What You Need to Know About Import & Export Compliance
Trading rules and regulations vary from country to country and import legislation can be both complicated and confusing.
Gaining a clear understanding of your obligations makes sound business sense, but because regulations can be complicated, we recommend you use professionals to help manage the process.
It is important to get every aspect of compliance right because failure to comply with the relevant laws or regulations can be expensive and may also damage your business credibility.
In addition to complying with the regulations of overseas governments, you may also need to meet customers’ regulations as this case study illustrates.
Old Fashioned Foods
Old Fashioned Foods, which produces the famous Aunt Betty range of products, is establishing new markets in North America and in Europe.
“You have to put something on the line to prove your credibility and accept there will be plenty of knocks along the way,” says Managing Director Ross MacKenzie. That might mean spending twice the value of an order to get it to its destination on time.
“Our ﬁrst consignment of steamed puddings for Sainsbury’s in the United Kingdom was rejected because delays at their end meant the product didn’t comply with shelf life requirements.
We responded by air freighting a container of puddings worth NZ$50,000 proﬁt at a cost of NZ$100,000.
It was our ﬁrst big breakthrough in the UK and we were determined not to miss the opportunity. Now we send half a million puddings to the United Kingdom each week.”
He is adamant that exporting is no different from selling on the domestic market, although the distances and lead times bring particular challenges.
“A lot of aspiring exporters think they’ve done the job when they close the container and put it on a boat, but that’s only the beginning.
At times we’ve been asked to do things in offshore markets that seem totally unreasonable but we usually ﬁnd out later it is standard practice in that market.”
Often complex information on entry requirements may only be readily available in the local market and may not always be clear or applied in a straightforward way.
As you need to follow strictly all applicable regulations to avoid shipment delays, ﬁnancial penalties and/or storage charges, do your research thoroughly and talk to experienced professionals before you export & import.
NZTE staff may be able to help you identify which regulations will apply to your product by market or put you in touch with someone else who already exports there and has ﬁrst-hand experience of complying with local requirements.
Given the complexity of export compliance, you may wish to use the services of a professional customs broker or freight forwarder.
Customs brokers and freight forwarders can help to:
- prepare export documentation
- advise on the best methods and routes for transporting goods
- classify your goods into different import fee or tariff groups
- negotiate and arranging transport of goods with shipping or freight companies
- calculate duty and GST payments
- arrange the insurance cover for goods and dealing with claims for loss or
Ask your business contacts for recommendations or look in the phone book or online for a business with experience in your chosen market.
Barriers to Market
Tariff and non-tariff barriers may impede getting your product to market. Tariffs are taxes or duties imposed by the government of the country you are exporting to.
Non-tariff barriers may include registration, standards and quality requirements, all of which can be costly and complicated to meet.
Check the general rules of trade to discover any barriers to exporting goods or services to your target market, then conﬁrm that your product or service meets speciﬁc individual regulations, such as registration or labelling.
Things to think about include:
- What tariffs/duties will the target country apply to your products?
- Are there standards, testing or other forms of certiﬁcation required?
- What regulations are in place for labelling and packaging?
- Are there any product liability issues to consider?
- What export documentation is required?
- What local trading and employment laws will you need to comply with?
Tariffs and duties
Tariffs are duties payable on imported goods. Rates can vary widely according to your product category and country of origin and can affect your product’s competitiveness against domestic suppliers and imports from other countries.
The New Zealand Customs Service can help you identify the New Zealand tariff number and description for speciﬁc markets for your products.
This information is published in the Working Tariff of New Zealand document which is available at www.customs.govt.nz or by calling your local Customs Service on 0800 428 786.
You can then check the actual duty the product attracts in your market:
- by contacting the Customs Department in the importing country
- through the Ministry of Foreign Affairs and Trade website (www.mfat.govt.nz)
- through freight forwarders and customs brokers.
Tariff rates are generally set as a percentage of the monetary value of the goods. You can access information on different market tariffs.
It is essential to check that your product complies with the relevant standards in your chosen market before shipping any goods. Non-compliance can be costly.
