Exporters should be aware of the demands that international shipping puts on packaged goods. Exporters should jeep four potential problems in mind when designing an export shipping crate: breakage, moisture, pilferage and excess weight.
Generally, cargo is carried in containers, but sometimes it is still shipped as breakbulk cargo. Besides the normal handling encountered in domestic transportation, a breakbulk shipment transported by ocean freight may be loaded aboard vessels in a net or by a sling, conveyor, or chute, that puts an added strain on the package. During the voyage, goods may be stacked on top of or come into violent contact with other goods. Overseas, handling facilities may be less sophisticated than in the United States and the cargo could be dragged, pushed, rolled, or dropped during unloading, while moving through customs, or in transit to the final destination.
Moisture is a constant concern because condensation may develop in the hold of a ship even if it is equipped with air conditioning and a dehumidifier. Another aspect of this problem is that cargo may also be unloaded in precipitation, or the foreign port may not have covered storage facilities. Theft and pilferage are added risks.
Buyers are often familiar with the port systems overseas, so they will often specify packaging requirements. If the buyer does not specify this, be sure the goods are prepared using these guidelines:
- Pack in strong containers, adequately sealed and filled when possible.
- To provide proper bracing in the container, regardless of size, make sure the weight is evenly distributed.
- Goods should be palletized and when possible containerized.
- Packages and packing filler should be made of moisture-resistant material.
- To avoid pilferage, avoid writing contents or brand names on packages. Other safeguards include using straps, seals, and shrink wrapping.
- Observe any product-specific hazardous materials packing requirements.
One popular method of shipment is to use containers obtained from carriers or private leasing companies. These containers vary in size, material, and construction and accommodate most cargo, but they are best suited for standard package sizes and shapes. Also, refrigerated and liquid bulk containers are usually readily available. Some containers are no more than semi-truck trailers lifted off their wheels, placed on a vessel at the port of export and then transferred to another set of wheels at the port of import.
Normally, air shipments require less heavy packing than ocean shipments, though they should still be adequately protected, especially if they are highly pilferable. In many instances, standard domestic packing is acceptable, especially if the product is durable and there is no concern for display packaging. In other instances, high-test (at least 250 pounds per square inch) cardboard or tri-wall construction boxes are more than adequate.
Finally, because transportation costs are determined by volume and weight, specially reinforced and lightweight packing materials have been developed for exporting. Packing goods to minimize volume and weight while reinforcing them may save money, as well as ensure that the goods are properly packed. It is recommended that a professional firm be hired to pack the products if the supplier is not equipped to do so. This service is usually provided at a moderate cost.
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Specific marking and labeling is used on export shipping cartons and containers to:
- Meet shipping regulations.
- Ensure proper handling.
- Conceal the identity of the contents.
- Help receivers identify shipments.
- Insure compliance with environmental and safety standards.
The overseas buyer usually specifies which export marks should appear on the cargo for easy identification by receivers. Products can require many markings for shipment. For example, exporters need to put the following markings on cartons to be shipped :
- Shipper's mark.
- Country of origin (U.S.A.).
- Weight marking (in pounds and in kilograms).
- Number of packages and size of cases (in inches and centimeters).
- Handling marks (international pictorial symbols).
- Cautionary markings, such as "This Side Up" or "Use No Hooks" (in English and in the language of the country of destination).
- Port of entry.
- Labels for hazardous materials (universal symbols adapted by the International Air Transport Association and the International Maritime Organization).
- Ingredients (if applicable, also included in the language of the destination country).
Packages should be clearly marked to prevent misunderstandings and delays in shipping. Letters are generally stenciled onto packages and containers in waterproof ink. Markings should appear on three faces of the container, preferably on the top and on the two ends or the two sides. Ant old markings must be completely removed from previously used packaging.
In addition to the port marks, the customer identification code, and an indication of origin, the marks should include the package number, gross and net weights, and dimensions. If more than one package is being shipped, the total number of packages in the shipment should be included in the markings. The exporter should also add any special handling instructions. It is a good idea to repeat these instructions in the language of the country of destination. and use standard international shipping and handling symbols.
