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7 tips for organising your export of home decoration and home textile products to Europe

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When you have found a buyer for your home decoration and home textiles (HDHT), you need to prepare for your first shipment to them. European buyers are generally professional, well-informed customers who will often offer a contract with a set of strict conditions, including payment terms and the type of insurance and packaging. You need to agree on these conditions with your buyer before signing the contract. The tips listed below discuss your options to help you become an efficient, trustworthy and successful exporter.

1. Draw up a detailed order, agreement or contract

When a buyer places an order with you, that is an agreement or contract. Whenever you enter into any kind of agreement, it is important that both parties know and agree to the terms of that contract. Buyers may see drawing up an extra contract in addition to the order as an extra step or even a hurdle. However, in case of a series of orders or recurring orders within a set time frame, it makes sense to draw up an agreement or contract that further specifies what you have agreed to with your buyer.

The most important details to include in your order, agreement or contract are:

  • name and addresses of both parties
  • product specification
  • quantity — both in figures and words
  • total value — including the currency
  • payment terms
  • delivery terms  — based on the Incoterms
  • taxes, duties and charges — who is responsible for what
  • delivery procedure — places of dispatch and delivery, and a definition of the period of delivery
  • packaging, labelling and marking requirements
  • insurance  — who insures what, the type of risk covered and the extent of coverage
  • documentary requirements — including the documents needed for customs clearance
  • general terms and conditions
  • legal signature of both parties
  • any special arrangements, provisions, requirements, rules, specifications, and standards you have agreed upon
 

To be prepared if things do not work out as planned, you should also include clauses for:

  • force majeure — when parties are relieved of their liability for a delay or failure to perform they did not give cause to
  • governing law — which law applies (that of your country or your buyer’s country)
  • place of jurisdiction — the competent court in case of a dispute between the parties
  • arbitration – an alternative to legal proceedings before a general jurisdiction court

Tips:

  • Ask a lawyer who is experienced in international trade to help with your first contracts.
  • For more information and examples, see the model contracts and clauses of the International Chamber of Commerce (ICC).
  • See our study on terms and conditions for details on how to make your own.

2. Negotiate the payment terms

Payment terms are part of the terms and conditions that you have to negotiate with your European buyer. The terms and conditions will be stated in a contract and signed by both parties. They generally include specifications regarding delivery, quality, health and safety requirements, as well as the payment terms. The contract formalises all these details and offers both parties protection if things go wrong.

Payment terms vary from buyer to buyer and are related to the volume and value of the order, the type of distribution partner, whether or not an agent is involved, and what delivery terms apply.

The most commonly used payment terms in HDHT are:

Cash in advance (CIA)

When you agree on CIA, the buyer pays before receiving your shipment, which limits the risks for you, as the seller. In Europe, it is not uncommon to ask for payment or partial payment in advance. For example, an advance payment of 50% is typical in the fair-trade sector. Mainstream buyers usually do not pay more than 30% in advance.

Cash against documents (CAD)

This method, also known as documentary collection, guarantees physical control of the goods until you get paid. Under CAD, you submit key export documents (such as the invoice and shipping papers) to your bank. After your bank has received the payment, your buyer can access the documents. If your buyer does not pay, you can return or store the products, although this obviously increases your costs. Combining 50% CIA with 50% CAD is a relatively safe method for both you and your buyer.

Letter of credit (LOC)

An LOC is another fairly safe method of payment. This letter guarantees that your buyer’s bank will cover the payment if your buyer is unable to. You are paid based on documentation that proves you have met the requirements agreed upon in the LOC, such as shipping papers. There are various types of LOCs. Most importantly, your LOC should be irrevocable. This means that the issuing bank cannot make any changes without your approval. A downside to doing business via LOCs is that bank fees can make them relatively expensive.

Cash on delivery (COD) and open account (OA)

COD and OA terms are the riskiest options for you. As the name implies, under COD your buyer pays when your shipment is delivered. In an OA arrangement, payment is made within a set time — usually 30, 60 or 90 days from the date of invoice — which is also known as deferred payment. You should generally avoid these types of agreements.

