Think of an item in your house, chances are they were not manufactured in your home country. For instance, you own an item that was manufactured in California but was available in Hamburg. So, how come you have the access to products that you depend on but were assembled and built in some other nation? The key is simple- International shipping.
International shipping is defined as the trade of goods and freight across the international borders to the neighboring nations via air, sea, or land. So, now you know the item you possess was transported by shipping containers in California to Hamburg and was made available. Over the past few centuries, international trade was much more complicated and difficult. Merchandise was transported on foot and over horseback. But ever since the advancement of technology, with the rapid growth of e-commerce, transportation of freight has increased manifolds as the demand for international transportation by various smaller businesses’ has boomed. Before getting into the details of the process of internation2al shipping, let’s brush through the basic knowledge about the various players involved in the process: 1. Importer: The buyer is the importer. The need for a particular product at a particular location is identified by an importer. He then searches for the best goods and service provider globally and places an order. Importers are basically of three types: a. Actual user: One who employs the goods for his use. They can be of two types:
b. Established importer: Based on the history of import transactions, he has availed a quota of products regularly. c. Registered exporter: One who avails to import under the government's export promotion schemes. 2. Exporter: He is the seller who is responsible for manufacturing/ procuring the products required by the buyer. The exporters are mainly classified under the following heads: Merchant Exporter: He exports the products in his name after procurement from the market. Manufacturer Exporter: He exports the finished products after manufacturing the goods from the procured raw materials. Service Exporter: He exports services like software, consultancy, etc. Third-party exporter: He exports freight on behalf of the manufacturer exporter. Project Exporter: He benefits by earning foreign exchange after providing goods and services on completing consignments. Deemed Exporter: He exports goods meant for specific projects like power projects, nuclear projects, etc. Such transactions even though don't exit the country still qualify as an export. 3. Bank: They play a crucial role in international trade. They can be financiers (provide loans, trade finance products like Letter of Credit & Documentary Collections), negotiators of trade, and act as custodians of goods and documents. 4. Insurance Company: They help to cover the risks involved in the container shipping business such as lost or damaged cargo, delays, and additional costs due to various external risk factors. 5. Freight Forwarders: They are like the ticketing agents for cargo shipments. A freight forwarder coordinates on the behalf of exporter & importer with all other players in the shipping industry to negotiate for freight rates, mode of transport, documentation of transport, and much more. 6. Shipping Company: They own the carrier ships that carry out transportation from the loading port to the port of destination. 7. Customs House Agent (CHA): He assists in obtaining the import and export customs clearance for the cargo from the authorities. 8. Custom Authorities: They provide clearance to the cargo to leave the country of export and enter the country of import. 9. Port Authorities: They provide clearance for goods to be loaded on the ship and unloaded from it in the exporting and importing countries respectively. 10. Intermodal Transport Providers: Rail and road transport providers are responsible for transporting goods from the warehouse/factory to the port of loading and from the port of destination to the final destination. Shipping of freight across international borders is a complicated & confusing procedure. To ensure hassle-free shipping, the procedure of International Shipping must be well apprehended. Amidst the wide array of stumbling blocks in the pathway of the shipping procedure, working with a qualified freight forwarder is the best way to ensure the shipping process as smooth as possible. Weighing down the crucial seven steps involved in the process of shipping procedure: 1. Importer Requests quotes and order goods: When an importer/consignee orders goods from the supplier/consignor, the suppliers provide for the issuance of a quote either accompanied by or in the form of a proforma invoice. It provides an estimate and differs from a commercial invoice. After approval of the quote, the consignee creates a purchase order consisting of an outline of the purchase mentioning details of the order, value of freight, shipping date, origin & destination addresses, freight dimensions, etc. According to the latest updated incoterms, the determination of who is responsible for what in the shipping of goods from origin to destination is a critical step. Failure to allocate the most suitable set of incoterms could result in greater losses than anticipated by the buyer. After the purchase order has been placed and incoterms have been finalized, the importer then arranges a freight forwarder. Then the next step is to obtain a Letter of credit to pay the supplier. It is one of the most secure payment methods in international trade as legally bound financial institutions are involved which ensure the terms and conditions prior to the commencement of manufacture of goods. Following this, the supplier provides the importer with a commercial invoice with an order confirmation and details which is required for customs clearance and is proof of sale. 2. Arrangement of export by a freight forwarder: Export customs clearance can be performed by a freight forwarder with a valid license or an agent appointed by him. On the other hand, it can also be performed by a customs house broker directly appointed by a shipper. A freight forwarder then arranges the collection of goods by the overseas buyer. This step involves the preparation of various key documents required in the process of international shipping.
2. Documents to be prepared by the buyer Every nation has different requirements for export customs clearance. But in general, the following documents are required by the buyers:
3. Booking of Freight: Once the documentation process is completed, it is a must for the exporter to book the export shipment early to avoid any last-minute hassle especially if it's the peak shipping season. 4. Goods to travel to international container depot/ port: Once the goods are packed, they are transported to a container depot or port for export. Depending upon the incoterms that were being agreed upon, this transportation is being arranged either by the consignee or consignor through the freight forwarder. When a carrier is delegated to pick up a shipment, a bill of lading is issued. This is the most important document for the exporters in the freight business. It is a legal document signed by the importer, shipping line, and exporter. In a single shipment, multiple bills of lading might be involved. 5. Goods processed through export customs clearance and placed in transit: Before the goods leave the port of country of origin, the goods are reviewed and checked by the related government authorities. All the documents are rechecked for export customs clearance. After the export declaration form is completed and export is cleared, the merchandise is allowed to be placed for international transit. A supplier can choose any mode of transport from the wide array of freight container options available including , Reefer, Out of Gauge, Flat Racks, etc. 6. Goods arrive in buyer’s country for import clearance: Once the goods reach the port of destination, the goods have to go through a customs import clearance and the buyer has to produce certain documents such as Import Licence, insurance Certificate, Purchase Order and Letter of Credit, Technical Write-up(in case of machinery), Test Report, Industrial Licence, Registration cum Membership certificate, Duty exemption documents, GATT/DGFT declarations, etc. The imported commodities may be subject to certain taxes, tariffs, and/or charges. They may also have to undergo quarantine inspection on arrival. 7. Goods are transported from port to the buyer: After the products are cleared by the customs, they receive the green signal to be transported to the agreed delivery point. As per incoterms, the responsible party will arrange the transport according to the discussion carried out beforehand between the receiver and the freight forwarder. The shipping process can be a daunting and confusing task to do. It can intimidate and trouble the rookie exporters and importers in the freight industry, given the numbers of steps, players, and documents involved in the process. But once you are familiar with all this, voila, you're good to go!
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