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TOPIC: Documents used in International Trade

Submitted by, RAHMATH E NO: 28 SMS, Calicut

Industrialization. Increasing international trade is crucial to the continuance of globalization. not different from domestic trade as the motivation and the behavior of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. goods. and outsourcing are all having a major impact on the international trade system. In most countries. multinational corporations. its economic. Thus international trade is mostly restricted to trade in goods and services. International trade is. Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. and only to a lesser extent to trade in capital. such trade represents a significant share of gross domestic product (GDP). Amber Road). the legal system or culture.INTERNATIONAL TRADE International trade is the exchange of capital. social. and services across international borders or territories. While international trade has been present throughout much of history (see Silk Road. and political importance has been on the rise in recent centuries. Without international trade. time costs due to border delays and costs associated with country differences such as language. The main difference is that international trade is typically more costly than domestic trade. labor or other factors of production. nations would be limited to the goods and services produced within their own borders. globalization. . in principle. The reason is that a border typically imposes additional costs such as tariffs. advanced transportation. Trade in goods and services can serve as a substitute for trade in factors of production.

The following is a list of documents often used in international trade:    Air Waybill Bill of Lading Certificate of Origin . Each trade document is differ from other and present the various aspects of the trade like description. inspection and so on. a trade document about the bill of lading is a proof that goods have been shipped on board. So. INCOTERMS International commercial terms. And Freight).' In brief these terms are (1) C&F (Cost And Freight). Thirteen terms of sale accepted worldwide in assignment of costs and responsibilities between the buyer and the seller. it becomes important for the importers and exporters to make sure that their documents support the guidelines as per international trade transactions. transportation medium. while Inspection Certificate. (7) Ex works. So. number. (4) Delivered Duty Paid. For example. (12) Free carrier. (10) FOB Airport. (3) Delivered At Frontier.INTERNATIONAL TRADE DOCUMENTS International market involves various types of trade documents that need to be produced while making transactions. and copyrighted by the International Chamber Of Commerce (ICC). insurance. (6) Ex ship. updated. (11) FOR/FOT (Free On Rail/Free On Truck). The last revision (1999) is named 'INCOTERMS 2000. (13) Free Carriage Paid To and Free Carriage Paid To And insurance. depending on these necessary documents. (2) CIF (Cost. A small mistake could prove costly for any of the parties. (5) Ex quay. indemnity. a seller can assure a buyer that he has fulfilled his responsibility whilst the buyer is assured of his request being carried out by the seller. Proposed. they serve as global standards for uniform interpretation of common contract clauses in international trade. quality. (9) FOB (Free On Board). certifies that the goods have been inspected and meet quality standards. (8) FAS (Free Alongside Ship).

The goods description must be consistent with that shown on other documents. • An invoice for the freight. dispatch and delivery of the consignment. The airport of departure and destination must be mention. • A certificate of insurance. The principal requirement for an air waybill are :    The proper shipper and consignee must be mention. is signed by an export agent. Air Waybills serves as: • Proof of receipt of the goods for shipment. A typical air waybill sample consists of three originals and nine copies. • A guide to airline staff for the handling.        Letter of credit Combined Transport Document Draft (or Bill of Exchange) Insurance Policy (or Certificate) Bill of Entry Dock's Receipt Packing List/Specification Inspection Certificate Air Waybills Air Waybills make sure that goods have been received for shipment by air. the third original is signed by the carrier and is handed to the export agent as a receipt for the goods. The first original is for the carrier and is signed by a export agent. the consignee's copy. . the second original.