A long-term relationship between buyers and sellers is based on trust. For your first shipments to a new buyer, you should insist on CIA or LOC arrangements. If an LOC proves costly, you can suggest sharing the fees. As your relationship with your buyer develops and you have both proven trustworthy, you can move towards CAD terms.

Tips:

  • Carefully study the payment terms offered by your (potential) buyer, and always include the payment terms in your price negotiations. While you can offer a lower price in return for advance payment, a long credit period can justify a higher price. Always include in the terms that all bank charges in your buyer’s country are paid by your buyer.
  • Agree with your buyer on how you will receive their payment. Direct bank transfers are common in international trade. Give your buyer all the bank details needed for a transfer into your account. Establish the currency you will be paid in and make sure your bank account accepts international currency transfers, if necessary. If you may be charged a currency conversion fee, you can include this in the price you quote to your buyer.
  • Ask advice from your bank or Chamber of Commerce to help you better understand the various payment terms. You can also buy several guides and practical documents on trade finance  from the International Chamber of Commerce (ICC), or follow their online courses.
  • If you are considering using an LOC, check with your bank for the actual costs and procedures. Select a bank that is recognised in Europe and has daily experience in dealing with LOCs. Ideally, your bank and the bank of your buyer should be part of the same subsidiary network.
  • For further details on payment terms, see our study on terms and conditions, which also explains the benefits of having your own terms and conditions.

3. Agree on delivery terms

HDHT products from developing countries are usually shipped to Europe by sea. While sea freight may be slow, it is particularly suitable for large volumes of finished goods. Especially when the goods are relatively heavy or large, such as pieces of furniture. Truck or rail transport are faster options if your country is connected to the European Union by land. These modes of transport can also be used to move your products within Europe beyond the port of arrival. Airfreight, while fast, is expensive and therefore usually reserved for high-value items.

Each shipment involves seven steps:

  1. Export haulage — moving the goods from your location to the freight forwarder;
  2. Export customs clearance — having the goods cleared for export by the local customs authority;
  3. Origin handling — inspecting the goods, loading them into a container and then onto an export vessel;
  4. Sea freight — transporting the goods to Europe via a shipping line;
  5. Import customs clearance — having the goods cleared for import by the European customs authority;
  6. Destination handling — unloading the container and preparing the goods for collection;
  7. Import haulage — moving the goods from the freight forwarder to the buyer’s location.

With each step come costs that must be settled by either the exporter or the buyer. To avoid cost surprises and unnecessary delays, your contract must specify the rights and responsibilities of the exporter (you) and the buyer. These delivery terms, or Incoterms, determine who pays for each of the steps. They depend on the type of buyer you work with.

Importers generally prefer FOB or Free Carrier (FCA). Under FOB, you pay for transporting the goods to the port, plus loading costs. After that, the buyer is responsible. With FCA, you have to clear the goods for export and hand them over to the carrier. Retail multiples may prefer cost insurance freight (CIF), where you include the shipping and insurance charges in your quotation. Small retailers may ask for the goods to be delivered to their doorstep via delivered duty paid (DDP). For importers who consolidate orders often prefer Ex Works (EXW).

Tips:

  • Study the rights and obligations of buyers and sellers for the different Incoterms and make them part of your negotiation. The delivery terms are part of the service and solutions you offer.
  • Carefully select your freight forwarder. Send your request for proposal to several operators and be as specific as possible. When you have selected a forwarder, sign a detailed contract including aspects such as responsibilities, how damaged goods will be dealt with, price changes and compensation.
  • See Transporteca’s how-to guide on the shipping process for a more detailed discussion of the seven steps.
  • For information on the safe transport of your products, see for example the Container Handbook. The European Union also offers best practice guidelines on cargo securing for road transport.

4. Use safe, efficient and sustainable packaging

Your buyer will usually instruct you how to pack the goods. They have their own specific requirements for the use of packaging materials, filling boxes, palletisation, and stowing containers, which are included in the order specifications.

Damage prevention

Packaging should minimise the risk of damage from shocks. It should ensure that the items inside a box cannot damage each other and prevent damage to the boxes when they are stacked inside the container. Packaging therefore usually consists of outer and inner cardboard boxes, filled with protective materials, like bubble wrap or paper. Another concern is moisture, as condensation inside the container can cause mould. Proper ventilation and dehumidifiers inside the container can prevent this. Make sure to follow the importer’s instructions here.

