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 IncotermsDifferent 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.
5. International trade documentation and payments The right paperwork plays an important part in making and receiving payment. Documentary collections and documentary credits are payment methods often used in international trade. By using special paperwork, the risk of the customer failing to pay or the supplier failing to deliver is reduced. With a documentary collection: The exporter prepares a bill of exchange stating how much is to be paid and when. Once the customer accepts this bill of exchange, the customer is legally liable for payment. Only then does the exporter, usually through the bank in the overseas country, allow the customer to have the transport documents needed to take possession of the goods. With a documentary credit: The customer arranges a letter of credit from their bank. The bank agrees to pay the exporter once all the right documentation-such as transport documents showing that the right goods have been dispatched-is received. The exporter must provide the required paperwork within the agreed time limit and with no discrepancies. If you are using one of these payment methods, it's important to understand what documentation is required and ensure it is accurate. Payments under letter of credit can be particularly problematic, as the exporter must provide exactly the right documentation to get paid. Regardless of what payment method you agree, you should have a clear written contract stating what amount is due, in what currency, and when. The contract should also make it clear who is responsible for any bank charges. 6. Special cases/productsIn some cases international trade requires special documentation.
- If you are importing goods, you may need proof of which country the goods come from.
- Similarly, if you are exporting, your customer may require a certificate of origin from you. Chambers of commerce are authorised to issue these.
- There are special requirements for some controlled goods, such as firearms, medicines, plants and animal products. For example, a licence may be required.
- If you are exporting, you should check whether any special documentation is required overseas to satisfy local regulations. For example, you might need documentary proof that your goods meet local product standards.
- Dangerous goods must be accompanied by appropriate special paperwork.
- There are simplified processes for temporary exports, for example if you are taking samples to an overseas exhibition.
If you have any doubts about the documentation you need, you should take advice. Many businesses get help from freight forwarders or import agents. -Dianne Tipping is the managing director of Excon International and a director at the Australian Institute of Export (www.aiex.com.au)
Don’t risk it!
Develop a framework for integrating risk management in documentation with the following:
- Create an awareness of trade in the organisation.
- Draw up a checklist of rules to observe.
- Implement control and procedures.
- Involve the right people.
- Educate and teach staff involved in the trade transaction at all levels.