NZTE may be able to supply you with:
- a summary of relevant compliance requirements. For example, import/export licences, quotas, phytosanitary/veterinary requirements, acts, standards, labelling and packaging requirements
- copies of all relevant acts and standards where available
- samples, brochures and product descriptions submitted to the relevant authority
- web links and web addresses for relevant compliance organisations
- comment on known planned changes to regulations.
Note: This service may incur a fee.
Check who is legally responsible for the safety of the products you make and sell. Some countries have product liability legislation which makes manufacturers, distributors and/or retailers legally responsible.
You may be liable for any injury or damage overseas caused by any defective products. For example, if you manufacture children’s toys, you will need to meet strict regulations in most markets covering safety and quality standards.
INTERNATIONAL STANDARDS BODY
Standards New Zealand can supply standards from other international standards bodies. Call customer services on 0800 735 656 or email [email protected] with details.
Product liability settlements can be expensive, particularly in the United States where million- dollar settlements are not unusual.
Wherever possible, you should have the appropriate insurance, remembering that this is another cost to include in your pricing.
Try to assess and discuss the risk of liability with potential distributors in markets with a high threat of prosecution.
Consider talking to a lawyer who is familiar with your market – NZTE may be able to refer you to a local expert. Seek legal advice on your particular situation, and ﬁnd out how to best to protect yourself and gain cover against legal action.
GET YOUR IMPORTER TO CHECK
Send a sample of your product to your importer or agent and ask them to check that everything complies with local regulations or standards.
The ﬁrst level protection – and often a condition of acceptance by importers and a criterion for insurance cover – includes ensuring that:
- products meet speciﬁcations
- warnings are placed on packaging
- instructions for use are clear, especially if there is any possibility of danger from accidental or deliberate misuse or failure.
Packaging and labelling
Ensure you check packaging and labelling regulations early on in the process. Requirements vary in different markets and you may ﬁnd you need to use different materials, packaging sizes or need to translate labelling information for each market to which you export.
Showing you fully comply with (or even exceed) environmental regulations can be used to your competitive advantage. If you promote your business as ‘environmentally responsible’, it can help you be seen in the market as a business that ‘cares’.
Packaging regulations may control:
- the composition and use of different packaging materials
- size and construction
- reusable or disposable packaging
- the packaging of hazardous materials or perishables
- permissible or acceptable claims about your product’s beneﬁts.
Labelling and marking regulations are designed to protect consumers by providing essential information on the product. For example, clothing usually needs to carry care labelling.
Speciﬁcations may include:
- instructions on whether the garment should be washed or dry cleaned
- descriptions of the materials used
- country of origin labelling
- ﬂammability warning labels on certain fabrics.
If you are dealing with hazardous substances, there may also be regulations relating to the disposal of your packaging.
For example, in Europe pressure is increasing for manufacturers to take more ‘cradle to grave’ responsibility for their products.
You may be required to take responsibility for recycling or eventual safe disposal of products or hazardous product components (such as batteries) that pose a threat to the environment.
Talk to someone already manufacturing goods for your intended market if possible. Your industry association, local NZTE ofﬁce or Chamber of Commerce may be able to recommend a business contact you can talk to.
Electronic tracking systems have become a lot more sophisticated, and are rapidly evolving. Keeping up to date with electronic identifi cation tracking technology may give you a competitive advantage with speed to market.
GS1 New Zealand is a non-profi t association that provides the identifi cation of items, trade and logistic units, services and location. For more information visit their website, www.gs1nz.org
Regulations for foodstuffs are particularly stringent and may require information on:
- product name
- form, such as smoked or frozen
- coding of additives, colourings and ﬂavour enhancers
- name and address of the importer
- country of origin, and name and address of the manufacturer
- date of manufacture, or date by which product must be consumed
- storage requirements
- ingredients in order of relative importance, often by weight
- instructions for preparation or use, particularly any precautions required
- net weight shown in measurements used by the importing country
- translations of information in the required language of the importing country.
Bar codes and tracking chips
Driven by the increasing use of electronic identiﬁcation for goods in transit or in-store, bar coding, or product numbering, is essential in many export markets.
