THE NORTH CAROLINA A

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THE NORTH CAROLINA AT STATE UNIVERSITY
INTERNATIONAL TRADE CENTER
presents DOCUMENTATION SHIPPING TERMS
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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.
• Export documentation provides important
  information that is used by the seller, the
  freight companies, governments, and the buyer.

This is essential if the seller wishes to get paid
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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
• Shippers export declaration (SED)
• Consular Invoice

• Inspection certificate
• Insurance certificate
• Dock/warehouse receipt
• Letter of credit
• Draft

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DEFINITIONS

• Pro forma invoice - basically a price quote.
  Describes the type and quantity of the goods to
  be shipped, value of the goods, total cost of the
  transaction based on the terms of sale, and other
  specifications.
• Bill of lading - a contract between the seller
  and the carrier. The BOL is usually prepared by
  the carrier of forwarder. It documents the
  condition of the goods upon the carriers
  acceptance. It is negotiable when it is
  consigned to order of meaning the buyer is
  allowed to take possession of the goods.
• Certificate of Origin - a statement required by
  some countries that certifies the origin of the
  exported goods (eg. The NAFTA certificate of
  origin)
• Packing List - An itemized list describing the
  contents of each package in a shipment. Used in
  determining the total weight and volume of a
  shipment and for verifying the cargo.
• Commercial Invoice - Basically a bill for the
  goods from the buyer to the seller
• SED - a document required to be filed for every
  shipment exceeding 2500 in value. It is used by
  the Department of Commerce to gather statistical
  information on the types, volume, value, and
  destination(s) of products exported from the U.S.

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DEFINITIONS...

• Consular Invoice - A document required by some
  foreign governments for identifying and
  controlling imported goods
• Inspection Certificate - a document required by
  some foreign governments that certifies that
  the goods imported conform to the order
• Insurance Certificate - the document providing
  proof that the cargo (goods shipped) have been
  properly insured. (amount and type of insurance)
• Dock/warehouse receipt - this document transfers
  accountability from the seller to the carrier.
• Letter of Credit - a letter from your customers
  bank to you, in which the importers bank
  guarantees payment, provided that all the terms
  stated in the letter are met.
• Draft - An unconditional order in writing from
  the drawer to the drawee that directs the drawee
  to pay a specified amount to a named drawer at a
  fixed or determinable future date.

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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 Exporters Encyclopedia or the
  National Trade Data Bank (both available at the
  Center.)
• contact commercial attaches in the target markets
• Foreign Agricultural Services Overseas Contact
  List
• http//www.fas.usda.gov/scriptsw/fasfield/ovc_frm.
  asp
• The U.S. Department of Commerces Overseas
  Contact List
• http//www.usatrade.gov/website/

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WHAT IS A FREIGHT FORWARDER?

• The freight forwarding professional advises
  clients of the best rates, routings and modes of
  transporting goods to or from any area in the
  world. The forwarder is the exporters agent and
  provides the traffic and documentation services
  consistent with the exporters needs, arranging
  for carriage with vessel operators, trucking
  companies and airlines specializing in the
  consolidation of container-load shipments.
• Using the many resources at their disposal,
  forwarders find the right match of services
  available so that products are moved by the most
  timely and cost-effective means.
• Customized services to fit the clients
  operational needs are forwarders specialty.
  Forwarders coordinate arrangements for storage,
  pick-and-pack operations, consolidations or full
  container movements as well as inland
  transportation to provide clients with true
  door-to-door service.
• From assisting with initial quotations or
  preparation of proforma invoices, to banking
  clients documents for collection, the
  professional ocean and or air freight forwarder
  is and essential component in the facilitation of
  international trade.
• The Exporters Encyclopedia. P 3 104

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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, 2/94. pp. 173-174
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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 INCOTERMS

• EXW- EX WORKS
• FCA- FREE CARRIER
• FAS- FREE ALONGSIDE SHIP
• FOB- FREE ON BOARD
• CFR- COST AND FREIGHT
• CIF- COST, INSURANCE, FREIGHT

• CPT- CARRIAGE PAID TO
• DAF- DELIVERY AT FRONTIER
• DES- DELIVERED EX SHIP
• DEQ- DELIVERED EX QUAY
• DDU- DELIVERED DUTY UNPAID
• 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)
• (EX Works Anytown, Anystate)
• 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 shippers
  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 Ships Rail Ocean Port of Exit, State)
• When offering an FOB quotation the
  shipper/seller places the product over the ships
  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 ships 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 ships 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.