Step #7 - Shippers and Shipping: Delivering the Goods
"Choosing the right shipping method is vital to your export success."
7.1 International trade regulations
You'll have to familiarize yourself with your target market's import regulations, product standards and licensing requirements. If you're a service exporter, you may have to acquire professional or other accreditation from the country where you'll be operating.
Trade and international security
The World Customs Organization (WCO) has developed an initiative to help protect the international supply chain against terrorist exploitation. Called the SAFE Framework, it aims to establish and integrate standards for supply chain security and management, strengthen cooperation among customs administrations and promote the seamless movement of goods through well-secured international supply chains.
7.2 Export declarations
Unless you're exporting to the United States, reporting your exports is mandatory under Canadian regulations. For details on how to do this, go to the Canada Border Services (CBSA) website and download or read Guide BSF5081, Exporting Goods from Canada – A Handy Guide for Exporters.
The B13A Export Declaration, along with the appropriate permits and licences, must also be prepared by exporters prior to exporting to all non-U.S. destinations.
You can also submit the B13A Export Declaration electronically using the Canadian Automated Export Declaration (CAED) software. Visit the Statistics Canada website to find out how.
7.3 Export permits
You'll need an export permit if:
- The destination country is on the Area Control List (where any export, except humanitarian items, require an export permit)
- The goods are on the Export Control List (goods and technologies that require export permits pursuant to the Export and Import Permits Act)
For detailed information about export and import controls and permits, refer to the Trade Controls & Technical Barriers Bureau (TCTBB) website.
A PDF publication called A Guide to Canada's Export Controls is available.
Companies in the agrifood sector can learn about export regulations and certifications for food products by visiting the Canadian Food Inspection Agency website.
Avoid spreading yourself thin by entering too many different markets too quickly.
7.4 Delivering products
There are four ways of getting your product to your customer's doorstep. Choosing the right shipping method, or combination of methods, is vital to export success—you want the product to get there on time and at the lowest cost.
Agriculture and Agri-food Canada's Agri-food Trade Service website has a useful list of shipping resources that are applicable to most sectors.
Truck – trucking is popular for shipments within North America, but service declines once you go beyond the major industrialized countries.
Rail – rail is widely used when shipping to the United States, or to and from seaports.
Air – shipping by air is more expensive than surface or sea transport, but the higher costs may be offset by faster delivery, lower insurance, cheaper warehousing, exotic markets and better inventory control.
Ocean – shipping large items, bulk commodities and goods to offshore markets that do not require fast delivery is more economical by sea.
To provide a common terminology for international shipping and minimize misunderstandings, the International Chamber of Commerce (ICC) has developed a set of terms known as Incoterms.
7.5 Freight forwarders and brokers
You'll need to deal with a lot of documents when delivering products to foreign countries.
However, you don't normally do it all yourself—you use freight forwarders and customs brokers
Freight forwarders – a freight forwarder will help you improve your delivery times and customer service. These agencies will negotiate rates for you with shipping lines, airlines, trucking companies, customs brokers and insurance firms. They can handle all your logistical requirements, or just negotiate your shipping rate; it's up to you.
7.6 Packing your goods
Assume your products will have a bumpy ride, particularly if you're shipping overseas.
Pack them to survive rough-and-ready cargo handlers and poor roads.
During transit, handling and storage, your goods may have to endure bad weather and extreme temperatures. If they need special temperature controls or other protective measures, be sure they get them.
The type of shipping may determine the kind of packing you should use. For example, if the goods are carried by ship, you need to know whether they will be placed above or below deck.
Proper packing can reduce the risk of theft during transit.
7.7 Labels and marks
Labelling regulations vary widely from nation to nation, so verify the required labels before you ship.
Your product may not clear customs if labels don't conform to local requirements such as product weight or electrical standards.
Marking distinguishes your goods from those of other shippers. Marks shown on the shipping container must agree with those on the bill of lading or other shipping documents, and may include some or all of the following:
- Buyer's name or some other form of agreed identification
- Point/port of entry into the importing country
- Gross and net weight of the product in kilograms and pounds
- Identification of the country of origin, e.g. "Made in Canada"
- Number of packages
- Appropriate warnings or cautionary markings
Provide a packing list identifying and itemizing the contents of each container. Each container must also contain a packing list itemizing its contents.
