If there is ONE thing that life offers too little of, it’s time. Between our jobs, families, and personal lives, we’re juggling an extraordinary amount, so it’s no wonder that we’re always looking for short-cuts – tools and methods to steal back a few minutes here and there.
But sometimes we cut too deep, resulting in much bigger problems and costs than the time saved, even cumulatively speaking, could ever offset.
When it comes to international freight shipping, the pro-forma invoice is the step that many take for granted, and often cut out altogether. This is a mistake, and often the most significant and costliest one you’ll encounter.
I often make the comparison of those who ship without a pro forma invoice to folks who drive their cars without seatbelts. Sure, it’s unlikely that you’ll run into a situation where the seatbelt will actually save your life or limbs. Just as it is unlikely that your shipment will be taken through a deep examination with customs.
…. but it DOES happen, and when it does, that little amount of time you save over the course of history, NOT buckling that seat belt and NOT filling out the pro forma invoice, will seem of little value to you as you go flying through the windshield, or your cargo goes sinking to the bottom of Pacific.
You go to great lengths to locate distributors or manufacturers for your products to meet the demand of the marketplace. It takes working capital, research, cost analysis, production, packaging, and then shipping & delivery.
It’s quite the process that needs deliberate, step-by-step focus among all of the parties to handle every component and ensure a successful enterprise.
When shippers & consignees strike a deal, as an international shipping company, we emphasized the importance of creating a pro-forma that has to be signed & agreed upon by both parties. Even though your deal is in ink, I promise that this is something that your process should include.
It’s not that difficult, and I’ll even spell it out for you –
Pro Forma Base Requirements:
- Origin shipper’ s name & address
- Destination buyer’ s name & address
- Description per item of the merchandises
- Harmonized system number (HS code) & value per item
- Payment terms: Letter of Credit (which kinds), deposit amount, remittance at shipping with proof of shipment & or inspection certificate (many more options can be agreed upon).
- Weight & dimensions per item
- Cargo insurance
- Estimated dispatch date
This is your basic pro-forma information that can be altered to meet your very shipments. Once done, the shippers and their consignees would need to follow the instructions of the pro-forma & share it with your international freight forwarding company.
Ensuring Accuracy of the Pro Forma:
When your freight forwarder gives you a freight quote, it needs to meet the specifications of the pro-forma. After the freight bid is accepted & shippers place a booking request with their freight forwarders, we highly recommend that the international shipping company have you review & acknowledge the following:
- Freight quote to match the weight, dimensions, origin & destination, along with the freight terms desired of your commercial invoice & the packing list.
- One of the following:
- An EIN number for a business
- A foreign passport, if you buy in the USA & you are from a foreign country
- An EIN number for a USA citizen (shipper) that is exporting as an individual (free of charge). LINK
- Copy of the bill of lading for the shippers to check thoroughly all of the information (legal form): See sample attached
- Bill of lading terms & conditions
- Copy of the insurance certificate (if one was requested)
Here are a couple of important links:
- https://uscensus.prod.3ceonline.com/ (harmonized System Number)
- http://www.bordercenter.org/chem/vehicles.htm (Auto Import Regulations)
Cargo Insurance vs Carriers limited liability
Whether you import or export a shipment, you must know that the carriers (truckers, airlines, steam lines) carry a very limited amount of liability that does not cover the cost of your shipment – regardless of what happens. You are taking a gamble while shipping, so make sure you hammer out this detail in your pro forma invoice as well.
Cargo insurance can be purchased through your international shipping company (the forwarder). It is typically 110% of the commercial invoice value. Rates may vary & depending on products, destinations, & war risks.
Also, shippers must make a distinction between personal effects & commercial goods, as rates & policy type are different. Personal effects packed by the shippers will obtain an FPA / Total loss insurance only with rates of 2 to 2.5% of the value declared. Partial loss is not covered. However, if for personal effect packed by a certified packer, you can access an all risk policy that gives you full or partial coverage. Commercial & industrial accounts access all risk coverage.
We constantly experience shippers that do not see the need for insurance coverage, but I believe it’s a price worth paying. Cargo can be dropped, stolen, crushedo, burned, or dropped in the ocean (Google container ship disasters).
(If flown on United Airlines, it can be removed by force, slammed down & deprived of any basic respect after being legally seated in a cargo department…. Anyway, you get the drift)
In conclusion, the pro forma invoice is an important step to ensuring your shipments arrive on time, and that you’re covered and prepared for the worst in case the unavoidable disaster occurs.
I suggest finding a freight forwarder who does good work, with good bedside manner, and who cares about your cargo as much as you. Looking for a freight quote from a group of freight forwarders who do good work and offer superior customer service?
Look no further – Request a free quote!