you export with the help of a freight forwarder, you can benefit from the freight forwarder’s experience and rely on them to advise you with regard to the documentation needed. But in any case, it is good to be aware of the different documents required, and their purpose. And when you export directly on your own account, knowledge of these requirements will be fundamental.
You should also keep in mind that even though the export documentation may be routine for freight forwarders and customs agents, you as the exporter have the final responsibility for the completeness and accuracy of the documents.
Documents Commonly Used in Exporting
The documentation required depends on the regulations that apply in the U.S. and the destination country, the selling conditions, the mode of transport, and the characteristics of your product in particular. Described below are several of the documents that are used in the majority of exports.
Pro Forma Invoice
Once the deal is closed and a purchase order from the customer overseas is accepted, the exporter prepares a pro forma invoice. This invoice starts the export process. The buyer needs it to request the import, and if paying with a letter of credit, the buyer needs the pro forma invoice to present to its bank to request the letter of credit.
The pro forma invoice must contain complete and accurate information on the product being exported and the conditions agreed between the exporter and importer, including the price of the product and all other costs on the importer’s account.
The pro forma invoice should have a description of the merchandise and the quantity, including shipping weight and dimensions and any other product specifications; the unit price and total price of the shipment; the type of quotation, with an indication of the Incoterms, which are commonly accepted commercial terms for international trade that precisely define the responsibilities for taking control of the goods and insuring them at the various points in the shipping process; the packaging method; the mode of transportation and the associated costs; the place where the goods will be unloaded or delivered; the delivery date; and the form of payment and the instrument used for payment.
The pro forma invoice must also include the exporter and importer’s data, such as name, address, and telephone numbers; the date and place in which the invoice is issued; and the exporter’s signature. The invoice should include the specific text that the importer requires, according to the regulations in its country and according to the type of product being imported. The format of the pro forma invoice can de different from that of the commercial invoice.
Commercial Invoice
Once the pro forma invoice is accepted, the exporter must prepare a commercial invoice. Some countries require special formats for the commercial invoice according to their internal regulations, with specifications regarding the content, number of copies, the language, and other aspects. The common practice is to prepare the commercial invoice in English and also in the language of the destination country. A freight forwarder can advise whether a translated copy is needed and can probably recommend a translation service if necessary.
The commercial invoice must contain the same information as the pro forma invoice and all other information required in the destination country. The description of the merchandise must correspond exactly to the description in the letter of credit or in the document for another form of payment, such as documentary collection. Any difference could complicate the process for collecting on the export sale. The importer needs the commercial invoice to clear customs in the destination country and to determine the tariffs and customs duties that must be paid.
The consular invoice is similar to the commercial invoice and is required in certain countries. It must be prepared in the language of the destination country and presented in the consulate of that country in order to be legalized, ensuring that the goods to be imported comply with the regulations of the importer’s country. The consulate may be able to provide the forms that are required for preparing the consular invoice.
The consulate charges fees for certifying and legalizing the documents and the sales contract or purchase order should specify whether the exporter or importer is responsible for these as well as other documentation costs.
Export Packing List
An export packing list is generally more detailed, with more information than a standard domestic packing list. The contents of each individual package are detailed, indicating the type of package, whether a box, drum, or other. The packing list also indicates the legal gross and net weights and measurements of each package in English and metric units. The packing labels should indicate the shipper’s and buyer’s reference data. The shipper or freight forwarder uses this list to determine the total weight and volume of the shipment and to ensure that the right cargo is being shipped. Also, customs officials in the U.S. and the destination country use the packing list to review the cargo, and the buyer uses it to do an inventory of the merchandise received.
Ocean Bill of Lading
The ocean bill of lading is issued by the transportation company. It acknowledges that the specified goods have been received on board for transport, and are ready for delivery to a certain location, to the consignee identified. The ocean bill of lading constitutes evidence of the contract between the exporter and the transportation company, for example the ocean freight company, for transporting the goods. It constitutes title of ownership of the goods. It is a receipt, signed by the transport company, confirming that the goods have been received on board in good condition and ready for transport. It specifies the place of delivery, payment of freight, and to whom the goods are consigned. And the ocean bill of lading details the legal responsibilities of the different parties involved in the shipment.
The original ocean bill of lading is a negotiable instrument that affects all legal aspects of the physical transportation of the goods. It can be endorsed to transfer ownership of the goods that are being transported.
When the exporter wants to consign the cargo directly to the final buyer, it can use a non-negotiable ocean bill of lading. Another type is the order bill of lading, which can be used when the exporter does not want ownership to pass to the buyer until certain conditions are met. This type of bill of lading is normally used when collection is made through a bank draft or letter of credit. It allows the buyer’s bank to take ownership of the goods in the event the buyer fails to comply. The bank does not hand over title until payment is received from the buyer, and it does not turn the funds over to the exporter until the conditions of the sale have been completed.
Air Waybill
When the export is shipped by air, an air waybill is used instead of an ocean bill of lading. Air waybills are non-negotiable instruments and serve as a receipt for the exporter. The air waybill is evidence that the airline has accepted the goods indicated on the packing list and promises to carry them to the destination airport. It may include indications regarding handling, shipment, and delivery of the merchandise. The majority of air waybills also have a customs declaration.
