Essentials of Freight Forwarding P2.pptx

1. Essentials of
Freight
Forwarding
P2 Commercial Documentation

2. IMPORTANT
DATES
ASSSIGNMENTS – May 3 (Fri)
MIDTERM – May 10 (Fri)
FINAL EXAM: May 17 (Fri)

3. Enabling Learning Objectives (ELO’s)
Documentation Requirements:
▶ Identify Regulatory Requirements: Understand and identify the legal and regulatory documentation requirements for
international trade in a given country or region.
▶ Explain Documentation Timelines: Explain the importance of adhering to specific documentation timelines and deadlines
in international trade transactions.
▶ List Key Information: Compile a comprehensive list of essential information and data needed for international trade
documentation.
▶ Distinguish Between Types: Differentiate between various types of documents required for international trade, including
commercial invoices, certificates of origin, and bills of lading.
Invoices:
▶ Create Accurate Invoices: Learn how to create accurate and compliant commercial invoices for international
transactions, including details such as pricing, currency, and Incoterms.
▶ Calculate Duties and Taxes: Understand how to calculate and include relevant duties, taxes, and fees in international
invoices.
▶ Invoice Language and Formatting: Learn the importance of presenting invoices in the appropriate
language and format for the destination country.
Export Documents:
▶ Prepare Export Declarations: Understand how to prepare and submit export declarations to customs authorities, as
required by the exporting country.
▶ Master Bill of Lading: Learn how to complete a master bill of lading and understand its role in international shipping.
▶ Certificate of Origin: Describe the purpose of a certificate of origin and how to
obtain one for export documentation.

4. Enabling Learning Objectives (ELO’s)
Import Documents:
▶ Understanding Import Regulations: Gain knowledge of import regulations and documentation requirements of the destination country.
▶ Import Licensing: Explain the concept of import licenses and how to obtain them when required.
▶ Customs Documentation: Learn about customs clearance documents, such as import
declarations and customs bonds.
Transportation Documents:
▶ Bill of Lading Types: Understand the different types of bills of lading, including negotiable and non-negotiable, and when to use each.
▶ Air Waybills: Explain the role and importance of air waybills in air freight shipments.
▶ Packing List: Describe the purpose of a packing list and how to create an accurate and complete packing list for
different modes of transportation.
Electronic Data Interchange (EDI):
▶ EDI Implementation: Learn the basics of implementing Electronic Data Interchange for efficient and paperless international document
exchange.
▶ Data Security in EDI: Understand the importance of data security and confidentiality when using EDI for international trade documents.
▶ EDI Standards: Familiarize with common EDI standards and protocols used in international trade, such as
UN/EDIFACT and ANSI X12.
Document Preparation as a Marketing Tool:
▶ Branding in Documentation: Explore how the preparation and presentation of international trade documents can be used as a marketing
tool to enhance the company's brand image.
▶ Document Accuracy and Reputation: Understand how accurate and well-prepared documents can contribute to a positive business
reputation in international markets.
▶ Document Automation: Learn about the benefits of document automation and the use of technology in improving document accuracy
and efficiency.

5. The Complex Web of International Trade
Documentation
▶ International trade involves numerous documents that must adhere to specific requirements based on
goods, destination, transportation, and payment methods.
▶ Accurate documentation is crucial for smooth cross-border trade, compliance with regulations, and
proof of transaction details.
▶ Filling out these documents correctly is complex, with varying requirements between countries and
industries.
▶ Errors or missing documents can lead to delays, extra costs, and legal complications.
▶ Specialized software solutions have emerged to simplify the document generation process, reducing
the risk of mistakes and streamlining the workflow.
▶ Extensive documentation requirements often involve multiple originals and copies, posing logistical
challenges for exporters when dealing with various intermediaries and organizations.
▶ Despite digital advancements, many countries still favor paper-based documents, presenting logistical,
financial, and environmental challenges.
▶ The role of software in simplifying documentation is crucial, offering efficiency, accuracy, and
convenience. Future trends may include increased electronic submissions and international
standardization of trade documentation processes.

