Documents Required for International Shipping

Import-export business requires a lot of documentation. One must understand the documents required for international shipping to successfully avoid legal hassles in this business.

The international trade industry may seem glamorous to people, but it involves many research, travel, paperwork, marketing, and sales skills. While the traveling part may be a little lucrative, things get tricky when it comes to the documentation part.

If you want your products to be delivered or get a delivery successfully, you need to thoroughly know the documents required for international shipping. Only a successful delivery will help you earn a lot of money, and it solely depends on proper documentation.

What are the important documents required for international shipping?

This article will discuss all the 8 important documents that you need to have successful shipping in the International trade market. These are the standard documentation that everyone in the import-export segment should understand and follow.

8 Important documents required for international shipping

1. Proforma Invoice

Like any other business, even the import-export business starts upon receiving an inquiry about a product. Usually, the inquiry comes in the form of a quotation request for a certain product in a certain quantity with some customization requirements.

While wholesalers have a standard quotation format for domestic inquiries, international dealings will not start without a proper Proforma Invoice.

Why do international prospects require a proforma invoice?

There are several reasons behind your international clients asking for a proforma invoice. The financial arrangement is one of the biggest reasons here. Once they receive a proforma invoice from you, they raise a credit letter and apply for an import permit/license from the concerned Government department.

Description of a proforma invoice:

Before you prepare or ask for a proforma invoice, let’s understand what it looks like. A proforma is very similar to the invoice we use for commercial purposes. But international trading requires a complete invoice. Ensure that your proforma mentions the below details-

  • Information about the seller and buyer involved in the transaction.
  • A detailed goods description
  • Goods should be classified in a Harmonized System
  • The selling price of the good
  • Mention of the 11 Incoterms of prevailing trade, with a special focus on the payment terms.
  • Delivery information with detailed information on where and how the product will be delivered and the charges applicable for the same.
  • Mention the currency of the quotation. In most cases, it is marked as U.S. dollars.

Every proforma invoice must contain the date of quotation and an expiration date stating how long the quote is valid. The specified time frame reduces the risks of volatility once faces in the import-export-trading process.

2. Invoice for commercial purpose

While an international trade can’t commence without a proforma invoice, it also requires a commercial invoice to process the export transaction. The commercial invoice is one of the major documents required for international shipping.

Once your international trading partner receives the proforma invoice and places their order, you need a commercial invoice as a preparatory part of goods shipping. Every export product must contain commercial invoice paperwork to clear customs.

What does a commercial invoice include?

Like the proforma invoice, there is certain information that every export transaction requires a commercial invoice to display. Usually, it should contain every small detail from the beginning of the transaction to the end.

A commercial invoice for international orders will always have a different appearance than that of domestic orders. Don’t get confused with the appearance. The domestic invoices we create are not for export purposes but the company’s ERP or accounting needs.

On the other hand, a commercial invoice looks almost like a proforma invoice that you exchange with your foreign trading partner during quotation. The new document, however, includes some additional information.

  • Order number
  • Reference number for the customer, raised during the inquiry
  • Purchase order details
  • Banking details
  • Agreed payment terms, denoting the chosen method of payment
  • Acceptance that the customer has paid you in full before shipping.

Since international shipping will involve marine shipment or cargo services, it is worth opting for marine insurance. Your commercial invoice must display the insurance details. It ensures that there is no hassle during shipping.

3. A list for packing

The packing list you prepare for export purposes is supposed to be more detailed than any domestic shipment packing slip.

Why do you need a detailed packing list?

A packing list for international shipping is required for several purposes.

  • The freight forwarder handling the goods uses information from this list for lading bill preparation before shipment.
  • Your bank considers the packing list as one of the important documents required for international shipping as they use the details mentioned to release payment under the credit letter.
  • This list works like the document for identifying exported goods when the customs officials in yours’ and at the destination country examine your package. Having the list gives them a clue on which items they should unwrap in particular instead of searching the entire consignment.

What does the packing list contain?

  • Information to identify the items present in the package or consignment
  • Gross and net weight of the products in the package
  • Package dimension information as per the metric and U.S. imperial measurements
  • Any information about any special marking on the packaging
  • Safe delivery instructions

4. Origin certificates

International shipping requires suppliers to provide customs with a certificate of origin to understand the country of origin of the goods present in the consignment. A certificate of origin is usually signed by personnel from semi-official organizations like the Chamber of Commerce or the Consulate officials of the country of origin.

Though your commercial invoice might have information on the country of origin, the certificate of origin is essential for international shipping.

When you try to raise a Certificate of Origin for international shipping, you will need to pay a fee to the Chamber of Commerce for a signature and stamp on the certificate. These charges are waived off when the person responsible for shipping is a member of the chamber. Apart from the payable fees, the trader needs to submit a duly filled form to the Chamber of Commerce. You will get the certificate of origin signed only when the form gets approved by the Chamber.

Delivering the Certificate of Origin to the Chamber’s office through an expensive courier service provider can be time-consuming. To avoid the delay, traders nowadays prefer to hand-deliver the certificate to their Chamber of Commerce office. Some even rely on eCO or electronic copies of the Certificate of Origin for their consignment. Using an eCO is time-saving and permits you to provide the certificate to the importer in a faster electronic method. An eCO provides added reliability to the International Chamber of Commerce.

Certificates for specific countries:

Certificate of Origin has different specifications from different countries. So far, the United States of America has signed gratis trade agreements with 20 different countries. These agreements allow the import of goods to these countries for zero or reduced duty fees. The CAFTA-DR or United States-Central America-Dominican Republic Free Trade Agreement, covers terms with multiple countries.