To reduce risks, you should:

  • pack your products in strong containers, adequately sealed and filled;
  • provide proper bracing in the container and distribute the weight evenly;
  • use moisture-resistant material for your packaging and filler;
  • use straps, seals and shrink wrapping to prevent theft, and not write contents or brand names on packages;
  • observe any product-specific hazardous materials packing requirements.

Efficiency

Boxes are usually palletised for transport. You have to maximise pallet space and minimise transport costs, for example by flat-packing, nesting and efficient stacking. Packaging should be easy to handle in terms of size and weight. Standards are often related to labour regulations at the point of destination and must be specified by the buyer. Most European traders use pallets of 120 cm x 80 cm (Euro-pallet). The maximum recommended height of a cargo unit is about 170 cm. As waste removal is a cost, you should avoid using excess materials or shipping ‘air’.

You can reduce the amount and diversity of packing materials by:

  • partitioning inside the cartons, using folded cardboard
  • matching inner boxes and outer cartons by using standard sizes
  • considering packing and logistical requirements when designing your products
  • asking the buyer for alternatives

Sustainability

Importers are increasingly banning wooden crating and packaging due to their unsustainability and high material and disposal costs. Economical and sustainable packaging materials are becoming more popular. Using biodegradable packing materials can be a marketing opportunity. For some buyers, it can even be a requirement.

Europe has specific packaging and packaging waste legislation to reduce impact on the environment. Buyers may therefore ask you to minimise the use of packaging materials (paper, carton, plastic) or to use a different kind of  material, possibly recycled material. There also are European requirements for wood packaging materials (WPM) used for transport, such as boxes, pallets, and dunnage. These requirements aim to prevent organisms that are harmful to plants or plant products from being introduced into and spreading within the European Union.

Labelling

Information on the outer packaging of your products should correspond to the packing list sent to the importer. It should include producer name, consignee name, materials used and quantity, size, volume and caution signs.

The external packaging labels should include:

  • producer name
  • consignee name
  • quantity
  • size
  • volume
  • caution signs

Your buyer will specify what information they need on the product labels or on the item itself, such as logos or 'Made in…' information. This is part of the order specifications. It is common in Europe to use EAN or barcodes on the product label. Labelling should be in English, unless your buyer indicates otherwise.

Packing list

Upon completion of packing and labelling, you must prepare a packing list. This is an essential document, needed for customs procedures. It will be used by carriers, cargo handlers, warehouses and customers. The packing list gives the total number of packages and the total gross weight and volume.

It should also contain the following details for each package:

  • marks
  • numbers
  • gross and net weight in kg
  • dimensions in cm
  • volumes
  • content description

Tips:

  • Make sure that your packaging protects your products, while minimising the cost and the effects on the environment. Use biodegradable packaging where you can. Smart packaging and optimising pallet and container space can save considerable money. For some large-size products, you should already consider this in the design phase of the product.
  • Always ask for the importer’s order specifications, packaging and labelling requirements.
  • See Packaging Europe for more information on the latest packaging developments, including regular news articles about biodegradable packaging.
  • Check software such as ShipHawk, packVol and TOPS Pro. These programmes allow you to calculate and design packaging, as well as plan the best arrangement of the goods inside containers and trucks.
  • See our studies about promising export products for more product-specific packaging requirements.

5. Insure your export

Because doing international business is a risk, insurance is important for you, as an exporter. You should ensure the payment and goods, especially if the contract involves larger volumes and values.

Credit insurance

With credit insurance you not only secure payment for your export, but you can also increase your competitiveness. If European buyers ask for deferred payment, export insurance makes it easier for you to agree to those terms by ensuring that you will be paid. There are many privately owned export credit agencies (ECAs) with an international network of offices, but agencies can also be government owned. You should search for an agency in your country.

The process of contracting credit insurance has five steps:

  1. You submit the request for credit insurance with the necessary documents to the insurer.
  2. The insurer sends an indicative offer.
  3. If you agree to the indicative offer, the insurer will request a credit report of the buyer.
  4. The responsible department analyses the buyer’s creditworthiness and sets the credit limits.
  5. The insurer delivers the final offer to you, after which, if you accept, the insurance policy is signed.

