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Ship Freight

Document List For Ship Freight

Bill of Lading

A bill of lading is a written statement outlining the nature and quantity of goods to be shipped and the destination of the shipment. You’re unlikely to encounter the word ‘lading’ outside of the shipping industry. It’s derived from the term ‘lade’. This is an old-fashioned word that means to load cargo onto a vessel or other type of carrier (a truck, for example).

What Purpose Does a Bill of Lading Serve?

A bill of lading is a legally-binding document that helps the seller and carrier ensure the smooth movement of freight across different territories by land and/or sea. All consignments, whether carried by ocean or over land, must be accompanied by an accurately completed, signed, and dated bill of lading.

During your interactions with freight forwarders or shipping agents, you may see a bill of lading referred to as BL, B/L, or BoL. These are just shorter ways of saying the same thing.

Why Is a Bill of Lading Important?

A bill of lading is important because it serves multiple purposes

Certificate of Origin

A certificate of origin is an important document that shows in which country the items listed for export on the certificate are manufactured or obtained.

Types of Certificates of Origin (COs)

There are two types of certificate of origin—Non-Preferential COs and Preferential COs. Let’s take a look at both.

Non-Preferential COs

As the name suggests, these certify that the consignment is not subject to any preferential treatment. This is the main type of CO and is also known as a normal CO.

As well as denoting the country the product originated from, the form acknowledges that the goods listed are not entitled to reduced tariffs under the terms of any trade agreement between the countries of origin and import.

Because nearly all world trade is now conducted under World Trade Organization (WTO) rules , non-WTO transactions are rare. Therefore, few WTO members demand a non-preferential certificate of origin to access most favored nation (MFN) tariffs. The reduced tariffs are applied automatically.

However, a non-preferential certificate of origin is still vital, particularly in the event of a trade war. The document permits goods to enter a country imposing trade sanctions, as long as they don’t originate from a country that is the target of those sanctions.

Preferential COs

A preferential CO certifies that the goods detailed on the form are subject to reduced tariffs or exemptions. That will typically be because they originate from a territory with which the importing country has a trade agreement.

Unlike the non-preferential certificate of origin, which usually mentions only the country of origin, preferential certificates also show the name of the applicable trade agreement.

Certificate of Origin Formats

COOs are either printed on paper or issued electronically. Let’s explore both formats in a little more detail.

Contract of Carriage for Freight

A contract of carriage is a binding agreement between a freight carrier and a shipper. It’s a legal document in which the carrier agrees in writing to transport specified goods from one location to another.

The Agreement

Under the terms of a contract of carriage, the carrier agrees to transport goods from a stated place of departure (an airport for air freight or seaport for ocean cargo) to a stated destination. The shipper agrees to pay the carrier for providing this service.

The contract will detail the nature of the goods the shipper wishes the carrier to deliver, and which the carrier agrees to deliver. Dates and times will be agreed upon so both parties know when the cargo is to be shipped and when it’s due to arrive at the destination.

International Conventions

Various international conventions have standardized the law relating to the carriage of goods, as well as the rights and responsibilities of shippers and carriers. These conventions include:

  • The Hague and Hague-Visby Rules
  • The Hamburg Rules
  • The Rotterdam Rules

Liabilities

As regards liability, at the very least, a carrier is expected to take reasonable care of the cargo. The shipper is expected to accurately describe the nature of the freight, including its weight and dimensions. A compensation claim can be made if the shipment arrives damaged or late, or is lost during transit. Under the terms of the Hague-Visby Rules, the carrier’s liability for the goods is discharged one year after the goods have been delivered.

Formats

Contracts of carriage can be paper-based. But, increasingly, the shipping industry is adopting new technology with the use of electronic documents becoming more widespread. As a result, many contracts of carriage can now be completed online and shared via email.

Export Declaration form

An export declaration form is a shipping document containing information about the goods a shipper wishes to export. The details required on the form include:

  • The nature of the goods to be exported
  • The number of goods being exported
  • The value of those goods

Why is an Export Declaration Required?

