Besides commercial and transport documents, exporters must organize certificates, documents and approvals that will satisfy foreign customs as to the value, country of origin, weight, quality, and safety of the goods being shipped and demonstrate approval to trade controlled goods. These certificates and approvals required for international shipping by customs are dependent on the type of goods being shipped (e.g. food, plant material, electrical tools, used clothing), and the regulations of the country accepting the goods.

It is important to ensure that all the certificates and approvals are in place prior to reaching the border to prevent delays or extra costs, e.g. storage. Provision of such documents should be specified as one of the terms of a sales agreement/contract. Importers need to ensure they inform exporters of the importing requirements so that goods can meet the standards and proper certificates can be obtained.

The following certificates and approvals have been organized and grouped as follows:

• Certificates of origin
• Packing declarations
• Certificates of quality and safety
• Importer/exporter declaration
• Importer/exporter licences and permits
• Consular invoices

Certificates of Origin (CO)

A Certificate of Origin declares that goods to be exported in a shipment have been grown, obtained, produced, manufactured and/or processed in a particular country. Customs importers, freight forwarders or banks may request Certificates of Origin for clearance of letters of credits. Certificates of Origin should provide the following international shipping information:

• Name and address of exporter
• Name and address of producer
• Name and address of importer
• Time period of certification
• Description of goods
• HS code
• Gross weight or other quantity
• Signature, name and contact information of authorizing individual

Certificates of Origin are important when there are international free trade agreements as there are opportunities for preferential rates of duty and special tariff treatment if the country of origin is a signatory. For example, special tariff treatment is extended to goods traded between countries that are signatory to the General Agreement on Tariff and Trade (GATT), administered by the World Trade Organization.

The main criteria for these special tariff treatments are:

• Goods are grown, produced or manufactured in a country entitled to the specific tariff treatment
• Not less than a certain percentage of the production cost was incurred in the country of origin or a country entitled to the same or a more favourable tariff treatment
• The goods are shipped directly (or by acceptable transhipment) from one qualifying country to the other

To substantiate their entitlement to the preferred rates of customs duty available, importers must have a Certificate of Origin and must present it to customs if requested.

If you are a manufacturer or an exporter, check with your governments customs or revenue agencies to determine rules of origin that apply to identify what agreements can impact the taxes and duties you could be charged and to make sure your claim is valid.

Want to learn more about managing all necessary documentation for exporting and importing goods and services? Check out the FITTskills Global Value Chain online course.

Packing Declarations

A packing declaration is a letter from the packing supplier or shipper or exporter stating that the type of materials used for packing and the packing container meet the standards for entry into a country. Some countries may require other certifications if certain materials (e.g. straw or wood shavings) are used for packing. A Dangerous Good Declaration is another form of packing declaration certifying that dangerous goods are packaged, labelled and being transported in accordance with international shipping regulations.

Certificates of Quality/Safety

For some shipments, the contract terms will call for additional documentation that verifies that the grade or quality of a product meets the requirements of the importing country, or as proof that the goods have passed through health or sanitary inspections. These are not international shipping documents, but in many cases the exporter will need these documents to pass the goods through customs and have the goods admitted into the importing country.

Typical certificates include the following.

Phytosanitary certificates verify that the plants and plant products covered by the certificate are free from quarantine pests, practically free from other injurious pests, and that they conform to the country’s phytosanitary import requirements. It is an official document issued by the plant protection organization of the exporting country to the plant protection organization of the importing country. A phytosanitary certificate is a requirement for propagative (reproductive) material (excluding specified seeds) imported from all foreign countries, and for other specified plant-based commodities.

Food safety or consumption certificates verify that the type of food being exported is an approved species, meets certain labeling specifications, approved storage conditions, meets specific content levels (e.g. sulfites), approved for human consumption, and other requirements based on the different food types. Many countries trade or food safety regulatory agencies will have databases that can be accessed for importing requirements for different types and classifications of food products. For example, the Canadian Food Inspection Agency’s AIRS (Automated Import Reference System), provides information to importers on what is required for specific food items to be brought into Canada from different countries. These certificates, depending on the food type and the import requirement, may require inspections or laboratory testing and analysis.

Public health and veterinary certificates verify that animal products come from animals that have been reared, slaughtered and processed in regions free of disease, and that live animals and their rearing environment are disease-free. This type of certification requires an inspection by an authorized inspector.

