Exporting Logistics

Focuses on the rules and regulations that

cover the importation and exportation of
goods and their payment as well as the
physical movement of goods between
countries.
The Exporting Process
🞂The exporting process includes;-
◦ The licenses and documentation necessary for products
to leave the country.
◦ The shipping terms and logistics to transport the goods.
◦ The order fulfillment (licenses and documentation) of
the import requirements to get the shipment legally into
a foreign country.
◦ The payment terms meant to conclude the transaction
Elements of the Exporting Process
Leaving the Exporting Physical Distribution Entering the Importing
Country Country
1. Export Licenses 1. Incoterms 1. Tariffs

2. Documentation 2. Packing and Marking 2. Non-tariff barriers

• export declaration 3. Shipping and logistics • Documentation

• commercial invoice intermediaries • Quotas
• bill of lading • Import Licenses
• consular invoice • Embargoes
• special certificates • Standards
• other (as may be required) • Inspection
• Special certificates
• Exchange permits
International Commercial Terms of Sale
(INCOTERMS)
🞂Incoterms define the mutual obligations of the seller
and buyer arising from the movement of goods under
an international contract from the standpoint of risks,
costs and documentation (UNCTAD, 1990).
🞂These indicate how the buyer and the seller divide risks
and obligations and thus costs of a trade transaction.
Why are they Important?
🞂Reduce the uncertainty caused by trade practices in
different countries.
🞂Simplify negotiations involved in international trade.
🞂Ensure common understanding of obligations.
International Commercial Terms of Sale
🞂 Ex-works (EXW) - at the point of origin
◦ The exporter agrees to make the goods available at the disposal of the buyer
at the specified place (normally the factory) on the specified date or within a
fixed period.
◦ All other charges are borne by the buyer.
🞂 Free Alongside Ship (FAS) - at a named port of export.
◦ The exporter quotes a price for the goods, including charges for delivery of
the goods alongside a vessel at a port.
◦ The seller covers the costs of unloading at the dock and wharfage.
◦ Loading onto the ship, transportation, insurance, unloading and wharfage at
a port of destination and transport to the site required by the buyer are on the
buyer’s account.
🞂 Free on Board (FOB) - at a named port of export
◦ In addition to FAS, the exporter undertakes to load the goods on the vessel
to be used for transportation and the price quoted by the exporter reflects
this cost.
🞂 Cost and Freight (CFR) - to a named overseas port of
disembarkation
◦ The exporter quotes a price for the goods, including the cost of
transportation to a named overseas port of disembarkation.
◦ The cost of insurance and the choice of the insurer are left to the importer.
🞂 Cost, Insurance and Freight (CIF) - to a named overseas port of
disembarkation
◦ The exporter quotes a price including insurance and all transportation and
miscellaneous charges to the port of disembarkation from the ship or
aircraft.
◦ CIF costs are influenced by port charges (unloading, wharfage, heavy lift,
and demurrage), documentation charges (certification of invoice,
certification of origin, weight certificate) and other miscellaneous charges
(fees of freight forwarder, insurance premiums).
🞂 Delivery Duty Paid (DDP) - to an overseas buyer’s premises
◦ The exporter delivers the goods with import duties paid including inland
transportation from the docks to the importer’s premises.
Export Documentation
🞂 An export shipment involves many documents required to
meet international commercial transactions.
🞂 Export documents are a result of;-
🞂 Requirements imposed by the exporting government.
🞂 Requirements set by commercial procedures established in foreign trade.
🞂 The supporting import documents required by the importing
government.
🞂 The importance of these documents should not be minimised
as incomplete or improperly completed documents lead to
delays in shipment
🞂 In some countries, there are penalties, fines and even
confiscation of goods as a result of errors in some of these
export documents.
Types of Export Documents
1. The Bill of Lading ;- is a contract between the exporter and the
shipper indicating that the shipper has accepted responsibility for
the goods and will provide transportation in return for payment.
🞂 Purpose
◦ Most important document required for establishing legal ownership and
facilitating financial transactions.
◦ Serves as a certificate of ownership or title to the goods.
◦ Serves as a contract for shipment between the carrier and the exporter.
🞂 Types
◦ A straight bill of lading is non-negotiable as is delivered directly to the
consignee.
◦ A shipper’s order bill of lading is negotiable; it can be bought, sold or traded
while the goods are still in transit, (title of goods can change hands)
2. Export/Import Declaration;- used by countries to determine
whether export or import regulations are being met and to maintain
a statistical measure of the quantity of goods shipped or received
from abroad.
◦ Presented at the port of exit/entry, it includes;-
▪ Names and addresses of the principals involved
▪ The destination/origin of the goods
▪ A full description of the goods and their declared value
3. Commercial invoice ;- a bill or invoice for the goods sold.
◦ Generally required for customs clearance to authenticate the value of the
products imported/exported.
◦ Also a key financial document required in international commercial
payments e.g. in raising an LC.