6. The Significance of the International
Invoice in Trade Transactions
▶ Currency and Exchange Rates: International transactions often involve multiple currencies. Exporters must specify
not only the price of goods in the currency of their own country but also the equivalent value in the currency of the
importing country. This necessitates an awareness of current exchange rates and a clear display of the chosen
currency.
▶ Incoterms: The International Commercial Terms, or Incoterms, dictate the responsibilities and risks associated with the
delivery of goods. Exporters must specify the chosen Incoterm on the international invoice, as it determines the point at
which ownership and risk are transferred from the seller to the buyer.
▶ Customs and Regulatory Compliance: International invoices must adhere to the customs and regulatory
requirements of the importing country. This includes accurately identifying the products, specifying their HS
(Harmonized System) codes, and providing any necessary certifications or documentation for compliance with trade
regulations and tariffs.
▶ Shipping and Transportation Details: In international transactions, the invoice should include comprehensive shipping
and transportation details. This encompasses the mode of transportation, the port of departure, and the destination port,
among other specifics. Accurate shipping information is crucial to prevent delays, clear customs, and facilitate the
smooth movement of goods.
▶ Language and Cultural Considerations: An international invoice should be presented in a language that the importer
understands. This could necessitate translations or the use of standardized, universally recognized terminology.
Additionally, an understanding of cultural nuances is important to ensure respectful and effective communication in an
international business context.
▶ Taxation and Duties: Taxation and duty-related information, such as VAT (Value Added Tax) or GST (Goods and
Services Tax), must be included in an international invoice. Accurate taxation information is essential for compliance
with the tax laws of the importing country and for the importer's claims for input tax credits.

7. Commercial Invoice
▶ An international shipment invoice is known as a commercial
invoice and can be sent directly to the importer or indirectly
through banking channels depending on the payment terms.
▶ The commercial invoice must provide a precise description of
the products being billed, including the Harmonized System
Number, due to customs clearance requirements.
▶ The terms of trade or Incoterms® rule used should be explicitly
stated, following the International Chamber of Commerce
guidelines to clarify responsibilities for various ancillary
services and fees.
▶ Detailed notes of prepaid items should be included, such as
international insurance payments for CIF or CIP shipments, to
ensure accurate duty calculations.
▶ The terms of payment, whether it's a letter of credit, bank draft,
cash-in-advance, purchasing card, or an open-account sale,
should be clearly indicated.
▶ The currency for payment should be specified, with strategies
for handling currency fluctuations discussed in our previous
lectures.
▶ Essential shipping information, including departure and
destination ports, shipping company details, shipment dates,
box or container quantities, weights, and sizes, must be
provided.
▶ Identifying information for involved parties, including seller-
exporter and buyer-importer names, contact persons,
addresses, and relevant details, should be included without
local telephone access codes.

8. Pro forma Invoice
▶ A pro forma invoice is a commonly used international document, serving as a quote
rather than an actual invoice.
▶ Due to the complexity of international transactions and the various cost factors
involved, importers may request a pro forma invoice to estimate their final
expenses.
When an exporter requests payment through a letter of credit, the information from
the pro forma invoice is used by the issuing bank to open the letter of credit, and it
must match the final transaction documents.
▶
▶ Careful attention is essential when creating a pro forma invoice, as any variance
between the pro forma invoice and the final commercial invoice may lead to
discrepancies, requiring costly amendments.
The pro forma invoice should mirror the final commercial invoice in terms of
information, amount, and quotes from other suppliers involved, such as shipping
and insurance.
▶
▶ Including an expiration date in the pro forma invoice is crucial, as international
transactions treat offer expiration differently from domestic ones, particularly under
the United Nations Convention on the International Sale of Goods (CISG).
▶ In international transactions under the CISG, the offer in a pro forma invoice cannot
be revoked by the seller (or buyer) before the expiration date, making it an
irrevocable offer, with different rules than in many domestic transactions.