Safety standards certifications confirm that the goods conform to the importing countries regulatory or technical standards. They are required for specific types of goods being brought into the country (e.g. electronic goods and appliances). Performance and safety testing is carried out by accredited organizations with testing facilities, which certify that the goods meet the requirement of the importing country, and affix the required safety mark. There are many different types of safety standards and marks that are accepted by different countries.

Treatment certificates verify that specific treatments have been administered to ensure that the goods and packing materials are not bringing in any unwanted species. For example, in Australia, goods or packing materials made from wood, especially with bark on it, must be fumigated. Some food items may need to be irradiated, or some items made from fabric must be certified new material or be disinfected. Authorized providers of the required treatments would provide these certificates.

Go deeper and learn all aspects of recording, filing and storing everything you need to maintain efficient day-to-day operations. Get started with the FITTskills Document Management online workshop today and complete it in 30 days or less!

International shipping approvals

Approvals of shipments by importing governments are required before goods are shipped or before reaching a port of entry when importing or exporting specific controlled or restricted goods. This form of government approval is a way for governments to monitor and control the flow of specific, restricted and/or controlled goods, e.g. dangerous goods, nuclear materials. The following types of documents are pre-authorizations imposed by governments of countries accepting imports or allowing exports that importers or exporters must obtain.

Importer declarations are statements of the type of goods and the quantity being brought into the country using a customs form completed by the importer or an agent acting on their behalf.

Importer licences and permits provide approval and permission for an importer to bring in a specific amount of certain goods that are controlled by the importing country, for a specific time period. A licence is used to control the entry of dangerous or restricted products, such as firearms or to protect domestic markets from foreign competition.

Exporter declarations are statements of the amount, nature and value of the exported goods completed by the exporter prior to shipping goods. The declaration may need to include an export licence and/or a certificate of origin. These declarations provide statistical data on foreign trade for the exporting country and are used as control documents to monitor the export of specific products.

Exporter licences or permits are required when exporting specific types of goods to certain destinations. These documents allow the government of the exporting country to monitor or control the flow of these products. This may apply to goods that are potentially sensitive (e.g. advanced computer technologies), prohibited (e.g. drugs, plant materials), dangerous (e.g. explosives or radioactive materials), or in short supply.

Consular invoices (CI) are certified statements of the goods being shipped that are approved by the consulate representative at the point of shipment. CIs attest to the marks, numbers, weights, value, and origin of the goods. They are declarations of the accuracy of the contents of the shipment’s invoice. CIs are in the language of the importing country and must be filled out in that language; some translation of accompanying documents may be required. CIs facilitate customs clearance of the shipment into the importing country. Typically, consular invoice forms are purchased from the consul of the importing country, and as many as six copies may need to be completed. The consul must then legalize these documents. Other documents, such as the commercial invoice, are typically presented to the consul at the time the consular invoice is validated.

Pre-inspection certificates verify that the shipment of goods meets the requirements for that type of good prior to the shipment crossing the border. These certificates can be a requirement of exporting or importing regulatory authorities. An inspector, authorized by the appropriate regulatory agency, physically examines samples of the shipment before issuing a certificate. These certificates typically apply to shipments of live animals and unprocessed food items. These inspections may also be required at the port of entry by customs agents.

When importing services, the importing country may require the service business to be registered with their domestic revenue or tax agency. Permits or licences to supply the service domestically may also be required. Another requirement of importing services may be to use a local agent as a representative. Consult embassies, consulates, trade commissioners and regional chambers of commerce for information on trade in service requirements.

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Governments use export clearance, customs and security clearance processes to monitor trade, collect revenue and prevent criminal and terrorist activity. These processes also provide data that assist governments in assessing the state of their economies and the need for regulatory changes.

As countries continue to move towards integrating their economies and removing trade barriers, the regulatory processes of exporting and importing should become easier, however that does not remove the need for continued collection of data, therefore documentation will continue to play an important role in the import and export clearance processes.

Given the number of countries in the world, it is impossible to offer one set of guidelines that would cover all eventualities, especially because requirements and procedures can change frequently. However, due to the WCO and the adoption of international recommendations for customs and border security practices, there are some common activities required of exporters and importers.