Customs officials in the country of export use the information on the declaration form to help track and control the level and nature of exports. The details on the form will also be used to compile data about that country’s export trade. These statistics often feature in trade and export reports commissioned or compiled by governments.

Key Information Required on an Export Declaration

We’ve included a sample of a Shipper’s Export Declaration (SED) used in the United States further down this page. Most export declaration forms used around the world follow a similar format.

Key details that must be supplied on the SED (when exporting from the USA) include:

  • The name and address of the person/business exporting the goods.
  • The business’ nine-digit Employer Identification Number.
  • The name and address of the person/business receiving the goods.
  • An International Transaction Number (ITN). This can be obtained from US Customs via the automated export system (AES). We include more detail about this below.
  • The state in the USA from which the goods are being picked up and taken to port.
  • The Schedule B number; a ten-digit code that identifies the nature of products being exported.

Whether the goods being exported are:

  • Domestic (D) – produced in the USA
  • Foreign (F) – goods that entered the USA and are being exported to a different country without having been altered while in the USA
  • Military (M) – goods that are being exported to a foreign government for use by that government’s military
  • The country to which the freight is being exported.
  • The method of transportation being used to ship the goods.
  • The port of origin and port of arrival.
  • The quantity and weight of goods being exported.
  • The value of the goods. If your consignment is valued below $2,500, you may not need to complete an export declaration form.
  • Export License Number—this permits the export of specific goods to certain destinations by the license holder.

Letter of Credit

A letter of credit is a legally-binding document frequently used in international trade. Its key purpose is to give sellers/exporters of goods a guarantee that they’ll receive payment for those goods from the buyer.

An LC (which may also be referred to as a banker’s commercial credit or documentary credit) is issued by a bank. It denotes that the bank agrees to pay for the seller’s goods if the buyer cannot make the payment. It follows that banks only issue letters of credit to buyers they are confident can pay.

Letters of credit usually stipulate the payment terms agreed between the buyer and seller in great detail, to ensure the nature of the agreement is clearly laid out. Details that must be accurately specified in the LC include:

  • The amount to be paid for the goods
  • The currency in which the payment is to be made
  • When the payment is due.

An LC 90 denotes that the money promised in the letter must be paid within 90 days. An LC 60 allows 60 days for payment, while an LC 30 offers an even smaller payment window.

The rules governing letters of credit are set out in guidelines known as the UCP600 (Uniform Customs and Practice), issued by the International Chamber of Commerce

Who Needs an LC?

LCs are primarily, but not exclusively, used in international trade transactions between sellers and buyers who do not know each other well. They represent an arrangement entered into between banks, focused on amicably settling the commercial transaction to protect the financial interests of both parties. The involvement of banks gives buyers and sellers more peace of mind that the transaction will happen.

A letter of credit is particularly useful when the buyer and seller:

  • Are entering into a new trading relationship
  • Live/work/trade in different countries
  • Are subject to different international trade laws, rules, and regulations
  • Are trading an exceptionally large consignment

Benefits of LCs to Sellers

Understandably, a seller dealing with a new buyer of their goods may have doubts about whether the buyer can or will pay for their products. There are several reasons why a buyer may not be able to pay a seller for their goods. These include:

  • The buyer is declared bankrupt
  • The buyer’s assets are seized or frozen
  • Payment is delayed by problems in the buyer’s country (political unrest, for example)

The involvement of a bank in the transaction brings a degree of assurance that payment will be made. If a seller doesn’t receive payment from the buyer after shipping their goods, the bank that issued the LC is liable to pay the seller.

Payment depends on the seller meeting specific criteria laid out in the letter. The bank will examine the claim, and if it complies, payment will be made.

Of course, the seller is reliant on the bank being able to make the payment promised in the LC. As explained in more detail later in this article, the seller can get another bank to guarantee payment from the initial bank.

Benefits of LCs to Buyers

When dealing with a seller from a different country for the first time, a buyer could have reservations about paying for goods before receiving them. A letter of credit will give the buyer a degree of certainty that they will receive the goods without having to make an upfront payment. The buyer can instruct a bank to issue a letter of credit, which effectively means that the bank accepts the risk on the buyer’s behalf.