three or more. The bill of lading must be signed by the shipping company or its agent.  It must be signed and dated by the actual carrier or by the named agent of a named carrier. Any weight.) . a bank which finances a trade transaction will need to control the complete set. and must show how many signed originals were issued. Bill of Lading (B/L) Bill of Lading is a document given by the shipping agency for the goods shipped for transportation form one destination to another and is signed by the representatives of the carrying vessel. the "on board" wording is in small print at the bottom of the B/L. the B/L should :  Carry an "On Board" notation to showing the actual date of shipment. To be acceptable to the buyer. measure or shipping marks must agree with those shown on other documents. Only one original is sufficient to take possession of goods at port of discharge so.  It must mention whether freight has been paid or will be paid at the destination point. (Sometimes however. Bill of landing is issued in the set of two. It will indicate whether cost of freight/ carriage has been paid or not : "FREIGHT PREPAID" : Paid by shipper "FREIGHT COLLECT" : To be paid by the buyer at the port of discharge The bill of lading also forms the contract of carriage. in which cases there is no need for a dated "on board" notation to be shown separately with date and signature. This is done due to the safety reasons which ensure that the document never comes into the hands of an un authorized person. The number in the set will be indicated on each bill of lading and all must be accounted for.

if different from port of loading or port of discharge. Any weight or measures must agree with those shown on other documents.    It must state whether freight has been paid or is payable at destination. to whom the shipping company or its agent gives notice of arrival of the goods. The place of receipt and place of delivery must be stated. Shipping marks and numbers and /or container number must agree with those shown on other documents. usually the importer. The main parties involve in a bill of lading are:  Shipper o The person who send the goods.  Carrier o The person or company who has concluded a contract with the shipper for conveyance of goods The bill of lading must meet all the requirements of the credit as well as complying with UCP 500. consignee and notifying party must be shown. It must state the actual name of the carrier or be signed as agent for a named carrier.  Notify Party o The person. These are as follows :    The correct shipper. .  Consignee o The person who take delivery of the goods. The carrying vessel and ports of the loading and discharge must be stated. It must be dated on or before the latest date for shipment specified in the credit.    The goods description must be consistent with that shown on other documents. Be "clean" have no notation by the shipping company to the effect that goods/ packaging are damaged.

shipping marks and description of goods to agree with that on other documents. the exporter of goods desires to have adequate proof regarding the credit worthiness of the importer. Package numbers. details of the good to be transported and so on. It would normally include :    The name of the company and address as exporter.   Any weight or measurements must agree with those shown on other documents. The name of the importer. Letter of Credit may also be issued on the strength of the business of the importer with the bank. It is usually issued by the Chamber of Commerce and contains information like seal of the chamber. The certificate must provide that the information required by the credit and be consistent with all other document.Certificate of Origin The Certificate of Origin is required by the custom authority of the importing country for the purpose of imposing import duty. it contains a guarantee or an undertaking by one bank that the bill of exchange drawn on the importer will be honoured on presentation to the extent of the amount specified in the letter. It is issued by the bank (in the importer's country) in favour of the foreign supplier. . Letter of Credit can be defined as "an undertaking by importer's bank stating that payment will be made to the exporter if the required documents are presented to the bank". It is for safety and security of the exporter as regards payment for the goods to be exported. It should be signed and stamped by the Chamber of Commerce. Letter of Credit Letter of Credit is an important document in international trade. Before executing an export order.

The Letter of Credit also contains certain conditions such as date of bill. In the case of multimodal transport document. shipment by approved vessels with approved flags packing. The exporter gets discounting facility from the bank. or taken in charges. Combined Transport Document Combined Transport Document is also known as Multimodal Transport Document. 3. The advantages of the letter of credit to the exporters are many such as :1. if any must be dated and signed. The place goods are received. This documents need to be signed with appropriate number of originals in the full set and proper evidence which indicates that transport charges have been paid or will be paid at destination port. etc. and is used when goods are transported using more than one mode of transportation. Art. multimodal transport operator or their agents. . Exporter gets safety and security of payment for the goods exported. It also evidence receipt of goods but it does not evidence on board shipment. It enables the exporter to take more initiative in promoting exports and earns foreign exchange for his country.   Total number of originals. 26(a). and place of final destination. Whether freight is prepaid or to be collected. The date of dispatch or taking in charge. the contract of carriage is meant for a combined transport from the place of shipping to the place of delivery. and the "On Board" notation. if it complies with ICC 500. date for shipment. 2. Signature of the carrier. Multimodal transport document would normally show :     That the consignee and notify parties are as the credit. The liability of the combined transport operator starts from the place of shipment and ends at the place of delivery.