First, take care of the basics of export clearance

The export clearance process will differ depending on several variables:

• The trade regulations of the exporting and importing countries
• Type of goods being exported, e.g. restricted, food products
• Free trade agreements currently in force
• Level of customs and border security agency’s use of information and communication technology, e.g. Electronic Data Interchange (EDI)

With consideration of the above variables, typical activities for obtaining export clearance could include all or some of the following:

• Registering with customs and border security agency, e.g. obtain export/ import business number
• Determining country of origin for the goods being exported
• Ensuring product is exportable, i.e. not a prohibited good or service
• Ensuring product is allowed into importing country
• Determining HS code for product
• Filing export declaration, if required
• Obtaining export licences or permits, if required
• Obtaining product-specific/packing certificates and import specific documentation
• Determining shipping method and identifying reporting time frame

Want to learn more about how to keep your customers, clients and suppliers happy by transporting goods in a timely manner and in compliance with all regulatory requirements? Check out the FITTskills Global Value Chain online course.

What do the Incoterms® rules say?

Submitting export declaration and other documentation to customs and border security agency prior to shipping, if required

• Shipping goods as agreed upon with importer
• Providing certificate of origin and other documents to importer or importing country’s customs and border security agency
• Keeping export records for required time period

The responsibility for the cost and completion of these tasks will vary depending on the sales contract agreement, usually defined by the agreed upon Incoterms® rules. It is to the mutual benefit of both the importer and exporter if they help each other complete the export clearance process.

Next, check the local laws and regulations for further requirements

There are other factors that must be considered when exporting goods, including:

International export regulations:

Most countries have some form of export control. For example, 41 countries are signatory members of the Wassenaar Arrangement, which was established in 1996 to establish controls over sales of arms and dual-use products and technologies.

The control lists covered by the Wassenaar Arrangement cover a wide range of goods and technologies, including protective clothing, materials used in aircraft construction, metal alloys, many chemical compounds, submersible vehicles, robots designed for underwater use, telecommunications equipment, satellite components and many forms of software.

In order to export any of the controlled products or technologies, certain procedures must be followed. The importing company will often have to assist the exporter to obtain an export licence from its government, usually by providing an import certificate or other documentation.

Where an export licence or permit is required, both the importing and exporting companies need to consider the time it will take to obtain exporting and importing licences/permits when planning delivery schedules. The importing company must also include clauses in its agreements to require the exporter to obtain all required licences.

Exchange control licences:

Most countries also have some form of foreign exchange control, i.e. controls over the amounts of foreign currency in their economies. This means that exporters may have to provide proof that they will be paid by the importer in a specific currency before they will be permitted to export valuable products. Importers may also require a licence from the exporting country to convert payments into local currency to pay exporters. Importers should check whether this is necessary because otherwise delays might result while exporters wait for payment.

Some countries require payment to be made by specific means, such as a letter of credit. Some governments also impose strict payment regulations on all foreign trade contracts in order to ensure payment.

Export quotas:

Export quotas are restrictions imposed by a government on the amount or number of goods or services that can be exported annually. The purpose is to ensure that domestic prices of this good or service do not increase because of exports. Importing companies must make sure there are no foreign government quotas that could make their purchase agreement unsustainable.

Have all your documents ready – here’s what else you may need

Standard export transactions require that the exporter provide standard documentation to accompany shipments of goods:

• Commercial invoice
• Bill of lading or transport document
• Export declaration
• Packing list
• Insurance documentation
• Certificate of origin

Documentary requirements can vary significantly, due to the specifics of a transaction or shipment, as well as the payment and financing arrangements, which may be based on the tendering of documents by the exporter, depending on the agreed mechanism of settlement.

In addition to this standard list of documents, some export trades might require additional documents because of complications or the nature of the goods being transported.

These documents include the following:

• Export licences or permits: Either general (permitting any good to be exported, usually for shipments exceeding a specific value) or specific (required for restricted or controlled goods).
• Dangerous goods declaration: A statement about the contents and emergency handling of a dangerous goods shipment.
• Exchange control document: A declaration that the payments received for the shipped goods follow regulations.
• Inspection certificates: A certificate confirming that certain products (including packing materials) have been inspected for safety or conformity purposes.
• Consular invoices: Invoices provided by the importing country’s consulate located in the exporter’s country approving the shipment for import. It is important that the information on documents is complete, consistent, and accurate, whether electronic or hard copy.
• Intellectual property registration: When exporting to another country, it may be necessary to ensure that intellectual property is protected. It is prudent to check and register patents, trademarks, and copyright in the importing country to prevent infringement. Despite efforts, protection will depend on how rigorous the importing government’s regulations are, as well as the level of enforcement.

