Is shipment made as per declaration?

 

For many grounds you may want to be sure about, is shipment made as per declaration. As a stakeholder in an international import-export trade transaction, it is a typical curiosity. Now the question is how you can be sure without being present on the spot?

In this part of writing, we'll discuss what may be the reasons you'll want to know about it. Then we'll discuss the procedures to be confirmed that the exporter has shipped as per their declaration, examining different documents.

This article is intended for exporters, importers, bankers, and other professionals dealing with import-export trade. Though we've discussed the export-import documentation in Bangladesh, the procedure is almost identical for other countries.

Stakeholders in an International Import-Export Trade Transaction

Usual stakeholders in an international import-export trade transaction are importers, exporters, and bankers. Moreover, persons directly operating the transactions on behalf of the importer or exporter (like officers/executives of importer or exporter) are also curious about the shipment information. Other involved parties are customs authority, clearing and forwarding agents, shipping lines, regulatory bodies, including the central bank.

On the other hand, different law enforcing authorities and controllers of import and export also monitors the process based on this information. Let us see why all these parties would check the shipment information?

Purposes of Checking the Shipment Information

Different party checks the shipment information for various purposes. Each of them has a different point of view to scrutiny all this information. All information is equally important. However, there is no problem if this information is correct as per the declaration of export or import; we'll discuss later how.

Executives/Officers of the importer will want to know their shipment of goods is coming to their destination as per their orders. The same goes for the importer. But their executives/officers are more curious about it because their job depends on their performance. Any mistake can ruin the importer's business, and at the same time, that will end their employment.

Executives/Officers of the exporter will also want to be confirmed that their shipment of goods is as per contract. Any mistake can become the cause of non-payment by the buyer or may become an issue of penalty. The exporter will have to face financial loss anyway. Therefore, that will become a threat to their job.

On the other hand, bankers of importers or exporters also remain anxious about the accuracy of the import-export information. Bankers not only remain eager about the shipment because of their investments, instead because of the regulatory compliance requirements (AML, CTF & TBML).

Customs authority checks the shipment information for accurate revenue collection and observance of trade regulations. Proper revenue collection depends on the accurate description of goods in the import and export declaration of the importer and exporter. Moreover, they also have responsibilities regarding the import and export of banned or prohibited items and the restricted items.

The law enforcement authority will check to ensure that no illegal trafficking has occurred. They have responsibilities regarding unlawful trafficking of goods in the form of under pricing, over pricing, excess or short shipment, shipment of prohibited and restricted goods. They want to be sure that everything is going on according to the prevailing rules and regulations.

Banks certify the export declaration of the exporter in the form EXP and import declaration of the importer in the form LCAF as per the export LC or Contract. In this case, the bank also makes sure that the description of the goods is commensurate to the Customs First Schedule (or Tariff schedule) in terms of the H.S. Code and standard unit of quantity. Moreover, banks have additional responsibilities concerning anti-money laundering and combating terrorist financing.

Documents to be checked to see whether the shipment is made as per declaration

There is a simple way to check whether the shipment is made as per declaration! Open up the container and check all the goods shipped and count it to confirm the declaration!! But, it is pretty impossible in a real-life scenario. So, we have to depend on the documents of shipment. Now, let us see those documents that can ensure that shipment is made as per declaration.

We'll examine only six main documents. Those are –

1. Contract or Letter of Credit: Import or Export Contracts are the first documents. An international import-export trade begins with them. These are the agreements of buy or sell between the buyer and seller. Sometimes, the buyer may arrange a letter of credit for the seller. Buyers have to make import declarations on form LCAF, and Sellers have to make an export declaration on form EXP as per these Contracts or LCs.

2. Form EXP: Form EXP is the standard form for export declaration in Bangladesh and many other countries worldwide. Exporters apply to an AD (authorized dealer) for authorization in this form. Click Here to see a sample EXP form.

3. Form LCAF: An importer has filled up the form LCAF for buying or importing items from abroad. They submit the form to an AD in Bangladesh for import authorization. Click Here to know more about form LCAF.

4. Commercial Invoice: A commercial invoice works as a legal document. The seller or exporter issues it to the buyer or importer. It also serves as proof of sale in an international trade transaction.