9. Consular Invoice
▶ A consular invoice is needed for exports to specific Latin American
countries.
▶ It is a regular commercial invoice printed on consulate-provided
stationery and made official by the consulate through stamping,
embossing, or other procedures.
▶ Obtaining a consular invoice can be time-consuming, involving
exchanges with the consulate.
▶ Countries that require consular invoices use them to forecast foreign
currency needs and generate revenue through stationery and
officialization fees.
▶ The requirement for consular invoices is diminishing and is often seen
as a non-tariff trade barrier by exporters.
▶ As of June 2017, consular invoices were still required in about six
countries, primarily in Latin America.

10. Specialized Commercial Invoices
▶ Commercial invoices are vital in international trade,
recording transaction details for goods or services.
▶ Some countries, such as Canada, Mexico, New
Zealand, Brazil, and Israel, mandate specialized
commercial invoices printed on standardized forms.
▶ These forms meet specific criteria and are compliant
with the country's customs regulations and legal
requirements.
▶ The requirement is intended to facilitate customs
procedures and expedite clearance, not seen as a
trade barrier.
▶ Specialized international stationery printers provide
these standardized forms.
▶ The use of such invoices simplifies the work of
customs employees and enhances trade efficiency.

11. Specialized Commercial
Invoices
The utilization of specialized commercial invoices offers several notable advantages:
▶ Simplification of Customs Procedures: Standardized commercial invoices streamline the customs
clearance process by presenting information in a structured and consistent format. This simplifies the work
of customs officials, who can quickly locate and verify essential data, such as the product description,
value, and origin. As a result, goods can move through the customs process more efficiently, reducing
delays and enhancing trade facilitation.
▶ Enhanced Accuracy and Compliance: The use of specialized invoices helps ensure that exporters provide
accurate and complete information. These forms often include fields for specific details required by
customs, such as the HS (Harmonized System) codes for products. This not only aids in maintaining legal
compliance but also reduces the potential for errors or discrepancies.
Greater Transparency and Accountability: Standardized forms foster transparency and accountability
throughout the supply chain. The structured layout of these invoices makes it easier for customs officials,
as well as other parties involved, to understand the transaction and confirm that it aligns with international
trade regulations. This transparency builds trust and promotes efficient trade relations.
Consistency and Predictability: Specialized invoices provide a consistent and predictable framework for
conducting international trade. Exporters can readily access and complete these forms, knowing that they
meet the legal requirements of the importing country. This consistency aids both small and large
businesses, as they do not need to tailor their invoices for different markets.
▶
▶
▶ Compliance with Legal Regulations: Using standardized commercial invoices helps exporters meet the
specific legal requirements of the destination country. Some countries have unique regulations regarding
invoices, and specialized forms ensure that exporters adhere to these rules. Compliance is essential for
avoiding legal disputes and potential penalties.

12. Export
Documents
▶ Governments may impose document
requirements for exports to gather
accurate data on outgoing products.
▶ Specific documents like Electronic Export
Information (EEI) in the United States and
the Single Administrative Document in the
European Union serve this purpose.
▶ Export licenses may also be necessary
when governments seek to control the
export of certain goods or limit trade with
specific countries for political reasons.
▶ These licenses are required in cases of
controlled merchandise or embargoes.

13. Electronic Export
Information
▶ The Electronic Export Information (EEI) is
required by the U.S. government for exports
over $2,500 per item category, except for
exports to Canada.
▶ EEI is collected electronically by U.S.
Customs and Border Protection or the
Census Bureau.
▶ EEI replaced the paper Shipper's Export
Declaration (SED) and helps tabulate
exported products and their destinations.
▶ The EEI's definition of "exporter" designates
the U.S. principal party in interest (USPPI) as
the manufacturer, improving the accuracy of
export statistics.
▶ The data collected is available through the
National Trade Data Bank on the
International Trade Commission's website
with a subscription.

