Introduction to Global Trade | Tory Burch Foundation

Opening your business to global trade has the potential to dramatically shift your business. Small businesses can start importing even at the early stages, and it doesn’t have to be overwhelming. 

Caitlin Murphy is the founder and CEO of Global Gateway Logistics, a freight forwarding company that has over 9,500 forwarding partners in 194 countries. The 2019 Tory Burch Fellow joined our webinar series to share her expertise on how business owners can expand their reach internationally through strategic and informed importing and exporting practices.  

HOW DO IMPORTING AND EXPORTING WORK?

There are four major steps to each of these operations that business owners should know:

Importing

Whether you make a product in a factory overseas or you’re importing a finished product for sale in your area, the steps are mostly the same. After you’ve completed your purchase, you’ll 

1) make sure you’ve received all paperwork and product details from the seller;

2) determine shipping costs, responsibilities, and transit time;

3) confirm the cargo has been picked up and sent on its way by the freight forwarder 

4) handle any customs costs after delivery.

Exporting

When exporting, you’ll 

1) prepare and package your product for transit,

2) work with a freight forwarder to determine the best shipping rate, method and transit timeline

3) schedule a time for the freight forwarder to pick up your product so they can transfer it to the main export port; 

4) communicate with your buyer as the package clears customs and heads to their door. 

While this general overview can help business owners understand the process, knowing how to select and work with a freight forwarder, or forwarding agent, may be the most important part in importing or exporting goods. 

WHAT IS A FREIGHT FORWARDER? 

The freight forwarder acts as the middle man between the business owner and the many moving parts of importing and exporting. While they do not actually move goods, freight forwarders work with the companies that do, like the ones that own the ships or trucks. Freight forwarders help business owners decide how best to transport items according to their needs, help them find the best prices and timelines and navigate complex systems like international banking regulations. Freight forwarders often store and warehouse goods before they reach their final destination on their way to their final destination.

Murphy detailed a few must-haves when choosing a freight forwarding service. Make sure they include all costs upfront and don’t hide fees. She recommended finding a partner that offers 24/7 service or one that will assign you a dedicated contact available no matter what time or time zone a potential shipping crisis occurs. Murphy explained that freight forwarders offer  freight insurance based on the valuation of the cargo. She also said it’s OK to have more than one freight forwarder to service the variety of goods you’re transporting.

Freight Forwarder vs. Carrier

Selecting the right carrier is just as important as selecting the right freight forwarder. While freight forwarders manage the logistics of your shipments, they’re not actually the ones transporting your goods. Carriers, such as FedEx, DHL and UPS, will take a shipment from points A to B via air, sea, rail, or road, depending on what best fits your budget and delivery commitments. Murphy noted that these carriers also offer full freight forwarding services for businesses. You can fill out the necessary documents on their website, and they’ll take it from there, even handling customs. 

Imagine you’ve purchased a set of wine glasses for your store, from a glassblower in France. That business owner could partner with a freight forwarding service to sort the documents and logistics needed to ship your glasses to your warehouse in the U.S. The forwarder may choose an air freight carrier, arrange for your shipment to be moved by truck to the airport in France, and coordinate the delivery from your local airport to the warehouse, where you can now ship them to your customers who place an order with you.

INCOTERMS SET THE TONE

Incoterms are 11 terms set by the International Chamber of Commerce for use in contracts, purchase orders, and quotations for business-to-business sales and purchases of tangible goods. Overall, Incoterms reduce the likelihood of misunderstandings between buyer and seller. Murphy used the global online marketplace Alibaba as an example. You might notice a three-letter code in their purchase order that dictates Alibaba’s responsibilities to help inform your buying experience. “It’s going to dictate, along that process of trade, … what the buyer is responsible for in terms of the insurance or the risk, and what they are responsible for with transportation, both the service and the cost,” Murphy said. 

Customs brokers are experts on commodities and can be a great resource when determining which Incoterm is best for your shipment. A customs broker can be a private individual, partnership, corporation, or association that assists with meeting federal requirements by submitting necessary payments and information to the U.S. Customs and Border Protection (CBP) on behalf of its client. They are licensed and regulated by CBP. Some logistics companies can act as both a freight forwarder and a customs broker.

In a contract, you can find the Incoterms listed under terms of delivery, shipping method, terms of sale, or even in a field specifically dedicated to Incoterms. Whether you’re the buyer or the seller, always double check that it’s included. 

Murphy highlighted some of the most common Incoterms you may encounter: 

• EXW: Ex Works puts the bulk of the shipping responsibilities on the buyer. The seller takes care of export packaging only. Ex Works is applicable to any mode of transportation
• FOB: Free On Board relates to sea or inland waterway shipments. The buyer is responsible for main carriage, destination terminal charges, import customs (and related duties and taxes), and delivery to the destination. 
• CFR (Cost and Freight) and CIF (Cost, Insurance, & Freight): Both Incoterms are related to water transportation, but unlike FOB, the seller is responsible for main carriage costs. CIF is also one of only two Incoterms that require the seller to include insurance.
• DDP: Delivery Duty Paid indicates that the seller is responsible for all costs and risks at each step of the import or export process. Murphy recommended only using DDP when you’re working with countries where you’re very familiar with their customs laws or really trust the freight forwarder to handle door-to-door service. This Incoterm can be used with any mode of transportation.

PREPARING TO IMPORT

When importing goods, you’ll want to know as much about the seller as possible. Do your research to assess what risks you might be incurring: purchasing risks, risks importing from one country to another, risks of partnering with a particular brand or service, etc. Dun & Bradstreet credit checks and vendor ratings are your best friends. If you need additional financing for the purchase, are there investors or managers you need to consult? Murphy pointed attendees to the International Trade Association’s resources on due diligence as a guide. 

PREPARING TO EXPORT

A good place to start when creating a plan for exporting is to learn about the demand for your product overseas and who your potential competitors are. You’ll also want an idea of what registration, licensing, and fees are required. Our Beginners’ Guide to Exports can help you get started with getting your product overseas. 

Once you’ve done your research and have a plan in place, the next steps on your import or export checklist are very similar. 

GET YOUR DOCUMENTS IN ORDER

To import or export, you’ll need a commercial invoice, a packing list, a certificate of origin, bills of lading, and any applicable certificates depending on the commodity. An example certificate might be FDA approval for medical devices or face masks. Some beauty products may require similar clearance.

The Harmonized Tariff Schedule is a 10-digit number that’s listed on every commodity. It helps customs brokers assign duty rates and track patterns of goods being shipped. The U.S. International Trade Commission has online tools and resources you can reference. 

All freight forwarders will provide businesses with a shipping quotation, a document that outlines all the costs associated with the shipment, details about pickup and delivery and the mode of transportation. For imports, you’ll send freight forwarders a packing list and specifically denote delivery due dates so that they choose a mode of transportation that best fits your needs. For exports, a Shipper’s Letter of Instruction, organized via Excel spreadsheet or Word document, will be the one-stop-shop for every detail related to your shipment. 

When exporting your products, you should also provide tracking information to the recipients, any necessary documents and always follow up to ensure the products were delivered in good condition. There are deadlines for declaring damage that could take place in transit, and you should be informed about what your options are. 

Murphy provided an expert overview of international import and export processes, but so much of what you encounter as a founder will be subjective to what you’re shipping or ordering and which countries you’re partnering with. She stressed that no business owner’s question is too small or silly to bring to their freight forwarder. Additionally, Murphy encouraged founders selecting a freight forwarder to inquire about what other services they offer. They might have training programs or other resources that could help equip you and your company for your next big step.