Cross-Border Transactions: A Shipper's Complete Guide

by Vector | Sep 4, 2020 12:00:00 AM

Cross-Border Transactions: A Shipper's Complete Guide

September 4, 2020
Cross-Border Transactions: A Shipper's Complete Guide

Cross-border shipping is complicated. You need to think about customs and international regulations. You have to manage more documents than you do for domestic shipment. And any small issue with these documents can cause problems that ripple through the delivery supply chain. However, the growing international commerce market has made cross-border shipping very lucrative.

Thus, if you can manage the challenges smoothly, there are massive opportunities for you. This article will look into some of the key issues, list the main documents for cross-border shipping, and provide tips on how to improve the overall experience.

Cross-Border Shipping Issues

What types of cross-border shipping issues do you need to think about? There are three that should matter most to you.

Client Requirements

Choosing the right shipping partner is difficult because there are so many options on the market. Which factors would your clients consider? How do they know which shipping process is better?

When a brand decides to start cross-border delivery, having the right shipping partner is extremely important to them. Their supply chain and customer satisfaction heavily depend on you doing a good job. Thus, it's important to understand your clients' needs and how they choose their shipping partners.

Most firms look for a few things.

  • The cost—including any hidden charges—is of course important to them.
  • They can also work with multiple partners to reduce dependency on a single carrier, or they can outsource everything to a single firm to negotiate better rates.
  • A high-quality parcel tracking facility and responsive customer support are important in case of any delivery issues. Digitizing all shipping documents for transparency is thus a great competitive advantage.

Keep these points in mind as you optimize your offer.

Understanding Incoterms

International Commercial Terms (Incoterms) help to clearly define the responsibilities associated with the transportation and delivery of goods.

  • At what point do the ownership and responsibility shift?
  • Which party is responsible for clearing customs?
  • When does the risk of the shipment pass from the seller to the buyer?

Incoterms helps to make sure all parties are on the same page on these  issues.

You must use these Incoterms while filling out the necessary documents for the shipping. Any small misunderstanding with these shipping terms between the parties can lead to disputes over delivery, insurance, and customs clearance. Thus, every cross-border shipper must have a great command over this "language."

Clearing Customs

The customs department of every country or economic region places strict regulations on what can and can't be sent or shipped into their country. As a shipper, it is critical to thoroughly understand all the customs compliance of each country you ship to. You need to stay updated with the latest security regulations as well.

Your delivery will have significant delays if your shipment can't clear the customs. This leads to delayed payment or even no payment, unsatisfied customers, and additional operations cost to get clearances. Thus, you must be extra careful that your shipments follow the customs regulations. Any surprises at the borders can cause havoc to your operations.

The custom officials can hold your shipment for a variety of reasons. For instance, you may be carrying prohibited goods in your container that the destination country doesn't permit. More commonly, you may have missing or incorrect documents. Thus, you must ensure that your delivery staff has complete and proper documentation. One way to reduce the chances of missing or incorrect documents is to use a digital process.

What documents do you need? Let's discuss that next.

Key Documents Required for Cross-Border Shipping

As mentioned before, it's imperative for your business to manage all key shipping and delivery documents. Not only will that help during customs, but it will also enable you to streamline the delivery and payment. Here are some of the key documents that you must arrange for cross-border shipping:

Bill of Lading

The bill of lading (BOL) is one of the most important cross-border shipping documents, whether the shipment is by land, sea, or air. It verifies that the carrier successfully picked up the shipment and will transport it to the agreed destination.

The BOL specifies the ownership of different parties of the transportation deal at each stage and acts as a contract between them. Thus, the document protects all three parties and can be used in case of a dispute. It also mentions the nature, weight, and number or volume of each of the goods loaded. This information is the backbone of keeping track of any freight you choose to ship or haul. Recently, the electronic Bill of Lading has become popular.

Packing List

The packing list mentions the items in the shipment. It also includes the item's details, such as the weight and dimensions of the package. This information on the packing list may be used to create the bills of lading for the shipment. Customs officials may also refer to it to identify certain packed items they want to examine.

Transport Insurance Certificate

Cross-border shipments face many risks. Thus, it makes sense to have insurance against unwanted situations, such as damage, missing shipments, deterioration, and so on. The transport insurance certificate is an important part of cross-border shipping documentation. It clearly mentions the goods covered, defines the scope of the risks covered, and specifies the terms and conditions of the business deal.

Proof of Delivery

You need a POD whether the shipment is cross-border or not. The POD acts as a legal receipt that the consignee has received the shipment. A signed POD confirms that the delivery was correct and that the shipment was in the right quantity and damage-free. There are two primary methods of proof of delivery: paper and electronic. However, the paper method is slow and error-prone. Thus, more shippers are now switching to electronic proof of delivery.

Certificates of Origin

Some international customs regulations require a certificate of origin for your shipments. This document clearly certifies that the items in the shipment were wholly obtained, produced, manufactured, or processed in a particular country. This helps officials easily determine in which country the goods originated. It also serves as a declaration that the shipment satisfies customs or trade requirements. Almost every country in the world requires CO for customs clearance procedures. Consider using an electronic certificate of origin (eCO) for your shipments, as they are often quicker to turn around.

Commercial Invoice for Shipping

The commercial invoice is one of the most important documents to clear customs during international trade. The document helps the customs officials to quickly calculate and assess the duties and import taxes due on your shipment. It contains most of the details about the goods and all the parties involved. Failure to fill out a commercial invoice accurately may result in lengthy holdups and delays.

These are some of the main documents for cross-border shipping and clearing customs. Other documents include country-specific certificates, dangerous goods forms, a shipper’s letter of instruction (SLI), a pro forma invoice, and so on. Whether you need any of these will depend on your particular case.

Digitize Documents for an Easier Cross-Border Shipping Experience

Traditionally, shipping firms used paper-based forms of all the above documents. Multiple parties manually handled the paper documents throughout the delivery chain. This made the process excruciatingly slow. It could take weeks after delivery to bill the client. The paper documents were also easy to misplace. One missing document could hold your goods at customs, cause delays, increase operational costs, and severely disrupt your entire delivery. Moreover, the paper documents made life harder for all parties involved. They made collaboration and sharing of shipping information much more difficult.

Therefore, digitizing the documents and the collection and management process improves the cross-border shipping experience. All parties know the status of the shipment almost in real time. If there are problems, the back office can quickly send correct documents. The chances of missing documents are also much lower. The shipper can also get paid faster. Thus, a simple switch to digital through tools such as Vector's custom workflow will help save operational costs, improve customer satisfaction, increase efficiency, and reduce delays at customs.

This post was written by Aditya Khanduri. Aditya currently handles product and growth at Cryptio.co, and he's also built a couple of B2B products. He's proficient in data analysis with Python and has worked with multiple startups in the blockchain and artificial intelligence sector.

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