Jargon buster: 20 key export terms you need to know

Article posted by Sandra Strong, on behalf of Strong and Herd LLP

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Carrier The transport company that owns the means of transport – in other words, the airline, shipping line, road haulage company.  The transport of goods by carriers come under the terms and conditions of international transport conventions such as the Montreal Convention (air freight)
Certificate of Origin (CofO) A document required by some countries to establish the place of manufacture or production of the goods.  It is generally issued by the Chamber of Commerce and confirms the nationality (country of origin) of the goods.  If a country does not require a Certificate of Origin a statement of origin must still be made on the commercial invoice.
Certified Documents When a country’s regulation stipulates certificated documents, eg invoices or CofO, they mean the document must be endorsed by a body such as a Chamber of Commerce.
Commercial Sample This is an overused term and should only be used to describe genuine samples being sent overseas to engender future sales.  The commercial samples must not be fit for resale.  Free of charge supplies are generally not genuine commercial samples.
Commodity Code A string of numbers used to identify goods for customs purposes.  The commodity code systems is harmonised so all countries customs authorities can cross reference the commodity code.  The codes are issued in a countries tariff.  UK/EU commodity codes can be found at Trade Tariff
Consignee The overseas party receiving the goods but not a freight company.
Consignor The company sending the goods overseas – this party is also the “exporter of record” and bears legal responsibility for paperwork and customs declarations made
EORI Economic Operator Registered Identification number.  No company can export from the UK/EU without having an EORI.  It is different from a VAT Number, though it looks similar.  Any company wishing to export must contact HM Revenue & Customs EORI Team. (Note: this does not apply if you are only trading within the EU.)
European Union (EU) The 28 Member States of the EU act as a Customs Union which minimises formalities, customs paperwork and other documentation when supplying goods internally.
Export Controls Certain types of goods are flagged as strategically important as military goods or high tech products that could be used in a strategic military way without modification or have the inherent capabilities to assist in the delivery or manufacture of chemical or biological weapons.  Checking the commodity code on the Trade Tariff will help you assess if your products are classed as strategic (dual-use controlled).  Military and dual-use controlled goods require an export licence before they can leave the UK
Export Declaration All goods leaving the EU must be declared to customs.  This export declaration has a number of names – C88/SAD/NES/EAD – but whatever we call it, it is a legal requirement.  The consignor is legally responsible of the information provided on the export declaration even though it may be prepared by the freight forwarder.  Exporting companies must receive a copy of this export declaration for their records and as evidence of export. (Note: does not apply to intra-EU shipments.)
Excise Goods Goods subject to national controls within the EU.  They fall under three main categories: alcohol; hydrocarbon oils and tobacco.  Such goods require specific customs declarations even when moving within the EU and will be subject to variable national taxes (excise duty).
Free Circulation Goods moving around the EU should be in free circulation.  This means that they are either wholly produced within the EU or, if imported, all EU customs duties have been paid.  Free circulation goods do not require customs paperwork when moving around the MS of the EU.
Freight Forwarder A company employed to arrange the movement of goods using one or more carrier.  They are subject to terms and condition agreed with the consignor/consignee and should be formally contracted and, if used regularly, provided with a Standard Operating Procedures (SOP).  Many freight forwarders complete export declarations on behalf of the consignor but they are not legally responsible for any errors or omissions. Liability and duty of care rests with the consignor
Incoterms Rules International Commerce Terms – a set of shipping terms with internationally recognised terms and conditions.  Written by the International Chamber of Commerce (ICC) since 1936 it sets out the obligations of buyer and seller in relation to the movement of goods.  Current set is Incoterms Rules 2010
Invoices An invoice is required to accompany a shipment of goods.  There are three main types of invoices in international trade:

  • Shipping invoice – a document prepared for the movement of goods.  Often used when the goods are free of charge but can be used when the commercial invoice is not available or will be raised at a later date.
  • Commercial invoice – the invoice on which the customers is expected to pay.  Some customs authorities insist that the commercial invoice is available at the time of import.
  • Proforma invoice – not to be used for shipping goods.  This is an invoice raised in advance generally to enable payment in advance, the release of foreign currency, the setting up of a letter of credit or obtaining an import licence.  Proforma indicates it is “before the actual” invoice so therefore precedes a commercial invoice
Legalised Documents When a country’s regulation stipulates legalised documents, eg invoices or CofO, they mean the document must be endorsed by the Embassy of the country to which the goods are being shipped.
Preferential Trade A system whereby EU manufactured goods may enter overseas countries at a lower customs duty rates.  The EU negotiates preferential trade agreements to encourage overseas countries to buy EU made goods.  It is illegal to issue a preference certificate unless you have evidence that the goods qualify under the preferential trade agreement.  If you manufacture goods in the UK preferential trade agreements will give you a competitive advantage; ensure this is reviewed prior to sales negotiations
Transport Document Transport documents, such as air waybills, bills of lading, are commercial evidence of export and may be used to provide evidence that goods have left the UK during VAT audits.  For shipments to countries outside of the EU your evidence must also include a copy of the export declaration
Volumetric Weight Generally freight charges are calculated on the actual weight of the goods plus packing (gross weight) but if the goods are a low weight but large in volume then you will be charged for the amount of space you goods use.