International Shipping 101: Small Parcel Reach Around the World Charlene Savage & Lauren Greco September 20, 2010

2 Mar 18, 2010 Reach Around the World; Agenda  Why Export?  Who’s Looking?  Service Options  International Documentation – Commercial Invoice – Electronic Export Information  Duties & Taxes  Export Resources September 20, 2010

3 Mar 18, 2010 Why Should I Consider Export Shipping?  If you’re only selling in the U.S., you’re only reaching a small share of your potential customers.  It is estimated that 95 % of the world’s consumers live outside of the U.S. Size is no longer a requirement for international success in global markets.  Small businesses: – Account for 30% of all U.S. export shipments. – Are the fastest-growing segment of U.S. exporting companies. – With 20 or fewer employees make up 72% of all U.S. exporters September 20, 2010

4 Mar 18, 2010 How will Exporting Help my Business?  Some of the benefits for your business include: – Increased sales and profits. If your business is succeeding in the U.S., expanding globally will likely improve overall profitability and increase productivity. – Short-term security. Your business will be less affected by fluctuations in the U.S. economy and marketplace. – Long-term security. The U.S. is a large, mature market with intense competition from domestic and foreign competitors, so international business trade may become a necessity if you want to keep up in an increasingly global marketplace. – Increased innovation. Extending your customer base internationally can help you finance new product development. – Economies of scale. Exporting is an excellent way to expand your business with products that are more widely accepted around the world. September 20, 2010

5 Mar 18, 2010 Exports: Who’s Looking?  Every country has processes, procedures, special programs, and/or agreements for transporting commodities/goods across its borders. These are enforced by a regulatory authority or agency, most commonly known as ‘Customs.’  Overall Missions of Customs – Assess and collect duties on imported commodities – Prevent fraud and smugglingfraud – Control carriers, people, and articles entering or leaving a country – Protect local industry against unfair competition September 20, 2010

6 Mar 18, 2010 Exports: Who’s Looking?  Accurate documentation is one of the most important elements in international shipping. Unlike shipping in the U.S., now you must comply with the laws of two countries, not just one.  Properly completed documentation will help your shipment reach its international destination on time and reduce the risk of it being delayed at customs. September 20, 2010

7 Mar 18, 2010  Importance of Properly Classifying your Products – Whether you're importing, exporting or both, you need to properly classify your products under the Harmonized Tariff System (HTS) codes to meet the U.S. and foreign governments' customs requirements. – All of the import and export codes used by the U.S. are based on the HTS. The HTS assigns six-digit codes for general categories. The U.S. defines products using 10-digit HTS codes. Export codes (which the U.S. calls Schedule B) are administered by the U.S. Census Bureau. Import codes are administered by the U.S. International Trade CommissionU.S. Census BureauU.S. International Trade Commission Exports: Who’s Looking? September 20, 2010

8 Mar 18, 2010  Same Day Delivery: Between major cities worldwide, 24/7 depending on flight availability.  Within 1-3 Business Days: To/From the U.S. to/from more than 220 countries and territories.  Within 5 business Days: To/From the U.S. to/from more than 215 countries and territories.  Catalogs / Brochures / International Mail: Delivery in 4–7 or 7–11 international business days to the destination country postal service.  Ground Delivery to Canada: Delivery in 2–7 business days. Small Parcel: International Service Options September 20, 2010

9 Mar 18, 2010 Understanding International Documentation September 20, 2010

10 Mar 18, 2010 Your Destination will Determine Required Documentation  Your shipment’s destination country will help you determine the proper documentation, special clearance requirements, what duties and taxes will need to be paid, and much more.  Contents of the shipment will affect documentation required: – Determine if the country you’re shipping to considers your product a document or a commodity. – Provide an accurate and detailed description of your product. One of the most common reasons for customs delays is an inaccurate or vague shipment description. September 20, 2010

11 Mar 18, 2010 Commercial Invoice (CI) - Definition  The Commercial Invoice (CI) is the most common customs document. A CI is required for most non-document international shipments and for all International Ground shipments. Use business or personal stationery for your Commercial Invoice.  A 'document' shipment includes paper of little or no commercial value, such as business correspondence.  A 'non-document' shipment is everything else, such as printed materials of value (e.g., books and large quantities of magazines), clothing, parts, flowers, etc. September 20, 2010