Letter Of Indemnity.

A letter of indemnity is used in shipping to reassure one party that they will not suffer financial loss if the other party cannot fulfil an agreement, or if the nature of that agreement changes.

Indemnity?

‘Indemnity’ isn’t the sort of word most people use or encounter much in everyday life. It can be defined as: Protection or security against legal liability for the consequences of one’s actions.

The concept of indemnity is based on helping one party in a contract avoid losses if the other party:

  • Makes a mistake
  • Changes the terms of a contract or agreement
  • Does not fulfil their obligations.

Who Is Affected By A Letter of Indemnity?

Usually, three parties are involved in the agreement laid out in a letter of indemnity:

  1. The party that is seeking or offered the indemnity.
  2. The granter of the indemnity, usually the person or business receiving the goods.
  3. The backer – typically, this is a bank or other financial institution that is backing the person or business granting the indemnity.

The Benefits of an Indemnification Letter in International Shipping

There are several shipping scenarios in which a letter of indemnity (LOI) is of value. For example, a carrier can offer an LOI to a customer who has reservations about accepting a shipment that arrived in port without its bill of lading.

The terms of the LOI can offer the customer assurances that they won’t suffer a loss if they accept the cargo without its bill of lading, but later find the shipment was delivered incomplete. That helps the shipping process, as the carrier gets to offload the cargo without having to wait for the bill of lading, which could delay their operations.

Here are some more of the most common scenarios in which such letters provide indemnity in shipping:

  1. When the cargo’s consignee requests the carrier to release the goods without producing the original bill of lading.

The speed of shipping has increased to such an extent that cargo vessels often arrive at their port of discharge before the paperwork has arrived by courier. In such cases, or when the original bill of lading has been lost, the consignee will offer the carrier a letter of indemnity in exchange for delivery of the freight without the bill of lading. The LOI will absolve the carrier of any blame or financial penalty if the shipment is later found to be substantially different to that recorded on the original bill of lading.

  1. When cargo is sold during transit as part of a high sea sale.

Cargo can be traded while in transit, sometimes several times. This often leads to complicated situations in which an LOI issued by the shipper is assumed to cover all parties involved in the chain of selling until the goods are released at the port of discharge.

Without a letter of indemnity, the carrier could be held liable for lack of documentary evidence of the transactions, including who is the owner of the cargo when it reaches the port of discharge.

While the availability and use of electronic Bills of Lading is certainly helping to overcome these problems, they still exist, as digital documentation has yet to be adopted in all areas of shipping.

  1. When cargo is delivered to a port that’s different to the one named on the original bill of lading.

Acts of God, political unrest, or human error can cause goods to be delivered to a port that isn’t the one stated on the bill of lading. In such circumstances, the carrier can request a letter of indemnity from the shipper or recipient.

  1. When a clean bill of lading is issued.

Here the shipper agrees to protect the shipping company against any possible consequences that may arise from issuing a clean bill of lading. Usually, a shipper needs a new bill of lading when the goods loaded onto the cargo vessel do not match those stated on the original bill of lading.

Power of Attorney

Power of Attorney is a legally binding document which assigns legal powers to the freight forwarder on the behalf of an importer/exporter.

How Does the Power of Attorney Work?

A POA (which is sometimes called a ‘letter of empowerment’) gives the forwarder or agent control of the cargo so they can:

  • Prepare, sign and submit relevant shipping documentation on behalf of the seller/buyer
  • Act as an intermediary between the seller and buyer of the goods
  • Handle the cargo
  • Secure customs clearance for the freight

A shipper who wishes to give a freight forwarder the right to process customs clearance documents on their behalf will need to draw up a power of attorney. The document must state which powers are being granted and it must be sent with the consignment for inspection by customs officials at the port of arrival.

The POA must be ready before the freight is shipped. This will ensure that any issues regarding the shipment are directed to whoever has been granted POA, rather than the person or business granting that POA.

As with all shipping documents, the content should be worded precisely and accurately so that the nature of the agreed transfer of power is clear. Naturally, shippers should ensure they trust the agent to whom they are granting the POA.

