Shipping your first international order
Sandra Strong is one of the founding partners of Strong and Herd LLP, a widely respected import/export consultancy, and has nearly 30 years’ experience in international trade. She was awarded a Fellowship of the Institute of Export (IoE) in 2011 for services to UK companies. She is also a Certified International Trade Advisor and a member of the International Chamber of Commerce (ICC).
Sandra is an expert in international trade documentation and the import, export and customs procedures in-line with HMRC standards. She regularly runs training courses through Strong and Herd as well as assisting with the day-to-day activity of the Shipping Office and OneCall client support services with audits and reviews.
Here, Sandra talks us through the key steps in preparing your first international order for delivery. This will therefore cover important aspects of international shipping and international trade.
If you are putting an international order together for shipping for the first time, this is what you need to bear in mind.
What are the terms for of your international shipping arrangement?
What have you agreed to supply and how? Are you in control of the supply chain, or is the customer? It is important to establish this clearly from the outset.
International shipping terms such as the International Commercial Terms (Incoterms Rules) are generally used in international trade when pricing the supply but they are vitally important as they establish the responsibility of the seller to the buyer within the supply chain.
Many companies like to quote ExWorks when first starting out exporting because it is assumed that making the buyer responsible for the whole supply chain will make it easier for the seller. ExWorks though is not a good term to use as if you fail to get the correct evidence of shipment you will be unable to provide evidence of export to support you raising an invoice without VAT.
The other Incoterms Rules are divided into three groups that give the seller a greater level of control of the whole supply chain:
- Group F – for example FCA: similar to ExWorks but the seller is responsible for freeing the goods for export thereby giving the seller some control
- Group C – for example CPT: under this group the seller organises and pays the international freight but does not have the risk of loss or damage
- Group D – for example DAP: this is the group for delivering your goods into the buyer’s country. The seller is responsible for organising the supply chain and bears full risk of loss or damage.
What is the product you will be transporting?
Overseas regulations differ depending on the type of product you are exporting. Food and drink, chemicals and pharmaceutical products usually have a greater level of import controls and may come under transport regulations such as the carriage of dangerous goods conventions.
Ensure you research your customers’ countries checking out what special paperwork and regulations apply to your particular type of goods.
Which country are you shipping to?
If you are selling to one of the other Member States (MS) of the European Union (EU) there are very few regulations or documents required. This is because we are a customs union and, as such, goods can freely circulate throughout the MS with the minimum of formalities and paperwork.
One of the main exceptions is goods falling under the category of excise goods, such as alcohol, tobacco and hydrocarbon oils. These require special movement documents as they are subject to national taxes.
If you are selling to countries outside of the EU then you need to establish what documents are required. To find out what documentation is needed for the country you are shipping to, go to the Market Access Database (or MADB) and select your destination country. This is a regularly updated database for companies exporting from the EU.
We also have an article on how to use the MADB.
Are you responsible for the freight?
If you are responsible for supplying the goods – in other words, selling under Group C or D Incoterms Rules – then you need to look into a freight forwarding service.
Whatever your responsibilities with regard to the supply chain, make sure you get the correct evidence that the goods have been exported so you don’t have to charge VAT. It is vital you obtain this in case you are audited.
If you are responsible for the freight, you should consider transit insurance as well – the Incoterms Rules establish who is responsible for loss or damage within the supply chain and if this is the exporter then you need to ensure you are not at risk.
For example, if you have agreed Delivery At Place (DAP) then the risk is with you as the seller and this has an impact on your costs. Your freight company can also handle insurance for you.
Remember, even if you use a freight forwarder or an agent, it’s still up to you to make sure the right documentation is used and completed when your order ships, so make sure you take your time. Ask questions and get advice from the experts – they’re there to help you!
We also have a handy checklist of things to consider when you receive your first order, if you sell a physical product, and another checklist if you are selling a software or service, if you need further information on international trade and international shipping.