Drop ship from contract manufacturer to UAE- commercial invoice

Question posted by Wesley Watson, on behalf of CAMELBAK Products, LLC in California, USA

We have customers in the UAE who are asking for certain details of commercial invoice documents.
We use contract manufacturers in Asia to produce products of our design. We currently drop ship from these contract manufacturers to our customers in the UAE as the well as the rest of the world.
Our company is the seller of the goods; drop shipped direct from our contract manufacturer. Our customer in the UAE is requiring us to provide a commercial invoice on the letter head of our contract manufacturer, as if they are the seller. This does not seem correct, and it puts us in an odd situation of providing documents that are inaccurate related to the seller.
Also in order to generate this commercial invoice on the letter head of our contract manufacturer, we must provide our "selling" price to our manufacturer. Obviously this creates some issues with our manufacturer who now knows our selling price vs our buying price from the manufacturer.
Can you help us understand if this requirement is valid?
Can we provide a commercial invoice on our letter head which includes the name and address of the contract manufacturer?
We have now had multiple shipments with issues being held in UAE customs, (according to our customer) due to documentation improperly on our letter head, instead of the contract manufacturer's letter head.
Your assistance in clarifying the true needs for customs clearance is requested.

Thank you,
Wesley Watson- Global Logistics Manager

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Gemma Price, on behalf of @GemmaPriceUK in W13.

Hi Wesley

Open to Export is a platform designed to help UK based companies interact and ultimately export their products globally, therefore you may not find the assistance you were hoping for here.

That being said I would strongly advise you not to release commercially sensitive information to your importer or your contracted manufacturer. I would also advise you not to raise / have a document raised that you know will be incorrect.

Does the drop shipper/manufacturer label the products with your company labels / ship the goods with your companies invoice? If not then I can understand the confusion of UAE customs and the frustration felt by your customer.

I “export” products manufactured in another country on a regular basis and have these shipped directly from the country of manufacture to my customer. I email the manufacturer a label to use and a delivery note to accompany the goods. I then email the customer & freight forwarder a copy of the sales invoice, bill of lading/shipping documents, packing list, certificate of origin etc before couriering the originals to the customer. All documents and shipping labels consistently show my company as the exporter/consignor and not the manufacturer (who have supplied but not sold the goods)– Do you do this also?

You may wish to contact the international trade arm of the Californian Chamber of Commerce, who will be able to handhold you through the process and help you to overcome these issues:

http://www.calchamber.com/International/Pages/Default.aspx

I hope this helps.

Kind regards

Gemma
@ExportExpertUK
info@export-expert.co.uk
www.export-expert.co.uk

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Wesley Watson, on behalf of CAMELBAK Products, LLC in California, USA.

Hello Gemma,

We provide labels to our manufacturer and they ship in cartons with our name on it.

We provide documentation to the freight forwarder directly using our commercial invoice & SLI. However, the manufacturer provides a packing list on their letterhead with the shipment. This should be consistent with the bill of lading, as the exporter (Asia manufacturer) is truely the exporter on the BOL.

We have offered to provide the CI, PL and SLI on our letter head directly to the freight forwarder, however our customer (the importer of record) has resisted and maintains their request that it must be on the manufacturers letter head. Claiming requirement by UAE customs.

Appreciate your response.

Wesley

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Gemma Price, on behalf of @GemmaPriceUK in W13.

Hi Wesley

To clarify, the manufacturer is being shown on the bill of lading as the exporter/consignor/shipper with no mention of your company? All other documents are from your company to the importer?

For most countries, including UAE, all export documentation must be consistent with the BL to enable customs clearance unless using a 3PL.

I can therefore understand why you are having clearance issues as your company is the exporter. The manufacturer has not sold the goods to your customer, even if they have arranged the freight.

You may wish to speak with your manufacturer and establish which freight forwarder they are using and try to get the Bills of Lading amended to show your company as the exporter?

Alternatively you may wish to purchase the goods from your manufacturer EXW and arrange the logistics of these sales yourself – this is how I export in this way and retain control of the whole process.

As Open to Export is intended for UK exporters, and we are using American terminology such as SLI, perhaps it is best we discuss this over email - info@export-expert.co.uk

Kind regards

Gemma

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Hello Wesley,
Please take care - if you swap your terms to Ex Works and try to be the exporter from Asia you can easily find that your company's tax position has been compromised and you may be required to register for tax purposes in the country of export.

This is an issue that is faced by all companies who want to drop ship from a country where they do not have a legal entity. You will find that the big companies who drop ship create legal entities (they need only be a registered tax office in many cases) in the countries of export.

An alternative is to create a legal entity in the country of import (again it often only needs to be a registered tax office). They can then be the importer and make the sale themselves within the importing country. The manufacturer can then sell directly to the legal entity in the destination country removing the paperwork issues. You do need to check this out with your tax team so that the contract and the company structure is beneficial. This is also a method used by many of the big companies.

Regards,
Susan

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Gemma Price, on behalf of @GemmaPriceUK in W13.

Hi Wesley

Susan is absolutely correct, with EXW there are taxation considerations, but if you take no action you will likely continue to experience clearance issues and possibly harm the relationship with your customer.

Something you could try is arrange a switch Bill of Lading. Switch BL’s help to conceal identities of shippers and consignees, they are issued mid-voyage. First step is to check if the Bills of Lading are original bills or waybills – being Chinese origin I would imagine your bills are originals. If this is the case you will needs to speak to the carrying freight forwarder (if your nominated incoterm is FOB onward then all the better as its your nominated forwarder rather than the manufacturers), and ask if they will issue switch Bills of Lading (most do), then when the freight forwarder is authorised to release the docs after sailing, or the shipper sends the originals forward to you, then send the originals to the freight forwarders nominated agent, the new freight forwarder will re-issue a new set of BL’s showing you as the exporter/shipper/consignor and all is well and happy.

If its waybills then it doesn’t matter about the surrendering etc, your freight forwarder can just issue another waybill showing you as the exporter – the BL’s will need to show the correct port of loading and destination etc and and commercial docs should show country of origin as China but I am sure with UAE you already have this along with a CofO.

This is getting into the more complex levels of international trade but is the only work around I can think of without hitting taxation issues, revealing commercially sensitive data or raising incorrect documentation.

I hope this helps.

Kind regards

Gemma

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Wesley Watson, on behalf of CAMELBAK Products, LLC in California, USA.

Thank you all for this conversation...

Our customer in the UAE arranges the freight forwarder from origin port to door. Our terms with our customer is FOB origin port.

The terms with our supplier is FOB origin port. The financial transaction with our supplier happens when they turn the goods over to our customers freight forwarder. We then supply the commercial invoice to the freight forwarder supporting our financial transaction with our customer.

As noted we are not the importer of record into the UAE, and we do not have a business registration in the origin country. Thus the shipper/ exporter is our supplier, however the seller of the goods is the US company, drop shipping from origin country.

Maybe if we reference on the BOL our supplier as the shipper/ exporter "in care of" our company... (c/o US company); along with supplying the CI, PL & SLI with reference only to the US company, this will maintain the consistency UAE customs is looking for.

I have spoken to the UAE trade representative at our local US embassy (supporting legalized documents), however, he had no input on what would be acceptable or not. His recommendation was to provide supporting documents (in whatever format we deemed necessary) and have our customer take them to UAE customs for validation prior to the next shipment.

Thank you again... Wesley Watson

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