China Logistics
Q & A
By Vicky Lu
XPI China Logistics Analyst
Entry Documents
Question:
I'm curious to know all of the entry documents require to get a shipment into a country and who is responsible for each. Is it me or the customs officials?
Answer:
Entry is a process of filing documents to get goods released from customs. The basic documents include commercial invoice, bill of lading or airway bill, packing list and other specific customs entry documents. Customs entry documents vary from a country to a country. In most countries, it is the importer's responsibility to provide customs with all documents required to clear goods. In some countries, including in the US, customs might assess a penalty if the importer fails to submit required documents to clear goods. The importer in the US is expected to exercise "reasonable care" when clearing goods. That includes submitting the correct documents to customs.
Freight Forwarding
Question:
Hi, could you tell me how to get into freight forwarding? What criteria or qualifications do I need to do this? Thanks.
Answer:
A freight forwarder is an agent who handles export shipments for a fee. Freight forwarders play a very important role for exporters. Here are few of the many activities that you will conduct as a freight forwarder:
• International documentation and packaging
• Carrier and routing information
• Export license assistance
• Marine insurance rates and coverage
• Warehouse and distribution services
• Hazardous materials shipping compliance information
You should check with your local government authorities on what is required to be a freight forwarder in your country.
FOB Responsibility
Question:
Hello, I was wondering, with FOB, when does the responsibility for the shipment pass from seller to buyer? Thank you.
Answer:
FOB - Free on board (named port of shipment) is the most preferred pricing term by exporters. FOB indicates that the price quoted includes the cost of loading the goods into the ship. The responsibility from the seller to the buyer passes once the goods are on board the ship (loaded). Remember, the exporter is responsible to obtain export clearance, including license to export if required. According to Incoterms 2000, FOB is only used when the mode of transportation is sea or inland waterway transportation.
Assignment of Proceeds
Question:
Hi, I was wondering if you could tell what an "assignment of proceeds" document is.
Answer:
Assignment is the transfer in writing of proceeds from one party to another party. For example, a beneficiary of a letter of credit may pledge the proceeds of future drawings to a third party. The documents used for this mechanism are referred as assignment of proceeds documents.
Incoterms
Question:
Hi, I am wondering when Incoterms apply. Are they just for ocean freight or all types of cargo? Does this depend on the weight of the shipment?
Answer:
Incoterms are not limited to ocean shipments only. They are also used for shipments through air and inland routes (track, rail). The weight of the product has nothing to do with which one of the 13 Incoterms you use. A complete list of Incoterms is published by the International Chamber of Commerce Incoterms 2000. This should be a permanent part of your import export business library.
“Clean” Bill of Lading
Question:
Hello. When it comes to bill of lading, what happens if the bill is not "clean," meaning what process follows if this happens? And who is responsible financially at this stage? Thank you.
Answer:
A bill of lading is a document issued and signed by a transportation company to show receipt of goods for transportation from and to the point of destination. A clean bill of lading, simply put, is when the goods received by the carrier (transportation company) are in appropriate condition with no defects or damage to goods and/or packaging. If, for example, the container received by the carrier was damaged, the carrier makes a notation that expressly declares the defective condition of the container. Ultimately, it is the exporter who will be responsible financially because of the damaged container and or package to be shipped.
Shipping Terms
Question:
For those of us who are new to the world of import/export and don't have a lot of experience, how do you decide which shipping term is the best one to use? For example moving children's clothes from India to Indiana, USA?
Answer:
Shipping terms are decided based on the responsibility the importer or the exporter is willing to take in a specific transaction. Shipping terms in some regions of the world are referred to as "pricing terms" or "terms of sale." "Incoterms" are universally accepted term used in import-export transactions. These terms define the rights and obligations of the importer and the exporter. You should be very familiar with the most common shipping terms before agreeing to any of them. While you can use any of the 13 Incoterms, most importers prefer and accept either CIF - Cost, Insurance and Freight (named port of destination) or CFR - Cost and Freight (named port of destination). The destination port is the importer's port. Furthermore, most US importers, for example, prefer CFR over CIF and arrange insurance in the US only because they want to control the insurance part of the transaction. They find it to be easier to file claims with local insurers than foreign insurers in the event of loss of or damage to the goods. I recommend that you hire a custom broker to help you clear products for at least your first and second shipment.
Certificate of Origin
Question:
Could you please tell me how a certificate of origin works? I mean, what part or percentage of the product has to be made in a country for this fact to appear on the certificate? Thanks.
Answer:
A certificate of origin is issued by the exporter's country (chamber of commerce or government entity) to declare that goods sold to a foreign buyer have been produced in the exporter's country and not in another country. Some countries do not require that the goods' content to be 100% from the certificate of origin issuing country. In many countries certificates of origin are issued based on "content rule." For example, country "X's" content rule could be 60% domestic content and the rest be foreign content to qualify for the country "X" country of origin certification. In addition to identifying the country of origin of the product, the document also serves to claim full or partial exemption from duties paid when clearing goods through customs. Some countries require a separate certificate that goes along with the certificate of origin. This additional certificate is countersigned by a chamber of commerce and possibly even a visa is issued by the resident consul of the importing country at the exporter's country.
Customs Documentation
Question:
Hi, I was wondering if you could tell me which documents I have to present to customs to get my shipment through. Thanks
Answer:
Because national laws vary, customs document requirements also vary from country to a country when clearing goods through customs. An importer in the US, for example, is required to present the following documents to clear goods through customs:
• Commercial Invoice/Customs Pro Forma Invoice (When Commercial Invoice is not available)
• Entry (CF3461)/Entry Summary (CF 7501) ( U.S. Customs forms)
• Evidence to make Entry (Bill of Lading or Airway Bill or Carrier Certificate)
• Packing list
• Other agency requirements (Example, FDA, FTC or other agencies to meet the agency's requirement)
Certainly, other countries might require totally different types of documents. Therefore, you need to find out from your government's customs or your custom brokers the types of documents required to clear your goods. Custom brokers are agents who are authorized to conduct customs transactions.
Quotations
Question:
In your opinion, what is the best way to make a quotation? How much information is necessary to avoid confusion at later stages of the deal, and are there parts of a quotation that may be considered to be legally binding? Thanks
Answer:
When importers request quotations, experienced exporters always provide them with a proforma-invoice. A pro forma invoice is similar to a quotation, but is more formal and if done right provides solid information to help the importer make decision. Proforma-invoice though similar is more than just a quotation. A quotation most often is an offer to sell goods at a stated price. Proforma-invoice however, resembles commercial invoice and provides information to the importer the product to be shipped including itemized list of charges, pricing terms, quantity, value, weight, size and other important specifications of the transaction. Proforma-Invoice is one of the most important and common document the importer receives prior to shipment. Many legal experts suggest that proforma-invoice is considered as a legally binding document, even though price might change prior to the final sale of the goods. When an exporter provides a proforma-invoice to the importer the importer can use the proforma-invoice to request foreign currency if his currency is not freely convertible. Proforma-invoice can also help the importer apply for a letter of credit at his bank.