As each product unit is given a unique identifying number, (every variation in colour, size and pack has a separate number) bar coding provides a common stock-handling method for manufacturers, wholesalers and retailers.
Often directly related to an ordering and inventory control system, bar coding or electronic tracking through embedded product tracking chips is increasingly becoming a prerequisite to products being considered by major buying organisations and end-users.
Each country has a coding authority which assigns codes to manufacturers and maintains a central database.
Your distributor should be able to advise you which codes are required.
Specialist sheep and beef breeders Rissington Breedline exports lamb products to Marks & Spencer in the United Kingdom market.
The product is processed further on arrival in the United Kingdom and labelled with the Marks & Spencer brand and the name of the farmer who provided the original lamb.
For consumers, who increasingly want to know where their food comes from, this means they can look behind the label and trust the food they are eating.
Marking regulations apply to transport containers and vary from country to country. Freight forwarders, shipping companies or airlines can advise on current requirements. These can include:
- marking gross and/or net weight or volumetric measure
- serial and invoice numbers
- container dimensions
- name and address of the importer
- transit instructions
- country of origin
- handling instructions shown in internationally accepted symbols or words
- translation into the language of handling or importing countries.
All required labelling and marking should be clear and durable.
Exporting can be a bureaucratic business, so get help to ensure that you comply with all regulations, including those you may not be aware of.
Be aware that even when you use a customs broker or agent in the clearance of goods through Customs, any declarations or actions undertaken by them in the export process are deemed also to have been made by you, the exporter.
You may be liable for any or all penalties that are incurred by the broker or agent in this clearance process whether the broker or agent is located within New Zealand or overseas.
The contract between buyer and seller sets out the terms of the export shipment. These include prices, speciﬁcations of goods, packing, conditions of carriage, dates of shipment and payment arrangements.
All details must be carefully recorded and checked, as they will be included in other documentation. Any defects in the documentation, such as omissions or conﬂicting information, will inevitably cause delays.
These can delay or put payment at risk, incur the additional and unnecessary expense, and ultimately damage your reputation.
If you are exporting under a letter of credit speak to your bank about the obligations and requirements.
Freight forwarders, freight consultants and banks can also explain and handle your export documentation requirements, as well as negotiate best freight rates.
Most exporters use the experts to perform this role to ensure accurate advice and export documentation compliance.
Basic export documentation
- Export entry
All exports with a value over NZ$1,000 FOB (unless otherwise exempted) must be supported by an export entry lodged with the New Zealand Customs Service.
Failure to lodge an export entry may incur penalties, and unless Customs has otherwise approved, entries must be lodged with them 48 hours prior to export.
Your local Chamber of Commerce may be able to offer advice and can assist with issues such as:
• special documents and certification procedures that may be required for the country of destination of your goods.
• legal validation of trade documents by overseas embassies.
Information required on the entry includes the description of goods, plus:
- tariff item number (a freight forwarder can help you identify the right HS Code)
- statistical quantity where required number and kind of packages
- New Zealand dollar FOB value
- gross weight
- whether travelling by ship/aircraft and ship name or ﬂight number.
Export entries may be lodged electronically by accessing on the NZ Customs Online Declarations website www.cusweb.co.nz.
Electronic Data Interchange (EDI) software is often purchased by companies with a high volume of entries so they can electronically transfer their entries to Customs.
If you are a ﬁrst-time commercial exporter, your local Customs ofﬁce can send a frontline ofﬁcer to help you get started with this documentation. Contact them online via www.customs.govt.nz or call your local Customs Service on 0800 428 786.
If the exported goods contain imported goods upon which duty has been paid, or they are excisable goods upon which excise duty has been paid, you may be entitled to claim drawback of this duty. Again, check with your local Customs Service ofﬁce.
Commonly Used Documents
Although every country has its own particular requirements, there are some commonly used documents in the export process.
- Commercial invoice (certiﬁed invoice)
This is the ‘charge’ document, containing details of the seller, buyer, goods, price, terms of sale, such as FOB or CIF. As this document is used to clear your goods, it must follow the requirements for Customs in the importing country.
- Bill of lading (B/L)
This is issued by or for the shipping company and serves as a receipt for goods uplifted for shipment. It is also a contract of carriage and a legal document of title.