The United States of America-Mexico-Canada Agreement (USMCA) was rolled out on 1st July 2020 to replace the prevailing trade agreement, NAFTA, between these countries. The new agreement imposed new trade rules for the USA traders.

5. The Letter of Instruction from the shipper

The freight forwarder is one of the major people you need to work with during an export business. This person takes care of the goods’ transportation in a secured career and also ensures that all the documents required for international shipping are present with the package.

The Incoterm you finalize with your trader will determine your sales term. Based on the agreed terms, either you hire your freight forwarder, or the buyer hires the freight forwarder when the transaction happens for routed export business. Irrespective of who is hiring your freight forwarder, you need to provide the forwarder with a Shipper’s Letter of Instruction or SLI. This letter contains detailed information about the product, shipment, delivery, payment, etc., that will be required for successful export.

An SLI can be described as a cover letter or memo for the paperwork required during the export business. Whether the SLI will include a restricted Power of Attorney for the freight forwarder depends on who he works for. A power of attorney gives him or her the authority of handling the shipment on your behalf.

AES concerns with SLI paperwork:

Based on the freight forwarder hiring authority, your SLI grants permission to electronically filing the export information through AES or Automated Export System to the forwarder. As per customs norms, you must submit SLI via AES for export goods that have a value above $2,500 for each item. Hence, filing through AES is one of the biggest concerns for exporters.

When the buyer hires your freight forwarder, it becomes the forwarder’s duty to file through AES. The forwarder can still do the filing on your behalf you hire him or her directly.

Even if you don’t file through AES directly, you remain legally obliged to furnish certain data to the forwarder for the filing. An SLI usually suffices for this purpose. However, recommend the exporters to do the AES filing themselves, even for routed export business.

The filing process through AES is simple. If you do it all by yourself, you get better control over the export process. It’s time you understand the step-by-step filing process and take the responsibility of export shipment yourself. Regardless of who files through AES, you will need an SLI as a part of your documentation for international shipping.

6. The Bill of Lading

The Bill of Lading is yet another important document required for international shipping. Before you prepare one, understand that there are three types of lading bills available.

I) Inland Bill of Lading:

The first document of transportation you need for international shipping is the Inland Bill of Lading. You can prepare the bill yourself or let the inland carrier company do it. It is a paper of agreement between the shipper and the exporter of the goods where the delivery destination is mentioned. It can also serve as a receipt of acceptance that the transporter picked up the goods.

This Bill of Lading is not assigned to the buyer in the international trade market. It gets consigned to the transporter responsible for the international goods movement. If your carrier doesn’t get the bill directly, the warehouse or the freight forwarder, a third party involved in consigning the goods to the transporter, gets the bill.

II) The Ocean Bill of Lading:

Does your international shipping involve a marine vessel for transportation? You will require the Ocean Bill of Lading then. This bill works both as the transportation contract and cargo document. There are two variations of Ocean Bills available-

a. Straight Bill of Lading:

This bill is a non-negotiable bill assigned to a certain consignee. The consignee can get possession of the export goods by presenting a signed copy of the Lading Bill to the transporter.

b. Negotiable Bill of Lading:

The Negotiable Bill of Lading is prepared in “to order of shipper” or ” to order” format/ The shipper signs the Bill and sends it to the buyer’s bank. The Bank retains the original Bill of Lading until they receive a Letter of Credit from the buyer.

III) Air Waybill:

When you ship off your export goods in a plane, you need an air waybill. It is not a negotiable Bill of Lading. It is a simple contract of transportation between the carrier and the shipper.

7. Form for Dangerous Goods Declaration

Does your consignment contain any item that can be considered dangerous by either the International Maritime Organization (IMO) or the International Air Transport Association (IATA)? If yes, you should have an appropriate declaration form for dangerous goods along with your shipment. Shipping these goods is tricky. If you have a plan to ship such items, you need to start by training the responsible staff with proper packaging, documentation, and labeling of the goods before they get shipped.

IATA requires you to fill up a Shipper’s Declaration Form for Dangerous Goods before you opt for air cargo. Ocean shipments have different forms. One needs to fill these forms thoroughly before submitting them. Ensure that the person responsible for form fill up is well trained and versed with dangerous goods export.

8. Bank Draft

The bank draft is the last and probably the most important part of the documentation in international trading. Once you have the bank draft, it’s the sign to transfer your control over the export goods to your buyer. The buyer gets the authority over the exported items in exchange for the funds the seller receives.

A bank draft is otherwise known as the documentary collection in the trade industry. A seller provides several documents and a cover letter along with the bank draft during the transaction. The transaction process is very simple.

  • The seller’s bank sends a bank draft with different documents to the buyer’s bank in the buyer’s country, either directly or via the freight forwarder.
  • Upon receiving the draft, the buyer’s bank will authorize payment against the exported goods.
  • The buyer’s bank then releases a transfer document to the buyer and makes a money transfer to the seller’s bank.

The draft you prepare can include a letter for transmission with details of the required transaction, additional document inclusion, and instructions given for payment.

Final thoughts on the documents required for international shipping

People involved in export-import trading need to be well versed with the documentation required for international shipping. The above-mentioned eight are the most important documents that every trader needs to prepare.

Without these eight, international shipping can turn out to be a hassle. In fact, customs will not process the shipment if your consignment doesn’t have this document clearance.

However, there are more than a dozen other documents that vary with the nature of your business and the goods you ship. Ensure that you have the fundamental documentation right, the rest will vary with your trade.