There are four types of power of attorney that relate to shipping:

EXPORT POWER OF ATTORNEY

This is an authorization from the shipper to the freight forwarder to handle the cargo and deal with customs clearance documentation. The POA must be signed by the shipper.

IMPORT POWER OF ATTORNEY

This is an authorization from the buyer or seller of a consignment to a freight forwarder, permitting them to act on their behalf and handle customs and other entry requirements. Customs law in the USA requires that an import POA is signed by the customs broker or freight forwarder.

GENERAL POWER OF ATTORNEY

This is an authorization from a shipper giving their forwarder or agent authority to handle all issues relating to the shipment on their behalf.

DURABLE POWER OF ATTORNEY

This is an authorization from a shipper giving their forwarder or agent authority to handle specific issues relating to the shipment on their behalf. The POA document must clearly and explicitly state the issues concerned.

What Is Required on a POA Document?

In the USA, shippers will need to supply the following details on a document granting power of attorney:

  • Their name
  • The name of the business shipping the goods
  • An IRS, importer, or social security number
  • A signature (ideally this should be witnessed or notarized)
  • A declaration that the forwarder or agent named in the document is being granted the power to act on behalf of the signatory.

The Packing List

Packing lists are used in international trade to provide precise information about the contents of a shipment. The document conveys several important pieces of information, including:

  • Who is sending the package
  • The destination of the cargo
  • How many items the package contains

A packing list is compiled by whoever is responsible for packing the goods—usually the seller, exporter, or freight forwarder. It is essential for both ocean and air shipments. The document includes details about the nature, weight, and dimensions of the goods in the consignment. It also carries information about how the goods were packed, and notes any marks or numbers present on the exterior of the box, crate, or other container used to protect the goods during transit.

You may see or hear a packing list referred to using a variety of alternative terms, such as a:

  • Shipping packing list
  • Delivery docket
  • Bill of parcel
  • Shipping list
  • Packing slip
  • Delivery list
  • Manifest
  • Unpacking note
  • Customer receipt

Packing lists are required for the majority of air and ocean freight shipments. The details on the form will be used by freight forwarders, customs officials, and others involved in the supply chain.

Customs teams at ports of origin and arrival will refer to a packing list when checking that the product and packaging comply with local rules and regulations. The document helps customs officials at the destination port calculate import duties or taxes payable and determine whether reduced tariffs or preferential treatment should be applied to a consignment.

A packing list also provides a source of vital information required to complete a bill of lading, another vital shipping document to which we’ve dedicated an entire article.

CBP Form 7501 

The CBP Form 7501 is five pages long, but don’t be put off by that. Four of those pages are continuation sheets that give you extra room to provide in-depth details such as:

  • Descriptions of the products being imported
  • The value of the goods

Who Fills in An Entry Summary Form?

CBP Form 7501 is usually completed and filed by a customs broker. But the shipper and importer need to know the information required on the form, as the broker is likely to ask them to supply some of it. Two copies of the form are required, the importer’s copy and the permit copy.

Key Information Required on the Entry Summary Form

A lot of information is required on Form 7501, including:

ENTRY NUMBER

This is an 11-digit number that’s a unique number assigned to the freight by the customs broker or importer.

PORT CODE

Every airport and seaport in the United States is represented by a 4-digit code. The form must include the code of the US port where the goods were unloaded.

Information about port codes and many of the other codes that are required on Form 7501 can be found on the CBP Form entry summary instructions, and the CBP website.

ENTRY DATE

This is the date on which the goods were released by CBP to the importer/consignee.

COUNTRY OF ORIGIN

This refers to the nation in which the imported goods were produced, grown, or manufactured. For goods made in multiple countries, the country in which the goods were last significantly transformed should be listed as the country of origin on the form.

IMPORTER NUMBER

CBP Form 7501 requires the unique reference number of the person or business importing the goods into the United States. US citizens can simply add two zeros to the end of their tax ID number to create their importer number. If you have imported into the US before, your importer number will be on a commercial invoice.

DESCRIPTION OF MERCHANDISE

The form and its continuation pages allow the importer to include detailed information about the nature of the goods they’re importing into the United States. This can include the weight, volume, and dimensions of the goods, as well as their value.