7.8 Transportation insurance
International carriers assume only limited liability and make the seller responsible for the goods up to the point of delivery to the foreign buyer. For this reason, you absolutely must have international transportation insurance.
Marine transportation insurance protects both ocean and air-bound cargo. It also covers connecting land transportation. There are three main types of marine transportation insurance:
Free of Particular Average (FPA) is the narrowest type of coverage. Total losses are covered, as well as partial losses at sea if the vessel sinks, burns or is stranded.
With Average (WA) offers greater protection from partial losses at sea.
All Risk is the most comprehensive, protecting against all physical loss or damage from external causes. Once the documents transferring title are delivered to the foreign buyer, you are no longer liable for the goods.
7.9 Export documentation
Export documentation identifies the goods and the terms of sale. It also provides title to the goods, evidence of insurance coverage and certifies a certain quality or standard. Several documents are required for overseas shipping and fall into two categories.
7.9.1 Shipping documents
Shipping documents are prepared by you or your freight forwarder. They allow the shipment to pass through customs, to be loaded onto a carrier and transported to the destination. Key shipping documents include:
- A commercial invoice
- A special packing or marking list
- A certificate of origin
- A certificate of insurance
- A bill of lading
A bill of lading is used for land and ocean freight, and an air waybill is used for air freight. Note that the ocean bill of lading can be a negotiable instrument that passes title to the goods. Other types of bills pass title to the consignee as soon as the goods are delivered.
Goods shipped by sea are typically insured for 110% of their value, to compensate for the extra costs involved in replacing lost goods.
7.9.2 Collection documents
The most important collection document is probably the commercial invoice, which describes the goods in detail and lists the amount owing by the foreign buyer. This form is also used for customs records and must include:
- the date of issue
- the names and addresses of the buyer and seller
- the contract or invoice number
- a description of the goods and the unit price — the total weight and number of packages
- shipping marks and numbers
- the terms of delivery and payment
Other collection documents include:
- certificates of origin
- certificates of inspection, used to ensure that goods are free from defect
- import and export licences as required (for example, a NAFTA certificate of origin)
7.10 Duty deferral and duty relief
If you're importing goods in order to re-export them, you might be able to use the Duty Deferral Program administered by the Canada Border Services Agency (CBSA). The program relieves or defers payment duties if the goods are in transit through Canada and will not be sold here.
There are three components to the Duty Deferral Program:
Duty Relief Program – Enables eligible companies to import goods without having to pay customs duties, as long as they export the goods after importing them.
For more information, refer to Memorandum D7-4-1, "Duty Deferral Program".
Drawback Program – With the Drawback Program, duty is refunded on previously imported goods when these goods have been exported.
For more information, refer to Memorandum D7-4-2, "Duty Drawback Program".
Bonded Warehouse Program – A bonded warehouse is a facility operated by the private sector and regulated by the CBSA, in which you may store goods without having to pay duties and taxes. This could be beneficial if you're planning on importing goods for the purpose of exporting them.
For more information, refer to Memorandum D7-4-4, "Customs Bonded Warehouses".
7.11 Delivering services: How it's different
The challenges of delivering services to a foreign market are just as complex as those of delivering products. The challenges are different, however, and often depend on factors in your target market such as:
- Extent and reliability of telecommunications/Internet links
- Existence of a reliable IT infrastructure
- Frequency and convenience of air links between Canada and the market
- Technological sophistication, receptivity and flexibility of customers
- Potential support through official channels, government departments and international development agencies
- Ability to satisfy legal regulations governing work permits or professional certification
- Potential to enter into a local partnership
You'll most likely be delivering your services by one, or a combination of, the following methods:
Provider visits client – this is the most common export activity; meeting the client repeatedly, often at the site.
Client visits provider – in industries such as tourism, thousands of Canadians earn income by meeting the needs of foreign visitors.
Establishment in the market – large legal and accounting firms, as well as major banks, are most likely to use this method to establish their presence abroad.
Electronic delivery – e-business is increasingly more important for conducting global business.