12 Mar 18, 2010 Commercial Invoice (CI) - Purpose  Serves as the official transaction record between the exporter and the importer to completely identify shipment contents.  Provides the basis for the completion of other shipping and entry documents. If there are inconsistencies between the CI and the air waybill, the shipment may be held in customs. September 20, 2010

13 Mar 18, 2010 Commercial Invoice (CI) - Format  Contact Information of the Shipper or Exporter: – Contact Name – Company Name – Full Address & Telephone – Business or Individual Tax ID Number  Country of Manufacture: – The country in which each commodity was manufactured or produced  Contact Information of the Consignee or Importer: – Contact Name – Company Name – Full Address & Telephone September 20, 2010

14 Mar 18, 2010 Commercial Invoice (CI) – Format Continued  Description of each commodity. It must include: – Full description of item – Harmonized code – Part and/or serial numbers – Reason for export/intended use of item  Number of packages  Type of packaging: box, crate, etc.  Quantity of item September 20, 2010

15 Mar 18, 2010 Commercial Invoice (CI) - Description  A good description answers the following questions:  What is it?  How many are there?  What is it made from?  What is the intended use?  Poor description: Parts for machine  Good Description: Steel parts for woodworking machine used to make furniture. September 20, 2010

16 Mar 18, 2010 Commercial Invoice International Air Shipments: one signed original and two copies International Ground Shipments: one signed original and four copies September 20, 2010

17 Mar 18, 2010 Electronic Export Information (EEI) - Definition  Known as the SED; the equivalent electronic version, the Electronic Export Information (EEI) serves the dual purpose of providing export statistics and export control.  The EEI reports all pertinent export data of an international shipment transaction.  All EEI filing records must be retained for five years from date of export as required by law September 20, 2010

18 Mar 18, 2010 Electronic Export Information (EEI) - Definition  The EEI must be filed with shipments from the U.S., to foreign destinations; if any of the following applies: – Shipment of merchandise under the same Schedule B commodity number is valued at more than US$2,500 and is sent from the same exporter to the same recipient on the same day. – The shipment contains merchandise, regardless of value, that requires an export license or permit. – The merchandise is subject to the International Traffic in Arms Regulations (ITAR), regardless of value. September 20, 2010

19 Mar 18, 2010 Electronic Export Information (EEI) - Definition  Helpful Definitions for Completing the EEI : – EIN is Employer Identification Number: Tax ID if the shipper is a corporation; or Social Security number if the shipper is an individual. – Parties to Transaction: Indicate whether sender and recipient are subsidiaries or divisions of the same company or are unrelated. – Transportation Reference No. Field: Indicate your Carriers International Air Waybill number. – ECCN Field: An Export Control Classification Number (ECCN) is required for any commodity shipped under an export license. September 20, 2010

20 Mar 18, 2010 Electronic Export Information (EEI) - Definition – Ultimate Consignee Field: "Ultimate consignee" is the end user of merchandise being shipped. Complete this section only if the ultimate consignee differs from the consignee indicated on the International Air Waybill. – Country of Ultimate Destination Field: the country where the shipment ultimately will be used. – D/F Field: Indicate domestic (made or manufactured in the U.S.) commodity as "D" and foreign (made or manufactured outside the U.S.) commodity as "F.“ – Schedule B Number: Commodity Classification Number – Value field: The Value - Selling price (or cost if not sold) September 20, 2010

21 Mar 18, 2010 EEI - Internal Transaction Number (ITN)  An Internal Transaction Number (ITN) is the number issued by the U.S. government as approval for the export of a specific shipment. – The ITN must be noted on the Bill of Lading, air waybill, or automated shipping label and all other international documents when the customer tenders the shipment to their designated carrier. September 20, 2010

22 Mar 18, 2010 Understanding Duties & Taxes September 20, 2010

23 Mar 18, 2010 Duties and Taxes - Definition  Every item entering a foreign country is subject to customs inspection and the assessment of duties and taxes in accordance with that country's laws. In general, customs duties and taxes are assessed if the merchandise is valued above the threshold set by the country's laws.  Why is it Important Understand Duties & Taxes? – Depending on the content of your shipment and the destination country, customs charges may affect the price your recipient is willing to pay for your product. Being able to calculate and communicate the “landed cost” upfront can often save both you and your recipient valuable time and money. September 20, 2010