CBP Form 3461

If your business ships goods to the United States, you’ll likely be familiar with Form 3461. If you’re exporting to the US for the first time, you soon will be familiar with this critical shipping document.

While its name is far from catchy, CBP Form 3461 is extremely useful if you are importing freight into the United States. Also known as the Customs Release form, 3461 can be used to speed up the release of goods entering the US by air or sea.

What Purpose Does Form 3461 Serve?

The information on the form helps US Customs and Border Protection (CBP) officials decide whether freight entering the country should be handed over to the consignee or whether it should first undergo a customs inspection.

Who Needs To Fill-In Form 3461

Form 3461 is completed and submitted to customs officials at the port of arrival by the importer via email. However, if customs officials tell the importer they wish to see printed copies of shipping documents, Form 3461 cannot be used.

Some of the key bits of information the importer is required to supply include:

  • The date when the goods are expected to arrive in the United States
  • The port of arrival
  • The name of the consignee
  • A description of the merchandise being imported

Let’s take a look at these and other Form 3461 requirements in more detail:

The Key Details Required on Form 3461

As with all shipping documentation, accuracy is crucial. Any discrepancies between the information recorded on CBP Form 3461 and the goods that US customs officials inspect could result in a delay in the goods being released. Here is some further information about the key details that the importer needs to supply on the customs release form.

ARRIVAL DATE

This is the date on which the conveyance—be it an aircraft or ocean vessel—arrives at the port or airport of discharge.

PORT REFERENCE NUMBER

Every port and airport in the United States has a unique 4-digit code. The importer must enter the code of the port where the goods are to be unloaded.

CONSIGNEE NAME AND NUMBER

The name of the consignee and their social security or IRS number must be provided on the form.

IMPORTER NUMBER

If the importer is different from the consignee, their social security or IRS number must be provided on the form.

CARRIER CODE

If the goods are arriving in the United States by air, the IATA code of the airline transporting the goods into the US must be provided. In the case of goods arriving in the US via connecting flights, only the IATA code of the airline responsible for the last leg of the journey to the US needs to be provided. For goods transported into the US by sea, the sea carrier code must be supplied.

VOYAGE OR FLIGHT REFERENCE NUMBER

The voyage, flight, or trip number of the carrier bringing the goods into the United States must be included on Form 3461.

LOCATION OF GOODS

This section of the customs release form should detail the location in the port of arrival where the goods are awaiting release to the importer/consignee.

UNITED STATES PORT OF LADING

The 4-digit code of the US port or airport where the goods are to be unloaded must be supplied.

TOTAL VALUE

This area of Form 3461 must record the value of the shipment in US dollars. The total should match the amount on the Shipping Invoice.

DESCRIPTION

The importer is required to give a short description of the nature of the freight being imported. The size, weight, and dimensions of the goods should be outlined.

COUNTRY OF ORIGIN

The form requires the 2-character ISO code of the country of origin of the goods. The country of origin is defined as the territory where the goods were manufactured, produced, or grown.

Why Form 3461 is Important to Shipping in the United States

In 2018, the total value of imports into the United States exceeded $2.6 billion. That year, over 4,500 different types of products arrived in the US from 223 countries.

That’s a lot of imports, each of which is subject to customs checks at the port or airport of arrival. In the United States, those checks are carried out by the CBP, the US Customs and Border Protection unit. Form 3461 enables the CBP to release cargo to consignees more quickly, speeding up the processing of imports.

The Shipping Order

Shipping orders contain essential information about international shipments. The details that need to be provided on a shipping order include:

  • The space booking number
  • Contact details of the shipper/customs broker/freight forwarder
  • The reference number of the vessel transporting the goods
  • The voyage number
  • When the vessel is due to depart
  • The delivery location and date
  • The number of packages in the consignment

Who Needs a Shipping Order?

The majority of commercial shipments require a shipping order so that the goods can be released to the buyer at the destination port. However, in some territories, a shipping order is seen as redundant. Only a space booking number is required. That’s because the information on the shipping order is also contained on the dock receipt.

