Documenting Risk
Most people classify export documentation as tedious, but the reality is that if you get it wrong it can damage, or even sink, your business.
Making sure you have the right documentation is a vital part of international trade. Thorough, accurate paperwork minimises the risk of problems and delays. There should be a clear written contract between buyer and seller, including details of exactly where goods will be delivered.
Specific documents may be needed to get the goods through customs and to work out the right duty and tax charges. There may be requirements both for the country the goods are being exported from and the country they are being imported into.
Documentation is needed to cover the transport of the goods and insurance during the journey. The right paperwork can be an important part of the payment mechanism, so it is important to cooperate with your counterpart on getting the paperwork right. For example, if you’re shipping goods to a customer overseas, they should tell you what paperwork they require at their end.
You may want to get help with handling paperwork, however, you should remember that you are ultimately responsible for what is submitted.
Key documentation for international trade
1. International trade contracts and Incoterms
Different countries have different business cultures and even languages. It’s a good idea to make sure you have a clear written contract to minimise the risk of misunderstandings. The contract should set out where the goods are being delivered. It should cover who is responsible for every stage of the journey, including customs clearance, and what insurance is required. It should also make it clear who pays for each different cost.
To avoid confusion, internationally agreed Incoterms should be used to spell out exactly what delivery terms are being agreed, such as:
- where the goods will be delivered
- who arranges transport
- who is responsible for insuring the goods, and who pays for insurance; and
- who handles customs procedures, and who pays any duties and taxes.
For example, an exporter might agree to deliver goods, at the exporter’s expense, to a port in the customer’s country. The customer might then take over responsibility, arranging and paying for customs clearance and delivery to their premises. The exporter might also be responsible for arranging insurance for the goods until they reach the port, but pass this cost on to the customer.
As well as including delivery details, the contract should cover payment. This should include what currency payment will be made in, how much will be paid, when payment is due and what payment method will be used.
For trade in services: With no physical delivery of the product, contracts in services cannot use Incoterms. Instead, the key issue tends to be defining exactly what services are being provided and to what standards.
2. Import documentation
The documents and data required by each of the customs authorities in markets throughout the world are the keys to international trade. For moving goods from one country to or through another, it is imperative that you correctly complete the required documents, or input the right computerised information online.
3. Export documentation
You may need an export licence to export goods, for example there are controls on exports of chemicals and military technology. Licence requirements may also depend on the country to which you are exporting.
4. International transport documentation
Transport documentation is needed to provide instructions to the carrier on what should be done with the goods. They can be used to pass responsibility for, and sometimes ownership of, the goods during their journey. Transport documents are also an essential part of some payment procedures.
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