The post Use these lists to get through the export clearance process more quickly appeared first on Trade Ready.

Countless products traverse the globe every day, moving from one country to the other as trade is carried out. Many of the array of items that are shipped from nation to nation can be shipped by any person or company who wishes to do so.

However, there are some specific products that require parties to have import and export licenses to ship products or materials across national borders.

Wondering which items require some extra paperwork? Here is a look at some materials that may require an import or export license for shipping.

Which exports fall under government control?

There are a number of factors that can determine whether or not an item will require a license from a government agency in order to be shipped internationally. These include the materials used in the product, its destination, the party who will receive the product, and the manner in which the export will be used.

Many countries have lists of export product types that require a license for shipment. Countries typically put items on these lists for security purposes or to protect intellectual property. If a product ends up on this list, it would be illegal to ship it without a license.

For example, in the United States, the Bureau of Industry and Security (BIS) maintains a Commerce Control List. Items on this list require licensing from companies in order to be exported. The list includes:

• Nuclear Materials and Equipment
• Electronics
• Chemicals, Microorganisms, Toxins
• Computers
• Materials Processing
• Sensors and Lasers
• Telecommunication and Information Security
• Navigation and Avionic equipment
• Propulsion Systems, Space Vehicles and Related Equipment

Most of the items on this list could potentially be used for nefarious military purposes, or pose a threat to national security if exported without controls. That’s why it’s important that the government knows exactly who is shipping them, where they are being shipped to, and why they are being shipped.

Without this information the movement of these materials could be a major concern for the U.S. government.

Items that do not fall on the commerce control list are typically classified as NLR, which means “No License Required.” This includes a vast number of items, like food or clothing, which have been not been deemed a security threat upon leaving the country.

Every country has its own regulations for export licenses, however, many of the same exports are viewed as potentially dangerous worldwide.

Import licenses in the U.S. aren’t quite as straightforward

The requirements for imports coming into a country are often quite different than the requirements for exports leaving it, due to national regulations on everything from environmental standards to food safety guidelines.

For example, in the United States, the Customs and Border Protection Agency (CBP), does not require people or companies who import items to have an import license.

Instead, other U.S. agencies like the FDA, EPA, DOT, CPSC, FTC, Agriculture, etc., set their own regulations on goods like agriculture, livestock and food products, which then require licenses from those specific agencies.

This does not mean imports to the United States aren’t heavily screened and regulated by the CBP. The CBP takes many precautions to ensure that every import to the U.S. is appraised and the required duties are paid. The country of origin is also noted.

Just as there is a Commerce Control List that regulates exports leaving America, there is a list of items that are forbidden from being imported into the U.S. This list includes:

• Arms, Ammunition, Explosives, and Implements of War
• Conflict Diamonds
• Pesticides, Toxic and Hazardous Materials
• Counterfeit Products
• Wildlife and Pets
• Obscene, Immoral, or Seditious Matter
• Illicit Drugs

The U.S. also has a number of sanctions and trade embargoes in place for specific nations such as North Korea, Iran, and Sudan.

Like exports, every nation has its own policies and licensing requirements for imports. However, anything that poses a security threat or represents a conflict of interest, such as conflict diamonds, is likely to be heavily regulated, or restricted.

Get started on obtaining the license you need

First, do the proper research to ascertain whether or not a license is required for your specific product. If you’re importing or exporting activity does require a license, then your next step will be to figure out which government agencies handle the licensing for the products that you want to import or export.

For example, in the United States, the Bureau of Industry and Security handles licensing for exports, and more information on licensing generally is available through USA.gov. In Canada, the Canada Border Services Agency (CBSA) and Global Affairs Canada have information on export/import permits.

After you have figured out which government agency handles licensing, your next step is to go through the process of applying for a license. There may be a number of steps that you have to go through and regulations you’ll need to comply with during this process.

Finally, once your import or export license is approved and issued, you will be free to import or export those goods. Of course, you will have to do so in full accordance with national and international law.