14. Single Administrative
Document
▶ The Single Administrative Document (SAD) is required by
the European Union for all exports.
▶ It can be submitted in paper or electronic form and must
be filed where the goods are packed and shipped.
▶ The "owner of the goods" or their representative is
responsible for filing the SAD.

15. Export
Licenses
▶ Export licenses are government authorizations for specific product
exports.
▶ Export licenses are usually required for national treasures, antiques,
raw materials, or for political and military control.
▶ Several countries like India, Britain, France, Russia, and Turkey use
export licenses to control the export of antiques and cultural artifacts.
▶ Some governments, like China, use export licenses to manage the
export of raw materials like rare earths and phosphates.
▶ Export controls can be implemented for political reasons, such as
the Ivory Coast banning cocoa exports in 2011.
▶ Export licenses are also employed for political or military objectives,
notably by the United States.
▶ Various countries have export restrictions or controls, with over 50
countries identified by the OECD.
▶ The European Union, for instance, prohibits the export of personal
data gathered on customers or consumers.

16. Fair trade in cocoa from the Ivory Coast

17. U.S. Export
Controls
▶ U.S. export control policy has been shaped by
historical milestones such as the CoCom
agreement, the Export Administration Act, and
the Comprehensive Anti-Apartheid Act.
▶ These milestones led to the creation of the
Commerce Control List, which specifies which
commodities and products can be shipped to
certain countries.
▶ The list is published in the U.S. Export
Administration Regulations (EAR) and was
revised in 1996 to shift from a policy of
"everything not explicitly authorized needs an
export license" to "everything is authorized
unless specifically prohibited."
▶ In 2002, the Bureau of Export Administration
was renamed the Bureau of Industry and
Security.
▶ U.S. export control policies focus on three
elements: the product being exported, the
entity purchasing it, and the ultimate
destination of the product.
▶ Dual-use products, which can have both
commercial and military applications, are
subject to close scrutiny to ensure they are not
diverted for military use.

18. Internet
Encryption
▶ Businesses are increasingly interested in conducting
international transactions over the internet, requiring data
security for confidential information like credit card details.
▶ Encryption software is a means to secure data by scrambling it,
making it readable only to those with the corresponding
software.
▶ The United States government has historically classified
encryption technology as sensitive due to potential military
applications, placing it on the Commerce Control List.
Initially, the U.S. government restricted the use of encryption
software on the internet as it was considered an export, but
certain entities like banks, health facilities, and online
merchants were granted access.
▶
▶ The Bureau of Industry and Security (BIS) now permits low-
level "mass-market encryption" for export, but software with
such encryption is still subject to BIS review.
Software products containing low-level encryption remain listed
in the Commerce Control List.
▶

19. The Product
Exported
The Bureau of Industry and Security (BIS) publishes the Commerce
Control List (CCL), which lists products that concern the United States
and may require export licenses.
Each product on the CCL is assigned an Export Control Classification
Number (ECCN), different from the Harmonized System Number, to
determine the need for an export license.
Products not on the CCL are classified as "EAR99" by the BIS,
although some may still require licenses if under the jurisdiction of
another government entity.
The BIS provides the reason for each product's inclusion on the CCL,
such as national security, anti-terrorism, or encryption.
ECCN commodities may or may not require licenses based on the
reason for listing and the destination country, with the BIS offering a
Product/Country License Determination Matrix to assist exporters.