On delivery of the goods, the consignee is required to surrender a negotiable copy of the bill of lading to take possession.
Variations of these documents are a marine bill of lading, a combined transport document, or house bill of lading.
- Airway bill (AWB)
The AWB is equivalent to a bill of lading for goods sent by air. Courier companies often have their own additional documentation, unique to that transaction, which travels with the goods.
- Certiﬁcate of origin
The origin of goods has a direct bearing on the rate of customs duty. Certiﬁcation of origin may be incorporated in the commercial invoice, but often a separate document, issued or countersigned by the Chamber of Commerce in the country of origin may be required.
- Certiﬁcate of content
You may sometimes be required to provide this informal document. It demonstrates the New Zealand content if you are claiming any preferences on entry into some markets (especially Australia), or avoiding penalties in others.
- Insurance policy certificate
The insurance document must comply with any terms in a letter of credit. The insurance coverage of goods being shipped without a letter of credit is determined by arrangements between buyer and seller.
LETTER OF CREDIT
Goods being sold under a letter of credit must be described on the invoice exactly as in the letter of credit.
This invoice must also meet any other requirements stipulated in the letter of credit, and show marks and numbers of packages as on the bill of lading or other transport documents
Your export goods should be well covered by insurance, and both parties to the export transaction must be fully aware of their responsibilities.
Note that you may have an insurable interest long after the goods have left your possession, while your buyers could be ‘on risk’ before the goods are actually received.
The terms of the cover are usually laid down in the sale contract or letter of credit. Three common categories have been developed by the Institute of London Underwriters. These ‘Institute Clauses’ are used internationally.
- Free of particular average (FPA) is a restricted cover and is basically conﬁned to total losses from marine perils of a package during loading, transhipment or discharge. Claims for partial loss or damage cannot be recovered unless the vessel is stranded, sunk, burnt or in collision.
- With average (WA) cover extends the FPA clause to include partial loss arising from heavy weather and sea-water damage.
- All risks (AR) covers all risks of loss or damage. However, it excludes loss or damage arising from delay, inherent vice or the nature of the goods insured. Events such as goods lost because of inadequate packaging, weight loss from drying out or market loss are not covered by this clause.
Marine open cover
Marine cover guarantees cover up to a speciﬁed amount for all goods in which you have an interest.
Exporters must provide details of each shipment made. However, if the declaration is delayed or lost, continuity of cover is guaranteed even after a claim has been made.
Marine open cover is generally open-ended with no expiry date. Either party can cancel, if they wish, with prior notice.
Working Directly in Your Export Market
As with entry requirements, employment legislation varies from country to country.
If you are intending to establish a branch ofﬁce or employ staff in the country you are exporting to, you need to check the local market’s legislation to ensure that you comply with all HR laws and requirements.
- if you are trading in Brazil, you must form a Brazilian company before hiring any local employees
- all employees work a mandatory 35-hour week in France
- in China, wholly foreign owned enterprises must provide local employees with a written agreement in the prescribed Chinese language.
Always seek expert legal advice before starting to trade or employing staff overseas.
It is important to remember that selling your products or services online does not absolve you from compliance requirements. Consider these six steps to protect yourself and your customers.
- State your physical location in New Zealand and clarify how disputes will be resolved.
- If overseas people buy from your website, state which currency applies (for instance, New Zealand dollars, US dollars or Euros) and if there are any extra charges, such as extra shipping or insurance charges (it is a common mistake to omit these details). If appropriate provide a currency converter for customer convenience.
- Clarify the level of security you offer for online transactions that require customers to enter personal details, and credit card Customers need reassurance.
- If you have patents, copyright or brand protection, feature this information prominently on your website to deter thieves or imitators.
- Ask an expert to evaluate your online trading systems to make sure it is ‘best practice’.
Although export& import rules and regulations will vary from country to country, they will always exist, and it is always important to get them right.
Find out as much as you can about your market to get a broad understanding. Then save yourself time and money by talking to, and ideally engaging the services of, experts when exporting to a market, particularly for the ﬁrst time.
Source: New Zealand TRADE & ENTERPRISE
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