By Deirdre Moffitt
Expanding your business to new international markets is an exciting milestone, but it also brings a unique set of challenges. Before shipping internationally, it’s crucial to get all the details right—after all, the most minor mistake could lead to costly delays, fines, or, even worse, strained business relationships.
So, before you embark on this new journey, here are five important things you need to know. They will set you up for success and keep your business running smoothly as you expand into new territories.
When it comes to international shipping, one of the most critical elements to understand is Incoterms (short for International Commercial Terms).
Established by the International Chamber of Commerce (ICC), the 2020 Incoterms contain 11 rules issued by the International Chamber of Commerce (ICC) and are updated every 10 years.
These terms define the responsibilities between buyers and sellers during global transactions and help clarify who is responsible for what.
Your Incoterms will actually determine who pays for what, who holds the risk, and what visibility and choice you may have in how the shipment will be moved (routing, mode of transport, etc.).
Without a clear understanding of Incoterms, you risk misunderstandings or miscommunication that can lead to delays, fines, or even lost shipments.
Compliance and regulations do not only apply to the clearance of imports and exports. There are also compliance rules and regulations for the transportation of goods.
As the Exporter and/or Importer of Record, it is your and your company’s responsibility to ensure these regulations are adhered to. You need to understand these rules before you start shipping.
Just because you work with a freight forwarder and a customs broker doesn’t mean you are off the hook. Ultimately, it is the Exporter and Importer of Record’s responsibility.
Familiarize yourself with the rules, and when you start sourcing and selling, do your research on those countries’ regulations as well.
Each country has its own regulations; you could export something to Brazil thinking everything is fine, and when it arrives, there’s an error in the paperwork. Now your shipment is sitting with Brazilian customs, collecting storage that, based on your Incoterms, you could be responsible for.
Another issue might be importing into the U.S. a product that requires a quota. If you exceed the quota amount, you could be forced to abandon the goods, destroy them, or enter them into a foreign trade zone (FTZ) until the quotas are reset.
All that comes with an expense, and you cannot sell that product immediately as planned.
A former colleague of mine would often tell our customers, “You date your freight forwarder, but you marry your customs broker.” Throughout my logistics career, this saying has remained strong.
The majority of freight forwarders these days also offer in-house customs brokerage services. It’s a nice one-stop-shop, easy to track, one group of contacts. And it makes it easier for your team to manage.
But, not every freight forwarder’s customs department is robust, and it may not be the perfect fit for you and your company. One freight forwarder may have the best transportation rates, visibility tools, and communication skills.
That’s great! But you may not be too impressed with their customs team.
That’s okay. You can split it up. There are stand-alone customs brokers out there that don’t offer transportation services. They focus on compliance within logistics. Or there may be two freight forwarders you are looking at for service. One handles your transportation, and the other handles the customs part.
When you split up the services, you, as the customer, need to stress to all parties that this isn’t a competition. You do not want them to get into finger-pointing or have any resentment toward each other.
Remember, you all work on the same team and want everyone to succeed. The goal is to help you, the customer, with their logistics needs.
Trains, planes, vessels, and automobiles are all modes of transport when shipping internationally and domestically. However, there’s more than just a straight full freight container and a single air shipment. There are always other options.
For now, let’s look at the main transportation options you may want to consider.
In airfreight, consider utilizing consolidations. For instance, if you have a shipment ready now from Nanjing, China, but aren’t in a hurry for it, you can combine it with another air shipment scheduled for the following week from Shanghai, China.
You can arrange to have the Nanjing shipment picked up the week it is ready, brought to your freight forwarder’s warehouse in Shanghai, and then wait until the second shipment in Shanghai is ready.
Once it’s ready, you can have them booked on the same flight. This may result in cost savings on your freight rate. Remember, the larger the shipment, the lower the airfreight rate.
For ocean, you don’t need to fill an entire container of freight to ship. There is another option for smaller shipments, which is LCL (Less than Container Load).
Again, consolidation might be a good option. Ocean consolidators collect freight from multiple shippers for multiple customers. They load your freight along with others and send it in one container.
It is the slowest mode of transport, but it is also the cheapest. If your shipment is too large for a parcel, like UPS / DHL / FedEx, but not enough freight to load a full container, LCL might be the way for you to go, especially if you have lead time in that product.
Ocean and rail freight go hand-in-hand when shipping internationally. For instance, if a full container is arriving at the Port of New York from England while you’re in Central Indiana. You don’t want to truck the container from New York to Indiana because that will be too expensive.
You can have your freight forwarder book the container from Liverpool to Central Indiana via New York. The container arrives at the port, is moved from the port, put on the rail, and will be transported to the Container Yard (CY) in Central Indiana. Then, you only pay the trucking costs from the CY to your facility in Central Indiana.
Yes, your ocean freight will be higher, but you will save on trucking costs and come out ahead. For your information, when moving a 20FT container on the rail, the rail carriers need to match it up with another 20FT container.
So, if there is no other 20FT container to travel with your 20FT container, your container may have to wait a few days to be matched up and moved on the rail.
However, you will not see this when moving 40FT containers.
So, you have your freight forwarder and customs broker set up and are ready to start shipping internationally!
Like Importers and exporters, freight forwarders and customs brokers must have a clear record-keeping process.
However, do not depend on them to retain your records. As the Importer or Exporter of Record, it is also your responsibility to retain your records. 5 years is the rule. You need to keep the documents for 5 years from the date of entry.
A lot can happen within this timeframe. You may have moved on from your freight forwarder, the sales rep may have left, and you may not have the same relationship with them as when you first started. That’s why it’s best for you to have a retention plan.
U.S. Customs and Border Patrol (CBP) and Partner Government Agencies (PGAs) may request documents on a specific shipment from four and a half years ago. Typically, you are given 30 days from the date of request to provide the documents to that agency. Failure to do so may result in fines.
The documents you are required to keep are:
When shipping internationally, I strongly suggest that your freight forwarder and customs broker include a complete packet along with their invoice so that you have everything you need. Save them to a drive for retention and easy access.
You are allowed to dispose of those documents after five years from the date of entry, and I highly suggest you have them shredded.
At Zulu7, we offer logistics consulting services to guide you through the complexities of shipping internationally. We can even take all the work off your shoulders. Contact Deirdre Moffitt to discuss how we can help.
Deirdre Moffit is the chief logistics officer and managing partner at Zulu7. She has been in the logistics industry for over two decades and manages her own company, LGM Logistics.
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