20. The Purchaser
of the Product
▶ The Entity List. This list identifies people, companies, and organizations
engaged in weapon proliferation, drug smuggling, or terrorism, and to which
the U.S. government wants to control exports. Sales to persons or
organizations on the Entity List require an export license. The Entity List is
maintained by the BIS.
▶ The Unverified List. This list identifies individuals, companies, and
organizations that are suspected of engaging in activities that. the BIS
considers illegal. Before making a sale to a person on the Unverified List, the
exporter must check with the BIS about possible issues. The Unverified List is
also maintained by the BIS. In addition, the exporter must report a suspect
transaction when. the transaction has elements that the BIS considers “red
flags,”such as when a cash sale is made for a product that is generally.
Purchased on credit, or when a product is sold to a company that. does not
appear to be in the exporter’s main line of business.
▶ The Specially Designated Nationals List. The Specially Designated
Nationals List contains the names of persons located. abroad with whom
exporters are expressly warned not to do. business. These persons have been
deemed to represent countries. to which the United States does not want to
export, or they? represent companies or organizations engaged in terrorism or
trafficking. Some of these companies are located in the United. States. The
Specially Designated Nationals List also identifies. U.S. persons, companies,
or organizations “whose export privileges have been revoked.” The list is
maintained by the Department of the Treasury.
▶ The Debarred List. An exporter is expressly prohibited to sell to a person on
the Debarred List, and a company that is contacted. (even for a domestic sale)
by one of these companies must notify. the BIS. The Debarred List is
maintained by the United States Department of State.

21. The Country of
Import
▶ The Commerce Control List (CCL) determines
whether a product with an Export Control
Classification Number (ECCN) can be exported
to a specific country.
▶ The U.S. has different export regulations for
friendly and unfriendly countries, with
embargoes imposed on certain products for
select countries.
▶ Total embargoes prohibit any product exports to
Cuba, Iran, North Korea, and Syria.
▶ Limited embargoes apply to other countries,
including Belarus, Iraq, Libya, and Venezuela.
▶ When an export license is required, exporters
need an Individual Validated Export License
with specific terms and conditions, including a
Destination Control Statement on related
documents.

22. Deemed Export
▶ The U.S. Bureau of Industry and Security
(BIS) regulates exports of products with
potential risks to national security.
▶ BIS also includes "deemed exports,"
covering products sold to foreign
nationals within the United States.
▶ Companies should monitor and control
access to sensitive technology by foreign
employees.
▶ Export licenses may be required to grant
foreign employees access to controlled
technology.
▶ Permanent U.S. residents are exempt
from these regulations.

23. Fines
▶ Schlumberger Oilfield Holdings, a wholly-owned
subsidiary of Schlumberger, a Curaçao-based
company with headquarters in Sugarland, Texas,
agreed to pay over $232 million for trading with Iran
and Sudan.
▶ Hetran, located in Pennsylvania, manufactured a
large horizontal lathe, which it sold for $800,000 to a
company in the United Arab Emirates. Since
Hetran’s president knew that the shipment was
ultimately being sent to an Iranian company named
Falcon Instrumentation and Machinery, he pleaded
guilty and was sentenced to a fine of $837,500.
▶ Gary Tsai pleaded guilty to illegally export high-
precision milling machines to his father, Alex Tsai, in
Taiwan. These milling machines needed a Validated
Export License that was not obtained. Alex Tsai was
sentenced to two years in prison.
▶ Weatherford International conducted business in
Cuba, Iran, Sudan and Syria through Weatherford’s
subsidiary in the United Kingdom. Combined,
Weatherford generated approximately $110 million
in revenue from sales to these countries. The
company was fined $100 million.
▶ EgyptAir Airlines Company, the flag carrier airline of
Egypt, leased two Boeing 737 aircraft to Sudan.
EgyptAir agreed to pay a fine of $140,000 for having
re-exported the aircraft without a Validated Export
License.