The post Want to export or import these products? You’re going to need a license appeared first on Trade Ready.

In essence, FCA takes the burden off of the seller to arrange the transportation and allows the buyer to:

(a) Keep transportation related costs out of the price of the goods

(b) Use their own preferred carriers and brokers

(c) Leverage consolidation opportunities

(d) Maintain care and control of the material from origin to destination.

The trade-off for these benefits for the buyer is, of course, more risk.

In a simple example, assume you are a Canadian buyer placing a purchase order with a seller in Europe.

Using the FCA Incoterm, the European seller must ensure the goods are ready and cleared for export. They will do this either directly, by taking care of all of the details themselves, or indirectly, by providing you with everything required to do so.

Normally this would include the standard information necessary to pass through customs, and is fairly straightforward for a simple direct Country A to Country B export of most goods.

Know who’s in charge when documentation gets more complicated

But what if the export requirements for the seller or the import requirements for the buyer are more complex? And what if the goods will be transiting through one or several other countries? This can quickly complicate the export from origin to final destination.

As your supply base expands into the global trade arena, sellers and buyers need to be acutely aware of how this may impact purchases under the FCA Incoterm.

With respect to the first question, both the seller and the buyer must either provide, or render assistance in obtaining any documents or information. This includes security related information and everything that each party needs for the successful export, import and transport of the goods.

In complex transactions, there is often a strong co-dependence between the importer and exporter for documents and information from beginning to end (i.e. export permits linked to import licenses).

Assistance provided by the seller is reimbursable by the buyer and vice versa. This requirement is contained in FCA sections A10 and B10, but is often misunderstood or overlooked.

As an example, in order for the European seller to obtain their export license, you, the Canadian buyer, may already have had to obtain an International Import Certificate from Global Affairs Canada.

Don’t let multi-country transit slow your goods down

With respect to the second question, when the transport of the goods involves transiting one or several other countries, reference sections A10 and B10 (“transport through any country”). These sections are vague on exact responsibilities, but imply the majority of the burden would be on the seller.

In practice, this will really depend on what the requirements and regulations of the transited countries are, and which party is either bound or in the best position to fulfill them (i.e. language barriers, time zones).

Again, assistance provided by either party is reimbursable.

Shipping goods through other counties may require additional authorizations from foreign government departments, as determined by trade agreements and international conventions for the commodities being shipped. This can take up to 6-10 weeks to secure prior to shipping, depending on the circumstances.

Other considerations may include the mode required and specific carrier, depending on the value, controlled status, classification and dimensions of the freight.

As examples, certain air or ocean carriers will not accept military cargo. If your cargo is out of gauge and the typical passenger or commercial carrier cannot accept it, the default would be a freighter. This can be a challenge, as most freighters transit the U.S. before coming to Canada.

The U.S. controls what is allowed to transit through their country. If goods are considered controlled by the Department of State or Department of Commerce, U.S. Customs could seize your material if you fail to provide the right documentation.

Getting through government authorities is going to take some teamwork

Authorities in the countries being transited often require complete disclosure of the full transaction between the buyer and the seller. This would include all documents, such as end user certificates, in determining whether or not they will grant permission.

For example, if you are shipping  material from northern European countries and need to transit Germany for the required flights to Canada, you will require transit permits from the German Authorities if the material is considered restricted. For example weapons of war, medicinal products, textiles etc.

It is therefore very important for both the buyer and seller to work together, and with their respective transportation departments and/or freight forwarder.

This should be done well in advance, in order to identify any transshipment requirements, ensure they will be able to get any supporting documentation they may need from each other, and understand what each will do.

It is equally important to start this dialogue as early as possible, so that there is adequate time to understand and execute each country’s requirements to support the contractual delivery schedules.

One way to provide transparency and accountability is to maintain an action item log containing points of contact, target dates, and tasks assigned to individuals. This living document should be provided with shared access to all accountable parties.

Failure to know and understand the exact route, country by country, port by port, that an international shipment will take can lead to delays, additional costs, compliance violations and potential contractual default.

Taking the time to properly prepare under the FCA Incoterm will save you these unpleasant repercussions. And we all know in international commerce, there are always enough surprises.

Do you have much experience using the FCA Incoterm? How could using it present opportunities or challenges to your business?

The post Do your homework if you plan on using the FCA Incoterm appeared first on Trade Ready.