Five key export terms explained
Exporting offers an exciting opportunity to many small businesses. For first-timers, however, even the terminology can be daunting. We explain five key terms related to the movement of goods overseas
1. Certificate of Origin
A Certificate of Origin (CO) proves that your goods have been obtained from or manufactured in a particular country. A CO is usually required for overseas customs clearance and it will determine the level of duties payable.
The certificate should include the name and address of the exporter, the manufacturer (if different), the importer, a description of the goods and, if required, the signatures and seals of the authorising organisation.
There are two types of CO. Non-Preferential COs certify that the country of origin of a particular product does not qualify for any special treatment. With Preferential COs, goods qualify for a tariff reduction or even exemption.
In most countries, chambers of commerce provide Certificates of Origin. The World Chambers Network website allows you to search for the nearest chamber that provides this service. Goods from the UK must be specifically identified as from the “European Community – United Kingdom”, not “the UK” and not England, Scotland, Wales or Northern Ireland.
2. Bill of Lading
A Bill of Lading is a legal document between the shipper and the carrier that must accompany the goods at all times, regardless of the transportation used. It must be signed by an authorised representative from the carrier, the shipper and the receiver.
This important document has three main functions. Firstly, it acts as a receipt for goods shipped. This identifies the nature of the goods, the number of packages, their quantity and weight and their condition at the time of loading.
Secondly, a bill of lading is issued by the Carrier or his agent and bears a notation that the goods have actually been loaded on board a named vessel.. Thirdly, it is a document of title. It proves that the person indicated is the owner of the goods and has title to them.
3. Freight forwarder
Known as the travel agents of international trading, freight forwarders help importers and exporters to move their goods around the world.
Using a freight forwarder offers many advantages, not least potential cost savings. These transport and logistics experts can select the best routes and modes of transport and, by consolidating loads, they can often save you money.
Freight forwarders are often experienced in transportation procedures and can also guide businesses that are new to international trading, helping them with everything from packaging to paperwork. They offer services such as completing customs clearances and paying duties or taxes on your behalf, supplying key documents including a Bill of Lading, and providing insurance.
International Commerce Terms (known as Incoterms) are standard trade terms that set out buyer and seller responsibilities.
Recognised and accepted around the world, Incoterms are maintained by the International Chambers of Commerce. They are there to take the uncertainty out of trading in order to protect both the buyer and seller. The latest set of Incoterms, known as Incoterms 2010, came into force in 2011. There are 11 key terms, each covered by a three-letter abbreviation.
Incoterms establish at a glance who is responsible for everything from transport costs and insurance to duties and customs clearance. They also specify where the goods should be picked up from and transported to and who is responsible for the goods at each stage of transportation. However, the use of Incoterms is voluntary not automatic; if Incoterms rules are being applied to a transaction they must be incorporated by specific reference in the contract.
The Intrastat system compiles details of the movement of goods within the EU. If you are a VAT-registered business trading with other EU member states, you are required to provide details of these transactions for statistical purposes on your VAT return. The supply of services, however, is excluded from Intrastat.
Movements of goods between EU member states are called Arrivals (acquisitions, purchases or imports) and Dispatches (removals, sales or exports). All VAT-registered businesses must tell HMRC the total value of goods dispatched to other EU member states and the total arrivals of goods acquired from other EU member states.
Did you know…?
50,000 merchant ships from more than 150 countries carry around 90 per cent of world trade.
Briefing: First steps to exporting