24 Mar 18, 2010 Duties and Taxes – Definition  All shipments crossing international borders are subject to the assessment of duties and taxes imposed by the importing country’s government. – Duties and taxes are imposed to generate revenue, protect local industries against foreign competition, or both. The duties and taxes normally must be paid before the goods are released from customs. – A shipment’s duty and tax amount are usually based on the product’s market value and Harmonized System (HS) code. The duty and tax amount may also be affected by trade agreements, country of manufacture and the intended use of the product.  Customs officials assess duties and taxes based on the information provided on the air waybill, the Commercial Invoice and other relevant documents. September 20, 2010

25 Mar 18, 2010 Duties & Taxes – Terms of Sale  Responsible Party. Duties and taxes on your international shipment will automatically be billed to the recipient, unless you, as the shipper, request your transportation provider to bill them to you or a third party.  Delivered Duty Unpaid (DDU) The consignee is responsible for the duties and taxes.  Delivered Duty Paid (DDP) The shipper is responsible for the duties and taxes. September 20, 2010

26 Mar 18, 2010 Value Added Tax (VAT) Definition  A value added tax (VAT) is assessed on international goods and services that are bought and sold for use or consumption.  Who Imposes a VAT? – The U.S. does not impose a VAT. It is imposed by more than 135 countries or regions, including Europe and Mexico. In Australia, Canada, New Zealand, and Singapore this tax is known as a 'goods and services tax' (GST). September 20, 2010

27 Mar 18, 2010 Determining Duties and Taxes  The Harmonized Product Description and Coding System (HS) is used to classify products for customs purposes. The HS assigns codes that represent general categories of goods. – For example, is the HS code for ceramic sinks, washbasins, washbasin pedestals, baths, and similar sanitary fixtures made of porcelain or china.  All countries adhering to the HS use the same six-digit code for each product. Each country, however, can assign its own additional four numbers, making the entire code 10 digits. U.S. exporters can use the Schedule B code to approximate. In most cases, the Schedule B code will be the same first six digits as the importing country’s classification code.. September 20, 2010

28 Mar 18, 2010 Calculating Duties & Taxes  CIF is a pricing term that means the cost of the goods, insurance and freight shipping charges. The total duty and tax charge is calculated by adding all costs together. For example:  Value of Goods: $932  Insurance Charge: $16  Freight Charge: $52  Total CIF Value $1,000  Duty Rate (7%): x.07  Duty Charge: $70.00  Total CIF & Duty $1,070  VAT (18%): x.18  VAT Charge $  Total Landed Price: $1, September 20, 2010

29 Mar 18, 2010 Declared Value for Customs & Duties  Customs officials use a shipment’s declared value (the value the shipper declares on the goods being shipped) and the description of the goods to determine duties and taxes. – Inaccurate declared value for customs is one of the most prevalent reasons for duty and tax disputes.  A shipment’s declared value is based upon the selling price or fair-market value of the contents of the shipment, even if the shipment is not sold. – This value is identified on the International Air Waybill and the “Total Value for Customs,” and must agree with the value shown on the Commercial Invoice. September 20, 2010

30 Mar 18, 2010 Additional Export Resources  Use FedEx Global Trade Manager at to: – Estimate Duties & Taxes / Find International Documents – Search Country Profiles for Prohibited Items – Obtain Shipping Advisories for Important Regulatory Information – Search “Denied Party Screening” for individuals/companies denied international trade  Additional FedEx International Resources Include: – FedEx International Hotline: (800) – FedEx Trade Networks Regulatory Group: (800)  Additional Information regarding Documentation / EEI requirements: – U.S. Census Bureau Website: – AES Website: – To determine whether an export license number or a license exception symbol should be used, call the U.S. Department of Commerce, , or or go to the Bureau of Industry and Security Website at – Schedule B or Harmonized Code Number and Units: (Commodity Classification Number in AES) field call all the U.S. Census Bureau at , option 2 or use the U.S. Census Bureau Web Site: September 20, 2010