Stories by Isaac Anumihe
The basic idea about export procedures and formalities are the same in almost all countries with slight variations.
In almost all countries, a one-time licensing procedure to act as an exporter/importer is required to be completed. For instance, whether you are an importer or exporter, an IEC number (Import Export Code number) is required for you to operate.
If you are an exporter, you would have already set up an export company by following necessary government rules and regulations. By choosing your export product, you would have sent expired samples to your international buyer if required and got approved. After necessary communication with your overseas buyer in terms of payment and terms of delivery, you arrange to issue programme invoice and in turn you receive export order followed by purchase order from your overseas buyer.
The terms of payment for your export contract could be advance payment, documents against acceptance (DA), documents against payment (DAP), or under letter of credit (LC). If you as overseas seller will require to cover credit risk against your overseas buyer, you can approach concerned authorities to cover insurance. Such an agency covers credit risks for exporters, freight on board (FOB), cost and freight (CFR), cost, insurance and freight (CIF). These are some of the terms associated with importation or exportation you are required to know because you will constantly come across them in your dealings.
FOB: The term means that the buyer takes delivery of goods being shipped to him by a supplier once the goods leave the supplier’s shipping dock.
Cost, Insurance and Freight (CIF) is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.
The difference between CIF and FOB is that while the seller must pay the cost and freight, including insurance, to bring the goods to the port of destination, the risk is transferred to the buyer once the goods are loaded on the ship (FOB).
The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under CIF shipping terms for the shipper to provide a minimum amount of marine insurance for goods shipped.
Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery, payment; when the risk of loss shifts from the seller to the buyer and who pays the costs of freight and insurance. The most commonly known trade terms are called Incoterms, published by the International Chamber of Commerce (ICC). These are often identical in form to domestic terms (such as the American Uniform Commercial Code), but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms.
Another term that an intending importer will meet always in his transaction is CPT, which means carriage paid to (CPT). This is a commercial term denoting that the seller delivers the goods to a carrier or to another person nominated by the seller, at a place mutually agreed upon by the buyer and seller, and that the seller pays the freight charges to transport the goods to the specified destination.
CPT means that the risk of damage or loss to the goods being transported is transferred from the seller to the buyer as soon as the goods have been delivered to the carrier. The seller is responsible only for arranging freight to the destination, and not for insuring the goods’ shipment when they are being transported.
The term CPT is typically used in conjunction with a destination. For example, CPT Owerri means that the seller will pay freight charges to Owerri.
Also, a fresh exporter is supposed to know what a bill of lading is. A bill of lading is a legal document between the shipper of goods and the carrier detailing the type, quantity and destination of the goods being carried. The bill of lading also serves as a receipt of shipment when the goods are delivered at the predetermined destination.
If you would like to arrange finance against export, you can approach your bank for pre-shipment or post-shipment finance against export orders obtained by you.
If any international quality check agencies like SGS, BVQI are involved as per the terms of conditions between you and your overseas buyer, such inspection is arranged. After completing such necessary quality checks (QC), the goods are arranged for proper packing to meet export quality. Palletisation or crating of cargo is arranged for safety of cargo. Type of container is decided based on nature of export goods. Then the goods are ready for export. The documentation department prepares export invoice and export packing list based on the purchased order or LC. Application for certificate of origin (generalised system of preference (GSP) and other required documents for the importer are also prepared.
A Nigerian exporter, Mr. Eddy Akwaeze, also provided some insight into the exportation procedure.
According to him, he must have a registered company and must have paid his taxes and obtained his tax certificate or his Tax Identification Number (TIN) as a pre-requisite for importation or exportation.
“He (exporter) will first of all have his registration. He must have his tax clearance certificate. Those things are needed because the port authorities will want to go through them. From the port of loading, the authorities will check the Nigerian system whether he has been paying tax. He must have a TIN. For agricultural produce, your products must be certified worthy of consumption here. Your standard must be the same as that of America and any other part of the world because they are using the same parameter. Once that is done, then you give information to the port of discharge. You don’t just carry oil and say you want to export oil. To whom?
“So, you have to do your contact and confirm the demand for that product; how much they are selling. All these have to be in the document you will still submit to the Customs Export Department. They will now go through it. Although sometimes, Nigerians, with their mischievous acts, can doctor the whole process. The much you put will determine the amount of tax you will pay.
“However, if your money is not enough, you can meet your bank. For instance, Bank of Industry (BoI) is giving credits to some small scale businesses on agriculture products. When you get these ready, your product is ready for export,” Akwaeze said.