24. The
Significance of
End-Use
Certificates in
International
Trade
▶ Legitimacy and Accountability: EUCs serve as a legal
commitment by the importing entity, typically a government
or authorized agency, to use the goods for the intended,
legitimate purpose. This commitment holds the importer
accountable and legally responsible for any deviations from
the stated purpose.
▶ Preventing Diversion: The primary purpose of End-Use
Certificates is to prevent the diversion of controlled goods for
unauthorized or unacceptable uses. These certificates act as
a safeguard, providing a formal mechanism for exporters to
confirm the intended end use of their products.
▶ Government Oversight: In most cases, End-Use Certificates
are issued by the importing country's government or relevant
authorities. This adds an additional layer of oversight, as
government officials evaluate and approve the intended use
of sensitive items, thereby reducing the risk of misuse.
▶ International Agreements and Treaties: End-Use Certificates
often align with international agreements and treaties that
regulate the export and use of certain goods. Compliance
with these agreements is vital for maintaining diplomatic
relations and international trust.
▶ Security and Transparency: EUCs contribute to security and
transparency in international trade. By ensuring the intended
use of controlled items, they bolster the integrity of export
controls and promote international peace and security.
▶ Preventing Human Rights Abuses: In the case of military
equipment, End-Use Certificates are instrumental in
preventing potential human rights abuses or misuse of such
equipment, such as the use of weapons against civilian
populations.

25. Assignment Review

26. • A bill of lading also serves as a
shipment receipt when the carrier
delivers the goods at a predetermined
destination.
• A bill of lading is important because
whoever has it owns the cargo. It acts as
the legal document of title which allows the
person holding it to claim ownership of the
cargo. This means that filling out your bill of
lading accurately and completely is very
important. The bill of lading also acts as a
contract of carriage — it details the
responsibilities of the carrier with the
parties involved in the transportation of the
cargo.
Bill of Lading

27. • A forwarder does not move the goods
but acts as an expert in the logistics
network.
• A freight forwarder is a firm specializing in
the arrangement of cargo on behalf of
shippers. In most cases, freight
forwarders provide a variety of supply
chain services, including: Ocean or air
freight transportation. Inland
transportation from origin and/or to
destination. Preparation of
documentation.
Forwarder

28. • Different types of containers include
General-purpose containers, tank
containers, and flat rack containers.
• The most important and popular way to
move different types and sizes of goods
around the globe.
• Goods are often moved intermodal by
using several transport nodes in a single
shipping container during the journey.
Containers

29. • Canada’s largest trading partner is the
United States
• Canada and the U.S. share one of the
largest trading relationships in the world,
with more than $3.4 billion worth of goods
and services crossing the border each
day in 2022
• That year, Canada-U.S. trade in goods
and services was over $1.2 trillion and
represented about two thirds of Canada's
total global trade.
Trading Partners

30. • In Canada, the commercial invoice
should be in English or in French.
• Your CCI is one of four key documents
CBSA needs to release your goods:
Canada Customers Invoice, or a
Commercial Invoice, Bill of Lading,
Manifest or Cargo Control Document, and
Shipper’s Export Declaration.
Canada Customs
Invoice

31. • Incoterms 2020 are divided into four
groups (C, D, E, F).
• The rules are classified according to the
fees, risk, responsibility for formalities, as
well as issues related to import and
export.
• Currently, there are 11 different
incoterms. These categories are
determined by the delivery location and
who is responsible for covering the
cost of each part of the journey. The
groups are then split into sub-
categories which refer to various
scenarios.
Incoterms

32. • ICD stands for Inland Container Depot.
• An Inland Container Depot (ICD) is a
container storage facility situated in the
hinterlands, away from any major port.
• Shipping companies use ICDs to store and
move containers before and after
transporting them to the seaport.
Inland Container Depot

33. • Break bulk cargo are goods that must
be loaded individually and separately,
rather than being shipped in a
container.
• Break-bulk/general cargo consists of goods
transported, stowed and handled
piecemeal to some degree, typically
bundled somehow in unit loads for hoisting,
either with cargo nets, slings, or crates, or
stacked on trays, pallets or skids
• Ideally, break-bulk cargo is lifted directly
into and out of a vessel's holds, and this is
mostly the case today.
Break bulk cargo

34. • Placards are used to warn others of
hazardous materials, and this signs are
put on the outside of a vehicle and
packages that identify the hazard class
of the cargo
• A placard is required if the chemical is in a
quantity or concentration for which an
ERAP is required.
• If 500 kg or more of a quantity is being
transported of one hazard class a placard
is required.
Placards

35. Managing the costs of doing international trade in
2023