So you have found yourself an international client who loves your product and is ready to place a large order. Now what? To successfully export your goods, there are many elements to consider.
You will need a basic understanding of the export process, including International Trade Laws, Customs regulations for your product at the country of import, not to mention the terms of sale and the most strategic and cost-effective way to get it there.
That is why we have compiled this list of five tips when exporting your goods to other countries.
1. Secure your payment
Having a secure method of payment is key. Lucky for you, there are many ways to do this. Regardless of the method, you select (options presented below), a formal sales contract must be signed by both parties before initializing an international transaction.
What are those usual methods of payment?
Letter of credit: this is the most secure method of payment. In this case, the sum will be paid by the buyer’s bank only when presenting the documents that conform with the Letter of Credit requirements. If you want to verify the customer’s financial position, this is a good option. The issuing bank will do a credit adequacy test before opening the Letter of Credit on behalf of the buyer.
Export collections: This is a frequently used payment method in international trade because it secures payment after the shipment of goods and allows you to retain control of your cargo until payment is made. This document is a guarantee of the physical management of the assets until you get paid. Invoice, shipping documents, insurance, and more, are transferred through the banking system.
Other more traditional methods include payment by check or electronic bank transfer.
2. Be covered, insure your cargo!
The act of exporting exposes your goods to risks such as damage while handling, loss at sea, exposure to elements. For this reason, your best method of protection is purchasing all-risk cargo insurance. Having cargo insurance safeguards your company’s assets against all unforeseen risks, regardless of the mode of transportation.
Unlike auto insurance, all-risk cargo insurance is purchased on a per shipment basis; no contract is required. So do not hesitate to have your cargo protected and ensure your product arrives to your NEW international customer intact and on time.
3. Select a quality company that brings you best-in-class logistic services
To guarantee an efficient supply chain, it is imperative to work with a third-party logistics company (3PL) with a reputation for excellent customer service, reliability, financial stability, and strong international relationships.
If you are unfamiliar with the term third-party logistics company or 3PL, allow us to explain. A 3PL offers logistics services, which involve managing one or more components of procurement and fulfillment activities. In business, 3PL applies to any service contract that includes storing, packing, or transporting items.
As we mentioned, it is imperative to select a company that is part of a substantial freight network—providing reliable and extensive global reach.
4. Make detailed contracts and know your incoterms.
Incoterms are recommendations to be applied by importers and exporters which define their responsibilities in each operation. Every ten years, The International Chamber of Commerce publishes a list of internationally accepted incoterms to be used for the purpose of facilitating international trade. There are four main aspects of the import and export process to be considered:
– The specific place where the goods will deliver.
– Which party is responsible for generating the documents from origin to the final destination.
– At what point in the transaction, the risk will transfer from the seller to the customer.
– Which costs in the logistics process will be paid by the seller and which by the buyer.
After considering those mentioned above and agreeing on incoterms, your freight forwarder will arrange transportation accordingly.
What is the recommended Incoterm for exporting?
One size is not fit all when it comes to incoterms; however, if you are new to exporting or looking for the least risk when shipping internationally, choose EXW (Ex Works) incoterms. Under EXW incoterms, the seller is responsible for nothing more than making the goods available for pick-up at an agreed-upon location, at which point the risk transfers to the buyer.
5. Have your documents ready!
When exporting your goods, the following documents will be required.
- Proforma invoice: A proforma invoice allows the buyer to arrange for financing, open a letter of credit and start the process. The proforma invoice looks like a commercial invoice and should contain:
a. The buyer and seller in this contract.
b. A detailed description of the cargo and the price.
c. The Harmonized System classification of those goods and the Schedule B. The U.S. uses a 10-digit Schedule B classification system based upon the Harmonized System. The first six digits of the Schedule B and Harmonized System numbers are the same.
d. The payment terms of the sale are expressed as one of the Incoterms.
e. The delivery details.
f. The currency used in the transaction.
- A Commercial Invoice: The commercial invoice details the entire transaction, from start to end, and usually includes the HTS Code of the items exported.
- Packing list: Used to indicate the contents of each package, a packing list should contain the specification of the goods, including dimensions, weight, and item descriptions.
- Shipments Letter of Instructions (SLI): A document frequently requested by freight forwarders; the SLI contains all the information needed to move the cargo.
- Country-specific certificates: Besides the generic certificate of origin, many countries required specific certifications based on the classification of goods. Examples include pharmaceuticals, food products, and cosmetics, among others.
- Bills of lading: Bill of Ladings are used in every mode of shipping. Their fundamental purpose is to act as an agreement between the carrier and the shipper. The BOL contains the names of both the shipper and the consignee, origin, destination, and shipment contents. Upon delivery to the consignee, the BOL is used to verify that the shipment is being turned over to the intended party.
As is the case with most shipping forms, a proactive approach and organization are vital in ensuring a smooth and painless export process for both you and your buyer.