Customs regulations regarding freight labeling are strictly enforced. For example, many countries require that the country of origin be clearly labeled on each imported package. Most freight forwarders and export packing specialists can supply the necessary information regarding specific regulations.
The handling of transportation is similar for domestic and export orders. Export marks are added to the standard information on a domestic bill of lading. These marks show the name of the exporting carrier and the latest allowed arrival date at the port of export. Instructions for the inland carrier to notify the international freight forwarder by telephone upon arrival should also be included.
Exporters may find it useful to consult with a freight forwarder when determining the method of international shipping. Since carriers are often used for large and bulky shipments, the exporter should reserve space on the carrier well before actual shipment date. This reservation is called the booking contract.
International shipments are increasingly made on a through bill of lading under a multimodal contract. The multimodal transit operator (frequently one of the transporters) takes charge of and responsibility for the entire movement from factory to final destination.
The cost of the shipment, the delivery schedule, and the accessibility to the shipped product by the foreign buyer are all factors to consider when determining the method of international shipping. Although air carriers can be more expensive, their cost may be offset by lower domestic shipping costs (for example, using a local airport instead of a coastal seaport) and quicker delivery times. These factors may give the U.S. exporter an edge over other competitors.
Before shipping, the U.S. firm should be sure to check with the foreign buyer about the destination of the goods. Buyers often want the goods to be shipped to a free-trade zone or a free port where they are exempt from import duties.
The computation of the actual cost of producing a product and bringing it to market is the core element in determining if exporting is financially viable. Many new exporters calculate their export price by the cost-plus method. In the cost-plus method of calculation, the exporter starts with the domestic manufacturing cost and adds administration, research and development, overhead, freight forwarding, distributor margins, customs charges, and profit.
The effect of this pricing approach may be that the export price escalates into an uncompetitive range gives a sample calculation. It clearly shows that if an export product has the same ex-factory price as the domestic product, its final consumer price is considerably higher once exporting costs are included.
Marginal cost pricing is a more competitive method of pricing a product for market entry. This method considers the direct, out-of-pocket expenses of producing and selling products for export as a floor beneath which prices cannot be set without incurring a loss. For example, additional costs may occur due to product modification for the export market that accommodates different sizes, electrical systems, or labels. On the other hand, costs may decrease if the export products are stripped-down versions or made without increasing the fixed costs of domestic production.
Other costs should be assessed for domestic and export products according to how much benefit each product receives from such expenditures. Additional costs often associated with export sales include :
- Market research and credit checks.
- Business travel.
- International postage, cable, and telephone rates.
- Translation costs.
- Commissions, training charges, and other costs involving foreign representatives.
- Consultants and freight forwarders.
- Product modification and special packaging.
After the actual cost of the export product has been calculated, the exporter should formulate an approximate consumer price for the foreign market.
Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make insurance an important protection for U.S. exporters. If the terms of sale make the exporter responsible for insurance, the exporter should either obtain its own policy or insure the cargo under a freight forwarder's policy for a fee. If the terms of sale make the foreign buyer responsible, the exporter should not assume (or even take the buyer's word) that adequate insurance has been obtained. If the buyer neglects to obtain adequate coverage, damage to the cargo may cause a major financial loss to the exporter.
Shipments by sea are covered by marine cargo insurance.
Air shipments may also be covered by marine cargo insurance or insurance may be purchased from the air carrier.
Export shipments are usually insured against loss, damage, and delay in transit by cargo insurance. Carrier liability is frequently limited by international agreements. Additionally, the coverage is substantially different from domestic coverage. Arrangements for insurance may be made by either the buyer or the seller, in accordance with the terms of sale. Exporters are advised to consult with international insurance carriers or freight forwarders for more information.
Although sellers and buyers can agree to different components, coverage is usually placed at 110 percent of the CIF (cost, insurance, freight) or CIP (carriage and insurance paid to) value.