Be issued in the stated number of originals (which must be marked "Original) and copies. commercial invoice is finally used by the custom authorities of the importer's country to evaluate the good for the purpose of taxation.Commercial Invoice Commercial Invoice document is provided by the seller to the buyer. This document has special importance in wholesale trade where large amount of money involved. Drawee: The person who pays the bill. Be address to the applicant of the credit (the buyer). Also known as export invoice or import invoice. Include the description of the goods exactly as detailed in the credit. . Bill of Exchange A Bill of Exchange is a special type of written document under which an exporter ask importer a certain amount of money in future and the importer also agrees to pay the importer that amount of money on or before the future date. State the price amount payable which must not exceed that stated in the credit include the shipping terms. Following persons are involved in a bill of exchange: Drawer: The person who writes or prepares the bill. Be signed by the beneficiary (if required). Payee: The person to whom the payment is to be made.    Include the price and unit prices if appropriate. The invoice must :      Be issued by the beneficiary named in the credit (the seller).

Marks and numbers to agree with those on other documents. which must be consistent with that in the credit and on the invoice. The requirements for completion of an insurance policy are as follow :    The name of the party in the favor which the documents has been issued.    Insurance value that specified in the credit. The name of the vessel or flight details.  Bill of exchange after Sight: In this case the due date is counted from the date of acceptance of the bill and is also called bill of exchange after sight.  The name and address of the claims settling agent together with the place where claims are payable. Also. . it certifies that goods transported have been insured under an open policy and is not actionable with little details about the risk covered. On the basis of the due date there are two types of bill of exchange:  Bill of exchange after Date: In this case the due date is counted from the date of drawing and is also called bill after date. The place from where insurance is to commerce typically the sellers warehouse or the port of loading and the place where insurance cases usually the buyer's warehouse or the port of destination. the insured amount must be in the same currency as the credit and usually for the bill amount plus 10 per cent. The description of the goods. if submitted under a LC.Holder of the Bill: The person who is in possession of the bill. It is necessary that the date on which the insurance becomes effective is same or earlier than the date of issuance of the transport documents. Insurance Certificate Also known as Insurance Policy.

3. 5. Bill of Entry Bill of entry is a document required in case of import of goods. 2. Date of issue to be no later than the date of transport documents unless cover is shown to be effective prior to that date. . Entry for goods to be re-exported. Import License number of importer. Name and address of importer. Entry of goods which are meant for consumption at home. 4. 7. 2. Three different colours are used to prepare bill of entry. 3. Name of port where goods are to be cleared. One copy is retained by custom department. other is retained by port trust and the third is kept by the importer. The contents of Bill of Entry are :1. all these entries are on the same form. In India. 6. The customs office supplies this form which is prepared in triplicate. Rate and amount of import duty payable. Entry for duty free goods. Name and address of exporter. Description of goods.  Countersigned where necessary. Value of goods. The bill of entry is divided into three classes :1. A Bill of Entry is the document testifying the fact that goods of the stated value and description in specified quantity are entering into the country from abroad. It is like shipping bill in case of exports.

The goods are then brought inside the docks. Many-a-times immediate loading on ship is not possible. The goods are then stored in sheds at the port or docks. The packing List must :   Have a description of the goods ("A") consistent with the other documents. Other relevant details. Dock's Receipt Dock authorities issue dock's receipt once the goods are stored in the sheds at the docks. The Clearing and Forwarding agent clears the documents from the customs authorities. . Packing List Also known as packing specification. It also include details like measurement and weight of goods. it contain details about the packing materials used in the shipping of goods.8. The goods may be loaded immediately on the ship. The dock authorities then issues the dock receipt as an acknowledgement for goods received in sheds. Have details of shipping marks ("B") and numbers consistent with other documents Inspection Certificate Certificate of Inspection is a document prepared on the request of seller when he wants the consignment to be checked by a third party at the port of shipment before the goods are sealed for final transportation. Then he approaches the Port Trust authorities and obtains the Carting Order. The Carting Order is the permission to cart the goods inside the docks.

shipping bill.On demand.S inspection can be done by various world renowned inspection agencies on nominal charges. packing list.In this process seller submit a valid Inspection Certificate along with the other trade documents like invoice. bill of lading etc to the bank for negotiation. .