Four Reasons Exporters Should Complete a Shipper's Letter of Instruction
A Shipper's Letter of Instruction (SLI) is an optional, non-legal document that helps exporters accurately communicate information to the freight forwarder. This letter outlines handling instructions for your shipment, speeds up the processing of required authorizations, and ensures compliance with Foreign Trade Commission standards. An SLI also enables your freight forwarder to manage export control and customs by granting them the power of authorized forwarding agent.
International trade finance companies can help you eliminate foreign trade risks by guaranteeing payment in the event of consignee (recipient) insolvency. Below, you'll find out why you should include a Shipper's Letter of Instruction, essential tips on filling out the forms, and how the best factoring companies can assist.
1. Comply with Federal Regulations
Before your goods can be exported, your freight forwarder will have to transfer data on your behalf to US Customs and Border Protection (CBP), according to Foreign Trade Regulations. The SLI gives your freight forwarder permission to send the information necessary for the delivery of your shipment.
Your international exports will be declared electronically via the Automated Export System (AES), which sends your data, or Electronic Export Information (EEI) to the US Census Bureau. CBP then uses this information to ensure compliance of your goods with US export regulations. If you fail to complete an SLI, your shipment could be in danger of landing in the hands of unauthorized parties.
2. Ensure Best Business Practices
You may be reluctant to fill out this additional and non-mandatory document, but doing so establishes best practices for your business. With an SLI, you'll know who issued the export control documents, which parties received the information, and who to contact if issues arise.
Without an SLI, the timeliness and safety of your delivery could be jeopardized. A letter of instruction will tell your freight forwarder precisely how they should handle the transportation and management of your shipment. Taking the time to fill out your SLI correctly could prevent mistakes that delay your cargo and payment.
3. Meet Export Control Requirements
An SLI enables your freight forwarder to communicate with AES, which is mandatory for many products shipped outside the United States. If your merchandise is worth more than $2,500, you're required to file with AES. Additionally, AES filings are necessary for all shipments that require an export license, regardless of their value.
Using an SLI will help move your shipment through control requirements more quickly since the actual report needs to be filed within a narrow time frame, one to 24 hours before departure. Filing incorrect information or failing to file at all could result in a $10,000 penalty. By submitting an SLI with your export documents, your freight forwarder can ensure that all filings are completed accurately and on time.
4. Outline Shipping and Handling Instructions
A Shipper's Letter of Instruction can help you avoid misunderstandings when it comes to how your freight forwarder should handle your cargo. The SLI acts as a single point of reference and contains all relevant data and instructions in one document. As a result, your shipment will be processed more efficiently. Without the SLI, your freight forwarder will have to search through numerous commercial files to find the information they need.
Tips for Completing Your SLI
A Shipper's Letter of Instruction might not be mandatory, but should always be included in the export documents to your freight forwarder. Taking this additional short step will ensure that your delivery reaches its destination without complications. Follow these tips when completing your SLI paperwork.
Find the Correct Forms
You can obtain all the forms and documents you need to complete your SLI at the National Customs Brokers and Forwarders Association of America (NCBFAA). Unknowingly, many exporters continue to use the outdated Shipper’s Export Declaration (SED), which doesn't contain all the data fields required under current regulations.
Include specific details on the SLI for fast and efficient delivery. For example, the “Notify Party” section specifies a freight forwarder that should be contacted upon arrival of your goods. Without these details, your shipment will have to go through the freight partner of your agent, and they will contact the consignee for information, costing extra time and money.
Specify Payment Terms
The charges section of the SLI outlines which parties pay for what expenses. As the shipper, you guarantee payment of all destination charges except duties, if your consignee refuses to pay. If you're shipping on a letter of credit, you'll have to include these documents as well.
How Export Factoring Helps
An international trade finance company like Tradewind Finance can help streamline export processes by securing payment terms for your letter of credit. Non-recourse factoring provides financing based on your clients' credit, not yours, thereby limiting your exposure to risks. Meanwhile, your intermediary will monitor the creditworthiness of your clients, perform collections and bookkeeping on your behalf, and increase your short-term cash flow, enabling you to generate more sales.