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Global Trade Compliance & Sanctions

Everything Businesses Should Know About Shipping to the US

JAYRAJ SHETTY

Nov 17, 2020 : 11 Mins Read Read

In 2019, the US was the world’s leading importer, accounting for over 13 percent of imports globally. The chief exporter to the U.S. last year was China, closely followed by Mexico, Canada, and Japan. As elsewhere in the world, a growing number of buyers in the United States are purchasing from suppliers outside their home country. In 2018, 47 percent of shoppers in the US bought from merchants overseas. If you are trying to sell overseas, the United States is a big market to expand your business.

Here’s a lowdown on everything you need to know if you are a first-time exporter to the U.S.

Understanding the Basics

Before you initiate your shipping process, here are a few terms you should know:

Shipper: An individual or organization that deals with the shipment at the supplier end
Consignee: An individual or organization that deals with the shipment at the receiving end
Freight: It is the general term for goods transported from one place to another by any means
Freight forwarder: The logistics provider
Shipping line/Carrier: The organization that carries product-related cargo
Port of Entry: The initial port of entry in a country where a cargo vessel arrives
Customs and Border Protection(CBP): An agency within the US Department of Homeland Security that enforces export and import regulations and checks the flow of goods in and out of the country
Customs: A government agency that is responsible for enforcing trade regulations and collecting import duties. The assessment of a shipment to ensure compliance with the country’s import regulations is called customs clearance
In bond: Cargo that has not cleared customs
Arrival notice: A notice that the carrier provides when the cargo is delivered to the consignee
Balloon freight: Cargo that is light but high in volume
Bulk cargo: Cargo that is shipped loose, not in packages or containers.
Consolidation: When cargo from several shippers is combined within a single container
Landed cost: The final cost of the goods, including import duties and shipment costs
Liquidated damages: The payment made by the seller to the buyer if the quality standards or deadline stipulated in the sales contract are not met

The Shipping Cycle

There are seven stages in the shipping cycle. Of these, two involve customs clearance at the origin and destination respectively, while five involve transportation of goods.

Export haulage

The first stage in the shipping cycle, it involves the transfer of goods from the shipper to the freight forwarder’s premises.

Export customs clearance

This is the first of two documentation stages, wherein a declaration of the cargo being shipped and supporting documents are submitted to a customs house broker for further submission to Customs.

Origin handling

Here, the cargo is received by the freight forwarder at a warehouse, where it is unloaded, counted, and inspected.

Ocean freight

The cargo is passed by the freight forwarder to the shipping line, which executes the ocean freight.

Import customs clearance

This is the second and final documentation stage, wherein the documents detailing the cargo are submitted to the freight forwarder or a licensed customs house broker at the destination. It typically begins before the shipment arrives at the port.

Destination handling

The cargo is unloaded from the ship and transported to the destination warehouse, where it is inspected and sorted for transportation. This stage is executed by the freight forwarder.

Import haulage

The final stage in the shipping cycle, here the cargo is transported from the warehouse to the consignee, and finally to the end consumer. The transportation is either handled by the freight forwarder or a local transport company.

Required Documents

For your cargo to clear US customs, you will need the following documents or information:

Harmonized System Code (HS Code)

The Harmonized System is a commodity description and coding system that is used internationally, based on which customs officials will determine the taxes, duties, and regulations for your goods. Prior to exporting your shipment, it is necessary to determine the Harmonized System Code for them.

U.S. Customs Invoice

The U.S. Customs Invoice is the basic document provided to the shipping line. It identifies the exporter and the type and value of goods shipped. It includes the following information: (i) Description of the merchandise (ii) Quantity of the merchandise (iii) Approximate value of the merchandise (iv) Eight-digit subheading from the Harmonized Tariff Schedule of the United States, and (v) Name and address of the individual or company who is responsible for invoicing the merchandise – typically the manufacturer or seller, or the person or organization who made the goods available for sale.

Inward Cargo Manifest

This is an itemised list of the shipment’s contents, usually prepared by the shipping line based on information provided by the shipper. It is submitted to officials for customs clearance either as a paper document or as an electronic copy. Once accepted, the manifest and its Bond Number are monitored until the shipment is closed.

Commercial Invoice

The Commercial Invoice is presented by the shipping line to the customs officials once the shipment reaches the border. It is used to determine the value of the goods and enables the exporter to collect money from the importer and while also assisting the latter in clearing the cargo through customs. It contains the following information: (i) The parties involved in the shipping process (ii) The goods being transported (iii) The manufacturing country, and (iv) The Harmonized System codes for the goods.

Bill of Lading

This document is issued to the shipper by the shipping line. It contains a description of the items being shipped, an acknowledgement of receipt and the terms of the contract for carriage. Copies of the Bill of Lading are issued to the shipper and the importer.

Packing List

This is a detailed description of the goods being shipped. Although the Packing List is not necessary for customs, customs brokers. It includes details such as quantities, items, model numbers, dimensions, and net and gross weights. It is prepared by the shipper before the goods are shipped.

