Freight forwarding involves complex terminology and operational details that can be confusing. Understanding these elements is crucial to avoid costly mistakes. Below is a breakdown of common challenges and best practices in the industry.
SWB vs. Telex Release: Controlling Cargo Ownership
The Sea Waybill (SWB) and Telex Release are two critical documents with distinct implications for cargo control. With an SWB, ownership transfers to the consignee once the vessel departs, allowing the consignee to claim goods using only a bill of lading copy. This leaves the shipper with limited control. In contrast, a Telex Release requires the shipper to submit a letter of indemnity to the shipping company, which then notifies the destination port to release the cargo. The consignee must present a bill of lading copy stamped with "Telex Release" to take possession. To retain control over unpaid shipments, opt for Telex Release. SWB should only be used after full payment confirmation.
VAT and Tax Refunds: Adapting to Policy Changes
Since April 1, 2019, China's value-added tax (VAT) rates have been adjusted. For invoices issued after this date, the VAT rate is 13%. Products previously eligible for a 16% refund now qualify for 13%, while those with a 13% refund rate remain unchanged. Under the new policy, 13% is the highest refund rate. Traders must stay updated on tax regulations to avoid financial losses.
Manifest Accuracy: Avoiding Costly Errors
The manifest, essentially the bill of lading, must reflect the final client’s requirements precisely. If the consignee is listed as "TO ORDER," the manifest should display "TO ORDER" in the consignee field, with additional details entered under "Notify Party." Double-checking all information prevents customs delays and extra fees.
Customs Declarations: HS Codes and Invoice Descriptions
Proper HS code classification is essential for customs declarations. While commercial invoices may use broader terms (e.g., "roller skates"), customs declarations require specificity (e.g., "inline skates"). The descriptions need not match exactly, but the declared product must align with the actual goods.
Certification Requirements: Chamber of Commerce vs. CCPIT
If clients request Chamber of Commerce or China Council for the Promotion of International Trade (CCPIT)-certified documents, these typically involve certificates of origin or CCPIT-issued paperwork. Requesting a sample from the client clarifies the exact certification needed, streamlining the process.
FOB Terms: Handling LSS Charges
Under Free on Board (FOB) terms, the Liner Security Surcharge (LSS) is best paid upon delivery. While prepayment is an option, confirming the preferred method with the freight forwarder minimizes disputes.
Unit Discrepancies: Invoices vs. Customs Declarations
If the primary legal unit for a product is "kilograms," invoices may use alternative units (e.g., "pairs"). However, the legal unit must still appear on the customs declaration. This discrepancy does not affect invoicing or tax refunds.
HS Codes and Declarations: A Case Study
For example, HS code 90178000.00 corresponds to "other hand-operated measuring devices." Required declaration details include brand type, export benefits, purpose, function, brand, model, GTIN, and CAS. Accurate reporting ensures smooth customs clearance.
Mastering these aspects of freight forwarding enhances operational efficiency and mitigates risks in international trade.