No one loves paperwork. But when it comes to global commerce, international shipping documents are essential to getting goods delivered successfully and making money.
If you’re arranging global shipments of imports or exports, don’t think of paperwork as a necessary evil; think of it as PROTECTION. Incomplete or inaccurate shipping documents could trigger a range of negative consequences. These could include delayed shipments, inflated duty rates, or disputes about damage and liability. A little attention to detail at the front end can avoid these costly headaches.
One thing is for sure: Your cargo can’t move unless the right information moves with it. To help you master all paperwork requirements, here’s information on five of the most important international shipping documents, the role of each in the shipping process, and why each is important.
1. Shipper’s Letter of Instruction
The Shippers Letter of Instruction (SLI) is what the name implies. It’s your detailed export shipment instructions summary for your freight forwarder to follow. It’s sort of a cover memo for your other paperwork. The SLI is not actually a required document by law. However, it could be the most important global shipping document you prepare.
When you start the shipping process, you should list all relevant details such as commodity, weight, value, and special handling requirements. The SLI provides written proof of who needs to do what in the transaction.
If you don’t have your own SLI template, most forwarders, like Dimerco, can provide one. Here is an SLI template you can use.
Why is the Shipper’s Letter of Instruction important?
You contract with a freight forwarder to expertly handle the many details of the shipping process. But, due to cargo ownership and legalities, no forwarder can just step in and make decisions on your behalf.
The Shipper’s Letter of Instruction provides a limited Power of Attorney to your forwarder to serve as your agent for actions involving carriers, ports, cargo insurance, customs and other matters.
The SLI documents your request in detail so that, if the instructions are not followed, clear evidence exists. Details matter in SLIs. For instance, if you want to ship from Hong Kong to Chicago via LA, but don’t specify the exact routing, the shipment could be routed via the East Coast, taking more time and money. SLIs spell out the details to minimize the potential for errors.
2. Bill of Lading
The Bill of Lading (BOL) is a legally binding shipping document which formalizes the agreement between the shipper and the transportation provider. The Shipper’s Letter of Instruction is created by the shipper for the carrier, whereas the BOL is issued by the carrier to the shipper.
Different types of BOLs exist – a trucker’s BOL (Freight bill) for over-the-road shipments, an ocean BOL or OBL for sea freight, and an Air Waybill, or AWB, for air freight shipments. An OBL can be either a negotiable order bill of lading, straight bill of lading or express bill of lading (Sea Waybill).
The BOL contains a lot of the same information as an SLI. They both include origin, destination, shipping date, shipping instructions with shipper, consignee, commodity, piece count, weight, and measurement details. If information is incorrect in the SLI, the mistake will likely carry over to the BOLs and create problems.
Why is the Bill of Lading important?
In international trade, an original negotiable order ocean bill of lading is an instrument of title and provides ownership of the cargo to the holder of the BOL. All other types of BOLs serve as evidence of receipt for two things: receipt of goods as well as the contract of carriage. The issuance of the BOL is proof that the carrier has received the goods from the shipper or their 3PL in good order and condition.
Consequences of an inaccurate BOL include exposure to claims, unclear liabilities or inability to identify the party at fault. Disputes arise when a BOL indicates that goods are received in good condition, but the consignee says otherwise. For example, a BOL might state “5 pieces.” Actually, it should clearly spell out the details, like “20 cartons on 5 pallets.” It will be hard to get your full freight claim paid or prove you have not received the correct freight if the BOL is incorrect or unclear.
Here’s another example. Let’s say the outside cartons of your cargo have shipping marks that say “ABC Company.” You need to indicate this on the BOL instead of showing, simply, “No Marking.” If you don’t, you will not be able to prove you have received the wrong cargo if a different batch of cartons with no markings gets delivered to you with the same piece count and similar weight and measurements.
BOLs have the terms and conditions on the reverse side of the documents which define the applicable laws, and the rights and obligations of carriers and cargo interests. Although they are in fine print, the courts have honored most of the provisions, such as limitations of carrier’s liability, time to sue limitations or forum selection clauses.
3. Commercial Invoice
In international trade, a Commercial Invoice is used as a customs document by the exporter or importer. It’s the proof of sale between a seller and a buyer. It acts like your freight passport and allows global shipments to clear customs. There is no standard format, but a Commercial Invoice must include:
- Name and address of the buyer and seller
- Detailed description of the goods
- Country where the goods were manufactured
- HS code for the commodity being shipped
- Value of the goods
- Terms of Sale (Incoterm)
You could add additional details if you have them, such as order number, purchase order number or any other customer reference number.
Why is the Commercial Invoice important?
The Commercial Invoice is required for customs clearance to determine the duties and taxes due. Inaccurate information on a Commercial Invoice may lead to underpayment or overpayment of the duties and taxes. An incorrect customs declaration can lead to legal consequences as well as lengthy shipments delays. The Commercial Invoice also identifies the Terms of Sale (the incoterm). These terms determine the rights and obligations of the buyer and the seller regarding assumption of risk and transportation costs during the shipping process.
4. Packing List
Like a Commercial Invoice, a Packing List is a shipping document generated by the seller/exporter and contains similar information. While the Commercial Invoice reflects the financial transaction, the Packing List mentions the count, weight, measurement, and description of the cargo being shipped. It allows parties to verify, all along the supply chain journey, that what was shipped is what was received.
Details on the Packing List will include number of units, dimensions, weight per carton, measurement per carton, and details on shipping marks. Shipping marks are the data on the outside of a shipping box. They help prevent your boxes from being lost or misplaced. For example, your shipping box may show consignee details, product description, item quantity, size and weight. They differentiate your box from the hundreds of thousands of other brown boxes moving every day through the world’s airports, shipping terminals and warehouses.
Why is the Packing List important?
The Packing List is the original source document to check for discrepancies with the commercial invoice, BOL, and actual cargo received.
5. Certificate of Origin
Depending on where your cargo is going, the Certificate of Origin (or Country of Origin Certificate) could be a very important international shipping document. It certifies that goods were manufactured or processed in a particular country. Typically, Certificates of Origin are issued by an official organization, like a country’s Chamber of Commerce.
Based on the cargo destination and the applicable trade agreements in place, the Certificate of Origin will determine what duties are applied to the shipment. For instance, the US has 14 free trade agreements with 20 different countries where US goods get reduced or zero duty rates.
Why is the Certificate of Origin important?
Should you make an incorrect origin declaration or misrepresent the origin country, your shipment may be refused, assessed a penalty fee or become subject to a rigorous compliance program.
Accurate International Shipping Documents Provide Protection for Your Shipments, and for Your Company
These are just some of the compulsory international shipping documents that will apply to your shipment. The right freight forwarder can advise you on other forms you might need.
In a busy global shipping department, it’s tempting to skip or rush through paperwork details.
Don’t do it.
Ultimately, these shipping documents are designed to protect you from shipment delays, compliance violations and liability. Align with a global freight forwarder that understands what documentation is required. They will work patiently with you to ensure all the necessary details are handled.
For advice on what international shipping documents might apply to your shipments, contact Dimerco to speak to one of our global shipping experts.