Entry/Immediate Delivery

This document is only necessary for time-sensitive shipments and should be submitted to customs by the shipping line before the arrival of the shipment.

Other documents

If you are shipping controlled goods, you may also need permits and licenses to supply to importers in the U.S.

Who Pays What?

All payment obligations between the shipper and the consignee are detailed in the sales contract. In the contract, you will find terms called Incoterms, or International Commercial Terms. Incoterms are a series of voluntary and internationally recognised commercial terms published by the International Chamber of Commerce that outline the cost allocations and risks borne between the seller and buyer.

However, it should be noted that Incoterms are only a part of the trade contract. They do not outline the price of the shipment, transfer of ownership, product liability or breach of contract, nor can they override existing global trade laws. The series is now in its ninth version and there are 11 Incoterms you should know about. Seven of these cover all modes of transport while four cover sea and inland waterway transport.

Incoterms for all modes of transport

Ex Works (EXW)

Ex Works places most of the obligation on the consignee or buyer. The seller prepares the cargo for pickup at its premises or a pre-decided location such as a factory or warehouse. The pickup is arranged by the buyer, who is also responsible for clearing the shipment through customs and transporting it to the final destination.

Free Carrier (FCA)

The seller handles the transport of the shipment to the carrier chosen by the buyer. The shipment is carried to a designated location. All charges upto this point, including transportation and customs clearance at the origin, are handled by the seller. On reaching the designated location, if the delivery occurs at the seller’s premises, the loading and unloading is their responsibility. If it takes place at another location, it is the buyer’s responsibility. The buyer is responsible for all charges from the handover of the goods to the carrier to its arrival at the destination.

Carriage Paid To (CPT)

The seller transports the shipment to a predetermined location and also handles the costs for export clearance and transportation charges to the named place of destination. All further charges, including the customs clearance and insurance costs are to be paid by the buyer.

Carriage and Insurance Paid To (CIP)

Similar to CPT, the seller is responsible for transporting the shipment to a predetermined location and also handles the export clearance costs and transportation charges. But in this case, the seller also pays for the insurance of the shipment while in transit. The insurance policy should be in the same currency as that of the importer and should be claimable by the buyer, seller and any other party that has an interest in the shipment. The insurance coverage should be at least 110 percent of the value of the goods being shipped.

Delivered at Place (DAP)

The seller is responsible for all the costs up to the named place by buyer including the customs formalities at the origin but excluding the unloading. At the destination, the buyer is responsible for all the customs clearances and unloading costs.

Delivered at Place Unloaded (DPU)

The seller is responsible for all the costs until the shipment is unloaded at the place named by a buyer, including the charges related to export, carriage, and unloading at the destination port. The buyer is responsible for customs clearance at the destination and all the transport charges after the cargo is unloaded.

Delivered Duty Paid (DDP)

All risks and costs involved in bringing the shipment to the destination are borne by the seller, including the import duties and taxes and securing the necessary authorisation at the destination country, except the unloading of the cargo.

Incoterms Specific to Sea and Inland Waterway Transport

Free alongside Ship (FAS)

The ship is chosen by the buyer and all charges and risks are borne by them from the moment the shipment is placed in the boarding area alongside the ship, including export clearance and cargo loading costs. The seller is responsible for all charges upto the point of arrival at the port.

Free-on-Board (FOB)

Unlike FAS, the exporter is responsible for all the costs and risks, including the export clearance, until the shipment is loaded onto the ship, which is chosen by the buyer. The latter pays the freight transportation costs, insurance, unloading and transportation charges from port of origin to the destination.

Cost and Freight (CFR)

The seller arranges for the carriage of the goods by sea or inland waterways, to the named port of destination and is responsible to pay for it. Once the loads the ship with the goods, the risk passes from the seller to the buyer.

Cost, Insurance and Freight (CIF)

The seller handles all costs at the origin – the transportation to the origin port, export clearance and freight costs to the named port of destination. However, in this case the seller covers the insurance costs. The policy is in the same currency as the contract. The buyer is responsible for all costs after arrival at the destination port.

A Few Best Practices

Electronic trade documentation Typically, multiple copies of each invoice must be submitted at customs. Electronic trade documentation can help you avoid the hassle of printing several copies. However, the shipper must include a single printed copy of the invoice inside the packages in case the label is damaged in transit.

Shipping automation software Shipping automation software allows shippers to purchase discounted postage, automatically print labels, and track shipments from a centralized dashboard, thereby easing customs issues. It also eliminates the possibility of input errors.

Technology-based rate shopping Shippers can use rate-shopping software to explore all the shipping carriers available along with shipping cost estimates.

Omnichannel shipping Omnichannel shipping involves using multiple resources to deliver the shipment. Customers can receive their shipment from the warehouse or stores or have them shipped by third-party logistics companies.