4. Consular invoice from consulate office of importing country in
importing country language
◦ Probably produces the most red tape, is the most exacting to complete and
should be handled with care because fines are generally levied in most
countries for any errors uncovered
5. Country of origin certificate;- certifying where the goods were
manufactured. Should be backed by the consular invoice where
these are treated differently
6. Insurance certificate;-
◦ Cover risks of shipment due to political and economic risks and
possibility of damage from sea and the weather.
◦ Most terms of sale or payment methods require goods to be insured.
7. Export / Import licenses – required in various countries to allow
firms to import or export goods
8. Pre-Shipment inspection documents;- inspection of the goods done
by or on behalf of the importer before the shipment by an
independent party
9. Export packing list;- a document listing the packaging and items in
each packing
10. Sanitary and health inspection certificates;- attesting to the absence
of disease and pests particularly for agricultural products
International Commercial Terms of Payment
🞂 Payment for exported products is complicated by the additional
risks encountered when dealing with foreign companies.
🞂 Risks include;-
◦ Inadequate credit reports on customers
◦ Problems of currency exchange controls
◦ Distance
◦ Different legal systems
◦ Cost and difficulty of collecting bad debts
🞂 Terms of payment to be used generally depend on;-
◦ The type of merchandise
◦ Amount of money involved
◦ Credit rating of the buyer
◦ Country of the buyer
◦ Nature of relationship between buyer and seller
Foreign Commercial Terms of Payment
1. Cash with order (e.g. telegraphic transfers, RTGS etc.)
2. Letters of Credit
🞂 Revocable letter of credit
◦ A letter of credit that may be withdrawn by the bank from the beneficiary at
any time without prior notice to the exporter. It does not carry a bank’s
obligation to pay.
🞂 Unconfirmed irrevocable letter of credit
◦ A letter of credit issued by the importer’s bank. The issuing bank (importers
bank) still has an obligation to pay if the buyer fails to.
🞂 Confirmed irrevocable letter of credit
◦ A letter of credit is issued by the importer’s bank and confirmed by another
bank, usually in the exporter’s country. The obligation of the second bank is
added to the obligation of the issuing bank to honor drafts presented in
accordance with the terms of the letter of credit.
3. Bills of Exchange (Drafts):- The seller draws a draft on the buyer and
presents it with the necessary documents to his bank, which then
forwards it with the documents to the correspondent bank in the buyer’s
country. The buyer is presented with the draft for acceptance and
immediate or latter payment.
🞂 Types of Bills of Exchange
◦ Sight Draft ;- Requires acceptance and payment on presentation of the draft and
often before arrival of the goods.
◦ Arrival Draft;- requires payment to be made on arrival of the goods at the buyer’s
country.
◦ Date Draft;- has an exact date of for payment and is in no way affected by the
movement of the goods.
4. Open Account
◦ Transaction payable at date specified on invoice. Very rare in foreign trade
except to customers of long standing with excellent credit reputations or to a
subsidiary of the exporter.
5. Consignment
◦ A shipment that is held by the importer until the merchandise has been sold,
at which time payment is made to the exporter.
Student Work
🞂Examine the advantages and disadvantages of the
discussed foreign commercial payment terms.
Packing and Marking
🞂 Packing that is adequate for domestic shipments often falls
short for goods to be; transported over water, subject to
excessive handling or destined for parts of the world with
extreme climates.
🞂 Protection against rough handling, moisture, temperature
extremes and pilferage may require heavy crating which
increases total packing costs as well as freight rates because of
increased weight and size.
🞂 To avoid the extremes of too much or too little packing, the
marketer should consult export brokers, freight forwarders and
other specialists.
🞂 Marking of the shipments – markings on the outer packaging
of the export consignment for the purpose of identification
🞂 All countries regulate the marking of goods and containers on
imports and non-compliance can result in severe penalties.
🞂 Marking on the container must conform exactly to the data in
the export documents because discrepancies are often
interpreted by customs officials as an attempt to defraud
Export logistics Intermediaries
🞂 Freight forwarder;- a company involved in packing and shipment of
export goods
🞂 Customs Clearing Agent;- company involved in dealing with the
customs clearance of imported or exported goods
🞂 Bonded warehouse;- a designated warehouse where imported goods
may be stored prior to the payment of import duties. Importers pay
customs duties when they take the goods out of the bonded
warehouse
🞂 Containers;- metal containers (normally 20 or 40 feet long) for safe
transportation of cargo by sea
🞂 Bulk-breaking;- normally goods are transported by sea in large
metal containers – some exporters may not have enough cargo to fill
a container then the cargo companies combine cargos from a
number of exporters to fill a container for shipment to a destination
Conclusion
🞂An awareness of the mechanics of export trade is
indispensible to the foreign marketer
🞂In handling the mechanics of export trade successfully,
the marketer must keep abreast of all foreign and
domestic changes in requirements and regulations
pertaining to the products involved.