This is the document that certifies that the goods were manufactured or produced in the U.S. Importers use the certificate of origin to take advantage of exemption from tariffs, according to free trade agreements that other countries have signed with the U.S. For example, a certificate of origin from the North American Free Trade Agreement is used for products shipped to Canada or Mexico, provided the rules of origin per that agreement have been met.
The U.S. also has free trade agreements with Australia, Bahrain, Central America and the Dominican Republic, Chile, Israel, Jordan, Morocco, Oman, and Singapore. It has agreements pending with Colombia, Korea, Panama and Peru. You can find an up-to-date list of the agreements in effect and more information on them in the website of the U.S. International Trade Administration at http://trade.gov/fta.
The exporter must sign this certificate, and when the rules in the destination country so specify, the certificate must be endorsed by an accredited chamber of commerce and sometimes by the consulate. In this latter case, the exporter must sign the certificate before a notary public and the certificate must then by signed by a chamber of commerce, before presenting it in the consulate.
Inspection Certificate
Many times, customs in the destination country or the buyers require an inspection certificate for certain regulated products, typically related to agriculture, health, or the environment. An inspection certificate may also be needed to ensure that containers are free from contaminants prior to entering certain ports, or to indicate that the products meet the specifications of a contract or purchase order.
Depending on the type of product being exported, inspection certificates can be issued by different agencies, such as the U.S. Department of Agriculture, the Food and Drug Administration, the Environmental Protection Agency, or third-party inspection companies.
Phytosanitary Certificate
The majority of countries require a phytosanitary certificate for importing plants, and fresh fruits and vegetables. This document certifies that the product is free from harmful plagues that could affect crops. Special treatment and handling necessary to comply with the destination country’s regulations, such as cold storage, is also specified in this certificate.
The Animal Plant and Health Service of the U.S. Department of Agriculture and other state-level agencies grant these phytosanitary certificates.
Insurance Certificate
The insurance certificate is used to provide assurance to the consignee that the insurance will cover loss or damage to the cargo in transit. This certificate is needed when the letter of credit or other documentary collection procedure requires evidence of insurance coverage against risks to the goods that are being exported. Typically, freight forwarders have an open policy for their customers to use, and can issue the certificate in the exporter’s name.
Shipper’s Export Declaration
A Shipper’s Export Declaration is needed for all shipments with a value of over $2,500 and for any shipment less than that amount when an export license is explicitly required. This declaration enables the Census Bureau to monitor the types of products that are being exported from the U.S. for statistical purposes. It must be presented to the transport company before shipment. Ocean and air freight companies attach a copy of the shipper’s export declaration to the shipping manifest, and present it to the U.S. Customs Department for approval of shipment of the merchandise.
The declaration includes a list of the products, indicated by their corresponding code from the “harmonized system”, which is a system used internationally for classifying trade products. This declaration is done on form 7525-V, which can be downloaded from the website of the U.S. Census Bureau at www.census.gov/foreign-trade/regulations/forms. For help in completing the form you can refer to www.census.gov/foreign-trade/regualtions/forms/correct-way-to-complete-the-sed.pdf. The declaration can also be presented electronically. For more details, see the website www.aesdirect.gov.
Export License
Export controls depend on the type of goods being exported, and their final destination. Although the majority of exports do not require a license, the exporter has the obligation to request an official determination from the Bureau of Industry and Security (BIS). The majority of exports are shipped according to a classification of “No License Required” (NLR), which is a certification on the exporter’s part that a license is not required.
In order to determine whether you need an export license for your product, you need to know the Export Commodities Classification Number (ECCN) for your product. Your freight forwarder may be able to provide you with this number. If not, you can get it from the manufacturer or producer, if the product has been exported before, or you can look up the number in the Code of Federal Regulations, 15 CFR Parts 730-774. For additional information you can consult the Export Administration Regulations (EARs) at www.bis.doc.gov. Once you have this number, you can consult the Bureau of Industry and Security to determine whether your product could be subject to controls over exports, and therefore needs to have a license.
Shipper’s Instructions
When you export with the help of a freight forwarder, you as the exporter are responsible for providing all necessary information related to the shipment. Your instructions should be clear and precise, and the more detailed information you can provide, the better will be the likelihood that your goods will arrive at their destination without any problems. The freight forwarder needs to have as much information as you do regarding the transaction, in order to meet the requirements of the buyer overseas. Normally the freight forwarder can provide you with a form commonly used to note these instructions.
Country-Specific Requirements
As mentioned above, the documents that are required depend on the specific requirements of the destination country. Therefore, you as the exporter should make the applicable inquiries so that you can present all the necessary documentation, in the stipulated format. The freight forwarder will generally be aware of these requirements. You can also ask about these requirements in the consulate of the buyer’s country.
Another source of information is the website of the Trade Information Center at http://www.export.gov/exportbasics/ticredirect.asp. When you select the option “Country Information” a map of the world opens, where you can select a region. Under the region, you can select a country within that region. When you select a country, a list of options will open, which can include “Customs Information & Import Documentation” or “Import Licensing & Documentation”. Under one of these options you can find an option such as “Import Regs: Documentation”. When you select this option, you will find an indication of the documents needed to bring goods into the country, general information, or a reference to another website where you can find more information.