Processing an export credit insurance policy will take four to six weeks on average. It will also give you a clearer picture of the company you want to make a deal with, by giving you an impression of their solvency and creditworthiness.

Transport insurance

In addition to insuring payment, you can also insure your products. International transport insurance can protect your products throughout their entire journey to your buyer.

Your agreed Incoterms define whether the exporter (you) or the importer (your buyer) is responsible for insuring the goods. They give you a precise understanding of each party’s rights and obligations with regards to insurance and transportation. In HDHT, FOB arrangements are most common. Under FOB, you (as the seller) have to clear the goods for export and ensure they are delivered to and loaded onto the vessel for transport. At that point, your buyer takes over the risks and costs, including import clearance and duties.

Transport insurance typically covers risks such as theft and damage due to heavy weather or problems with a vessel. If it is your responsibility, you need to contract an insurer that can handle a claim globally and request a policy that covers the goods from the time they leave your premises until your customer has taken possession of them. Hiring a professional carrier does not automatically mean that their insurance covers your goods. If carriers do include transport insurance, the cover is usually limited.

Product liability insurance

As a manufacturer, you need to make sure your products are safe. If a product proves faulty and causes harm, international product liability insurance covers your legal fees, compensation costs and other claims. This type of insurance is particularly important for small and medium-sized enterprises (SMEs), as the costs associated with defective products can be so high, you risk bankruptcy. Although you are not legally obliged to have product liability insurance, your European buyers may well demand that you do.

Even if you export to only one European country, your products may be re-exported across Europe (or even worldwide). Because of this, you need to select an insurance company that offers global coverage and is familiar with international claims.

Product liability insurance does not cover intentional damage, contractual liabilities (where you have contractually agreed to assume another party’s liability) or criminal prosecution. To make sure you are covered, you need to make every effort to ensure product safety and comply with any laws that apply to your product.

Tips:

  • Find a reliable ECA that is part of a larger international network, for example, on the member list of the Berne Union, the International Union of Credit and Investment Insurers.
  • Check Chamber of Commerce business registrations or business directories like Kompass, to see if data such as the annual turnover and basic balance sheets of your potential buyers are available for free.
  • Be clear with your buyer about who is responsible for transport insurance according to your Incoterms. If you are, you can look for a reliable insurer via the International Union of Marine Insurers and its member associations.

6. Study European Union customs policy

Importers, agents or customs brokers are responsible for taking your goods through European customs. You, as the exporter, are not directly involved in this process at the point of entry into the European Union. However, it is extremely important to be in touch with the transporter and importer, and to provide them with all necessary documents and further support.

European import procedures roughly have three steps:

  1. Entry summary declaration (ENS): the carrier usually electronically submits an ENS at least 24 hours before loading begins.
  2. Inspection and control: customs authorities check the documentation and the goods declared in the ENS and the customs declaration.
  3. Decision on customs procedure: the goods are either released for free circulation or placed under a special procedure, unless they are rejected because they do not comply with European legislation

Documents needed for customs clearance are:

  • commercial invoice: a record of the transaction between you and the importer, with basic information such as your name and address, a description of the goods, and the total value;
  • transport documents: a set of documents including the bzill of Lading (for sea freight), air waybill, road waybill or rail waybill;
  • packing list (P/L): a commercial document with information on the imported items and the packaging details of each shipment, such as weight, dimensions and contents of the packages;
  • customs value declaration: a document stating the value of the goods, including all the costs incurred, which must be presented if the value of the imported goods exceeds €20,000;
  • proof of origin: a document certifying that the goods originate from a particular country or territory, as lower customs duties may apply based on the rules of origin;
  • freight insurance: an insurance invoice is required only when the relevant data are not included in the commercial invoice indicating the premium paid to insure the merchandise;
  • customs import declaration: a single administrative document (SAD) with information such as the identifying data of the goods and the parties involved.

Tips:

7. Look for organisations that can support you

Government bodies and private sector organisations in your European target markets may be able to help you organise your export.

Organisations that could support you include:

Read our other tips for exporting to Europe

This study was carried out on behalf of CBI by Globally Cool B.V. in collaboration with Remco Kemper (MDD).

Please review our market information disclaimer.