Who Issues a Shipping Order?

A cargo carrier will issue a shipping order to a shipper to confirm that a consignment booked for transportation has been assigned space on a vessel. After transportation of the cargo, a shipping order is issued by the carrier to the consignee to confirm that shipment has taken place. The consignee then presents the document to customs officials as part of the customs clearance and release process.

Before issuing a shipping order to a consignee, the carrier (or agent acting for the carrier) will need the buyer or receiver of the goods to present at least one of the following documentation:

  • The original bill of lading
  • Authorized bank guarantees
  • A copy of the seaway bill

If a freight forwarder issues the bill of lading, the forwarder must collect the original bill at the port of arrival and issue a release letter to the carrier, permitting the shipping order to be released to the cargo’s recipient. To help accelerate the issuance of the shipping order, the bill of lading is usually issued as an electronic telex release.

How to Get a Shipping Order

Shippers and freight forwarders should approach the carrier of their goods for a shipping order. To obtain a shipping order before goods are transported, the freight forwarder will usually need to send the carrier a packing list. The carrier will use it to decide how much space to allocate for the goods on its vessel. Sometimes a valid export permit is also required.

Start and Finish the Shipping Process With a Shipping Order

Shipping orders are one of the many important documents that help speed-up international trade. It’s a simple form that serves a dual purpose. It’s the carrier’s confirmation to the seller that space has been allocated aboard a shipping vessel—and confirmation to the buyer that shipping is complete.

Commercial Invoice

A commercial invoice is an important document that is required for international shipping, particularly, for customs clearance. It’s used by customs authorities to determine the taxes and import duties that need to be settled for the particular goods that you are shipping.

By having a complete and correct commercial invoice for customs clearance, the clearing process of your goods will be a breeze and mitigates the risk of delays or issues.

What is a Commercial Invoice Used For?

A commercial invoice is used by the customs authorities in your country of import. It helps them conduct all the formalities required to process and clear your cargo, such as:

  • Determining the taxes and import duties that apply to your shipment
  • Determining if the cargo meets all the import requirements
  • Retrieving information needed for customs clearance in the destination country

Although it’s an integral part of international shipping, some customs authorities do not require a commercial invoice. This is true in the EU and the countries part of it. However, some may provide exceptions. If you are shipping to this part of the world, make sure to do your research on their rules on the shipping invoice and customs requirements.

Invoice Information

Information regarding the commercial invoice is the most crucial part of the document. This section will require the following details:

  • Invoice number or reference number
  • Invoice date of issue
  • Order number of the goods

Shipper Information

This section asks for details about the sender of the goods, including:

  • Name of the shipper or sender
  • Complete address of the shipper or sender, including the postal code or zip code and the city name
  • Telephone number of the shipper or sender
  • Fax number of the shipper or sender
  • Value added tax (VAT) reference number for countries which require the VAT
  • Country where the shipper or sender is located

Consignee Information

This section will ask for details about the person who will receive the goods at the destination. It requires the following information:

  • Name of the receiver
  • Complete address of the receiver, including the postal code or zip code and the city name
  • Telephone number of the receiver
  • Fax number of the receiver
  • Value added tax (VAT) reference number for countries which require the VAT
  • Country where the receiver is located
  • Notify party or the point person who should be notified when the goods arrive
  • Notify party’s address

Shipping Information

This section asks for information about the specific shipment or mode of shipment. It includes:

  • Air Way Bill (AWB) number
  • Forwarding agent or the name of the shipping company or freight forwarder
  • Date of export or shipping date
  • Mode of payment for the shipment

Shipment Information

This section refers to the required details for the specific goods that are shipped, including:

  • Quantity or number of pieces
  • Specification of commodities or a description of the goods in subject
  • Gross weight of each piece of the goods
  • Quantity of the goods in the cargo
  • Unit price or the value of each item
  • Amount of each set of goods
  • Total weight of the shipment
  • Currency used for the pricing or value of the goods
  • Total amount or value of the shipment
  • Country of origin
  • Name of the sender
  • Signature of the sender or the company stamp of the freight forwarder/ shipping company.
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