5. Transport Documents: Transport documents are the documents that serve as proof of shipment. A shipping company, shipping lines, carrier, or their agents can issue such documents. Sometimes forwarders issue another form of transport document. Standard transport documents are Billof Lading (B/L), Air Way Bill (AWB), Rail Way Receipt (RR), Lorry Receipts (LR), Truck Receipts (TR), Combined Bill of Lading, and Forwarder's Cargo Receipts (FCR).

6. Bill of Entry/ Bill of Export: Customs authority issues Bill of Entry or Bill of Export. It is a document containing information regarding a shipment made or receipt. Customs authority assesses taxes and duties as per their schedule and issues this document when they find everything as per the declaration of the importer or the exporter.

Checking - Is shipment made as per declaration

We will straightforwardly discuss the checking process. You can use a spreadsheet here if you don't feel comfortable checking it manually. We'll start with the declaration on the EXP and LCAF.

In this section, we'll give an instance based on export activities. However, the procedure is more or less identical in the case of import procedures. We'll emphasize the following information and scrutinize all other documents whether this information is the same everywhere, if available.

1. EXP or LCAF number: The number of EXP (for export) and LCAF (for import) must be identical in all the documents, including Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export.

2. Country and Port of Destination: Country and Port of destination mentioned in Contract or Letter of Credit, Form EXP, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export must match. If the destination port does not match, that must be sufficiently documented with actual reason. However, it will be a discrepancy in the case of the DC (Documentary Credit) operation.

3. Commodity/H.S. Code: A product/commodity is identified with the help of Harmonized System Code (H.S. Code). Description of the product bears such codes to identify the item. Customs authority also uses those codes to assess tax and duties. This code and description of goods will remain the same in Contract or Letter of Credit, Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export.

4. Quantity and Unit: Quantity and unit of goods must not conflict in Contract or Letter of Credit, Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export. Exporter and importer must use a standard measure of the unit as per Customs Tariff Schedule to avoid reporting complexity.

Note that we've mentioned that it must not be conflicting, not the word "same" in this case because if a shipper makes a partial shipment or the contract or L/C has a tolerance, the quantity therein will differ from all other documents. However, the quantity and unit will remain the same in Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export.

5. Unit Price and Value (Amount): The value of shipment mentioned in Form EXP/Form LCAF, Commercial Invoice, and Bill of Entry/ Bill of Export must be identical. Transport Documents usually do not carry value or unit price; however, they must not be conflicting if mentioned. Value of shipment and its currency must match with the contract or LC. The unit price will be the same everywhere.

6. Trade Terms: Trade Term must be the same as the contract or LC in all the documents.

7. LC / Cont. no. & Date: The contract number or LC number and Date must be exact in Contract or Letter of Credit, Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export.

8. Exporter Name, Importer/Consignee Name & Address: The exporter, importer/consignee name must be the same, and address must not be conflicting in Contract or Letter of Credit, Form EXP/Form LCAF, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export.

9. Carrying Vessel Name: The carrying vessel name must be the same where mentioned.

10. Transport Document number and Shipment Date: Transport document (BL/RR/AWB/TR/PP etc.) number and shipment Date must be identical (where mentioned).

11. Port of Shipment/Dispatch: This information will be identical in Contract or Letter of Credit, Form EXP, Commercial Invoice, Transport Documents, and Bill of Entry/ Bill of Export (if mentioned).

12. IRC, ERC, IP, and EP number: The IRC (Import Registration Certificate), ERC (Export Registration Certificate) number, IP (Import Permit), EP (Export Permit), and their issue date must be exact in Contract or Letter of Credit, Form EXP, Commercial Invoice, Transport Documents and Bill of Entry/ Bill of Export (if mentioned).

To Wrapping Up

Finally, if you follow the above procedure to check all the information and find no conflict in them, you can ascertain that shipment is made as per declaration. Moreover, this scrutiny can also help you combat money laundering and terrorist financing. If you find the price competitive and all the ports, countries, or parties involved are not bearing any sanction from Local authority, OFAC / US, UN, EU, etc., you can be confident that the trade transaction is free from money laundering and terrorist financing activities.

Tracking a Shipment can help you in this regard.

Read More on this blog.

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