True cost of export documentation
Fourth in our series on ‘The True Cost of Exporting’ is the cost of export documentation, a necessary expense that can be eased by knowing what’s required. Here are some ways to tighten up on export documentation.
Organising the right documentation and paperwork makes the export process simpler, smoother and cheaper. When it comes to a paper trail in export, it doesn’t matter if you are shipping large volumes or just sending a few samples: the goods have to get there and the exporter has to get paid. Not having the right paperwork can result in an importer not being able to accept the goods and the exporter not being paid, which is costly in terms of time and money.
Export documentation covers the spectrum of: shipping documents, commercial documents, inspections, permits and consular stamps. Each requires preparation time, courier costs and fees with its associated risks of mistakes adding to delays and considerable costs.
There are strict requirements when declaring goods for export that require an Export Declaration Number (EDN), which is used to report a specific consignment of cargo for export from Australia and may be lodged up to six months prior to the intended date of export. The EDN can be issued at a cost by your freight forwarder, or you can use software that will connect you directly to Australian Customs. Any inaccuracy of the information given to customs can result in a legal infringement, even five years down the track so make sure you amend the declaration post shipment if the details have changed, e.g. short shipment, late shipment, and so forth.
An exporter has to provide the details to appear on the bill of lading to the freight forwarder. A bill of lading can show at least two different modes of transport from road, rail, air, and sea. The customer usually needs an original BOL as proof of ownership to take possession of the goods. If dealing with a letter of credit, the accuracy of the information is essential. One word missing and the importer will consider the document to be ‘discrepant’ and can refuse to accept the goods. This will result in having to return the goods to Australia, or quickly finding a new buyer in the country of cargo discharge, or even arranging to destroy the goods to avoid paying port demurrage fees.
Airfreight shipments are handled by air waybills, which can never be made in negotiable form, unlike a bill of lading. In the case of a letter of credit, the goods in the air consignment are consigned directly to the consignee named in the letter of credit. Unless the goods are consigned to a third party like the issuing bank, the importer can obtain the goods from the carrier at destination without paying the issuing bank or the consignor. Therefore, unless the exporter has received a cash payment or the buyer’s integrity is unquestionable, consigning goods directly to the importer when shipping by air carries a high risk of not getting paid.
A commercial invoice is a bill for the goods from the seller to the buyer. Governments often use these invoices to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, number of copies, language to be used, and other characteristics. It should describe the shipment of goods and show information such as the consignor, consignee, and value of the shipment.
If the right information is not displayed on the invoice, the importer could have delays and problems clearing the goods, or if the value or the description of the goods is not specified clearly, the importer could end up paying more import duty and taxes than necessary. Some countries require an invoice certified by the consulate of the foreign country stationed in Australia to verify the value, quantity, and nature of the shipment; without this certification, the importer risks being unable to clear the goods.
A certificate of origin is a document required in certain countries and for certain products and quite commonly needed when dealing with free trade agreements. It is a signed statement as to the origin of the export item. Certificate of origin are usually signed through an official organisation, such as a State Chamber of Commerce. Usually, an exporter can lower the cost by becoming a member of the organisation issuing the certificate and using an organisation that accepts electronic documentation, reducing courier cost and time.
An importer might not trust that you will provide them with quality goods, or the country of import might require an inspection certificate to clear the goods. This is usually performed by a third party and often obtained from independent testing organisations or a government department such as AQIS. Depending on the amount of testing or inspection needed, the cost can quickly add up.
Certain products require an export permit by the relevant government organisations or industry groups authorising the export of specific goods in specific quantities to a particular destination. If a permit is required, make sure you have accounted for the cost and issue time as it might not be possible to ship the goods until received.
When creating an export packing list, make sure to include considerably more details than a standard domestic packing list. You need to itemise the material in each individual package and indicates the type of package, such as a box, crate, drum, or carton. It also shows the individual net, legal, tare, and gross weights and measurements for each package. Package markings should be shown along with the shipper’s and buyer’s references.
An insurance certificate is used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit. If you are exporting in accordance with the incoterms CIF, DES, DEQ, CIP, DAF, DDU and/or DDP, it is important to consider marine insurance.
Documentation must be precise because slight discrepancies or omissions may prevent merchandise from being exported, result in non-payment, or even result in the seizure of the exporter’s goods by customs. Most documentation is routine for freight forwarders and customs brokers, but the exporter is ultimately responsible for the accuracy of its documents.
The number and kind of documents the exporter must deal with varies depending on the destination of the shipment. Because each country has different import regulations, the exporter must be careful to provide all proper documentation. It is important to do your research with customs, your industry association, government departments, freight forwarders and the overseas buyer to be fully aware of the procedures per product and per country of export.
It would be a waste of time and money to go through researching the specific needs of your export and not having the internal knowledge to implement a process. Training yourself and your staff in the intricacies of export including documentation, logistics, finance as well as cultural issues can make the difference between being successful for years to come or failing after the first shipment.
International trade carries high levels of risk. Knowing how to avoid the pitfalls is the key to success.
—Corinne Campbell is the founder of Xdoc, a company specialising in helping businesses mitigate import/export risks by providing information, knowledge, education and support. For more information, visit www.xdoc.com.au
Bill of lading (also BOL or B/L): Acknowledges that specified goods have been received on board as cargo to a named place for delivery to the buyer.
Demurrage fee: Charged according to a level of damage and payable for delays in loading or discharging the vessel.
Letter of credit: A contract issued by a bank authorising the payment of money to a beneficiary against specific documents evidencing the shipment of goods.
Incoterm: International commercial terms
What affects document costs?
There are no hard and fast rules about how much export documentation will cost you but as a general guide, the final figure will depend on what you’re sending, where you’re sending it, and the method of payment.
Perishable items need more permits, and would also require closer inspection by quarantine, for example, so you would need to factor that in. Some countries may just require an invoice, while others are more rigorous when it comes to paperwork. The method of payment and the checks required to ensure the goods have been paid for, and by whom, will also affect costs.